[ATTY.

DIMAYUGA]
G.R. No. L-25532

February 28, 1969

COMMISSIONER OF INTERNAL
REVENUE, petitioner,
vs.

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.

WILLIAM J. SUTER and THE COURT OF

In 1948, however, general partner Suter and

TAX APPEALS, respondents.

limited partner Spirig got married and,

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.:

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,

A limited partnership, named "William J.

Commissioner of Internal Revenue, until in

Suter 'Morcoin' Co., Ltd.," was formed on

1959 when the latter, in an assessment,

30 September 1947 by herein respondent

consolidated the income of the firm and the

William J. Suter as the general partner, and

individual incomes of the partners-spouses

Julia Spirig and Gustav Carlson, as the

Suter and Spirig resulting in a determination

limited partners. The partners contributed,

of a deficiency income tax against

respectively, P20,000.00, P18,000.00 and

respondent Suter in the amount of P2,678.06

P2,000.00 to the partnership. On 1 October

for 1954 and P4,567.00 for 1955.

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,

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.

[ATTY. DIMAYUGA]
The present case is a petition for review,

partnership, in accordance with Section 45

filed by the Commissioner of Internal

(d) of the National Internal Revenue Code,

Revenue, of the tax court's aforesaid

which provides as follows:

decision. It raises these issues:

(d) Husband and wife. In the case of

(a) Whether or not the corporate personality

married persons, whether citizens, residents

of the William J. Suter "Morcoin" Co., Ltd.

or non-residents, only one consolidated

should be disregarded for income tax

return for the taxable year shall be filed by

purposes, considering that respondent

either spouse to cover the income of both

William J. Suter and his wife, Julia Spirig

spouses; ....

Suter actually formed a single taxable unit;

and

In refutation of the foregoing, respondent

Suter maintains, as the Court of Tax Appeals

(b) Whether or not the partnership was

held, that his marriage with limited partner

dissolved after the marriage of the partners,

Spirig and their acquisition of Carlson's

respondent William J. Suter and Julia Spirig

interests in the partnership in 1948 is not a

Suter and the subsequent sale to them by the

ground for dissolution of the partnership,

remaining partner, Gustav Carlson, of his

either in the Code of Commerce or in the

participation of P2,000.00 in the partnership

New Civil Code, and that since its juridical

for a nominal amount of P1.00.

personality had not been affected and since,

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,

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.

the fiction of juridical personality of the

We find the Commissioner's appeal

partnership should be disregarded for

unmeritorious.

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

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

[ATTY. DIMAYUGA]
partnership was organized is rested by the

partnership, since the contributions of the

appellant upon the opinion of now Senator

partners were fixed sums of money,

Tolentino in Commentaries and

P20,000.00 by William Suter and

Jurisprudence on Commercial Laws of the

P18,000.00 by Julia Spirig and neither one

Philippines, Vol. 1, 4th Ed., page 58, that

of them was an industrial partner. It follows

reads as follows:

that William J. Suter "Morcoin" Co., Ltd.

A husband and a wife may not enter into a

contract of general copartnership, because
under the Civil Code, which applies in the

was not a partnership that spouses were

forbidden to enter by Article 1677 of the
Civil Code of 1889.

absence of express provision in the Code of

The former Chief Justice of the Spanish

Commerce, persons prohibited from making

Supreme Court, D. Jose Casan, in his

donations to each other are prohibited from

Derecho Civil, 7th Edition, 1952, Volume 4,

entering into universal partnerships. (2

page 546, footnote 1, says with regard to the

Echaverri 196) It follows that the marriage

prohibition contained in the aforesaid Article

of partners necessarily brings about the

1677:

dissolution of a pre-existing partnership. (1

Guy de Montella 58)

Los conyuges, segun esto, no pueden

celebrar entre si el contrato de sociedad

The petitioner-appellant has evidently failed

universal, pero o podran constituir sociedad

to observe the fact that William J. Suter

particular? Aunque el punto ha sido muy

"Morcoin" Co., Ltd. was not a

debatido, nos inclinamos a la tesis permisiva

universal partnership, but a particular one.

de los contratos de sociedad particular entre

As appears from Articles 1674 and 1675 of

esposos, ya que ningun precepto de nuestro

the Spanish Civil Code, of 1889 (which was

Codigo los prohibe, y hay que estar a la

the law in force when the subject firm was

norma general segun la que toda persona es

organized in 1947), a universal partnership

capaz para contratar mientras no sea

requires either that the object of the

declarado incapaz por la ley. La

association be all the present property of the

jurisprudencia de la Direccion de los

partners, as contributed by them to the

Registros fue favorable a esta misma tesis en

common fund, or else "all that the partners

su resolution de 3 de febrero de 1936, mas

may acquire by their industry or

parece cambiar de rumbo en la de 9 de

work during the existence of the

marzo de 1943.

partnership". William J. Suter "Morcoin"

Co., Ltd. was not such a universal

[ATTY. DIMAYUGA]
Nor could the subsequent marriage of the

only be done by ignoring or disregarding

partners operate to dissolve it, such marriage

clear statutory mandates and basic principles

not being one of the causes provided for that

of our law. The limited partnership's

purpose either by the Spanish Civil Code or

separate individuality makes it impossible to

the Code of Commerce.

equate its income with that of the

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:

component members. True, section 24 of the

Internal Revenue Code merges registered
general co-partnerships (compaias
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

(a) That which is brought to the marriage as

Phil. 504) as authority for disregarding the

his or her own; ....

fiction of legal personality of the

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.

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

It being a basic tenet of the Spanish and

the present case, to do so would exempt the

Philippine law that the partnership has a

limited partnership from income taxation but

juridical personality of its own, distinct and

would throw the tax burden upon the

separate from that of its partners (unlike

partners-spouses in their individual

American and English law that does not

capacities. The corporations, in the cases

recognize such separate juridical

cited, merely served as business conduits

personality), the bypassing of the existence

or alter egos of the stockholders, a factor

of the limited partnership as a taxpayer can

that justified a disregard of their corporate

personalities for tax purposes. This is not

[ATTY. DIMAYUGA]
true in the present case. Here, the limited

because it is in the case of compaias

partnership is not a mere business conduit of

colectivas that the members, and not the

the partner-spouses; it was organized for

firm, are taxable in their individual

legitimate business purposes; it conducted

capacities for any dividend or share of the

its own dealings with its customers prior to

profit derived from the duly registered

appellee's marriage, and had been filing its

general partnership (Section 26, N.I.R.C.;

own income tax returns as such independent

Araas, Anno. & Juris. on the N.I.R.C., As

entity. The change in its membership,

Amended, Vol. 1, pp. 88-89).lawphi1.nt

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.

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

As the limited partnership under

confines itself to the question of the legal

consideration is taxable on its income, to

personality of the limited partnership, which

require that income to be included in the

is not essential to the income taxability of

individual tax return of respondent Suter is

the partnership since the law taxes the

to overstretch the letter and intent of the law.

income of even joint accounts that have no

In fact, it would even conflict with what it

personality of their own. 1 Appellant is,

specifically provides in its Section 24: for

likewise, mistaken in that it assumes that the

the appellant Commissioner's stand results

conjugal partnership of gains is a taxable

in equal treatment, tax wise, of a general

unit, which it is not. What is taxable is the

copartnership (compaia colectiva) and a

"income of both spouses" (Section 45 [d] in

limited partnership, when the code plainly

their individual capacities. Though the

differentiates the two. Thus, the code taxes

amount of income (income of the conjugal

the latter on its income, but not the former,

partnership vis-a-vis the joint income of

[ATTY. DIMAYUGA]
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.

REYES, J.:
This is an action originally brought in the
Court of First Instance of Rizal, Quezon
City Branch, to recover possesion of

The difference in tax rates between the

registered land situated in barrio Tatalon,

income of the limited partnership being

Quezon City.

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.

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

FOR THE FOREGOING REASONS, the

Province and as containing an area of 13

decision under review is hereby affirmed.

hectares more or less. But the complaint was

No costs.

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

G.R. No. L-4935

May 28, 1954

Title No. 37677. And still later, in the course

of trial, after defendant's surveyor and

J. M. TUASON & CO., INC., represented

by it Managing PARTNER, GREGORIA
ARANETA, INC., plaintiff-appellee,
vs.
QUIRINO BOLAOS, defendant-appellant.
Araneta and Araneta for appellee.
Jose A. Buendia for appellant.

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.

[ATTY. DIMAYUGA]
Defendant, in his answer, sets up

I. The trial court erred in not dismissing the

prescription and title in himself thru "open,

case on the ground that the case was not

continuous, exclusive and public and

brought by the real property in interest.

notorious possession (of land in dispute)

under claim of ownership, adverse to the
entire world by defendant and his

II. The trial court erred in admitting the third

amended complaint.

predecessor in interest" from "time in-

III. The trial court erred in denying

memorial". The answer further alleges that

defendant's motion to strike.

registration of the land in dispute was

obtained by plaintiff or its predecessors in
interest thru "fraud or error and without

IV. The trial court erred in including in its

decision land not involved in the litigation.

knowledge (of) or interest either personal or

V. The trial court erred in holding that the

thru publication to defendant and/or

land in dispute is covered by transfer

predecessors in interest." The answer

certificates of Title Nos. 37686 and 37677.

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

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.

possession thereof to plaintiff and to pay the

VIII. The trial court erred in not ordering the

latter a monthly rent of P132.62 from

plaintiff to reconvey the land in litigation to

January, 1940, until he vacates the land, and

the defendant.

also to pay the costs.

As to the first assigned error, there is
Appealing directly to this court because of

nothing to the contention that the present

the value of the property involved,

action is not brought by the real party in

defendant makes the following assignment

interest, that is, by J. M. Tuason and Co.,

or errors:

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

[ATTY. DIMAYUGA]
an attorney-at-law to bring the action, that is

may be answered by mere reference to

to file the complaint, in the name of the

section 4 of Rule 17, Rules of Court, which

plaintiff. That practice appears to have been

sanctions such amendment. It reads:

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

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.

Cyc. of Corp., 1082.) There is nothing in the

Under this provision amendment is not even

record to indicate that the venture in which

necessary for the purpose of rendering

plaintiff is represented by Gregorio Araneta,

judgment on issues proved though not

Inc. as "its managing partner" is not in line

alleged. Thus, commenting on the provision,

with the corporate business of either of

Chief Justice Moran says in this Rules of

them.

Court:

Errors II, III, and IV, referring to the

admission of the third amended complaint,

[ATTY. DIMAYUGA]
Under this section, American courts have,

meters, more or less, covered by transfer

under the New Federal Rules of Civil

certificate of title No. 37677 of the land

Procedure, ruled that where the facts shown

records of the same province, both lots

entitled plaintiff to relief other than that

having been originally registered on July 8,

asked for, no amendment to the complaint is

1914 under original certificate of title No.

necessary, especially where defendant has

735. The identity of the lots was established

himself raised the point on which recovery

by the testimony of Antonio Manahan and

is based, and that the appellate court treat

Magno Faustino, witnesses for plaintiff, and

the pleadings as amended to conform to the

the identity of the portion thereof claimed by

evidence, although the pleadings were not

defendant was established by the testimony

actually amended. (I Moran, Rules of Court,

of his own witness, Quirico Feria. The

1952 ed., 389-390.)

combined testimony of these three witnesses

Our conclusion therefore is that

specification of error II, III, and IV are
without merit..

clearly shows that the portion claimed by

defendant is made up of a part of lot 4-B-3C and major on portion of lot 4-B-4, and is
well within the area covered by the two

Let us now pass on the errors V and VI.

transfer certificates of title already

Admitting, though his attorney, at the early

mentioned. This fact also appears admitted

stage of the trial, that the land in dispute "is

in defendant's answer to the third amended

that described or represented in Exhibit A

complaint.

and in Exhibit B enclosed in red pencil with

the name Quirino Bolaos," 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

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. (Sorogon 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

[ATTY. DIMAYUGA]
prescription or adverse possession. (Section

question 'have always been since time

46, Act No. 496.) Adverse, notorious and

immemorial in open, continuous, exclusive

continuous possession under claim of

and public and notorious possession and

ownership for the period fixed by law is

under claim of ownership adverse to the

ineffective against a Torrens title.

entire world by defendant and his

(Valiente vs. Judge of CFI of Tarlac,2 etc.,

predecessors in interest.' This assignment of

45 Off. Gaz., Supp. 9, p. 43.) And it is

error is thus clearly without merit.

