Professional Documents
Culture Documents
in the document. Therefore, the Court of Appeals did not err in limiting
petitioners share to the assets of the businesses enumerated in the
Acknowledgement of Participating Capital.
In Villareal v. Ramirez, the Court held that since a partnership is a separate
juridical entity, the shares to be paid out to the partners is necessarily
limited only to its total resources.
CIVIL LAW- express and implied trust
The petitioner further asserts that he is entitled to respondents properties
based on the concept of trust. He claims that since the subject real
properties were purchased using funds of the partnership, wherein he has a
6% share, then "law and equity mandates that he should be considered as a
co-owner of those properties in such proportion."
As a rule, the burden of proving the existence of a trust is on the party
asserting its existence, and such proof must be clear and satisfactorily show
the existence of the trust and its elements. While implied trusts may be
proved by oral evidence, the evidence must be trustworthy and received by
the courts with extreme caution, and should not be made to rest on loose,
equivocal or indefinite declarations. Trustworthy evidence is required
because oral evidence can easily be fabricated.
The petitioner has failed to prove that there exists a trust over the subject
real properties. Aside from his bare allegations, he has failed to show that
the respondents used the partnerships money to purchase the said
properties. Even assuming arguendo that some partnership income was used
to acquire these properties, the petitioner should have successfully shown
that these funds came from his share in the partnership profits. After all, by
his own admission, and as stated in the Acknowledgement of Participating
Capital, he owned a mere 6% equity in the partnership.
DENIED.
- Heirs of Jose Lim vs. Juliet Villa Lim, 614 SCRA 141 (2010)
FACTS:
Petitioners are the heirs of the late Jose Lim (Jose), namely: Jose's
widow Cresencia Palad (Cresencia); and their children Elenito, Evelia, Imelda,
Edelyna and Edison, all surnamed Lim (petitioners), represented by Elenito
Lim (Elenito). They filed a Complaint for Partition, Accounting and Damages
against respondent Juliet Villa Lim (respondent), widow of the late Elfledo Lim
(Elfledo), who was the eldest son of Jose and Cresencia.
Petitioners alleged that Jose was the liaison officer of Interwood Sawmill in
Cagsiay, Mauban, Quezon. Sometime in 1980, Jose, together with his friends
Jimmy Yu (Jimmy) and Norberto Uy (Norberto), formed a partnership to
engage in the trucking business. Initially, with a contribution of P50,000.00
each, they purchased a truck to be used in the hauling and transport of
lumber of the sawmill. Jose managed the operations of this trucking business
until his death on August 15, 1981. Thereafter, Jose's heirs, including Elfledo,
and partners agreed to continue the business under the management of
Elfledo. The shares in the partnership profits and income that formed part of
the estate of Jose were held in trust by Elfledo, with petitioners' authority for
Elfledo to use, purchase or acquire properties using said funds.
Petitioners also alleged that, at that time, Elfledo was a fresh commerce
graduate serving as his fathers driver in the trucking business. He was never
a partner or an investor in the business and merely supervised the purchase
of additional trucks using the income from the trucking business of the
partners. By the time the partnership ceased, it had nine trucks, which were
all registered in Elfledo's name. Petitioners asseverated that it was also
through Elfledos management of the partnership that he was able to
purchase numerous real properties by using the profits derived therefrom, all
of which were registered in his name and that of respondent. In addition to
the nine trucks, Elfledo also acquired five other motor vehicles.
On May 18, 1995, Elfledo died, leaving respondent as his sole surviving heir.
Petitioners claimed that respondent took over the administration of the
aforementioned properties, which belonged to the estate of Jose, without
their consent and approval. Claiming that they are co-owners of the
properties, petitioners required respondent to submit an accounting of all
income, profits and rentals received from the estate of Elfledo, and to
surrender the administration thereof. Respondent refused; thus, the filing of
this case.
Respondent traversed petitioners' allegations and claimed that Elfledo was
himself a partner of Norberto and Jimmy. Respondent also claimed that per
testimony of Cresencia, sometime in 1980, Jose gave Elfledo P50,000.00 as
the latter's capital in an informal partnership with Jimmy and Norberto. When
Elfledo and respondent got married in 1981, the partnership only had one
truck; but through the efforts of Elfledo, the business flourished. Other than
this trucking business, Elfledo, together with respondent, engaged in other
business ventures. Thus, they were able to buy real properties and to put up
their own car assembly and repair business. When Norberto was ambushed
and killed on July 16, 1993, the trucking business started to falter. When
Elfledo died on May 18, 1995 due to a heart attack, respondent talked to
Jimmy and to the heirs of Norberto, as she could no longer run the business.
Jimmy suggested that three out of the nine trucks be given to him as his
share, while the other three trucks be given to the heirs of Norberto.
However, Norberto's wife, Paquita Uy, was not interested in the vehicles.
Thus, she sold the same to respondent, who paid for them in installments.
