AURELIO K. LITONJUA, JR. VS. EDUARDO K. LITONJUA, SR.

G.R. Nos. 166299-166300 December 13, 2005

FACTS:

Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that Eduardo entered
into a contract of partnership with him. Aurelio showed as evidence a letter sent to him
by Eduardo that the latter is allowing Aurelio to manage their family business if
Eduardo is away and in exchange thereof he will be giving Aurelio P1 million or 10%
equity, whichever is higher. A memorandum was subsequently made for the
said partnership agreement. The memorandum this time stated that in exchange of
Aurelio, who just got married, retaining his share in the family business (movie
theatres, shipping and land development) and some other immovable properties, he
will be given P1 Million or 10% equity in all these businesses and those to be
subsequently acquired by them whichever is greater.

In 1992 however, the relationship between the brothers went sour. And so Aurelio
demanded an accounting and the liquidation of his share in the partnership. Eduardo
did not heed and so Aurelio sued Eduardo.

ISSUE:

Whether or not there exists a partnership.

HELD:

NO.

The partnership is void and legally nonexistent.

The documentary evidence presented by Aurelio, i.e. the letter from Eduardo and
the Memorandum, did not prove partnership. The 1973 letter from Eduardo on its face,
contains typewritten entries, personal in tone, but is unsigned and undated. As
an unsigned document, there can be no doubt that said letter does not meet the public
instrumentation requirements exacted under Article 1771 of the Civil Code.

Moreover, being unsigned and doubtless referring to a partnership involving

more than P3,000.00 in money or property, said letter cannot be presented for
notarization, let alone registered with the Securities and Exchange Commission
(SEC), as called for under the Article 1772 of the Code.

And inasmuch as the inventory requirement under the succeeding Article 1773
goes into the matter of validity when immovable property is contributed to the
partnership, the next logical point of inquiry turns on the nature of Aurelio’s
contribution, if any, to the supposed partnership. The Memorandum is also not a proof
of the partnership for the same is not a public instrument and again, no inventory was
made of the immovable property and no inventory was attached to the Memorandum.
Article 1773 of the Civil Code requires that if immovable property is contributed to the
partnership an inventory shall be had and attached to the contract.

REYES, JUSIO RAE F. ASSIGNMENT NO. 1

J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
EUFEMIA EVANGELISTA, et al. vs THE COLLECTOR OF INTERNAL REVENUE
and THE COURT OF TAX APPEALS
G.R. No. L-9996 October 15, 1957

FACTS:

Petitioners borrowed sum of money from their father and together with their own
personal funds they used said money to buy several real properties. They then
appointed their brother Simeon as manager of the said real properties with powers
and authority to sell, lease or rent out said properties to third persons. They realized
rental income from the said properties for the period 1945-1949.

On September 24, 1954 respondent Collector of Internal Revenue demanded

the payment of income tax on corporations, real estate dealer's fixed tax and
corporation residence tax for the years 1945-1949. The letter of demand and
corresponding assessments were delivered to petitioners on December 3, 1954,
whereupon they instituted the present case in the Court of Tax Appeals, with a prayer
that "the decision of the respondent contained in his letter of demand dated September
24, 1954" be reversed, and that they be absolved from the payment of the taxes in
question. CTA denied their petition and subsequent Motion for Reconsideration and
New Trials were denied. Hence this petition.

ISSUE:

Whether or not petitioners have formed a partnership and consequently, are subject
to the tax.

HELD:

YES.

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. Upon consideration of all the facts and circumstances
surrounding the case, the Court is fully satisfied that their purpose was to engage in
real estate transactions for monetary gain and then divide the same among
themselves, because of the following observations, among others: (1) Said common
fund was not something they found already in existence; (2) They invested the same,
not merely in one transaction, but in a series of transactions; (3) The aforesaid lots
were not devoted to residential purposes, or to other personal uses, of petitioners
herein.

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

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J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
no room for doubt on the existence of said intent in petitioners herein.

For purposes of the tax on corporations, our National Internal Revenue Code,
includes these partnerships — with the exception only of duly registered general co-
partnerships — within the purview of the term "corporation." It is, therefore, clear to
our mind that petitioners herein constitute a partnership, insofar as said Code is
concerned and are subject to the income tax for corporations.