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

Error No. VIII is but a consequence of the

other errors alleged and needs for further
consideration.

decision of this Court on this point is that

During the pendency of this case in this

rendered in the case of Jose Alcantara et al.,

Court appellant, thru other counsel, has filed

vs. Mariano et al., 92 Phil., 796. This

a motion to dismiss alleging that there is

disposes of the alleged errors V and VI.

pending before the Court of First Instance of

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

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.

[ATTY. DIMAYUGA]
Wherefore, the judgment appealed from is

contribution of P17,500 each. The amended

affirmed, with costs against the plaintiff.

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

G.R. No. L-31684 June 28, 1973

them equally; and 30% for the fourth partner

Estrella Abad Santos."

EVANGELISTA & CO., DOMINGO C.

EVANGELISTA, JR., CONCHITA B.

On December 17, 1963 herein respondent

NAVARRO and LEONARDA ATIENZA

filed suit against the three other partners in

ABAD SABTOS, petitioners,

the Court of First Instance of Manila,

vs.

alleging that the partnership, which was also

ESTRELLA ABAD SANTOS, respondent.

made a party-defendant, had been paying

dividends to the partners except to her; and

Leonardo Abola for petitioners.

Baisas, Alberto & Associates for respondent.

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

MAKALINTAL, J.:

the partnership affairs to pay her any share

in the dividends declared by the partnership.

On October 9, 1954 a co-partnership was

She therefore prayed that the defendants be

formed under the name of "Evangelista &

ordered to render accounting to her of the

Co." On June 7, 1955 the Articles of Co-

partnership business and to pay her

partnership was amended as to include

corresponding share in the partnership

herein respondent, Estrella Abad Santos, as

profits after such accounting, plus attorney's

industrial partner, with herein petitioners

fees and costs.

Domingo C. Evangelista, Jr., Leonardo

Atienza Abad Santos and Conchita P.

The defendants, in their answer, denied ever

Navarro, the original capitalist partners,

having declared dividends or distributed

remaining in that capacity, with a

profits of the partnership; denied likewise

[ATTY. DIMAYUGA]
that the plaintiff ever demanded that she be

due as her share in the partnership profits

allowed to examine the partnership books;

and/or dividends after such an accounting

and byway of affirmative defense alleged

has been properly made; to pay plaintiff

that the amended Articles of Co-partnership

attorney's fees in the sum of P2,000.00 and

did not express the true agreement of the

the costs of this suit."

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

The defendants appealed to the Court of

Appeals, which thereafter affirmed
judgments of the court a quo.

profits which might be realized by the

In the petition before Us the petitioners have

partnership only until full payment of the

assigned the following errors:

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.

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

The parties are in agreement that the main

judges of the City Court of Manila, and

issue in this case is "whether the plaintiff-

despite its findings that respondent had been

appellee (respondent here) is an industrial

paid for services allegedly contributed by

partner as claimed by her or merely a profit

her to the partnership. In this connection the

sharer entitled to 30% of the net profits that

Court of Appeals erred:

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

(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.

of First Instance found for the plaintiff and

(B) In not finding that a portion of

rendered judgement "declaring her an

respondent's testimony quoted in the

industrial partner of Evangelista & Co.;

decision proves that said respondent did not

ordering the defendants to render an

bind herself to contribute her industry, and

accounting of the business operations of the

she could not, and in fact did not, because

(said) partnership ... from June 7, 1955; to

pay the plaintiff such amounts as may be

[ATTY. DIMAYUGA]
she was one of the judges of the City Court

in support of their respective positions on

of Manila since 1954.

the issue of whether or not the respondent

(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.

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 Copartnership, identified in the record as
Exhibit "A", was conclusive evidence that

III. The Court of Appeals erred in

the respondent was an industrial partner of

affirming in toto the decision of the trial

the said company, but considered it together

court whereby respondent was declared an

with other factors, consisting of both

industrial partner of the petitioner, and

testimonial and documentary evidences, in

petitioners were ordered to render an

arriving at the factual conclusion expressed

accounting of the business operation of the

in the decision.

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

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

[ATTY. DIMAYUGA]
conclusively prove that appellee was in fact

Jr., would have us believe as against the

admitted by appellants as industrial partner

cumulative force of appellee's aforesaid

of Evangelista & Co." and that "The grounds

documentary evidence is the appellee's

relied upon by the lower Court are

Exhibit "A", as confirmed and corroborated

untenable" (Pages 21 and 26, Appellant's

by the other exhibits already mentioned,

Brief).

does not express the true intent and

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

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.

they all bear the imprint of their knowledge

At pages 32-33 of appellants' brief, they also

and consent, and there is no credible

make much of the argument that 'there is an

showing that they ever protested against or

overriding fact which proves that the parties

opposed their contents prior of the filing of

to the Amended Articles of Partnership,

their answer to appellee's complaint. As a

Exhibit "A", did not contemplate to make

matter of fact, all the appellant Evangelista,

the appellee Estrella Abad Santos, an

[ATTY. DIMAYUGA]
industrial partner of Evangelista & Co. It is

specify the kind of industry that a partner

an admitted fact that since before the

may thus contribute, hence the said services

execution of the amended articles of

may legitimately be considered as appellee's

partnership, Exhibit "A", the appellee

contribution to the common fund. Another

Estrella Abad Santos has been, and up to the

article of the same Code relied upon

present time still is, one of the judges of the

appellants reads:

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:

'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

One cannot read appellee's testimony just

the partnership, and to insure faithful

quoted without gaining the very definite

compliance by said partner with this

impression that, even as she was and still is

prestation. There is no pretense, however,

a Judge of the City Court of Manila, she has

even on the part of the appellee is engaged

rendered services for appellants without

in any business antagonistic to that of

which they would not have had the

appellant company, since being a Judge of

wherewithal to operate the business for

one of the branches of the City Court of

which appellant company was organized.

Manila can hardly be characterized as a

Article 1767 of the New Civil Code which

business. That appellee has faithfully

provides that "By contract of partnership

complied with her prestation with respect to

two or more persons bind themselves, to

appellants is clearly shown by the fact that it

contribute money, property, or industry to a

was only after filing of the complaint in this

common fund, with the intention of dividing

case and the answer thereto appellants

the profits among themselves, 'does not

exercised their right of exclusion under the

[ATTY. DIMAYUGA]
codal art just mentioned by alleging in their

from June 7, 1955, until the mortgage of

Supplemental Answer dated June 29, 1964

P30,000.00 obtained from the Rehabilitation

or after around nine (9) years from June

Finance Corporal shall have been fully

7, 1955 subsequent to the filing of

paid." (Appellants Brief, p. 38).

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,

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:

devoting her time to performance of her

'ART. 1899. Any partner shall have the right

duties as such judge and enjoying the

to a formal account as to partnership affairs:

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

(1) If he is wrongfully excluded from the

partnership business or possession of its
property by his co-partners;

On Appeal, pp. 24-25). Having always

(2) If the right exists under the terms of any

knows as a appellee as a City judge even

agreement;

before she joined appellant company on

June 7, 1955 as an industrial partner, why

(3) As provided by article 1807;

did it take appellants many yearn before

(4) Whenever other circumstance render it

excluding her from said company as

just and reasonable.

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

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.

[ATTY. DIMAYUGA]
The judgment appealed from is affirmed,

Second. After a consideration of the facts

with costs.

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

G.R. L-No. 3666

August 17, 1909

THE CITY OF MANILA, plaintiffappellant,

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:

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

First. That upon the 31st day of August,

Manila vs. Gambe, 6 Phil. Rep., 49.)

1903, the plaintiff commenced an action in

the Court of First Instance of the city of

Sixth. The judgment thus affirmed was

Manila against the defendants, Francisco

returned to the lower court for an execution

Gambe, Manuel Perez, Antonio Herranz,

of the same.

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.

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

[ATTY. DIMAYUGA]
the Court of First Instance against the

That an execution upon said judgment was

defendant, Francisco Gambe, which was

duly issued against the property of said

returned upon the 17th day of August, 1906,

judgment debtor.

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

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.

Pilots' Association of Manila. These

That affiant is informed and believes that an

attachments were directed to the Hongkong

organization or association known as the

and Shanghai Banking Corporation, the

"Manila Pilots' Association," of which

Hon. W. Morgan Shuster, Collector of

Francisco Aguado is the chief pilot, Manuel

Customs, as well as Francisco Aguado, who

Goitia is the treasurer and custodian of its

was the chief of the said Pilot's Association.

funds, and of which W. Morgan Shuster,

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.

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

[ATTY. DIMAYUGA]
association the amount exceeding eight

Francisco Gambe, Manuel Goitia, and W.

hundred pesos (P800), Philippine currency,

Morgan Shuster, be and appear and answer

and that the said association now holds the

as to the indebtedness of the said Pilots'

said amount subject to the order of said

Association to said judgment debtor, at a

judgment debtor, and that the said amount

time and place by said court to be specified.

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

(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.

association, W. Morgan Shuster, and

(Signed) MODESTO REYES,

Francisco Gambe, was duly notified and

Notary Public.

each of the above-mentioned persons were

so duly notified by the sheriff of the city of

Commission expires December 31, 1906.

Manila, that attachment was levied against

Upon this affidavit, the Hon. A. S.

all the goods, effects, interests, credits or

Crossfield, one of the judges of the Court of

money belonging to the defendant, in the

First Instance of the city of Manila, made

possession of said association and persons,

the following order:

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.

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

That all of the above-mentioned persons

judgment in said action, and that Francisco

denied having in their possession, and

Aguado is the chief pilot, Manuel Goitia the

refused to deliver any such said goods,

treasurer, and Francisco Gambe and W.

effects, interests, credits, or money

Morgan Shuster are members of said

belonging to said defendant.

association, and that it is proper cause for

Wherefore deponent prays an order of this

court that the said Francisco Aguado,

this order, I, the undersigned, judge of the

Court of First Instance of the city of Manila,
Philippine Islands, do hereby order the said

[ATTY. DIMAYUGA]
Francisco Aguado, Francisco Gambe,

That each member of the Pilots' Association

Manuel Goitia, and W. Morgan Shuster

before becoming such, must deposit with the

personally to appear before me in the said

association the sum of P800, to be retained

city of Manila, on the 10th day of

by the association for the purpose of

September, at 10 o'clock in the morning of

satisfying damages which may be incurred

that day, to answer concerning the said

by others by reason of negligence or fault on

property.

the part of the association in the transaction

Eleventh. In accordance with the above

of its business.

order, the said parties appeared before the

It further appears from the declarations that

said court and testified relating to the

persons thus depositing the money could not

money, property, credits or effects which the

withdraw it; that it is property of the

said Pilots' Association had in its possession

association and may not be withdrawn, even

belonging to the said defendants.

in case of the death of a member, and that

After hearing the evidence of these parties,

said Francisco Gambe is a member.

the said Hon. A. S. Crossfield rendered the

I therefore find that the above-named

following judgment:

respondents, either as officers of the

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

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.

possession or under their control, belonging

From this decision of the lower court the

to the defendant, Francisco Gambe.

plaintiff appealed and made the following

Execution having been issued in the above-

assignments of error in this court:

named respondents having been attached, as

in garnishee proceedings, all of the abovenamed respondents appeared and the two
first-named made declarations as to the
property in their hands.
From the declaration made it appears:

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

[ATTY. DIMAYUGA]
a member", and that the said Francisco

Debts and credits, and other personal

Gambe is such a member.

property not capable of manual delivery,

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.

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

The only question presented in this court is

maintain an action against the said

whether or not the said Pilots' Association

association for the recovery of the specific

had debts, credits, or personal property, not

debt, credit, or personal property which the

capable of manual delivery, in its possession

plaintiff here is attempting to get possession

or under its control, belonging to the

of by virtue of the action, that said plaintiff

defendant. In other words, did said Pilots'

could not recover the same under the form

Association owe to the defendant, a debt or

of action adopted by it. If Gambe could

have in its possession and under its control

successfully maintain an action against the

credits and other personal property,

said Pilots' Association for the recovery of a

belonging to the defendant, subject to be

specific sum of money or specific personal

attached in accordance with the provisions

property, then, in our opinion, his judgment

of said section 431? Section 431 of the Code

creditors, or the plaintiff in this case, might

of Procedure in Civil Actions provides:

also by the procedure provided for under

said section 431 maintain the present action,

[ATTY. DIMAYUGA]
but not otherwise. (Hassie vs. God Is With

pilot, and no one can act as a pilot who has

Us Cong., 35 Cal., 378, 386.)

not been expressly recommended and

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.)