Respondent also alleged that when Jose died in 1981, he left no known
assets, and the partnership with Jimmy and Norberto ceased upon his
demise. Respondent also stressed that Jose left no properties that Elfledo
could have held in trust. Respondent maintained that all the properties
involved in this case were purchased and acquired through her and her
husbands joint efforts and hard work, and without any participation or
contribution from petitioners or from Jose. Respondent submitted that these
are conjugal partnership properties; and thus, she had the right to refuse to
render an accounting for the income or profits of their own business.
On April 12, 2004, the RTC rendered its decision in favor of petitioners.
On June 29, 2005, the CA reversed and set aside the RTC's decision,
dismissing petitioners' complaint for lack of merit. Undaunted, petitioners
filed their Motion for Reconsideration, which the CA, however, denied in its
Resolution dated May 8, 2006. Hence, this petition.
ISSUE:
Whether or not Jose Lim or Elfledo is the partner in the trucking
business
HELD:
The partner is Elfledo Lim based on the evidence presented regardless
of Jimmy Yus testimony in court that Jose Lim was the partner. If Jose Lim
was the partner, then the partnership would have been dissolved upon his
death (in fact, though the SC did not say so, I believe it should have been
dissolved upon Norbertos death in 1993). A partnership is dissolved upon
the death of the partner. Further, no evidence was presented as to the
articles of partnership or contract of partnership between Jose, Norberto and
Jimmy. Unfortunately, there is none in this case, because the alleged
partnership was never formally organized.
A partnership exists when two or more persons agree to place their
money, effects, labor, and skill in lawful commerce or business, with the
understanding that there shall be a proportionate sharing of the profits and
losses among them. A contract of partnership is defined by the Civil Code as
one where two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the
profits among themselves.
Undoubtedly, the best evidence would have been the contract of partnership
MANAGEMENT of the STO. NINO MINE. The said ELEVEN MILLION PESOS
(P11,000,000.00) shall be deemed, for internal audit purposes, as the
owners account in the Sto. Nino PROJECT. Any part of any income of the
PRINCIPAL from the STO. NINO MINE, which is left with the Sto. Nino PROJECT,
shall be added to such owners account.
5. Whenever the MANAGERS shall deem it necessary and convenient in
connection with the MANAGEMENT of the STO. NINO MINE, they may transfer
their own funds or property to the Sto. Nino PROJECT, in accordance with the
following arrangements:
(a) The properties shall be appraised and, together with the cash, shall be
carried by the Sto. Nino PROJECT as a special fund to be known as the
MANAGERS account.
(b) The total of the MANAGERS account shall not exceed P11,000,000.00,
except with prior approval of the PRINCIPAL; provided, however, that if the
compensation of the MANAGERS as herein provided cannot be paid in cash
from the Sto. Nino PROJECT, the amount not so paid in cash shall be added to
the MANAGERS account.
(c) The cash and property shall not thereafter be withdrawn from the Sto.
Nino PROJECT until termination of this Agency.
(d) The MANAGERS account shall not accrue interest. Since it is the desire of
the PRINCIPAL to extend to the MANAGERS the benefit of subsequent
appreciation of property, upon a projected termination of this Agency, the
ratio which the MANAGERS account has to the owners account will be
determined, and the corresponding proportion of the entire assets of the
STO. NINO MINE, excluding the claims, shall be transferred to the MANAGERS,
except that such transferred assets shall not include mine development,
roads, buildings, and similar property which will be valueless, or of slight
value, to the MANAGERS. The MANAGERS can, on the other hand, require at
their option that property originally transferred by them to the Sto. Nino
PROJECT be re-transferred to them. Until such assets are transferred to the
MANAGERS, this Agency shall remain subsisting.
xxxx
12. The compensation of the MANAGER shall be fifty per cent (50%) of the
net profit of the Sto. Nino PROJECT before income tax. It is understood that
the MANAGERS shall pay income tax on their compensation, while the
PRINCIPAL shall pay income tax on the net profit of the Sto. Nino PROJECT
after deduction therefrom of the MANAGERS compensation.
xxxx
16. The PRINCIPAL has current pecuniary obligation in favor of the
MANAGERS and, in the future, may incur other obligations in favor of the
MANAGERS. This Power of Attorney has been executed as security for the
payment and satisfaction of all such obligations of the PRINCIPAL in favor of
the MANAGERS and as a means to fulfill the same. Therefore, this Agency
shall be irrevocable while any obligation of the PRINCIPAL in favor of the
MANAGERS is outstanding, inclusive of the MANAGERS account. After all
obligations of the PRINCIPAL in favor of the MANAGERS have been paid and
satisfied in full, this Agency shall be revocable by the PRINCIPAL upon 36month notice to the MANAGERS.
allowed since all requisites for a bad debt deduction were satisfied, to wit: (a)
there was a valid and existing debt; (b) the debt was ascertained to be
worthless; and (c) it was charged off within the taxable year when it was
determined to be worthless.
