July 30, 1979
attorney and client — to acquire and use a trade name,
PETITION FOR AUTHORITY TO CONTINUE USE OF
THE FIRM NAME "SYCIP, SALAZAR, FELICIANO,
HERNANDEZ & CASTILLO." LUCIANO E. SALAZAR,
FLORENTINO P. FELICIANO, BENILDO G.
HERNANDEZ. GREGORIO R. CASTILLO. ALBERTO P.
SAN JUAN, JUAN C. REYES. JR., ANDRES G.
GATMAITAN, JUSTINO H. CACANINDIN, NOEL A.
LAMAN, ETHELWOLDO E. FERNANDEZ, ANGELITO
C. IMPERIO, EDUARDO R. CENIZA, TRISTAN A.
CATINDIG, ANCHETA K. TAN, and ALICE V.
PESIGAN, petitioners.
IN THE MATTER OF THE PETITION FOR AUTHORITY
TO CONTINUE USE OF THE FIRM NAME "OZAETA,
ROMULO, DE LEON, MABANTA & REYES." RICARDO
J. ROMULO, BENJAMIN M. DE LEON, ROMAN
MABANTA, JR., JOSE MA, REYES, JESUS S. J.
SAYOC, EDUARDO DE LOS ANGELES, and JOSE F.
BUENAVENTURA, petitioners.
RESOLUTION
MELENCIO-HERRERA, J.:ñé+.£ªwph!1
Two separate Petitions were filed before this Court 1) by
the surviving partners of Atty. Alexander Sycip, who died
on May 5, 1975, and 2) by the surviving partners of Atty.
Herminio Ozaeta, who died on February 14, 1976, praying
that they be allowed to continue using, in the names of
their firms, the names of partners who had passed away.
In the Court's Resolution of September 2, 1976, both
Petitions were ordered consolidated.
Petitioners base their petitions on the following
arguments:
1. Under the law, a partnership is not prohibited from
continuing its business under a firm name which includes
the name of a deceased partner; in fact, Article 1840 of
the Civil Code explicitly sanctions the practice when it
provides in the last paragraph that: têñ.£îhqwâ£
The use by the person or partnership
continuing the business of the
partnership name, or the name of a
deceased partner as part thereof, shall
not of itself make the individual property
of the deceased partner liable for any
debts contracted by such person or
partnership. 1
2. In regulating other professions, such as accountancy
and engineering, the legislature has authorized the
adoption of firm names without any restriction as to the
use, in such firm name, of the name of a deceased
partner; 2 the legislative authorization given to those
engaged in the practice of accountancy — a profession
requiring the same degree of trust and confidence in
respect of clients as that implicit in the relationship of
strongly indicates that there is no fundamental policy that
is offended by the continued use by a firm of professionals
of a firm name which includes the name of a deceased
partner, at least where such firm name has acquired the
characteristics of a "trade name." 3
3. The Canons of Professional Ethics are not
transgressed by the continued use of the name of a
deceased partner in the firm name of a law partnership
because Canon 33 of the Canons of Professional Ethics
adopted by the American Bar Association declares
that: têñ.£îhqwâ£
... The continued use of the name of a
deceased or former partner when
permissible by local custom, is not
unethical but care should be taken that
no imposition or deception is practiced
through this use. ... 4
4. There is no possibility of imposition or deception
because the deaths of their respective deceased partners
were well-publicized in all newspapers of general
circulation for several days; the stationeries now being
used by them carry new letterheads indicating the years
when their respective deceased partners were connected
with the firm; petitioners will notify all leading national and
international law directories of the fact of their respective
deceased partners' deaths. 5
5. No local custom prohibits the continued use of a
deceased partner's name in a professional firm's
name; 6 there is no custom or usage in the Philippines, or
at least in the Greater Manila Area, which recognizes that
the name of a law firm necessarily Identifies the individual
members of the firm. 7
6. The continued use of a deceased partner's name in the
firm name of law partnerships has been consistently
allowed by U.S. Courts and is an accepted practice in the
legal profession of most countries in the world.8
The question involved in these Petitions first came under
consideration by this Court in 1953 when a law firm in
Cebu (the Deen case) continued its practice of including
in its firm name that of a deceased partner, C.D.
Johnston. The matter was resolved with this Court
advising the firm to desist from including in their firm
designation the name of C. D. Johnston, who has long
been dead."
The same issue was raised before this Court in 1958 as
an incident in G. R. No. L-11964, entitled Register of
Deeds of Manila vs. China Banking Corporation. The law
firm of Perkins & Ponce Enrile moved to intervene
as amicus curiae. Before acting thereon, the Court, in a
Resolution of April 15, 1957, stated that it "would like to
be informed why the name of Perkins is still being used
although Atty. E. A. Perkins is already dead." In a
Manifestation dated May 21, 1957, the law firm of Perkins
and Ponce Enrile, raising substantially the same
arguments as those now being raised by petitioners,
prayed that the continued use of the firm name "Perkins
& Ponce Enrile" be held proper.
On June 16, 1958, this Court resolved: têñ.£îhqwâ£
After carefully considering the reasons
given by Attorneys Alfonso Ponce Enrile
and Associates for their continued use of
the name of the deceased E. G. Perkins,
the Court found no reason to depart from
the policy it adopted in June 1953 when
it required Attorneys Alfred P. Deen and
Eddy A. Deen of Cebu City to desist from
including in their firm designation, the
name of C. D. Johnston, deceased. The
Court believes that, in view of the
personal and confidential nature of the
relations between attorney and client,
and the high standards demanded in the
canons of professional ethics, no practice
should be allowed which even in a
remote degree could give rise to the
possibility of deception. Said attorneys
are accordingly advised to drop the name
"PERKINS" from their firm name.
Petitioners herein now seek a re-examination of the policy
thus far enunciated by the Court.
The Court finds no sufficient reason to depart from the
rulings thus laid down.
A. Inasmuch as "Sycip, Salazar, Feliciano, Hernandez
and Castillo" and "Ozaeta, Romulo, De Leon, Mabanta
and Reyes" are partnerships, the use in their partnership
names of the names of deceased partners will run counter
to Article 1815 of the Civil Code which
provides: têñ.£îhqwâ£
Art. 1815. Every partnership shall
operate under a firm name, which may or
may not include the name of one or more
of the partners.
Those who, not being members of the
partnership, include their names in the
firm name, shall be subject to the liability,
of a partner.
It is clearly tacit in the above provision that names in a
firm name of a partnership must either be those of living
partners and. in the case of non-partners, should be living
persons who can be subjected to liability. In fact, Article
1825 of the Civil Code prohibits a third person from
including his name in the firm name under pain of
assuming the liability of a partner. The heirs of a
deceased partner in a law firm cannot be held liable as
the old members to the creditors of a firm particularly
where they are non-lawyers. Thus, Canon 34 of the
Canons of Professional Ethics "prohibits an agreement for
the payment to the widow and heirs of a deceased lawyer
of a percentage, either gross or net, of the fees received
from the future business of the deceased lawyer's clients,
both because the recipients of such division are not
lawyers and because such payments will not represent
service or responsibility on the part of the recipient. "
Accordingly, neither the widow nor the heirs can be held
liable for transactions entered into after the death of their
lawyer-predecessor. There being no benefits accruing,
there ran be no corresponding liability.
Prescinding the law, there could be practical objections to
allowing the use by law firms of the names of deceased
partners. The public relations value of the use of an old
firm name can tend to create undue advantages and
disadvantages in the practice of the profession. An able
lawyer without connections will have to make a name for
himself starting from scratch. Another able lawyer, who
can join an old firm, can initially ride on that old firm's
reputation established by deceased partners.
B. In regards to the last paragraph of Article 1840 of the
Civil Code cited by petitioners, supra, the first factor to
consider is that it is within Chapter 3 of Title IX of the Code
entitled "Dissolution and Winding Up." The Article
primarily deals with the exemption from liability in cases
of a dissolved partnership, of the individual property of the
deceased partner for debts contracted by the person or
partnership which continues the business using the
partnership name or the name of the deceased partner as
part thereof. What the law contemplates therein is a hold-
over situation preparatory to formal reorganization.
Secondly, Article 1840 treats more of
a commercial partnership with a good will to protect rather
than of a professional partnership, with no saleable good
will but whose reputation depends on the personal
qualifications of its individual members. Thus, it has been
held that a saleable goodwill can exist only in a
commercial partnership and cannot arise in a professional
partnership consisting of lawyers. 9têñ.£îhqwâ£
As a general rule, upon the dissolution of
a commercial partnership the
succeeding partners or parties have the
right to carry on the business under the
old name, in the absence of a stipulation
forbidding it, (s)ince the name of a
commercial partnership is a partnership
asset inseparable from the good will of
the firm. ... (60 Am Jur 2d, s 204, p. 115)
(Emphasis supplied)
On the other hand, têñ.£îhqwâ£
... a professional partnership the
reputation of which depends or; the
individual skill of the members, such as
 partnerships of attorneys or physicians,
has no good win to be distributed as a
firm asset on its dissolution, however
intrinsically valuable such skill and
reputation may be, especially where
there is no provision in the partnership
agreement relating to good will as an
asset. ... (ibid, s 203, p. 115) (Emphasis
supplied)
C. A partnership for the practice of law cannot be likened
to partnerships formed by other professionals or for
business. For one thing, the law on accountancy
specifically allows the use of a trade name in connection
with the practice of accountancy.10 têñ.£îhqwâ£
A partnership for the practice of law is not
a legal entity. It is a mere relationship or
association for a particular purpose. ... It
is not a partnership formed for the
purpose of carrying on trade or business
or of holding property." 11 Thus, it has
been stated that "the use of a nom de
plume, assumed or trade name in law
practice is improper. 12
The usual reason given for different
standards of conduct being applicable to
the practice of law from those pertaining
to business is that the law is a profession.
