LITONJUA VS. LITONJUA period after the war until Kee’s death in 1984.
period after the war until Kee’s death in 1984. It had no business book, no written account nor any memorandum
Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that Eduardo entered into a contract of partnership
with him. Aurelio showed as evidence a letter sent to him by Eduardo that the latter is allowing Aurelio to manage
their family business (if Eduardo’s away) and in exchange thereof he will be giving Aurelio P1 million or 10% equity,
whichever is higher. A memorandum was subsequently made for the said partnership agreement. The
memorandum this time stated that in exchange of Aurelio, who just got married, retaining his share in the family
business (movie theatres, shipping and land development) and some other immovable properties, he will be given
P1 Million or 10% equity in all these businesses and those to be subsequently acquired by them whichever is
greater.
In 1992 however, the relationship between the brothers went sour. And so Aurelio demanded an accounting and
the liquidation of his share in the partnership. Eduardo did not heed and so Aurelio sued Eduardo.
ISSUE: Whether or not there exists a partnership.
HELD: No. The partnership is void and legally nonexistent. The documentary evidence presented by Aurelio, i.e. the
letter from Eduardo and the Memorandum, did not prove partnership.
The 1973 letter from Eduardo on its face, contains typewritten entries, personal in tone, but is unsigned and
undated. As an unsigned document, there can be no quibbling that said letter does not meet the public
instrumentation requirements exacted under Article 1771 (how partnership is constituted) of the Civil Code.
Moreover, being unsigned and doubtless referring to a partnership involving more than P3,000.00 in money or
property, said letter cannot be presented for notarization, let alone registered with the Securities and Exchange
Commission (SEC), as called for under the Article 1772 (capitalization of a partnership) of the Code. And inasmuch
as the inventory requirement under the succeeding Article 1773 goes into the matter of validity when immovable
property is contributed to the partnership, the next logical point of inquiry turns on the nature of Aurelio’s
contribution, if any, to the supposed partnership.
The Memorandum is also not a proof of the partnership for the same is not a public instrument and again, no
inventory was made of the immovable property and no inventory was attached to the Memorandum. Article 1773
of the Civil Code requires that if immovable property is contributed to the partnership an inventory shall be had
and attached to the contract.
HEIRS OF TAN ENG KEE VS CA
Benguet Lumber has been around even before World War II but during the war, its stocks were confiscated by the
Japanese. After the war, the brothers Tan Eng Lay and Tan Eng Kee pooled their resources in order to revive the
business. In 1981, Tan Eng Lay caused the conversion of Benguet Lumber into a corporation called Benguet Lumber
and Hardware Company, with him and his family as the incorporators. In 1983, Tan Eng Kee died. Thereafter, the
heirs of Tan Eng Kee demanded for an accounting and the liquidation of the partnership.
Tan Eng Lay denied that there was a partnership between him and his brother. He said that Tan Eng Kee was merely
an employee of Benguet Lumber. He showed evidence consisting of Tan Eng Kee’s payroll; his SSS as an employee
and Benguet Lumber being the employee. As a result of the presentation of said evidence, the heirs of Tan Eng Kee
filed a criminal case against Tan Eng Lay for allegedly fabricating those evidence. Said criminal case was however
dismissed for lack of evidence.
ISSUE: Whether or not Tan Eng Kee is a partner.
HELD: No. There was no certificate of partnership between the brothers. The heirs were not able to show what was
the agreement between the brothers as to the sharing of profits. All they presented were circumstantial evidence
which in no way proved partnership.
It is obvious that there was no partnership whatsoever. Except for a firm name, there was no firm account, no firm
letterheads submitted as evidence, no certificate of partnership, no agreement as to profits and losses, and no time
fixed for the duration of the partnership. There was even no attempt to submit an accounting corresponding to the
for that matter and no license mentioning the existence of a partnership.
In fact, Tan Eng Lay was able to show evidence that Benguet Lumber is a sole proprietorship. He registered the
same as such in 1954; that Kee was just an employee based on the latter’s payroll and SSS coverage, and other
records indicating Tan Eng Lay as the proprietor.