Petitioner emphasized that the debt arose out of a valid management
contract it entered into with Baguio Gold. The bad debt deduction
represented advances made by petitioner which, pursuant to the
management contract, formed part of Baguio Golds "pecuniary obligations"
to petitioner. It also included payments made by petitioner as guarantor of
Baguio Golds long-term loans which legally entitled petitioner to be
subrogated to the rights of the original creditor.
Petitioner also asserted that due to Baguio Golds irreversible losses, it
became evident that it would not be able to recover the advances and
payments it had made in behalf of Baguio Gold. For a debt to be considered
worthless, petitioner claimed that it was neither required to institute a
judicial action for collection against the debtor nor to sell or dispose of
collateral assets in satisfaction of the debt. It is enough that a taxpayer
exerted diligent efforts to enforce collection and exhausted all reasonable
means to collect.
On October 28, 1994, the BIR denied petitioners protest for lack of
legal and factual basis. It held that the alleged debt was not ascertained to
be worthless since Baguio Gold remained existing and had not filed a petition
for bankruptcy; and that the deduction did not consist of a valid and
subsisting debt considering that, under the management contract, petitioner
was to be paid fifty percent (50%) of the projects net profit.10
Petitioner appealed before the Court of Tax Appeals (CTA) which rendered
judgment, as follows:
WHEREFORE, in view of the foregoing, the instant Petition for Review is
hereby DENIED for lack of merit. The assessment in question, viz: FAS-1-8288-003067 for deficiency income tax in the amount of P62,811,161.39 is
hereby AFFIRMED.
ACCORDINGLY, petitioner Philex Mining Corporation is hereby ORDERED to
PAY respondent Commissioner of Internal Revenue the amount of
P62,811,161.39, plus, 20% delinquency interest due computed from
February 10, 1995, which is the date after the 20-day grace period given by
the respondent within which petitioner has to pay the deficiency amount x x
x up to actual date of payment.
SO ORDERED.11
The CTA rejected petitioners assertion that the advances it made for
the Sto. Nino mine were in the nature of a loan. It instead characterized the
advances as petitioners investment in a partnership with Baguio Gold for the
development and exploitation of the Sto. Nino mine. The CTA held that the
"Power of Attorney" executed by petitioner and Baguio Gold was actually a
partnership agreement. Since the advanced amount partook of the nature of
an investment, it could not be deducted as a bad debt from petitioners gross
income.
The CTA likewise held that the amount paid by petitioner for the longterm loan obligations of Baguio Gold could not be allowed as a bad debt
deduction. At the time the payments were made, Baguio Gold was not in
default since its loans were not yet due and demandable. What petitioner did
was to pre-pay the loans as evidenced by the notice sent by Bank of America
showing that it was merely demanding payment of the installment and
interests due. Moreover, Citibank imposed and collected a "pre-termination
penalty" for the pre-payment.
The Court of Appeals affirmed the decision of the CTA.12
ISSUE:
Whether or not the Court of Appeals erred in ruling that the 50%-50%
sharing in the net profits of the Sto. Nino Mine indicates that Philex is a
partner of Baguio Gold in the development of the Sto. Nino Mine
notwithstanding the clear absence of any intent on the part of Philex and
Baguio Gold to form a partnership.
HELD:
The lower courts correctly held that the "Power of Attorney" is the
instrument that is material in determining the true nature of the business
relationship between petitioner and Baguio Gold. Before resort may be had
to the two compromise agreements, the parties contractual intent must first
be discovered from the expressed language of the primary contract under
which the parties business relations were founded. It should be noted that
the compromise agreements were mere collateral documents executed by
the parties pursuant to the termination of their business relationship created
under the "Power of Attorney". On the other hand, it is the latter which
established the juridical relation of the parties and defined the parameters of
their dealings with one another.
The execution of the two compromise agreements can hardly be considered
as a subsequent or contemporaneous act that is reflective of the parties true
intent. The compromise agreements were executed eleven years after the
"Power of Attorney" and merely laid out a plan or procedure by which
petitioner could recover the advances and payments it made under the
"Power of Attorney". The parties entered into the compromise agreements as
a consequence of the dissolution of their business relationship. It did not
define that relationship or indicate its real character.