Dean Pound, in his recently published
contribution to the Survey of the Legal
Profession, (The Lawyer from Antiquity to
Modern Times, p. 5) defines a profession
as "a group of men pursuing a learned art
as a common calling in the spirit of public
service, — no less a public service
because it may incidentally be a means
of livelihood."
xxx xxx xxx
Primary characteristics which distinguish
the legal profession from business are:
1. A duty of public service, of which the
emolument is a byproduct, and in which
one may attain the highest eminence
without making much money.
2. A relation as an "officer of court" to the
administration of justice involving
thorough sincerity, integrity, and
reliability.
3. A relation to clients in the highest
degree fiduciary.
4. A relation to colleagues at the bar
characterized by candor, fairness, and
unwillingness to resort to current
business methods of advertising and
encroachment on their practice, or
dealing directly with their clients. 13
"The right to practice law is not a natural or constitutional
right but is in the nature of a privilege or franchise. 14 It is
limited to persons of good moral character with special
qualifications duly ascertained and certified. 15 The right
does not only presuppose in its possessor integrity, legal
standing and attainment, but also the exercise of a special
privilege, highly personal and partaking of the nature of a
public trust." 16
D. Petitioners cited Canon 33 of the Canons of
Professional Ethics of the American Bar Association" in
support of their petitions.
It is true that Canon 33 does not consider as unethical the
continued use of the name of a deceased or former
partner in the firm name of a law partnership when such
a practice is permissible by local custom but the Canon
warns that care should be taken that no imposition or
deception is practiced through this use.
It must be conceded that in the Philippines, no local
custom permits or allows the continued use of a
deceased or former partner's name in the firm names of
law partnerships. Firm names, under our custom, Identify
the more active and/or more senior members or partners
of the law firm. A glimpse at the history of the firms of
petitioners and of other law firms in this country would
show how their firm names have evolved and changed
from time to time as the composition of the partnership
changed. têñ.£îhqwâ£
The continued use of a firm name after
the death of one or more of the partners
designated by it is proper only where
sustained by local custom and not where
by custom this purports to Identify the
active members. ...
There would seem to be a question,
under the working of the Canon, as to the
propriety of adding the name of a new
partner and at the same time retaining
that of a deceased partner who was
never a partner with the new one. (H.S.
Drinker, op. cit., supra, at pp. 207208)
(Emphasis supplied).
The possibility of deception upon the public, real or
consequential, where the name of a deceased partner
continues to be used cannot be ruled out. A person in
search of legal counsel might be guided by the familiar
ring of a distinguished name appearing in a firm title.
E. Petitioners argue that U.S. Courts have consistently
allowed the continued use of a deceased partner's name
in the firm name of law partnerships. But that is so
because it is sanctioned by custom.
In the case of Mendelsohn v. Equitable Life Assurance
Society (33 N.Y.S. 2d 733) which petitioners Salazar, et
al. quoted in their memorandum, the New York Supreme
Court sustained the use of the firm name Alexander &
Green even if none of the present ten partners of the firm
bears either name because the practice was sanctioned
by custom and did not offend any statutory provision or
legislative policy and was adopted by agreement of the
parties. The Court stated therein: têñ.£îhqwâ£
The practice sought to be proscribed has
the sanction of custom and offends no
statutory provision or legislative policy.
Canon 33 of the Canons of Professional
Ethics of both the American Bar
Association and the New York State Bar
Association provides in part as follows:
"The continued use of the name of a
deceased or former partner, when
permissible by local custom is not
unethical, but care should be taken that
no imposition or deception is practiced
through this use." There is no question
as to local custom. Many firms in the city
use the names of deceased members
with the approval of other attorneys, bar
associations and the courts. The
Appellate Division of the First
Department has considered the matter
and reached The conclusion that such
practice should not be prohibited.
(Emphasis supplied)
xxx xxx xxx
Neither the Partnership Law nor the
Penal Law prohibits the practice in
question. The use of the firm name
herein is also sustainable by reason of
agreement between the partners. 18
Not so in this jurisdiction where there is no local custom
that sanctions the practice. Custom has been defined as
a rule of conduct formed by repetition of acts, uniformly
observed (practiced) as a social rule, legally binding and
obligatory. 19 Courts take no judicial notice of custom. A
custom must be proved as a fact, according to the rules
of evidence. 20 A local custom as a source of right cannot
be considered by a court of justice unless such custom is
properly established by competent evidence like any
other fact. 21 We find such proof of the existence of a local
custom, and of the elements requisite to constitute the
same, wanting herein. Merely because something is done
as a matter of practice does not mean that Courts can rely
on the same for purposes of adjudication as a juridical
custom. Juridical custom must be differentiated from
social custom. The former can supplement statutory law
or be applied in the absence of such statute. Not so with
the latter.
Moreover, judicial decisions applying or interpreting the
laws form part of the legal system. 22 When the Supreme
Court in the Deen and Perkins cases issued its
Resolutions directing lawyers to desist from including the
names of deceased partners in their firm designation, it
laid down a legal rule against which no custom or practice
to the contrary, even if proven, can prevail. This is not to
speak of our civil law which clearly ordains that a
partnership is dissolved by the death of any
partner. 23 Custom which are contrary to law, public order
or public policy shall not be countenanced. 24
The practice of law is intimately and peculiarly related to
the administration of justice and should not be considered
like an ordinary "money-making trade." têñ.£îhqwâ£
... It is of the essence of a profession that
it is practiced in a spirit of public service.
A trade ... aims primarily at personal gain;
a profession at the exercise of powers
beneficial to mankind. If, as in the era of
wide free opportunity, we think of free
competitive self assertion as the highest
good, lawyer and grocer and farmer may
seem to be freely competing with their
fellows in their calling in order each to
acquire as much of the world's good as
he may within the allowed him by law. But
the member of a profession does not
regard himself as in competition with his
professional brethren. He is not bartering
his services as is the artisan nor
exchanging the products of his skill and
learning as the farmer sells wheat or
corn. There should be no such thing as a
lawyers' or physicians' strike. The best
service of the professional man is often
rendered for no equivalent or for a trifling
equivalent and it is his pride to do what
he does in a way worthy of his profession
even if done with no expectation of
reward, This spirit of public service in
which the profession of law is and ought
to be exercised is a prerequisite of sound
administration of justice according to law.
The other two elements of a profession,
namely, organization and pursuit of a
learned art have their justification in that
they secure and maintain that spirit. 25
In fine, petitioners' desire to preserve the Identity of their
firms in the eyes of the public must bow to legal and
ethical impediment.
ACCORDINGLY, the petitions filed herein are denied and
petitioners advised to drop the names "SYCIP" and
"OZAETA" from their respective firm names. Those
names may, however, be included in the listing of
individuals who have been partners in their firms
indicating the years during which they served as such.
SO ORDERED.
G.R. No. 109248 July 3, 1995
GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO,
JR., and BENJAMIN T. BACORRO, petitioners,
vs.
HON. COURT OF APPEALS, SECURITIES AND
EXCHANGE COMMISSION and JOAQUIN L.
MISA, respondents.
VITUG, J.:
The instant petition seeks a review of the decision
rendered by the Court of Appeals, dated 26 February
1993, in CA-G.R. SP No. 24638 and No. 24648
affirming in toto that of the Securities and Exchange
Commission ("SEC") in SEC AC 254.
The antecedents of the controversy, summarized by
respondent Commission and quoted at length by the
appellate court in its decision, are hereunder restated.
The law firm of ROSS, LAWRENCE, SELPH and
CARRASCOSO was duly registered in the
Mercantile Registry on 4 January 1937 and
reconstituted with the Securities and Exchange
Commission on 4 August 1948. The SEC records
show that there were several subsequent
amendments to the articles of partnership on 18
September 1958, to change the firm [name] to
ROSS, SELPH and CARRASCOSO; on 6 July
1965 . . . to ROSS, SELPH, SALCEDO, DEL
ROSARIO, BITO & MISA; on 18 April 1972 to
SALCEDO, DEL ROSARIO, BITO, MISA &
LOZADA; on 4 December 1972 to SALCEDO,
DEL ROSARIO, BITO, MISA & LOZADA; on 11
March 1977 to DEL ROSARIO, BITO, MISA &
LOZADA; on 7 June 1977 to BITO, MISA &
LOZADA; on 19 December 1980, [Joaquin L.
Misa] appellees Jesus B. Bito and Mariano M.
Lozada associated themselves together, as
senior partners with respondents-appellees
Gregorio F. Ortega, Tomas O. del Castillo, Jr.,
and Benjamin Bacorro, as junior partners.
On February 17, 1988, petitioner-appellant wrote
the respondents-appellees a letter stating:
I am withdrawing and retiring
from the firm of Bito, Misa and
Lozada, effective at the end of
this month.
"I trust that the accountants will
be instructed to make the proper
liquidation of my participation in
the firm."
On the same day, petitioner-appellant wrote
respondents-appellees another letter stating:
"Further to my letter to you today,
I would like to have a meeting
with all of you with regard to the
mechanics of liquidation, and
more particularly, my interest in
the two floors of this building. I
would like to have this resolved
soon because it has to do with
my own plans."
On 19 February 1988, petitioner-appellant wrote
respondents-appellees another letter stating:
"The partnership has ceased to
be mutually satisfactory because
of the working conditions of our
employees including the
assistant attorneys. All my efforts
to ameliorate the below
subsistence level of the pay
scale of our employees have
