G.R. No.

L-12541 August 28, 1959

ROSARIO U. YULO, assisted by her husband JOSE C. YULO, Plaintiffs-Appellants, vs.
YANG CHIAO SENG, Defendant-Appellee.
Punzalan, Yabut, Eusebio & Tiburcio for appellants.
Augusto Francisco and Julian T. Ocampo for appellee.
LABRADOR, J.:

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Appeal from the judgment of the Court of First Instance of Manila, Hon. Bienvenido A. Tan,
presiding, dismissing plaintiff's complaint as well as defendant's counterclaim. The appeal is
prosecuted by plaintiff.
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The record discloses that on June 17, 1945, defendant Yang Chiao Seng wrote a letter to the
palintiff Mrs. Rosario U. Yulo, proposing the formation of a partnership between them to run and
operate a theatre on the premises occupied by former Cine Oro at Plaza Sta. Cruz, Manila. The
principal conditions of the offer are (1) that Yang Chiao Seng guarantees Mrs. Yulo a monthly
participation of P3,000 payable quarterly in advance within the first 15 days of each quarter, (2)
that the partnership shall be for a period of two years and six months, starting from July 1, 1945
to December 31, 1947, with the condition that if the land is expropriated or rendered
impracticable for the business, or if the owner constructs a permanent building thereon, or Mrs.
Yulo's right of lease is terminated by the owner, then the partnership shall be terminated even if
the period for which the partnership was agreed to be established has not yet expired; (3) that
Mrs. Yulo is authorized personally to conduct such business in the lobby of the building as is
ordinarily carried on in lobbies of theatres in operation, provided the said business may not
obstruct the free ingress and agrees of patrons of the theatre; (4) that after December 31, 1947,
all improvements placed by the partnership shall belong to Mrs. Yulo, but if the partnership
agreement is terminated before the lapse of one and a half years period under any of the causes
mentioned in paragraph (2), then Yang Chiao Seng shall have the right to remove and take away
all improvements that the partnership may place in the premises.
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Pursuant to the above offer, which plaintiff evidently accepted, the parties executed a partnership
agreement establishing the "Yang & Company, Limited," which was to exist from July 1, 1945 to
December 31, 1947. It states that it will conduct and carry on the business of operating a theatre
for the exhibition of motion and talking pictures. The capital is fixed at P100,000, P80,000 of
which is to be furnished by Yang Chiao Seng and P20,000, by Mrs. Yulo. All gains and profits
are to be distributed among the partners in the same proportion as their capital contribution and
the liability of Mrs. Yulo, in case of loss, shall be limited to her capital contribution (Exh. "B").