An examination of the "Power of Attorney" reveals that a partnership or joint
venture was indeed intended by the parties. Under a contract of partnership,
two or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the profits among
themselves.15 While a corporation, like petitioner, cannot generally enter into
a contract of partnership unless authorized by law or its charter, it has been
held that it may enter into a joint venture which is akin to a particular
partnership:
The legal concept of a joint venture is of common law origin. It has no precise
legal definition, but it has been generally understood to mean an
organization formed for some temporary purpose. x x x It is in fact hardly
distinguishable from the partnership, since their elements are similar
community of interest in the business, sharing of profits and losses, and a
mutual right of control. x x x The main distinction cited by most opinions in
common law jurisdictions is that the partnership contemplates a general
business with some degree of continuity, while the joint venture is formed for
the execution of a single transaction, and is thus of a temporary nature. x x x
This observation is not entirely accurate in this jurisdiction, since under the
Civil Code, a partnership may be particular or universal, and a particular
partnership may have for its object a specific undertaking. x x x It would
seem therefore that under Philippine law, a joint venture is a form of
partnership and should be governed by the law of partnerships. The Supreme
Court has however recognized a distinction between these two business
forms, and has held that although a corporation cannot enter into a
partnership contract, it may however engage in a joint venture with others. x
x x (Citations omitted) 16
Perusal of the agreement denominated as the "Power of Attorney" indicates
that the parties had intended to create a partnership and establish a
common fund for the purpose. They also had a joint interest in the profits of
the business as shown by a 50-50 sharing in the income of the mine.
Under the "Power of Attorney", petitioner and Baguio Gold undertook to
contribute money, property and industry to the common fund known as the
Sto. Nio mine.17 In this regard, we note that there is a substantive
equivalence in the respective contributions of the parties to the development
and operation of the mine. Pursuant to paragraphs 4 and 5 of the agreement,
petitioner and Baguio Gold were to contribute equally to the joint venture
assets under their respective accounts. Baguio Gold would contribute P11M
under its owners account plus any of its income that is left in the project, in
addition to its actual mining claim. Meanwhile, petitioners contribution
Baguio Golds creditors, we find no reason to depart from the tax courts
factual finding that Baguio Golds debts were not yet due and demandable at
the time that petitioner paid the same. Verily, petitioner pre-paid Baguio
Golds outstanding loans to its bank creditors and this conclusion is
supported by the evidence on record.26
In sum, petitioner cannot claim the advances as a bad debt deduction from
its gross income. Deductions for income tax purposes partake of the nature
of tax exemptions and are strictly construed against the taxpayer, who must
prove by convincing evidence that he is entitled to the deduction claimed. 27
In this case, petitioner failed to substantiate its assertion that the advances
were subsisting debts of Baguio Gold that could be deducted from its gross
income. Consequently, it could not claim the advances as a valid bad debt
deduction.
loan releases.
During the pre-trial, the parties narrowed the issues to the following
points: whether [respondents] were employees or partners of [petitioner],
whether [petitioner] entrusted money to [respondents] for delivery to
Gragera, whether the P1,555,068.70 claimed under the complaint was
actually remitted to Gragera and whether [respondents] were entitled to
their counterclaim for share in the profits.
The trial court as well as the Court of Appeals ruled against Santos and
ordered the latter to pay the shares of the spouses
ISSUE:
Whether or not the parties relationship was one of partnership or of
employer-employee
HELD:
Partnership.
We agree with both courts on this point. By the contract of partnership,
two or more persons bind themselves to contribute money, property or
industry to a common fund, with the intention of dividing the profits among
themselves. The Articles of Agreement stipulated that the signatories shall
share the profits of the business in a 70-15-15 manner, with petitioner
getting the lions share. stipulation clearly proved the establishment of a
partnership.
We find no cogent reason to disagree with the lower courts that the
partnership continued lending money to the members of the Monte Maria
Community Development Group, Inc., which later on changed its business
name to Private Association for Community Development, Inc. (PACDI).
Nieves was not merely petitioners employee. She discharged her
bookkeeping duties in accordance with paragraphs 2 and 3 of the
Agreement, which states as follows:
2. That the SECOND PARTY and THIRD PARTY shall handle the
solicitation and screening of prospective borrowers, and shall x x x
each be responsible in handling the collection of the loan payments of
the borrowers that they each solicited.
3. That the bookkeeping and daily balancing of account of the business
operation shall be handled by the SECOND PARTY.
The Second Party named in the Agreement was none other than Nieves
(4) two percent (2%) for her demonstration services. The agreement was not
reduced to writing on the strength of Belo's assurances that he was sincere,
dependable and honest when it came to financial commitments.
On October 9, 1987, Anay learned that Marjorie Tocao had signed a
letter addressed to the Cubao sales office to the effect that she was no
longer the vice-president of Geminesse Enterprise.
Anay attempted to contact Belo. She wrote him twice to demand her
overriding commission for the period of January 8, 1988 to February 5, 1988
and the audit of the company to determine her share in the net profits.
Anay still received her five percent (5%) overriding commission up to
December 1987. The following year, 1988, she did not receive the same
commission although the company netted a gross sales of P 13,300,360.00.