been thwarted by the other
partners. Not only have they
refused to give meaningful
increases to the employees,
even attorneys, are dressed
down publicly in a loud voice in a
manner that deprived them of
their self-respect. The result of
such policies is the formation of
the union, including the assistant
attorneys."
On 30 June 1988, petitioner filed with this
Commission's Securities Investigation and
Clearing Department (SICD) a petition for
dissolution and liquidation of partnership,
docketed as SEC Case No. 3384 praying that the
Commission:
"1. Decree the formal dissolution
and order the immediate
liquidation of (the partnership of)
Bito, Misa & Lozada;
"2. Order the respondents to
deliver or pay for petitioner's
share in the partnership assets
plus the profits, rent or interest
 attributable to the use of his right
in the assets of the dissolved
partnership;
"3. Enjoin respondents from
using the firm name of Bito, Misa
& Lozada in any of their
correspondence, checks and
pleadings and to pay petitioners
damages for the use thereof
despite the dissolution of the
partnership in the amount of at
least P50,000.00;
"4. Order respondents jointly and
severally to pay petitioner
attorney's fees and expense of
litigation in such amounts as
maybe proven during the trial
and which the Commission may
deem just and equitable under
the premises but in no case less
than ten (10%) per cent of the
value of the shares of petitioner
or P100,000.00;
"5. Order the respondents to pay
petitioner moral damages with
the amount of P500,000.00 and
exemplary damages in the
amount of P200,000.00.
"Petitioner likewise prayed for
such other and further reliefs that
the Commission may deem just
and equitable under the
premises."
On 13 July 1988, respondents-appellees filed
their opposition to the petition.
On 13 July 1988, petitioner filed his Reply to the
Opposition.
On 31 March 1989, the hearing officer rendered
a decision ruling that:
"[P]etitioner's withdrawal from
the law firm Bito, Misa & Lozada
did not dissolve the said law
partnership. Accordingly, the
petitioner and respondents are
hereby enjoined to abide by the
provisions of the Agreement
relative to the matter governing
the liquidation of the shares of
any retiring or withdrawing
partner in the partnership
interest."1
On appeal, the SEC en banc reversed the decision of the
Hearing Officer and held that the withdrawal of Attorney
Joaquin L. Misa had dissolved the partnership of "Bito,
Misa & Lozada." The Commission ruled that, being a
partnership at will, the law firm could be dissolved by any
partner at anytime, such as by his withdrawal therefrom,
regardless of good faith or bad faith, since no partner can
be forced to continue in the partnership against his will. In
its decision, dated 17 January 1990, the SEC held:
WHEREFORE, premises considered the
appealed order of 31 March 1989 is hereby
REVERSED insofar as it concludes that the
partnership of Bito, Misa & Lozada has not been
dissolved. The case is hereby REMANDED to the
Hearing Officer for determination of the
respective rights and obligations of the parties.2
The parties sought a reconsideration of the above
decision. Attorney Misa, in addition, asked for an
appointment of a receiver to take over the assets of the
dissolved partnership and to take charge of the winding
up of its affairs. On 4 April 1991, respondent SEC issued
an order denying reconsideration, as well as rejecting the
petition for receivership, and reiterating the remand of the
case to the Hearing Officer.
The parties filed with the appellate court separate appeals
(docketed CA-G.R. SP No. 24638 and CA-G.R. SP No.
24648).
During the pendency of the case with the Court of
Appeals, Attorney Jesus Bito and Attorney Mariano
Lozada both died on, respectively, 05 September 1991
and 21 December 1991. The death of the two partners,
as well as the admission of new partners, in the law firm
prompted Attorney Misa to renew his application for
receivership (in CA G.R. SP No. 24648). He expressed
concern over the need to preserve and care for the
partnership assets. The other partners opposed the
prayer.
The Court of Appeals, finding no reversible error on the
part of respondent Commission, AFFIRMED in toto the
SEC decision and order appealed from. In fine, the
appellate court held, per its decision of 26 February 1993,
(a) that Atty. Misa's withdrawal from the partnership had
changed the relation of the parties and inevitably caused
the dissolution of the partnership; (b) that such withdrawal
was not in bad faith; (c) that the liquidation should be to
the extent of Attorney Misa's interest or participation in the
partnership which could be computed and paid in the
manner stipulated in the partnership agreement; (d) that
the case should be remanded to the SEC Hearing Officer
for the corresponding determination of the value of
Attorney Misa's share in the partnership assets; and (e)
that the appointment of a receiver was unnecessary as no
sufficient proof had been shown to indicate that the
partnership assets were in any such danger of being lost,
removed or materially impaired.
In this petition for review under Rule 45 of the Rules of
Court, petitioners confine themselves to the following
issues:
1. Whether or not the Court of Appeals has erred
in holding that the partnership of Bito, Misa &
Lozada (now Bito, Lozada, Ortega & Castillo) is a
partnership at will;
2. Whether or not the Court of Appeals has erred
in holding that the withdrawal of private
respondent dissolved the partnership regardless
of his good or bad faith; and
3. Whether or not the Court of Appeals has erred
in holding that private respondent's demand for
the dissolution of the partnership so that he can
get a physical partition of partnership was not
made in bad faith;
to which matters we shall, accordingly, likewise limit
ourselves.
A partnership that does not fix its term is a partnership at
will. That the law firm "Bito, Misa & Lozada," and now
"Bito, Lozada, Ortega and Castillo," is indeed such a
partnership need not be unduly belabored. We quote, with
approval, like did the appellate court, the findings and
disquisition of respondent SEC on this matter; viz:
The partnership agreement (amended articles of
19 August 1948) does not provide for a specified
period or undertaking. The "DURATION" clause
simply states:
"5. DURATION. The partnership
shall continue so long as
mutually satisfactory and upon
the death or legal incapacity of
one of the partners, shall be
continued by the surviving
partners."
The hearing officer however opined that the
partnership is one for a specific undertaking and
hence not a partnership at will, citing paragraph 2
of the Amended Articles of Partnership (19
August 1948):
"2. Purpose. The purpose for
which the partnership is formed,
is to act as legal adviser and
representative of any individual,
firm and corporation engaged in
commercial, industrial or other
lawful businesses and
occupations; to counsel and
advise such persons and entities
with respect to their legal and
other affairs; and to appear for
and represent their principals
and client in all courts of justice
and government departments
and offices in the Philippines,
and elsewhere when legally
authorized to do so."
The "purpose" of the partnership is not the
specific undertaking referred to in the law.
Otherwise, all partnerships, which necessarily
must have a purpose, would all be considered as
partnerships for a definite undertaking. There
would therefore be no need to provide for articles
on partnership at will as none would so exist.
Apparently what the law contemplates, is a
specific undertaking or "project" which has a
definite or definable period of completion.3
The birth and life of a partnership at will is predicated on
the mutual desire and consent of the partners. The right
to choose with whom a person wishes to associate
himself is the very foundation and essence of that
partnership. Its continued existence is, in turn, dependent
on the constancy of that mutual resolve, along with each
partner's capability to give it, and the absence of a cause
for dissolution provided by the law itself. Verily, any one
of the partners may, at his sole pleasure, dictate a
dissolution of the partnership at will. He must, however,
act in good faith, not that the attendance of bad faith can
prevent the dissolution of the partnership4 but that it can
result in a liability for damages.5
In passing, neither would the presence of a period for its
specific duration or the statement of a particular purpose
for its creation prevent the dissolution of any partnership
by an act or will of a partner.6 Among partners,7 mutual
agency arises and the doctrine of delectus
personae allows them to have the power, although not
necessarily theright, to dissolve the partnership. An
unjustified dissolution by the partner can subject him to a
possible action for damages.
The dissolution of a partnership is the change in the
relation of the parties caused by any partner ceasing to
be associated in the carrying on, as might be
distinguished from the winding up of, the business.8 Upon
its dissolution, the partnership continues and its legal
personality is retained until the complete winding up of its
business culminating in its termination.9
The liquidation of the assets of the partnership following
its dissolution is governed by various provisions of the
Civil Code; 10 however, an agreement of the partners, like
any other contract, is binding among them and normally
takes precedence to the extent applicable over the Code's
general provisions. We here take note of paragraph 8 of
the "Amendment to Articles of Partnership" reading
thusly:
. . . In the event of the death or retirement of any
partner, his interest in the partnership shall be
 liquidated and paid in accordance with the
existing agreements and his partnership
participation shall revert to the Senior Partners for
allocation as the Senior Partners may
determine; provided, however, that with respect
to the two (2) floors of office condominium which
the partnership is now acquiring, consisting of the
5th and the 6th floors of the Alpap Building, 140
Alfaro Street, Salcedo Village, Makati, Metro
Manila, their true value at the time of such death
or retirement shall be determined by two (2)
independent appraisers, one to be appointed (by
the partnership and the other by the) retiring
partner or the heirs of a deceased partner, as the
case may be. In the event of any disagreement
between the said appraisers a third appraiser will
be appointed by them whose decision shall be
final. The share of the retiring or deceased
partner in the aforementioned two (2) floor office
condominium shall be determined upon the basis
of the valuation above mentioned which shall be
paid monthly within the first ten (10) days of every
month in installments of not less than P20,000.00
for the Senior Partners, P10,000.00 in the case of
two (2) existing Junior Partners and P5,000.00 in
the case of the new Junior Partner. 11

