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LITONJUA V. LITONJUA, G.R. NO 166299-300 (2005)
FACTS: Petitioner Aurelio Litonjua and respondent Eduardo
Litonjua are brothers. Aurelio filed an action against Eduardo
and Robert Yang and several corporations for specific
performance and accounting
1. Aurelio alleged that since 1973, he and Eduardo had
been in a joint venture/partnership arrangement in the
Odeon Theater business which had expanded through
several other business
2. To bolster his claim, Aurelio presented a memorandum
between Aurelio and Eduardo allowing petitioner to
manage the family business and in consideration
therefor, Aurelio was to receive P1 million or 10% in
equity in their business including those which will be
subsequently acquired, whichever was greater
3. Sometime in 1992, the relations between the brothers
Litonjua became sour and Aurelio demanded for an
accounting and liquidation of his share in the joint
venture/partnership which was not heeded by Eduardo
4. Respondent contended that the actionable document
presented by Aurelio is void under Art 1767 in relation to
Art 1773. He further alleged that whatever undertaking
Eduardo agreed to do under the memorandum, are
unenforceable under the Statute of Frauds

ISSUE: WON a partnership exists between Aurelio and Eduardo

HELD: No. A partnership exists when two or more persons agree
to place their money, effects, labor and skill in lawful
commerce of business, with the understanding that there shall
be a proportionate sharing of the profits and losses between
them. A contract of partnership is defined as one where two or
more persons bound themselves to contribute money, property
or industry to a common fund with the intention of dividing the
profits among themselves. A joint venture, on the other hand, is
hardly distinguishable form, and may be likened to, a
partnership since their elements are similar, i.e. community of
interests in the business and sharing of profits and losses. Being
a form of partnership, a joint venture is governed by the law on
partnership.

A partnership may be constituted in any form, save when
immovable property or real rights are contributed thereto or
when the partnership has a capital of at least P3,000 in which
case a public instrument shall be necessary. An inventory to be
signed by the parties and attached to the public instrument is
also indispensable to the validity of the partnership whenever
immovable property is contributed to it.

CAB: The document in question contained typewritten entries,
personal in tone, but is unsigned and undated. As an unsigned
document, it does not meet the public instrumentation
requirements under Art 1771 NCC. Moreover, being unsigned
and referring to a partnership involving more than P3,000 in
money or property, cannot be presented for notarization, let
alone registered with SEC, as called for under Art 1772.

Because of the failure to comply with the essential formalities
of a valid contract, the purported partnership/joint venture is
legally inexistent and it produces no effect whatsoever.
Necessarily, a void or legally inexistent contract cannot be the
source of any contractual or legal right.














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AFISCO V. CA, G.R. NO 112675 (1999)
FACTS: 41 non-life insurance companies entered into a
reinsurance treaty with MUNICH, a non-resident foreign
insurance corporation. Since the reinsurance treaty required
that the petitioners form a pool, an insurance pool was formed
1. In April 1976, the insurance pool submitted its income
tax return. BIR assessed (assessment was made beyond
the allowable period of assessment) a deficiency
corporate income tax.
2. Petitioners protested the assessment and argued that:
a. They were not an unregistered partnership
b. They have tax exemption
c. There is double taxation in this case
d. The assessment was made beyond the period
allowed by law
3. BIR denied the protest. On appeal, CA held that the
pool of machinery insurers was a partnership taxable as
a corporation, and that the latters collection of
premiums on behalf of its members, the ceding
companies, was taxable income

ISSUES: WON the insurance pool was a taxable partnership

HELD: Yes. The Philippine legislature included in the concept of
corporations those entities that resembled them such as
unregistered partnerships and associations. Sec 24 NIRC
covered unregistered partnerships and even associations and
joint accounts, which had no legal personalities apart from
their individual members.

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.

The ceding companies entered into a pool agreement or an
association that would handle all the insurance businesses
covered under their quota-share reinsurance treaty and
surplus reinsurance treaty with Munich. This clearly indicates a
partnership or association covered by Sec 24 NIRC since:
a. The pool has a common fund, consisting of money and
other valuables that are deposited in the name and
credit of the pool. This common fund pays for the
administration and operation expenses of the pool
b. The pool functions through an executive board, which
resembles the board of directors of a corporation,
composed of one representative for each of the
ceding companies
c. While the pool itself is not a reinsurer and does not issue
any insurance policy, its work is indispensable,
beneficial and economically useful to the business of
the ceding companies and Munich. The ceding
companies share in the business ceded to the pool
and in the expenses according to a Rules of
Distribution annexed to the pool agreement. Profit
motive or business is, therefore, the primordial reason
for the pools formation.