On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a
complaint for sum of money with damages against Marjorie D. Tocao and
William Belo before the Regional Trial Court of Makati, Branch 140
*** William Belo introduced Nenita Anay to his girlfriend, Marjorie Tocao. The
three agreed to form a joint venture for the sale of cooking wares. Belo was
to contribute P2.5 million; Tocao also contributed some cash and she shall
also act as president and general manager; and Anay shall be in charge of
marketing. Belo and Tocao specifically asked Anay because of her experience
and connections as a marketer. They agreed further that Anay shall receive
the following:
10% share of annual net profits
6% overriding commission for weekly sales
30% of sales Anay will make herself
2% share for her demo services
They operated under the name Geminesse Enterprise, this name was
however registered as a sole proprietorship with the Bureau of Domestic
Trade under Tocao. The joint venture agreement was not reduced to writing
because Anay trusted Belos assurances.
The venture succeeded under Anays marketing prowess. But then the
relationship between Anay and Tocao soured. One day, Tocao advised one of
the branch managers that Anay was no longer a part of the company. Anay
then demanded that the company be audited and her shares be given to her.
The trial court held that there was indeed an "oral partnership agreement
between the plaintiff and the defendants. The Court of Appeals affirmed the
lower courts decision.
ISSUE:
Whether or not a partnership exists
HELD:
To be considered a juridical personality, a partnership must fulfill these
requisites: (1) two or more persons bind themselves to contribute money,
property or industry to a common fund; and (2) intention on the part of the
partners to divide the profits among themselves. It may be constituted in any
form; a public instrument is necessary only where immovable property or
real rights are contributed thereto. This implies that since a contract of
partnership is consensual, an oral contract of partnership is as good as a
written one. Where no immovable property or real rights are involved, what
matters is that the parties have complied with the requisites of a
partnership. The fact that there appears to be no record in the Securities and
Exchange Commission of a public instrument embodying the partnership
agreement pursuant to Article 1772 of the Civil Code did not cause the
nullification of the partnership. The pertinent provision of the Civil Code on
the matter states:
Art. 1768. The partnership has a juridical personality separate and distinct
from that of each of the partners, even in case of failure to comply with the
requirements of article 1772, first paragraph.
Petitioners admit that private respondent had the expertise to engage in the
business of distributorship of cookware. Private respondent contributed such
expertise to the partnership and hence, under the law, she was the industrial
or managing partner. It was through her reputation with the West Bend
Company that the partnership was able to open the business of
distributorship of that companys cookware products; it was through the same
efforts that the business was propelled to financial success. Petitioner Tocao
herself admitted private respondents indispensable role in putting up the
business when, upon being asked if private respondent held the positions of
marketing manager and vice-president for sales, she testified thus:
A: No, sir at the start she was the marketing manager because there were no
one to sell yet, its only me there then her and then two (2) people, so about
four (4). Now, after that when she recruited already Oscar Abella and Lina
Torda-Cruz these two (2) people were given the designation of marketing
managers of which definitely Nita as superior to them would be the Vice
President.
By the set-up of the business, third persons were made to believe that a
partnership had indeed been forged between petitioners and private
respondents. Thus, the communication dated June 4, 1986 of Missy Jagler of
West Bend Company to Roger Muencheberg of the same company states:
agreement, they explicitly agreed to profit sharing this is even though Anay
was receiving commissions because this is only incidental to her efforts as a
head marketer.
The Supreme Court also noted that a partner who is excluded wrongfully
from a partnership is an innocent partner. Hence, the guilty partner must
give him his due upon the dissolution of the partnership as well as damages
or share in the profits realized from the appropriation of the partnership
business and goodwill. An innocent partner thus possesses pecuniary
interest in every existing contract that was incomplete and in the trade name
of the co-partnership and assets at the time he was wrongfully expelled.
An unjustified dissolution by a partner can subject him to action for damages
because by the mutual agency that arises in a partnership, the doctrine
of delectus personaeallows the partners to have the power, although not
necessarily the right to dissolve the partnership.
Tocaos unilateral exclusion of Anay from the partnership is shown by her
memo to the Cubao office plainly stating that Anay was, as of October 9,
1987, no longer the vice-president for sales of Geminesse Enterprise. By that
memo, petitioner Tocao effected her own withdrawal from the partnership
and considered herself as having ceased to be associated with the
partnership in the carrying on of the business. Nevertheless, the partnership
was not terminated thereby; it continues until the winding up of the
business.
Motion for Reconsideration filed by Tocao and Belo decided by the SC on
September 20, 2001.
Belo is not a partner. Anay was not able to prove that Belo in fact received
profits from the company. Belo merely acted as a guarantor. His participation
in the business meetings was not as a partner but as a guarantor. He in fact
had only limited partnership. Tocao also testified that Belo received nothing
from the profits. The Supreme Court also noted that the partnership was yet
to be registered in the Securities and Exchange Commission. As such, it was
understandable that Belo, who was after all petitioner Tocaos good friend
and confidante, would occasionally participate in the affairs of the business,
although never in a formal or official capacity.
