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July 30, 1979 respect of clients as that implicit in the relationship of

attorney and client — to acquire and use a trade name,

PETITION FOR AUTHORITY TO CONTINUE USE OF strongly indicates that there is no fundamental policy that
THE FIRM NAME "SYCIP, SALAZAR, FELICIANO, is offended by the continued use by a firm of professionals
HERNANDEZ & CASTILLO." LUCIANO E. SALAZAR, of a firm name which includes the name of a deceased
FLORENTINO P. FELICIANO, BENILDO G. partner, at least where such firm name has acquired the
HERNANDEZ. GREGORIO R. CASTILLO. ALBERTO P. characteristics of a "trade name." 3
GATMAITAN, JUSTINO H. CACANINDIN, NOEL A. 3. The Canons of Professional Ethics are not
LAMAN, ETHELWOLDO E. FERNANDEZ, ANGELITO transgressed by the continued use of the name of a
C. IMPERIO, EDUARDO R. CENIZA, TRISTAN A. deceased partner in the firm name of a law partnership
CATINDIG, ANCHETA K. TAN, and ALICE V. because Canon 33 of the Canons of Professional Ethics
PESIGAN, petitioners. adopted by the American Bar Association declares
that: têñ.£îhqwâ£
TO CONTINUE USE OF THE FIRM NAME "OZAETA, ... The continued use of the name of a
ROMULO, DE LEON, MABANTA & REYES." RICARDO deceased or former partner when
J. ROMULO, BENJAMIN M. DE LEON, ROMAN permissible by local custom, is not
MABANTA, JR., JOSE MA, REYES, JESUS S. J. unethical but care should be taken that
SAYOC, EDUARDO DE LOS ANGELES, and JOSE F. no imposition or deception is practiced
BUENAVENTURA, petitioners. through this use. ... 4

RESOLUTION 4. There is no possibility of imposition or deception

because the deaths of their respective deceased partners
MELENCIO-HERRERA, J.:ñé+.£ªwph!1 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
Two separate Petitions were filed before this Court 1) by
the surviving partners of Atty. Alexander Sycip, who died when their respective deceased partners were connected
on May 5, 1975, and 2) by the surviving partners of Atty. with the firm; petitioners will notify all leading national and
international law directories of the fact of their respective
Herminio Ozaeta, who died on February 14, 1976, praying
deceased partners' deaths. 5
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 5. No local custom prohibits the continued use of a
Petitions were ordered consolidated. 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
Petitioners base their petitions on the following
the name of a law firm necessarily Identifies the individual
members of the firm. 7
1. Under the law, a partnership is not prohibited from
6. The continued use of a deceased partner's name in the
continuing its business under a firm name which includes
firm name of law partnerships has been consistently
the name of a deceased partner; in fact, Article 1840 of
allowed by U.S. Courts and is an accepted practice in the
the Civil Code explicitly sanctions the practice when it
provides in the last paragraph that: têñ.£îhqw⣠legal profession of most countries in the world.8

The question involved in these Petitions first came under

The use by the person or partnership
consideration by this Court in 1953 when a law firm in
continuing the business of the
partnership name, or the name of a Cebu (the Deen case) continued its practice of including
deceased partner as part thereof, shall in its firm name that of a deceased partner, C.D.
not of itself make the individual property Johnston. The matter was resolved with this Court
advising the firm to desist from including in their firm
of the deceased partner liable for any
designation the name of C. D. Johnston, who has long
debts contracted by such person or
been dead."
partnership. 1