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In June , 1946, they executed a supplementary agreement, extending the partnership for a period
of three years beginning January 1, 1948 to December 31, 1950. The benefits are to be divided
between them at the rate of 50-50 and after December 31, 1950, the showhouse building shall
belong exclusively to the second party, Mrs. Yulo.
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The land on which the theatre was constructed was leased by plaintiff Mrs. Yulo from Emilia
Carrion Santa Marina and Maria Carrion Santa Marina. In the contract of lease it was stipulated
that the lease shall continue for an indefinite period of time, but that after one year the lease may
be cancelled by either party by written notice to the other party at least 90 days before the date of
cancellation. The last contract was executed between the owners and Mrs. Yulo on April 5, 1948.
But on April 12, 1949, the attorney for the owners notified Mrs. Yulo of the owner's desire to
cancel the contract of lease on July 31, 1949. In view of the above notice, Mrs. Yulo and her
husband brought a civil action to the Court of First Instance of Manila on July 3, 1949 to declare
the lease of the premises. On February 9, 1950, the Municipal Court of Manila rendered
judgment ordering the ejectment of Mrs. Yulo and Mr. Yang. The judgment was appealed. In the
Court of First Instance, the two cases were afterwards heard jointly, and judgment was rendered
dismissing the complaint of Mrs. Yulo and her husband, and declaring the contract of lease of the
premises terminated as of July 31, 1949, and fixing the reasonable monthly rentals of said
premises at P100. Both parties appealed from said decision and the Court of Appeals, on April
30, 1955, affirmed the judgment.
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On October 27, 1950, Mrs. Yulo demanded from Yang Chiao Seng her share in the profits of the
business. Yang answered the letter saying that upon the advice of his counsel he had to suspend
the payment (of the rentals) because of the pendency of the ejectment suit by the owners of the
land against Mrs. Yulo. In this letter Yang alleges that inasmuch as he is a sublessee and
inasmuch as Mrs. Yulo has not paid to the lessors the rentals from August, 1949, he was retaining
the rentals to make good to the landowners the rentals due from Mrs. Yulo in arrears (Exh.
"E").
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In view of the refusal of Yang to pay her the amount agreed upon, Mrs. Yulo instituted this action
on May 26, 1954, alleging the existence of a partnership between them and that the defendant
Yang Chiao Seng has refused to pay her share from December, 1949 to December, 1950; that
after December 31, 1950 the partnership between Mrs. Yulo and Yang terminated, as a result of
which, plaintiff became the absolute owner of the building occupied by the Cine Astor; that the
reasonable rental that the defendant should pay therefor from January, 1951 is P5,000; that the
defendant has acted maliciously and refuses to pay the participation of the plaintiff in the profits
of the business amounting to P35,000 from November, 1949 to October, 1950, and that as a
result of such bad faith and malice on the part of the defendant, Mrs. Yulo has suffered damages
in the amount of P160,000 and exemplary damages to the extent of P5,000. The prayer includes a
demand for the payment of the above sums plus the sum of P10,000 for the attorney's fees.
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In answer to the complaint, defendant alleges that the real agreement between the plaintiff and
the defendant was one of lease and not of partnership; that the partnership was adopted as a
subterfuge to get around the prohibition contained in the contract of lease between the owners
and the plaintiff against the sublease of the said property. As to the other claims, he denies the
same and alleges that the fair rental value of the land is only P1,100. By way of counterclaim he
alleges that by reason of an attachment issued against the properties of the defendant the latter
has suffered damages amounting to P100,000.
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The first hearing was had on April 19, 1955, at which time only the plaintiff appeared. The court
heard evidence of the plaintiff in the absence of the defendant and thereafter rendered judgment
ordering the defendant to pay to the plaintiff P41,000 for her participation in the business up to
December, 1950; P5,000 as monthly rental for the use and occupation of the building from
January 1, 1951 until defendant vacates the same, and P3,000 for the use and occupation of the
lobby from July 1, 1945 until defendant vacates the property. This decision, however, was set
aside on a motion for reconsideration. In said motion it is claimed that defendant failed to appear
at the hearing because of his honest belief that a joint petition for postponement filed by both
parties, in view of a possible amicable settlement, would be granted; that in view of the decision
of the Court of Appeals in two previous cases between the owners of the land and the plaintiff
Rosario Yulo, the plaintiff has no right to claim the alleged participation in the profit of the
business, etc. The court, finding the above motion, well-founded, set aside its decision and a new
trial was held. After trial the court rendered the decision making the following findings: that it is
not true that a partnership was created between the plaintiff and the defendant because defendant
has not actually contributed the sum mentioned in the Articles of Partnership, or any other
amount; that the real agreement between the plaintiff and the defendant is not of the partnership
but one of the lease for the reason that under the agreement the plaintiff did not share either in
the profits or in the losses of the business as required by Article 1769 of the Civil Code; and that
the fact that plaintiff was granted a "guaranteed participation" in the profits also belies the
supposed existence of a partnership between them. It. therefore, denied plaintiff's claim for
damages or supposed participation in the profits.
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As to her claim for damages for the refusal of the defendant to allow the use of the supposed
lobby of the theatre, the court after ocular inspection found that the said lobby was very narrow
space leading to the balcony of the theatre which could not be used for business purposes under
existing ordinances of the City of Manila because it would constitute a hazard and danger to the
patrons of the theatre. The court, therefore, dismissed the complaint; so did it dismiss the
defendant's counterclaim, on the ground that the defendant failed to present sufficient evidence to
sustain the same. It is against this decision that the appeal has been prosecuted by plaintiff to this
Court.
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The first assignment of error imputed to the trial court is its order setting aside its former
decision and allowing a new trial. This assignment of error is without merit. As that parties