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

A "debt," as used in said section, means

of protecting its members against losses

some definite amount of money, ascertained

occasioned by its members to ships while

or capable of being ascertained, which may

said ships are under the control of a member

be paid over to the sheriff or the court under

or members of said association. The money

an order, while "credits " and "personal

paid in by one member of said association

property" are something belonging to the

becomes a part of a general fund of said

defendant, but in possession and under the

association, subject to be paid out for

control of the person attached.

damages done to ships by any member of

(Gow vs. Marshall, 90 Cal., 565;

the association. The fund created by the

Dunsmoor vs. Furstenfeldt, 88 Cal., 522.)

contributions of the members no longer

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.)

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

The said Pilots' Association is purely a

is of such a character for which the said

voluntary association of the pilots of the city

association assumed the responsibility is a

of Manila. The association is expressly

question which the person injured has a right

recognized under the law. No one can

to test in a special action against said

become a member of said association who

association.

has not shown special qualifications as a

[ATTY. DIMAYUGA]
From the evidence that was adduced before

between members of the same family arising

the lower court we are of the opinion, and so

from their joint ownership of certain

hold, that the said association had no debts,

properties.

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.

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

G.R. No. L-49982 April 27, 1988

Angeles 1 They agreed to help their brother,

petitioner herein, by allowing him to operate

ELIGIO ESTANISLAO, JR., petitioner,

and manage the gasoline service station of

vs.

the family. They negotiated with SHELL.

THE HONORABLE COURT OF APPE

For practical purposes and in order not to

ALS, REMEDIOS ESTANISLAO, EMILIO

run counter to the company's policy of

and LEOCADIO SANTIAGO,respondents.

appointing only one dealer, it was agreed

that petitioner would apply for the

Agustin O. Benitez for petitioner.

Benjamin C. Yatco for private respondents.

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

GANCAYCO, J.:

into an Additional Cash Pledge Agreement

By this petition for certiorari the Court is

with SHELL wherein it was reiterated that

asked to determine if a partnership exists

the P 15,000.00 advance rental shall be

[ATTY. DIMAYUGA]
deposited with SHELL to cover advances of

order is issued and that the same be subject

fuel to petitioner as dealer with a proviso

to proper audit;

that said agreement "cancels and supersedes

the Joint Affidavit dated 11 April 1966
executed by the co-owners." 2

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

For sometime, the petitioner submitted

l50,000.00 with interest at the rate of 1% per

financial statements regarding the operation

month from date of demand until full

of the business to private respondents, but

payment thereof for the entire duration of

therafter petitioner failed to render

the business; and

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

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

Thus, on August 25, 1970 private

private respondents to pay petitioner P

respondents filed a complaint in the Court of

3,000.00 attorney's fee and costs. Private

First Instance of Rizal against petitioner

respondent filed a motion for

praying among others that the latter be

reconsideration of the decision. On

ordered:

December 10, 1975, Hon. Ricardo Tensuan

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

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:

business operation covering the period from

WHEREFORE, the Decision of this Court

May 6, 1966 up to December 21, 1968 and

dated October 14, 1975 is hereby

from January 1, 1969 up to the time the

reconsidered and a new judgment is hereby

[ATTY. DIMAYUGA]
rendered in favor of the plaintiffs and as

A motion for reconsideration of said

against the defendant:

decision filed by petitioner was denied on

(1) Ordering the defendant to execute a

public instrument embodying all the
provisions of the partnership agreement
entered into between plaintiffs and

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:

defendant as provided for in Article 1771,

1. In interpreting the legal import of the

Civil Code of the Philippines;

Joint Affidavit (Exh. 'A') vis-a-vis the

(2) Ordering the defendant to render a

formal accounting of the business operation

Additional Cash Pledge Agreement (Exhs.

"B-2","6", and "L"); and

from April 1969 up to the time this order is

2. In declaring that a partnership was

issued, the same to be subject to

established by and among the petitioner and

examination and audit by the plaintiff,

the private respondents as regards the

(3) Ordering the defendant to pay plaintiffs

their lawful shares and participation in the

ownership and or operation of the gasoline

service station business.

net profits of the business in the amount of P

Petitioner relies heavily on the provisions of

150,000.00, with interest thereon at the rate

the Joint Affidavit of April 11, 1966 (Exhibit

of One (1%) Per Cent per month from date

A) and the Additional Cash Pledge

of demand until full payment thereof;

Agreement of May 20, 1966 (Exhibit 6)

(4) Ordering the defendant to pay the

which are herein reproduced-

plaintiffs the sum of P 5,000.00 by way of

(a) The joint Affidavit of April 11, 1966,

attorney's fees of plaintiffs' counsel; as well

Exhibit A reads:

as the costs of suit. (pp. 161-162. Record on

Appeal).

(1) That we are the Lessors of two parcels of

land fully describe in Transfer Certificates

Petitioner then interposed an appeal to the

of Title Nos. 45071 and 71244 of the

Court of Appeals enumerating seven (7)

Register of Deeds of Quezon City, in favor

errors allegedly committed by the trial court.

of the LESSEE - SHELL COMPANY OF

In due course, a decision was rendered by

THE PHILIPPINES LIMITED a corporation

the Court of Appeals on November 28,1978

duly licensed to do business in the

affirming in toto the decision of the lower

Philippines;

court with costs against petitioner. *

[ATTY. DIMAYUGA]
(2) That we have requested the said SHELL

(5) That we have likewise agreed among

COMPANY OF THE PHILIPPINE

ourselves that the SHELL COMPANY OF

LIMITED advanced rentals in the total

THE PHILIPPINES LIMITED execute an

amount of FIFTEEN THOUSAND PESOS

instrument for us to sign embodying our

(P l5,000.00) Philippine Currency, so that

conformity that the said amount that it will

we can use the said amount to augment our

generously grant us as requested be applied

capital investment in the operation of that

as ADVANCED RENTALS; and

gasoline station constructed ,by the said

company on our two lots aforesaid by virtue

(6) FURTHER AFFIANTS SAYETH NOT.,

of an outstanding Lease Agreement we have

(b) The Additional Cash Pledge Agreement

entered into with the said company;

of May 20,1966, Exhibit 6, is as follows:

(3) That the and SHELL COMPANY OF

WHEREAS, under the lease Agreement

THE PHILIPPINE LIMITED out of its

dated 13th November, 1963 (identified as

benevolence and desire to help us in

doc. Nos. 491 & 1407, Page Nos. 99 & 66,

aumenting our capital investment in the

Book Nos. V & III, Series of 1963 in the

operation of the said gasoline station, has

Notarial Registers of Notaries Public

agreed to give us the said amount of P

Rosauro Marquez, and R.D. Liwanag,

15,000.00, which amount will partake the

respectively) executed in favour of SHELL

nature of ADVANCED RENTALS;

by the herein CO-OWNERS and another

(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

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;

estimate and one-half months from May 25,

WHEREAS, CO-OWNER Eligio Estanislao

1966 or until the 10th of October, 1966 more

Jr. is the Dealer of the Shell Station

or less;

constructed on the leased land, and as Dealer

under the Cash Pledge Agreement dated llth

[ATTY. DIMAYUGA]
May 1966, he deposited to SHELL in cash

SHELL the monthly rental of P 3,382.29

the amount of PESOS TEN THOUSAND (P

payable to them respectively as they fall

10,000), Philippine Currency, to secure his

due, monthly, commencing 24th May 1966,

purchase on credit of Shell petroleum

until such time that the monthly rentals

products; . . .

accumulated, shall be equal to P l5,000.

WHEREAS, said DEALER, in his desire, to

2. The above stated monthly rentals

be granted an increased the limit up to P

accumulated shall be treated as additional

25,000, has secured the conformity of his

cash deposit by DEALER to SHELL,

CO-OWNERS to waive and assign to

thereby in increasing his credit limit from P

SHELL the total monthly rentals due to all

10,000 to P 25,000. This agreement,

of them to accumulate the equivalent

therefore, cancels and supersedes the Joint

amount of P 15,000, commencing 24th May

affidavit dated 11 April 1966 executed by

1966, this P 15,000 shall be treated as

the CO-OWNERS.

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 COOWNERS 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

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. "B2," "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

[ATTY. DIMAYUGA]
months or until 10 October 1966, more or

document, it is silent as to the statement in

less covering said P 15,000.00.

the Joint Affidavit that the 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

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.

increase his credit limit as dealer. As above-

Moreover other evidence in the record

stated it provided therein that "This

shows that there was in fact such partnership

agreement, therefore, cancels and supersedes

agreement between the parties. This is

the Joint Affidavit dated 11 April 1966

attested by the testimonies of private

executed by the CO-OWNERS."

respondent Remedies Estanislao and Atty.

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

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 aforestated policy of SHELL and the

[ATTY. DIMAYUGA]
understanding of the parties of having only

The object of this action is to obtain from

one dealer of the SHELL products.

the court a declaration that a partnership

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

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.

time to file a motion for reconsideration

The respective claims of the parties as to the

shag beentertained.

facts, so far as it is necessary to state them in

SO ORDERED.

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

February 2, 1903

proportionately; that in the same January the

G.R. No. 413

plaintiff furnished the defendant 300 pesos

JOSE FERNANDEZ, plaintiff-appellant,

to purchase a casco designated as No. 1515,

vs.

which the defendant did purchase for 500

FRANCISCO DE LA ROSA, defendant-

pesos of Doa Isabel Vales, taking the title

appellee.

in his own name; that the plaintiff furnished

further sums aggregating about 300 pesos

Vicente Miranda, for appellant.

for repairs on this casco; that on the fifth of

Simplicio del Rosario, for appellee.

the following March he furnished the

LADD, J.:

defendant 825 pesos to purchase another

[ATTY. DIMAYUGA]
casco designated as No. 2089, which the

account in January from the bakery firm,

defendant did purchase for 1,000 pesos of

consisting of the plaintiff, Marcos Angulo,

Luis R. Yangco, taking the title to this casco

and Antonio Angulo. The 825 pesos, which

also in his own name; that in April the

he admits he received from the plaintiff

parties undertook to draw up articles of

March 5, he claims was for the purchase of

partnership for the purpose of embodying

casco No. 1515, which he alleged was

the same in an authentic document, but that

bought March 12, and he alleges that he

the defendant having proposed a draft of

never received anything from the defendant

such articles which differed materially from

toward the purchase of casco No. 2089. He

the terms of the earlier verbal agreement,

claims to have paid, exclusive of repairs,

and being unwillingly to include casco No.

1,200 pesos for the first casco and 2,000

2089 in the partnership, they were unable to

pesos for the second one.

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,

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:

denying the existence of the partnership

(1) Doa Isabel Vales, from whom the

altogether.

defendant bought casco No. 1515, testifies

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

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.

consummated. He denies that the plaintiff

It is true that the public document of sale

furnished any money in January, 1900, for

was executed March 10, and that the vendor

the purchase of casco No. 1515, or for

declares therein that she is the owner of the

repairs on the same, but claims that he

casco, but such declaration does not exclude

borrowed 300 pesos on his individual

[ATTY. DIMAYUGA]
proof as to the actual date of the sale, at least

testifies, but the defendant claims that the

as against the plaintiff, who was not a party

fact that Angulo was a partner of the

to the instrument. (Civil Code, sec. 1218.) It

plaintiff rendered him incompetent as a

often happens, of course, in such cases, that

witness under the provisions of article 643

the actual sale precedes by a considerable

of the then Code of Civil Procedure, and

time the execution of the formal instrument

without deciding whether this point is well

of transfer, and this is what we think

taken, we have discarded his testimony

occurred here.

altogether in considering the case. The

(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.

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

(3) Antonio Fernandez testifies that in the

purchase for joint ownership of casco No.

early part of January, 1900, he saw Antonio

1515, and that the defendant received it with

Angulo give the defendant, in the name of

the understanding that it was to be used for

the plaintiff, a sum of money, the amount of

this purposed. We also find that the plaintiff

which he is unable to state, for the purchase

furnished some further sums of money for

of a casco to be used in the plaintiff's and

the repair of casco.

defendant's business. Antonio Angulo also

[ATTY. DIMAYUGA]
(4) The balance of the purchase price of

rights as a partner. We find this to be the

each of the two cascoes over and above the

fact.

amount contributed by the plaintiff was

furnished by the defendant.

Two questions of law are raised by the

foregoing facts: (1) Did a partnership exist

(5) We are unable to find upon the evidence

between the parties? (2) If such partnership

before us that there was any specific verbal

existed, was it terminated as a result of the

agreement of partnership, except such as

act of the defendant in receiving back the

may be implied from the fact as to the

1,125 pesos?

purchase of the casco.

(1) "Partnership is a contract by which two

(6) Although the evidence is somewhat

or more persons bind themselves to

unsatisfactory upon this point, we think it

contribute money, property, or industry to a

more probable than otherwise that no

common fund, with the intention of dividing

attempt was made to agree upon articles of

the profits among themselves." (Civil Code,

partnership till about the middle of the April

art. 1665.)

following the purchase of the cascoes.