The term "retirement" must have been used in the articles,

as we so hold, in a generic sense to mean the dissociation
by a partner, inclusive of resignation or withdrawal, from
the partnership that thereby dissolves it.

On the third and final issue, we accord due respect to the

appellate court and respondent Commission on their
common factual finding, i.e., that Attorney Misa did not act
in bad faith. Public respondents viewed his withdrawal to
have been spurred by "interpersonal conflict" among the
partners. It would not be right, we agree, to let any of the
partners remain in the partnership under such an
atmosphere of animosity; certainly, not against their
will. 12 Indeed, for as long as the reason for withdrawal of
a partner is not contrary to the dictates of justice and
fairness, nor for the purpose of unduly visiting harm and
damage upon the partnership, bad faith cannot be said to
characterize the act. Bad faith, in the context here used,
is no different from its normal concept of a conscious and
intentional design to do a wrongful act for a dishonest
purpose or moral obliquity.

WHEREFORE, the decision appealed from is

AFFIRMED. No pronouncement on costs.

SO ORDERED.
G.R. No. L-49982 April 27, 1988
ELIGIO ESTANISLAO, JR., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, REMEDIOS
ESTANISLAO, EMILIO and LEOCADIO
SANTIAGO, respondents.
Agustin O. Benitez for petitioner.
Benjamin C. Yatco for private respondents.
GANCAYCO, J.:
By this petition for certiorari the Court is asked to
determine if a partnership exists between members of the
same family arising from their joint ownership of certain
properties.
Petitioner and private respondents are brothers and
sisters who are co-owners of certain lots at the corner of
Annapolis and Aurora Blvd., QuezonCity which were then
being leased to the Shell Company of the Philippines
Limited (SHELL). They agreed to open and operate a gas
station thereat to be known as Estanislao Shell Service
Station with an initial investment of P 15,000.00 to be
taken from the advance rentals due to them from SHELL
for the occupancy of the said lots owned in common by
them. A joint affidavit was executed by them on April 11,
1966 which was prepared byAtty. Democrito
Angeles 1 They agreed to help their brother, petitioner
herein, by allowing him to operate and manage the
gasoline service station of the family. They negotiated
with SHELL. For practical purposes and in order not to run
counter to the company's policy of appointing only one
dealer, it was agreed that petitioner would apply for the
dealership. Respondent Remedios helped in managing
the bussiness with petitioner from May 3, 1966 up to
February 16, 1967.
On May 26, 1966, the parties herein entered into an
Additional Cash Pledge Agreement with SHELL wherein
it was reiterated that the P 15,000.00 advance rental shall
be deposited with SHELL to cover advances of fuel to
petitioner as dealer with a proviso that said agreement
"cancels and supersedes the Joint Affidavit dated 11 April
1966 executed by the co-owners." 2
For sometime, the petitioner submitted financial
statements regarding the operation of the business to
private respondents, but therafter petitioner failed to
render subsequent accounting. Hence through Atty.
Angeles, a demand was made on petitioner to render an
accounting of the profits.
The financial report of December 31, 1968 shows that the
business was able to make a profit of P 87,293.79 and
that by the year ending 1969, a profit of P 150,000.00 was
realized. 3
Thus, on August 25, 1970 private respondents filed a
complaint in the Court of First Instance of Rizal against
petitioner praying among others that the latter be ordered:
1. to execute a public document
embodying all the provisions of the
partnership agreement entered into
between plaintiffs and defendant as
provided in Article 1771 of the New Civil
Code;
2. to render a formal accounting of the
business operation covering the period
from May 6, 1966 up to December 21,
1968 and from January 1, 1969 up to the
time the order is issued and that the
same be subject to proper audit;
3. to pay the plaintiffs their lawful shares
and participation in the net profits of the
business in an amount of no less than P
l50,000.00 with interest at the rate of 1%
per month from date of demand until full
payment thereof for the entire duration of
the business; and
4. to pay the plaintiffs the amount of P
10,000.00 as attorney's fees and costs of
the suit (pp. 13-14 Record on Appeal.)
After trial on the merits, on October 15, 1975, Hon. Lino
Anover who was then the temporary presiding judge of
Branch IV of the trial court, rendered judgment dismissing
the complaint and counterclaim and ordering private
respondents to pay petitioner P 3,000.00 attorney's fee
and costs. Private respondent filed a motion for
reconsideration of the decision. On December 10, 1975,
Hon. Ricardo Tensuan who was the newly appointed
presiding judge of the same branch, set aside the
aforesaid derision and rendered another decision in favor
of said respondents.
The dispositive part thereof reads as follows:
WHEREFORE, the Decision of this Court
dated October 14, 1975 is hereby
reconsidered and a new judgment is
hereby rendered in favor of the plaintiffs
and as against the defendant:
(1) Ordering the defendant to execute a
public instrument embodying all the
provisions of the partnership agreement
entered into between plaintiffs and
defendant as provided for in Article 1771,
Civil Code of the Philippines;
 (2) Ordering the defendant to render a
formal accounting of the business
operation from April 1969 up to the time
this order is issued, the same to be
subject to examination and audit by the
plaintiff,
(3) Ordering the defendant to pay
plaintiffs their lawful shares and
participation in the net profits of the
business in the amount of P 150,000.00,
with interest thereon at the rate of One
(1%) Per Cent per month from date of
demand until full payment thereof;
(4) Ordering the defendant to pay the
plaintiffs the sum of P 5,000.00 by way of
attorney's fees of plaintiffs' counsel; as
well as the costs of suit. (pp. 161-162.
Record on Appeal).
Petitioner then interposed an appeal to the Court of
Appeals enumerating seven (7) errors allegedly
committed by the trial court. In due course, a decision was
rendered by the Court of Appeals on November 28,1978
affirming in toto the decision of the lower court with costs
against petitioner. *
A motion for reconsideration of said decision filed by
petitioner was denied on January 30, 1979. Not satisfied
therewith, the petitioner now comes to this court by way
of this petition for certiorari alleging that the respondent
court erred:
1. In interpreting the legal import of the
Joint Affidavit (Exh. 'A') vis-a-vis the
Additional Cash Pledge Agreement
(Exhs. "B-2","6", and "L"); and
2. In declaring that a partnership was
established by and among the petitioner
and the private respondents as regards
the ownership and or operation of the
gasoline service station business.
Petitioner relies heavily on the provisions of the Joint
Affidavit of April 11, 1966 (Exhibit A) and the Additional
Cash Pledge Agreement of May 20, 1966 (Exhibit 6)
which are herein reproduced-
(a) The joint Affidavit of April 11, 1966, Exhibit A reads:
(1) That we are the Lessors of two
parcels of land fully describe in Transfer
Certificates of Title Nos. 45071 and
71244 of the Register of Deeds of
Quezon City, in favor of the LESSEE -
SHELL COMPANY OF THE
PHILIPPINES LIMITED a corporation
duly licensed to do business in the
Philippines;
(2) That we have requested the said
SHELL COMPANY OF THE PHILIPPINE
LIMITED advanced rentals in the total
amount of FIFTEEN THOUSAND
PESOS (P l5,000.00) Philippine
Currency, so that we can use the said
amount to augment our capital
investment in the operation of that
gasoline station constructed ,by the said
company on our two lots aforesaid by
virtue of an outstanding Lease
Agreement we have entered into with the
said company;
(3) That the and SHELL COMPANY OF
THE PHILIPPINE LIMITED out of its
benevolence and desire to help us in
aumenting our capital investment in the
operation of the said gasoline station,
has agreed to give us the said amount of
P 15,000.00, which amount will partake
the nature of ADVANCED RENTALS;
(4) That we have freely and voluntarily
agreed that upon receipt of the said
amount of FIFTEEN THOUSAND
PESOS (P l6,000.00) from he SHELL
COMPANY OF THE PHILIPPINES
LIMITED, the said sum as ADVANCED
RENTALS to us be applied as monthly
rentals for the sai two lots under our
Lease Agreement starting on the 25th of
May, 1966 until such time that the said of
P 15,000.00 be applicable, which time to
our estimate and one-half months from
May 25, 1966 or until the 10th of October,
1966 more or less;
(5) That we have likewise agreed among
ourselves that the SHELL COMPANY OF
THE PHILIPPINES LIMITED execute an
instrument for us to sign embodying our
conformity that the said amount that it will
generously grant us as requested be
applied as ADVANCED RENTALS; and
(6) FURTHER AFFIANTS SAYETH
NOT.,
(b) The Additional Cash Pledge Agreement of May
20,1966, Exhibit 6, is as follows:
WHEREAS, under the lease Agreement
dated 13th November, 1963 (identified as
doc. Nos. 491 & 1407, Page Nos. 99 &
66, Book Nos. V & III, Series of 1963 in
the Notarial Registers of Notaries Public
Rosauro Marquez, and R.D. Liwanag,
respectively) executed in favour of
SHELL by the herein CO-OWNERS and
another Lease Agreement dated 19th
March 1964 . . . also executed in favour
of SHELL by CO-OWNERS Remedios
and MARIA ESTANISLAO for the lease
of adjoining portions of two parcels of
land at Aurora Blvd./ Annapolis, Quezon
City, the CO OWNERS RECEIVE a total
monthly rental of PESOS THREE
THOUSAND THREE HUNDRED
EIGHTY TWO AND 29/100 (P 3,382.29),
Philippine Currency;
WHEREAS, CO-OWNER Eligio
Estanislao Jr. is the Dealer of the Shell
Station constructed on the leased land,
and as Dealer under the Cash Pledge
Agreement dated llth May 1966, he
deposited to SHELL in cash the amount
of PESOS TEN THOUSAND (P 10,000),
Philippine Currency, to secure his
purchase on credit of Shell petroleum
products; . . .
WHEREAS, said DEALER, in his desire,
to be granted an increased the limit up to
P 25,000, has secured the conformity of
his CO-OWNERS to waive and assign to
SHELL the total monthly rentals due to all
of them to accumulate the equivalent
amount of P 15,000, commencing 24th
May 1966, this P 15,000 shall be treated
as additional cash deposit to SHELL
under the same terms and conditions of
the aforementioned Cash Pledge
Agreement dated llth May 1966.
NOW, THEREFORE, for and in
consideration of the foregoing
premises,and the mutual covenants
among the CO-OWNERS herein and
SHELL, said parties have agreed and
hereby agree as follows:
l. The CO-OWNERS dohere by waive in
favor of DEALER the monthly rentals due
to all CO-OWNERS, collectively, under
the above describe two Lease
Agreements, one dated 13th November
1963 and the other dated 19th March
1964 to enable DEALER to increase his
existing cash deposit to SHELL, from P
10,000 to P 25,000, for such purpose, the
SHELL CO-OWNERS and DEALER
hereby irrevocably assign to SHELL the
monthly rental of P 3,382.29 payable to
them respectively as they fall due,
monthly, commencing 24th May 1966,
until such time that the monthly rentals
accumulated, shall be equal to P l5,000.
2. The above stated monthly rentals
accumulated shall be treated as
additional cash deposit by DEALER to
SHELL, thereby in increasing his credit
limit from P 10,000 to P 25,000. This
agreement, therefore, cancels and
supersedes the Joint affidavit dated 11
April 1966 executed by the CO-
OWNERS.
3. Effective upon the signing of this
agreement, SHELL agrees to allow
DEALER to purchase from SHELL
petroleum products, on credit, up to the
amount of P 25,000.
4. This increase in the credit shall also be
subject to the same terms and conditions
of the above-mentioned Cash Pledge
Agreement dated llth May 1966. (Exhs.
"B-2," "L," and "6"; emphasis supplied)
In the aforesaid Joint Affidavit of April 11, 1966 (Exhibit
A), it is clearly stipulated by the parties that the P
15,000.00 advance rental due to them from SHELL shall
augment their "capital investment" in the operation of the
gasoline station, which advance rentals shall be credited
as rentals from May 25, 1966 up to four and one-half
months or until 10 October 1966, more or less covering
said P 15,000.00.
In the subsequent document entitled "Additional Cash
Pledge Agreement" above reproduced (Exhibit 6), the
private respondents and petitioners assigned to SHELL
the monthly rentals due them commencing the 24th of
May 1966 until such time that the monthly rentals
accumulated equal P 15,000.00 which private
respondents agree to be a cash deposit of petitioner in
favor of SHELL to increase his credit limit as dealer. As
above-stated it provided therein that "This agreement,
therefore, cancels and supersedes the Joint Affidavit
dated 11 April 1966 executed by the CO-OWNERS."
Petitioner contends that because of the said stipulation
cancelling and superseding that previous Joint Affidavit,
whatever partnership agreement there was in said
previous agreement had thereby been abrogated. We find
no merit in this argument. Said cancelling provision was
necessary for the Joint Affidavit speaks of P 15,000.00
advance rentals starting May 25, 1966 while the latter
agreement also refers to advance rentals of the same
amount starting May 24, 1966. There is, therefore, a
duplication of reference to the P 15,000.00 hence the
need to provide in the subsequent document that it
"cancels and supersedes" the previous one. True it is that
in the latter document, it is silent as to the statement in
the Joint Affidavit that the P 15,000.00 represents the
"capital investment" of the parties in the gasoline station
business and it speaks of petitioner as the sole dealer, but
this is as it should be for in the latter document SHELL
was a signatory and it would be against its policy if in the
agreement it should be stated that the business is a
partnership with private respondents and not a sole
proprietorship of petitioner.

