Download - Partnership 1st Batch Full Text
[ ] PARTNERSHIP
G.R. No. L-25532 February 28, 1969
COMMISSIONER OF INTERNAL
REVENUE, petitioner,
vs.
WILLIAM J. SUTER and THE COURT OF
TAX APPEALS, respondents.
Office of the Solicitor General Antonio P.
Barredo, Assistant Solicitor General
Felicisimo R. Rosete and Special Attorneys
B. Gatdula, Jr. and T. Temprosa Jr. for
petitioner.
A. S. Monzon, Gutierrez, Farrales and Ong
for respondents.
REYES, J.B.L., J.:
A limited partnership, named "William J.
Suter 'Morcoin' Co., Ltd.," was formed on
30 September 1947 by herein respondent
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. On 1 October
1947, the limited partnership was registered
with the Securities and Exchange
Commission. 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, handling
and carrying merchandise, using invoices,
bills and letterheads bearing its trade-name,
maintaining its own books of accounts and
bank accounts, and had a quota allocation
with the Central Bank.
In 1948, however, general partner Suter and
limited partner Spirig got married and,
thereafter, on 18 December 1948, limited
partner Carlson sold his share in the
partnership to Suter and his wife. The sale
was duly recorded with the Securities and
Exchange Commission on 20 December
1948.
The limited partnership had been filing its
income tax returns as a corporation, without
objection by the herein petitioner,
Commissioner of Internal Revenue, until in
1959 when the latter, in an assessment,
consolidated the income of the firm and the
individual incomes of the partners-spouses
Suter and Spirig resulting in a determination
of a deficiency income tax against
respondent Suter in the amount of P2,678.06
for 1954 and P4,567.00 for 1955.
Respondent Suter protested the assessment,
and requested its cancellation and
withdrawal, as not in accordance with law,
but his request was denied. Unable to secure
a reconsideration, he appealed to the Court
of Tax Appeals, which court, after trial,
rendered a decision, on 11 November 1965,
reversing that of the Commissioner of
Internal Revenue.
[ ] PARTNERSHIP
The present case is a petition for review,
filed by the Commissioner of Internal
Revenue, of the tax court's aforesaid
decision. It raises these issues:
(a) Whether or not the corporate personality
of the William J. Suter "Morcoin" Co., Ltd.
should be disregarded for income tax
purposes, considering that respondent
William J. Suter and his wife, Julia Spirig
Suter actually formed a single taxable unit;
and
(b) Whether or not the partnership was
dissolved after the marriage of the partners,
respondent William J. Suter and Julia Spirig
Suter 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.
The theory of the petitioner, Commissioner
of Internal Revenue, is that the marriage of
Suter and Spirig and their subsequent
acquisition of the interests of remaining
partner Carlson in the partnership dissolved
the limited partnership, and if they did not,
the fiction of juridical personality of the
partnership should be disregarded for
income tax purposes because the spouses
have exclusive ownership and control of the
business; 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, in accordance with Section 45
(d) of the National Internal Revenue Code,
which provides as follows:
(d) Husband and wife. — In the case of
married persons, whether citizens, residents
or non-residents, only one consolidated
return for the taxable year shall be filed by
either spouse to cover the income of both
spouses; ....
In refutation of the foregoing, respondent
Suter maintains, as the Court of Tax Appeals
held, that his marriage with limited partner
Spirig and their acquisition of Carlson's
interests in the partnership in 1948 is not a
ground for dissolution of the partnership,
either in the Code of Commerce or in the
New Civil Code, and that since its juridical
personality had not been affected and since,
as a limited partnership, as contra
distinguished from a duly registered general
partnership, it is taxable on its income
similarly with corporations, Suter was not
bound to include in his individual return the
income of the limited partnership.
We find the Commissioner's appeal
unmeritorious.
The thesis that the limited partnership,
William J. Suter "Morcoin" Co., Ltd., has
been dissolved by operation of law because
of the marriage of the only general partner,
William J. Suter to the originally limited
partner, Julia Spirig one year after the
[ ] PARTNERSHIP
partnership was organized is rested by the
appellant upon the opinion of now Senator
Tolentino in Commentaries and
Jurisprudence on Commercial Laws of the
Philippines, Vol. 1, 4th Ed., page 58, that
reads as follows:
A husband and a wife may not enter into a
contract of general copartnership, because
under the Civil Code, which applies in the
absence of express provision in the Code of
Commerce, persons prohibited from making
donations to each other are prohibited from
entering into universal partnerships. (2
Echaverri 196) It follows that the marriage
of partners necessarily brings about the
dissolution of a pre-existing partnership. (1
Guy de Montella 58)
The petitioner-appellant 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 (which was
the law in force when the subject 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.
The former Chief Justice of the Spanish
Supreme Court, D. Jose Casan, in his
Derecho Civil, 7th Edition, 1952, Volume 4,
page 546, footnote 1, says with regard to the
prohibition contained in the aforesaid
Article 1677:
Los conyuges, segun esto, no pueden
celebrar entre si el contrato de sociedad
universal, pero o podran constituir sociedad
particular? Aunque el punto ha sido muy
debatido, nos inclinamos a la tesis permisiva
de los contratos de sociedad particular entre
esposos, ya que ningun precepto de nuestro
Codigo los prohibe, y hay que estar a la
norma general segun la que toda persona es
capaz para contratar mientras no sea
declarado incapaz por la ley. La
jurisprudencia de la Direccion de los
Registros fue favorable a esta misma tesis en
su resolution de 3 de febrero de 1936, mas
parece cambiar de rumbo en la de 9 de
marzo de 1943.
[ ] PARTNERSHIP
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 appellant's view, that by the marriage of
both partners the company became a single
proprietorship, is equally erroneous. The
capital contributions of partners William J.
Suter and Julia Spirig were separately
owned and contributed by them before their
marriage; and after they were joined in
wedlock, such contributions remained their
respective separate property under the
Spanish Civil Code (Article 1396):
The following shall be
the exclusive property of each spouse:
(a) That which is brought to the marriage as
his or her own; ....
Thus, the individual interest of each consort
in William J. Suter "Morcoin" Co., Ltd. did
not become common property of both after
their marriage in 1948.
It being a basic tenet of the Spanish and
Philippine law that the partnership has a
juridical personality of its own, distinct and
separate from that of its partners (unlike
American and English law that does not
recognize such separate juridical
personality), the bypassing of the existence
of the limited partnership as a taxpayer can
only be done by ignoring or disregarding
clear statutory mandates and basic principles
of our law. The limited partnership's
separate individuality makes it impossible to
equate its income with that of the
component members. True, section 24 of the
Internal Revenue Code merges registered
general co-partnerships (compañias
colectivas) with the personality of the
individual partners for income tax purposes.
But this rule is exceptional in its disregard
of a cardinal tenet of our partnership laws,
and can not be extended by mere implication
to limited partnerships.
The rulings cited by the petitioner (Collector
of Internal Revenue vs. University of the
Visayas, L-13554, Resolution of 30 October
1964, and Koppel [Phil.], Inc. vs. Yatco, 77
Phil. 504) as authority for disregarding the
fiction of legal personality of the
corporations involved therein are not
applicable to the present case. In the cited
cases, the corporations were
already subject to tax when the fiction of
their corporate personality was pierced; in
the present case, to do so would exempt the
limited partnership from income taxation but
would throw the tax burden upon the
partners-spouses in their individual
capacities. The corporations, in the cases
cited, merely served as business conduits
or alter egos of the stockholders, a factor
that justified a disregard of their corporate
personalities for tax purposes. This is not
[ ] PARTNERSHIP
true in the present case. Here, the limited
partnership is not a mere business conduit of
the partner-spouses; it was organized for
legitimate business purposes; it conducted
its own dealings with its customers prior to
appellee's marriage, and had been filing its
own income tax returns as such independent
entity. The change in its membership,
brought about by the marriage of the
partners and their subsequent acquisition of
all interest therein, is no ground for
withdrawing the partnership from the
coverage of Section 24 of the tax code,
requiring it to pay income tax. As far as the
records show, the partners did not enter into
matrimony and thereafter buy the interests
of the remaining partner with the
premeditated scheme or design to use the
partnership as a business conduit to dodge
the tax laws. Regularity, not otherwise, is
presumed.
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.
In fact, it would even conflict with what it
specifically provides in its Section 24: for
the appellant Commissioner's stand results
in equal treatment, tax wise, of a general
copartnership (compañia colectiva) and a
limited partnership, when the code plainly
differentiates the two. Thus, the code taxes
the latter on its income, but not the former,
because it is in the case of compañias
colectivas that 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 (Section 26, N.I.R.C.;
Arañas, Anno. & Juris. on the N.I.R.C., As
Amended, Vol. 1, pp. 88-89).lawphi1.nêt
But it is argued that the income of the
limited partnership is actually or
constructively the income of the spouses and
forms part of the conjugal partnership of
gains. This is not wholly correct. As pointed
out in Agapito vs. Molo 50 Phil. 779, and
People's Bank vs. Register of Deeds of
Manila, 60 Phil. 167, the fruits of the wife's
parapherna become conjugal only when no
longer needed to defray the expenses for the
administration and preservation of the
paraphernal capital of the wife. Then again,
the appellant's argument erroneously
confines itself to the question of the legal
personality of the limited partnership, which
is not essential to the income taxability of
the partnership since the law taxes the
income of even joint accounts that have no
personality of their own. 1 Appellant is,
likewise, mistaken in that it assumes that the
conjugal partnership of gains is a taxable
unit, which it is not. What is taxable is the
"income of both spouses" (Section 45 [d] in
their individual capacities. Though the
amount of income (income of the conjugal
partnership vis-a-vis the joint income of
[ ] PARTNERSHIP
husband and wife) may be the same for a
given taxable year, their consequences
would be different, as their contributions in
the business partnership are not the same.
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.
FOR THE FOREGOING REASONS, the
decision under review is hereby affirmed.
No costs.
G.R. No. L-4935 May 28, 1954
J. M. TUASON & CO., INC., represented
by it Managing PARTNER, GREGORIA
ARANETA, INC., plaintiff-appellee,
vs.
QUIRINO BOLAÑOS, defendant-appellant.
Araneta and Araneta for appellee.
Jose A. Buendia for appellant.
REYES, J.:
This is an action originally brought in the
Court of First Instance of Rizal, Quezon
City Branch, to recover possesion of
registered land situated in barrio Tatalon,
Quezon City.
Plaintiff's complaint was amended three
times with respect to the extent and
description of the land sought to be
recovered. The original complaint described
the land as 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 as containing an area of 13
hectares more or less. But the complaint was
amended by reducing the area of 6 hectares,
more or less, after the defendant had
indicated the plaintiff's surveyors the portion
of land claimed and occupied by him. The
second 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. And still later, 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
allegations conform to the evidence.
[ ] PARTNERSHIP
Defendant, in his answer, sets up
prescription and title in himself thru "open,
continuous, exclusive and public and
notorious possession (of land in dispute)
under claim of ownership, adverse to the
entire world by defendant and his
predecessor in interest" from "time in-
memorial". The answer further alleges that
registration of the land in dispute was
obtained by plaintiff or its predecessors in
interest thru "fraud or error and without
knowledge (of) or interest either personal or
thru publication to defendant and/or
predecessors in interest." The answer
therefore prays that the complaint be
dismissed with costs and plaintiff required
to reconvey the land to defendant or pay its
value.
After trial, the 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.
Appealing directly to this court because of
the value of the property involved,
defendant makes the following assignment
or errors:
I. The trial court erred in not dismissing the
case on the ground that the case was not
brought by the real property in interest.
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.
V. The trial court erred in holding that the
land in dispute is covered by transfer
certificates of Title Nos. 37686 and 37677.
Vl. The trial court erred in not finding that
the defendant is the true and lawful owner of
the land.
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.
VIII. The trial court erred in not ordering the
plaintiff to reconvey the land in litigation to
the defendant.
As to the first assigned error, there is
nothing to the contention that the present
action is not brought by the real party in
interest, that is, by J. M. Tuason and Co.,
Inc. What the Rules of Court require is that
an action be broughtin the name of, but not
necessarily by, the real party in interest.
(Section 2, Rule 2.) In fact the practice is for
[ ] PARTNERSHIP
an attorney-at-law 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." It
is true that 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. 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." (Wyoming-Indiana Oil Gas Co. vs.
Weston, 80 A. L. R., 1043, citing 2 Fletcher
Cyc. of Corp., 1082.) 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.
Errors II, III, and IV, referring to the
admission of the third amended complaint,
may be answered by mere reference to
section 4 of Rule 17, Rules of Court, which
sanctions such amendment. It reads:
Sec. 4. Amendment to conform to evidence.
— When issues not raise d 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.
Under this provision amendment is not even
necessary for the purpose of rendering
judgment on issues proved though not
alleged. Thus, commenting on the provision,
Chief Justice Moran says in this Rules of
Court:
[ ] PARTNERSHIP
Under this section, American courts have,
under the New Federal Rules of Civil
Procedure, ruled that 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. (I Moran, Rules of Court,
1952 ed., 389-390.)
Our conclusion therefore is that
specification of error II, III, and IV are
without merit..
Let us now pass on the errors V and VI.
Admitting, though his attorney, at the early
stage of the trial, 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 Bolaños," defendant later
changed his lawyer and also his theory and
tried to prove that the land in dispute was
not covered by plaintiff's certificate of title.
The evidence, however, is against defendant,
for it clearly establishes that plaintiff is the
registered owner of lot No. 4-B-3-C, situate
in barrio Tatalon, Quezon City, with an area
of 5,297,429.3 square meters, more or less,
covered by transfer certificate of title No.
37686 of the land records of Rizal province,
and of lot No. 4-B-4, situated in the same
barrio, having an area of 74,789 square
meters, more or less, covered by transfer
certificate of title No. 37677 of the land
records of the same province, both lots
having been originally registered on July 8,
1914 under original certificate of title No.
735. 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, Quirico Feria. The
combined testimony of these three witnesses
clearly shows that the portion claimed by
defendant is made up of a part of lot 4-B-3-
C and major on portion of lot 4-B-4, and is
well within the area covered by the two
transfer certificates of title already
mentioned. This fact also appears admitted
in defendant's answer to the third amended
complaint.
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
court the decree be collaterally attacked by
any person claiming title to, or interest in,
the land prior to the registration
proceedings. (Soroñgon vs. Makalintal,1 45
Off. Gaz., 3819.) Nor could title to that land
in derogation of that of plaintiff, the
registered owner, be acquired by
[ ] PARTNERSHIP
prescription or adverse possession. (Section
46, Act No. 496.) Adverse, notorious and
continuous possession under claim of
ownership for the period fixed by law is
ineffective against a Torrens title.
(Valiente vs. Judge of CFI of Tarlac,2 etc.,
45 Off. Gaz., Supp. 9, p. 43.) And it is
likewise settled that the right to secure
possession under a decree of registration
does not prescribed. (Francisco vs. Cruz, 43
Off. Gaz., 5105, 5109-5110.) A recent
decision of this Court on this point is that
rendered in the case of Jose Alcantara et al.,
vs. Mariano et al., 92 Phil., 796. This
disposes of the alleged errors V and VI.
As to error VII, it is claimed that `there was
no evidence to sustain the finding that
defendant should be sentenced to pay
plaintiff P132.62 monthly from January,
1940, until he vacates the premises.' But it
appears from the record that that 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. It is appears from the testimony of J.
A. Araneta and witness Emigdio Tanjuatco
that as early as 1939 an action of ejectment
had already been filed against defendant.
And it cannot be supposed that defendant
has been paying rents, for he has been
asserting all along that the premises in
question 'have always been since time
immemorial in open, continuous, exclusive
and public and notorious possession and
under claim of ownership adverse to the
entire world by defendant and his
predecessors in interest.' This assignment of
error is thus clearly without merit.
Error No. VIII is but a consequence of the
other errors alleged and needs for further
consideration.
During the pendency of this case in this
Court appellant, thru other counsel, has filed
a motion to dismiss alleging that there is
pending before the Court of First Instance of
Rizal another action between the same
parties and for the same cause and seeking
to sustain that allegation with a copy of the
complaint filed in said action. But an
examination of that complaint reveals that
appellant's allegation is not correct, for the
pretended identity of parties and cause of
action in the two suits does not appear. That
other case is one for recovery of ownership,
while the present one is for recovery of
possession. And while appellant claims that
he is also involved in that order action
because it is a class suit, the complaint does
not show that such is really the case. On the
contrary, it appears that the action seeks
relief for each individual plaintiff and not
relief for and on behalf of others. The
motion for dismissal is clearly without
merit.
[ ] PARTNERSHIP
Wherefore, the judgment appealed from is
affirmed, with costs against the plaintiff.
G.R. No. L-31684 June 28, 1973
EVANGELISTA & CO., DOMINGO C.
EVANGELISTA, JR., CONCHITA B.
NAVARRO and LEONARDA ATIENZA
ABAD SABTOS, petitioners,
vs.
ESTRELLA ABAD SANTOS, respondent.
Leonardo Abola for petitioners.
Baisas, Alberto & Associates for
respondent.
MAKALINTAL, J.:
On October 9, 1954 a co-partnership was
formed under the name of "Evangelista &
Co." On June 7, 1955 the Articles of Co-
partnership was amended as 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 amended
Articles provided, inter alia, that "the
contribution of Estrella Abad Santos
consists of her industry being an industrial
partner", and that the profits and losses
"shall be divided and distributed among the
partners ... in the proportion of 70% for the
first three partners, Domingo C. Evangelista,
Jr., Conchita P. Navarro and Leonardo
Atienza Abad Santos to be divided among
them equally; and 30% for the fourth partner
Estrella Abad Santos."
On December 17, 1963 herein respondent
filed suit against the three other partners in
the Court of First Instance of Manila,
alleging that the partnership, which was also
made a party-defendant, had been paying
dividends to the partners except to her; and
that notwithstanding her demands the
defendants had refused and continued to
refuse and let her examine the partnership
books or to give her information regarding
the partnership affairs to pay her any share
in the dividends declared by the partnership.
She therefore prayed that the defendants be
ordered to render accounting to her of the
partnership business and to pay her
corresponding share in the partnership
profits after such accounting, plus attorney's
fees and costs.
The defendants, in their answer, denied ever
having declared dividends or distributed
[ ] PARTNERSHIP
profits of the partnership; denied likewise
that the plaintiff ever demanded that she be
allowed to examine the partnership books;
and byway of affirmative defense alleged
that the amended Articles of Co-partnership
did not express the true agreement of the
parties, which was that the plaintiff was not
an industrial partner; that she did not in fact
contribute industry to the partnership; and
that her share of 30% was to be based on the
profits which might be realized by the
partnership only until full payment of the
loan which it had obtained in December,
1955 from the Rehabilitation Finance
Corporation in the sum of P30,000, for
which the plaintiff had signed a promisory
note as co-maker and mortgaged her
property as security.
The parties are in agreement that the main
issue in this case is "whether the plaintiff-
appellee (respondent here) is an industrial
partner as claimed by her 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 from
the Rehabilitation Finance Corporation shall
be fully paid, as claimed by appellants
(herein petitioners)." On that issue the Court
of First Instance found for the plaintiff and
rendered judgement "declaring her an
industrial partner of Evangelista & Co.;
ordering the defendants to render an
accounting of the business operations of the
(said) partnership ... from June 7, 1955; to
pay the plaintiff such amounts as may be
due as her share in the partnership profits
and/or dividends after such an accounting
has been properly made; to pay plaintiff
attorney's fees in the sum of P2,000.00 and
the costs of this suit."
The defendants appealed to the Court of
Appeals, which thereafter affirmed
judgments of the court a quo.
In the petition before Us the petitioners have
assigned the following errors:
I. The Court of Appeals erred in the finding
that the respondent is an industrial partner of
Evangelista & Co., notwithstanding the
admitted fact that since 1954 and until after
promulgation of the decision of the appellate
court the said respondent was one of the
judges of the City Court of Manila, and
despite its findings that respondent had been
paid for services allegedly contributed by
her to the partnership. In this connection the
Court of Appeals erred:
(A) In finding that the "amended Articles of
Co-partnership," Exhibit "A" is conclusive
evidence that respondent was in fact made
an industrial partner of Evangelista & Co.
(B) In not finding that a portion of
respondent's testimony quoted in the
decision proves that said respondent did not
bind herself to contribute her industry, and
she could not, and in fact did not, because
[ ] PARTNERSHIP
she was one of the judges of the City Court
of Manila since 1954.