Also, the business definitely amounted to more P3,000.00 hence if there was a partnership, it should have been
made in a public instrument.
But the business was started after the war (1945) prior to the publication of the New Civil Code in 1950?
Even so, nothing prevented the parties from complying with this requirement.
Also, the Supreme Court emphasized that for 40 years, Tan Eng Kee never asked for an accounting. The essence of a
partnership is that the partners share in the profits and losses. Each has the right to demand an accounting as long
as the partnership exists. Even if it can be speculated that a scenario wherein “if excellent relations exist among the
partners at the start of the business and all the partners are more interested in seeing the firm grow rather than get
immediate returns, a deferment of sharing in the profits is perfectly plausible.” But in the situation in the case at
bar, the deferment, if any, had gone on too long to be plausible. A person is presumed to take ordinary care of his
concerns. A demand for periodic accounting is evidence of a partnership which Kee never did.
The Supreme Court also noted:
In determining whether a partnership exists, these rules shall apply:
(1) Except as provided by Article 1825, persons who are not partners as to each other are not partners as to third
persons;
(2) Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or co-
possessors do or do not share any profits made by the use of the property;
(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them
have a joint or common right or interest in any property which the returns are derived;
(4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the
business, but no such inference shall be drawn if such profits were received in payment:
(a) As a debt by installment or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased partner;
(d) As interest on a loan, though the amount of payment vary with the profits of the business;
(e) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise.
JARANTILLA VS JARANTILLA
The spouses Andres Jarantilla and FelisaJaleco were survived by eight children: Federico Sr., Delfin, Benjamin,
Conchita, Rosita, Pacita, Rafael and Antonieta. Petitioner Federico Jarantilla, Jr. is the grandchild of the late
Jarantilla spouses by their son Federico Jarantilla, Sr. and his wife Leda Jamili. Petitioner also has two other
brothers: Doroteo and Tomas Jarantilla.
The Jarantilla heirs extrajudicially partitioned amongst themselves the real properties of their deceased parents.
With the exception of the real property adjudicated to PacitaJarantilla, the heirs also agreed to allot the produce of
the said real properties for the years 1947-1949 for the studies of Rafael and AntonietaJarantilla.
Sps. Rosita Jarantilla and Vivencio Deocampo entered into an agreement with the spouses Buenaventura
Remotigue and ConchitaJarantilla to provide mutual assistance to each other by way of financial support to any
commercial and agricultural activity on a joint business arrangement. This proved to be successful as they were able
to establish a manufacturing and trading business, acquire real properties, and construct buildings, among other
things. The same ended in 1973 upon their voluntary dissolution.
The spouses Buenaventura and ConchitaRemotigue executed a document Acknowledgement of Participating
Capital stating the participating capital of of their co-owners as of the year 1952, with AntonietaJarantillas stated as
eight thousand pesos (P8,000.00) and Federico Jarantilla, Jr.s as five thousand pesos (P5,000.00).
The controversy started when Antonieta filed a complaint against Buenaventura, Cynthia, Doroteo and Tomas, for
the accounting of the assets and income of the co-ownership, for its partition and the delivery of her share
corresponding to eight percent (8%), and for damages. She alleged that the initial contribution of property and
money came from the heirs inheritance, and her subsequent annual investment of seven thousand five hundred
pesos (P7,500.00) as additional capital came from the proceeds of her farm.
Respondents denied having formed a partnership. They did not deny the existence and validity of the
"Acknowledgement of Participating Capital" and in fact used this as evidence to support their claim that Antonietas
8% share was limited to the businesses enumerated therein. Petitioner Federico Jr joined his aunt Antonieta and
likewise asserted his share in the supposed partnership.
The RTC rendered judgment in favor of Antonieta and Federico. On appeal, the CA set the RTC Decision. Petitioner
filed a petition for review to the SC.
ISSUE: Whether or not the CA erred in ruling that petitioners are not entitled to profits over the businesses not listed
in the Acknowledgement
HELD: No. CA Decision Affirmed
CIVIL LAW- There is a co-ownership when an undivided thing or right belongs to different persons. It is a
partnership when two or more persons bind themselves to contribute money, property, or industry to a common
fund, with the intention of dividing the profits among themselves.