The essential points upon which the minds

(7) At some time subsequently to the failure

of the parties must meet in a contract of

of the attempt to agree upon partnership

partnership are, therefore, (1) mutual

articles and after the defendant had been

contribution to a common stock, and (2) a

operating the cascoes for some time, the

joint interest in the profits. If the contract

defendant returned to the plaintiff 1,125

contains these two elements the partnership

pesos, in two different sums, one of 300 and

relation results, and the law itself fixes the

one of 825 pesos. The only evidence in the

incidents of this relation if the parties fail to

record as to the circumstances under which

do so. (Civil Code, secs. 1689, 1695.)

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

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

[ATTY. DIMAYUGA]
deduction from the fact of the purchase of

condition, postponing its operation until an

the cascoes in common, in the absence of

agreement was reached as to the respective

any other explanation of the object of the

participation of the partners in the profits,

parties in making the purchase in that form,

the character of the partnership as collective

and, it may be added, in view of the

or en comandita, and other details, but

admitted fact that prior to the purchase of

although it is asserted by counsel for the

the first casco the formation of a partnership

defendant that such was the case, there is

had been a subject of negotiation between

little or nothing in the record to support this

them.

claim, and that fact that the defendant did

Under other circumstances the relation of

joint ownership, a relation distinct though
perhaps not essentially different in its
practical consequence from that of

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.

partnership, might have been the result of

The execution of a written agreement was

the joint purchase. If, for instance, it were

not necessary in order to give efficacy to the

shown that the object of the parties in

verbal contract of partnership as a civil

purchasing in company had been to make a

contract, the contributions of the partners

more favorable bargain for the two cascoes

not having been in the form of immovables

that they could have done by purchasing

or rights in immovables. (Civil Code, art.

them separately, and that they had no

1667.) The special provision cited, requiring

ulterior object except to effect a division of

the execution of a public writing in the

the common property when once they had

single case mentioned and dispensing with

acquired it, the affectio societatis would be

all formal requirements in other cases,

lacking and the parties would have become

renders inapplicable to this species of

joint tenants only; but, as nothing of this sort

contract the general provisions of article

appears in the case, we must assume that the

1280 of the Civil Code.

object of the purchase was active use and

profit and not mere passive ownership in
common.

(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

It is thus apparent that a complete and

after the definitive failure of the attempt to

perfect contract of partnership was entered

agree upon partnership articles. The amount

into by the parties. This contract, it is true,

returned fell short, in our view of the facts,

might have been subject to a suspensive

of that which the plaintiff had contributed to

[ATTY. DIMAYUGA]
the capital of the partnership, since it did not

the defendant any ground whatever to

include the sum which he had furnished for

believe that he intended to relinquish them.

the repairs of casco No. 1515. Moreover, it

On the contrary he notified the defendant

is quite possible, as claimed by the plaintiff,

that he waived none of his rights in the

that a profit may have been realized from the

partnership. Nor was the acceptance of the

business during the period in which the

money an act which was in itself

defendant have been administering it prior to

inconsistent with the continuance of the

the return of the money, and if so he still

partnership relation, as would have been the

retained that sum in his hands. For these

case had the plaintiff withdrawn his entire

reasons the acceptance of the money by the

interest in the partnership. There is,

plaintiff did not have the effect of

therefore, nothing upon which a waiver,

terminating the legal existence of the

either express or implied, can be predicated.

partnership by converting it into a societas

The defendant might have himself

leonina, as claimed by counsel for the

terminated the partnership relation at any

defendant.

time, if he had chosen to do so, by

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

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 copartner 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.

these questions must be answered in the

The result is that we hold and declare that a

negative.

partnership was formed between the parties

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

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

[ATTY. DIMAYUGA]
profits derived therefrom. This declaration

one of the principal bases for determining

does not involve an adjudication as to any

with exactness the amount due to each.

disputed items of the partnership account.

With respect to the first point, the appellant

The judgment of the court below will be

cites the fifth conclusion of the decision,

reversed without costs, and the record

which is as follows: "We are unable to find

returned for the execution of the judgment

from the evidence before us that there was

now rendered. So ordered.

any specific verbal agreement of

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:

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

1. Because that part of the decision which

what may be inferred to exist, and still less

refers to the existence of the partnership

as sufficient ground for declaring its efficacy

which is the object of the complaint is not

to produce legal effects.

based upon clear and decisive legal grounds;

and

This reasoning rests upon a false basis. We

have not taken into consideration the mere

2. Because, upon the supposition of the

possibility of an inference, as the appellant

existence of the partnership, the decision

gratuitously stated, for the purpose of

does not clearly determine whether the

arriving at a conclusion that a contract of

juridical relation between the partners

partnership was entered into between him

suffered any modification in consequence of

and the plaintiff, but have considered the

the withdrawal by the plaintiff of the sum of

proof which is derived from the facts

1,125 pesos from the funds of the

connected with the purchase of the cascoes.

partnership, or if it continued as before, the

It is stated in the decision that with the

parties being thereby deprived, he alleges, of

exception of this evidence we find no other

[ATTY. DIMAYUGA]
which shows the making of the contract. But

record, we have reached the conclusion that

this does not mean (for it says exactly the

the plaintiff and the defendant agreed to the

contrary) that this fact is not absolutely

essential parts of that contract, and did in

proven, as the defendant erroneously

fact constitute a partnership, with the funds

appears to think. From this data we infer a

of which were purchased the cascoes with

fact which to our mind is certain and

which this litigation deals, although it is true

positive, and not a mere possibility; we infer

that they did not take the precaution to

not that it is possible that the contract may

precisely establish and determine from the

have existed, but that it actually did exist.

beginning the conditions with respect to the

The proofs constituted by the facts referred

participation of each partner in the profits or

to, although it is the only evidence, and in

losses of the partnership. The disagreements

spite of the fact that it is not direct, we

subsequently arising between them, when

consider, however, sufficient to produce

endeavoring to fix these conditions, should

such a conviction, which may certainly be

not and can not produce the effect of

founded upon any of the various classes of

destroying that which has been done, to the

evidence which the law admits. There is all

prejudice of one of the partners, nor could it

the more reason for its being so in this case,

divest his rights under the partnership which

because a civil partnership may be

had accrued by the actual contribution of

constituted in any form, according to article

capital which followed the agreement to

1667 of the Civil Code, unless real property

enter into a partnership, together with the

or real rights are contributed to it the only

transactions effected with partnership funds.

case of exception in which it is necessary

The law has foreseen the possibility of the

that the agreement be recorded in a public

constitution of a partnership without an

instrument.

express stipulation by the partners upon

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

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.

partnership, according to the definition of

With respect to the second point, it is

article 1665. Considering as a whole the

obvious that upon declaring the existence of

probatory facts which appears from the

a partnership and the right of the plaintiff to

[ATTY. DIMAYUGA]
demand from the defendant an itemized

The contentions advanced by the moving

accounting of his management thereof, it

party are so evidently unfounded that we can

was impossible at the same time to

not see the necessity or convenience of

determine the effects which might have been

granting the rehearing prayed for, and the

produced with respect to the interest of the

motion is therefore denied.

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

G.R. No. L-55397 February 29, 1988

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

TAI TONG CHUACHE & CO., petitioner,

vs.
THE INSURANCE COMMISSION and
TRAVELLERS MULTI-INDEMNITY
CORPORATION, respondents.

liquidation are innumerable. The liquidation

will finally determine the condition of the
legal relations of the partners inter se at the

GANCAYCO, J.:

time of the withdrawal of the sum

This petition for review on certiorari seeks

mentioned. It was not, nor is it possible to

the reversal of the decision of the Insurance

determine this status a priori without

Commission in IC Case #367 1dismissing

prejudging the result, as yet unknown, of the

the complaint 2 for recovery of the alleged

litigation. Therefore it is that in the decision

unpaid balance of the proceeds of the Fire

no direct statement has been made upon this

Insurance Policies issued by herein

point. It is for the same reason that it was

respondent insurance company in favor of

expressly stated in the decision that it "does

petitioner-intervenor.

not involve an adjudication as to any

disputed item of the partnership account."

The facts of the case as found by respondent

Insurance Commission are as follows:

[ATTY. DIMAYUGA]
Complainants acquired from a certain

On July 31, 1975, the building and the

Rolando Gonzales a parcel of land and a

contents were totally razed by fire.

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.

Adjustment Standard Corporation submitted

a report as follow
xxx xxx xxx
... Thus the apportioned share of each
company is as follows:

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

Policy No..

Company

Risk

Insures

MIRO

Zenith

Building

P50,000

F-02500

Insurance

Household

70,000

Inc.

FFF & F5

50,000

Policy No.

Company

Risk

Insures

FIC-15381

SSSAccre

Building

P25,000

Totals

P195,000

"1" and "1-A"). On April 25, 1975, Arsenio

Corp.

Chua, representative of Thai Tong Chuache

& Co. insured the latter's interest with

F-84590

Travellers Multi-Indemnity Corporation for

Phil.
British

P100,000.00 (P70,000.00 for the building

and P30,000.00 for the contents thereof)

Assco. Co.

(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

dited Group
of Insurers

British Assurance Company, covering the

same building for P50,000.00 and the
contents thereof for P70,000.00.

We are showing hereunder another

apportionment of the loss which includes the

[ATTY. DIMAYUGA]
Travellers Multi-Indemnity policy for

the loss. Complainants were paid the

reference purposes.

following: P41,546.79 by Philippine British

Assurance Co., P11,877.14 by Zenith

Policy No.

Company

MIRO/

Zenith

F-02500

Insurance

Risk

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

Corp.

Building

refused. Hence, complainants demanded

from the other three (3) respondents the

F-84590

Phil.

balance of each share in the loss based on

the computation of the Adjustment

British
Assco. Co.

Standards Report excluding Travellers

I-Building

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,

PVC-15181

SSS

FFF & PE

hence, this action.

Accredited

In their answers, Philippine British

Assurance and Zenith Insurance Corporation

Group of

F-599 DV

admitted the material allegations in the

Insurers

Building

Insurers

I-Ref

complaint, but denied liability on the ground

that the claim of the complainants had
already been waived, extinguished or paid.
Both companies set up counterclaim in the

Multi

II-Building

total amount of P 91,546.79.

Totals

Instead of filing an answer, SSS Accredited

Group of Insurers informed the Commission

Based on the computation of the loss,

in its letter of July 22, 1977 that the herein

including the Travellers Multi- Indemnity,

claim of complainants for the balance had

respondents, Zenith Insurance, Phil. British

been paid in the amount of P 5,938.57 in

Assurance and S.S.S. Accredited Group of

full, based on the Adjustment Standards

Insurers, paid their corresponding shares of

Corporation Report of September 22, 1975.

[ATTY. DIMAYUGA]
Travellers Insurance, on its part, admitted

As adverted to above respondent Insurance

the issuance of the Policy No. 599 DV and

Commission dismissed spouses Palomos'

alleged as its special and affirmative

complaint on the ground that the insurance

defenses the following, to wit: that Fire

policy subject of the complaint was taken

Policy No. 599 DV, covering the furniture

out by Tai Tong Chuache & Company,

and building of complainants was secured

petitioner herein, for its own interest only as

by a certain Arsenio Chua, mortgage

mortgagee of the insured property and thus

creditor, for the purpose of protecting his

complainant as mortgagors of the insured

mortgage credit against the complainants;

property have no right of action against

that the said policy was issued in the name

herein respondent. It likewise dismissed

of Azucena Palomo, only to indicate that she

petitioner's complaint in intervention in the

owns the insured premises; that the policy

following words:

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.

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

On May 31, 1977, Tai Tong Chuache & Co.

evidence. The certification (Exhibit 'E-e')

filed a complaint in intervention claiming

issued by the Court of First Instance of

the proceeds of the fire Insurance Policy No.

Davao, Branch 11, indicate that the

F-559 DV, issued by respondent Travellers

complainant was Antonio Lopez Chua and

Multi-Indemnity.

not Tai Tong Chuache & Company. 4

Travellers Insurance, in answer to the

From the above decision, only intervenor Tai

complaint in intervention, alleged that the

Tong Chuache filed a motion for

Intervenor is not entitled to indemnity under

reconsideration but it was likewise denied

its Fire Insurance Policy for lack of

hence, the present petition.