(C) In finding that respondent did not in fact
contribute her industry, despite the appellate
court's own finding that she has been paid
for the services allegedly rendered by her, as
well as for the loans of money made by her
to the partnership.
II. The lower court erred in not finding that
in any event the respondent was lawfully
excluded from, and deprived of, her alleged
share, interests and participation, as an
alleged industrial partner, in the partnership
Evangelista & Co., and its profits or net
income.
III. The Court of Appeals erred in
affirming in toto the decision of the trial
court whereby respondent was declared an
industrial partner of the petitioner, and
petitioners were ordered to render an
accounting of the business operation of the
partnership from June 7, 1955, and to pay
the respondent her alleged share in the net
profits of the partnership plus the sum of
P2,000.00 as attorney's fees and the costs of
the suit, instead of dismissing respondent's
complaint, with costs, against the
respondent.
It is quite obvious that the questions raised
in the first assigned errors refer to the facts
as found by the Court of Appeals. The
evidence presented by the parties as the trial
in support of their respective positions on
the issue of whether or not the respondent
was an industrial partner was thoroughly
analyzed by the Court of Appeals on its
decision, to the extent of
reproducing verbatim therein the lengthy
testimony of the witnesses.
It is not the function of the Supreme Court
to analyze or weigh such evidence all over
again, its jurisdiction being limited to
reviewing errors of law that might have been
commited by the lower court. It should be
observed, in this regard, that the Court of
Appeals did not hold that the Articles of Co-
partnership, identified in the record as
Exhibit "A", was conclusive evidence that
the respondent was an industrial partner of
the said company, but considered it together
with other factors, consisting of both
testimonial and documentary evidences, in
arriving at the factual conclusion expressed
in the decision.
The findings of the Court of Appeals on the
various points raised in the first assignment
of error are hereunder reproduced if only to
demonstrate that the same were made after a
through analysis of then evidence, and hence
are beyond this Court's power of review.
The aforequoted findings of the lower Court
are assailed under Appellants' first assigned
error, wherein it is pointed out that
"Appellee's documentary evidence does not
[ ] PARTNERSHIP
conclusively prove that appellee was in fact
admitted by appellants as industrial partner
of Evangelista & Co." and that "The grounds
relied upon by the lower Court are
untenable" (Pages 21 and 26, Appellant's
Brief).
The first point refers to Exhibit A, B, C, K,
K-1, J, N and S, appellants' complaint being
that "In finding that the appellee is an
industrial partner of appellant Evangelista &
Co., herein referred to as the partnership —
the lower court relied mainly on the
appellee's documentary evidence, entirely
disregarding facts and circumstances
established by appellants" evidence which
contradict the said finding' (Page 21,
Appellants' Brief). The lower court could
not have done otherwise but rely on the
exhibits just mentioned, first, because
appellants have admitted their genuineness
and due execution, hence they were
admitted without objection by the lower
court when appellee rested her case and,
secondly the said exhibits indubitably show
the appellee is an industrial partner of
appellant company. Appellants are virtually
estopped from attempting to detract from the
probative force of the said exhibits because
they all bear the imprint of their knowledge
and consent, and there is no credible
showing that they ever protested against or
opposed their contents prior of the filing of
their answer to appellee's complaint. As a
matter of fact, all the appellant Evangelista,
Jr., would have us believe — as against the
cumulative force of appellee's aforesaid
documentary evidence — is the appellee's
Exhibit "A", as confirmed and corroborated
by the other exhibits already mentioned,
does not express the true intent and
agreement of the parties thereto, the real
understanding between them being the
appellee would be merely a profit sharer
entitled to 30% of the net profits that may be
realized between the partners from June 7,
1955, until the mortgage loan of P30,000.00
to be obtained from the RFC shall have been
fully paid. This version, however, is
discredited not only by the aforesaid
documentary evidence brought forward by
the appellee, but also by the fact that from
June 7, 1955 up to the filing of their answer
to the complaint on February 8, 1964 — or a
period of over eight (8) years — appellants
did nothing to correct the alleged false
agreement of the parties contained in Exhibit
"A". It is thus reasonable to suppose that,
had appellee not filed the present action,
appellants would not have advanced this
obvious afterthought that Exhibit "A" does
not express the true intent and agreement of
the parties thereto.
At pages 32-33 of appellants' brief, they also
make much of the argument that 'there is an
overriding fact which proves that the parties
to the Amended Articles of Partnership,
Exhibit "A", did not contemplate to make
the appellee Estrella Abad Santos, an
[ ] PARTNERSHIP
industrial partner of Evangelista & Co. It is
an admitted fact that since before the
execution of the amended articles of
partnership, Exhibit "A", the appellee
Estrella Abad Santos has been, and up to the
present time still is, one of the judges of the
City Court of Manila, devoting all her time
to the performance of the duties of her
public office. This fact proves beyond
peradventure that it was never contemplated
between the parties, for she could not
lawfully contribute her full time and
industry which is the obligation of an
industrial partner pursuant to Art. 1789 of
the Civil Code.
The Court of Appeals then proceeded to
consider appellee's testimony on this point,
quoting it in the decision, and then
concluded as follows:
One cannot read appellee's testimony just
quoted without gaining the very definite
impression that, even as she was and still is
a Judge of the City Court of Manila, she has
rendered services for appellants without
which they would not have had the
wherewithal to operate the business for
which appellant company was organized.
Article 1767 of the New Civil Code which
provides that "By 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, 'does not
specify the kind of industry that a partner
may thus contribute, hence the said services
may legitimately be considered as appellee's
contribution to the common fund. Another
article of the same Code relied upon
appellants reads:
'ART. 1789. An industrial 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 benefits
which he may have obtained in violation of
this provision, with a right to damages in
either case.'
It is not disputed that the provision against
the industrial partner engaging in business
for himself seeks to prevent any conflict of
interest between the industrial partner and
the partnership, and to insure faithful
compliance by said partner with this
prestation. There is no pretense, however,
even on the part of the appellee is engaged
in any business antagonistic to that of
appellant company, since being a Judge of
one of the branches of the City Court of
Manila can hardly be characterized as a
business. That appellee has faithfully
complied with her prestation with respect to
appellants is clearly shown by the fact that it
was only after filing of the complaint in this
case and the answer thereto appellants
exercised their right of exclusion under the
[ ] PARTNERSHIP
codal art just mentioned by alleging in their
Supplemental Answer dated June 29, 1964
— or after around nine (9) years from June
7, 1955 — subsequent to the filing of
defendants' answer to the complaint,
defendants reached an agreement whereby
the herein plaintiff been excluded from, and
deprived of, her alleged share, interests or
participation, as an alleged industrial
partner, in the defendant partnership and/or
in its net profits or income, on the ground
plaintiff has never contributed her industry
to the partnership, instead she has been and
still is a judge of the City Court (formerly
Municipal Court) of the City of Manila,
devoting her time to performance of her
duties as such judge and enjoying the
privilege and emoluments appertaining to
the said office, aside from teaching in law
school in Manila, without the express
consent of the herein defendants' (Record
On Appeal, pp. 24-25). Having always
knows as a appellee as a City judge even
before she joined appellant company on
June 7, 1955 as an industrial partner, why
did it take appellants many yearn before
excluding her from said company as
aforequoted allegations? And how can they
reconcile such exclusive with their main
theory that appellee has never been such a
partner because "The real agreement
evidenced by Exhibit "A" was to grant the
appellee a share of 30% of the net profits
which the appellant partnership may realize
from June 7, 1955, until the mortgage of
P30,000.00 obtained from the Rehabilitation
Finance Corporal shall have been fully
paid." (Appellants Brief, p. 38).
What has gone before persuades us to hold
with the lower Court that appellee is an
industrial partner of appellant company,
with the right to demand for a formal
accounting and to receive her share in the
net profit that may result from such an
accounting, which right appellants take
exception under their second assigned error.
Our said holding is based on the following
article of the New Civil Code:
'ART. 1899. Any partner shall have the right
to a formal account as to partnership affairs:
(1) If he is wrongfully excluded from the
partnership business or possession of its
property by his co-partners;
(2) If the right exists under the terms of any
agreement;
(3) As provided by article 1807;
(4) Whenever other circumstance render it
just and reasonable.
We find no reason in this case to depart
from the rule which limits this Court's
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.
[ ] PARTNERSHIP
The judgment appealed from is affirmed,
with costs.
G.R. L-No. 3666 August 17, 1909
THE CITY OF MANILA, plaintiff-
appellant,
vs.
FRANCISCO GAMBE, ET
AL., defendants-appellees.
Modesto Reyes for appellant.
Del-Pan, Ortigas and Fisher for appellees.
JOHNSON, J.:
From the record the following facts appear:
First. That upon the 31st day of August,
1903, the plaintiff commenced an action in
the Court of First Instance of the city of
Manila against the defendants, Francisco
Gambe, Manuel Perez, Antonio Herranz,
and Florencio Garriz, who constitute the
commercial firm of Herranz & Garriz, for
the purpose of recovering the sum of five
thousand dollars ($5,000), United States
currency, for certain damages occasioned by
the steamship Alfred to the "Spanish
Bridge" in the city of Manila.
Second. After a consideration of the facts
adduced during the trial, the Honorable
Judge Rohde, then one of the judges of the
Court of First Instance of the city of Manila,
rendered a judgment against the said
Francisco Gambe, for the sum of $1,300,
United States currency, and for the costs.
Third. Francisco Gambe was a pilot and
member of the Pilot's Association of Manila
and was at the time of the alleged accident
and injury in charge of said
steamship Alfred. Judge Rohde dismissed
the cause as to the other defendants.
Fourth. From this judgment of the lower
court the defendant Gambe appealed to the
Supreme Court.
Fifth. After a consideration of the facts, the
Supreme Court on the 31st day of March,
1906, affirmed with costs the judgment of
the lower court. (See City of
Manila vs. Gambe, 6 Phil. Rep., 49.)
Sixth. The judgment thus affirmed was
returned to the lower court for an execution
of the same.
Seventh. On the 26th day of May, 1906, an
execution was issued upon the said
judgment against the said defendant,
Francisco Gambe, and was returned upon
the 23d day of June, 1906, unsatisfied.
Eighth. Later, upon the 11th day of July,
1906, another execution was issued out of
[ ] PARTNERSHIP
the Court of First Instance against the
defendant, Francisco Gambe, which was
returned upon the 17th day of August, 1906,
unsatisfied.
Ninth. On the same day, or the 11th day of
July, 1906, in accordance with the
provisions of section 431 of the Code of
Procedure in Civil Actions, the plaintiff
attempted to attach whatever money or
effects which the defendant had in the said
Pilots' Association of Manila. These
attachments were directed to the Hongkong
and Shanghai Banking Corporation, the
Hon. W. Morgan Shuster, Collector of
Customs, as well as Francisco Aguado, who
was the chief of the said Pilot's Association.
Tenth. On the 22d day of August, 1906, the
attorney for the plaintiff presented in the
lower court the following affidavit:
Edmond Block, being duly sworn, says:
That he is the attorney for the plaintiff in the
above-entitled action.
That a judgment was duly entered and
docketed in the said action in the said court
on the 20th day of April, 1906, for the sum
of thirteen hundred dollars ($1,300), United
States currency, and costs, against the
above-named defendant, in favor of the
plaintiff.
That an execution upon said judgment was
duly issued against the property of said
judgment debtor.
That the said judgment debtor now resides
in the said city of Manila.
That the sheriff of the city of Manila has
returned said execution wholly unsatisfied,
and that the said judgment still remains
wholly unpaid.
That affiant is informed and believes that an
organization or association known as the
"Manila Pilots' Association," of which
Francisco Aguado is the chief pilot, Manuel
Goitia is the treasurer and custodian of its
funds, and of which W. Morgan Shuster,
Francisco Gambe, and other pilots of the
port of Manila are members, has property in
its possession dedicated to and for the
purpose of payment of damages caused
through negligence of the pilots of said
association, or any of them, to third persons.
That the said association has in its
possession and under its control, property of
the said judgment debtor, exceeding eight
hundred pesos (P800), Philippine currency,
and is indebted to the said judgment debtor
in an amount exceeding eight hundred pesos
(P800), Philippine currency.
That the said indebtedness to said judgment
debtor arose through this, that the said
judgment debtor has deposited with the said
[ ] PARTNERSHIP
association the amount exceeding eight
hundred pesos (P800), Philippine currency,
and that the said association now holds the
said amount subject to the order of said
judgment debtor, and that the said amount
should be applied, affiant believes, to the
payment or satisfaction of the judgment
debtor.
That on the 23d day of June and 11th of
July, 1906, the said Pilots' Association,
through the chief pilot, the treasurer of said
association, W. Morgan Shuster, and
Francisco Gambe, was duly notified and
each of the above-mentioned persons were
so duly notified by the sheriff of the city of
Manila, that attachment was levied against
all the goods, effects, interests, credits or
money belonging to the defendant, in the
possession of said association and persons,
to cover the amount of two thousand six
hundred and seventy pesos (P2,670),
Philippine currency, and to make immediate
payment of said goods, effects, interests,
credits, or money and forward same to the
sheriff.
That all of the above-mentioned persons
denied having in their possession, and
refused to deliver any such said goods,
effects, interests, credits, or money
belonging to said defendant.
Wherefore deponent prays an order of this
court that the said Francisco Aguado,
Francisco Gambe, Manuel Goitia, and W.
Morgan Shuster, be and appear and answer
as to the indebtedness of the said Pilots'
Association to said judgment debtor, at a
time and place by said court to be specified.
(Signed) EDMOND BLOCK.
Subscribed and sworn to before me this 22d
day of August, 1906, exhibiting in the act
cedula No. 175565, dated Manila, June 6,
1906.
(Signed) MODESTO REYES,
Notary Public.
Commission expires December 31, 1906.
Upon this affidavit, the Hon. A. S.
Crossfield, one of the judges of the Court of
First Instance of the city of Manila, made
the following order:
On reading the foregoing affidavit, it is
satisfactorily appearing to me therefrom that
the Manila Pilots' Association has property
of Francisco Gambe, the defendant in the
above-entitled action, which property ought
to be applied toward the satisfaction of the
judgment in said action, and that Francisco
Aguado is the chief pilot, Manuel Goitia the
treasurer, and Francisco Gambe and W.
Morgan Shuster are members of said
association, and that it is proper cause for
this order, I, the undersigned, judge of the
Court of First Instance of the city of Manila,
Philippine Islands, do hereby order the said
[ ] PARTNERSHIP
Francisco Aguado, Francisco Gambe,
Manuel Goitia, and W. Morgan Shuster
personally to appear before me in the said
city of Manila, on the 10th day of
September, at 10 o'clock in the morning of
that day, to answer concerning the said
property.
Eleventh. In accordance with the above
order, the said parties appeared before the
said court and testified relating to the
money, property, credits or effects which the
said Pilots' Association had in its possession
belonging to the said defendants.
After hearing the evidence of these parties,
the said Hon. A. S. Crossfield rendered the
following judgment:
This case is now before the court for hearing
the order directing Francisco Aguado as
chief pilot, Manuel Goitia as treasurer, and
Francisco Gambe and W. Morgan Shuster as
members of the Pilots' Association to
answer as to any property they may have in
their possession or under their control,
belonging to the defendant, Francisco
Gambe. Execution having been issued in the
above-named respondents having been
attached, as in garnishee proceedings, all of
the above-named respondents appeared and
the two first-named made declarations as to
the property in their hands.
From the declaration made it appears:
That each member of the Pilots' Association
before becoming such, must deposit with the
association the sum of P800, to be retained
by the association for the purpose of
satisfying damages which may be incurred
by others by reason of negligence or fault on
the part of the association in the transaction
of its business.
It further appears from the declarations that
persons thus depositing the money could not
withdraw it; that it is property of the
association and may not be withdrawn, even
in case of the death of a member, and that
said Francisco Gambe is a member.
I therefore find that the above-named
respondents, either as officers of the
association or members thereof, have not in
their control, nor do they possess any
property, money, or effects which would be
the subject of a levy under execution against
said Gambe, and the order to appear is
discharged.
From this decision of the lower court the
plaintiff appealed and made the following
assignments of error in this court:
1. The court below erred in deciding that the
sum of P800, Philippine currency, deposited
by the defendant, Gambe, with the Pilots'
Association could not be withdrawn by him:
"that it has become the property of the
association, and that the same can not be
withdrawn even in the event of the death of
[ ] PARTNERSHIP
a member", and that the said Francisco
Gambe is such a member.
2. The court below erred in deciding that the
respondents called upon to appear in this
incident "either as officers of the association
or as members thereof, have not under their
control nor in their possession any property,
money, or goods subject to attachment by
reason of an execution against the said
Gambe."
3. The court below erred in not ordering the
respondents, as officers or members of the
Pilots' Association, to deliver to the plaintiff,
the city of Manila, the P800, Philippine
currency, which the said defendant Gambe,
against whom the plaintiff has an execution
pending for the sum of P2,670, Philippine
currency, has in the treasury of the
association.
The only question presented in this court is
whether or not the said Pilots' Association
had debts, credits, or personal property, not
capable of manual delivery, in its possession
or under its control, belonging to the
defendant. In other words, did said Pilots'
Association owe to the defendant, a debt or
have in its possession and under its control
credits and other personal property,
belonging to the defendant, subject to be
attached in accordance with the provisions
of said section 431? Section 431 of the Code
of Procedure in Civil Actions provides:
Debts and credits, and other personal
property not capable of manual delivery,
shall be attached by leaving with the person
owing such debts or having in his possession
or under his control such credits and other
personal property, a copy of the order of
attachment, and a notice that the debts
owing by him to the defendant, or the credits
and other personal property in his
possession or under his control, belonging to
the defendant, are attached in pursuance of
such order.
The test whether or not the interests of the
defendant, if he has any, in said association
may be attached by virtue of said section is
whether said Gambe could maintain an
action against the said association for the
recovery of the specific debt, credit, or
personal property. It would seem clear and
conclusive that if Gambe himself could not
maintain an action against the said
association for the recovery of the specific
debt, credit, or personal property which the
plaintiff here is attempting to get possession
of by virtue of the action, that said plaintiff
could not recover the same under the form
of action adopted by it. If Gambe could
successfully maintain an action against the
said Pilots' Association for the recovery of a
specific sum of money or specific personal
property, then, in our opinion, his judgment
creditors, or the plaintiff in this case, might
also by the procedure provided for under
said section 431 maintain the present action,
[ ] PARTNERSHIP
but not otherwise. (Hassie vs. God Is With
Us Cong., 35 Cal., 378, 386.)
We do not believe that a mere equitable or
contingent debt, credit, or personal property
can be reached by the procedure provided
for in said section (431). (Redondo Beach
Co. vs. Brewer, 101 Cal., 322.)
A "debt," as used in said section, means
some definite amount of money, ascertained
or capable of being ascertained, which may
be paid over to the sheriff or the court under
an order, while "credits " and "personal
property" are something belonging to the
defendant, but in possession and under the
control of the person attached.
(Gow vs. Marshall, 90 Cal., 565;
Dunsmoor vs. Furstenfeldt, 88 Cal., 522.)
In our opinion it is also essential that the
debt, credit, or the personal property which
is attempted to be subjected to the payment
of the obligation of the defendant, and which
is alleged to be in the possession of the
person attached, must exist in some definite
and ascertainable form at the time of the
attachment. (Norris vs. Burgoyne, 4 Cal.,
409.)
The said Pilots' Association is purely a
voluntary association of the pilots of the city
of Manila. The association is expressly
recognized under the law. No one can
become a member of said association who
has not shown special qualifications as a
pilot, and no one can act as a pilot who has
not been expressly recommended and
approved by the collector of the port of
Manila, and no one can become a member
of said association without having paid a
certain sum of money into the treasury of
said association. This funds becomes the
property of the association for the purpose
of protecting its members against losses
occasioned by its members to ships while
said ships are under the control of a member
or members of said association. The money
paid in by one member of said association
becomes a part of a general fund of said
association, subject to be paid out for
damages done to ships by any member of
the association. The fund created by the
contributions of the members no longer
belongs to the members of the association; it
belongs to the association. The association
has a distinct and separate entity from the
individual members who make it up. The
fund is created for a specific purpose. (See
articles 35, 36, 38, and 39 of the regulations
of said association.) Under the regulations of
said association it has assumed a certain
responsibility for its members. Whether the
damage caused by the defendant in this case
is of such a character for which the said
association assumed the responsibility is a
question which the person injured has a right
to test in a special action against said
association.