agreed to postpone the trial because of a probable amicable settlement, the plaintiff could not
take advantage of defendant's absence at the time fixed for the hearing. The lower court,
therefore, did not err in setting aside its former judgment. The final result of the hearing shown
by the decision indicates that the setting aside of the previous decision was in the interest of
justice.
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In the second assignment of error plaintiff-appellant claims that the lower court erred in not
striking out the evidence offered by the defendant-appellee to prove that the relation between
him and the plaintiff is one of the sublease and not of partnership. The action of the lower court
in admitting evidence is justified by the express allegation in the defendant's answer that the
agreement set forth in the complaint was one of lease and not of partnership, and that the
partnership formed was adopted in view of a prohibition contained in plaintiff's lease against a
sublease of the property.
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The most important issue raised in the appeal is that contained in the fourth assignment of error,
to the effect that the lower court erred in holding that the written contracts, Exhs. "A", "B", and
"C, between plaintiff and defendant, are one of lease and not of partnership. We have gone over
the evidence and we fully agree with the conclusion of the trial court that the agreement was a
sublease, not a partnership. The following are the requisites of partnership: (1) two or more
persons who bind themselves to contribute money, property, or industry to a common fund; (2)
intention on the part of the partners to divide the profits among themselves. (Art. 1767, Civil
Code.).
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In the first place, plaintiff did not furnish the supposed P20,000 capital. In the second place, she
did not furnish any help or intervention in the management of the theatre. In the third place, it
does not appear that she has ever demanded from defendant any accounting of the expenses and
earnings of the business. Were she really a partner, her first concern should have been to find out
how the business was progressing, whether the expenses were legitimate, whether the earnings
were correct, etc. She was absolutely silent with respect to any of the acts that a partner should
have done; all that she did was to receive her share of P3,000 a month, which can not be
interpreted in any manner than a payment for the use of the premises which she had leased from
the owners. Clearly, plaintiff had always acted in accordance with the original letter of defendant
of June 17, 1945 (Exh. "A"), which shows that both parties considered this offer as the real
contract between them.
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Plaintiff claims the sum of P41,000 as representing her share or participation in the business
from December, 1949. But the original letter of the defendant, Exh. "A", expressly states that the
agreement between the plaintiff and the defendant was to end upon the termination of the right of
the plaintiff to the lease. Plaintiff's right having terminated in July, 1949 as found by the Court of
Appeals, the partnership agreement or the agreement for her to receive a participation of P3,000
automatically ceased as of said date.
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We find no error in the judgment of the court below and we affirm it in toto, with costs against
plaintiff-appellant.
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GONZALO MAKABENTA, petitioner,

vs.
JUAN L. BOCAR, Judge of First Instance of Leyte, and FILOMENO R. NEGADO,
respondents.
Alberto T. Aguja for petitioner.
Mateo Canonoy for respondents.
REYES, J.B.L., J.:
On September 30, 1950, Filomeno R. Negado filed a complaint in the Justice of the Peace Court
of Carigara, Leyte, against Gonzalo Makabenta for the recovery of a sum of money. Within the
prescribed period, the defendant Gonzalo Makabenta filed his answer with counterclaim. After
issues had been joined, the case was set for trial on September 18, 1951. At the trial, defendant
failed to appear; plaintiff moved that the former be declared in default, and accordingly, the
Justice of the Peace Court declared him in default and ordered the plaintiff to present his
evidence. Judgment was rendered for the plaintiff on November 24, 1951, copy of which
defendant Makabenta received on December 8, 1951, and it was only then that he learned for the
first time that he was declared in default and that judgment by default had been taken against
him. Whereupon, defendant Gonzalo Makabenta appealed to the Court of First Instance of Leyte
(Civil Case No. 1453), where both parties filed their respective pleadings. When the case was
ready for trial, the plaintiff appellee Filomeno R. Negado filed on July 20, 1952 a motion for the
dismissal of the appeal on the ground that the appellant had been declared in default in the
Justice of the Peace Court and had, therefore, no standing in court. The Court of First Instance
considered the motion well-taken and dismissed the appeal, holding that Makabenta had no right
to appeal unless the order declaring him in default is first set aside. A motion for the
reconsideration of the order of dismissal was denied, and defendant-appellant Gonzalo
Makabenta came to this court with a petition for certiorari , asking that after due hearing, the
order of the respondent Judge dismissing his appeal be annulled, and the case set for trial on the
merits.
The petition must be granted. The order of default taken against the petitioner Gonzalo
Makabenta in the Justice of the Peace Court of Carigara, Leyte is clearly illegal and without
effect; for although petitioner failed to appear during the trial of the case therein, he filed his
answer to the complaint, and as we have consistently held, the sole ground for default in the
inferior courts is failure to appeal (Veluz vs. Justice of the Peace of Sariaya, 42 Phil., 557;
Quizan vs. Arellano, 90 Phil., 644, Carballo vs. Hon. Demetrio B. Encarnacion, et al., 92 Phil.,
974). By filing his answer in the Justice of the Peace Court, petitioner put in his appearance and