REYES, JUSIO RAE F. ASSIGNMENT NO. 1

J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
 LIM TONG LIM vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC.
G.R. No. 136448 November 3, 1999

FACTS:

It was established that Lim Tong Lim requested Peter Yao to engage in
commercial fishing with him and one Antonio Chua. The three agreed to purchase two
fishing boats but since they do not have the money, they borrowed from one Jesus
Lim (brother of Lim Tong Lim). They again borrowed money and they agreed to
purchase fishing nets and other fishing equipments.

Now, Yao and Chua represented themselves as acting in behalf of “Ocean Quest
Fishing Corporation” (OQFC) they contracted with Philippine Fishing Gear Industries
(PFGI) for the purchase of fishing nets amounting to more than P500k. They were
however unable to pay PFGI and so they were sued in their own names because
apparently OQFC is a non-existent corporation. Chua admitted liability and asked for
some time to pay. Yao waived his rights. Lim Tong Lim however argued that he’s not
liable because he was not aware that Chua and Yao represented themselves as a
corporation; that the two acted without his knowledge and consent.

ISSUE:

Whether or not Lim Tong Lim is liable.

HELD:

YES.

From the factual findings of both lower courts, it is clear that Chua, Yao and Lim
had decided to engage in a fishing business, which they started by buying boats worth
P3.35 million, financed by a loan secured from Jesus Lim. In their Compromise
Agreement, they subsequently revealed their intention to pay the loan with the
proceeds of the sale of the boats, and to divide equally among them the excess or
loss.

These boats, the purchase and the repair of which were financed with borrowed
money, fell under the term “common fund” under Article 1767. The contribution to such
fund need not be cash or fixed assets; it could be an intangible like credit or industry.
That the parties agreed that any loss or profit from the sale and operation of the boats
would be divided equally among them also shows that they had indeed formed a
partnership.

Lim Tong Lim cannot argue that the principle of corporation by estoppels can
only be imputed to Yao and Chua. Unquestionably, Lim Tong Lim benefited from the
use of the nets found in his boats, the boat which has earlier been proven to be an
asset of the partnership.

Lim, Chua and Yao decided to form a corporation. Although it was never legally
formed for unknown reasons, this fact alone does not preclude the liabilities of the
three as contracting parties in representation of it. Clearly, under the law on estoppel,

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those acting on behalf of a corporation and those benefited by it, knowing it to be
without valid existence, are held liable as general partners.

REYES, JUSIO RAE F. ASSIGNMENT NO. 1

J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
 HEIRS OF TAN ENG KEE vs. COURT OF APPEALS
G.R. No. 126881, October 3, 2000

FACTS:

After the second World War, Tan Eng Kee and Tan Eng Lay, pooling their
resources and industry together, entered into a partnership engaged in the business
of selling lumber and hardware and construction supplies. They named their enterprise
"Benguet Lumber" which they jointly managed until Tan Eng Kee's death. Petitioners
herein averred that the business prospered due to the hard work and thrift of the
alleged partners. However, they claimed that in 1981, Tan Eng Lay and his children
caused the conversion of the partnership "Benguet Lumber" into a corporation called
"Benguet Lumber Company." The incorporation was purportedly a ruse to deprive Tan
Eng Kee and his heirs of their rightful participation in the profits of the business.
Petitioners prayed for accounting of the partnership assets, and the dissolution,
winding up and liquidation thereof, and the equal division of the net assets of Benguet
Lumber. The RTC ruled in favor of petitioners, declaring that Benguet Lumber is a joint
venture which is akin to a particular partnership. The Court of Appeals rendered the
assailed decision reversing the judgment of the trial court.

ISSUE:

Whether the deceased Tan EngKee and Tan Eng Lay are joint adventurers and/or
partners in a business venture and/or particular partnership

HELD:

There was no partnership whatsoever. Except for a firm name, there was no firm
account, no firm letterheads submitted as evidence, no certificate of partnership, no
agreement as to profits and losses, and no time fixed for the duration of the
partnership. There was even no attempt to submit an accounting corresponding to the
period after the war until Kee's death in 1984. It had no business book, no written
account nor any memorandum for that matter and no license mentioning the existence
of a partnership.

Also, the trial court determined that Tan Eng Kee and Tan Eng Lay had entered
into a joint venture, which it said is akin to a particular partnership. A particular
partnership is distinguished from a joint adventure, to wit:

(a) A joint adventure is a sort of informal partnership, with no firm name and no
legal personality. In a joint account, the participating merchants can transact business
under their own name, and can be individually liable therefor;
(b) Usually, but not necessarily a joint adventure is limited to a SINGLE
TRANSACTION, although the business of pursuing to a successful termination may
continue for a number of years; a partnership generally relates to a continuing
business of various transactions of a certain kind.