[ ] PARTNERSHIP
From the evidence that was adduced before
the lower court we are of the opinion, and so
hold, that the said association had no debts,
credits, or personal property, not capable of
manual delivery, in its possession, belonging
to the defendant (Gambe), which are subject
to be attached in accordance with the
provisions of section 431. It is, therefore,
hereby ordered that the plaintiff take nothing
in this action and that the plaintiff be
charged with the costs of both instances.
G.R. No. L-49982 April 27, 1988
ELIGIO ESTANISLAO, JR., petitioner,
vs.
THE HONORABLE COURT OF APPE
ALS, REMEDIOS ESTANISLAO, EMILIO
and LEOCADIO SANTIAGO,respondents.
Agustin O. Benitez for petitioner.
Benjamin C. Yatco for private respondents.
GANCAYCO, J.:
By this petition for certiorari the Court is
asked to determine if a partnership exists
between members of the same family arising
from their joint ownership of certain
properties.
Petitioner and private respondents are
brothers and sisters who are co-owners of
certain lots at the corner of Annapolis and
Aurora Blvd., QuezonCity which were then
being leased to the Shell Company of the
Philippines Limited (SHELL). They agreed
to open and operate a gas station thereat to
be known as Estanislao Shell Service
Station with an initial investment of P
15,000.00 to be taken from the advance
rentals due to them from SHELL for the
occupancy of the said lots owned in
common by them. A joint affidavit was
executed by them on April 11, 1966 which
was prepared byAtty. Democrito
Angeles 1 They agreed to help their brother,
petitioner herein, by allowing him to operate
and manage the gasoline service station of
the family. They negotiated with SHELL.
For practical purposes and in order not to
run counter to the company's policy of
appointing only one dealer, it was agreed
that petitioner would apply for the
dealership. Respondent Remedios helped in
managing the bussiness with petitioner from
May 3, 1966 up to February 16, 1967.
On May 26, 1966, the parties herein entered
into an Additional Cash Pledge Agreement
with SHELL wherein it was reiterated that
the P 15,000.00 advance rental shall be
[ ] PARTNERSHIP
deposited with SHELL to cover advances of
fuel to petitioner as dealer with a proviso
that said agreement "cancels and supersedes
the Joint Affidavit dated 11 April 1966
executed by the co-owners." 2
For sometime, the petitioner submitted
financial statements regarding the operation
of the business to private respondents, but
therafter petitioner failed to render
subsequent accounting. Hence through Atty.
Angeles, a demand was made on petitioner
to render an accounting of the profits.
The financial report of December 31, 1968
shows that the business was able to make a
profit of P 87,293.79 and that by the year
ending 1969, a profit of P 150,000.00 was
realized. 3
Thus, on August 25, 1970 private
respondents filed a complaint in the Court of
First Instance of Rizal against petitioner
praying among others that the latter be
ordered:
1. to execute a public document embodying
all the provisions of the partnership
agreement entered into between plaintiffs
and defendant as provided in Article 1771 of
the New Civil Code;
2. to render a formal accounting of the
business operation covering the period from
May 6, 1966 up to December 21, 1968 and
from January 1, 1969 up to the time the
order is issued and that the same be subject
to proper audit;
3. to pay the plaintiffs their lawful shares
and participation in the net profits of the
business in an amount of no less than P
l50,000.00 with interest at the rate of 1% per
month from date of demand until full
payment thereof for the entire duration of
the business; and
4. to pay the plaintiffs the amount of P
10,000.00 as attorney's fees and costs of the
suit (pp. 13-14 Record on Appeal.)
After trial on the merits, on October 15,
1975, Hon. Lino Anover who was then the
temporary presiding judge of Branch IV of
the trial court, rendered judgment dismissing
the complaint and counterclaim and ordering
private respondents to pay petitioner P
3,000.00 attorney's fee and costs. Private
respondent filed a motion for
reconsideration of the decision. On
December 10, 1975, Hon. Ricardo Tensuan
who was the newly appointed presiding
judge of the same branch, set aside the
aforesaid derision and rendered another
decision in favor of said respondents.
The dispositive part thereof reads as follows:
WHEREFORE, the Decision of this Court
dated October 14, 1975 is hereby
reconsidered and a new judgment is hereby
[ ] PARTNERSHIP
rendered in favor of the plaintiffs and as
against the defendant:
(1) Ordering the defendant to execute a
public instrument embodying all the
provisions of the partnership agreement
entered into between plaintiffs and
defendant as provided for in Article 1771,
Civil Code of the Philippines;
(2) Ordering the defendant to render a
formal accounting of the business operation
from April 1969 up to the time this order is
issued, the same to be subject to
examination and audit by the plaintiff,
(3) Ordering the defendant to pay plaintiffs
their lawful shares and participation in the
net profits of the business in the amount of P
150,000.00, with interest thereon at the rate
of One (1%) Per Cent per month from date
of demand until full payment thereof;
(4) Ordering the defendant to pay the
plaintiffs the sum of P 5,000.00 by way of
attorney's fees of plaintiffs' counsel; as well
as the costs of suit. (pp. 161-162. Record on
Appeal).
Petitioner then interposed an appeal to the
Court of Appeals enumerating seven (7)
errors allegedly committed by the trial court.
In due course, a decision was rendered by
the Court of Appeals on November 28,1978
affirming in toto the decision of the lower
court with costs against petitioner. *
A motion for reconsideration of said
decision filed by petitioner was denied on
January 30, 1979. Not satisfied therewith,
the petitioner now comes to this court by
way of this petition for certiorari alleging
that the respondent court erred:
1. In interpreting the legal import of the
Joint Affidavit (Exh. 'A') vis-a-vis the
Additional Cash Pledge Agreement (Exhs.
"B-2","6", and "L"); and
2. In declaring that a partnership was
established by and among the petitioner and
the private respondents as regards the
ownership and or operation of the gasoline
service station business.
Petitioner relies heavily on the provisions of
the Joint Affidavit of April 11, 1966
(Exhibit A) and the Additional Cash Pledge
Agreement of May 20, 1966 (Exhibit 6)
which are herein reproduced-
(a) The joint Affidavit of April 11, 1966,
Exhibit A reads:
(1) That we are the Lessors of two parcels of
land fully describe in Transfer Certificates
of Title Nos. 45071 and 71244 of the
Register of Deeds of Quezon City, in favor
of the LESSEE - SHELL COMPANY OF
THE PHILIPPINES LIMITED a corporation
duly licensed to do business in the
Philippines;
[ ] PARTNERSHIP
(2) That we have requested the said SHELL
COMPANY OF THE PHILIPPINE
LIMITED advanced rentals in the total
amount of FIFTEEN THOUSAND PESOS
(P l5,000.00) Philippine Currency, so that
we can use the said amount to augment our
capital investment in the operation of that
gasoline station constructed ,by the said
company on our two lots aforesaid by virtue
of an outstanding Lease Agreement we have
entered into with the said company;
(3) That the and SHELL COMPANY OF
THE PHILIPPINE LIMITED out of its
benevolence and desire to help us in
aumenting our capital investment in the
operation of the said gasoline station, has
agreed to give us the said amount of P
15,000.00, which amount will partake the
nature of ADVANCED RENTALS;
(4) That we have freely and voluntarily
agreed that upon receipt of the said amount
of FIFTEEN THOUSAND PESOS (P
l6,000.00) from he SHELL COMPANY OF
THE PHILIPPINES LIMITED, the said sum
as ADVANCED RENTALS to us be applied
as monthly rentals for the sai two lots under
our Lease Agreement starting on the 25th of
May, 1966 until such time that the said of P
15,000.00 be applicable, which time to our
estimate and one-half months from May 25,
1966 or until the 10th of October, 1966
more or less;
(5) That we have likewise agreed among
ourselves that the SHELL COMPANY OF
THE PHILIPPINES LIMITED execute an
instrument for us to sign embodying our
conformity that the said amount that it will
generously grant us as requested be applied
as ADVANCED RENTALS; and
(6) FURTHER AFFIANTS SAYETH NOT.,
(b) The Additional Cash Pledge Agreement
of May 20,1966, Exhibit 6, is as follows:
WHEREAS, under the lease Agreement
dated 13th November, 1963 (identified as
doc. Nos. 491 & 1407, Page Nos. 99 & 66,
Book Nos. V & III, Series of 1963 in the
Notarial Registers of Notaries Public
Rosauro Marquez, and R.D. Liwanag,
respectively) executed in favour of SHELL
by the herein CO-OWNERS and another
Lease Agreement dated 19th March
1964 . . . also executed in favour of SHELL
by CO-OWNERS Remedios and MARIA
ESTANISLAO for the lease of adjoining
portions of two parcels of land at Aurora
Blvd./ Annapolis, Quezon City, the CO
OWNERS RECEIVE a total monthly rental
of PESOS THREE THOUSAND THREE
HUNDRED EIGHTY TWO AND 29/100 (P
3,382.29), Philippine Currency;
WHEREAS, CO-OWNER Eligio Estanislao
Jr. is the Dealer of the Shell Station
constructed on the leased land, and as Dealer
under the Cash Pledge Agreement dated llth
[ ] PARTNERSHIP
May 1966, he deposited to SHELL in cash
the amount of PESOS TEN THOUSAND (P
10,000), Philippine Currency, to secure his
purchase on credit of Shell petroleum
products; . . .
WHEREAS, said DEALER, in his desire, to
be granted an increased the limit up to P
25,000, has secured the conformity of his
CO-OWNERS to waive and assign to
SHELL the total monthly rentals due to all
of them to accumulate the equivalent
amount of P 15,000, commencing 24th May
1966, this P 15,000 shall be treated as
additional cash deposit to SHELL under the
same terms and conditions of the
aforementioned Cash Pledge Agreement
dated llth May 1966.
NOW, THEREFORE, for and in
consideration of the foregoing premises,and
the mutual covenants among the CO-
OWNERS herein and SHELL, said parties
have agreed and hereby agree as follows:
l. The CO-OWNERS dohere by waive in
favor of DEALER the monthly rentals due
to all CO-OWNERS, collectively, under the
above describe two Lease Agreements, one
dated 13th November 1963 and the other
dated 19th March 1964 to enable DEALER
to increase his existing cash deposit to
SHELL, from P 10,000 to P 25,000, for such
purpose, the SHELL CO-OWNERS and
DEALER hereby irrevocably assign to
SHELL the monthly rental of P 3,382.29
payable to them respectively as they fall
due, monthly, commencing 24th May 1966,
until such time that the monthly rentals
accumulated, shall be equal to P l5,000.
2. The above stated monthly rentals
accumulated shall be treated as additional
cash deposit by DEALER to SHELL,
thereby in increasing his credit limit from P
10,000 to P 25,000. This agreement,
therefore, cancels and supersedes the Joint
affidavit dated 11 April 1966 executed by
the CO-OWNERS.
3. Effective upon the signing of this
agreement, SHELL agrees to allow
DEALER to purchase from SHELL
petroleum products, on credit, up to the
amount of P 25,000.
4. This increase in the credit shall also be
subject to the same terms and conditions of
the above-mentioned Cash Pledge
Agreement dated llth May 1966. (Exhs. "B-
2," "L," and "6"; emphasis supplied)
In the aforesaid Joint Affidavit of April 11,
1966 (Exhibit A), it is clearly stipulated by
the parties that the P 15,000.00 advance
rental due to them from SHELL shall
augment their "capital investment" in the
operation of the gasoline station, which
advance rentals shall be credited as rentals
from May 25, 1966 up to four and one-half
[ ] PARTNERSHIP
months or until 10 October 1966, more or
less covering said P 15,000.00.
In the subsequent document entitled
"Additional Cash Pledge Agreement" above
reproduced (Exhibit 6), the private
respondents and petitioners assigned to
SHELL the monthly rentals due them
commencing the 24th of May 1966 until
such time that the monthly rentals
accumulated equal P 15,000.00 which
private respondents agree to be a cash
deposit of petitioner in favor of SHELL to
increase his credit limit as dealer. As above-
stated it provided therein that "This
agreement, therefore, cancels and supersedes
the Joint Affidavit dated 11 April 1966
executed by the CO-OWNERS."
Petitioner contends that because of the said
stipulation cancelling and superseding that
previous Joint Affidavit, whatever
partnership agreement there was in said
previous agreement had thereby been
abrogated. We find no merit in this
argument. Said cancelling provision was
necessary for the Joint Affidavit speaks of P
15,000.00 advance rentals starting May 25,
1966 while the latter agreement also refers
to advance rentals of the same amount
starting May 24, 1966. There is, therefore, a
duplication of reference to the P 15,000.00
hence the need to provide in the subsequent
document that it "cancels and supersedes"
the previous one. True it is that in the latter
document, it is silent as to the statement in
the Joint Affidavit that the P 15,000.00
represents the "capital investment" of the
parties in the gasoline station business and it
speaks of petitioner as the sole dealer, but
this is as it should be for in the latter
document SHELL was a signatory and it
would be against its policy if in the
agreement it should be stated that the
business is a partnership with private
respondents and not a sole proprietorship of
petitioner.
Moreover other evidence in the record
shows that there was in fact such partnership
agreement between the parties. This is
attested by the testimonies of private
respondent Remedies Estanislao and Atty.
Angeles. Petitioner submitted to private
respondents periodic accounting of the
business. 4 Petitioner gave a written
authority to private respondent Remedies
Estanislao, his sister, to examine and audit
the books of their "common business' aming
negosyo). 5 Respondent Remedios assisted
in the running of the business. There is no
doubt that the parties hereto formed a
partnership when they bound themselves to
contribute money to a common fund with
the intention of dividing the profits among
themselves. 6 The sole dealership by the
petitioner and the issuance of all government
permits and licenses in the name of
petitioner was in compliance with the afore-
stated policy of SHELL and the
[ ] PARTNERSHIP
understanding of the parties of having only
one dealer of the SHELL products.
Further, the findings of facts of the
respondent court are conclusive in this
proceeding, and its conclusion based on the
said facts are in accordancewith the
applicable law.
WHEREFORE, the judgment appealed from
is AFFIRMED in toto with costs against
petitioner. This decision is immediately
executory and no motion for extension of
time to file a motion for reconsideration
shag beentertained.
SO ORDERED.
February 2, 1903
G.R. No. 413
JOSE FERNANDEZ, plaintiff-appellant,
vs.
FRANCISCO DE LA ROSA, defendant-
appellee.
Vicente Miranda, for appellant.
Simplicio del Rosario, for appellee.
LADD, J.:
The object of this action is to obtain from
the court a declaration that a partnership
exists between the parties, that the plaintiff
has a consequent interested in certain
cascoes which are alleged to be partnership
property, and that the defendant is bound to
render an account of his administration of
the cascoes and the business carried on with
them.
Judgment was rendered for the defendant in
the court below and the plaintiff appealed.
The respective claims of the parties as to the
facts, so far as it is necessary to state them in
order to indicate the point in dispute, may be
briefly summarized. The plaintiff alleges
that in January, 1900, he entered into a
verbal agreement with the defendant to form
a partnership for the purchase of cascoes and
the carrying on of the business of letting the
same for hire in Manila, the defendant to
buy the cascoes and each partner to furnish
for that purpose such amount of money as he
could, the profits to be divided
proportionately; that in the same January the
plaintiff furnished the defendant 300 pesos
to purchase a casco designated as No. 1515,
which the defendant did purchase for 500
pesos of Doña Isabel Vales, taking the title
in his own name; that the plaintiff furnished
further sums aggregating about 300 pesos
for repairs on this casco; that on the fifth of
the following March he furnished the
defendant 825 pesos to purchase another
[ ] PARTNERSHIP
casco designated as No. 2089, which the
defendant did purchase for 1,000 pesos of
Luis R. Yangco, taking the title to this casco
also in his own name; that in April the
parties undertook to draw up articles of
partnership for the purpose of embodying
the same in an authentic document, but that
the defendant having proposed a draft of
such articles which differed materially from
the terms of the earlier verbal agreement,
and being unwillingly to include casco No.
2089 in the partnership, they were unable to
come to any understanding and no written
agreement was executed; that the defendant
having in the meantime had the control and
management of the two cascoes, the plaintiff
made a demand for an accounting upon him,
which the defendant refused to render,
denying the existence of the partnership
altogether.
The defendant admits that the project of
forming a partnership in the casco business
in which he was already engaged to some
extent individually was discussed between
himself and the plaintiff in January, 1900,
and earlier, one Marcos Angulo, who was a
partner of the plaintiff in a bakery business,
being also a party to the negotiations, but he
denies that any agreement was ever
consummated. He denies that the plaintiff
furnished any money in January, 1900, for
the purchase of casco No. 1515, or for
repairs on the same, but claims that he
borrowed 300 pesos on his individual
account in January from the bakery firm,
consisting of the plaintiff, Marcos Angulo,
and Antonio Angulo. The 825 pesos, which
he admits he received from the plaintiff
March 5, he claims was for the purchase of
casco No. 1515, which he alleged was
bought March 12, and he alleges that he
never received anything from the defendant
toward the purchase of casco No. 2089. He
claims to have paid, exclusive of repairs,
1,200 pesos for the first casco and 2,000
pesos for the second one.
The case comes to this court under the old
procedure, and it is therefore necessary for
us the review the evidence and pass upon the
facts. Our general conclusions may be stated
as follows:
(1) Doña Isabel Vales, from whom the
defendant bought casco No. 1515, testifies
that the sale was made and the casco
delivered in January, although the public
document of sale was not executed till some
time afterwards. This witness is apparently
disinterested, and we think it is safe to rely
upon the truth of her testimony, especially as
the defendant, while asserting that the sale
was in March, admits that he had the casco
taken to the ways for repairs in January.
It is true that the public document of sale
was executed March 10, and that the vendor
declares therein that she is the owner of the
casco, but such declaration does not exclude
[ ] PARTNERSHIP
proof as to the actual date of the sale, at least
as against the plaintiff, who was not a party
to the instrument. (Civil Code, sec. 1218.) It
often happens, of course, in such cases, that
the actual sale precedes by a considerable
time the execution of the formal instrument
of transfer, and this is what we think
occurred here.
(2) The plaintiff presented in evidence the
following receipt: "I have this day received
from D. Jose Fernandez eight hundred and
twenty-five pesos for the cost of a casco
which we are to purchase in company.
Manila, March 5, 1900. Francisco de la
Rosa." The authenticity of this receipt is
admitted by the defendant. If casco No.
1515 was bought, as we think it was, in
January, the casco referred to in the receipt
which the parties "are to purchase in
company" must be casco No. 2089, which
was bought March 22. We find this to be the
fact, and that the plaintiff furnished and the
defendant received 825 pesos toward the
purchase of this casco, with the
understanding that it was to be purchased on
joint account.
(3) Antonio Fernandez testifies that in the
early part of January, 1900, he saw Antonio
Angulo give the defendant, in the name of
the plaintiff, a sum of money, the amount of
which he is unable to state, for the purchase
of a casco to be used in the plaintiff's and
defendant's business. Antonio Angulo also
testifies, but the defendant claims that the
fact that Angulo was a partner of the
plaintiff rendered him incompetent as a
witness under the provisions of article 643
of the then Code of Civil Procedure, and
without deciding whether this point is well
taken, we have discarded his testimony
altogether in considering the case. The
defendant admits the receipt of 300 pesos
from Antonio Angulo in January, claiming,
as has been stated, that it was a loan from
the firm. Yet he sets up the claim that the
825 pesos which he received from the
plaintiff in March were furnished toward the
purchase of casco No. 1515, thereby
virtually admitting that casco was purchased
in company with the plaintiff. We discover
nothing in the evidence to support the claim
that the 300 pesos received in January was a
loan, unless it may be the fact that the
defendant had on previous occasions
borrowed money from the bakery firm. We
think all the probabilities of the case point to
the truth of the evidence of Antonio
Fernandez as to this transaction, and we find
the fact to be that the sum in question was
furnished by the plaintiff toward the
purchase for joint ownership of casco No.
1515, and that the defendant received it with
the understanding that it was to be used for
this purposed. We also find that the plaintiff
furnished some further sums of money for
the repair of casco.
[ ] PARTNERSHIP
(4) The balance of the purchase price of
each of the two cascoes over and above the
amount contributed by the plaintiff was
furnished by the defendant.