ISSUE: WON the insurance pool was created for profit

HELD: Yes. While the pool itself is not a reinsurer and does not
issue any insurance policy, however, its work is indispensable,
beneficial and economically useful to the business of the
ceding companies, and Munic, because without it they would
not have received their premiums. The ceding companies
share in the business ceded to the pool and in the expenses
according to the rules of distribution annexed to the pool
agreement. Profit motive or business, therefore, is the
primordial reason for the pools formation.

The fact that the pool does not retain any profit or income
does not obliterate an antecedent fact that of the pool being
used in the transaction of business for profit. It is apparent that
their association or coaction was indispensable to the
transaction of the business. If together they have conducted
business, profit must have been the object as, indeed, profit
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was earned. Through the profit was apportioned among the
members, this is only a matter of consequence, as it implies
that profit actually resulted.




































LIM TONG LIM V. PHILIPPINE FISHING GEAR, G.R. NO 136448
(1999)
FACTS: On behalf of Ocean Quest Fishing Corp, Chua and
Yao entered into a contract with Philippine Fishing Gear for the
sale of fishing nets.
1. They claimed they were engaged in a business venture
with petitioner Lim Tong Lim, who was not a signatory to
the agreement
2. The buyers, however, failed to pay for the fishing nets
and floats.
3. As such, Philippine Fishing Gear filed a collection suit
against Chua, Yao and Lim. The suit was brought
against the three in their capacities as general
partners, on the allegation that Ocean Quests Fishing
Corpwas a non-existent corporation as shown by a
certification from SEC
4. Chua admitted his liability but asked for a reasonable
time within which to pay. Yao, on the other hand,
waived his right to cross-examine the witnesses due to
his failure to appear in the subsequent hearings
5. Petitioner Lim Tong Lim denied his liability on the
grounds that he was not aware that Chua and Yao
presented themselves as a corporation without his
knowledge and consent, and that he was only a lessor
of Chua and Yao, that he had merely leased the fishing
boat of Chua and Yao

ISSUE: WON Chua, Yao and Lim could be deemed to have
entered into a partnership

HELD: Yes. By a contract of partnership, two or more persons
bind themselves to contribute money, property or industry to a
common fund, with the intention of dividing profits among
themselves. Both the lower courts ruled that a partnership
existed based on the following:
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(1) Petitioner Lim requested Yao, who was engaged in
commercial fishing, to join him while Chua was already
Yaos partner
(2) All three agreed to purchase 2 fishing boats
(3) They borrowed P3.25 million from Jesus Lim to fund the
venture
(4) They bought the boats from CMF Fishing Corp, which
executed a Deed of Sale over the 2 boats in favor of
petitioner only to serve as a security for the loan
extended by Jesus Lim
(5) Lim, Yao and Chua agreed that the refurbishing and
repair shall be shouldered by Yao ad Chua
(6) Pursuant to their agreement, Yao and Chua bought
nets from respondent in behalf of Ocean Quest Fishing
Corp, their purported business name
(7) Subsequently, Yao and Chua filed an action against
Lim for the declaration of the nullity of commercial
documents and ownership of the fishing boats

From the factual findings, it is clear that Chua, Yao and Lim
decided to engage in a fishing business, which they started by
buying boats worth P3.5 million financed by a loan obtained
from Jesus Lim. In their compromise agreement, they
subsequently revealed their intention to pay the loan with the
proceeds of the sale of the boats, and to divide equally
among themselves the excess or loss. These boats, the
purchase and repair of which were financed with borrowed
money, fell under the term common fund under Art 1767. The
contribution to such fund need not be cash or fixed assets; it
could be an intangible like credit or industry. That the parties
agreed that any loss or profit from the sale and operation of
the boats would be equally divided among them shows that
they had indeed formed a partnership.

Moreover, it is clear that the partnership extended not only to
the purchase of the boat but also to that of the nets and the
floats. The fishing nets and floats, both essential to fishing, were
obviously acquired for the furtherance of their business.