CIVIL LAW- The common ownership of property does not itself create a partnership between the owners, though
they may use it for the purpose of making gains; and they may, without becoming partners, agree among
themselves as to the management, and use of such property and the application of the proceeds therefrom.
Under Article 1767 of the Civil Code, there are two essential elements in a contract of partnership: (a) an
agreement to contribute money, property or industry to a common fund; and (b) intent to divide the profits among
the contracting parties.
It is not denied that all the parties in this case have agreed to contribute capital to a common fund to be able to
later on share its profits. They have admitted this fact, agreed to its veracity, and even submitted one common
documentary evidence to prove such partnership - the Acknowledgement of Participating Capital.
The Acknowledgement of Participating Capital is a duly notarized document voluntarily executed by Conchita
Jarantilla-Remotigue and Buenaventura Remotigue in 1957. Petitioner does not dispute its contents and is actually
relying on it to prove his participation in the partnership. Article 1797 of the Civil Code provides:
Art. 1797. The losses and profits shall be distributed in conformity with the agreement. If only the share of each
partner in the profits has been agreed upon, the share of each in the losses shall be in the same proportion.
In the absence of stipulation, the share of each partner in the profits and losses shall be in proportion to what he
may have contributed, but the industrial partner shall not be liable for the losses.
The petitioner himself claims his share to be 6%, as stated in the Acknowledgement of Participating Capital.
However, petitioner fails to realize that this document specifically enumerated the businesses covered by the
partnership: Manila Athletic Supply, Remotigue Trading in Iloilo City and Remotigue Trading in Cotabato City. Since
there was a clear agreement that the capital the partners contributed went to the three businesses, then there is
no reason to deviate from such agreement and go beyond the stipulations in the document. Therefore, the Court of
Appeals did not err in limiting petitioners share to the assets of the businesses enumerated in the
Acknowledgement of Participating Capital.
In Villareal v. Ramirez, the Court held that since a partnership is a separate juridical entity, the shares to be paid out
to the partners is necessarily limited only to its total resources.
CIVIL LAW- express and implied trust
The petitioner further asserts that he is entitled to respondents properties based on the concept of trust. He claims
that since the subject real properties were purchased using funds of the partnership, wherein he has a 6% share,
then "law and equity mandates that he should be considered as a co-owner of those properties in such
proportion."
As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and such proof must
be clear and satisfactorily show the existence of the trust and its elements. While implied trusts may be proved by
oral evidence, the evidence must be trustworthy and received by the courts with extreme caution, and should not
be made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required because oral
evidence can easily be fabricated.
The petitioner has failed to prove that there exists a trust over the subject real properties. Aside from his bare
allegations, he has failed to show that the respondents used the partnerships money to purchase the said
properties. Even assuming arguendo that some partnership income was used to acquire these properties, the
petitioner should have successfully shown that these funds came from his share in the partnership profits. After all,
by his own admission, and as stated in the Acknowledgement of Participating Capital, he owned a mere 6% equity
in the partnership.
DENIED
SY VS. CA
Sometime in 1958, private respondent Jaime Sahot[5] started working as a truck helper for petitioners’ family-
owned trucking business named Vicente Sy Trucking. In 1965, he became a truck driver of the same family business,
renamed T. Paulino Trucking Service, later 6B’s Trucking Corporation in 1985, and thereafter known as SBT Trucking
Corporation since 1994. Throughout all these changes in names and for 36 years, private respondent continuously
served the trucking business of petitioners. When Sahot was 59 years old, he incurred several absences due to
various ailments. Particularly causing him pain was his left thigh, which greatly affected the performance of his task
as a driver. He inquired about his medical and retirement benefits with the Social Security System (SSS) on April 25,
1994, but discovered that his premium payments had not been remitted by his employer.Sahot filed a week-long
leave to get medical attention. He was treated for EOR, presleyopia, hypertensive retinopathy G II and heart
enlargement. Because of such, Belen Paulino of the SBT Trucking Service management told him to file a formal
request for extension of his leave. When Sahot applied for an extended leave, he was threatened of termination of
employment should he refuse to go back to work. Eventually, Sahot was dismissed from employment which
prompted the latter to file an illegal dismissal case with the NLRC. For their part, petitioners admitted they had a
trucking business in the 1950s but denied employing helpers and drivers. They contend that private respondent
was not illegally dismissed as a driver because he was in fact petitioner’s industrial partner. They add that it was not
until the year 1994, when SBT Trucking Corporation was established, and only then did respondent Sahot become
an employee of the company, with a monthly salary that reached P4,160.00 at the time of his separation. The NLRC
and the CA ruled that Sahot was an employee of the petitioner.