(5) We are unable to find upon the evidence
before us that there was any specific verbal
agreement of partnership, except such as
may be implied from the fact as to the
purchase of the casco.
(6) Although the evidence is somewhat
unsatisfactory upon this point, we think it
more probable than otherwise that no
attempt was made to agree upon articles of
partnership till about the middle of the April
following the purchase of the cascoes.
(7) At some time subsequently to the failure
of the attempt to agree upon partnership
articles and after the defendant had been
operating the cascoes for some time, the
defendant returned to the plaintiff 1,125
pesos, in two different sums, one of 300 and
one of 825 pesos. The only evidence in the
record as to the circumstances under which
the plaintiff received these sums is contained
in his answer to the interrogatories proposed
to him by the defendant, and the whole of
his statement on this point may properly be
considered in determining the fact as being
in the nature of an indivisible admission. He
states that both sums were received with an
express reservation on his part of all his
rights as a partner. We find this to be the
fact.
Two questions of law are raised by the
foregoing facts: (1) Did a partnership exist
between the parties? (2) If such partnership
existed, was it terminated as a result of the
act of the defendant in receiving back the
1,125 pesos?
(1) "Partnership is a contract by which 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 Code,
art. 1665.)
The essential points upon which the minds
of the parties must meet in a contract of
partnership are, therefore, (1) mutual
contribution to a common stock, and (2) a
joint interest in the profits. If the contract
contains these two elements the partnership
relation results, and the law itself fixes the
incidents of this relation if the parties fail to
do so. (Civil Code, secs. 1689, 1695.)
We have found as a fact that money was
furnished by the plaintiff and received by
the defendant with the understanding that it
was to be used for the purchase of the
cascoes in question. This establishes the first
element of the contract, namely, mutual
contribution to a common stock. The second
element, namely, the intention to share
profits, appears to be an unavoidable
[ ] PARTNERSHIP
deduction from the fact of the purchase of
the cascoes in common, in the absence of
any other explanation of the object of the
parties in making the purchase in that form,
and, it may be added, in view of the
admitted fact that prior to the purchase of
the first casco the formation of a partnership
had been a subject of negotiation between
them.
Under other circumstances the relation of
joint ownership, a relation distinct though
perhaps not essentially different in its
practical consequence from that of
partnership, might have been the result of
the joint purchase. If, for instance, it were
shown that the object of the parties in
purchasing in company had been to make a
more favorable bargain for the two cascoes
that they could have done by purchasing
them separately, and that they had no
ulterior object except to effect a division of
the common property when once they had
acquired it, the affectio societatis would be
lacking and the parties would have become
joint tenants only; but, as nothing of this sort
appears in the case, we must assume that the
object of the purchase was active use and
profit and not mere passive ownership in
common.
It is thus apparent that a complete and
perfect contract of partnership was entered
into by the parties. This contract, it is true,
might have been subject to a suspensive
condition, postponing its operation until an
agreement was reached as to the respective
participation of the partners in the profits,
the character of the partnership as collective
or en comandita, and other details, but
although it is asserted by counsel for the
defendant that such was the case, there is
little or nothing in the record to support this
claim, and that fact that the defendant did
actually go on and purchase the boat, as it
would seem, before any attempt had been
made to formulate partnership articles,
strongly discountenances the theory.
The execution of a written agreement was
not necessary in order to give efficacy to the
verbal contract of partnership as a civil
contract, the contributions of the partners
not having been in the form of immovables
or rights in immovables. (Civil Code, art.
1667.) The special provision cited, requiring
the execution of a public writing in the
single case mentioned and dispensing with
all formal requirements in other cases,
renders inapplicable to this species of
contract the general provisions of article
1280 of the Civil Code.
(2) The remaining question is as to the legal
effect of the acceptance by the plaintiff of
the money returned to him by the defendant
after the definitive failure of the attempt to
agree upon partnership articles. The amount
returned fell short, in our view of the facts,
of that which the plaintiff had contributed to
[ ] PARTNERSHIP
the capital of the partnership, since it did not
include the sum which he had furnished for
the repairs of casco No. 1515. Moreover, it
is quite possible, as claimed by the plaintiff,
that a profit may have been realized from the
business during the period in which the
defendant have been administering it prior to
the return of the money, and if so he still
retained that sum in his hands. For these
reasons the acceptance of the money by the
plaintiff did not have the effect of
terminating the legal existence of the
partnership by converting it into a societas
leonina, as claimed by counsel for the
defendant.
Did the defendant waive his right to such
interest as remained to him in the
partnership property by receiving the
money? Did he by so doing waive his right
to an accounting of the profits already
realized, if any, and a participation in them
in proportion to the amount he had
originally contributed to the common fund?
Was the partnership dissolved by the "will
or withdrawal of one of the partners" under
article 1705 of the Civil Code? We think
these questions must be answered in the
negative.
There was no intention on the part of the
plaintiff in accepting the money to
relinquish his rights as a partner, nor is there
any evidence that by anything that he said or
by anything that he omitted to say he gave
the defendant any ground whatever to
believe that he intended to relinquish them.
On the contrary he notified the defendant
that he waived none of his rights in the
partnership. Nor was the acceptance of the
money an act which was in itself
inconsistent with the continuance of the
partnership relation, as would have been the
case had the plaintiff withdrawn his entire
interest in the partnership. There is,
therefore, nothing upon which a waiver,
either express or implied, can be predicated.
The defendant might have himself
terminated the partnership relation at any
time, if he had chosen to do so, by
recognizing the plaintiff's right in the
partnership property and in the profits.
Having failed to do this he can not be
permitted to force a dissolution upon his co-
partner upon terms which the latter is
unwilling to accept. We see nothing in the
case which can give the transaction in
question any other aspect than that of the
withdrawal by one partner with the consent
of the other of a portion of the common
capital.
The result is that we hold and declare that a
partnership was formed between the parties
in January, 1900, the existence of which the
defendant is bound to recognize; that
cascoes No. 1515 and 2089 constitute
partnership property, and that the plaintiff is
entitled to an accounting of the defendant's
administration of such property, and of the
[ ] PARTNERSHIP
profits derived therefrom. This declaration
does not involve an adjudication as to any
disputed items of the partnership account.
The judgment of the court below will be
reversed without costs, and the record
returned for the execution of the judgment
now rendered. So ordered.
Arellano, C.J., Torres, Cooper, and Mapa,
JJ., concur.
Willard, J., dissenting.
ON MOTION FOR A REHEARING.
MAPA, J.:
This case has been decided on appeal in
favor of the plaintiff, and the defendant has
moved for a rehearing upon the following
grounds:
1. Because that part of the decision which
refers to the existence of the partnership
which is the object of the complaint is not
based upon clear and decisive legal grounds;
and
2. Because, upon the supposition of the
existence of the partnership, the decision
does not clearly determine whether the
juridical relation between the partners
suffered any modification in consequence of
the withdrawal by the plaintiff of the sum of
1,125 pesos from the funds of the
partnership, or if it continued as before, the
parties being thereby deprived, he alleges, of
one of the principal bases for determining
with exactness the amount due to each.
With respect to the first point, the appellant
cites the fifth conclusion of the decision,
which is as follows: "We are unable to find
from the evidence before us that there was
any specific verbal agreement of
partnership, except such as may be implied
from the facts as to the purchase of the
cascoes."
Discussing this part of the decision, the
defendant says that, in the judgment of the
court, if on the one hand there is no direct
evidence of a contract, on the other its
existence can only be inferred from certain
facts, and the defendant adds that the
possibility of an inference is not sufficient
ground upon which to consider as existing
what may be inferred to exist, and still less
as sufficient ground for declaring its efficacy
to produce legal effects.
This reasoning rests upon a false basis. We
have not taken into consideration the mere
possibility of an inference, as the appellant
gratuitously stated, for the purpose of
arriving at a conclusion that a contract of
partnership was entered into between him
and the plaintiff, but have considered the
proof which is derived from the facts
connected with the purchase of the cascoes.
It is stated in the decision that with the
exception of this evidence we find no other
[ ] PARTNERSHIP
which shows the making of the contract. But
this does not mean (for it says exactly the
contrary) that this fact is not absolutely
proven, as the defendant erroneously
appears to think. From this data we infer a
fact which to our mind is certain and
positive, and not a mere possibility; we infer
not that it is possible that the contract may
have existed, but that it actually did exist.
The proofs constituted by the facts referred
to, although it is the only evidence, and in
spite of the fact that it is not direct, we
consider, however, sufficient to produce
such a conviction, which may certainly be
founded upon any of the various classes of
evidence which the law admits. There is all
the more reason for its being so in this case,
because a civil partnership may be
constituted in any form, according to article
1667 of the Civil Code, unless real property
or real rights are contributed to it — the only
case of exception in which it is necessary
that the agreement be recorded in a public
instrument.
It is of no importance that the parties have
failed to reach an agreement with respect to
the minor details of contract. These details
pertain to the accidental and not to the
essential part of the contract. We have
already stated in the opinion what are the
essential requisites of a contract of
partnership, according to the definition of
article 1665. Considering as a whole the
probatory facts which appears from the
record, we have reached the conclusion that
the plaintiff and the defendant agreed to the
essential parts of that contract, and did in
fact constitute a partnership, with the funds
of which were purchased the cascoes with
which this litigation deals, although it is true
that they did not take the precaution to
precisely establish and determine from the
beginning the conditions with respect to the
participation of each partner in the profits or
losses of the partnership. The disagreements
subsequently arising between them, when
endeavoring to fix these conditions, should
not and can not produce the effect of
destroying that which has been done, to the
prejudice of one of the partners, nor could it
divest his rights under the partnership which
had accrued by the actual contribution of
capital which followed the agreement to
enter into a partnership, together with the
transactions effected with partnership funds.
The law has foreseen the possibility of the
constitution of a partnership without an
express stipulation by the partners upon
those conditions, and has established rules
which may serve as a basis for the
distribution of profits and losses among the
partners. (Art. 1689 of the Civil Code. ) We
consider that the partnership entered into by
the plaintiff and the defendant falls within
the provisions of this article.
With respect to the second point, it is
obvious that upon declaring the existence of
a partnership and the right of the plaintiff to
[ ] PARTNERSHIP
demand from the defendant an itemized
accounting of his management thereof, it
was impossible at the same time to
determine the effects which might have been
produced with respect to the interest of the
partnership by the withdrawal by the
plaintiff of the sum of 1,125 pesos. This
could only be determined after a liquidation
of the partnership. Then, and only then, can
it be known if this sum is to be charged to
the capital contributed by the plaintiff, or to
his share of the profits, or to both. It might
well be that the partnership has earned
profits, and that the plaintiff's participation
therein is equivalent to or exceeds the sum
mentioned. In this case it is evident that,
notwithstanding that payment, his interest in
the partnership would still continue. This is
one case. It would be easy to imagine many
others, as the possible results of a
liquidation are innumerable. The liquidation
will finally determine the condition of the
legal relations of the partners inter se at the
time of the withdrawal of the sum
mentioned. It was not, nor is it possible to
determine this status a priori without
prejudging the result, as yet unknown, of the
litigation. Therefore it is that in the decision
no direct statement has been made upon this
point. It is for the same reason that it was
expressly stated in the decision that it "does
not involve an adjudication as to any
disputed item of the partnership account."
The contentions advanced by the moving
party are so evidently unfounded that we can
not see the necessity or convenience of
granting the rehearing prayed for, and the
motion is therefore denied.
G.R. No. L-55397 February 29, 1988
TAI TONG CHUACHE & CO., petitioner,
vs.
THE INSURANCE COMMISSION and
TRAVELLERS MULTI-INDEMNITY
CORPORATION, respondents.
GANCAYCO, J.:
This petition for review on certiorari seeks
the reversal of the decision of the Insurance
Commission in IC Case #367 1dismissing
the complaint 2 for recovery of the alleged
unpaid balance of the proceeds of the Fire
Insurance Policies issued by herein
respondent insurance company in favor of
petitioner-intervenor.
The facts of the case as found by respondent
Insurance Commission are as follows:
[ ] PARTNERSHIP
Complainants acquired from a certain
Rolando Gonzales a parcel of land and a
building located at San Rafael Village,
Davao City. Complainants assumed the
mortgage of the building in favor of S.S.S.,
which building was insured with respondent
S.S.S. Accredited Group of Insurers for
P25,000.00.
On April 19, 1975, Azucena Palomo
obtained a loan from Tai Tong Chuache
Inc. in the amount of P100,000.00. To
secure the payment of the loan, a mortgage
was executed over the land and the building
in favor of Tai Tong Chuache & Co.
(Exhibit "1" and "1-A"). On April 25, 1975,
Arsenio Chua, representative of Thai Tong
Chuache & Co. insured the latter's interest
with Travellers Multi-Indemnity
Corporation for P100,000.00 (P70,000.00
for the building and P30,000.00 for the
contents thereof) (Exhibit "A-a," contents
thereof) (Exhibit "A-a").
On June 11, 1975, Pedro Palomo secured a
Fire Insurance Policy No. F- 02500 (Exhibit
"A"), covering the building for P50,000.00
with respondent Zenith Insurance
Corporation. On July 16, 1975, another Fire
Insurance Policy No. 8459 (Exhibit "B")
was procured from respondent Philippine
British Assurance Company, covering the
same building for P50,000.00 and the
contents thereof for P70,000.00.
On July 31, 1975, the building and the
contents were totally razed by fire.
Adjustment Standard Corporation submitted
a report as follow
xxx xxx xxx
... Thus the apportioned share of each
company is as follows:
Policy No.. Company Risk Insures
MIRO Zenith Building P50,000
F-02500 Insurance
Corp.
F-84590 Phil. Household 70,000
British
Assco. Co.
Inc. FFF & F5 50,000
Policy No. Company Risk Insures
FIC-15381 SSSAccre
dited Group
of Insurers Building P25,000
[ ] PARTNERSHIP
Totals
We are showing hereunder another
apportionment of the loss which includes the
Travellers Multi-Indemnity policy for
reference purposes.
Policy No. Company Risk
MIRO/ Zenith
F-02500 Insurance
Corp. Building
F-84590 Phil.
British
Assco. Co. I-Building
FFF & PE
PVC-15181 SSS Accredited
Group of
Insurers Building
F-599 DV Insurers I-Ref
Multi II-Building 70,000
Totals P295.000
Based on the computation of the loss,
including the Travellers Multi- Indemnity,
respondents, Zenith Insurance, Phil. British
Assurance and S.S.S. Accredited Group of
Insurers, paid their corresponding shares of
the loss. Complainants were paid the
following: P41,546.79 by Philippine British
Assurance Co., P11,877.14 by Zenith
Insurance Corporation, and P5,936.57 by
S.S.S. Group of Accredited Insurers (Par. 6.
Amended Complaint). Demand was made
from respondent Travellers Multi-Indemnity
for its share in the loss but the same was
refused. Hence, complainants demanded
from the other three (3) respondents the
balance of each share in the loss based on
the computation of the Adjustment
Standards Report excluding Travellers
Multi-Indemnity in the amount of
P30,894.31 (P5,732.79-Zenith Insurance:
P22,294.62, Phil. British: and P2,866.90,
SSS Accredited) but the same was refused,
hence, this action.
In their answers, Philippine British
Assurance and Zenith Insurance Corporation
admitted the material allegations in the
complaint, but denied liability on the ground
that the claim of the complainants had
already been waived, extinguished or paid.
[ ] PARTNERSHIP
Both companies set up counterclaim in the
total amount of P 91,546.79.
Instead of filing an answer, SSS Accredited
Group of Insurers informed the Commission
in its letter of July 22, 1977 that the herein
claim of complainants for the balance had
been paid in the amount of P 5,938.57 in
full, based on the Adjustment Standards
Corporation Report of September 22, 1975.
Travellers Insurance, on its part, admitted
the issuance of the Policy No. 599 DV and
alleged as its special and affirmative
defenses the following, to wit: that Fire
Policy No. 599 DV, covering the furniture
and building of complainants was secured
by a certain Arsenio Chua, mortgage
creditor, for the purpose of protecting his
mortgage credit against the complainants;
that the said policy was issued in the name
of Azucena Palomo, only to indicate that she
owns the insured premises; that the policy
contains an endorsement in favor of Arsenio
Chua as his mortgage interest may appear to
indicate that insured was Arsenio Chua and
the complainants; that the premium due on
said fire policy was paid by Arsenio Chua;
that respondent Travellers is not liable to
pay complainants.
On May 31, 1977, Tai Tong Chuache & Co.
filed a complaint in intervention claiming
the proceeds of the fire Insurance Policy No.
F-559 DV, issued by respondent Travellers
Multi-Indemnity.
Travellers Insurance, in answer to the
complaint in intervention, alleged that the
Intervenor is not entitled to indemnity under
its Fire Insurance Policy for lack of
insurable interest before the loss of the
insured premises and that the complainants,
spouses Pedro and Azucena Palomo, had
already paid in full their mortgage
indebtedness to the intervenor. 3
As adverted to above respondent Insurance
Commission dismissed spouses Palomos'
complaint on the ground that the insurance
policy subject of the complaint was taken
out by Tai Tong Chuache & Company,
petitioner herein, for its own interest only as
mortgagee of the insured property and thus
complainant as mortgagors of the insured
property have no right of action against
herein respondent. It likewise dismissed
petitioner's complaint in intervention in the
following words:
We move on the issue of liability of
respondent Travellers Multi-Indemnity to
the Intervenor-mortgagee. The complainant
testified that she was still indebted to
Intervenor in the amount of P100,000.00.
Such allegation has not however, been
sufficiently proven by documentary
evidence. The certification (Exhibit 'E-e')
issued by the Court of First Instance of
[ ] PARTNERSHIP
Davao, Branch 11, indicate that the
complainant was Antonio Lopez Chua and
not Tai Tong Chuache & Company. 4
From the above decision, only intervenor
Tai Tong Chuache filed a motion for
reconsideration but it was likewise denied
hence, the present petition.
It is the contention of the petitioner that
respondent Insurance Commission decided
an issue not raised in the pleadings of the
parties in that it ruled that a certain Arsenio
Lopez Chua is the one entitled to the
insurance proceeds and not Tai Tong
Chuache & Company.
This Court cannot fault petitioner for the
above erroneous interpretation of the
decision appealed from considering the
manner it was written. 5 As correctly
pointed out by respondent insurance
commission in their comment, the decision
did not pronounce that it was Arsenio Lopez
Chua who has insurable interest over the
insured property. Perusal of the decision
reveals however that it readily absolved
respondent insurance company from liability
on the basis of the commissioner's
conclusion that at the time of the occurrence
of the peril insured against petitioner as
mortgagee had no more insurable interest
over the insured property. It was based on
the inference that the credit secured by the
mortgaged property was already paid by the
Palomos before the said property was gutted
down by fire. The foregoing conclusion was
arrived at on the basis of the certification
issued by the then Court of First Instance of
Davao, Branch II that in a certain civil
action against the Palomos, Antonio Lopez
Chua stands as the complainant and not
petitioner Tai Tong Chuache & Company.
We find the petition to be impressed with
merit. It is a well known postulate that the
case of a party is constituted by his own
affirmative allegations. Under Section 1,
Rule 131 6 each party must prove his own
affirmative allegations by the amount of
evidence required by law which in civil
cases as in the present case is preponderance
of evidence. The party, whether plaintiff or
defendant, who asserts the affirmative of the
issue has the burden of presenting at the trial
such amount of evidence as required by law
to obtain favorable judgment. 7 Thus,
petitioner who is claiming a right over the
insurance must prove its case. Likewise,
respondent insurance company to avoid
liability under the policy by setting up an
affirmative defense of lack of insurable
interest on the part of the petitioner must
prove its own affirmative allegations.
It will be recalled that respondent insurance
company did not assail the validity of the
insurance policy taken out by petitioner over
the mortgaged property. Neither did it deny
that the said property was totally razed by
[ ] PARTNERSHIP
fire within the period covered by the
insurance. Respondent, as mentioned earlier
advanced an affirmative defense of lack of
insurable interest on the part of the
petitioner that before the occurrence of the
peril insured against the Palomos had
already paid their credit due the petitioner.
Respondent having admitted the material
allegations in the complaint, has the burden
of proof to show that petitioner has no
insurable interest over the insured property
at the time the contingency took place. Upon
that point, there is a failure of proof.
Respondent, it will be noted, exerted no
effort to present any evidence to substantiate
its claim, while petitioner did. For said
respondent's failure, the decision must be
adverse to it.