-AFISCO insurance corp. vs. CA, 302 SCRA 1 (1999)
FACTS:
The petitioners are 41 non-life insurance corporations, organized and
existing under the laws of the Philippines. Upon issuance by them of
5. That on April 28, 1944 they bought form Mrs. Valentina Afable a lot of
8,371 sq. m. including improvements thereon for P237,234.34. This property
has an assessed value of P59,140.00 as of 1948;
6. That in a document dated August 16, 1945, they appointed their brother
Simeon Evangelista to 'manage their properties with full power to lease; to
collect and receive rents; to issue receipts therefor; in default of such
payment, to bring suits against the defaulting tenants; to sign all letters,
contracts, etc., for and in their behalf, and to endorse and deposit all notes
and checks for them;
7. That after having bought the above-mentioned real properties the
petitioners had the same rented or leases to various tenants;
8. That from the month of March, 1945 up to and including December, 1945,
the total amount collected as rents on their real properties was P9,599.00
while the expenses amounted to P3,650.00 thereby leaving them a net rental
income of P5,948.33;
9. That on 1946, they realized a gross rental income of in the sum of
P24,786.30, out of which amount was deducted in the sum of P16,288.27 for
expenses thereby leaving them a net rental income of P7,498.13;
10. That in 1948, they realized a gross rental income of P17,453.00 out of
the which amount was deducted the sum of P4,837.65 as expenses, thereby
leaving them a net rental income of P12,615.35.
It further appears that on September 24, 1954 respondent Collector of
Internal Revenue demanded the payment of income tax on corporations, real
estate dealer's fixed tax and corporation residence tax for the years 19451949, computed, according to assessment made by said officer, as follows:
INCOME TAXES
1945
14.84
1946
1,144.71
1947
10.34
1948
1,912.30
1949
1,575.90
P6,157.09
compromise
REAL ESTATE DEALER'S FIXED TAX
1946
P37.50
1947
150.00
1948
150.00
1949
150.00
P527.00
P38.75
1946
38.75
1947
38.75
1948
38.75
1949
38.75
P193.75
P6,878.34.
With respect to the tax on corporations, the issue hinges on the meaning of
the terms "corporation" and "partnership," as used in section 24 and 84 of
said Code, the pertinent parts of which read:
SEC. 24. Rate of tax on corporations.There shall be levied, assessed,
collected, and paid annually upon the total net income received in the
preceding taxable year from all sources by every corporation organized in, or
existing under the laws of the Philippines, no matter how created or
organized but not including duly registered general co-partnerships
(compaias colectivas), a tax upon such income equal to the sum of the
following: . . .
SEC. 84 (b). The term 'corporation' includes partnerships, no matter how
created or organized, joint-stock companies, joint accounts (cuentas en
participacion), associations or insurance companies, but does not include
duly registered general copartnerships. (compaias colectivas).
Article 1767 of the Civil Code of the Philippines provides:
By the contract of partnership two or more persons bind themselves to
contribute money, properly, or industry to a common fund, with the intention
of dividing the profits among themselves.
Pursuant to the article, the essential elements of a partnership are two,
namely: (a) an agreement to contribute money, property or industry to a
common fund; and (b) intent to divide the profits among the contracting
parties. The first element is undoubtedly present in the case at bar, for,
admittedly, petitioners have agreed to, and did, contribute money and
property to a common fund. Hence, the issue narrows down to their intent in
acting as they did. Upon consideration of all the facts and circumstances
surrounding the case, we are fully satisfied that their purpose was to engage
in real estate transactions for monetary gain and then divide the same
among themselves, because:
1. Said common fund was not something they fou
nd already in existence. It was not property inherited by them pro indiviso.
They created it purposely. What is more they jointly borrowed a substantial
portion thereof in order to establish said common fund.
2. They invested the same, not merely not merely in one transaction, but in a
series of transactions. On February 2, 1943, they bought a lot for
P100,000.00. On April 3, 1944, they purchased 21 lots for P18,000.00. This
was soon followed on April 23, 1944, by the acquisition of another real estate
for P108,825.00. Five (5) days later (April 28, 1944), they got a fourth lot for
P237,234.14. The number of lots (24) acquired and transactions undertaken,
as well as the brief interregnum between each, particularly the last three
purchases, is strongly indicative of a pattern or common design that was not
limited to the conservation and preservation of the aforementioned common
fund or even of the property acquired by the petitioners in February, 1943. In
other words, one cannot but perceive a character of habitually peculiar to
business transactions engaged in the purpose of gain.
3. The aforesaid lots were not devoted to residential purposes, or to other
personal uses, of petitioners herein. The properties were leased separately to
several persons, who, from 1945 to 1948 inclusive, paid the total sum of
P70,068.30 by way of rentals. Seemingly, the lots are still being so let, for
petitioners do not even suggest that there has been any change in the
utilization thereof.
4. Since August, 1945, the properties have been under the management of
one person, namely Simeon Evangelista, with full power to lease, to collect
rents, to issue receipts, to bring suits, to sign letters and contracts, and to
indorse and deposit notes and checks. Thus, the affairs relative to said
properties have been handled as if the same belonged to a corporation or
business and enterprise operated for profit.