A joint venture "presupposes generally a parity of standing between the joint co-
ventures or partners, in which each party has an equal proprietary interest in the capital

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or property contributed, and where each party exercises equal rights in the conduct of
the business.

The evidence presented by petitioners falls short of the quantum of proof required
to establish a partnership. In the absence of evidence, the Court cannot accept as an
established fact that Tan Eng Kee allegedly contributed his resources to a common
fund for the purpose of establishing a partnership. Besides, it is indeed odd, if not
unnatural, that despite the forty years the partnership was allegedly in existence, Tan
Eng Kee never asked for an accounting. The essence of a partnership is that the
partners share in the profits and losses. Each has the right to demand an accounting
as long as the partnership exists. A demand for periodic accounting is evidence of a
partnership. During his lifetime, Tan Eng Kee appeared never to have made any such
demand for accounting from his brother, Tang Eng Lay. We conclude that Tan Eng
Kee was only an employee, not a partner since they did not present and offer evidence
that would show that Tan Eng Kee received amounts of money allegedly representing
his share in the profits of the enterprise. There being no partnership, it follows that
there is no dissolution, winding up or liquidation to speak of.

REYES, JUSIO RAE F. ASSIGNMENT NO. 1

J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
 CESAR C. LIRIO vs. WILMER D. GENOVIA
G.R. No. 169757 November 23, 2011

FACTS:

Respondent Wilmer D. Genovia was hired on Aug. 15, 2001 as studio manager
by petitioner Cesar C. Lirio, owner of Celkor Ad Sonicmix Recording Studio, to
promote and sell the studio’s services to music enthusiasts and other prospective
clients. He received a monthly salary of P7,000.00 and additional commission of P100
per hour as recording technician.

Respondent was made to report for work from Monday to Friday from 9:00 a.m.
to 6 p.m. On Saturdays, he was required to work half-day only, but most of the time,
he still rendered eight hours of work or more. All the employees of petitioner, including
respondent, rendered overtime work almost everyday, but petitioner never kept a daily
time record to avoid paying the employees overtime pay.

In a complaint for illegal dismissal, petitioner invoked the defense that no

employer-employee relationship exists between him and respondent. Theirs is one of
an informal partnership since they agreed to contribute money, property or industry to
a common fund with the intention of dividing the profits among themselves.

ISSUE:

Whether the relationship between Lirio and Genovia was an informal partnership.

HELD:

No. It was not partnership but an employer-employee relationship.

The elements to determine the existence of an employment relationship are: (a)

the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee's conduct.
The most important element is the employer's control of the employee's conduct, not
only as to the result of the work to be done, but also as to the means and methods to
accomplish it.

All the aforesaid elements are present and was proven by Genovia through
documentary evidence:

a. A document denominated as "payroll" (dated July 31, 2001 to March 15,

2002) certified correct by petitioner which showed that respondent received a
monthly salary of P7,000.00 (P3,500.00 every 15th of the month and another
P3,500.00 every 30th of the month) with the corresponding deductions due to
absences incurred by respondent; and (2) copies of petty cash vouchers, showing
the amounts he received and signed for in the payrolls.
b. Petitioner wielded the power to dismiss as respondent stated that he was
verbally dismissed by petitioner, and respondent, thereafter, filed an action for
illegal dismissal against petitioner.

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J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
 c. Petitioner certainly had the power to check on the progress and work of
respondent as stated in his Position Paper and that it was agreed that he would
help and teach respondent how to use the studio equipment.

Lirio failed to prove that his relationship with respondent was one of partnership.
Such claim was not supported by any written agreement. In fact, in the payroll dated
July 31, 2001 to March 15, 2002, there were deductions from the wages of respondent
for his absence from work, which negates petitioner's claim that the wages paid were
advances for respondent’s work in the partnership.

It is a well-settled doctrine, that if doubts exist between the evidence presented

by the employer and the employee, the scales of justice must be tilted in favor of the
latter. It is a time-honored rule that in controversies between a laborer and his master,
doubts reasonably arising from the evidence or in the interpretation of agreements and
writing should be resolved in the former’s favor.