Moreover other evidence in the record shows that there

was in fact such partnership agreement between the
parties. This is attested by the testimonies of private
respondent Remedies Estanislao and Atty. Angeles.
Petitioner submitted to private respondents periodic
accounting of the business. 4 Petitioner gave a written
authority to private respondent Remedies Estanislao, his
sister, to examine and audit the books of their "common
business' aming negosyo). 5 Respondent Remedios
assisted in the running of the business. There is no doubt
that the parties hereto formed a partnership when they
bound themselves to contribute money to a common fund
with the intention of dividing the profits among
themselves.6 The sole dealership by the petitioner and
the issuance of all government permits and licenses in the
name of petitioner was in compliance with the afore-
stated policy of SHELL and the understanding of the
parties of having only one dealer of the SHELL products.

Further, the findings of facts of the respondent court are

conclusive in this proceeding, and its conclusion based on
the said facts are in accordancewith the applicable law.

WHEREFORE, the judgment appealed from is

AFFIRMED in toto with costs against petitioner. This
decision is immediately executory and no motion for
extension of time to file a motion for reconsideration shag
beentertained.

SO ORDERED.
G.R. No. L-18703 August 28, 1922
INVOLUNTARY INSOLVENCY OF CAMPOS RUEDA &
CO., S. en C., appellee,
vs.
PACIFIC COMMERCIAL CO., ASIATIC PETROLEUM
CO., and INTERNATIONAL BANKING
CORPORATION,petitioners-appellants.
Jose Yulo, Ross and Lawrence and J. A. Wolfson for
appellants.
Antonio Sanz for appellee.
ROMUALDEZ, J.:
The record of this proceeding having been transmitted to
this court by virtue of an appeal taken herein, a motion
was presented by the appellants praying this court that
this case be considered purely a moot question now, for
the reason that subsequent to the decision appealed
from, the partnership Campos Rueda & Co., voluntarily
filed an application for a judicial decree adjudging itself
insolvent, which is just what the herein petitioners and
appellants tried to obtain from the lower court in this
proceeding.
The motion now before us must be, and is hereby, denied
even under the facts stated by the appellants in their
motion aforesaid. The question raised in this case is not
purely moot one; the fact that a man was insolvent on a
certain day does not justify an inference that he was some
time prior thereto.
Proof that a man was insolvent on a certain day
does not justify an inference that he was on a day
some time prior thereto. Many contingencies,
such as unwise investments, losing contracts,
misfortune, or accident, might happen to reduce
a person from a state of solvency within a short
space of time. (Kimball vs. Dresser, 98 Me., 519;
57 Atl. Rep., 767.)
A decree of insolvency begins to operate on the date it is
issued. It is one thing to adjudge Campos Rueda & Co.
insolvent in December, 1921, as prayed for in this case,
and another to declare it insolvent in July, 1922, as stated
in the motion.
Turning to the merits of this appeal, we find that this
limited partnership was, and is, indebted to the appellants
in various sums amounting to not less than P1,000,
payable in the Philippines, which were not paid more than
thirty days prior to the date of the filing by the petitioners
of the application for involuntary insolvency now before
us. These facts were sufficient established by the
evidence.
The trial court denied the petition on the ground that it was
not proven, nor alleged, that the members of the aforesaid
firm were insolvent at the time the application was filed;
and that was said partners are personally and solidarily
liable for the consequence of the transactions of the
partnership, it cannot be adjudged insolvent so long as
the partners are not alleged and proven to be insolvent.
From this judgment the petitioners appeal to this court, on
the ground that this finding of the lower court is erroneous.
The fundamental question that presents itself for decision
is whether or not a limited partnership, such as the
appellee, which has failed to pay its obligation with three
creditors for more than thirty days, may be held to have
committed an act of insolvency, and thereby be adjudged
insolvent against its will.
Unlike the common law, the Philippine statutes consider
a limited partnership as a juridical entity for all intents and
purposes, which personality is recognized in all its acts
and contracts (art. 116, Code of Commerce). This being
so and the juridical personality of a limited partnership
being different from that of its members, it must, on
general principle, answer for, and suffer, the
consequence of its acts as such an entity capable of being
the subject of rights and obligations. If, as in the instant
case, the limited partnership of Campos Rueda & Co.
Failed to pay its obligations with three creditors for a
period of more than thirty days, which failure constitutes,
under our Insolvency Law, one of the acts of bankruptcy
upon which an adjudication of involuntary insolvency can
be predicated, this partnership must suffer the
consequences of such a failure, and must be adjudged
insolvent. We are not unmindful of the fact that some
courts of the United States have held that a partnership
may not be adjudged insolvent in an involuntary
insolvency proceeding unless all of its members are
insolvent, while others have maintained a contrary view.
But it must be borne in mind that under the American
common law, partnerships have no juridical personality
independent from that of its members; and if now they
have such personality for the purpose of the insolvency
law, it is only by virtue of general law enacted by the
Congress of the United States on July 1, 1898, section 5,
paragraph (h), of which reads thus:
In the event of one or more but not all of the
members of a partnership being adjudged
bankrupt, the partnership property shall not be
administered in bankruptcy, unless by consent of
the partner or partners not adjudged bankrupt;
but such partner or partners not adjudged
bankrupt shall settle the partnership business as
expeditiously as its nature will permit, and
account for the interest of the partner or partners
adjudged bankrupt.
The general consideration that these partnership had no
juridical personality and the limitations prescribed in
subsection (h) above set forth gave rise to the conflict
noted in American decisions, as stated in the case of In
reSamuels (215 Fed., 845), which mentions the two
apparently conflicting doctrines, citing one from In
re Bertenshaw (157 Fed., 363), and the other from
Francis vs. McNeal (186 Fed., 481).

But there being in our insolvency law no such provision

as that contained in section 5 of said Act of Congress of
July 1, 1898, nor any rule similar thereto, and the juridical
personality of limited partnership being recognized by our
statutes from their formation in all their acts and contracts
the decision of American courts on this point can have no
application in this jurisdiction, nor we see any reason why
these partnerships cannot be adjudged bankrupt
irrespective of the solvency or insolvency of their
members, provided the partnership has, as such,
committed some of the acts of insolvency provided in our
law. Under this view it is unnecessary to discuss the other
points raised by the parties, although in the particular
case under consideration it can be added that the liability
of the limited partners for the obligations and losses of the
partnership is limited to the amounts paid or promised to
be paid into the common fund except when a limited
partner should have included his name or consented to its
inclusion in the firm name (arts. 147 and 148, Code of
Commerce).

Therefore, it having been proven that the partnership

Campos Rueda & Co. failed for more than thirty days to
pay its obligations to the petitioners the Pacific
Commercial Co. the Asiatic Petroleum Co. and the
International Banking Corporation, the case comes under
paragraph 11 of section 20 of Act No. 1956, and
consequently the petitioners have the right to a judicial
decree declaring the involuntary insolvency of said
partnership.

Wherefore, the judgment appealed from is reversed, and

it is adjudged that the limited partnership Campos Rueda
& Co. is and was on December 28, 1921, insolvent and
liable for having failed for more than thirty days to meet its
obligations with the three petitioners herein, and it is
ordered that this proceeding be remanded to the Court of
First Instance of Manila with instruction to said court to
issue the proper decrees under section 24 of Act No.
1956, and proceed therewith until its final disposition.

It is so ordered without special finding as to costs.