5. The foregoing conditions have existed for more than ten (10) years, or, to
be exact, over fifteen (15) years, since the first property was acquired, and
over twelve (12) years, since Simeon Evangelista became the manager.
6. Petitioners have not testified or introduced any evidence, either on their
purpose in creating the set up already adverted to, or on the causes for its
continued existence. They did not even try to offer an explanation therefor.
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. Only one or two of the aforementioned
circumstances were present in the cases cited by petitioners herein, and,
hence, those cases are not in point.
NOTE: For purposes of the tax on corporations, our National Internal
Revenue Code, includes these partnerships with the exception only of duly
registered general copartnerships within the purview of the term
"corporation." It is, therefore, clear to our mind that petitioners herein
constitute a partnership, insofar as said Code is concerned and are subject to
the income tax for corporations.
As regards the residence of tax for corporations, section 2 of
Commonwealth Act No. 465 provides in part:
offer are (1) that Yang Chiao Seng guarantees Mrs. Yulo a monthly
participation of P3,000 payable quarterly in advance within the first 15 days
of each quarter, (2) that the partnership shall be for a period of two years
and six months, starting from July 1, 1945 to December 31, 1947, with the
condition that if the land is expropriated or rendered impracticable for the
business, or if the owner constructs a permanent building thereon, or Mrs.
Yulo's right of lease is terminated by the owner, then the partnership shall be
terminated even if the period for which the partnership was agreed to be
established has not yet expired; (3) that Mrs. Yulo is authorized personally to
conduct such business in the lobby of the building as is ordinarily carried on
in lobbies of theatres in operation, provided the said business may not
obstruct the free ingress and agrees of patrons of the theatre; (4) that after
December 31, 1947, all improvements placed by the partnership shall belong
to Mrs. Yulo, but if the partnership agreement is terminated before the lapse
of one and a half years period under any of the causes mentioned in
paragraph (2), then Yang Chiao Seng shall have the right to remove and take
away all improvements that the partnership may place in the premises.
Pursuant to the above offer, which plaintiff evidently accepted, the
parties executed a partnership agreement establishing the "Yang &
Company, Limited," which was to exist from July 1, 1945 to December 31,
1947. It states that it will conduct and carry on the business of operating a
theatre for the exhibition of motion and talking pictures. The capital is fixed
at P100,000, P80,000 of which is to be furnished by Yang Chiao Seng and
P20,000, by Mrs. Yulo. All gains and profits are to be distributed among the
partners in the same proportion as their capital contribution and the liability
of Mrs. Yulo, in case of loss, shall be limited to her capital contribution (Exh.
"B").
In June 1946, they executed a supplementary agreement, extending
the partnership for a period of three years beginning January 1, 1948 to
December 31, 1950. The benefits are to be divided between them at the rate
of 50-50 and after December 31, 1950, the showhouse building shall belong
exclusively to the second party, Mrs. Yulo.
The land on which the theatre was constructed was leased by plaintiff
Mrs. Yulo from Emilia Carrion Santa Marina and Maria Carrion Santa Marina.
In the contract of lease it was stipulated that the lease shall continue for an
indefinite period of time, but that after one year the lease may be cancelled
by either party by written notice to the other party at least 90 days before
the date of cancellation. The last contract was executed between the owners
and Mrs. Yulo on April 5, 1948. But on April 12, 1949, the attorney for the
owners notified Mrs. Yulo of the owner's desire to cancel the contract of lease
on July 31, 1949. In view of the above notice, Mrs. Yulo and her husband
brought a civil action to the Court of First Instance of Manila on July 3, 1949
to declare the lease of the premises. On February 9, 1950, the Municipal
Court of Manila rendered judgment ordering the ejectment of Mrs. Yulo and
Mr. Yang. The judgment was appealed. In the Court of First Instance, the two
cases were afterwards heard jointly, and judgment was rendered dismissing
the complaint of Mrs. Yulo and her husband, and declaring the contract of
lease of the premises terminated as of July 31, 1949, and fixing the
reasonable monthly rentals of said premises at P100. Both parties appealed
from said decision and the Court of Appeals, on April 30, 1955, affirmed the
judgment.
On October 27, 1950, Mrs. Yulo demanded from Yang Chiao Seng her
share in the profits of the business. Yang answered the letter saying that
upon the advice of his counsel he had to suspend the payment (of the
rentals) because of the pendency of the ejectment suit by the owners of the
land against Mrs. Yulo. In this letter Yang alleges that inasmuch as he is a
sublessee and inasmuch as Mrs. Yulo has not paid to the lessors the rentals
from August, 1949, he was retaining the rentals to make good to the
landowners the rentals due from Mrs. Yulo in arrears (Exh. "E").
In view of the refusal of Yang to pay her the amount agreed upon, Mrs.