submitted to its jurisdiction; hence, he was not, and should not have been declared, in default.
While it was discretionary for the court to proceed with the trial of the case in the absence of
petitioner or his counsel, and render judgment on the basis of the evidence presented by the
plaintiff, such judgment was not by default, and petitioner could, under the law, appeal, as he in
fact did appeal, to the Court of First Instance (Carballo vs. Hon. Demetrio B. Encarnacion,
supra). Consequently, in dismissing petitioner's appeal on the ground that he had no standing in
court unless the order of default is first set aside, the respondent Court committed a grave abuse
of discretion amounting to lack of jurisdiction.
This petition for certiorari to annul the order of dismissal of the appeal is in the nature of a
petition for mandamus to order the Court of First Instance to proceed with the hearing of the
case, and it is not barred by the fact that the order complained of was appealable (Quizan vs.
Arellano, Supra).
Wherefore, the petition for certiorari is granted, the order of the court a quo dismissing
petitioner's appeal is annulled, and the respondent judge is hereby directed to reinstate said
appeal and proceed with the trial of the case on the merits. Costs to be taxed against the
respondent Filomeno R. Negado.

HEIRS OF TAN ENG KEE vs.CA

HEIRS OF TAN ENG KEE vs.CA 341 SCRA 740, G.R. No. 126881, October 3, 2000
FACTS:
After the second World War, Tan EngKee 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 EngKee'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 EngKee 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 called Benguet Lumber and as such
should share in the profits and/or losses of the business venture or particular partnership
RULING:
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 EngKee 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 (an
American concept similar to our joint accounts) 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 maycontinue 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 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,
we cannot accept as an established fact that Tan EngKee 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 EngKee
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 EngKee
appeared never to have made any such demand for accounting from his brother, Tang Eng Lay.
We conclude that Tan EngKee was only an employee, not a partner since they did not present and
offer evidence that would show that Tan EngKee 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.
FERNANDO SANTOS, Petitioner, v. Spouses ARSENIO and NIEVES REYES,
Respondents.
Facts:
In June 1986, Fernando Santos, Nieves Reyes and Melton Zabat orally agreed to form a
partnership a lending business. Santos contributed 70% (as financier) while Reyes and Zabat
shared 30% (as industrial partners). Later, Reyes introduced Cesar Gragera whom they would
provide loans to Grageras corporation particularly its employees. In return Gragera shall have a

commission based on the loan payments. The partners decided on August 1986 to have a written
agreement but they found out that Zabat engaged in a competitor venture thus expelled him. The
two had Arsenio Reyes (husband of Nieves) replaced Zabat.
However, Santos accused the Spouses of not remitting the loans payments. He argued that the
couple were only his employees and there was a special arrangement between him and Gragera.
The trial court and the Court of Appeals ruled against Santos.
Issue:
Whether or not there was a partnership formed between Santos and the Spouses Reyes?
Held:
YES. The original partnership with Zabat continued even after the expulsion of the latter
from the partnership because there was no intent to dissolve the (partnership) relationship.

[Respondents] were industrial partners of [petitioner]. . . . Nieves herself provided the

initiative in the lending activities with Monte Maria. In consonance with the agreement
between appellant, Nieves and Zabat (later replaced by Arsenio), [respondents] contributed
industry to the common fund with the intention of sharing in the profits of the partnership.
[Respondents] provided services without which the partnership would not have [had] the
wherewithal to carry on the purpose for which it was organized and as such [were] considered
industrial partners (Evangelista v. Abad Santos, 51 SCRA 416 [1973]).
While concededly, the partnership between [petitioner,] Nieves and Zabat was technically
dissolved by the expulsion of Zabat therefrom, the remaining partners simply continued the
business of the partnership without undergoing the procedure relative to dissolution. Instead,
they invited Arsenio to participate as a partner in their operations. There was therefore, no
intent to dissolve the earlier partnership. The partnership between [petitioner,] Nieves and
Arsenio simply took over and continued the business of the former partnership with Zabat,
one of the incidents of which was the lending operations with Monte Maria.