ISSUE: Whether Sahot is an industrial partner
RULING:
No. Article 1767 of the Civil Code states that in a contract of partnership two or more persons bind themselves to
contribute money, property or industry to a common fund, with the intention of dividing the profits among
themselves. Not one of these circumstances is present in this case. No written agreement exists to prove the
partnership between the parties. Private respondent did not contribute money, property or industry for the
purpose of engaging in the supposed business. There is no proof that he was receiving a share in the profits as a
matter of course, during the period when the trucking business was under operation. Neither is there any proof
that he had actively participated in the management, administration and adoption of policies of the business. Thus,
the NLRC and the CA did not err in reversing the finding of the Labor Arbiter that private respondent was an
industrial partner from 1958 to 1994. On this point, the Court affirmed the findings of the appellate court and the
NLRC. Private respondent Jaime Sahot was not an industrial partner but an employee of petitioners from 1958 to
1994. The existence of an employer-employee relationship is ultimately a question of fact and the findings thereon
by the NLRC, as affirmed by the Court of Appeals, deserve not only respect but finality when supported by
substantial evidence. Substantial evidence is such amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion.
EVANGELISTA VS CIR
Petitioners borrowed money from their father and purchased several lands. For several years, these lands were
leased to tenants by the petitioners. In 1954, respondent Collector of Internal Revenue demanded from petitioners
the payment of income tax on corporations, real estate dealer's fixed tax and corporation residence tax for the
years 1945-1949. A letter of demand and correspondingassessments were delivered to petitioners.
Petitioners claim that they should be absolved from paying said taxes since they are not a corporation.
Issue: Whether petitioners are subject to the tax on corporations provided for in section 24 of Commonwealth Act.
No. 466, otherwise known as the National Internal Revenue Code, as well as to the residence tax for corporations
and the real estate dealers fixed tax.
Held: Yes. Petitioners are subject to the income tax and residence tax for corporation.
As defined in section 84 (b) of the Internal Revenue Code, "the term corporation includes partnerships, no matter
how created or organized." This qualifying expression clearly indicates that a joint venture need not be undertaken
in any of the standard forms, or in conformity with the usual requirements of the law on partnerships, in order that
one could be deemed constituted for purposes of the tax on corporations. Partnership, as has been defined in the
civil code refers to two or more persons who bind themselves to contribute money, properly, or industry to
a common fund, with the intention of dividing the profits among themselves. Thus, petitioners, being engaged in
the real estate transactions for monetary gain and dividing the same among themselves constitute a partnership so
far as the Code is concerned and are subject to income tax for corporation.
Since Sec 2 of the Code in defining corporations also includes joint-stock company, partnership, joint account,
association or insurance company, no matter how created or organized, it follows that petitioners, regardless of
how their partnership was created is also subject to the residence tax for corporations.
AFISCO VS CA
The petitioners are 41 non-life domestic insurance corporations. They issued risk insurance policies for machines.
The petitioners in 1965 entered into a Quota Share Reinsurance Treaty and a Surplus Reinsurance Treaty with the
Munchener Ruckversicherungs-Gesselschaft (hereafter called Munich), a non-resident foreign insurance
corporation. The reinsurance treaties required petitioners to form a pool, which they complied with.
In 1976, the pool of machinery insurers submitted a financial statement and filed an “Information Return of
Organization Exempt from Income Tax” for 1975. On the basis of this, the CIR assessed a deficiency
of P1,843,273.60, and withholding taxes in the amount of P1,768,799.39 and P89,438.68 on dividends paid to
Munich and to the petitioners, respectively.