However, as adverted to earlier, respondent
Insurance Commission absolved respondent
insurance company from liability on the
basis of the certification issued by the then
Court of First Instance of Davao, Branch II,
that in a certain civil action against the
Palomos, Arsenio Lopez Chua stands as the
complainant and not Tai Tong Chuache.
From said evidence respondent commission
inferred that the credit extended by herein
petitioner to the Palomos secured by the
insured property must have been paid. Such
is a glaring error which this Court cannot
sanction. Respondent Commission's findings
are based upon a mere inference.
The record of the case shows that the
petitioner to support its claim for the
insurance proceeds offered as evidence the
contract of mortgage (Exh. 1) which has not
been cancelled nor released. It has been held
in a long line of cases that when the creditor
is in possession of the document of credit,
he need not prove non-payment for it is
presumed. 8 The validity of the insurance
policy taken b petitioner was not assailed by
private respondent. Moreover, petitioner's
claim that the loan extended to the Palomos
has not yet been paid was corroborated by
Azucena Palomo who testified that they are
still indebted to herein petitioner.9
Public respondent argues however, that if
the civil case really stemmed from the loan
granted to Azucena Palomo by petitioner the
same should have been brought by Tai Tong
Chuache or by its representative in its own
behalf. From the above premise respondent
concluded that the obligation secured by the
insured property must have been paid.
The premise is correct but the conclusion is
wrong. Citing Rule 3, Sec. 2 10 respondent
pointed out that the action must be brought
in the name of the real party in interest. We
agree. However, it should be borne in mind
that petitioner being a partnership may sue
and be sued in its name or by its duly
authorized representative. The fact that
Arsenio Lopez Chua is the representative of
petitioner is not questioned. Petitioner's
[ ] PARTNERSHIP
declaration that Arsenio Lopez Chua acts as
the managing partner of the partnership was
corroborated by respondent insurance
company. 11 Thus Chua as the managing
partner of the partnership may execute all
acts of administration 12 including the right
to sue debtors of the partnership in case of
their failure to pay their obligations when it
became due and demandable. Or at the very
least, Chua being a partner of petitioner Tai
Tong Chuache & Company is an agent of
the partnership. Being an agent, it is
understood that he acted for and in behalf of
the firm. 13 Public respondent's allegation
that the civil case flied by Arsenio Chua was
in his capacity as personal creditor of
spouses Palomo has no basis.
The respondent insurance company having
issued a policy in favor of herein petitioner
which policy was of legal force and effect at
the time of the fire, it is bound by its terms
and conditions. Upon its failure to prove the
allegation of lack of insurable interest on the
part of the petitioner, respondent insurance
company is and must be held liable.
IN VIEW OF THE FOREGOING, the
decision appealed from is hereby SET
ASIDE and ANOTHER judgment is
rendered order private respondent Travellers
Multi-Indemnity Corporation to pay
petitioner the face value of Insurance Policy
No. 599-DV in the amount of P100,000.00.
Costs against said private respondent.
SO ORDERED.
G.R. No. L-19342 May 25, 1972
LORENZO T. OÑA and HEIRS OF JULIA
BUÑALES, namely: RODOLFO B. OÑA,
MARIANO B. OÑA, LUZ B. OÑA,
VIRGINIA B. OÑA and LORENZO B.
OÑA, JR., petitioners,
vs.
THE COMMISSIONER OF INTERNAL
REVENUE, respondent.
Orlando Velasco for petitioners.
Office of the Solicitor General Arturo A.
Alafriz, Assistant Solicitor General
Felicisimo R. Rosete, and Special Attorney
Purificacion Ureta for respondent.
BARREDO, J.:p
Petition for review of the decision of the
Court of Tax Appeals in CTA Case No. 617,
similarly entitled as above, holding that
petitioners have constituted an unregistered
partnership and are, therefore, subject to the
payment of the deficiency corporate income
[ ] PARTNERSHIP
taxes assessed against them by respondent
Commissioner of Internal Revenue for the
years 1955 and 1956 in the total sum of
P21,891.00, plus 5% surcharge and 1%
monthly interest from December 15, 1958,
subject to the provisions of Section 51 (e)
(2) of the Internal Revenue Code, as
amended by Section 8 of Republic Act No.
2343 and the costs of the suit, 1 as well as
the resolution of said court denying
petitioners' motion for reconsideration of
said decision.
The facts are stated in the decision of the
Tax Court as follows:
Julia Buñales died on March 23, 1944,
leaving as heirs her surviving spouse,
Lorenzo T. Oña and her five children. In
1948, Civil Case No. 4519 was instituted in
the Court of First Instance of Manila for the
settlement of her estate. Later, Lorenzo T.
Oña the surviving spouse was appointed
administrator of the estate of said deceased
(Exhibit 3, pp. 34-41, BIR rec.). On April
14, 1949, the administrator submitted the
project of partition, which was approved by
the Court on May 16, 1949 (See Exhibit K).
Because three of the heirs, namely Luz,
Virginia and Lorenzo, Jr., all surnamed Oña,
were still minors when the project of
partition was approved, Lorenzo T. Oña,
their father and administrator of the estate,
filed a petition in Civil Case No. 9637 of the
Court of First Instance of Manila for
appointment as guardian of said minors. On
November 14, 1949, the Court appointed
him guardian of the persons and property of
the aforenamed minors (See p. 3, BIR rec.).
The project of partition (Exhibit K; see also
pp. 77-70, BIR rec.) shows that the heirs
have undivided one-half (1/2) interest in ten
parcels of land with a total assessed value of
P87,860.00, six houses with a total assessed
value of P17,590.00 and an undetermined
amount to be collected from the War
Damage Commission. Later, they received
from said Commission the amount of
P50,000.00, more or less. This amount was
not divided among them but was used in the
rehabilitation of properties owned by them
in common (t.s.n., p. 46). Of the ten parcels
of land aforementioned, two were acquired
after the death of the decedent with money
borrowed from the Philippine Trust
Company in the amount of P72,173.00
(t.s.n., p. 24; Exhibit 3, pp. 31-34 BIR rec.).
The project of partition also shows that the
estate shares equally with Lorenzo T. Oña,
the administrator thereof, in the obligation
of P94,973.00, consisting of loans
contracted by the latter with the approval of
the Court (see p. 3 of Exhibit K; or see p. 74,
BIR rec.).
Although the project of partition was
approved by the Court on May 16, 1949, no
attempt was made to divide the properties
[ ] PARTNERSHIP
therein listed. Instead, the properties
remained under the management of Lorenzo
T. Oña who used said properties in business
by leasing or selling them and investing the
income derived therefrom and the proceeds
from the sales thereof in real properties and
securities. As a result, petitioners' properties
and investments gradually increased from
P105,450.00 in 1949 to P480,005.20 in 1956
as can be gleaned from the following year-
end balances:
Investment Land Building
Account Account Account
P87,860.00 P17,590.00
P24,657.65 128,566.72 96,076.26
51,301.31 120,349.28 110,605.11
67,927.52 87,065.28 152,674.39
61,258.27 84,925.68 161,463.83
63,623.37 99,001.20 167,962.04
100,786.00 120,249.78 169,262.52
175,028.68 135,714.68 169,262.52
(See Exhibits 3 & K t.s.n., pp. 22, 25-26, 40,
50, 102-104)
From said investments and properties
petitioners derived such incomes as profits
from installment sales of subdivided lots,
profits from sales of stocks, dividends,
rentals and interests (see p. 3 of Exhibit 3; p.
32, BIR rec.; t.s.n., pp. 37-38). The said
incomes are recorded in the books of
account kept by Lorenzo T. Oña where the
corresponding shares of the petitioners in the
net income for the year are also known.
Every year, petitioners returned for income
tax purposes their shares in the net income
derived from said properties and securities
and/or from transactions involving them
(Exhibit 3,supra; t.s.n., pp. 25-26). However,
petitioners did not actually receive their
shares in the yearly income. (t.s.n., pp. 25-
26, 40, 98, 100). The income was always left
in the hands of Lorenzo T. Oña who, as
heretofore pointed out, invested them in real
properties and securities. (See Exhibit 3,
t.s.n., pp. 50, 102-104).
On the basis of the foregoing facts,
respondent (Commissioner of Internal
Revenue) decided that petitioners formed an
unregistered partnership and therefore,
subject to the corporate income tax, pursuant
to Section 24, in relation to Section 84(b), of
the Tax Code. Accordingly, he assessed
against the petitioners the amounts of
P8,092.00 and P13,899.00 as corporate
income taxes for 1955 and 1956,
respectively. (See Exhibit 5, amended by
Exhibit 17, pp. 50 and 86, BIR rec.).
[ ] PARTNERSHIP
Petitioners protested against the assessment
and asked for reconsideration of the ruling
of respondent that they have formed an
unregistered partnership. Finding no merit in
petitioners' request, respondent denied it
(See Exhibit 17, p. 86, BIR rec.). (See pp. 1-
4, Memorandum for Respondent, June 12,
1961).
The original assessment was as follows:
1955
Net income as per
investigation ................ P40,209.89
Income tax due thereon ...............................
8,042.00
25% surcharge ..............................................
2,010.50
Compromise for non-
filing .......................... 50.00
Total ..............................................................
. P10,102.50
1956
Net income as per
investigation ................ P69,245.23
Income tax due thereon ...............................
13,849.00
25% surcharge ..............................................
3,462.25
Compromise for non-
filing .......................... 50.00
Total ..............................................................
. P17,361.25
(See Exhibit 13, page 50, BIR records)
Upon further consideration of the case, the
25% surcharge was eliminated in line with
the ruling of the Supreme Court in Collector
v. Batangas Transportation Co., G.R. No. L-
9692, Jan. 6, 1958, so that the questioned
assessment refers solely to the income tax
proper for the years 1955 and 1956 and the
"Compromise for non-filing," the latter item
obviously referring to the compromise in
lieu of the criminal liability for failure of
petitioners to file the corporate income tax
returns for said years. (See Exh. 17, page 86,
BIR records). (Pp. 1-3, Annex C to Petition)
Petitioners have assigned the following as
alleged errors of the Tax Court:
I.
THE COURT OF TAX APPEALS ERRED
IN HOLDING THAT THE PETITIONERS
FORMED AN UNREGISTERED
PARTNERSHIP;
II.
THE COURT OF TAX APPEALS ERRED
IN NOT HOLDING THAT THE
PETITIONERS WERE CO-OWNERS OF
THE PROPERTIES INHERITED AND
(THE) PROFITS DERIVED FROM
TRANSACTIONS THEREFROM (sic);
[ ] PARTNERSHIP
III.
THE COURT OF TAX APPEALS ERRED
IN HOLDING THAT PETITIONERS
WERE LIABLE FOR CORPORATE
INCOME TAXES FOR 1955 AND 1956
AS AN UNREGISTERED
PARTNERSHIP;
IV.
ON THE ASSUMPTION THAT THE
PETITIONERS CONSTITUTED AN
UNREGISTERED PARTNERSHIP, THE
COURT OF TAX APPEALS ERRED IN
NOT HOLDING THAT THE
PETITIONERS WERE AN
UNREGISTERED PARTNERSHIP TO
THE EXTENT ONLY THAT THEY
INVESTED THE PROFITS FROM THE
PROPERTIES OWNED IN COMMON
AND THE LOANS RECEIVED USING
THE INHERITED PROPERTIES AS
COLLATERALS;
V .
ON THE ASSUMPTION THAT THERE
WAS AN UNREGISTERED
PARTNERSHIP, THE COURT OF TAX
APPEALS ERRED IN NOT DEDUCTING
THE VARIOUS AMOUNTS PAID BY
THE PETITIONERS AS INDIVIDUAL
INCOME TAX ON THEIR RESPECTIVE
SHARES OF THE PROFITS ACCRUING
FROM THE PROPERTIES OWNED IN
COMMON, FROM THE DEFICIENCY
TAX OF THE UNREGISTERED
PARTNERSHIP.
In other words, petitioners pose for our
resolution the following questions: (1)
Under the facts found by the Court of Tax
Appeals, should petitioners be considered as
co-owners of the properties inherited by
them from the deceased Julia Buñales and
the profits derived from transactions
involving the same, or, must they be deemed
to have formed an unregistered partnership
subject to tax under Sections 24 and 84(b) of
the National Internal Revenue Code? (2)
Assuming they have formed an unregistered
partnership, should this not be only in the
sense that they invested as a common fund
the profits earned by the properties owned
by them in common and the loans granted to
them upon the security of the said
properties, with the result that as far as their
respective shares in the inheritance are
concerned, the total income thereof should
be considered as that of co-owners and not
of the unregistered partnership? And (3)
assuming again that they are taxable as an
unregistered partnership, should not the
various amounts already paid by them for
the same years 1955 and 1956 as individual
income taxes on their respective shares of
the profits accruing from the properties they
owned in common be deducted from the
deficiency corporate taxes, herein involved,
assessed against such unregistered
[ ] PARTNERSHIP
partnership by the respondent
Commissioner?
Pondering on these questions, the first thing
that has struck the Court is that whereas
petitioners' predecessor in interest died way
back on March 23, 1944 and the project of
partition of her estate was judicially
approved as early as May 16, 1949, and
presumably petitioners have been holding
their respective shares in their inheritance
since those dates admittedly under the
administration or management of the head of
the family, the widower and father Lorenzo
T. Oña, the assessment in question refers to
the later years 1955 and 1956. We believe
this point to be important because,
apparently, at the start, or in the years 1944
to 1954, the respondent Commissioner of
Internal Revenue did treat petitioners as co-
owners, not liable to corporate tax, and it
was only from 1955 that he considered them
as having formed an unregistered
partnership. At least, there is nothing in the
record indicating that an earlier assessment
had already been made. Such being the case,
and We see no reason how it could be
otherwise, it is easily understandable why
petitioners' position that they are co-owners
and not unregistered co-partners, for the
purposes of the impugned assessment,
cannot be upheld. Truth to tell, petitioners
should find comfort in the fact that they
were not similarly assessed earlier by the
Bureau of Internal Revenue.
The Tax Court found that instead of actually
distributing the estate of the deceased among
themselves pursuant to the project of
partition approved in 1949, "the properties
remained under the management of Lorenzo
T. Oña who used said properties in business
by leasing or selling them and investing the
income derived therefrom and the proceed
from the sales thereof in real properties and
securities," as a result of which said
properties and investments steadily
increased yearly from P87,860.00 in "land
account" and P17,590.00 in "building
account" in 1949 to P175,028.68 in
"investment account," P135.714.68 in "land
account" and P169,262.52 in "building
account" in 1956. And all these became
possible because, admittedly, petitioners
never actually received any share of the
income or profits from Lorenzo T. Oña and
instead, they allowed him to continue using
said shares as part of the common fund for
their ventures, even as they paid the
corresponding income taxes on the basis of
their respective shares of the profits of their
common business as reported by the said
Lorenzo T. Oña.
It is thus incontrovertible that petitioners did
not, contrary to their contention, merely
limit themselves to holding the properties
inherited by them. Indeed, it is admitted that
during the material years herein involved,
some of the said properties were sold at
considerable profit, and that with said profit,
[ ] PARTNERSHIP
petitioners engaged, thru Lorenzo T. Oña, in
the purchase and sale of corporate securities.
It is likewise admitted that all the profits
from these ventures were divided among
petitioners proportionately in accordance
with their respective shares in the
inheritance. In these circumstances, it is Our
considered view that from the moment
petitioners allowed not only the incomes
from their respective shares of the
inheritance but even the inherited properties
themselves to be used by Lorenzo T. Oña as
a common fund in undertaking several
transactions or in business, with the
intention of deriving profit to be shared by
them proportionally, such act was
tantamonut to actually contributing such
incomes to a common fund and, in effect,
they thereby formed an unregistered
partnership within the purview of the above-
mentioned provisions of the Tax Code.
It is but logical that in cases of inheritance,
there should be a period when the heirs can
be considered as co-owners rather than
unregistered co-partners within the
contemplation of our corporate tax laws
aforementioned. Before the partition and
distribution of the estate of the deceased, all
the income thereof does belong commonly
to all the heirs, obviously, without them
becoming thereby unregistered co-partners,
but it does not necessarily follow that such
status as co-owners continues until the
inheritance is actually and physically
distributed among the heirs, for it is easily
conceivable that after knowing their
respective shares in the partition, they might
decide to continue holding said shares under
the common management of the
administrator or executor or of anyone
chosen by them and engage in business on
that basis. Withal, if this were to be allowed,
it would be the easiest thing for heirs in any
inheritance to circumvent and render
meaningless Sections 24 and 84(b) of the
National Internal Revenue Code.
It is true that in Evangelista vs. Collector,
102 Phil. 140, it was stated, among the
reasons for holding the appellants therein to
be unregistered co-partners for tax purposes,
that their common fund "was not something
they found already in existence" and that "it
was not a property inherited by them pro
indiviso," but it is certainly far fetched to
argue therefrom, as petitioners are doing
here, that ergo, in all instances where an
inheritance is not actually divided, there can
be no unregistered co-partnership. As
already indicated, for tax purposes, the co-
ownership of inherited properties is
automatically converted into an unregistered
partnership the moment the said common
properties and/or the incomes derived
therefrom are used as a common fund with
intent to produce profits for the heirs in
proportion to their respective shares in the
inheritance as determined in a project
partition either duly executed in an
[ ] PARTNERSHIP
extrajudicial settlement or approved by the
court in the corresponding testate or intestate
proceeding. The reason for this is simple.
From the moment of such partition, the heirs
are entitled already to their respective
definite shares of the estate and the incomes
thereof, for each of them to manage and
dispose of as exclusively his own without
the intervention of the other heirs, and,
accordingly he becomes liable individually
for all taxes in connection therewith. If after
such partition, he allows his share to be held
in common with his co-heirs under a single
management to be used with the intent of
making profit thereby in proportion to his
share, there can be no doubt that, even if no
document or instrument were executed for
the purpose, for tax purposes, at least, an
unregistered partnership is formed. This is
exactly what happened to petitioners in this
case.
In this connection, petitioners' reliance on
Article 1769, paragraph (3), of the Civil
Code, providing that: "The sharing of gross
returns does not of itself establish a
partnership, whether or not the persons
sharing them have a joint or common right
or interest in any property from which the
returns are derived," and, for that matter, on
any other provision of said code on
partnerships is unavailing.
In Evangelista, supra, this Court clearly
differentiated the concept of partnerships
under the Civil Code from that of
unregistered partnerships which are
considered as "corporations" under Sections
24 and 84(b) of the National Internal
Revenue Code. Mr. Justice Roberto
Concepcion, now Chief Justice, elucidated
on this point thus:
To begin with, the tax in question is one
imposed upon "corporations", which, strictly
speaking, are distinct and different from
"partnerships". When our Internal Revenue
Code includes "partnerships" among the
entities subject to the tax on "corporations",
said Code must allude, therefore, to
organizations which are not
necessarily "partnerships", in the technical
sense of the term. Thus, for instance, section
24 of said Code exempts from the
aforementioned tax "duly registered general
partnerships," which constitute precisely one
of the most typical forms of partnerships in
this jurisdiction. Likewise, as defined in
section 84(b) of said Code, "the term
corporation includes partnerships, no matter
how created or organized." This qualifying
expression clearly indicates that a joint
venture need not be undertaken in any of the
standard forms, or in confirmity with the
usual requirements of the law on
partnerships, in order that one could be
deemed constituted for purposes of the tax
on corporation. Again, pursuant to said
section 84(b),the term "corporation"
includes, among others, "joint accounts,
(cuentas en participacion)" and
[ ] PARTNERSHIP
"associations", none of which has a legal
personality of its own, independent of that of
its members. Accordingly, the lawmaker
could not have regarded that personality as a
condition essential to the existence of the
partnerships therein referred to. In fact, as
above stated, "duly registered general co-
partnerships" — which are possessed of the
aforementioned personality — have been
expressly excluded by law (sections 24 and
84[b]) from the connotation of the term
"corporation." ....
xxx xxx xxx
Similarly, the American Law
... provides its own concept of a partnership.
Under the term "partnership" it includes not
only a partnership as known in common law
but, as well, a syndicate, group, pool, joint
venture, or other unincorporated
organization which carries on any business,
financial operation, or venture, and which is
not, within the meaning of the Code, a trust,
estate, or a corporation. ... . (7A Merten's
Law of Federal Income Taxation, p. 789;
emphasis ours.)