REYES, JUSIO RAE F. ASSIGNMENT NO. 1

J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
 JOSEFINA P. REALUBIT vs PROSENCIO D. JASO AND EDEN JASO
G.R. No. 178782 September 21, 2011

FACTS:
Petitioner Josefina Realubit entered into a Joint Venture Agreement with
Francis Eric Amaury Biondo, a French national, for the operation of an ice
manufacturing business. With Josefina as the industrial partner and Biondo as the
capitalist partner, the parties agreed that they would each receive 40% of the net profit,
with the remaining 20% to be used for the payment of the ice making machine which
was purchased for the business. For and in consideration of the sum of P500,000.00,
however, Biondo subsequently executed a Deed of Assignment transferring all his
rights and interests in the business in favor of respondent Eden Jaso, the wife of
respondent Prosencio Jaso. With Biondo’s eventual departure from the country, the
Spouses Jaso caused their lawyer to send Josefina a letter apprising her of their
acquisition of said Frenchman’s share in the business and formally demanding an
accounting and inventory thereof as well as the remittance of their portion of its profits.
Faulting Josefina with unjustified failure to heed their demand, the Spouses
Jaso commenced the instant suit for specific performance, accounting, examination,
audit and inventory of assets and properties, dissolution of the joint venture,
appointment of a receiver and damages. The said complaint alleged that the Spouses
Realubit had no gainful occupation or business prior to their joint venture with Biondo
and that aside from appropriating for themselves the income of the business, they
have fraudulently concealed the funds and assets thereof thru their relatives,
associates or dummies. The Spouses Realubit claimed that they have been engaged
in the tube ice trading business under a single proprietorship even before their
dealings with Biondo.
The RTC rendered its Decision discounting the existence of sufficient evidence
from which the income, assets and the supposed dissolution of the joint venture can
be adequately reckoned. Upon the finding, however, that the Spouses Jaso had been
nevertheless subrogated to Biondo’s rights in the business in view of their valid
acquisition of the latter’s share as capitalist partner. On appeal before the CA, the
foregoing decision was set aside upon the following findings that the Spouses Jaso
validly acquired Biondo’s share in the business which had been transferred to and
continued its operations and not dissolved as claimed by the Spouses Realubit.
ISSUES
1. Whether there was a valid assignment or rights to the joint venture
2. Whether the joint venture is a contract of partnership
3. Whether Jaso acquired the title of being a partner based on the Deed of
Assignment

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J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
HELD:
On the issue of assignment, as a public document, the Deed of Assignment Biondo
executed in favor of Eden not only enjoys a presumption of regularity but is also
considered prima facie evidence of the facts therein stated. A party assailing the
authenticity and due execution of a notarized document is, consequently, required to
present evidence that is clear, convincing and more than merely preponderant. In view
of the Spouses Realubits failure to discharge this onus, the Court finds that both the
RTC and the CA correctly upheld the authenticity and validity of said Deed of
Assignment upon the combined strength of the disputable presumptions and the
testimonies elicited from Eden and Notary Public Rolando Diaz.

On the issue of partnership, generally understood to mean an organization formed for

some temporary purpose, a joint venture is likened to a particular partnership or one
which has for its object determinate things, their use or fruits, or a specific undertaking,
or the exercise of a profession or vocation. The rule is settled that joint ventures are
governed by the law on partnerships which are, in turn, based on mutual agency
or delectus personae. Thus, the Court finds that there is indeed a partnership in this
case.

On the issue of whether Jaso acquired the title of being a partner based on the Deed
of Assignment, the Court ruled in the negative. It is evident that the transfer by a
partner of his partnership interest does not make the assignee of such interest a
partner of the firm, nor entitle the assignee to interfere in the management of the
partnership business or to receive anything except the assignee’s profits. The
assignment does not purport to transfer an interest in the partnership, but only a future
contingent right to a portion of the ultimate residue as the assignor may become
entitled to receive by virtue of his proportionate interest in the capital. Since a partner’s
interest in the partnership includes his share in the profits, we find that the CA
committed no reversible error in ruling that the Spouses Jaso are entitled to
Biondo’s share in the profits, despite Juanita’s lack of consent to the assignment of
said Frenchman’s interest in the joint venture. Although Eden did not, moreover,
become a partner as a consequence of the assignment and/or acquire the right to
require an accounting of the partnership business, the CA correctly granted her prayer
for dissolution of the joint venture conformably with the right granted to the purchaser
of a partner’s interest under Article 1831 of the Civil Code.