G.R. No. L-8576 February 11, 1915
VARGAS and COMPANY, plaintiff-appellee,
vs.
CHAN HANG CHIU, ET AL., defendants-appellants.
Rohde and Wright for appellants.
Escaler and Salas for appellee.
MORELAND, J.:
This is an action brought to set aside a judgment of the
justice's court of Manila on the ground that the plaintiff
here, the defendant in the action in which the judgment
was secured, was not served with summons and that,
therefore, the justice's court acquired no jurisdiction to
render the judgment was that the same is null and void.
Judgment was entered in favor of plaintiff declaring the
judgment in controversy void and setting it aside. This
appeal is from that judgment.
It appears from the record that the plaintiff is a merchantile
association duly organized under the laws of the
Philippine Islands and presumably registered as required
by law. On the 19th day of August, 1911, an action was
begun by Chan Hang Chiu against the plaintiff in this case
to recover a sum of money. The summons and complaint
were placed in the hands of the sheriff, who certified that
on the 19th day of August, 1911, he served the same on
Vargas & Co. by delivering to and leaving with one Jose
Macapinlac personally true copies thereof, he being the
managing agent of said Vargas & Co. at the time of such
service. On July 2. 1912, the justice's court rendered
judgment against Vargas & Co. for the sum of 372.28.
Thereafter execution was duly issued and the property of
Vargas & Co. levied on for the payment thereof.
Thereupon Vargas & Co. paid the amount of the judgment
and costs under protest, with notice that it would sue to
recover the amount paid. The execution was returned
satisfied and there the matter rested until the present
action was brought.
The contention of plaintiff is, and that contention is
supported by the decision of the court below, that Vargas
& Co. being a partnership, it is necessary, in bringing an
action against it, to serve the summons on all of the
partners, delivering to each one of them personally a copy
thereof; and that the summons in this case having been
served on the managing agent of the company only, the
service was of no effect as against the company and the
members thereof and the judgment entered by virtue of
such a service was void.
Plaintiff also contends, and this contention is likewise
supported by the court below, that, even admitting that
service on the managing agent of the plaintiff is sufficient
service, as a matter of fact no service was really made on
the managing agent of the company but, rather, on an
employee or salesman of the company, who had no
powers of management or supervision and who was not
competent to receive service on behalf of the company
within the provisions of section 396 of the Code of Civil
Procedure.
We are of the opinion that neither of these contentions
can be sustained. As to the first, we may say that it has
been the universal practice in the Philippine Islands since
American occupation, and was the practice prior to that
time, to treat companies of the class to which the plaintiff
belongs as legal or juridicial entities and to permit them to
sue and be sued in the name of the company, the
summons being served solely on the managing agent or
other official of the company specified by the section of
the Code of Civil Procedure referred to. This very action
is an illustration of the practice in vogue in the Philippine
Islands. The plaintiff brings this action in the company
name and not in the name of the members of the firm.
Actions against companies of the class to which plaintiff
belongs are brought, according to the uninterrupted
practice, against such companies in their company names
and not against the individual partners constituting the
firm. In the States, in which the individual members of the
firm must be separately served with process, the rule also
prevails that they must be parties to the action, either
plaintiffs or defendant, and that the action cannot be
brought in the name of or against the company itself. This
follows naturally for the reason that, if it is necessary to
serve the partners individually, they are entitled to be
heard individually in the action and they must, therefore,
be made parties thereto so that they can be heard. It
would be idle to serve process on individual members of
a partnership if the litigation were to be conducted in the
name of the partnership itself and by the duly constituted
officials of the partnership exclusively.
From what has been said it is apparent that the plaintiff in
this action is acting contrary to its own contention by
bringing the action in the name of the company be served
with process, then the action should be brought in the
individual names of the partners and not in the name of
the company itself.
Article 35 of the Civil Code provides:
The following are judicial persons:
1. The corporation, associations, and institutions
of public interest recognized by law.
2. The associations of private interest, be they
civil, commercial, or industrial, to which the law
grants proper personality, independent of that of
each member thereof.
Article 38 provides: "Judicial persons may acquire and
possess property of all kinds, as well as contract
obligations and institute civil or criminal actions in
accordance with the laws and rules of their
establishment."
Article 116 of the Code of Commerce provides in part:
"After a commercial association has been established, it
shall have legal representation in all its acts and
contracts."
These provisions have been the foundation of the practice
followed without interruption for many years that
association of the class to which plaintiff belongs have an
independent and separate legal entity sufficient to permit
them to sue and be sued in the company name and to be
served with process through the chief officer or managing
agent thereof or any other official of the company
specified by law.
As to the second contention, we may say that the
presumption is that a judgment rendered by a justice's
court is a valid and enforceable judgment where the
record discloses that all of the steps necessary to confer
jurisdiction on the court have been taken. In the case
before us it affirmatively appears that the service of
process was made on the person the sheriff certified was
the managing agent of the defendant company. The
sheriff's certificate serves asprima facie evidence of the
existence of the facts stated therein. The record,
therefore, discloses, so far as the fact of service is
concerned, that it was duly made on the managing agent
of the company as required by section 396, paragraph 1,
of the Code of Civil Procedure. In attacking the judgement
on the ground that service was not made on the managing
agent of the company, it is incumbent on the plaintiff to
overcome the presumption arising from the sheriff's
certificate before the attack will succeed. Endeavoring to
overcome the presumption referred to, plaintiff offered as
a witness one Tomas O. Segovia, an employee of the
plaintiff company. He testified that he was a bookkeeper
and that as such he was well acquainted with the
business of the company and that the person Macapinlac
referred to in the sheriff's certificate as managing agent of
the plaintiff company was an agent for the sale of plows,
of which the plaintiff company was a manufacturer; and
that he had no other relations with the company than that
stated. During the course of the examination this question
was put to and answer elicited from this witness:
the statements contained it the sheriff's certificate of
service. His testimony is rather negative than positive, it
being at all times possible, in spite of his evidence,
indeed, in strict accord therewith, that Vargas & Co., of
which the witness was neither official nor manager, could
have appointed a managing agent for the company or
could have removed him without the personal knowledge
of the witness. The witness had no personal knowledge
of the relation between the company and Macapinlac. He
never saw the contract existing between them. He did not
hear the agreement between them nor did he know of his
own knowledge what the relations between the company
and Macapinlac were. His testimony besides being
negative in character has in it many of the elements of
hearsay and is not at all satisfactory. It would have been
very easy to present one of the members of the company,
or all of them, who engaged Macapinlac, who know the
relations between him and the company, to testify as to
what those relations were and to deny, if that were the
fact, that Macapinlac was such an agent or official of the
company as is within the purview of section 396 above
referred to. The facts stated in the certificate of the sheriff
will not be considered as overcome and rebutted except
on clear evidence showing the contrary. The evidence of
the bookkeeper, who is the only witness for the company,
is not satisfactory in any sense and is quite insufficient to
overcome the presumption established by the sheriff's
certificate.
In view of these considerations it is not necessary to
consider the question presented by the payment by the
plaintiff company of the judgment.
The judgment appealed from is reversed and the
complaint dismissed on the merits, without costs in this
instance. So ordered.

How do you know that they were not summoned,

or that they did not know of this case brought
before the justice of the peace of the city of
Manila?

I being the bookkeeper and the general attorney-

in-fact to Vargas & Co., in Iloilo, ought to know
whether they have been notified or summoned,
but I only knew about it when the sheriff appeared
in our office to make the levy.

This is the only witness who testified in the case. It does

not appear when he became the bookkeeper of the
company, or that he was in such a position that he could
know or did know personally the acts of the company and
its relations to Macapinlac. He does not testify of his own
knowledge to the essential facts necessary to controvert
G.R. No. L-48113 April 7, 1947
NGO TIAN TEK and NGO HAY, petitioner,
vs.
PHILIPPINE EDUCATION CO., INC., respondent.
Tansinsin and Yatco for petitioner.
Marcial Esposo for respondent.
PARAS, J.:
The plaintiff, Philippine Education Co., Inc., instituted in
the Court of First Instance of Manila an action against the
defendants, Vicente Tan alias Chan Sy and the
partnership of Ngo Tian Tek and Ngo Hay, for the
recovery of some P16,070.14, unpaid cost of
merchandise purchased by Lee Guan Box Factory from
the plaintiff and five other corporate entities which, though
not parties to the action, had previously assigned their
credits to the plaintiff, together with attorney's fees,
interest and costs. /by agreement of the parties, the case
was heard before a referee, Attorney Francisco Dalupan,
who in due time submitted his report holding the
defendants jointly and severally liable to the plaintiff for
the sum of P16,070.14 plus attorney's fees and interest at
the rates specified in the report. On March 6, 1939, the
Court of First Instance of Manila rendered judgment was
affirmed by the Court of Appeals in its decision of January
31, 1941, now the subject of our review at the instance of
the partnership Ngo Tian Tek and Ngo Hay, petitioner
herein.
"It appears that," quoting from the decision of the Court of
Appeals whose findings of fact are conclusive, "as far
back as the year 1925, the Modern Box Factory was
established at 603 Magdalena Street, Manila. It was at
first owned by Ngo Hay, who three years later was joined
by Ngo Tian Tek as a junior partner. The modern Box
Factory dealt in pare and similar merchandise and
purchased goods from the plaintiff and its assignors in the
names of the Modern Box Factory, Ngo Hay and Co., Go
Hay Box Factory, or Go Hay. Then about the year 1930,
the Lee Guan Box Factory was established a few meters
from the Modern Box Factory, under the management of
Vicente Tan. When that concern, through Vicente Tan,
sought credit with the plaintiff and its assignors, Ngo Hay,
in conversations and interviews with their officers and
employees, represented that he was the principal owner
of such factory, that the Lee Guan Box Factory and the
Modern Box Factory belonged to the same owner, and
that the Lee Guan Box Factory was a subsidiary of the
Modern Box Factory. There is evidence that many goods
purchased in the name of the Lee Guan Box Factory were
delivered to the Modern Box Factory by the employees of
the plaintiff and its assignors upon the express direction
of Vicente Tan. There is also evidence that the collectors
of the sellers were requested by Vicente Tan to collect —
and did collect — from the Modern Box Factory the bills
against the Lee Guan Box Factory. In the fact the record
shows many checks signed by Ngo Hay or Ngo Tian Tek
in payment of accounts of the Lee Guan Box Factory.
Furthermore, — and this seems to be conclusive-Ngo
Hay, testifying for the defense, admitted that 'he' was the
owner of the Lee Guan Box Factory in and before the year
1934, but that in January, 1935, 'he' sold it, by the contract
of sale Exhibit 7, to Vicente Tan, who had been his
manager of the business. Tan declared also that before
January, 1935, the Lee Guan Box Factory pertained to
Ngo Hay and Ngo Tian Tek. The contract Exhibit 7 was
found by the referee, to be untrue and simulated, for
various convincing reasons that need no repetition here.
And the quoted statements serve effectively to confirm the
evidence for the plaintiff that it was Ngo Hay's
representations of ownership of, and responsibility for,
Lee Guan Box Factory that induced them to open credit
for that concern. It must be stated that in this connection
— to answer appellant's fitting observation — that the
plaintiff and the assignors have considered Ngo Hay, the
Modern Box Factory and Ngo Hay and Co. as one and
the same, through the acts of the partners themselves,
and that the proof as to Ngo Hay's statements regarding
the ownership of Lee Guan Box Factory must be taken in
that view. Ngo Hay was wont to say 'he' owned the
Modern Box Factory, meaning that he was the principal
owner, his other partner being Ngo Tian Tek. Now, it
needs no demonstration — for appellant does not deny it
— that the obligations of the Lee Guan Box Factory must
rest upon its known owner. And that owner in Ngo Tian
Tek and Ngo Hay."
We must overrule petitioner's contention that the Court of
Appeals erred in holding that Lee Guan Box Factory was
a subsidiary of the Modern Box Factory and in
disregarding the fact that the contracts evidencing the
debts in question were signed by Vicente Tan alias Chan
Sy, without any indication that tended to involve the
Modern Box Factory or the petitioner. In the first place, we
are concluded by the finding of the Court of Appeals
regarding the ownership by the petitioner of Lee Guan
Box Factory. Secondly, the circumstances that Vicente
Tan alias Chan Sy acted in his own name cannot save the
petitioner, in view of said ownership, and because
contracts entered into by a factor of a commercial
establishment known to belong to a well known enterprise
or association, shall be understood as made for the
account of the owner of such enterprise or association,
even when the factor has not so stated at the time of
executing the same, provided that such contracts involve
objects comprised in the line and business of the
establishment. (Article 286, Code of Commerce.) The fact
that Vicente Tan did not have any recorded power of
attorney executed by the petitioner will not operate to
prejudice third persons, like the respondent Philippine
Education Co., Inc., and its assignors. (3 Echavarri, 133.)
Another defense set up by the petitioner is that prior to the
transactions which gave rise to this suit, Vicente Tan had
purchased Lee Guan Box Factory from Ngo Hay under
the contract, Exhibit 7; and the petitioner assails, under
the second assignment of error, the conclusion of the
Court of Appeals that said contract is simulated. This
contention is purely factual and must also be overruled.
The petitioner questions the right of the respondent
Philippine Education Co., Inc., to sue for the credits
assigned by the five entities with which Lee Guan Box
Factory originally contracted, it being argued that the
assignment, intended only for purposes of collection, did
not make said respondent the real party in interest. The
petitioner has cited 5 Corpus Juris, section 144, page 958,
which points out that "under statutes authorizing only
a bona fide assignee of choses in action to sue thereon in
his own name, an assignee for collection merely is not
entitled to sue in his own name."
are much too significant to permit a declaration that the
attachment was not justified."
Regarding the suggestion in petitioner's memorandum
that this case should be dismissed because of the death
of Ngo Hay, it is sufficient to state that the petitioner Ngo
Tian Tek and Ngo Hay is sued as a partnership
possessing a personality distinct from any of the partners.
The appealed decision is affirmed, with costs against the
petitioner. So ordered.