ISSUE: WON Lim was only a lessor of Yao and Chua

HELD: No. As found by the courts, petitioner entered into a
business agreement with Chua and Yao, in which debts were
undertaken in order to finance the acquisition and the
upgrading of the vessels which would be used in their fishing
business. The sale of the boats, as well as the division among
the three of the balance remaining after payment of their
loans, proves that the vessels, although registered in Lims
name, was not his own property but an asset of the
partnership. It is not uncommon to register the properties
acquired from a loan in the name of the person the lender
trusts. After all, Lim was the brother of the creditor, Jesus.

It would be absurd for petitioner to sell his property to pay a
debt he did not incur, if the relationship among the three was
merely that of a lessor-lessee instead of partners.




















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EVANGELISTA V. CIR, G.R. NO L-9996 (1957)
FACTS: Petitioners borrowed a sum of money from their father
and together with their personal money, used them to
purchase real properties
1. Petitioners then appointed Simeon Evangelista to
manage their properties
2. CIR taxed petitioners income tax on corporation, real
estate dealers fixed tax and corporation residence tax
for the years 1945-1948
3. Evangelista protested the same but it was denied by
CIR
4. Petitioners argued that they are mere co-owners, not
co-partners since some of the characteristics of
partnerships are lacking in the case at bar

ISSUE: WON petitioners are subject to tax on corporations

HELD: Yes. Pursuant to Art 1767 NCC, the essential elements of
a partnership are: (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 this case, for admittedly, the
petitioners agreed to and did contribute money and property
to a common fund. And upon consideration of all the facts
and circumstances surrounding the case, it appears that their
purpose was to engage in real estate transactions for
monetary gain and then divide the same among themselves
because:
(1) Said common fund was not something the found
already in existence. They created it purposely by
jointly borrowing a substantial portion thereof in order
to establish said common fund
(2) They invested the same, not merely in one transaction,
but in a series of transactions
(3) The lots were not devoted to residential purposes but
were leased to third persons
(4) The affairs relative to said properties have been
handled as if the same belonged to a corporation or
business and enterprise operated for profit

The term corporation as defined under NIRC includes
partnerships no matter how created or organized. This
qualifying expression clearly indicates that a joint venture need
not be undertaken in any of the standard forms, or in
conformity with the usual requirements of the law on
partnerships, in order that one could be deemed constituted
for purposes of the tax on corporations. It may not be amiss to
add that petitioners allegation to the effect that their liability
in connection with the leasing of the lots referred to, under the
management of one person tends to increase similarity
between the nature of their venture and that of corporations,
and is therefore, an additional argument in favor of the
imposition of said tax on corporations.



















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AGUILA V. CA, G.R. NO 127347 (1999)
FACTS: Petitioner is the manager of AC Aguila & Sons Co, a
partnership engaged in lending activities while private
respondent Abrogar were the registered owners of a house
and lot in Marikina
1. In 1991, Aguila & Sons and spouses Abrogar executed a
memorandum of agreement (MOA) for the sale of the
subject property with right to repurchase. Pursuant to
the MOA, the parties executed a Deed of Absolute
Sale over the subject property for P200,000.
2. When the spouses failed to redeem property within the
90-day period, petitioner caused the cancellation of
the TCT and the issuance of a new TCT in the name of
Aguila & Sons Co
3. Subsequently, Aguila & Sons demanded that Abrogar
vacate the premises. For failure to do so, Aguila & Sons
filed an ejectment suit against Abrogar. The trial court
ruled in favor of AC Aguila & Sons
4. Abrogar then filed a petition for the declaration of
nullity of the Deed of Sale alleging that the signature of
her husband on the Deed of Sale was forged because
he was already dead when the deed was supposed to
have been executed in June 1991. The trial court
dismissed the case.
5. On appeal, CA reversed the trial court decision citing
that the transaction between the two parties is actually
an equitable mortgage
6. Petitioner now contends that he is not a real party in
interest but AC Aguila & Sons

ISSUE: WON petitioner was liable with AC Aguila & Sons

HELD: No. Under Art 1768 NCC, a partnership has a juridical
personality separate and distinct from that of each of the
partners. The partners cannot be held liable for the obligations
of the partnership unless it is shown that the legal fiction of a
different juridical personality is being used for fraudulent, unfair
or illegal purposes.
CAB: Private respondent has not shown that AC Aguila & Sons,
as a separate juridical entity, is being used for fraudulent, unfair
or illegal purposes. Moreover, the title to the subject property is
in the name of AC Aguila & Sons and the MOA was executed
between Abrogar and AC Aguila & Sons, represented by
petitioner. Hence, it is the partnership, not its officers or agents,
which should be impleaded in any litigation involving property
registered in its name. A violation of this rule will result in the
dismissal of the complaint.






