2. In regulating other professions, such as accountancy The same issue was raised before this Court in 1958 as
an incident in G. R. No. L-11964, entitled Register of
and engineering, the legislature has authorized the
Deeds of Manila vs. China Banking Corporation. The law
adoption of firm names without any restriction as to the
firm of Perkins & Ponce Enrile moved to intervene
use, in such firm name, of the name of a deceased
as amicus curiae. Before acting thereon, the Court, in a
partner; 2 the legislative authorization given to those
engaged in the practice of accountancy — a profession Resolution of April 15, 1957, stated that it "would like to
requiring the same degree of trust and confidence in 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 the old members to the creditors of a firm particularly
and Ponce Enrile, raising substantially the same where they are non-lawyers. Thus, Canon 34 of the
arguments as those now being raised by petitioners, Canons of Professional Ethics "prohibits an agreement for
prayed that the continued use of the firm name "Perkins the payment to the widow and heirs of a deceased lawyer
& Ponce Enrile" be held proper. of a percentage, either gross or net, of the fees received
from the future business of the deceased lawyer's clients,
On June 16, 1958, this Court resolved: têñ.£îhqw⣠both because the recipients of such division are not
lawyers and because such payments will not represent
After carefully considering the reasons service or responsibility on the part of the recipient. "
Accordingly, neither the widow nor the heirs can be held
given by Attorneys Alfonso Ponce Enrile
liable for transactions entered into after the death of their
and Associates for their continued use of
lawyer-predecessor. There being no benefits accruing,
the name of the deceased E. G. Perkins,
there ran be no corresponding liability.
the Court found no reason to depart from
the policy it adopted in June 1953 when
it required Attorneys Alfred P. Deen and Prescinding the law, there could be practical objections to
Eddy A. Deen of Cebu City to desist from allowing the use by law firms of the names of deceased
including in their firm designation, the partners. The public relations value of the use of an old
name of C. D. Johnston, deceased. The firm name can tend to create undue advantages and
Court believes that, in view of the disadvantages in the practice of the profession. An able
personal and confidential nature of the lawyer without connections will have to make a name for
relations between attorney and client, himself starting from scratch. Another able lawyer, who
and the high standards demanded in the can join an old firm, can initially ride on that old firm's
canons of professional ethics, no practice reputation established by deceased partners.
should be allowed which even in a
remote degree could give rise to the B. In regards to the last paragraph of Article 1840 of the
possibility of deception. Said attorneys Civil Code cited by petitioners, supra, the first factor to
are accordingly advised to drop the name consider is that it is within Chapter 3 of Title IX of the Code
"PERKINS" from their firm name. entitled "Dissolution and Winding Up." The Article
primarily deals with the exemption from liability in cases
Petitioners herein now seek a re-examination of the policy of a dissolved partnership, of the individual property of the
thus far enunciated by the Court. 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
The Court finds no sufficient reason to depart from the
part thereof. What the law contemplates therein is a hold-
rulings thus laid down.
over situation preparatory to formal reorganization.
A. Inasmuch as "Sycip, Salazar, Feliciano, Hernandez
Secondly, Article 1840 treats more of
and Castillo" and "Ozaeta, Romulo, De Leon, Mabanta
a commercial partnership with a good will to protect rather
and Reyes" are partnerships, the use in their partnership
than of a professional partnership, with no saleable good
names of the names of deceased partners will run counter
to Article 1815 of the Civil Code which will but whose reputation depends on the personal
provides: têñ.£îhqw⣠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
Art. 1815. Every partnership shall partnership consisting of lawyers. 9têñ.£îhqwâ£
operate under a firm name, which may or
may not include the name of one or more
As a general rule, upon the dissolution of
of the partners.
a commercial partnership the
succeeding partners or parties have the
Those who, not being members of the right to carry on the business under the
partnership, include their names in the old name, in the absence of a stipulation
firm name, shall be subject to the liability, forbidding it, (s)ince the name of a
of a partner. commercial partnership is a partnership
asset inseparable from the good will of
It is clearly tacit in the above provision that names in a the firm. ... (60 Am Jur 2d, s 204, p. 115)
firm name of a partnership must either be those of living (Emphasis supplied)
partners and. in the case of non-partners, should be living
persons who can be subjected to liability. In fact, Article On the other hand, têñ.£îhqwâ£
1825 of the Civil Code prohibits a third person from
including his name in the firm name under pain of
... a professional partnership the
assuming the liability of a partner. The heirs of a
deceased partner in a law firm cannot be held liable as reputation of which depends or; the
individual skill of the members, such as
partnerships of attorneys or physicians, 4. A relation to colleagues at the bar
has no good win to be distributed as a characterized by candor, fairness, and
firm asset on its dissolution, however unwillingness to resort to current
intrinsically valuable such skill and business methods of advertising and
reputation may be, especially where encroachment on their practice, or
there is no provision in the partnership dealing directly with their clients. 13
agreement relating to good will as an
asset. ... (ibid, s 203, p. 115) (Emphasis "The right to practice law is not a natural or constitutional
supplied) right but is in the nature of a privilege or franchise. 14 It is
limited to persons of good moral character with special
C. A partnership for the practice of law cannot be likened qualifications duly ascertained and certified. 15 The right
to partnerships formed by other professionals or for does not only presuppose in its possessor integrity, legal
business. For one thing, the law on accountancy standing and attainment, but also the exercise of a special
specifically allows the use of a trade name in connection privilege, highly personal and partaking of the nature of a
with the practice of accountancy.10 têñ.£îhqw⣠public trust." 16