The Court of Tax Appeal sustained the petitioner's liability. The Court of Appeals dismissed their appeal.
The CA ruled in that the pool of machinery insurers was a partnership taxable as a corporation, and that the latter’s
collection of premiums on behalf of its members, the ceding companies, was taxable income.
ISSUE/S:
1. Whether or not the pool is taxable as a corporation.
2. Whether or not there is double taxation.
HELD:
1) Yes: Pool taxable as a corporation
Argument of Petitioner: The reinsurance policies were written by them “individually and separately,” and that their
liability was limited to the extent of their allocated share in the original risks thus reinsured. Hence, the pool did not
act or earn income as a reinsurer. Its role was limited to its principal function of “allocating and distributing the
risk(s) arising from the original insurance among the signatories to the treaty or the members of the pool based on
their ability to absorb the risk(s) ceded[;] as well as the performance of incidental functions, such as records,
maintenance, collection and custody of funds, etc.”
Argument of SC: According to Section 24 of the NIRC of 1975:
“SEC. 24. Rate of tax on corporations. -- (a) Tax on domestic corporations. -- A tax is hereby imposed upon the
taxable net income received during each taxable year from all sources by every corporation organized in, or existing
under the laws of the Philippines, no matter how created or organized, but not including duly registered general co-
partnership (compañias colectivas), general professional partnerships, private educational institutions, and building
and loan associations xxx.”
Ineludibly, the Philippine legislature included in the concept of corporations those entities that resembled
them such as unregistered partnerships and associations. Interestingly, the NIRC’s inclusion of such entities in the
tax on corporations was made even clearer by the Tax Reform Act of 1997 Sec. 27 read together with Sec. 22 reads:
“SEC. 27. Rates of Income Tax on Domestic Corporations. --
(A) In General. -- Except as otherwise provided in this Code, an income tax of thirty-five percent (35%) is hereby
imposed upon the taxable income derived during each taxable year from all sources within and without the
Philippines by every corporation, as defined in Section 22 (B) of this Code, and taxable under this Title as a
corporation xxx.”
“SEC. 22. -- Definition. -- When used in this Title:
xxx xxx xxx
(B) The term ‘corporation’ shall include partnerships, no matter how created or organized, joint-stock companies,
joint accounts (cuentas en participacion), associations, or insurance companies, but does not include general
professional partnerships [or] a joint venture or consortium formed for the purpose of undertaking construction
projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or
consortium agreement under a service contract without the Government. ‘General professional partnerships’ are
partnerships formed by persons for the sole purpose of exercising their common profession, no part of the income
of which is derived from engaging in any trade or business.
Thus, the Court in Evangelista v. Collector of Internal Revenue held that Section 24 covered these unregistered
partnerships and even associations or joint accounts, which had no legal personalities apart from their individual
members.
Furthermore, Pool Agreement or an association that would handle all the insurance businesses covered under their
quota-share reinsurance treaty and surplus reinsurance treaty with Munich may be considered a partnership
because it contains the following elements: (1) The pool has a common fund, consisting of money and other
valuables that are deposited in the name and credit of the pool. This common fund pays for the administration and
operation expenses of the pool. (2) The pool functions through an executive board, which resembles the board of
directors of a corporation, composed of one representative for each of the ceding companies. (3) While, the pool
itself is not a reinsurer and does not issue any policies; its work is indispensable, beneficial and economically useful
to the business of the ceding companies and Munich, because without it they would not have received their
premiums pursuant to the agreement with Munich. Profit motive or business is, therefore, the primordial reason
for the pool’s formation.
GATCHALIAN VS CHR
In August 1986, the three partners put into writing their verbal agreement to form the partnership. As earlier
agreed, Santos shall finance and Nieves shall do the daily cash flow more particularly from their dealings with
Gragera, Zabat on the other hand shall be a loan investigator. But then later, Nieves and Santos found out that
Zabat was engaged in another lending business which competes with their partnership hence Zabat was expelled.
The two continued with the partnership and they took with them Nieves’ husband, Arsenio, who became their loan
investigator.