The term "partnership" includes a syndicate,
group, pool, joint venture or other
unincorporated organization, through or by
means of which any business, financial
operation, or venture is carried on. ... . (8
Merten's Law of Federal Income Taxation,
p. 562 Note 63; emphasis ours.)
For purposes of the tax on corporations, our
National Internal Revenue Code includes
these partnerships — with the exception
only of duly registered general
copartnerships — within the purview of the
term "corporation." It is, therefore, clear to
our mind that petitioners herein constitute a
partnership, insofar as said Code is
concerned, and are subject to the income tax
for corporations.
We reiterated this view, thru Mr. Justice
Fernando, in Reyes vs. Commissioner of
Internal Revenue, G. R. Nos. L-24020-21,
July 29, 1968, 24 SCRA 198, wherein the
Court ruled against a theory of co-ownership
pursued by appellants therein.
As regards the second question raised by
petitioners about the segregation, for the
purposes of the corporate taxes in question,
of their inherited properties from those
acquired by them subsequently, We consider
as justified the following ratiocination of the
Tax Court in denying their motion for
reconsideration:
In connection with the second ground, it is
alleged that, if there was an unregistered
partnership, the holding should be limited to
the business engaged in apart from the
properties inherited by petitioners. In other
words, the taxable income of the partnership
should be limited to the income derived
from the acquisition and sale of real
[ ] PARTNERSHIP
properties and corporate securities and
should not include the income derived from
the inherited properties. It is admitted that
the inherited properties and the income
derived therefrom were used in the business
of buying and selling other real properties
and corporate securities. Accordingly, the
partnership income must include not only
the income derived from the purchase and
sale of other properties but also the income
of the inherited properties.
Besides, as already observed earlier, the
income derived from inherited properties
may be considered as individual income of
the respective heirs only so long as the
inheritance or estate is not distributed or, at
least, partitioned, but the moment their
respective known shares are used as part of
the common assets of the heirs to be used in
making profits, it is but proper that the
income of such shares should be considered
as the part of the taxable income of an
unregistered partnership. This, We hold, is
the clear intent of the law.
Likewise, the third question of petitioners
appears to have been adequately resolved by
the Tax Court in the aforementioned
resolution denying petitioners' motion for
reconsideration of the decision of said court.
Pertinently, the court ruled this wise:
In support of the third ground, counsel for
petitioners alleges:
Even if we were to yield to the decision of
this Honorable Court that the herein
petitioners have formed an unregistered
partnership and, therefore, have to be taxed
as such, it might be recalled that the
petitioners in their individual income tax
returns reported their shares of the profits of
the unregistered partnership. We think it
only fair and equitable that the various
amounts paid by the individual petitioners as
income tax on their respective shares of the
unregistered partnership should be deducted
from the deficiency income tax found by
this Honorable Court against the
unregistered partnership. (page 7,
Memorandum for the Petitioner in Support
of Their Motion for Reconsideration, Oct.
28, 1961.)
In other words, it is the position of
petitioners that the taxable income of the
partnership must be reduced by the amounts
of income tax paid by each petitioner on his
share of partnership profits. This is not
correct; rather, it should be the other way
around. The partnership profits distributable
to the partners (petitioners herein) should be
reduced by the amounts of income tax
assessed against the partnership.
Consequently, each of the petitioners in his
individual capacity overpaid his income tax
for the years in question, but the income tax
due from the partnership has been correctly
assessed. Since the individual income tax
liabilities of petitioners are not in issue in
[ ] PARTNERSHIP
this proceeding, it is not proper for the Court
to pass upon the same.
Petitioners insist that it was error for the Tax
Court to so rule that whatever excess they
might have paid as individual income tax
cannot be credited as part payment of the
taxes herein in question. It is argued that to
sanction the view of the Tax Court is to
oblige petitioners to pay double income tax
on the same income, and, worse, considering
the time that has lapsed since they paid their
individual income taxes, they may already
be barred by prescription from recovering
their overpayments in a separate action. We
do not agree. As We see it, the case of
petitioners as regards the point under
discussion is simply that of a taxpayer who
has paid the wrong tax, assuming that the
failure to pay the corporate taxes in question
was not deliberate. Of course, such taxpayer
has the right to be reimbursed what he has
erroneously paid, but the law is very clear
that the claim and action for such
reimbursement are subject to the bar of
prescription. And since the period for the
recovery of the excess income taxes in the
case of herein petitioners has already lapsed,
it would not seem right to virtually disregard
prescription merely upon the ground that the
reason for the delay is precisely because the
taxpayers failed to make the proper return
and payment of the corporate taxes legally
due from them. In principle, it is but proper
not to allow any relaxation of the tax laws in
favor of persons who are not exactly above
suspicion in their conduct vis-a-vis their tax
obligation to the State.
IN VIEW OF ALL THE FOREGOING, the
judgment of the Court of Tax Appeals
appealed from is affirm with costs against
petitioners.
G.R. No. L-45425 April 29, 1939
JOSE GATCHALIAN, ET AL., plaintiffs-
appellants,
vs.
THE COLLECTOR OF INTERNAL
REVENUE, defendant-appellee.
Guillermo B. Reyes for appellants.
Office of the Solicitor-General Tuason for
appellee.
IMPERIAL, J.:
The plaintiff brought this action to recover
from the defendant Collector of Internal
Revenue the sum of P1,863.44, with legal
interest thereon, which they paid under
protest by way of income tax. They appealed
from the decision rendered in the case on
[ ] PARTNERSHIP
October 23, 1936 by the Court of First
Instance of the City of Manila, which
dismissed the action with the costs against
them.
The case was submitted for decision upon
the following stipulation of facts:
Come now the parties to the above-
mentioned case, through their respective
undersigned attorneys, and hereby agree to
respectfully submit to this Honorable Court
the case upon the following statement of
facts:
1. That plaintiff are all residents of the
municipality of Pulilan, Bulacan, and that
defendant is the Collector of Internal
Revenue of the Philippines;
2. That prior to December 15, 1934
plaintiffs, in order to enable them to
purchase one sweepstakes ticket valued at
two pesos (P2), subscribed and paid therefor
the amounts as follows:
1. Jose
Gatchalian .............................................
.......................................................
P0.
18
2. Gregoria
Cristobal ................................................
...............................................
.18
3. Saturnina
Silva ......................................................
.08
..............................................
4. Guillermo
Tapia ......................................................
.............................................
.13
5. Jesus
Legaspi ..................................................
....................................................
.15
6. Jose
Silva ......................................................
.......................................................
.07
7. Tomasa
Mercado ................................................
................................................
.08
8. Julio
Gatchalian .............................................
......................................................
.13
9. Emiliana
Santiago .................................................
...............................................
.13
10. Maria C.
Legaspi ..................................................
.............................................
.16
11. Francisco
Cabral ....................................................
...........................................
.13
[ ] PARTNERSHIP
12. Gonzalo
Javier .....................................................
...............................................
.14
13. Maria
Santiago .................................................
..................................................
.17
14. Buenaventura
Guzman .................................................
.....................................
.13
15. Mariano
Santos ....................................................
.............................................
.14
Total ......................................................
..................................................
2.0
0
3. That immediately thereafter but prior to
December 15, 1934, plaintiffs purchased, in
the ordinary course of business, from one of
the duly authorized agents of the National
Charity Sweepstakes Office one ticket
bearing No. 178637 for the sum of two
pesos (P2) and that the said ticket was
registered in the name of Jose Gatchalian
and Company;
4. That as a result of the drawing of the
sweepstakes on December 15, 1934, the
above-mentioned ticket bearing No. 178637
won one of the third prizes in the amount of
P50,000 and that the corresponding check
covering the above-mentioned prize of
P50,000 was drawn by the National Charity
Sweepstakes Office in favor of Jose
Gatchalian & Company against the
Philippine National Bank, which check was
cashed during the latter part of December,
1934 by Jose Gatchalian & Company;
5. That on December 29, 1934, Jose
Gatchalian was required by income tax
examiner Alfredo David to file the
corresponding income tax return covering
the prize won by Jose Gatchalian &
Company and that on December 29, 1934,
the said return was signed by Jose
Gatchalian, a copy of which return is
enclosed as Exhibit A and made a part
hereof;
6. That on January 8, 1935, the defendant
made an assessment against Jose Gatchalian
& Company requesting the payment of the
sum of P1,499.94 to the deputy provincial
treasurer of Pulilan, Bulacan, giving to said
Jose Gatchalian & Company until January
20, 1935 within which to pay the said
amount of P1,499.94, a copy of which letter
marked Exhibit B is enclosed and made a
part hereof;
7. That on January 20, 1935, the plaintiffs,
through their attorney, sent to defendant a
reply, a copy of which marked Exhibit C is
attached and made a part hereof, requesting
[ ] PARTNERSHIP
exemption from payment of the income tax
to which reply there were enclosed fifteen
(15) separate individual income tax returns
filed separately by each one of the plaintiffs,
copies of which returns are attached and
marked Exhibit D-1 to D-15, respectively, in
order of their names listed in the caption of
this case and made parts hereof; a statement
of sale signed by Jose Gatchalian showing
the amount put up by each of the plaintiffs
to cover up the attached and marked as
Exhibit E and made a part hereof; and a
copy of the affidavit signed by Jose
Gatchalian dated December 29, 1934 is
attached and marked Exhibit F and made
part thereof;
8. That the defendant in his letter dated
January 28, 1935, a copy of which marked
Exhibit G is enclosed, denied plaintiffs'
request of January 20, 1935, for exemption
from the payment of tax and reiterated his
demand for the payment of the sum of
P1,499.94 as income tax and gave plaintiffs
until February 10, 1935 within which to pay
the said tax;
9. That in view of the failure of the plaintiffs
to pay the amount of tax demanded by the
defendant, notwithstanding subsequent
demand made by defendant upon the
plaintiffs through their attorney on March
23, 1935, a copy of which marked Exhibit H
is enclosed, defendant on May 13, 1935
issued a warrant of distraint and levy against
the property of the plaintiffs, a copy of
which warrant marked Exhibit I is enclosed
and made a part hereof;
10. That to avoid embarrassment arising
from the embargo of the property of the
plaintiffs, the said plaintiffs on June 15,
1935, through Gregoria Cristobal, Maria C.
Legaspi and Jesus Legaspi, paid under
protest the sum of P601.51 as part of the tax
and penalties to the municipal treasurer of
Pulilan, Bulacan, as evidenced by official
receipt No. 7454879 which is attached and
marked Exhibit J and made a part hereof,
and requested defendant that plaintiffs be
allowed to pay under protest the balance of
the tax and penalties by monthly
installments;
11. That plaintiff's request to pay the
balance of the tax and penalties was granted
by defendant subject to the condition that
plaintiffs file the usual bond secured by two
solvent persons to guarantee prompt
payment of each installments as it becomes
due;
12. That on July 16, 1935, plaintiff filed a
bond, a copy of which marked Exhibit K is
enclosed and made a part hereof, to
guarantee the payment of the balance of the
alleged tax liability by monthly installments
at the rate of P118.70 a month, the first
payment under protest to be effected on or
before July 31, 1935;
[ ] PARTNERSHIP
13. That on July 16, 1935 the said plaintiffs
formally protested against the payment of
the sum of P602.51, a copy of which protest
is attached and marked Exhibit L, but that
defendant in his letter dated August 1, 1935
overruled the protest and denied the request
for refund of the plaintiffs;
14. That, in view of the failure of the
plaintiffs to pay the monthly installments in
accordance with the terms and conditions of
bond filed by them, the defendant in his
letter dated July 23, 1935, copy of which is
attached and marked Exhibit M, ordered the
municipal treasurer of Pulilan, Bulacan to
execute within five days the warrant of
distraint and levy issued against the
plaintiffs on May 13, 1935;
15. That in order to avoid annoyance and
embarrassment arising from the levy of their
property, the plaintiffs on August 28, 1936,
through Jose Gatchalian, Guillermo Tapia,
Maria Santiago and Emiliano Santiago, paid
under protest to the municipal treasurer of
Pulilan, Bulacan the sum of P1,260.93
representing the unpaid balance of the
income tax and penalties demanded by
defendant as evidenced by income tax
receipt No. 35811 which is attached and
marked Exhibit N and made a part hereof;
and that on September 3, 1936, the plaintiffs
formally protested to the defendant against
the payment of said amount and requested
the refund thereof, copy of which is attached
and marked Exhibit O and made part hereof;
but that on September 4, 1936, the defendant
overruled the protest and denied the refund
thereof; copy of which is attached and
marked Exhibit P and made a part hereof;
and
16. That plaintiffs demanded upon defendant
the refund of the total sum of one thousand
eight hundred and sixty three pesos and
forty-four centavos (P1,863.44) paid under
protest by them but that defendant refused
and still refuses to refund the said amount
notwithstanding the plaintiffs' demands.
17. The parties hereto reserve the right to
present other and additional evidence if
necessary.
Exhibit E referred to in the stipulation is of
the following tenor:
To whom it may concern:
I, Jose Gatchalian, a resident of Pulilan,
Bulacan, married, of age, hereby certify, that
on the 11th day of August, 1934, I sold parts
of my shares on ticket No. 178637 to the
persons and for the amount indicated below
and the part of may share remaining is also
shown to wit:
PurchaserAmou
nt
Addres
s
1. Mariano
Santos ................................
P0.14 Pulilan
,
[ ] PARTNERSHIP
...........Bulaca
n.
2. Buenaventura
Guzman .............................
..
.13 - Do -
3. Maria
Santiago .............................
...............
.17 - Do -
4. Gonzalo
Javier .................................
.............
.14 - Do -
5. Francisco
Cabral ................................
..........
.13 - Do -
6. Maria C.
Legaspi ..............................
............
.16 - Do -
7. Emiliana
Santiago .............................
............
.13 - Do -
8. Julio
Gatchalian .........................
...................
.13 - Do -
9. Jose
Silva ...................................
.07 - Do -
...................
10. Tomasa
Mercado .............................
..........
.08 - Do -
11. Jesus
Legaspi ..............................
...............
.15 - Do -
12. Guillermo
Tapia ..................................
.........
.13 - Do -
13. Saturnina
Silva ...................................
.........
.08 - Do -
14. Gregoria
Cristobal ............................
...........
.18 - Do -
15. Jose
Gatchalian .........................
...................
.18 - Do -
2.00
Total
cost of
said
ticket; and that, therefore, the persons named
above are entitled to the parts of whatever
prize that might be won by said ticket.
Pulilan, Bulacan, P.I.
[ ] PARTNERSHIP
(Sgd.) JOSE GATCHALIAN
And a summary of Exhibits D-1 to D-15 is
inserted in the bill of exceptions as follows:
RECAPITULATIONS OF 15
INDIVIDUAL INCOME TAX RETURNS
FOR 1934 ALL DATED JANUARY 19,
1935 SUBMITTED TO THE COLLECTOR
OF INTERNAL REVENUE.
Name
Exh
ibit
No.
Purc
hase
Pric
e
Pri
ce
W
on
Expe
nses
Ne
t
pri
ze
1. Jose
Gatchalian ......
........................
............
D-1P0.1
8
P4,
42
5
P 4803,9
45
2. Gregoria
Cristobal .........
........................
.....
D-2 .184,5
752,000
2,5
75
3. Saturnina
Silva ...............
........................
......
D-3 .081,8
75360
1,5
15
4. Guillermo
Tapia ..............
........................
D-4 .13 3,3
25
360 2,9
65
....
5. Jesus
Legaspi by
Maria
Cristobal .........
D-5 .153,8
25720
3,1
05
6. Jose
Silva ...............
........................
.............
D-6 .081,8
75360
1,5
15
7. Tomasa
Mercado .........
........................
......
D-7 .071,8
75360
1,5
15
8. Julio
Gatchalian by
Beatriz
Guzman .......
D-8 .133,1
50240
2,9
10
9. Emiliana
Santiago .........
........................
.....
D-9 .133,3
25360
2,9
65
10. Maria C.
Legaspi ...........
........................
...
D-
10.16
4,1
00960
3,1
40
11. Francisco
Cabral .............
D- .13 3,3 360 2,9
[ ] PARTNERSHIP
........................
.11 25 65
12. Gonzalo
Javier ..............
........................
....
D-
12.14
3,3
25360
2,9
65
13. Maria
Santiago .........
........................
.........
D-
13.17
4,3
50360
3,9
90
14.
Buenaventura
Guzman ..........
.................
D-
14.13
3,3
25360
2,9
65
15. Mariano
Santos .............
........................
...
D-
15.14
3,3
25360
2,9
65
2.00
50,
00
0
<=""
td=""
style
="fon
t-
size:
14px;
text-
decor
ation:
none;
color:
rgb(0
, 0,
128);
font-
famil
y:
arial,
verda
na;">
The legal questions raised in plaintiffs-
appellants' five assigned errors may properly
be reduced to the two following: (1)
Whether the plaintiffs formed a partnership,
or merely a community of property without
a personality of its own; in the first case it is
admitted that the partnership thus formed is
liable for the payment of income tax,
whereas if there was merely a community of
property, they are exempt from such
payment; and (2) whether they should pay
the tax collectively or whether the latter
should be prorated among them and paid
individually.
The Collector of Internal Revenue collected
the tax under section 10 of Act No. 2833, as
last amended by section 2 of Act No. 3761,
reading as follows:
SEC. 10. (a) There shall be levied, assessed,
collected, and paid annually upon the total
net income received in the preceding
calendar year from all sources by every
[ ] PARTNERSHIP
corporation, joint-stock company,
partnership, joint account (cuenta en
participacion), association or insurance
company, organized in the Philippine
Islands, no matter how created or organized,
but not including duly registered general
copartnership (compañias colectivas), a tax
of three per centum upon such income; and a
like tax shall be levied, assessed, collected,
and paid annually upon the total net income
received in the preceding calendar year from
all sources within the Philippine Islands by
every corporation, joint-stock company,
partnership, joint account (cuenta en
participacion), association, or insurance
company organized, authorized, or existing
under the laws of any foreign country,
including interest on bonds, notes, or other
interest-bearing obligations of residents,
corporate or otherwise: Provided,
however, That nothing in this section shall
be construed as permitting the taxation of
the income derived from dividends or net
profits on which the normal tax has been
paid.
The gain derived or loss sustained from the
sale or other disposition by a corporation,
joint-stock company, partnership, joint
account (cuenta en participacion),
association, or insurance company, or
property, real, personal, or mixed, shall be
ascertained in accordance with subsections
(c) and (d) of section two of Act Numbered
Two thousand eight hundred and thirty-
three, as amended by Act Numbered
Twenty-nine hundred and twenty-six.
The foregoing tax rate shall apply to the net
income received by every taxable
corporation, joint-stock company,
partnership, joint account (cuenta en
participacion), association, or insurance
company in the calendar year nineteen
hundred and twenty and in each year
thereafter.
There is no doubt that if the plaintiffs
merely formed a community of property the
latter is exempt from the payment of income
tax under the law. But 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
equally the prize which they may win, as
they did in fact in the amount of P50,000
(article 1665, Civil Code). 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.
[ ] PARTNERSHIP
Having organized and constituted a
partnership of a civil nature, the said entity
is the one bound to pay the income tax
which the defendant collected under the
aforesaid section 10 (a) of Act No. 2833, as
amended by section 2 of Act No. 3761.
There is no merit in plaintiff's contention
that the tax should be prorated among them
and paid individually, resulting in their
exemption from the tax.
In view of the foregoing, the appealed
decision is affirmed, with the costs of this
instance to the plaintiffs appellants. So
ordered.
G.R. Nos. L-24020-21 July 29, 1968
FLORENCIO REYES and ANGEL
REYES, petitioners,
vs.
COMMISSIONER OF INTERNAL
REVENUE and HON. COURT OF TAX
APPEALS, respondents.
Jose W. Diokno and Domingo Sandoval for
petitioners.
Office of the Solicitor General for
respondents.
FERNANDO, J.:
Petitioners in this case were assessed by
respondent Commissioner of Internal
Revenue the sum of P46,647.00 as income
tax, surcharge and compromise for the years
1951 to 1954, an assessment subsequently
reduced to P37,528.00. This assessment
sought to be reconsidered unsuccessfully
was the subject of an appeal to respondent
Court of Tax Appeals. Thereafter, another
assessment was made against petitioners,
this time for back income taxes plus
surcharge and compromise in the total sum
of P25,973.75, covering the years 1955 and
1956. There being a failure on their part to
have such assessments reconsidered, the
matter was likewise taken to the respondent
Court of Tax Appeals. The two
cases1 involving as they did identical issues
and ultimately traceable to facts similar in
character were heard jointly with only one
decision being rendered.