A partnership for the practice of law is not D. Petitioners cited Canon 33 of the Canons of
a legal entity. It is a mere relationship or Professional Ethics of the American Bar Association" in
association for a particular purpose. ... It support of their petitions.
is not a partnership formed for the
purpose of carrying on trade or business It is true that Canon 33 does not consider as unethical the
or of holding property." 11 Thus, it has continued use of the name of a deceased or former
been stated that "the use of a nom de partner in the firm name of a law partnership when such
plume, assumed or trade name in law a practice is permissible by local custom but the Canon
practice is improper. 12 warns that care should be taken that no imposition or
deception is practiced through this use.
The usual reason given for different
standards of conduct being applicable to It must be conceded that in the Philippines, no local
the practice of law from those pertaining custom permits or allows the continued use of a
to business is that the law is a profession. deceased or former partner's name in the firm names of
law partnerships. Firm names, under our custom, Identify
Dean Pound, in his recently published the more active and/or more senior members or partners
contribution to the Survey of the Legal of the law firm. A glimpse at the history of the firms of
Profession, (The Lawyer from Antiquity to petitioners and of other law firms in this country would
Modern Times, p. 5) defines a profession show how their firm names have evolved and changed
as "a group of men pursuing a learned art from time to time as the composition of the partnership
as a common calling in the spirit of public changed. têñ.£îhqwâ£
service, — no less a public service
because it may incidentally be a means The continued use of a firm name after
of livelihood." the death of one or more of the partners
designated by it is proper only where
xxx xxx xxx sustained by local custom and not where
by custom this purports to Identify the
Primary characteristics which distinguish active members. ...
the legal profession from business are:
There would seem to be a question,
1. A duty of public service, of which the under the working of the Canon, as to the
emolument is a byproduct, and in which propriety of adding the name of a new
one may attain the highest eminence partner and at the same time retaining
without making much money. that of a deceased partner who was
never a partner with the new one. (H.S.
Drinker, op. cit., supra, at pp. 207208)
2. A relation as an "officer of court" to the
(Emphasis supplied).
administration of justice involving
thorough sincerity, integrity, and
reliability. 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
3. A relation to clients in the highest
search of legal counsel might be guided by the familiar
degree fiduciary.
ring of a distinguished name appearing in a firm title.
E. Petitioners argue that U.S. Courts have consistently social custom. The former can supplement statutory law
allowed the continued use of a deceased partner's name or be applied in the absence of such statute. Not so with
in the firm name of law partnerships. But that is so the latter.
because it is sanctioned by custom.
Moreover, judicial decisions applying or interpreting the
In the case of Mendelsohn v. Equitable Life Assurance laws form part of the legal system. 22 When the Supreme
Society (33 N.Y.S. 2d 733) which petitioners Salazar, et Court in the Deen and Perkins cases issued its
al. quoted in their memorandum, the New York Supreme Resolutions directing lawyers to desist from including the
Court sustained the use of the firm name Alexander & names of deceased partners in their firm designation, it
Green even if none of the present ten partners of the firm laid down a legal rule against which no custom or practice
bears either name because the practice was sanctioned to the contrary, even if proven, can prevail. This is not to
by custom and did not offend any statutory provision or speak of our civil law which clearly ordains that a
legislative policy and was adopted by agreement of the partnership is dissolved by the death of any
parties. The Court stated therein: têñ.£îhqw⣠partner. 23 Custom which are contrary to law, public order