The finding of the Court of Appeals that there is nothing

"simulated in the assignment," precludes us from ruling
that respondent company is not a bona fide assignee.
Even assuming, however, that said assignment was only
for collection, we are not prepared to say that, under
section 114 of the Code of Civil Procedure, in force at the
time this action was instituted, ours is not one of those
jurisdictions following the rule that "when a choose,
capable of legal assignment, is assigned absolutely to
one, but the assignment is made for purpose of collection,
the legal title thereto vests in the assignee, and it is no
concern of the debtor that the equitable title is in another,
and payment to the assignee discharges the debtor." (5
C. J., section 144, p. 958.) No substantial right of the
petitioner could indeed be prejudiced by such
assignment, because section 114 of the Code of Civil
Procedure reserves to it "'any set-off or other defense
existing at the time of or before notice of the assignment.'"

Petitioner's allegation that "fraud in the inception of the

debt is personal to the contracting parties and does not
follow assignment," and that the contracts assigned to the
respondent company "are immoral and against public
policy and therefore void," constitute defenses on the
merits, but do not affect the efficacy of the assignment. It
is obvious that, apart from the fact that the petitioner can
not invoke fraud of its authorship to evade liability, the
appealed decision is founded on an obligation arising, not
from fraud, but from the very contracts under which
merchandise had been purchased by Lee Guan Box
Factory.