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

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

[ATTY. DIMAYUGA]
Lopez Chua is the one entitled to the

Rule 131 6 each party must prove his own

insurance proceeds and not Tai Tong

affirmative allegations by the amount of

Chuache & Company.

evidence required by law which in civil

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

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.

of the peril insured against petitioner as

It will be recalled that respondent insurance

mortgagee had no more insurable interest

company did not assail the validity of the

over the insured property. It was based on

insurance policy taken out by petitioner over

the inference that the credit secured by the

the mortgaged property. Neither did it deny

mortgaged property was already paid by the

that the said property was totally razed by

Palomos before the said property was gutted

fire within the period covered by the

down by fire. The foregoing conclusion was

insurance. Respondent, as mentioned earlier

arrived at on the basis of the certification

advanced an affirmative defense of lack of

issued by the then Court of First Instance of

insurable interest on the part of the

Davao, Branch II that in a certain civil

petitioner that before the occurrence of the

action against the Palomos, Antonio Lopez

peril insured against the Palomos had

Chua stands as the complainant and not

already paid their credit due the petitioner.

petitioner Tai Tong Chuache & Company.

Respondent having admitted the material

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,

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.

[ATTY. DIMAYUGA]
Respondent, it will be noted, exerted no

Azucena Palomo who testified that they are

effort to present any evidence to substantiate

still indebted to herein petitioner.9

its claim, while petitioner did. For said

respondent's failure, the decision must be
adverse to it.

Public respondent argues however, that if

the civil case really stemmed from the loan
granted to Azucena Palomo by petitioner the

However, as adverted to earlier, respondent

same should have been brought by Tai Tong

Insurance Commission absolved respondent

Chuache or by its representative in its own

insurance company from liability on the

behalf. From the above premise respondent

basis of the certification issued by the then

concluded that the obligation secured by the

Court of First Instance of Davao, Branch II,

insured property must have been paid.

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 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

The record of the case shows that the

declaration that Arsenio Lopez Chua acts as

petitioner to support its claim for the

the managing partner of the partnership was

insurance proceeds offered as evidence the

corroborated by respondent insurance

contract of mortgage (Exh. 1) which has not

company. 11 Thus Chua as the managing

been cancelled nor released. It has been held

partner of the partnership may execute all

in a long line of cases that when the creditor

acts of administration 12 including the right

is in possession of the document of credit,

to sue debtors of the partnership in case of

he need not prove non-payment for it is

their failure to pay their obligations when it

presumed. 8 The validity of the insurance

became due and demandable. Or at the very

policy taken b petitioner was not assailed by

least, Chua being a partner of petitioner Tai

private respondent. Moreover, petitioner's

Tong Chuache & Company is an agent of

claim that the loan extended to the Palomos

the partnership. Being an agent, it is

has not yet been paid was corroborated by

understood that he acted for and in behalf of

[ATTY. DIMAYUGA]
the firm. 13 Public respondent's allegation

MARIANO B. OA, LUZ B. OA,

that the civil case flied by Arsenio Chua was

VIRGINIA B. OA and LORENZO B.

in his capacity as personal creditor of

OA, JR., petitioners,

spouses Palomo has no basis.

vs.

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.

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.

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.

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
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

G.R. No. L-19342 May 25, 1972

LORENZO T. OA and HEIRS OF JULIA
BUALES, namely: RODOLFO B. OA,

the resolution of said court denying

petitioners' motion for reconsideration of
said decision.

[ATTY. DIMAYUGA]
The facts are stated in the decision of the

from said Commission the amount of

Tax Court as follows:

P50,000.00, more or less. This amount was

Julia Buales died on March 23, 1944,

leaving as heirs her surviving spouse,
Lorenzo T. Oa 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.
Oa the surviving spouse was appointed
administrator of the estate of said deceased

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.).

(Exhibit 3, pp. 34-41, BIR rec.). On April

The project of partition also shows that the

14, 1949, the administrator submitted the

estate shares equally with Lorenzo T. Oa,

project of partition, which was approved by

the administrator thereof, in the obligation

the Court on May 16, 1949 (See Exhibit K).

of P94,973.00, consisting of loans

Because three of the heirs, namely Luz,

contracted by the latter with the approval of

Virginia and Lorenzo, Jr., all surnamed Oa,

the Court (see p. 3 of Exhibit K; or see p. 74,

were still minors when the project of

BIR rec.).

partition was approved, Lorenzo T. Oa,

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.).

Although the project of partition was

approved by the Court on May 16, 1949, no
attempt was made to divide the properties
therein listed. Instead, the properties
remained under the management of Lorenzo
T. Oa who used said properties in business
by leasing or selling them and investing the
income derived therefrom and the proceeds

The project of partition (Exhibit K; see also

from the sales thereof in real properties and

pp. 77-70, BIR rec.) shows that the heirs

securities. As a result, petitioners' properties

have undivided one-half (1/2) interest in ten

and investments gradually increased from

parcels of land with a total assessed value of

P105,450.00 in 1949 to P480,005.20 in 1956

P87,860.00, six houses with a total assessed

as can be gleaned from the following year-

value of P17,590.00 and an undetermined

end balances:

amount to be collected from the War

Damage Commission. Later, they received

Land

Building

nt

[ATTY. DIMAYUGA]
(Exhibit 3,supra; t.s.n., pp. 25-26). However,
petitioners did not actually receive their
Account

Account

26, 40, 98, 100). The income was always left

P87,860.00

P17,590.00

7.65

128,566.72

96,076.26

.31

120,349.28

110,605.11

.52

87,065.28

152,674.39

.27

84,925.68

161,463.83

.37

shares in the yearly income. (t.s.n., pp. 25in the hands of Lorenzo T. Oa 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,

99,001.20

167,962.04

subject to the corporate income tax, pursuant

to Section 24, in relation to Section 84(b), of

6.00

120,249.78

169,262.52

8.68

135,714.68

169,262.52

the Tax Code. Accordingly, he assessed

against the petitioners the amounts of
P8,092.00 and P13,899.00 as corporate

(See Exhibits 3 & K t.s.n., pp. 22, 25-26, 40,

income taxes for 1955 and 1956,

50, 102-104)

respectively. (See Exhibit 5, amended by

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. Oa 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

Exhibit 17, pp. 50 and 86, BIR rec.).

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. 14, Memorandum for Respondent, June 12,
1961).
The original assessment was as follows:
1955

derived from said properties and securities

Net income as per

and/or from transactions involving them

investigation ................ P40,209.89

[ATTY. DIMAYUGA]
petitioners to file the corporate income tax
Income tax due thereon ...............................

returns for said years. (See Exh. 17, page 86,

8,042.00

BIR records). (Pp. 1-3, Annex C to Petition)

25% surcharge ..............................................

2,010.50
Compromise for nonfiling .......................... 50.00
Total ..............................................................
. P10,102.50
1956
Net income as per

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;

investigation ................ P69,245.23

II.

Income tax due thereon ...............................

THE COURT OF TAX APPEALS ERRED

13,849.00

IN NOT HOLDING THAT THE

25% surcharge ..............................................

PETITIONERS WERE CO-OWNERS OF

3,462.25

THE PROPERTIES INHERITED AND

Compromise for non-

(THE) PROFITS DERIVED FROM

filing .......................... 50.00

TRANSACTIONS THEREFROM (sic);

Total ..............................................................
. P17,361.25
(See Exhibit 13, page 50, BIR records)

III.
THE COURT OF TAX APPEALS ERRED
IN HOLDING THAT PETITIONERS

Upon further consideration of the case, the

WERE LIABLE FOR CORPORATE

25% surcharge was eliminated in line with

INCOME TAXES FOR 1955 AND 1956 AS

the ruling of the Supreme Court in Collector

AN UNREGISTERED PARTNERSHIP;

v. Batangas Transportation Co., G.R. No. L9692, Jan. 6, 1958, so that the questioned

IV.

assessment refers solely to the income tax

ON THE ASSUMPTION THAT THE

proper for the years 1955 and 1956 and the

PETITIONERS CONSTITUTED AN

"Compromise for non-filing," the latter item

UNREGISTERED PARTNERSHIP, THE

obviously referring to the compromise in

COURT OF TAX APPEALS ERRED IN

lieu of the criminal liability for failure of

NOT HOLDING THAT THE

[ATTY. DIMAYUGA]
PETITIONERS WERE AN

Assuming they have formed an unregistered

UNREGISTERED PARTNERSHIP TO

partnership, should this not be only in the

THE EXTENT ONLY THAT THEY

sense that they invested as a common fund

INVESTED THE PROFITS FROM THE

the profits earned by the properties owned

PROPERTIES OWNED IN COMMON

by them in common and the loans granted to

AND THE LOANS RECEIVED USING

them upon the security of the said

THE INHERITED PROPERTIES AS

properties, with the result that as far as their

COLLATERALS;

respective shares in the inheritance are

V.

concerned, the total income thereof should

be considered as that of co-owners and not

ON THE ASSUMPTION THAT THERE

of the unregistered partnership? And (3)

WAS AN UNREGISTERED

assuming again that they are taxable as an

PARTNERSHIP, THE COURT OF TAX

unregistered partnership, should not the

APPEALS ERRED IN NOT DEDUCTING

various amounts already paid by them for

THE VARIOUS AMOUNTS PAID BY THE

the same years 1955 and 1956 as individual

PETITIONERS AS INDIVIDUAL

income taxes on their respective shares of

INCOME TAX ON THEIR RESPECTIVE

the profits accruing from the properties they

SHARES OF THE PROFITS ACCRUING

owned in common be deducted from the

FROM THE PROPERTIES OWNED IN

deficiency corporate taxes, herein involved,

COMMON, FROM THE DEFICIENCY

assessed against such unregistered

TAX OF THE UNREGISTERED

partnership by the respondent

PARTNERSHIP.

Commissioner?

In other words, petitioners pose for our

Pondering on these questions, the first thing

resolution the following questions: (1)

that has struck the Court is that whereas

Under the facts found by the Court of Tax

petitioners' predecessor in interest died way

Appeals, should petitioners be considered as

back on March 23, 1944 and the project of

co-owners of the properties inherited by

partition of her estate was judicially

them from the deceased Julia Buales and

approved as early as May 16, 1949, and

the profits derived from transactions

presumably petitioners have been holding

involving the same, or, must they be deemed

their respective shares in their inheritance

to have formed an unregistered partnership

since those dates admittedly under the

subject to tax under Sections 24 and 84(b) of

administration or management of the head of

the National Internal Revenue Code? (2)

the family, the widower and father Lorenzo

T. Oa, the assessment in question refers to

[ATTY. DIMAYUGA]
the later years 1955 and 1956. We believe

"investment account," P135.714.68 in "land

this point to be important because,

account" and P169,262.52 in "building

apparently, at the start, or in the years 1944

account" in 1956. And all these became

to 1954, the respondent Commissioner of

possible because, admittedly, petitioners

Internal Revenue did treat petitioners as co-

never actually received any share of the

owners, not liable to corporate tax, and it

income or profits from Lorenzo T. Oa and

was only from 1955 that he considered them

instead, they allowed him to continue using

as having formed an unregistered

said shares as part of the common fund for

partnership. At least, there is nothing in the

their ventures, even as they paid the

record indicating that an earlier assessment

corresponding income taxes on the basis of

had already been made. Such being the case,

their respective shares of the profits of their

and We see no reason how it could be

common business as reported by the said

otherwise, it is easily understandable why

Lorenzo T. Oa.

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.

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,

The Tax Court found that instead of actually

petitioners engaged, thru Lorenzo T. Oa, in

distributing the estate of the deceased among

the purchase and sale of corporate securities.

themselves pursuant to the project of

It is likewise admitted that all the profits

partition approved in 1949, "the properties

from these ventures were divided among

remained under the management of Lorenzo

petitioners proportionately in accordance

T. Oa who used said properties in business

with their respective shares in the

by leasing or selling them and investing the

inheritance. In these circumstances, it is Our

income derived therefrom and the proceed

considered view that from the moment

from the sales thereof in real properties and

petitioners allowed not only the incomes

securities," as a result of which said

from their respective shares of the

properties and investments steadily

inheritance but even the inherited properties

increased yearly from P87,860.00 in "land

themselves to be used by Lorenzo T. Oa as

account" and P17,590.00 in "building

a common fund in undertaking several

account" in 1949 to P175,028.68 in

transactions or in business, with the

[ATTY. DIMAYUGA]
intention of deriving profit to be shared by

It is true that in Evangelista vs. Collector,

them proportionally, such act was

102 Phil. 140, it was stated, among the

tantamonut to actually contributing such

reasons for holding the appellants therein to

incomes to a common fund and, in effect,

be unregistered co-partners for tax purposes,

they thereby formed an unregistered

that their common fund "was not something

partnership within the purview of the above-

they found already in existence" and that "it

mentioned provisions of the Tax Code.

was not a property inherited by them pro

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.