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EVANGELISTA V. CIR, G.R. NO L-9996 (1957)
FACTS: Petitioners borrowed a sum of money from their father
and together with their personal money, used them to
purchase real properties
5. Petitioners then appointed Simeon Evangelista to
manage their properties
6. CIR taxed petitioners income tax on corporation, real
estate dealers fixed tax and corporation residence tax
for the years 1945-1948
7. Evangelista protested the same but it was denied by
CIR
8. Petitioners argued that they are mere co-owners, not
co-partners since some of the characteristics of
partnerships are lacking in the case at bar

ISSUE: WON petitioners are subject to tax on corporations

HELD: Yes. Pursuant to Art 1767 NCC, the essential elements of
a partnership are: (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 this case, for admittedly, the
petitioners agreed to and did contribute money and property
to a common fund. And upon consideration of all the facts
and circumstances surrounding the case, it appears that their
purpose was to engage in real estate transactions for
monetary gain and then divide the same among themselves
because:
(5) Said common fund was not something the found
already in existence. They created it purposely by
jointly borrowing a substantial portion thereof in order
to establish said common fund
(6) They invested the same, not merely in one transaction,
but in a series of transactions
(7) The lots were not devoted to residential purposes but
were leased to third persons
(8) The affairs relative to said properties have been
handled as if the same belonged to a corporation or
business and enterprise operated for profit

The term corporation as defined under NIRC includes
partnerships no matter how created or organized. This
qualifying expression clearly indicates that a joint venture need
not be undertaken in any of the standard forms, or in
conformity with the usual requirements of the law on
partnerships, in order that one could be deemed constituted
for purposes of the tax on corporations. It may not be amiss to
add that petitioners allegation to the effect that their liability
in connection with the leasing of the lots referred to, under the
management of one person tends to increase similarity
between the nature of their venture and that of corporations,
and is therefore, an additional argument in favor of the
imposition of said tax on corporations.















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OBILLOS V. CIT, G.R. NO L-68118 (1985)
FACTS: This case is about the income tax liability of 4 brothers
and sisters who sold 2 parcels of land which they had acquired
from their father
1. In 1873, Jose Obillos Sr (father) purchased 2 parcels of
land from Ortigas & Co Ltd. He then transferred his
rights to his 4 children (petitioners) to enable them to
build their residences. The Torrens titles issued to
petitioners show that they were co-owners of the 2 lots
2. Subsequently, petitioners resold the subject property to
Walled City Securities Corp and Olga Cruz Canda for
P313,050. Petitioners gained total profit of P134,341.88
or P33,584 for each of them. They treated the property
as a capital gain and paid an income tax on thereof
or P16,792
3. CIR assessed petitioners corporate income tax on the
total profit in addition to the individual income tax
shares on their shares thereof. CIR also taxed in full the
profits of each petitioner on the theory that petitioners
had formed an unregistered partnership or joint venture
within the meaning of Sec 24(a) and 84(b) Tax Code

ISSUE: WON petitioners had formed a partnership

HELD: No. It is an error to consider the petitioners as having
formed a partnership under Art 1767 NCC simply because they
allegedly contributed P178,708.12 to buy the 2 lots, resold the
same and divided the profit among themselves.

As testified by one of the petitioners, they had no intention to
form a partnership. They were co-owners pure and simple. To
consider them as partners would obliterate the distinction
between co-ownership and partnership. They were not
engaged in any joint venture by reason of that one isolated
transaction.

Their original purpose was to divide the lots for residential
purposes. If later on they found it not feasible to build their
residences on the lots because of the high cost of
construction, then they had no choice but to resell the same to
dissolve the co-ownership. The division of the profit was merely
incidental to the dissolution of the co-ownership which was in
the nature of things a temporary state.

Art 1769(3) NCC provides that sharing of the gross returns does
not of itself establish a partnership, whether or not the persons
sharing them have a joint or common right or interest in any
property from which the returns are derived. There must be an
unmistakable intention to form a partnership or joint venture.

All co-ownerships are not deemed unregistered partnership, or
a corporation within the purview of income tax law.