In that joint decision of respondent Court of
Tax Appeals, the tax liability for the years
1951 to 1954 was reduced to P37,128.00
and for the years 1955 and 1956, to
P20,619.00 as income tax due "from the
partnership formed" by petitioners.2 The
reduction was due to the elimination of
surcharge, the failure to file the income tax
[ ] PARTNERSHIP
return being accepted as due to petitioners
honest belief that no such liability was
incurred as well as the compromise penalties
for such failure to file.3 A reconsideration of
the aforesaid decision was sought and
denied by respondent Court of Tax Appeals.
Hence this petition for review.
The facts as found by respondent Court of
Tax Appeals, which being supported by
substantial evidence, must be
respected4 follow: "On October 31, 1950,
petitioners, father and son, purchased a lot
and building, known as the Gibbs Building,
situated at 671 Dasmariñas Street, Manila,
for P835,000.00, of which they paid the sum
of P375,000.00, leaving a balance of
P460,000.00, representing the mortgage
obligation of the vendors with the China
Banking Corporation, which mortgage
obligations were assumed by the vendees.
The initial payment of P375,000.00 was
shared equally by petitioners. At the time of
the purchase, the building was leased to
various tenants, whose rights under the lease
contracts with the original owners, the
purchasers, petitioners herein, agreed to
respect. The administration of the building
was entrusted to an administrator who
collected the rents; kept its books and
records and rendered statements of accounts
to the owners; negotiated leases; made
necessary repairs and disbursed payments,
whenever necessary, after approval by the
owners; and performed such other functions
necessary for the conservation and
preservation of the building. Petitioners
divided equally the income of operation and
maintenance. The gross income from rentals
of the building amounted to about
P90,000.00 annually."5
From the above facts, the respondent Court
of Tax Appeals applying the appropriate
provisions of the National Internal Revenue
Code, the first of which imposes an income
tax on corporations "organized in, or
existing under the laws of the Philippines,
no matter how created or organized but not
including duly registered general co-
partnerships (companias colectivas), ...,"6 a
term, which according to the second
provision cited, includes partnerships "no
matter how created or organized, ...,"7 and
applying the leading case of Evangelista v.
Collector of Internal Revenue,8 sustained
the action of respondent Commissioner of
Internal Revenue, but reduced the tax
liability of petitioners, as previously noted.
Petitioners maintain the view that the
Evangelista ruling does not apply; for them,
the situation is
dissimilar.1äwphï1.ñëtConsequently they
allege that the reliance by respondent Court
of Tax Appeals was unwarranted and the
decision should be set aside. If their
interpretation of the authoritative doctrine
therein set forth commands assent, then
clearly what respondent Court of Tax
[ ] PARTNERSHIP
Appeals did fails to find shelter in the law.
That is the crux of the matter. A perusal of
the Evangelista decision is therefore
unavoidable.
As noted in the opinion of the Court, penned
by the present Chief Justice, the issue was
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, ..."9 After referring to another section
of the National Internal Revenue Code,
which explicitly provides that the term
corporation "includes partnerships" and then
to Article 1767 of the Civil Code of the
Philippines, defining what a contract of
partnership is, the opinion goes on to state
that "the essential elements of a partnership
are two, namely: (a) an agreement to
contribute money, property or industry to a
common fund; and (b) intent to divide the
profits among the contracting parties. The
first element is undoubtedly present in the
case at bar, for, admittedly, petitioners have
agreed to and did, contribute money and
property to a common fund. Hence, the issue
narrows down to their intent in acting as
they did. Upon consideration of all the facts
and circumstances surrounding the case, we
are fully satisfied that their purpose was to
engage in real estate transactions for
monetary gain and then divide the same
among themselves, ..."10
In support of the above conclusion,
reference was made to the following
circumstances, namely, the common fund
being created purposely not something
already found in existence, the investment of
the same not merely in one transaction but in
a series of transactions; the lots thus
acquired not being devoted to residential
purposes or to other personal uses of
petitioners in that case; such properties
having been under the management of one
person with full power to lease, to collect
rents, to issue receipts, to bring suits, to sign
letters and contracts and to endorse notes
and checks; the above conditions having
existed for more than 10 years since the
acquisition of the above properties; and no
testimony having been introduced as to the
purpose "in creating the set up already
adverted to, or on the causes for its
continued existence."11 The conclusion that
emerged had all the imprint of inevitability.
Thus: "Although, taken singly, they might
not suffice to establish the intent necessary
to constitute a partnership, the collective
effect of these circumstances is such as to
leave no room for doubt on the existence of
said intent in petitioners herein."12
It may be said that there could be a
differentiation made between the
circumstances above detailed and those
existing in the present case. It does not
suffice though to preclude the applicability
of the Evangelista decision. Petitioners
[ ] PARTNERSHIP
could harp on these being only one
transaction. They could stress that an
affidavit of one of them found in the Bureau
of Internal Revenue records would indicate
that their intention was to house in the
building acquired by them the respective
enterprises, coupled with a plan of effecting
a division in 10 years. It is a little surprising
then that while the purchase was made on
October 31, 1950 and their brief as
petitioners filed on October 20, 1965, almost
15 years later, there was no allegation that
such division as between them was in fact
made. Moreover, the facts as found and as
submitted in the brief made clear that the
building in question continued to be leased
by other parties with petitioners dividing
"equally the income ... after deducting the
expenses of operation and
maintenance ..."13 Differences of such
slight significance do not call for a different
ruling.
It is obvious that petitioners' effort to avoid
the controlling force of the Evangelista
ruling cannot be deemed successful.
Respondent Court of Tax Appeals acted
correctly. It yielded to the command of an
authoritative decision; it recognized its
binding character. There is clearly no merit
to the second error assigned by petitioners,
who would deny its applicability to their
situation.
The first alleged error committed by
respondent Court of Tax Appeals in holding
that petitioners, in acquiring the Gibbs
Building, established a partnership subject
to income tax as a corporation under the
National Internal Revenue Code is likewise
untenable. In their discussion in their brief
of this alleged error, stress is laid on their
being co-owners and not partners. Such an
allegation was likewise made in the
Evangelista case.
This is the way it was disposed of in the
opinion of the present Chief Justice: "This
pretense was correctly rejected by the Court
of Tax Appeals."14 Then came the
explanation why: "To begin with, the tax in
question is one imposed upon
"corporations", which, strictly speaking, are
distinct and different from "partnerships".
When our Internal Revenue Code includes
"partnerships" among the entities subject to
the tax on "corporations", said Code must
allude, therefore, to organizations which
are not necessarily "partnerships", in the
technical sense of the term. Thus, for
instance, section 24 of said
Code exempts from the aforementioned tax
"duly registered general partnerships",
which constitute precisely one of the most
typical forms of partnerships in this
jurisdiction. Likewise, as defined in section
84(b) of said Code, "the term corporation
includes partnerships, no matter how created
or organized." This qualifying expression
[ ] PARTNERSHIP
clearly indicates that a joint venture need not
be undertaken in any of the standard forms,
or in conformity with the usual requirements
of the law on partnerships, in order that one
could be deemed constituted for purposes of
the tax on corporations. Again, pursuant to
said section 84(b), the term "corporation"
includes, among others, "joint accounts,
(cuentas en participacion)" and
"associations", none of which has a legal
personality of its own, independent of that of
its members. Accordingly, the lawmaker
could not have regarded that personality as a
condition essential to the existence of the
partnerships therein referred to. In fact, as
above stated, "duly registered general
copartnerships" — which are possessed of
the aforementioned personality - have been
expressly excluded by law (sections 24 and
84[b]) from the connotation of the term
"corporation"."15 The opinion went on to
summarize the matter aptly: "For purposes
of the tax on corporations, our National
Internal Revenue Code, include these
partnerships — with the exception only of
duly registered general co-partnerships
within the purview of the term
"corporation." It is, therefore, clear to our
mind that petitioners herein constitute a
partnership, insofar as said Code is
concerned, and are subject to the income tax
for corporations."16
In the light of the above, it cannot be said
that the respondent Court of Tax Appeals
decided the matter incorrectly. There is no
warrant for the assertion that it failed to
apply the settled law to uncontroverted facts.
Its decision cannot be successfully assailed.
Moreover, an observation made in Alhambra
Cigar & Cigarette Manufacturing Co. v.
Commissioner of Internal Revenue,17 is
well-worth recalling. Thus: "Nor as a matter
of principle is it advisable for this Court to
set aside the conclusion reached by an
agency such as the Court of Tax Appeals
which is, by the very nature of its functions,
dedicated exclusively to the study and
consideration of tax problems and has
necessarily developed an expertise on the
subject, unless, as did not happen here, there
has been an abuse or improvident exercise
of its authority."
WHEREFORE, the decision of the
respondent Court of Tax Appeals ordering
petitioners "to pay the sums of P37,128.00
as income tax due from the partnership
formed by herein petitioners for the years
1951 to 1954 and P20,619.00 for the years
1955 and 1956 within thirty days from the
date this decision becomes final, plus the
corresponding surcharge and interest in case
of delinquency," is affirmed. With costs
against petitioners.
[ ] PARTNERSHIP
G.R. Nos. L-11483-11484 February
14, 1958
In the matter of the Testate Estate of the
deceased Edward E. Christensen, ADOLFO
CRUZ AZNAR,petitioner.
MARIA LUCY CHRISTENSEN DANEY
and ADOLFO CRUZ AZNAR, petitioners-
appellants,
vs.
MARIA HELEN CHRISTENSEN GARCIA
and BERNARDA
CAMPOREDONDO, oppositors-appellees.
BERNARDA
CAMPOREDONDO, plaintiff-appellee,
vs.
ADOLFO CRUZ AZNAR, as Executor of
the Deceased EDWARD E.
CHRISTENSEN, defendant-appellant.
M. R. Sotelo for appellants.
Leopoldo M. abellera and Amado A. Munda
for appellee Maria Heliuen Christensen
Garcia.
Pedro P. Suarez and Oscar Breva for
appellee Bernarda Camporedondo.
FELIX, J.:
From the records of the above-entitled cases,
it appears that as of 1913,Edward E.
Christensen, an American citizen, was
already residing in Davao and on the
following year became the manager of
Mindanao Estates located in the
municipality of Padada of the same
province. At a certain time, which the lower
court placed at 1917, a group of laborers
recruited from Argao, Cebu, arrived to work
in the said plantation. Among the group was
a young girl,Bernarda Camporendondo, who
became an assistant to the cook. Thereafter,
thegirl and Edward E. Christensen, who was
also unmarried staring living together as
husband and wife and although the records
failed to establishthe exact date when such
relationship commenced, the lower court
found the same to have been continous for
over 30 years until the death of Christensen
occurecd on April 30, 1953. Out of said
relations, 2 children, Lucy and Helen
Christensen, were allegedly born.
G. R. NO. L-11484.
Upon the demise of the American, who had
left a considerable amount of properties his
will naming Adolfo Cruz Aznar as executor
was duly presented for probate in court and
became the subject of Special Proceedings
No. 622 of the Court of First Instance of
Davao. Said will contains, among others, the
following provisions:
xxx xxx xxx.
[ ] PARTNERSHIP
3. I declare . . . that I have but one (1) child,
named MARIA LUCY CHRISTENSEN
(now Mrs. Bernard Daney), who was born in
the Philippines about twenty-eight years
ago, and who is now residing at No. 665
Rodger Young Village, Los Angeles,
California, U.S.A.
4. I further declare that I have no living
ascendants, andno descendantsexcept my
above named daughter, MARIA LUCY
CHRISTENSEN DANEY.
xxx xxx xxx.
7. I give, devise and bequeath unto MARIA
LUCY CHRISTENSEN, now married
toEduardo Garcia, about eighteen years of
age and who, notwithstanding the factthat
she was baptized Christensen, is not in any
way related to me, nor hasshe been at any
time adopted to me, and who, from all
information I have now resides in Egipt,
Digos, Davao, Philippines, the sum of
THREEE THOUSAND SIXHUNDRED
PESOS (P3,600) Philippine Currency, the
same to be deposited in trustfor said Maria
Lucy Christensen with the Davao Branch of
the PhilippineNational Bank, and paid to her
at the rate of One Hundred Pesos (P100),
Philippine Currency per month until the the
principal thereof as well as any interest
which may have accrued thereon, is
exhausted.
8. I give devise and bequeath unto
BERNARDA CAMPORENDONDO, now
residing inPadada, Davao, Philippines, the
sum of One Thousand Pesos (P1,000),
Philippine Currency.
xxx xxx xxx.
12. I hereby give, devise and bequeath, unto
my well-beloved daughter, the said MARIA
Lucy CHRISTENSEN DANEY (Mrs.
Bernard Daney), now residing as aforesaid
at No. 665 Rodger Young Village Los
Angeles, California, U.S.A., all the income
from the rest, remainder, and residue of my
property and estate, real, personal and/or
mixed, of whatsoever kind or character,
andwheresover situated; of which I may be
possessed at any death and which mayhave
come to me from any source whatsoever,
during her lifetime,Provided, honvever, that
should the said MARIA LUCY
CHRISTENSEN DANEY at any time prior
to her decease having living issue, then, and
in that event, the life interest herein given
shall terminate, and if so terminated, then I
give, devise, and bequeath to my said
daughter, the said MARIA LUCY
CHRISTENSEN DANEY, the rest
remainder and residue of my property, with
the same force and effectas if I had
originally so given, devised and
bequeathedit to her; and provided, further,
that should be said Maria Lucy
ChristensenDaney die without living issue
[ ] PARTNERSHIP
then, and in that event, I give, devise and
bequeath all the rest, remainder and residue
of my property, one-half (1/2) to my well-
beloved sister, Mrs. CARRIE LOIUSE C.
BORTON, now residing at No. 2124
Twentieth Street, Bakersfield, California,
U.S.A. and one-half (1/2) to the children of
my deceased brother, JOSEPH C.
CRISTENSEN, . . .
13. I hereby nominate and appoint Mr
Adolfo Cruz Aznar, of Davao City,
Philippines, my executor, and the executor
of this, my last will and testament.
. . . (Exh. A).
Oppositions to the probate of this will were
separately filed by Maria Helen Christensen
Garcia and Bernarda Camporendondo, the
first contending that thewill lacked the
formalities required by law; that granting
that he had, thedispositions made therein
were illegal because although she and Lucy
Christensen were both children had by the
deceased with Bernarda Camporendondo,
yet she was given only a meager sum of
P3,600 out of an estate valued at $485,000
while Lucy would get the rest of the
properties;and that the petitioner Adolfo
Cruz Aznar was not qualified to be
appointed as administrator of the estate
because he had an interest adverse to thatof
the estate. It was therefore prayed by his
oppositor that the application for probate be
denied and the will disallowed; that the
proceeding be declared intestate and that
another disinterested person be appointed as
administrator.
Bernarda Camporedondo, on the other hand,
claimed ownership over one-halfof the
entire estate in virtue of her relationship
with the deceased, it being alleged that she
and the testator having lived together as
husband andwife continuously for a period
of over 30 years, the properties acquired
during such cohabitation should be governed
by the rules on co-ownership. This
opposition was dismissed by the probate
court on the ground that shehad no right to
intervene in said proceeding, for as such
common-law wife she had no successional
right that might be affected by the probate of
thewill, and likewise, she could not be
allowed to establish her title and co-
ownership over the properties therein for
such questions must be ventilated in a court
of general jurisdiction. In view of this ruling
of the Court and in order to attain the
purpose sought by her overruled opposition
Bernarda Camporedondo had to institute, as
she did institute Civil Case No. 1076 of the
Court of First Instance of Davao (G.R. No.
L-11483) which we will consider and
discuss hereinafter.
In the meantime, Adolfo Cruz Aznar was
appointed special adminsitrator of the estate
after filing a bond for P5,000 pending the
[ ] PARTNERSHIP
appointment of a regular one, and letters of
special administrition were correspondingly
issued to him on May 21, 1953.
The records further show that subsequent to
her original opposition. Helen Christensen
Garcia filed a supplemental opposition and
motion to declare her an acknowledged
natural child of Edward E. Christensen,
alleging that shewas conceived during the
time when her mother Bernarda
Camporendondo was living with the
deceased as his common-law wife; that she
had been in continous possession of the
status of a natural child of the deceased;
thatahe had in her favor evidence and/or
proof that Edward Christensen was her
father; and that she and Lucy had the same
civil status as children of the decedent and
Bernarda Camporedondo. This motion was
opposed jointly by the executor and Maria
Lucy Christensen Daney asserting that
before, during and after the conception and
birth of Helen Christensen Garcia, her
mother was generally known to be carrying
relations with 3 different men; that during
the lifetime of the decedent and even years
before his death, Edward Christensen
verbally as well as in writing disavowed
relationship with said oppositor; that
oppositor appropriated and used the surname
Christensen illegally and without permission
from the deceased. Thus they prayed the
Court that the will be allowed; that Maria
Helen Christensen Garcia be declared not in
any way related to the deceased; and that the
motion of said oppositor be denied.
After due hearing, the lower court in a
decision dated February 28, 1953, found that
oppositor Maria Helen Cristensen had been
in continous possession of the status of a
natural child of the deceased Edward
Christensen notwithstanding the fact that she
was disowned by him in his will, for such
action must have been brought about by the
latter's disaproval of said oppositor's
marriage to a man he did not like. But taking
into considerationthat such possession of the
status of a natural child did not itself
constitute acknowledgment but may only be
availed of to compel acknowledgment, the
lower Court directed Maria Lucy
Christensen Daney toacknowledge the
oppositor as a natural child of Edward E.
Christensen. Thewill was, however, allowed
the letters testamentary consequently issued
toAdolfo Cruz Aznar, the executor named
therein. From the portion of the decision
requiring Lucy Christensen to acknowledge
Helen as a natural child of the testator, the
former and the executor interposed an
appeal to the Court of Appeals (CA-G. R.
No. 13421-R), but the appellate tribunal
elevatedthe same to Us on the ground that
the case involves an estate the value of
which far exceeds P50,000.00 and thus falls
within the exclusive appellate jurisdiction of
this Court pursuant to Section 17 (5),
Republic Act No. 296.
[ ] PARTNERSHIP
The principal issue in this litigation is
whether the lower court erred in finding that
the oppositor Maria Helen Christensen
Garcia had been in continous possession of
the status of a natural child of the deceased
EdwardE. Christensen and in directing
Maria Lucy Christensen Daney,
recognizeddaughter and instituted heirs of
the decedent, to acknowledge the former
assuch natural child.
Maria Lucy Christensen was born on April
25, 1922, and Maria Helen Christensen on
July 2, 1934, of the same mother, Bernarda
Camporedondo, during the period when the
latter was publicly known to have been
living as common-law wife of Edward E.
Chrisiensen. From the facts of the case there
can be no question as to Lucy's parentage,
but controversy arose when Edward
Christensen, in making his last will and
testament, disavowed such paternity to
Helen and gave her only a legacy of P3,600.
ln the course of the proceeding for the
probate of the will (Exh, A), Helen
introduced documentary and testimonial
evidence to support her claim that she,
Lucy,was a natural child of the deceased
and, therefore, entitled to the hereditaryshare
corresponding to such descendant. Several
witness testified in herfavor, including the
mother Bernarda Camporendondo, her
former teachers andother residents of the
community, tending to prove that she was
known in the locality as a child of the
testator and was introduced by the latter to
the circle of his friends and acquaintances as
his daughter. Family portraits, greeting cards
and letters were likewise presented to bolster
herassertion that she had always been treated
by the deceased and by Lucy herself as a
member of the family.
Lucy Christensen and Adolfo Cruz Aznar,
as executor, tried to repudiate herclaim by
introducing evidence to prove that on or
about the period when shewas conceived
and born, her mother was carrying an affair
with another man,Zosimo Silva, a former
laborer in her Paligue plantation. Silva
executed an affidavit and even took the
witness stand to testify to this effect.
Appellants also strived to show that the
defendant's solicitations for Helen's welfare
and the help extended to her merely sprang
out generosity and hammered on the fact
that on several occasions, the deceased
disclaimed any relationship with her (Exh.
O-Daney, Exh. Q-Daney, Exh. Z-Daney,
Exh. 8-Helen).