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 coownership 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
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

[ATTY. DIMAYUGA]
in common with his co-heirs under a single

entities subject to the tax on "corporations",

management to be used with the intent of

said Code must allude, therefore, to

making profit thereby in proportion to his

organizations which are not

share, there can be no doubt that, even if no

necessarily "partnerships", in the technical

document or instrument were executed for

sense of the term. Thus, for instance, section

the purpose, for tax purposes, at least, an

24 of said Code exempts from the

unregistered partnership is formed. This is

aforementioned tax "duly registered general

exactly what happened to petitioners in this

partnerships," which constitute precisely one

case.

of the most typical forms of partnerships in

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:

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
"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

To begin with, the tax in question is one

above stated, "duly registered general co-

imposed upon "corporations", which, strictly

partnerships" which are possessed of the

speaking, are distinct and different from

aforementioned personality have been

"partnerships". When our Internal Revenue

expressly excluded by law (sections 24 and

Code includes "partnerships" among the

[ATTY. DIMAYUGA]
84[b]) from the connotation of the term

For purposes of the tax on corporations, our

"corporation." ....

National Internal Revenue Code includes

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

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.

organization which carries on any business,

We reiterated this view, thru Mr. Justice

financial operation, or venture, and which is

Fernando, in Reyes vs. Commissioner of

not, within the meaning of the Code, a trust,

Internal Revenue, G. R. Nos. L-24020-21,

estate, or a corporation. ... . (7A Merten's

July 29, 1968, 24 SCRA 198, wherein the

Law of Federal Income Taxation, p. 789;

Court ruled against a theory of co-ownership

emphasis ours.)

pursued by appellants therein.

The term "partnership" includes a syndicate,

As regards the second question raised by

group, pool, joint venture or other

petitioners about the segregation, for the

unincorporated organization, through or by

purposes of the corporate taxes in question,

means of which any business, financial

of their inherited properties from those

operation, or venture is carried on. ... . (8

acquired by them subsequently, We consider

Merten's Law of Federal Income Taxation,

as justified the following ratiocination of the

p. 562 Note 63; emphasis ours.)

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

[ATTY. DIMAYUGA]
properties and corporate securities and

Even if we were to yield to the decision of

should not include the income derived from

this Honorable Court that the herein

the inherited properties. It is admitted that

petitioners have formed an unregistered

the inherited properties and the income

partnership and, therefore, have to be taxed

derived therefrom were used in the business

as such, it might be recalled that the

of buying and selling other real properties

petitioners in their individual income tax

and corporate securities. Accordingly, the

returns reported their shares of the profits of

partnership income must include not only

the unregistered partnership. We think it

the income derived from the purchase and

only fair and equitable that the various

sale of other properties but also the income

amounts paid by the individual petitioners as

of the inherited properties.

income tax on their respective shares of the

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

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.)

the common assets of the heirs to be used in

In other words, it is the position of

making profits, it is but proper that the

petitioners that the taxable income of the

income of such shares should be considered

partnership must be reduced by the amounts

as the part of the taxable income of an

of income tax paid by each petitioner on his

unregistered partnership. This, We hold, is

share of partnership profits. This is not

the clear intent of the law.

correct; rather, it should be the other way

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:

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

In support of the third ground, counsel for

due from the partnership has been correctly

petitioners alleges:

assessed. Since the individual income tax

liabilities of petitioners are not in issue in

[ATTY. DIMAYUGA]
this proceeding, it is not proper for the Court

favor of persons who are not exactly above

to pass upon the same.

suspicion in their conduct vis-a-vis their tax

Petitioners insist that it was error for the Tax

obligation to the State.

Court to so rule that whatever excess they

IN VIEW OF ALL THE FOREGOING, the

might have paid as individual income tax

judgment of the Court of Tax Appeals

cannot be credited as part payment of the

appealed from is affirm with costs against

taxes herein in question. It is argued that to

petitioners.

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

G.R. No. L-45425

April 29, 1939

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

JOSE GATCHALIAN, ET AL., plaintiffsappellants,

vs.
THE COLLECTOR OF INTERNAL
REVENUE, defendant-appellee.

that the claim and action for such

Guillermo B. Reyes for appellants.

reimbursement are subject to the bar of

Office of the Solicitor-General Tuason for

prescription. And since the period for the

appellee.

recovery of the excess income taxes in the

case of herein petitioners has already lapsed,

IMPERIAL, J.:

it would not seem right to virtually disregard

The plaintiff brought this action to recover

prescription merely upon the ground that the

from the defendant Collector of Internal

reason for the delay is precisely because the

Revenue the sum of P1,863.44, with legal

taxpayers failed to make the proper return

interest thereon, which they paid under

and payment of the corporate taxes legally

protest by way of income tax. They appealed

due from them. In principle, it is but proper

from the decision rendered in the case on

not to allow any relaxation of the tax laws in

[ATTY. DIMAYUGA]
October 23, 1936 by the Court of First

.................................................

Instance of the City of Manila, which

dismissed the action with the costs against

4. Guillermo

them.

Tapia .................................................. .13

.................................................

The case was submitted for decision upon

5. Jesus

the following stipulation of facts:

Legaspi ............................................... .15

Come now the parties to the above-

.......................................................

mentioned case, through their respective

undersigned attorneys, and hereby agree to

6. Jose

respectfully submit to this Honorable Court

Silva ................................................... .07

the case upon the following statement of

..........................................................

facts:

7. Tomasa

1. That plaintiff are all residents of the

Mercado ............................................. .08

municipality of Pulilan, Bulacan, and that

...................................................

defendant is the Collector of Internal

8. Julio

Revenue of the Philippines;

Gatchalian .......................................... .13

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.

Legaspi ............................................... .16

18

................................................
11. Francisco

Cristobal ............................................. .18

..................................................

Silva ...................................................

Santiago ............................................. .13

10. Maria C.

2. Gregoria

3. Saturnina

9. Emiliana

.08

Cabral ................................................. .13

..............................................
12. Gonzalo
Javier .................................................. .14
..................................................

[ATTY. DIMAYUGA]
13. Maria

cashed during the latter part of December,

Santiago ............................................. .17

1934 by Jose Gatchalian & Company;

......................................................

5. That on December 29, 1934, Jose

14. Buenaventura

Gatchalian was required by income tax

Guzman .............................................. .13

examiner Alfredo David to file the

........................................

corresponding income tax return covering

the prize won by Jose Gatchalian &

15. Mariano

Company and that on December 29, 1934,

Santos ................................................. .14

the said return was signed by Jose

................................................

Gatchalian, a copy of which return is

enclosed as Exhibit A and made a part
hereof;

Total ................................................... 2.0

.....................................................

6. That on January 8, 1935, the defendant

made an assessment against Jose Gatchalian

3. That immediately thereafter but prior to

& Company requesting the payment of the

December 15, 1934, plaintiffs purchased, in

sum of P1,499.94 to the deputy provincial

the ordinary course of business, from one of

treasurer of Pulilan, Bulacan, giving to said

the duly authorized agents of the National

Jose Gatchalian & Company until January

Charity Sweepstakes Office one ticket

20, 1935 within which to pay the said

bearing No. 178637 for the sum of two

amount of P1,499.94, a copy of which letter

pesos (P2) and that the said ticket was

marked Exhibit B is enclosed and made a

registered in the name of Jose Gatchalian

part hereof;

and Company;
7. That on January 20, 1935, the plaintiffs,
4. That as a result of the drawing of the

through their attorney, sent to defendant a

sweepstakes on December 15, 1934, the

reply, a copy of which marked Exhibit C is

above-mentioned ticket bearing No. 178637

attached and made a part hereof, requesting

won one of the third prizes in the amount of

exemption from payment of the income tax

P50,000 and that the corresponding check

to which reply there were enclosed fifteen

covering the above-mentioned prize of

(15) separate individual income tax returns

P50,000 was drawn by the National Charity

filed separately by each one of the plaintiffs,

Sweepstakes Office in favor of Jose

copies of which returns are attached and

Gatchalian & Company against the

marked Exhibit D-1 to D-15, respectively, in

Philippine National Bank, which check was

[ATTY. DIMAYUGA]
order of their names listed in the caption of

plaintiffs, the said plaintiffs on June 15,

this case and made parts hereof; a statement

1935, through Gregoria Cristobal, Maria C.

of sale signed by Jose Gatchalian showing

Legaspi and Jesus Legaspi, paid under

the amount put up by each of the plaintiffs

protest the sum of P601.51 as part of the tax

to cover up the attached and marked as

and penalties to the municipal treasurer of

Exhibit E and made a part hereof; and a

Pulilan, Bulacan, as evidenced by official

copy of the affidavit signed by Jose

receipt No. 7454879 which is attached and

Gatchalian dated December 29, 1934 is

marked Exhibit J and made a part hereof,

attached and marked Exhibit F and made

and requested defendant that plaintiffs be

part thereof;

allowed to pay under protest the balance of

8. That the defendant in his letter dated

January 28, 1935, a copy of which marked

the tax and penalties by monthly

installments;

Exhibit G is enclosed, denied plaintiffs'

11. That plaintiff's request to pay the balance

request of January 20, 1935, for exemption

of the tax and penalties was granted by

from the payment of tax and reiterated his

defendant subject to the condition that

demand for the payment of the sum of

plaintiffs file the usual bond secured by two

P1,499.94 as income tax and gave plaintiffs

solvent persons to guarantee prompt

until February 10, 1935 within which to pay

payment of each installments as it becomes

the said tax;

due;

9. That in view of the failure of the plaintiffs

12. That on July 16, 1935, plaintiff filed a

to pay the amount of tax demanded by the

bond, a copy of which marked Exhibit K is

defendant, notwithstanding subsequent

enclosed and made a part hereof, to

demand made by defendant upon the

guarantee the payment of the balance of the

plaintiffs through their attorney on March

alleged tax liability by monthly installments

23, 1935, a copy of which marked Exhibit H

at the rate of P118.70 a month, the first

is enclosed, defendant on May 13, 1935

payment under protest to be effected on or

issued a warrant of distraint and levy against

before July 31, 1935;

the property of the plaintiffs, a copy of

which warrant marked Exhibit I is enclosed
and made a part hereof;

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

10. That to avoid embarrassment arising

is attached and marked Exhibit L, but that

from the embargo of the property of the

defendant in his letter dated August 1, 1935

[ATTY. DIMAYUGA]
overruled the protest and denied the request

15. That in order to avoid annoyance and

for refund of the plaintiffs;

embarrassment arising from the levy of their

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;

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.

[ATTY. DIMAYUGA]
Exhibit E referred to in the stipulation is of

Legaspi ............................

the following tenor:

..............

To whom it may concern:

7. Emiliana

I, Jose Gatchalian, a resident of Pulilan,

Santiago .......................... .13

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

- Do -

8. Julio
Gatchalian ....................... .13

- Do -

.....................

and the part of may share remaining is also

9. Jose

shown to wit:

Silva ................................ .07

Purchaser

Amou Addre
nt

- Do -

......................

ss
10. Tomasa

1. Mariano
Santos .............................. P0.14
.............

Pulilan

Mercado .......................... .08

.............

Bulaca
n.

11. Jesus
Legaspi ............................ .15

2. Buenaventura

- Do -

.................

Guzman ........................... .13

- Do 12. Guillermo

....

Tapia ................................ .13

3. Maria

- Do -

...........

Santiago .......................... .17

- Do 13. Saturnina

..................

Silva ................................ .08

4. Gonzalo

- Do -

............

Javier ............................... .14

- Do 14. Gregoria

...............

Cristobal .......................... .18

5. Francisco

- Do -

.............

Cabral .............................. .13

- Do 15. Jose

............

Gatchalian .......................
6. Maria C.

- Do -

.16

- Do -

.18

- Do -

[ATTY. DIMAYUGA]
.....................

2. Gregoria
Total
cost of
2.00

said

ticket; and that, therefore, the persons named

above are entitled to the parts of whatever
prize that might be won by said ticket.

Cristobal ....... D....................... 2

.18

4,5 2,00
75

........
3. Saturnina
Silva .............. D....................... 3

.08

1,8
75

2,
57
5

1,
360

51
5

........

Pulilan, Bulacan, P.I.

4. Guillermo
(Sgd.) JOSE GATCHALIAN

Tapia ............. D-

And a summary of Exhibits D-1 to D-15 is

inserted in the bill of exceptions as follows:

INDIVIDUAL INCOME TAX RETURNS

1935 SUBMITTED TO THE COLLECTOR

Name

it
No.

chas
e
Pric
e

Gatchalian ..... D-

P0.