REYES, JUSIO RAE F. ASSIGNMENT NO. 1

J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
 E. S. LYONS vs. C. W. ROSENSTOCK
G.R. No. L-35469 March 17, 1932

FACTS:

Henry W. Elser was engaged in buying, selling, and administering real estate. E.
S. Lyons joined with him, the profits being shared by the two in equal parts. Lyons,
whose regular vocation was that of a missionary or missionary agent of the Methodist
Episcopal Church, went on leave to the United States and was gone for nearly a year
and a half. Elser made written statements showing that Lyons was, at that time, half
owner with Elser of three particular pieces of real property. Concurrently with this act,
Lyons executed in favor of Elser a general power of attorney empowering him to
manage and dispose of said properties at will and to represent Lyons fully and amply,
to the mutual advantage of both.

The attention of Elser was drawn to a piece of land, referred to as the San Juan
Estate. He obtained the loan of P50,000 to complete the amount needed for the first
payment on the San Juan Estate. The lender insisted that he should procure the
signature of the Fidelity & Surety Co. on the note to be given for said loan. Elser
mortgaged to the Fidelity & Surety Co. the equity of redemption in the property owned
by himself and Lyons on Carriedo Street to secure the liability thus assumed by it. The
case for the plaintiff supposes that, when Elser placed a mortgage for P50,000 upon
the equity of redemption in the Carriedo property, Lyons, as half owner of said
property, became, as it were, involuntarily the owner of an undivided interest in the
property acquired partly by that money; and it is insisted for him that, in consideration
of this fact, he is entitled to the four hundred forty-six and two-thirds shares of
J.K.Pickering & Company, with the earnings thereon, as claimed in his complaint.

ISSUE:

Whether there was a general relation of partnership.

HELD:

NO. The position of the appellant is, in the Court’s opinion, untenable.

If Elser had used any money actually belonging to Lyons in this deal, he would
under article 1724 of the Civil Code and Article 264 of the Code of Commerce, be
obligated to pay interest upon the money so applied to his own use. Under the law
prevailing in this jurisdiction a trust does not ordinarily attach with respect to property
acquired by person who uses money belonging to another. Of course, if an actual
relation of partnership had existed in the money used, the case might be different; and
much emphasis is laid in the appellant's brief upon the relation of partnership which, it
is claimed, existed.

But there was clearly no general relation of partnership, under article 1678 of the
Civil Code. It is clear that Elser, in buying the San Juan Estate, was not acting for any
partnership composed of himself and Lyons, and the law cannot be distorted into a
proposition which would make Lyons a participant in this deal contrary to his express
determination.

REYES, JUSIO RAE F. ASSIGNMENT NO. 1

J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
 It seems to be supposed that the doctrines of equity worked out in the
jurisprudence of England and the United States with reference to trusts apply a basis
for this action. The doctrines referred to operate, however, only where money
belonging to one person is used by another for the acquisition of property which should
belong to both; and it takes but little discernment to see that the situation here involved
is not one for the application of that doctrine, for no money belonging to Lyons or any
partnership composed of Elser and Lyons was in fact used by Elser in the purchase
of the San Juan Estate. Of course, if any damage had been caused to Lyons by the
placing of the mortgage upon the equity of redemption in the Carriedo property, Elser's
estate would be liable for such damage. But it is evident that Lyons was not prejudice
by that act.

REYES, JUSIO RAE F. ASSIGNMENT NO. 1

J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
 TOCAO vs COURT OF APPEALS
G.R. No. 127405 October 4, 2000

FACTS:

Private respondent Nenita A. Anay met petitioner William T. Belo, then the vice-
president for operations of Ultra Clean Water Purifier, through her former employer in
Bangkok. Belo introduced Anay to petitioner Marjorie Tocao, who conveyed her desire
to enter into a joint venture with her for the importation and local distribution of kitchen
cookwares.

Under the joint venture, Belo acted as capitalist, Tocao as president and
general manager, and Anay as head of the marketing department and later, vice-
president for sales.

The parties agreed that Belo's name should not appear in any documents relating
to their transactions with West Bend Company. Anay having secured the
distributorship of cookware products from the West Bend Company and organized the
administrative staff and the sales force, the cookware business took off successfully.
They operated under the name of Geminesse Enterprise, a sole proprietorship
registered in Marjorie Tocao's name.The parties agreed further that Anay would be
entitled to:
(1) ten percent (10%) of the annual net profits of the business;
(2) overriding commission of six percent (6%) of the overall weekly production;
(3) thirty percent (30%) of the sales she would make; and
(4) two percent (2%) for her demonstration services.