Going over the evidence adduced during the
trial, it appears indubitable that on or about
the period when Helen was born, Bernarda
Camporendondo had established residence
at her plantation at Paligue, Davao, and that
although Edward Christensen stayed in
Davao City to manage his merchandising
business, he spent the weekends with the
former and their child Lucy in the
[ ] PARTNERSHIP
Christensenplantation. Even granting that
Zosimo Silva at his stage fitted himself
intothe picture, it cannot be denied that
Helen's mother and the deceased
weregenerally and publicly known to be
living together as husband and wife.
Thismust have been the reason why
Christensen from Helen's birth in 1934
providedfor her maintenance; shouldered the
expenses for her education to the extentthat
she was even enrolled as an intern in an
exclusive college for girls inManila;
tolerated or allowed her carrying the
surname "Christensen", and ineffect gaver
her the attention and care that a father would
only do to this offspring. We should take
note that nothing appears on record to show
thatChristensen ever entertained any doubt
or disputed Helen's paternity.
Hisrepudations of her relationship with him
came about only after he andBernarda
Comperodondo parted ways in March, 1950,
and apparently after Helentook sides with
her mother. Furthermore, it seems that
despite that decedent's desire that she
continue her studies, Helen ignored the same
andgot married to a man for Christensen
held no high esteem. We may state at
hisjuncture that while it is true that herein
appellants introduced witnesses todisprove
oppositor'r claim, the lower Court that had
the opportunity to observe the conduct of the
witnesses while testifying and could better
gaugetheir credibility and impartiality in the
case, arrived at the conclusion that Maria
Helen Christensen had established that she
had been in continouspossessions of the
status of a natural child of the deceased.
Considering the preponderant evidence on
record, We see no reason to reverse said
ruling.The testator' lastacts cannot be made
the criterion in determining whether
oppositor was his child or not, for human
frailty and parental arrogance maydraw a
person to adopt unnatural or harsh measures
against an erring child orone who displeases
just so the weight of his authority could be
felt. In theconsideration of a claim that one
is a natural child, the attitude or directacts of
the person against whom such action is
directed or that of his family before the
controversy arose or during his lifetime if he
predeceases the claimant, and not a single
opportunity or an isolated occasions but as a
whole, must be taken into account. The
possession of such status is one of the cases
that gives rise to the right, in favor of the
child, of coumpulsaryrecognition. (Art. 283,
Civil Code).
The lower Court, however, after making its
finding directed Maria Lucy Christensen
Daney, an heir of the decedent, to recognize
oppositor as a natural child of the deceased.
This seems improper. The Civil Code for 2
kinds of acknowledgement of a natural
child: voluntary and compulsory. In the first
instance, which may be effected in the
record of birth, a will, a statement before a
[ ] PARTNERSHIP
court of record or in an authentic writing
(Art. 278,Civil Code), court intervention is
very nil and not altogether wanting, whereas
in the second, judicial pronouncement is
essential, and while it is true that the effect
of a voluntary and a compulsory
acknowledgment onthe right of the child so
recognized is the same, to maintain the view
of thelower Court would eliminate the
distinction between voluntary acts and those
brought about by judicial dicta. And if We
consider that in the case, where, the
presumed parent dies ahead of the child and
action for compulsory recogniton is brought
against the heirs of the deceased, as in the
instant case, the situation would take absurd
turn, for the heirs would be compelled to
recognize such child as a natural child of the
deceased without a properprovision of the
law, for as it now stands, the Civil Code
only requires a declaration by the court of
the child's status as a natural child of the
parent who, if living, would be compelled to
recognize his offspring as such.Therefore,
We hold that in cases of compulsory
recognition, as in the case at bar, it would be
sufficient that a competent court, after
taking into account all the evidence on
record, would declare that under any of the
circumstances specified by Article 283 of
the Civil Code, a child has acquired the
status of a natural child of the presumptive
parent and as such is entitled to all rights
granted it by law, for such declaration is by
itself already a judicial recognition of the
paternity of the parent concerned which is
her against whom the action is directed, are
bound to respect.
G.R. No. L-11483
Coming now to Civil Case No. 1076 of the
Court of First Instance of Davao, Bernarda
Camporendondo claimed in her complaint
1/2 of the properties of thedeceased as co-
owner thereof in virtue of her relations with
the deceased. She alleged as basis for action
that she and the deceased Edward E.
Christensen had lived and cohabitated as
husband and wife, continously and openly
for a period for more than 30 years; that
within said period, plaintiff and the deceased
acquired real and personal properties
through their common effort and industry;
and that in virtue of such relationship, she
was a co-owner of said properties. As the
executor refused to account forand deliver
the share allegedly belonging to her despite
her repeated demands, she prayed the court
that said executor be ordered to submit an
inventory and render an accounting of the
entire estate of the deceased;to divide the
same into 2 equal parts and declare that one
of them lawfully belonged to plaintiff; and
for such other reliefs as may be deemed just
and equitable in the premises. In his answer,
the executor denied the avermentsof the
complaint, contending that the decedent was
the sole owner of the properties left by him
[ ] PARTNERSHIP
as they were acquired through his own
efforts; thatplaintiff had never been a co-
owner of any property acquired or possessed
by the late Edward christensen during his
lifetime; that the personal relationship
between plaintiff and the deceased was
purely clandestinebecause the former
habitually lived in her plantation at Paligue,
Davao, from the time she acquired the same
in 1928; that she also maintained relations
with 2 other men; and that the claim of
plaintiff would violate the provisions of
Article 2253 of the Civil Code as the vested
rights of the compulsory heirs of the
deceased would be impaired. Defendant thus
prayed for the dismissal of the complaint
and as counterclaim demanded the sum
ofP70.000.00 representing actual, moral and
exemplary damages.
Due hearing was conducted thereon and
after the parties ad submitted theirrespective
memoranda, the lower Court on August 25,
1954, rendered judgmentfinding that the
deceased Edward Christensen and Bernarda
Camporendondo,not otherwise suffering
from any impediment to contract marriage,
lived together as husband and wife without
marital ties continously for over 30years
until the former's death in 1953; that out of
such relations 2 childrenwere born; and that
the properties in controversy were acquired
by either orboth of them through their work
or industry. Relying on Section 144 of
theCivil Code which said court considered
to have created another mode ofacquiring
ownership, plaintiff was held to be entitled
to one-half of saidproperties as co-owner
thereof in view of her relationship with the
deceasedand ordered the executor to account
for and deliver the same by her. Fromthis
decision, defendant Aznar, as Executor of
the will, perfected an appealto the Court of
Appeals, but as the property involved in the
litigation exceeds P50,000.00 said tribunal
elevated the case to Us for consideration.
It is not controverted that at the time of his
death, Edward Christensen was the owner of
certain properties, including shares of stock
in the plantation bearing his name and a
general merchandising store in Davao City.
It is also undeniable that the deceased and
appellee, both capacitated to enter into the
married state, maintained relations as
husband and wife, continuously and publicly
for a considerable number of years which
the lower Court declared to be until the
death of Christensen in 1953. While as a
general rule appellate courts do not usually
disturb the lower court's findings of fact,
unless said finding is not supported by or
totally devoid of or inconsistent with the
evidence on record, such finding must
ofnecessity be modified to confrom with the
evidence if the reviewing tribunalwere to
arrive at the proper and just solution of the
controversy. In theinstant case, the court a
quo overlooked or failed to consider the
testimonies of both Lucy and Helen
[ ] PARTNERSHIP
Christensen to the effect that the deceased
and their mother Bernarda Camporendondo
had some sort of quarrel or
misunderstanding and parted ways as of
March, 1950, a fact which appelleewas not
able to overcome. Taking into account the
circumstances of this caseas found by the
trial court, with the modification that the
cohabitation should appear as continuous
from the early 20's until March, 1950, the
question left for our determination is
whether Bernarda Camporedondo, byreason
of such relationship, may be considered as a
co-owner of the properties acquired by the
deceased during said period and thus
entitledto one-half thereof after the latter's
death.
Presumably taking judicial notice of the
existence in our society of a certain kind of
relationship brought about by couples living
together as husbands and wives without the
benefit of marriage, acquiring and
bringingproperties unto said union, and
probably realizing that while same may not
beacceptable from the moral point of view
they are as much entitled to theprotection of
the laws as any other property owners, the
lawmakersincorporated Article 144 in
Republic Act No. 386 (Civil Code of the
Philippines) to govern their property
relations. Said article read as follows:
ART. 114. When a man and a woman live
together as husband and wife, but they are
not married, or their marriage is void from
the beginning, the property acquired by
either or both of them through their work or
industry or their wages and salaries shall be
governed by the rules of co-ownership.
It must be noted that such form of co-
ownership requires that the man and the
woman thus living together must not in any
way be incapacitated to contract marriage
and that the properties realized during their
cohabitation be acquired through the work,
industry, employment or occupation of both
or either of them. And the same thing may
be said of whose marriages are by provision
of law declared void ab intio. While it is true
that these requisites are fully met and
satisfied in the case at bar, We must
remember that the deceased and herein
appellee were already estranged as of
March, 1950. There being no provision of
law governing the cessation of such informal
civil partnership, if ever existed, same may
be considered terminated upon their
separation or desistance to continue said
relations.The Spanish Civil Code which was
then enforce contains to counterpart of
Article 144 and as the records in the instant
case failed to show show thata subsequent
reconciliation ever took place and
considering that Republic ActNo. 386 which
recognizeed such form of co-ownership
went into operation onlyon August 30, 1950,
evidently, this later enactment cannot be
invoked as basis for appellee's claim.
[ ] PARTNERSHIP
In determining the question poised by this
action We may look upon the jurisprudence
then obtaining on the matter. As early as
1925, this Court already declared that where
a man and a woman, not suffering from any
impediment to contract marriage, live
together as husband and wife, an informal
civil partnership exists and made the
pronouncement that each of them has an
intereat in the properties acquired during
said union and is entitled to participate
therein if said properties were the product
oftheir JOINT efforts (Marata vs. Dionio
G.R. No. 24449, Dec. 31, 1925). In another
case, this Court similarly held that although
there is no technical marital partnership
between person living maritally without
being lawfully married, nevertheless there is
between them an informalcivil partnership,
and the parties would be entitled to an equal
interest where the property is acquired
through their JOINT efforts (Lesaca vs.
FelixVda. de Lesaca, 91 Phil., 135).
Appellee, claiming that the properties in
controversy were the product of their joint
industry apparently in her desire to tread on
the doctrine laiddown in the aforementioned
cases, would lead Us to believe that her help
wassolicited or she took a hand in the
management of and/or acquisition of
thesame. But such assertion appears
incredible if We consider that she
wasobserved by the trial Court as an
illiterate woman who cannot even
remembersimple things as the date when she
arrived at the Mindanao Estate, when
shecommenced relationship with the
deceased, not even her approximate age
orthat of her children. And considering that
aside from her own declaration, which We
find to be highly improbable, there appears
no evidence to proveher alleged contribution
or participation in the acquisition of the
properties involved therein, and that in view
of the holding of this Courtthat for a claim
to one-half of such property to be allowed it
must be provedthat the same was acquired
through their joint efforts and labor (Flores
vs.Rehabilitation Finance Corporation, * 50
Off. Gaz. 1029), We have no recoursebut
reverse the holding of the lower Court and
deny the claim of BernardaCampredondo.
We may further state that even granting, for
the sake ofargument, that this case falls
under the provisions of Article 144 of
theCivil Code, same would be applicable
only as far as properties acquiredafter the
effectivity of Republic Act 386 are
concerned and to no other, forsuch law
cannot be given retroactive effect to govern
those already possessedbefore August 30,
1950. It may be argued, however, that being
a newly created right, the provisions of
Section 144 should be made to retroact if
only toenforce such right. Article 2252 of
the same Code is explicit in thisrespect
when it states:
[ ] PARTNERSHIP
SEC. 2252. Changes made and new
provisions and rules laid down by this Code
which may prejudice or impair vested or
acquired rights in accordance with the old
legislation, shall have ro retroactive effect.
xxx xxx xxx.
As it cannot be denied that the rights and
legitimes of the compulsory heirsof the
deceased Edward Christensen would be
impaired or diminished if the claim of herein
appellee would succeed, the answer to such
argument wouldbe simply obvious.
With regard to appellant Aznar's contention
that the lower Court erred in admitting the
testimony of appellee Bernarda
Camporedondo dealing with facts that
transpired before the death of Edward
Christensen on the ground that it is
prohibited by Section 26-(c), Rule 123 of the
Rules of Court. We deem it unnecessary to
delve on the same because even admitting
that the court a quo committed the error
assigned, yet it will not affect anymore the
outcome of the case in view of the
conclusion We have already arrived at on
the main issue.
On the strength of the foregoing
considerations, We affirm the decision of
the lower Court in case G.R. No. L-11484,
with the modification that MariaLucy
Christensen Daney need not be compelled to
acknowledge her sister Maria Helen
Christensen Garcia as a natural child of her
father Edward E. Christensen, the
declaration of the Court in this respect being
sufficient to enable her to all the rights
inherent to such status.
The decision appealed from in case G.R. No.
L-11483 is hereby reversed and another one
rendered, dismissing plaintiff's complaint.
Costs are taxed against appellants in G.R.
No. L-11484 and against appellee Bernarda
Camporedondo in G.R. No. L-11483. It is so
ordered.
EN BANC
G.R. No. L-2484 April 11, 1906
JOHN FORTIS,Plaintiff-Appellee,
vs. GUTIERREZ HERMANOS,Defendants-
Appellants.
Hartigan, Rohde and Gutierrez, for
appellants.
W. A. Kincaid, for appellee.
WILLARD, J.:
[ ] PARTNERSHIP
Plaintiff, an employee of defendants during
the years 1900, 1901, and 1902, brought this
action to recover a balance due him as salary
for the year 1902. He alleged that he was
entitled, as salary, to 5 per cent of the net
profits of the business of the defendants for
said year. The complaint also contained a
cause of action for the sum of 600 pesos,
money expended by plaintiff for the
defendants during the year 1903. The court
below, in its judgment, found that the
contract had been made as claimed by the
plaintiff; that 5 per cent of the net profits of
the business for the year 1902 amounted to
26,378.68 pesos, Mexican currency; that the
plaintiff had received on account of such
salary 12,811.75 pesos, Mexican currency,
and ordered judgment against the defendants
for the sum 13,566.93 pesos, Mexican
currency, with interest thereon from
December 31, 1904. The court also ordered
judgment against the defendants for the 600
pesos mentioned in the complaint, and
intereat thereon. The total judgment
rendered against the defendants in favor of
the plaintiff, reduced to Philippine currency,
amounted to P13,025.40. The defendants
moved for a new trial, which was denied,
and they have brought the case here by bill
of
exceptions.chanroblesvirtualawlibrary chanr
obles virtual law library
(1) The evidence is sufifcient to support the
finding of the court below to the effect that
the plaintiff worked for the defendants
during the year 1902 under a contract by
which he was to receive as compensation 5
per cent of the net profits of the business.
The contract was made on the part of the
defendants by Miguel Alonzo Gutierrez. By
the provisions of the articles of partnership
he was made one of the managers of the
company, with full power to transact all of
the business thereof. As such manager he
had authority to make a contract of
employment with the
plaintiff.chanroblesvirtualawlibrary chanrobl
es virtual law library
(2) Before answering in the court below, the
defendants presented a motion that the
complaint be made more definite and
certain. This motion was denied. To the
order denying it the defendants excepted,
and they have assigned as error such ruling
of the court below. There is nothing in the
record to show that the defendants were in
any way prejudiced by this ruling of the
court below. If it were error it was error
without prejudice, and not ground for
reversal. (Sec. 503, Code of Civil
Procedure.)chanrobles virtual law library
(3) It is claimed by the appellants that the
contract alleged in the complaint made the
plaintiff a copartner of the defendants in the
business which they were carrying on. This
contention can not bo sustained. It was a
mere contract of employnent. The plaintiff
[ ] PARTNERSHIP
had no voice nor vote in the management of
the affairs of the company. The fact that the
compensation received by him was to be
determined with reference to the profits
made by the defendants in their business did
not in any sense make by a partner therein.
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 this provision of the
articles of partnership. The profits of the
business could not be determined until all of
the expenses had been paid. A part of the
expenses to be paid for the year 1902 was
the salary of the plaintiff. That salary had to
be deducted before the net profits of the
business, which were to be divided among
the partners, could be ascertained. It was
undoubtedly necessary in order to determine
what the salary of the plaintiff was, to
determine what the profits of the business
were, after paying all of the expenses except
his, but that determination was not the final
determination of the net profits of the
business. It was made for the purpose of
fixing the basis upon which his
compensation should be
determined.chanroblesvirtualawlibrary chanr
obles virtual law library
(4) It was no necessary that the contract
between the plaintiff and the defendants
should be made in writing. (Thunga Chui vs.
Que Bentec, 1 1 Off. Gaz., 818, October 8,
1903.)chanrobles virtual law library
(5) It appearred that Miguel Alonzo
Gutierrez, with whom the plaintiff had made
the contract, had died prior to the trial of the
action, and the defendants claim that by
reasons of the provisions of section 383,
paragraph 7, of the Code of Civil Procedure,
plaintiff could not be a witness at the trial.
That paragraph provides that parties to an
action against an executor or aministrator
upon a claim or demand against the estate of
a deceased person can not testify as to any
matter of fact occurring before the death of
such deceased person. This action was not
brought against the administrator of Miguel
Alonzo, nor was it brought upon a claim
against his estate. It was brought against a
partnership which was in existence at the
time of the trial of the action, and which was
juridical person. The fact that Miguel
Alonzo had been a partner in this company,
and that his interest therein might be
affected by the result of this suit, is not
sufficient to bring the case within the
provisions of the section above
cited.chanroblesvirtualawlibrary chanrobles
virtual law library
(6) The plaintiff was allowed to testify
against the objection and exception of the
defendants, that he had been paid as salary
for the year 1900 a part of the profits of the
[ ] PARTNERSHIP
business. This evidence was competent for
the purpose of corroborating the testimony
of the plaintiff as to the existence of the
contract set out in the
complain
t.chanroblesvirtualawlibrarychanrobles
virtual law library
(7) The plaintiff was allowed to testify as to
the contents of a certain letter written by
Miguel Glutierrez, one of the partners in the
defendant company, to Miguel Alonzo
Gutierrez, another partner, which letter was
read to plaintiff by Miguel Alonzo. It is not
necessary to inquire whether the court
committed an error in admitting this
evidence. The case already made by the
plaintiff was in itself sufficient to prove the
contract without reference to this letter. The
error, if any there were, was not prejudicial,
and is not ground for revesal. (Sec. 503,
Code of Civil Procedure.)chanrobles virtual
law library
(8) For the purpose of proving what the
profits of the defendants were for the year
1902, the plaintiff presented in evidence the
ledger of defendants, which contained an
entry made on the 31st of December, 1902,
as follows:
Perdidas y
Ganancias ...................................... a Varios
Ps. 527,573.66 Utilidades liquidas obtenidas
durante el ano y que abonamos conforme a
la proporcion que hemos establecido segun
el convenio de sociedad.
The defendant presented as a witness on, the
subject of profits Miguel Gutierrez, one of
the defendants, who testiffied, among other
things, that there were no profits during the
year 1902, but, on the contrary, that the
company suffered considerable loss during
that year. We do not think the evidence of
this witnees sufficiently definite and certain
to overcome the positive evidence furnished
by the books of the defendants
themselves.chanroblesvirtualawlibrary chanr
obles virtual law library
(9) In reference to the cause of action
relating to the 600 pesos, it appears that the
plaintiff left the employ of the defendants on
the 19th of Macrh, 1903; that at their request
he went to Hongkong, and was there for
about two months looking after the business
of the defendants in the matter of the repair
of a certain steamship. The appellants in
their brief say that the plaintiff is entitled to
no 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, the
contract of agency is supposed to be
gratuitous. That article i not applicable to
this case, because the amount of 600 pesos
not claimed as compensation for services but
as a reimbursment for money expended by
the plaintiff in the business of the
[ ] PARTNERSHIP
defendants. The article of the code that is
applicable is article
1728.chanroblesvirtualawlibrary chanrobles
virtual law library
The judgment of the court below is affirmed,
with the costs, of this instance against the
appellants. After the expiration of twenty
days from the date of this decision let final
judgment be entered herein, and ten days
thereafter let the case be remanded to the
lower court for execution. So ordered.