....................... 1

18

..............

Legaspi by
Cristobal .......

D5

Pri

ce

Expe et

....................... 6

nses

...............

on

P4,
42
5

96
5

.15

3,8
25

3,
720

10
5

6. Jose

pri
ze

Silva .............. D-

P
480

3,

....................... 7

94

........

.08

1,8
75

1,
360

.07

1,8
75

1,
360

Beatriz
Guzman .......

.13

3,1
50

51
5

8. Julio
Gatchalian by D-

51
5

7. Tomasa
Mercado ........ D-

1. Jose

360

..

OF INTERNAL REVENUE.

hib

25

......

Maria

FOR 1934 ALL DATED JANUARY 19,

Ex

.13

2,

5. Jesus

RECAPITULATIONS OF 15

Pur

....................... 4

3,3

2,
240

91
0

[ATTY. DIMAYUGA]
9. Emiliana
Santiago ........ D....................... 9

.13

3,3
25

td=""

2,
360

style

96

="fo

.......

ntsize:

10. Maria C.
Legaspi ......... D....................... 10

.16

4,1
00

960

......

3,

14px

14

textdeco
ratio

11. Francisco
Cabral ........... D....................... 11

.13

3,3
25

2,
360

96
5

....

n:
50, none
2.00 00
0

12. Gonzalo
Javier ............. D....................... 12

.14

3,3
25

360

......

color

2,

96

rgb(0

, 0,
128);
font-

13. Maria
Santiago ........ D....................... 13

.17

4,3
50

360

...........

3,

famil

99

y:

arial,
verd

14.
Buenaventura

D-

Guzman ......... 14

.13

3,3
25

2,
360

..................

....................... 15

>
The legal questions raised in plaintiffsappellants' five assigned errors may properly
be reduced to the two following: (1)

15. Mariano
Santos ........... D-

96

ana;"

.14

3,3
25

2,
360

96
5

......

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,

[ATTY. DIMAYUGA]
whereas if there was merely a community of

corporate or otherwise: Provided,

property, they are exempt from such

however, That nothing in this section shall

payment; and (2) whether they should pay

be construed as permitting the taxation of

the tax collectively or whether the latter

the income derived from dividends or net

should be prorated among them and paid

profits on which the normal tax has been

individually.

paid.

The Collector of Internal Revenue collected

The gain derived or loss sustained from the

the tax under section 10 of Act No. 2833, as

sale or other disposition by a corporation,

last amended by section 2 of Act No. 3761,

joint-stock company, partnership, joint

reading as follows:

account (cuenta en participacion),

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
corporation, joint-stock company,
partnership, joint account (cuenta en
participacion), association or insurance

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 thirtythree, as amended by Act Numbered
Twenty-nine hundred and twenty-six.

company, organized in the Philippine

The foregoing tax rate shall apply to the net

Islands, no matter how created or organized,

income received by every taxable

but not including duly registered general

corporation, joint-stock company,

copartnership (compaias colectivas), a tax

partnership, joint account (cuenta en

of three per centum upon such income; and a

participacion), association, or insurance

like tax shall be levied, assessed, collected,

company in the calendar year nineteen

and paid annually upon the total net income

hundred and twenty and in each year

received in the preceding calendar year from

thereafter.

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,

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

[ATTY. DIMAYUGA]
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

G.R. Nos. L-24020-21

July 29, 1968

prize, Jose Gatchalian personally appeared

FLORENCIO REYES and ANGEL

in the office of the Philippines Charity

REYES, petitioners,

Sweepstakes, in his capacity as co-partner,

vs.

as such collection the prize, the office issued

COMMISSIONER OF INTERNAL

the check for P50,000 in favor of Jose

REVENUE and HON. COURT OF TAX

Gatchalian and company, and the said

APPEALS, respondents.

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.
Having organized and constituted a
partnership of a civil nature, the said entity

Jose W. Diokno and Domingo Sandoval for

petitioners.
Office of the Solicitor General for
respondents.
FERNANDO, J.:

is the one bound to pay the income tax

Petitioners in this case were assessed by

which the defendant collected under the

respondent Commissioner of Internal

aforesaid section 10 (a) of Act No. 2833, as

Revenue the sum of P46,647.00 as income

amended by section 2 of Act No. 3761.

tax, surcharge and compromise for the years

There is no merit in plaintiff's contention

1951 to 1954, an assessment subsequently

that the tax should be prorated among them

reduced to P37,528.00. This assessment

and paid individually, resulting in their

sought to be reconsidered unsuccessfully

exemption from the tax.

was the subject of an appeal to respondent

In view of the foregoing, the appealed

decision is affirmed, with the costs of this
instance to the plaintiffs appellants. So
ordered.

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

[ATTY. DIMAYUGA]
matter was likewise taken to the respondent

obligations were assumed by the vendees.

Court of Tax Appeals. The two

The initial payment of P375,000.00 was

cases1 involving as they did identical issues

shared equally by petitioners. At the time of

and ultimately traceable to facts similar in

the purchase, the building was leased to

character were heard jointly with only one

various tenants, whose rights under the lease

decision being rendered.

contracts with the original owners, the

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
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 Dasmarias 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

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 copartnerships (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.

[ATTY. DIMAYUGA]
Collector of Internal Revenue,8 sustained

contribute money, property or industry to a

the action of respondent Commissioner of

common fund; and (b) intent to divide the

Internal Revenue, but reduced the tax

profits among the contracting parties. The

liability of petitioners, as previously noted.

first element is undoubtedly present in the

Petitioners maintain the view that the

Evangelista ruling does not apply; for them,
the situation is
dissimilar.1wph1.tConsequently 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

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

Appeals did fails to find shelter in the law.

In support of the above conclusion,

That is the crux of the matter. A perusal of

reference was made to the following

the Evangelista decision is therefore

circumstances, namely, the common fund

unavoidable.

being created purposely not something

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

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

[ATTY. DIMAYUGA]
continued existence."11 The conclusion that

slight significance do not call for a different

emerged had all the imprint of inevitability.

ruling.

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 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

It may be said that there could be a

binding character. There is clearly no merit

differentiation made between the

to the second error assigned by petitioners,

circumstances above detailed and those

who would deny its applicability to their

existing in the present case. It does not

situation.

suffice though to preclude the applicability

of the Evangelista decision. Petitioners
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

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.

petitioners filed on October 20, 1965, almost

This is the way it was disposed of in the

15 years later, there was no allegation that

opinion of the present Chief Justice: "This

such division as between them was in fact

pretense was correctly rejected by the Court

made. Moreover, the facts as found and as

of Tax Appeals."14 Then came the

submitted in the brief made clear that the

explanation why: "To begin with, the tax in

building in question continued to be leased

question is one imposed upon

by other parties with petitioners dividing

"corporations", which, strictly speaking, are

"equally the income ... after deducting the

distinct and different from "partnerships".

expenses of operation and

When our Internal Revenue Code includes

maintenance ..."13 Differences of such

[ATTY. DIMAYUGA]
"partnerships" among the entities subject to

"corporation"."15 The opinion went on to

the tax on "corporations", said Code must

summarize the matter aptly: "For purposes

allude, therefore, to organizations which

of the tax on corporations, our National

are not necessarily "partnerships", in the

Internal Revenue Code, include these

technical sense of the term. Thus, for

partnerships with the exception only of

instance, section 24 of said

duly registered general co-partnerships

Code exempts from the aforementioned tax

within the purview of the term

"duly registered general partnerships",

"corporation." It is, therefore, clear to our

which constitute precisely one of the most

mind that petitioners herein constitute a

typical forms of partnerships in this

partnership, insofar as said Code is

jurisdiction. Likewise, as defined in section

concerned, and are subject to the income tax

84(b) of said Code, "the term corporation

for corporations."16

includes partnerships, no matter how created

or organized." This qualifying expression
clearly indicates that a joint venture need not
be undertaken in any of the standard forms,
or in conformity with the usual requirements
of the law on partnerships, in order that one
could be deemed constituted for purposes of
the tax on corporations. Again, pursuant to
said section 84(b), the term "corporation"
includes, among 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

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."

[ATTY. DIMAYUGA]
WHEREFORE, the decision of the

BERNARDA

respondent Court of Tax Appeals ordering

CAMPOREDONDO, plaintiff-appellee,

petitioners "to pay the sums of P37,128.00

vs.

as income tax due from the partnership

ADOLFO CRUZ AZNAR, as Executor of

formed by herein petitioners for the years

the Deceased EDWARD E.

1951 to 1954 and P20,619.00 for the years

CHRISTENSEN, defendant-appellant.

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.

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

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, petitionersappellants,
vs.
MARIA HELEN CHRISTENSEN GARCIA
and BERNARDA
CAMPOREDONDO, oppositors-appellees.

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

[ATTY. DIMAYUGA]
over 30 years until the death of Christensen

she was baptized Christensen, is not in any

occurecd on April 30, 1953. Out of said

way related to me, nor hasshe been at any

relations, 2 children, Lucy and Helen

time adopted to me, and who, from all

Christensen, were allegedly born.

information I have now resides in Egipt,

Digos, Davao, Philippines, the sum of

G. R. NO. L-11484.

THREEE THOUSAND SIXHUNDRED

Upon the demise of the American, who had

PESOS (P3,600) Philippine Currency, the

left a considerable amount of properties his

same to be deposited in trustfor said Maria

will naming Adolfo Cruz Aznar as executor

Lucy Christensen with the Davao Branch of

was duly presented for probate in court and

the PhilippineNational Bank, and paid to her

became the subject of Special Proceedings

at the rate of One Hundred Pesos (P100),

No. 622 of the Court of First Instance of

Philippine Currency per month until the the

Davao. Said will contains, among others, the

principal thereof as well as any interest

following provisions:

which may have accrued thereon, is

xxx

xxx

xxx.

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.

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

4. I further declare that I have no living

my well-beloved daughter, the said MARIA

ascendants, andno descendantsexcept my

Lucy CHRISTENSEN DANEY (Mrs.

above named daughter, MARIA LUCY

Bernard Daney), now residing as aforesaid

CHRISTENSEN DANEY.

at No. 665 Rodger Young Village Los

xxx

xxx

xxx.

Angeles, California, U.S.A., all the income

from the rest, remainder, and residue of my

7. I give, devise and bequeath unto MARIA

property and estate, real, personal and/or

LUCY CHRISTENSEN, now married

mixed, of whatsoever kind or character,

toEduardo Garcia, about eighteen years of

andwheresover situated; of which I may be

age and who, notwithstanding the factthat

possessed at any death and which mayhave

[ATTY. DIMAYUGA]
come to me from any source whatsoever,

Garcia and Bernarda Camporendondo, the

during her lifetime,Provided, honvever, that

first contending that thewill lacked the

should the said MARIA LUCY

formalities required by law; that granting

CHRISTENSEN DANEY at any time prior

that he had, thedispositions made therein

to her decease having living issue, then, and

were illegal because although she and Lucy

in that event, the life interest herein given

Christensen were both children had by the

shall terminate, and if so terminated, then I

deceased with Bernarda Camporendondo,

give, devise, and bequeath to my said

yet she was given only a meager sum of

daughter, the said MARIA LUCY

P3,600 out of an estate valued at $485,000

CHRISTENSEN DANEY, the rest

while Lucy would get the rest of the

remainder and residue of my property, with

properties;and that the petitioner Adolfo

the same force and effectas if I had

Cruz Aznar was not qualified to be

originally so given, devised and

appointed as administrator of the estate

bequeathedit to her; and provided, further,

because he had an interest adverse to thatof

that should be said Maria Lucy

the estate. It was therefore prayed by his

ChristensenDaney die without living issue

oppositor that the application for probate be

then, and in that event, I give, devise and

denied and the will disallowed; that the

bequeath all the rest, remainder and residue

proceeding be declared intestate and that

of my property, one-half (1/2) to my well-

another disinterested person be appointed as

beloved sister, Mrs. CARRIE LOIUSE C.

administrator.

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, . . .