Later, Santos accused the spouses of not remitting Gragera’s commissions to the latter. He sued them for collection
of sum of money. The spouses countered that Santos merely filed the complaint because he did not want the
spouses to get their shares in the profits. Santos argued that the spouses, insofar as the dealing with Gragera is
concerned, are merely his employees. Santos alleged that there is a distinct partnership between him and Gragera
which is separate from the partnership formed between him, Zabat and Nieves.
The trial court as well as the Court of Appeals ruled against Santos and ordered the latter to pay the shares of the
spouses.
ISSUE: Whether or not the spouses are partners.

Plaintiffs purchased, in the ordinary course of business, from one of the duly authorized agents of the National
Charity Sweepstakes Office one ticket for the sum of two pesos (P2), saidticket was registered in the name of Jose
Gatchalian and Company. The ticket won one of the third-prizes in the amount of P50,000.
Jose Gatchalian was required to file the corresponding income taxreturn covering the prize won. Defendant-
Collector made an assessment against Jose Gatchalian and Co. requesting the payment of the sum of P1,499.94 to
the deputy provincial treasurer of Pulilan, Bulacan. Plaintiffs, however through counsel made a request for
exemption. It was denied.
Plaintiffs failed to pay the amount due, hence a warrant of distraint and levy was issued. Plaintiffs paid under
protest a part of the tax and penalties to avoid the effects of the warrant. A request that the balance be paid by
plaintiffs in installments was made. This was granted on the condition that a bond be filed.
Plaintiffs failed in their installment payments. Hence a request for execution of the warrant of distraint and levy
was made. Plaintiffs paid under protest to avoid the execution.
A claim for refund was made by the plaintiffs, which was dismissed, hence the appeal.
HELD: Yes. Though it is true that the original partnership between Zabat, Santos and Nieves was terminated when
Zabat was expelled, the said partnership was however considered continued when Nieves and Santos continued
engaging as usual in the lending business even getting Nieves’ husband, who resigned from the Asian Development
Bank, to be their loan investigator – who, in effect, substituted Zabat.
There is no separate partnership between Santos and Gragera. The latter being merely a commission agent of the
partnership. This is even though the partnership was formalized shortly after Gragera met with Santos (Note that
Nieves was even the one who introduced Gragera to Santos exactly for the purpose of setting up a lending
agreement between the corporation and the partnership).
HOWEVER, the order of the Court of Appeals directing Santos to give the spouses their shares in the profit is
premature. The accounting made by the trial court is based on the “total income” of the partnership. Such total
income calculated by the trial court did not consider the expenses sustained by the partnership. All expenses
incurred by the money-lending enterprise of the parties must first be deducted from the “total income” in order to
arrive at the “net profit” of the partnership. The share of each one of them should be based on this “net profit” and
not from the “gross income” or “total income”.

Issue: Whether the plaintiffs formed a partnership hence liable forincome tax.

Held: Yes. According to the stipulation facts the plaintiffs organized a partnership of a civil nature because each of
them put up money to buy a sweepstakes ticket for the sole purpose of dividing equallythe prize which they may
win, as they did in fact in the amount of P50,000. The partnership was not only formed, but upon the organization
thereof and the winning of the prize, Jose Gatchalian personally appeared in the office of the Philippines Charity
Sweepstakes, in his capacity as co-partner, as such collection the prize, the office issued the check for P50,000 in
favor of Jose Gatchalian and company, and the said partner, in the same capacity, collected the said check. All
these circumstances repel the idea that the plaintiffs organized and formed a community of property only.

SANTOS VS SPS REYES

n June 1986, Fernando Santos (70%), Nieves Reyes (15%), and Melton Zabat (15%) orally instituted a partnership
with them as partners. Their venture is to set up a lending business where it was agreed that Santos shall be
financier and that Nieves and Zabat shall contribute their industry. **The percentages after their names denote
their share in the profit.

Later, Nieves introduced Cesar Gragera to Santos. Gragera was the chairman of a corporation. It was agreed that
the partnership shall provide loans to the employees of Gragera’s corporation and Gragera shall earn commission
from loan payments.