The fourth and fifth assignments of error relate to the

refusal of the Court of Appeals to hold that the writ of
attachment is issued at the commencement of this action
by the Court of First Instance is illegal, and to award in
favor of the petitioner damages for such wrongful
attachment. For us to sustain petitioner's contention will
amount to an unauthorized reversal of the following
conclusion of fact of the Court of Appeals: "The
stereotyped manner in which defendants obtained goods
on credit from the six companies, Vicente Tan's sudden
disappearance, the execution of the fake sale Exhibit 7 to
throw the whole responsibility upon the absent or
otherwise insolvent Tan, defendant's mercurial and
unbelievable theories as to the ownership of the Modern
Box Factory and Lee Guan Box Factory — obviously
adopted in a vain effort to meet or explain away the
evidentiary force of plaintiff's documentary evidence —
G.R. No. L-17295 July 30, 1962
ANG PUE & COMPANY, ET AL., plaintiffs-appellants,
vs.
SECRETARY OF COMMERCE AND
INDUSTRY, defendant-appellee.
Felicisimo E. Escaran for plaintiffs-appellants.
Office of the Solicitor General for defendant-appellee.
DIZON, J.:
Action for declaratory relief filed in the Court of First
Instance of Iloilo by Ang Pue & Company, Ang Pue and
Tan Siong against the Secretary of Commerce and
Industry to secure judgment "declaring that plaintiffs could
extend for five years the term of the partnership pursuant
to the provisions of plaintiffs' Amendment to the Article of
Co-partnership."
The answer filed by the defendant alleged, in substance,
that the extension for another five years of the term of the
plaintiffs' partnership would be in violation of the
provisions of Republic Act No. 1180.
It appears that on May 1, 1953, Ang Pue and Tan Siong,
both Chinese citizens, organized the partnership Ang Pue
& Company for a term of five years from May 1, 1953,
extendible by their mutual consent. The purpose of the
partnership was "to maintain the business of general
merchandising, buying and selling at wholesale and retail,
particularly of lumber, hardware and other construction
materials for commerce, either native or foreign." The
corresponding articles of partnership (Exhibit B) were
registered in the Office of the Securities & Exchange
Commission on June 16, 1953.
On June 19, 1954 Republic Act No. 1180 was enacted to
regulate the retail business. It provided, among other
things, that, after its enactment, a partnership not wholly
formed by Filipinos could continue to engage in the retail
business until the expiration of its term.
On April 15, 1958 — prior to the expiration of the five-year
term of the partnership Ang Pue & Company, but after the
enactment of the Republic Act 1180, the partners already
mentioned amended the original articles of part ownership
(Exhibit B) so as to extend the term of life of the
partnership to another five years. When the amended
articles were presented for registration in the Office of the
Securities & Exchange Commission on April 16, 1958,
registration was refused upon the ground that the
extension was in violation of the aforesaid Act.
From the decision of the lower court dismissing the action,
with costs, the plaintiffs interposed this appeal.
The question before us is too clear to require an extended
discussion. To organize a corporation or a partnership
that could claim a juridical personality of its own and
transact business as such, is not a matter of absolute right
but a privilege which may be enjoyed only under such
terms as the State may deem necessary to impose. That
the State, through Congress, and in the manner provided
by law, had the right to enact Republic Act No. 1180 and
to provide therein that only Filipinos and concerns wholly
owned by Filipinos may engage in the retail business can
not be seriously disputed. That this provision was clearly
intended to apply to partnership already existing at the
time of the enactment of the law is clearly showing by its
provision giving them the right to continue engaging in
their retail business until the expiration of their term or life.
To argue that because the original articles of partnership
provided that the partners could extend the term of the
partnership, the provisions of Republic Act 1180 cannot
be adversely affect appellants herein, is to erroneously
assume that the aforesaid provision constitute a property
right of which the partners can not be deprived without
due process or without their consent. The agreement
contain therein must be deemed subject to the law
existing at the time when the partners came to agree
regarding the extension. In the present case, as already
stated, when the partners amended the articles of
partnership, the provisions of Republic Act 1180 were
already in force, and there can be not the slightest doubt
that the right claimed by appellants to extend the original
term of their partnership to another five years would be in
violation of the clear intent and purpose of the law
aforesaid.
WHEREFORE, the judgment appealed from is affirmed,
with costs.
G.R. No. 78133 October 18, 1988
MARIANO P. PASCUAL and RENATO P.
DRAGON, petitioners,
vs.
THE COMMISSIONER OF INTERNAL REVENUE and
COURT OF TAX APPEALS, respondents.
De la Cuesta, De las Alas and Callanta Law Offices for
petitioners.
The Solicitor General for respondents
GANCAYCO, J.:
The distinction between co-ownership and an
unregistered partnership or joint venture for income tax
purposes is the issue in this petition.
On June 22, 1965, petitioners bought two (2) parcels of
land from Santiago Bernardino, et al. and on May 28,
1966, they bought another three (3) parcels of land from
Juan Roque. The first two parcels of land were sold by
petitioners in 1968 toMarenir Development Corporation,
while the three parcels of land were sold by petitioners to A. IN HOLDING AS PRESUMPTIVELY
Erlinda Reyes and Maria Samson on March 19,1970. CORRECT THE DETERMINATION OF
Petitioners realized a net profit in the sale made in 1968 THE RESPONDENT COMMISSIONER,
in the amount of P165,224.70, while they realized a net TO THE EFFECT THAT PETITIONERS
profit of P60,000.00 in the sale made in 1970. The FORMED AN UNREGISTERED
corresponding capital gains taxes were paid by petitioners PARTNERSHIP SUBJECT TO
in 1973 and 1974 by availing of the tax amnesties granted CORPORATE INCOME TAX, AND
in the said years. THAT THE BURDEN OF OFFERING
EVIDENCE IN OPPOSITION THERETO
However, in a letter dated March 31, 1979 of then Acting RESTS UPON THE PETITIONERS.
BIR Commissioner Efren I. Plana, petitioners were
assessed and required to pay a total amount of B. IN MAKING A FINDING, SOLELY ON
P107,101.70 as alleged deficiency corporate income THE BASIS OF ISOLATED SALE
taxes for the years 1968 and 1970. TRANSACTIONS, THAT AN
UNREGISTERED PARTNERSHIP
Petitioners protested the said assessment in a letter of EXISTED THUS IGNORING THE
June 26, 1979 asserting that they had availed of tax REQUIREMENTS LAID DOWN BY LAW
amnesties way back in 1974. THAT WOULD WARRANT THE
PRESUMPTION/CONCLUSION THAT A
In a reply of August 22, 1979, respondent Commissioner PARTNERSHIP EXISTS.
informed petitioners that in the years 1968 and 1970,
petitioners as co-owners in the real estate transactions C. IN FINDING THAT THE INSTANT
formed an unregistered partnership or joint venture CASE IS SIMILAR TO THE
taxable as a corporation under Section 20(b) and its EVANGELISTA CASE AND
income was subject to the taxes prescribed under Section THEREFORE SHOULD BE DECIDED
24, both of the National Internal Revenue Code 1 that the ALONGSIDE THE EVANGELISTA
unregistered partnership was subject to corporate income CASE.
tax as distinguished from profits derived from the
partnership by them which is subject to individual income D. IN RULING THAT THE TAX
tax; and that the availment of tax amnesty under P.D. No. AMNESTY DID NOT RELIEVE THE
23, as amended, by petitioners relieved petitioners of their PETITIONERS FROM PAYMENT OF
individual income tax liabilities but did not relieve them OTHER TAXES FOR THE PERIOD
from the tax liability of the unregistered partnership. COVERED BY SUCH AMNESTY. (pp.
Hence, the petitioners were required to pay the deficiency 12-13, Rollo.)
income tax assessed.
The petition is meritorious.
Petitioners filed a petition for review with the respondent
Court of Tax Appeals docketed as CTA Case No. 3045. The basis of the subject decision of the respondent court
In due course, the respondent court by a majority decision is the ruling of this Court in Evangelista. 4
of March 30, 1987, 2 affirmed the decision and action
taken by respondent commissioner with costs against
In the said case, petitioners borrowed a sum of money
petitioners.
from their father which together with their own personal
funds they used in buying several real properties. They
It ruled that on the basis of the principle enunciated appointed their brother to manage their properties with full
in Evangelista 3 an unregistered partnership was in fact power to lease, collect, rent, issue receipts, etc. They had
formed by petitioners which like a corporation was subject the real properties rented or leased to various tenants for
to corporate income tax distinct from that imposed on the several years and they gained net profits from the rental
partners. income. Thus, the Collector of Internal Revenue
demanded the payment of income tax on a corporation,
In a separate dissenting opinion, Associate Judge among others, from them.
Constante Roaquin stated that considering the
circumstances of this case, although there might in fact In resolving the issue, this Court held as follows:
be a co-ownership between the petitioners, there was no
adequate basis for the conclusion that they thereby The issue in this case is whether
formed an unregistered partnership which made "hem petitioners are subject to the tax on
liable for corporate income tax under the Tax Code.
corporations provided for in section 24 of
Commonwealth Act No. 466, otherwise
Hence, this petition wherein petitioners invoke as basis known as the National Internal Revenue
thereof the following alleged errors of the respondent Code, as well as to the residence tax for
court: corporations and the real estate dealers'
fixed tax. With respect to the tax on
corporations, the issue hinges on the
meaning of the terms corporation and
partnership as used in sections 24 and
84 of said Code, the pertinent parts of
which read:
Sec. 24. Rate of the 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 (companies collectives), 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
participation), associations or insurance
companies, but does not include duly
registered general co-partnerships
(companies 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, property, or industry to
a common fund, with the intention of
dividing the profits among themselves.
Pursuant to this 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 found already in existence. It was
not a 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 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 transcations
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 petitioners in February,
1943. In other words, one cannot but
perceive a character of habituality
peculiar to business transactions
engaged in for purposes 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 Evangelists,
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 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
Evangelists 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. 5
In the present case, there is no evidence that petitioners
entered into an agreement to contribute money, property
or industry to a common fund, and that they intended to
divide the profits among themselves. Respondent
commissioner and/ or his representative just assumed
these conditions to be present on the basis of the fact that
petitioners purchased certain parcels of land and became
co-owners thereof.
In Evangelists, there was a series of transactions where
petitioners purchased twenty-four (24) lots showing that
the purpose was not limited to the conservation or
preservation of the common fund or even the properties
acquired by them. The character of habituality peculiar to
business transactions engaged in for the purpose of gain
was present.
In the instant case, petitioners bought two (2) parcels of
land in 1965. They did not sell the same nor make any
improvements thereon. In 1966, they bought another
three (3) parcels of land from one seller. It was only 1968
when they sold the two (2) parcels of land after which they
did not make any additional or new purchase. The
remaining three (3) parcels were sold by them in 1970.
The transactions were isolated. The character of
habituality peculiar to business transactions for the
purpose of gain was not present.
In Evangelista, the properties were leased out to tenants
for several years. The business was under the
management of one of the partners. Such condition
existed for over fifteen (15) years. None of the
circumstances are present in the case at bar. The co-
ownership started only in 1965 and ended in 1970.
Thus, in the concurring opinion of Mr. Justice Angelo
Bautista in Evangelista he said:
I wish however to make the following
observation Article 1769 of the new Civil
Code lays down the rule for determining
when a transaction should be deemed a
partnership or a co-ownership. Said
article paragraphs 2 and 3, provides;
(2) Co-ownership or co-possession does
not itself establish a partnership, whether
such co-owners or co-possessors do or
do not share any profits made by the use
of the property;
(3) The sharing of gross returns does not
of itself establish a partnership, whether
or not the persons sharing them have a
joint or common right or interest in any
property from which the returns are
derived;
From the above it appears that the fact
that those who agree to form a co-
ownership share or do not share any
profits made by the use of the property
held in common does not convert their
venture into a partnership. Or the sharing
of the gross returns does not of itself
establish a partnership whether or not the
persons sharing therein have a joint or
common right or interest in the property.
This only means that, aside from the
circumstance of profit, the presence of
other elements constituting partnership is
necessary, such as the clear intent to
form a partnership, the existence of a
juridical personality different from that of
the individual partners, and the freedom
to transfer or assign any interest in the
property by one with the consent of the
others (Padilla, Civil Code of the
Philippines Annotated, Vol. I, 1953 ed.,
pp. 635-636)
It is evident that an isolated transaction
whereby two or more persons contribute
funds to buy certain real estate for profit
in the absence of other circumstances
showing a contrary intention cannot be
considered a partnership.
Persons who contribute property or funds
for a common enterprise and agree to
share the gross returns of that enterprise
in proportion to their contribution, but who
severally retain the title to their respective
contribution, are not thereby rendered
partners. They have no common stock or
capital, and no community of interest as
principal proprietors in the business itself
which the proceeds derived. (Elements of
the Law of Partnership by Flord D.
Mechem 2nd Ed., section 83, p. 74.)
A joint purchase of land, by two, does not
constitute a co-partnership in respect
thereto; nor does an agreement to share
the profits and losses on the sale of land
create a partnership; the parties are only
 tenants in common. (Clark vs. Sideway,
142 U.S. 682,12 Ct. 327, 35 L. Ed.,
1157.)
Where plaintiff, his brother, and another
agreed to become owners of a single
tract of realty, holding as tenants in
common, and to divide the profits of
disposing of it, the brother and the other
not being entitled to share in plaintiffs
commission, no partnership existed as
between the three parties, whatever their
relation may have been as to third
parties. (Magee vs. Magee 123 N.E. 673,
233 Mass. 341.)
In order to constitute a partnership inter
sese there must be: (a) An intent to form
the same; (b) generally participating in
both profits and losses; (c) and such a
community of interest, as far as third
persons are concerned as enables each
party to make contract, manage the
business, and dispose of the whole
property.-Municipal Paving Co. vs.
Herring 150 P. 1067, 50 III 470.)
And even assuming for the sake of argument that such
unregistered partnership appears to have been formed,
since there is no such existing unregistered partnership
with a distinct personality nor with assets that can be held
liable for said deficiency corporate income tax, then
petitioners can be held individually liable as partners for
this unpaid obligation of the partnership p. 7 However, as
petitioners have availed of the benefits of tax amnesty as
individual taxpayers in these transactions, they are
thereby relieved of any further tax liability arising
therefrom.
WHEREFROM, the petition is hereby GRANTED and the
decision of the respondent Court of Tax Appeals of March
30, 1987 is hereby REVERSED and SET ASIDE and
another decision is hereby rendered relieving petitioners
of the corporate income tax liability in this case, without
pronouncement as to costs.
SO ORDERED.

The common ownership of property does

not itself create a partnership between
the owners, though they may use it for
the purpose of making gains; and they
may, without becoming partners, agree
among themselves as to the
management, and use of such property
and the application of the proceeds
therefrom. (Spurlock vs. Wilson, 142
S.W. 363,160 No. App. 14.) 6

The sharing of returns does not in itself establish a

partnership whether or not the persons sharing therein
have a joint or common right or interest in the property.
There must be a clear intent to form a partnership, the
existence of a juridical personality different from the
individual partners, and the freedom of each party to
transfer or assign the whole property.

In the present case, there is clear evidence of co-

ownership between the petitioners. There is no adequate
basis to support the proposition that they thereby formed
an unregistered partnership. The two isolated
transactions whereby they purchased properties and sold
the same a few years thereafter did not thereby make
them partners. They shared in the gross profits as co-
owners and paid their capital gains taxes on their net
profits and availed of the tax amnesty thereby. Under the
circumstances, they cannot be considered to have formed
an unregistered partnership which is thereby liable for
corporate income tax, as the respondent commissioner
proposes.