Yulo instituted this action on May 26, 1954, alleging the existence of a
partnership between them and that the defendant Yang Chiao Seng has
refused to pay her share from December, 1949 to December, 1950; that
after December 31, 1950 the partnership between Mrs. Yulo and Yang
terminated, as a result of which, plaintiff became the absolute owner of the
building occupied by the Cine Astor; that the reasonable rental that the
defendant should pay therefor from January, 1951 is P5,000; that the
defendant has acted maliciously and refuses to pay the participation of the
plaintiff in the profits of the business amounting to P35,000 from November,
1949 to October, 1950, and that as a result of such bad faith and malice on
the part of the defendant, Mrs. Yulo has suffered damages in the amount of
P160,000 and exemplary damages to the extent of P5,000. The prayer
includes a demand for the payment of the above sums plus the sum of
P10,000 for the attorney's fees.
In answer to the complaint, defendant alleges that the real agreement
between the plaintiff and the defendant was one of lease and not of
partnership; that the partnership was adopted as a subterfuge to get around
the prohibition contained in the contract of lease between the owners and
the plaintiff against the sublease of the said property. As to the other claims,
he denies the same and alleges that the fair rental value of the land is only
P1,100. By way of counterclaim he alleges that by reason of an attachment
issued against the properties of the defendant the latter has suffered
damages amounting to P100,000.
The first hearing was had on April 19, 1955, at which time only the plaintiff
appeared. The court heard evidence of the plaintiff in the absence of the
We have gone over the evidence and we fully agree with the
conclusion of the trial court that the agreement was a sublease, not a
partnership. The following are the requisites of partnership: (1) two or more
persons who bind themselves to contribute money, property, or industry to a
common fund; (2) intention on the part of the partners to divide the profits
among themselves. (Art. 1767, Civil Code.).
In the first place, plaintiff did not furnish the supposed P20,000 capital.
In the second place, she did not furnish any help or intervention in the
management of the theatre. In the third place, it does not appear that she
has ever demanded from defendant any accounting of the expenses and
earnings of the business. Were she really a partner, her first concern should
have been to find out how the business was progressing, whether the
expenses were legitimate, whether the earnings were correct, etc. She was
absolutely silent with respect to any of the acts that a partner should have
done; all that she did was to receive her share of P3,000 a month, which can
not be interpreted in any manner than a payment for the use of the premises
which she had leased from the owners. Clearly, plaintiff had always acted in
accordance with the original letter of defendant of June 17, 1945 (Exh. "A"),
which shows that both parties considered this offer as the real contract
between them.
Plaintiff claims the sum of P41,000 as representing her share or
participation in the business from December, 1949. But the original letter of
the defendant, Exh. "A", expressly states that the agreement between the
plaintiff and the defendant was to end upon the termination of the right of
the plaintiff to the lease. Plaintiff's right having terminated in July, 1949 as
found by the Court of Appeals, the partnership agreement or the agreement
for her to receive a participation of P3,000 automatically ceased as of said
date.
a. Requires fulfillment of the essential requisites of contracts art.
1318
Art. 1318. There is no contract unless the following requisites concur:
(1)Consent of the contracting parties;
(2)Object certain which is the subject matter of the contract;
(3)Cause of the obligation which is established. (1261)
i. Consent and capacity of the contracting parties
Art. 1327
Art. 1327. The following cannot give consent to a contract:
(1)Unemancipated minors;
(2)Insane or demented persons, and deaf-mutes who do not know how
to write. (1263a)
-
Art. 1329
Art. 1782
Art. 1782. Persons who are prohibited from giving each other any
donation or advantage cannot enter into universal partnership. (1677)
Reason: Each of the partners virtually make a donation. To allow
persons who are prohibited to give each other any donation or
advantage to form a universal partnership will be like permitting them
to do indirectly what the law expressly prohibits.
A partnership formed in violation of this article is null and void.
Consequently, no legal personality is acquired.
A husband and wife, however, may enter into a particular partnership
or be members thereof.
Art. 87
Art. 87. Every donation or grant of gratuitous advantage, direct or
indirect, between the spouses during the marriage shall be void,
except moderate gifts which the spouses may give each other on the
occasion of any family rejoicing. The prohibition shall also apply to
persons living together as husband and wife without a valid marriage.
(133a)
Art. 73
Art. 73. Either spouse may exercise any legitimate profession,
occupation, business or activity without the consent of the other. The
latter may object only on valid, serious, and moral grounds.
RULE 93
Appointment of Guardians
Section 1. Who may petition for appointment of guardian for resident.
Any relative, friend, or other person on behalf of a resident minor or
incompetent who has no parent or lawful guardian, or the minor himself if
fourteen years of age or over, may petition the court having jurisdiction
for the appointment of a general guardian for the person or estate, or
both, of such minor or incompetent. An officer of the Federal
Administration of the United States in the Philippines may also file a
petition in favor of a ward thereof, and the Director of Health, in favor of
an insane person who should be hospitalized, or in favor of an isolated
leper.