The agreement was not reduced to writing on the strength of Belo's assurances
that he was sincere, dependable and honest when it came to financial commitment.

On October 9, 1987, Anay learned that Marjorie Tocao had signed a

letter addressed to the Cubao sales office to the effect that she was no longer the vice-
president of Geminesse Enterprise.

Anay attempted to contact Belo. She wrote him twice to demand her overriding
commission for the period of January 8, 1988 to February 5, 1988 and the audit of the
company to determine her share in the net profits. Anay still received her five percent
(5%) overriding commission up to December 1987. The following year, 1988, she did
not receive the same commission although the company netted a gross sales of Php
13,300,360.00.

On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for
sum of money with damages against Marjorie D. Tocao and William Belo before the
Regional Trial Court of Makati, Branch 140

The trial court held that there was indeed an "oral partnership agreement”
between the plaintiff and the defendants. The Court of Appeals affirmed the lower
court’s decision.

REYES, JUSIO RAE F. ASSIGNMENT NO. 1

J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
ISSUE:

Whether the parties formed a partnership

HELD:

Yes, the parties involved in this case formed a partnership.

The Supreme Court held that to be considered a juridical personality, a

partnership must fulfill these requisites:

(1) two or more persons bind themselves to contribute money, property or

industry to a common fund; and

(2) intention on the part of the partners to divide the profits among themselves. It
may be constituted in any form; a public instrument is necessary only where
immovable property or real rights are contributed thereto.

This implies that since a contract of partnership is consensual, an oral contract

of partnership is as good as a written one.

In the case at hand, Belo acted as capitalist while Tocao as president and general
manager, and Anay as head of the marketing department and later, vice-president for
sales. Furthermore, Anay was entitled to a percentage of the net profits of the
business.Therefore, the parties formed a partnership.

REYES, JUSIO RAE F. ASSIGNMENT NO. 1

J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
 COMMISSIONER OF INTERNAL REVENUE vs WILLIAM J. SUTER and COURT
OF APPEALS
G.R. No. L-25532 February 28, 1969

FACTS:

A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed
by herein respondent William J. Suter as the general partner, and Julia Spirig and
Gustav Carlson, as the limited partner and was registered with SEC. The partners
contributed, respectively, P20,000.00, P18,000.00 and P2,000.00 to the partnership.
The firm engaged, among other activities, in the importation, marketing, distribution
and operation of automatic phonographs, radios, television sets and amusement
machines, their parts and accessories.

In 1948, however, general partner Suter and limited partner Spirig got married
and, thereafter, on 18 December 1948, limited partner Carlson sold his share in the
partnership to Suter and his wife.

In 1959, Commissioner of Internal Revenue consolidated the income of the firm

and the individual incomes of the partners-spouses Suter and Spirig resulting in a
determination of a deficiency income tax against respondent Suter.

The Court of Tax Appeals reversed the decision of the CIR. Hence, the petition.

ISSUES:

1. Whether or not the marriage of Suter and Spirig and their subsequent
acquisition of the interests of remaining partner Carlson in the partnership
dissolved the limited partnership; and,

2. Whether or not the income of the limited partnership be included In the

individual tax return of respondent

HELD:

On the first issue, the Court ruled in the negative. William J. Suter "Morcoin" Co.,
Ltd. was not a universal partnership, but a particular one since the contributions of the
partners were fixed sums of money, P20,000.00 by William Suter and P18,000.00 by
Julia Spirig and neither one of them was an industrial partner. It follows that William J.
Suter "Morcoin" Co., Ltd. was not a partnership that spouses were forbidden to enter
by Article 1677 of the Civil Code of 1889. Nor could the subsequent marriage of the
partners operate to dissolve it, such marriage not being one of the causes provided
for that purpose either by the Spanish Civil Code or the Code of Commerce

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J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
 On the second issue, the Court also ruled in the negative stating that although
Section 24 of the Internal Revenue Code merges registered general co-partnerships
with the personality of the individual partners for income tax purposes, the limited
partnership's separate individuality makes it impossible to equate its income with that
of the component members. The code taxes the latter on its income, but not the former,
because it is in the case of co-partnerships, that the members, and not the firm, are
taxable in their individual capacities for any dividend or share of the profit derived from
the duly registered general partnership.