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

13. I hereby nominate and appoint Mr

husband andwife continuously for a period

Adolfo Cruz Aznar, of Davao City,

of over 30 years, the properties acquired

Philippines, my executor, and the executor

during such cohabitation should be governed

of this, my last will and testament.

by the rules on co-ownership. This

opposition was dismissed by the probate

. . . (Exh. A).

court on the ground that shehad no right to

Oppositions to the probate of this will were

intervene in said proceeding, for as such

separately filed by Maria Helen Christensen

common-law wife she had no successional

right that might be affected by the probate of

[ATTY. DIMAYUGA]
thewill, and likewise, she could not be

Bernarda Camporedondo. This motion was

allowed to establish her title and co-

opposed jointly by the executor and Maria

ownership over the properties therein for

Lucy Christensen Daney asserting that

such questions must be ventilated in a court

before, during and after the conception and

of general jurisdiction. In view of this ruling

birth of Helen Christensen Garcia, her

of the Court and in order to attain the

mother was generally known to be carrying

purpose sought by her overruled opposition

relations with 3 different men; that during

Bernarda Camporedondo had to institute, as

the lifetime of the decedent and even years

she did institute Civil Case No. 1076 of the

before his death, Edward Christensen

Court of First Instance of Davao (G.R. No.

verbally as well as in writing disavowed

L-11483) which we will consider and

relationship with said oppositor; that

discuss hereinafter.

oppositor appropriated and used the surname

In the meantime, Adolfo Cruz Aznar was

appointed special adminsitrator of the estate
after filing a bond for P5,000 pending the
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

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

[ATTY. DIMAYUGA]
oppositor as a natural child of Edward E.

can be no question as to Lucy's parentage,

Christensen. Thewill was, however, allowed

but controversy arose when Edward

the letters testamentary consequently issued

Christensen, in making his last will and

toAdolfo Cruz Aznar, the executor named

testament, disavowed such paternity to

therein. From the portion of the decision

Helen and gave her only a legacy of P3,600.

requiring Lucy Christensen to acknowledge

ln the course of the proceeding for the

Helen as a natural child of the testator, the

probate of the will (Exh, A), Helen

former and the executor interposed an

introduced documentary and testimonial

appeal to the Court of Appeals (CA-G. R.

evidence to support her claim that she,

No. 13421-R), but the appellate tribunal

Lucy,was a natural child of the deceased

elevatedthe same to Us on the ground that

and, therefore, entitled to the hereditaryshare

the case involves an estate the value of

corresponding to such descendant. Several

which far exceeds P50,000.00 and thus falls

witness testified in herfavor, including the

within the exclusive appellate jurisdiction of

mother Bernarda Camporendondo, her

this Court pursuant to Section 17 (5),

former teachers andother residents of the

Republic Act No. 296.

community, tending to prove that she was

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

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.

the decedent, to acknowledge the former

Lucy Christensen and Adolfo Cruz Aznar, as

assuch natural child.

executor, tried to repudiate herclaim by

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

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

[ATTY. DIMAYUGA]
defendant's solicitations for Helen's welfare

or disputed Helen's paternity. Hisrepudations

and the help extended to her merely sprang

of her relationship with him came about

out generosity and hammered on the fact

only after he andBernarda Comperodondo

that on several occasions, the deceased

parted ways in March, 1950, and apparently

disclaimed any relationship with her (Exh.

after Helentook sides with her mother.

O-Daney, Exh. Q-Daney, Exh. Z-Daney,

Furthermore, it seems that despite that

Exh. 8-Helen).

decedent's desire that she continue her

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
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

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

[ATTY. DIMAYUGA]
predeceases the claimant, and not a single

deceased without a properprovision of the

opportunity or an isolated occasions but as a

law, for as it now stands, the Civil Code

whole, must be taken into account. The

only requires a declaration by the court of

possession of such status is one of the cases

the child's status as a natural child of the

that gives rise to the right, in favor of the

parent who, if living, would be compelled to

child, of coumpulsaryrecognition. (Art. 283,

recognize his offspring as such.Therefore,

Civil Code).

We hold that in cases of compulsory

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
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

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 coowner 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

[ATTY. DIMAYUGA]
through their common effort and industry;

ofP70.000.00 representing actual, moral and

and that in virtue of such relationship, she

exemplary damages.

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
as they were acquired through his own
efforts; thatplaintiff had never been a coowner 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

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.

rights of the compulsory heirs of the

It is not controverted that at the time of his

deceased would be impaired. Defendant thus

death, Edward Christensen was the owner of

prayed for the dismissal of the complaint

certain properties, including shares of stock

and as counterclaim demanded the sum

in the plantation bearing his name and a

general merchandising store in Davao City.

[ATTY. DIMAYUGA]
It is also undeniable that the deceased and

entitledto one-half thereof after the latter's

appellee, both capacitated to enter into the

death.

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

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:

testimonies of both Lucy and Helen

ART. 114. When a man and a woman live

Christensen to the effect that the deceased

together as husband and wife, but they are

and their mother Bernarda Camporendondo

not married, or their marriage is void from

had some sort of quarrel or

the beginning, the property acquired by

misunderstanding and parted ways as of

either or both of them through their work or

March, 1950, a fact which appelleewas not

industry or their wages and salaries shall be

able to overcome. Taking into account the

governed by the rules of co-ownership.

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

It must be noted that such form of coownership 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

[ATTY. DIMAYUGA]
of law declared void ab intio. While it is true

case, this Court similarly held that although

that these requisites are fully met and

there is no technical marital partnership

satisfied in the case at bar, We must

between person living maritally without

remember that the deceased and herein

being lawfully married, nevertheless there is

appellee were already estranged as of

between them an informalcivil partnership,

March, 1950. There being no provision of

and the parties would be entitled to an equal

law governing the cessation of such informal

interest where the property is acquired

civil partnership, if ever existed, same may

through their JOINT efforts (Lesaca vs.

be considered terminated upon their

FelixVda. de Lesaca, 91 Phil., 135).

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.

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

In determining the question poised by this

remembersimple things as the date when she

action We may look upon the jurisprudence

arrived at the Mindanao Estate, when

then obtaining on the matter. As early as

shecommenced relationship with the

1925, this Court already declared that where

deceased, not even her approximate age

a man and a woman, not suffering from any

orthat of her children. And considering that

impediment to contract marriage, live

aside from her own declaration, which We

together as husband and wife, an informal

find to be highly improbable, there appears

civil partnership exists and made the

no evidence to proveher alleged contribution

pronouncement that each of them has an

or participation in the acquisition of the

intereat in the properties acquired during

properties involved therein, and that in view

said union and is entitled to participate

of the holding of this Courtthat for a claim

therein if said properties were the product

to one-half of such property to be allowed it

oftheir JOINT efforts (Marata vs. Dionio

must be provedthat the same was acquired

G.R. No. 24449, Dec. 31, 1925). In another

through their joint efforts and labor (Flores

[ATTY. DIMAYUGA]
vs.Rehabilitation Finance Corporation, * 50

With regard to appellant Aznar's contention

Off. Gaz. 1029), We have no recoursebut

that the lower Court erred in admitting the

reverse the holding of the lower Court and

testimony of appellee Bernarda

deny the claim of BernardaCampredondo.

Camporedondo dealing with facts that

We may further state that even granting, for

transpired before the death of Edward

the sake ofargument, that this case falls

Christensen on the ground that it is

under the provisions of Article 144 of

prohibited by Section 26-(c), Rule 123 of

theCivil Code, same would be applicable

the Rules of Court. We deem it unnecessary

only as far as properties acquiredafter the

to delve on the same because even admitting

effectivity of Republic Act 386 are

that the court a quo committed the error

concerned and to no other, forsuch law

assigned, yet it will not affect anymore the

cannot be given retroactive effect to govern

outcome of the case in view of the

those already possessedbefore August 30,

conclusion We have already arrived at on the

1950. It may be argued, however, that being

main issue.

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:

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

SEC. 2252. Changes made and new

acknowledge her sister Maria Helen

provisions and rules laid down by this Code

Christensen Garcia as a natural child of her

which may prejudice or impair vested or

father Edward E. Christensen, the

acquired rights in accordance with the old

declaration of the Court in this respect being

legislation, shall have ro retroactive effect.

sufficient to enable her to all the rights

xxx

xxx

xxx.

As it cannot be denied that the rights and

legitimes of the compulsory heirsof the
deceased Edward Christensen would be

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.

impaired or diminished if the claim of herein

Costs are taxed against appellants in G.R.

appellee would succeed, the answer to such

No. L-11484 and against appellee Bernarda

argument wouldbe simply obvious.

Camporedondo in G.R. No. L-11483. It is so

ordered.

[ATTY. DIMAYUGA]
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
EN BANC
G.R. No. L-2484 April 11, 1906

pesos mentioned in the complaint, and

intereat thereon. The total judgment
rendered against the defendants in favor of
the plaintiff, reduced to Philippine currency,

JOHN FORTIS,Plaintiff-Appellee,
vs. GUTIERREZ HERMANOS,DefendantsAppellants.

amounted to P13,025.40. The defendants

moved for a new trial, which was denied,
and they have brought the case here by bill

Hartigan, Rohde and Gutierrez, for

of

appellants.

exceptions.chanroblesvirtualawlibrary chanr

W. A. Kincaid, for appellee.

obles virtual law library

WILLARD, J.:

(1) The evidence is sufifcient to support the

finding of the court below to the effect that

Plaintiff, an employee of defendants during

the plaintiff worked for the defendants

the years 1900, 1901, and 1902, brought this

during the year 1902 under a contract by

action to recover a balance due him as salary

which he was to receive as compensation 5

for the year 1902. He alleged that he was

per cent of the net profits of the business.

entitled, as salary, to 5 per cent of the net

The contract was made on the part of the

profits of the business of the defendants for

defendants by Miguel Alonzo Gutierrez. By

said year. The complaint also contained a

the provisions of the articles of partnership

cause of action for the sum of 600 pesos,

he was made one of the managers of the

money expended by plaintiff for the

company, with full power to transact all of

defendants during the year 1903. The court

the business thereof. As such manager he

below, in its judgment, found that the

had authority to make a contract of

contract had been made as claimed by the

employment with the

plaintiff; that 5 per cent of the net profits of

plaintiff.chanroblesvirtualawlibrary chanrobl

the business for the year 1902 amounted to

es virtual law library

26,378.68 pesos, Mexican currency; that the

[ATTY. DIMAYUGA]
(2) Before answering in the court below, the

the expenses had been paid. A part of the

defendants presented a motion that the

expenses to be paid for the year 1902 was

complaint be made more definite and

the salary of the plaintiff. That salary had to

certain. This motion was denied. To the

be deducted before the net profits of the

order denying it the defendants excepted,

business, which were to be divided among

and they have assigned as error such ruling

the partners, could be ascertained. It was

of the court below. There is nothing in the

undoubtedly necessary in order to determine

record to show that the defendants were in

what the salary of the plaintiff was, to

any way prejudiced by this ruling of the

determine what the profits of the business

court below. If it were error it was error

were, after paying all of the expenses except

without prejudice, and not ground for

his, but that determination was not the final

reversal. (Sec. 503, Code of Civil

determination of the net profits of the

Procedure.)chanrobles virtual law library

business. It was made for the purpose of

(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

fixing the basis upon which his

compensation should be
determined.chanroblesvirtualawlibrary chanr
obles virtual law library

contention can not bo sustained. It was a

(4) It was no necessary that the contract

mere contract of employnent. The plaintiff

between the plaintiff and the defendants

had no voice nor vote in the management of

should be made in writing. (Thunga Chui vs.

the affairs of the company. The fact that the

Que Bentec, 1 1 Off. Gaz., 818, October 8,

compensation received by him was to be

1903.)chanrobles virtual law library

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

(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

[ATTY. DIMAYUGA]
matter of fact occurring before the death of

evidence. The case already made by the

such deceased person. This action was not

plaintiff was in itself sufficient to prove the

brought against the administrator of Miguel

contract without reference to this letter. The

Alonzo, nor was it brought upon a claim

error, if any there were, was not prejudicial,

against his estate. It was brought against a

and is not ground for revesal. (Sec. 503,

partnership which was in existence at the

Code of Civil Procedure.)chanrobles virtual

time of the trial of the action, and which was

law library

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
business. This evidence was competent for

(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 purpose of corroborating the testimony

The defendant presented as a witness on, the

of the plaintiff as to the existence of the

subject of profits Miguel Gutierrez, one of

contract set out in the

the defendants, who testiffied, among other

complaint.chanroblesvirtualawlibrarychanro

things, that there were no profits during the

bles virtual law library

year 1902, but, on the contrary, that the

(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

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

[ATTY. DIMAYUGA]
(9) In reference to the cause of action

not claimed as compensation for services but

relating to the 600 pesos, it appears that the

as a reimbursment for money expended by

plaintiff left the employ of the defendants on

the plaintiff in the business of the

the 19th of Macrh, 1903; that at their request

defendants. The article of the code that is

he went to Hongkong, and was there for

applicable is article

about two months looking after the business

1728.chanroblesvirtualawlibrary chanrobles

of the defendants in the matter of the repair

virtual law library

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

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.