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HEIRS OF JOSE LIM V. JULIET LIM, G.R. NO 172690 (2010)
FACTS: Petitioners are the heirs of the late Jose Lim. They filed a
complaint for partition, accounting and damages against
respondent Juliet Lim, widow of Elfredo Lim who was the eldest
son of Jose Lim
1. Petitioners alleged that Jose was a liaison officer of
Interwood Sawmill. Sometime in 1980, Jose together
with Jimmy Yu and Norberto Uy, formed a partnership
to engage in the trucking business. Jose managed the
operations of the business until his death in 1981.
Thereafter, Joses heirs, including Elfledo, agreed to
continue the business under the management of
Elfledo.
2. Petitioners also alleged that Elfledo was never a partner
in the business and merely supervised the purchase of
additional trucks using the income from the trucking
business of the partners. By the time the partnership
ceased, it had 9 trucks which were all registered in
Elfledos name.
3. When Elfledo died in 1995, petitioners claimed that
respondent Juliet took over the administration of the
subject properties, which belonged to the estate of the
late Jose Lim, without their consent and approval.
Claiming that they are co-owners of the properties,
petitioners required respondent to submit an
accounting of income, profits and rentals received
from the estate of Elfledo, and to surrender
administration thereof which respondent refused
4. Respondent Juliet, on the other hand, contended that
Elfledo himself was a partner of Norberto and Jimmy
and that Jose gave Elfledo P50,000 as capital in an
informal partnership with Jimmy and Norberto. When
Elfledo and respondent got married in 1981, the
partnership only had 1 truck but through the efforts of
Elfledo, the business flourished
5. When Elfledo died in 1995, respondent talked to Jimmy
and to the heirs of Norberto (who died earlier in 1993)
that she could no longer run the business. As such, the 6
trucks were given to her and the 3 other trucks were
given to the heirs of Norberto (which were subsequently
sold to respondent)
6. Respondent also alleged that when Jose died, he left
no known assets and the partnership with Jimmy and
Norberto ceased upon his death
7. Petitioners argued that according to the testimony of
Jimmy, the sole surviving partner, Elfledo was not a
partner and that he entered into a partnership with
Norberto and Jose.

ISSUE: WON a partnership existed among Jimmy, Norberto and
Elfledo

HELD: Yes. The best evidence would have been the contract of
partnership or the articles of partnership. However, there is
none in this case because the alleged partnership was never
formally organized.

The evidence presented by petitioners fall short of the
quantum of proof to establish that (1) Jose was the partner
and not Elfledo; and (2) all the properties acquired by Elfledo
and respondent formed part of the estate of Jose, having
been derived from the partnership.

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Art 1769 (4) provides: The receipt by a person of a share of the
profits of a business is a prima facie evidence that he is a
partner in the business, but no such inference shall be drawn if
such profits were received in payment:
(a) As a debt by installments or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a
deceased partner;
(d) As interest on a loan, though the amount of
payment vary with the profits of the business;
(e) As the consideration for the sale of a goodwill of a
business or other property by installments or
otherwise.
Applying the legal provision to the facts of this case, the
following circumstances prove that Elfledo himself was the
partner of Jimmy and NOrtberto:
1) Cresencia (widow of Jose) testified that Jose gave
Elfledo P50,000 as share in the partnership on the date
that coincided with the payment of the initial capital in
the partnership
2) Elfledo ran the affairs of the partnership, wielding
absolute control, without any intervention or opposition
from any of the petitioners
3) All of the properties of the partnership were registered
in the name of Elfledo
4) Jimmy testified that Elfledo did not receive wages or
salaries from the partnership, indicating that what he
actually received were shares of the profits of the
business
5) None of the petitioners, as heirs of Jose the alleged
partner, demanded periodic accounting from Elfledo
during his lifetime

Furthermore, petitioners failed to adduce any evidence to
show that the real and personal properties acquired in the
names of Elfledo and Juliet formed part of the estate of Jose,
having been derived from the alleged partnership with Jimmy
and Norberto. They failed to refute Juliets claim that Elfledo
also sold Interwood lumber as a side line. Petitioners could not
offer any credible evidence except bare assertions.

It is also notable that Jose Lim died when the partnership was
barely a year old and the partnership and its business not only
continued but also flourished. If it were true that Jose Lim and
not Elfledo who was the partner, then upon Joses death, the
partnership should have been dissolved and its assets
liquidated. On the contrary, the operations of the business
continued under the helm of Elfledo and without any
participation from the heirs of Jose Lim.