REYES, JUSIO RAE F. ASSIGNMENT NO. 1

J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
 AGUILA, JR. v. COURT OF APPEALS
G.R. No. 127347 November 25, 1999

FACTS:

Alfredo N. Aguila, Jr. is the manager of A.C. Aguila & Sons, Co., a partnership
engaged in lending activities. On the other hand, Felicidad S. Vda. de Abrogar (private
respondent) and her late husband, Ruben M. Abrogar, were the registered owners of
a house and lot, covered by Transfer Certificate of Title No. 195101, in Marikina, Metro
Manila.

On April 18, 1991, private respondent, with the consent of her late husband, and
A.C. Aguila & Sons, Co., represented by petitioner, entered into a Memorandum of
Agreement which provided that A.C. Aguila & Sons, Co. shall buy the property from
private respondent for P200,000 subject to an option to repurchase for P230,000 (valid
for 90 days), etc. On the same day, the parties likewise executed a deed of absolute
sale, dated June 11, 1991, wherein private respondent, with the consent of her late
husband, sold the subject property to A.C. Aguila & Sons, Co., represented by
petitioner, for P200,000,00.

In a special power of attorney dated the same day, April 18, 1991, private
respondent authorized petitioner Atty. Charlie Mendoza to cause the cancellation of
TCT No. 195101 and the issuance of a new certificate of title in the name of A.C.
Aguila and Sons, Co., in the event she failed to redeem the subject property as
provided in the Memorandum of Agreement. Private respondent failed to redeem the
property.

Pursuant to the special power of attorney mentioned above, petitioner caused

the cancellation of TCT No. 195101 and the issuance of a new certificate of title in the
name of A.C. Aguila and Sons, Co. Private respondent then received a letter dated
August 10, 1991 from Atty. Lamberto C. Nanquil, counsel for A.C. Aguila & Sons, Co.,
demanding that she vacate the premises within 15 days after receipt of the letter and
surrender its possession peacefully to A.C. Aguila & Sons, Co. Otherwise, the latter
would bring the appropriate action in court. Upon the refusal of private respondent to
vacate the subject premises, A.C. Aguila & Sons, Co. filed an ejectment case against
her in the Metropolitan Trial Court, Branch 76, Marikina, Metro Manila. MeTC, Marikina
ruled in favor of A.C. Aguila & Sons, Co.

Private respondent appealed to RTC Pasig, CA, and then SC but she still lost.
Private respondent then filed a petition for declaration of nullity of a deed of sale filed
by Felicidad S. Vda. de Abrogar against Alfredo N. Aguila, Jr. She alleged that the
signature of her husband on the deed of sale was a forgery because he was already
dead when the deed was supposed to have been executed on June 11, 1991. The
RTC dismissed the case however, the CA reversed ruling of the RTC.

REYES, JUSIO RAE F. ASSIGNMENT NO. 1

J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST
 Hence, this petition for review on certiorari.

Petitioner now contends that: (1) he is not the real party in interest but A.C. Aguila
& Co., against which this case should have been brought; (2) the judgment in the
ejectment case is a bar to the filing of the complaint for declaration of nullity of a deed
of sale in this case; and (3) the contract between A.C. Aguila & Sons, Co. and private
respondent is a pacto de retro sale and not an equitable mortgage as held by the
appellate court.

ISSUE:

Whether the real party in interest is A.C. Aguila & Co. and not petitioner.

HELD:

YES.

Under Art. 1768 of the Civil Code, a partnership "has a juridical personality
separate and distinct from that of each of the partners." The partners cannot be held
liable for the obligations of the partnership unless it is shown that the legal fiction of a
different juridical personality is being used for fraudulent, unfair, or illegal purposes.

In this case, private respondent has not shown that A.C. Aguila & Sons, Co., as
a separate juridical entity, is being used for fraudulent, unfair, or illegal purposes.
Moreover, the title to the subject property is in the name of A.C. Aguila & Sons, Co.
and the Memorandum of Agreement was executed between private respondent, with
the consent of her late husband, and A.C. Aguila & Sons, Co., represented by
petitioner. Hence, it is the partnership, not its officers or agents, which should be
impleaded in any litigation involving property registered in its name. A violation of this
rule will result in the dismissal of the complaint.

REYES, JUSIO RAE F. ASSIGNMENT NO. 1

J.D. III LAW ON PARTNERSHIP, AGENCY AND TRUST