or public policy shall not be countenanced. 24
The practice sought to be proscribed has
the sanction of custom and offends no The practice of law is intimately and peculiarly related to
statutory provision or legislative policy. the administration of justice and should not be considered
Canon 33 of the Canons of Professional like an ordinary "money-making trade." têñ.£îhqwâ£
Ethics of both the American Bar
Association and the New York State Bar ... It is of the essence of a profession that
Association provides in part as follows: it is practiced in a spirit of public service.
"The continued use of the name of a A trade ... aims primarily at personal gain;
deceased or former partner, when a profession at the exercise of powers
permissible by local custom is not beneficial to mankind. If, as in the era of
unethical, but care should be taken that wide free opportunity, we think of free
no imposition or deception is practiced competitive self assertion as the highest
through this use." There is no question good, lawyer and grocer and farmer may
as to local custom. Many firms in the city seem to be freely competing with their
use the names of deceased members fellows in their calling in order each to
with the approval of other attorneys, bar acquire as much of the world's good as
associations and the courts. The he may within the allowed him by law. But
Appellate Division of the First the member of a profession does not
Department has considered the matter regard himself as in competition with his
and reached The conclusion that such professional brethren. He is not bartering
practice should not be prohibited. his services as is the artisan nor
(Emphasis supplied) exchanging the products of his skill and
learning as the farmer sells wheat or
xxx xxx xxx corn. There should be no such thing as a
lawyers' or physicians' strike. The best
Neither the Partnership Law nor the service of the professional man is often
Penal Law prohibits the practice in rendered for no equivalent or for a trifling
question. The use of the firm name equivalent and it is his pride to do what
herein is also sustainable by reason of he does in a way worthy of his profession
agreement between the partners. 18 even if done with no expectation of
reward, This spirit of public service in
which the profession of law is and ought
Not so in this jurisdiction where there is no local custom
to be exercised is a prerequisite of sound
that sanctions the practice. Custom has been defined as
administration of justice according to law.
a rule of conduct formed by repetition of acts, uniformly
The other two elements of a profession,
observed (practiced) as a social rule, legally binding and
obligatory. 19 Courts take no judicial notice of custom. A namely, organization and pursuit of a
custom must be proved as a fact, according to the rules learned art have their justification in that
they secure and maintain that spirit. 25
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 In fine, petitioners' desire to preserve the Identity of their
other fact. 21 We find such proof of the existence of a local firms in the eyes of the public must bow to legal and
custom, and of the elements requisite to constitute the ethical impediment.
same, wanting herein. Merely because something is done
as a matter of practice does not mean that Courts can rely ACCORDINGLY, the petitions filed herein are denied and
on the same for purposes of adjudication as a juridical petitioners advised to drop the names "SYCIP" and
custom. Juridical custom must be differentiated from "OZAETA" from their respective firm names. Those
names may, however, be included in the listing of Lozada, effective at the end of
individuals who have been partners in their firms this month.
indicating the years during which they served as such.
"I trust that the accountants will
SO ORDERED. be instructed to make the proper
liquidation of my participation in
the firm."

G.R. No. 109248 July 3, 1995 On the same day, petitioner-appellant wrote
respondents-appellees another letter stating:
JR., and BENJAMIN T. BACORRO, petitioners, "Further to my letter to you today,
vs. I would like to have a meeting
HON. COURT OF APPEALS, SECURITIES AND with all of you with regard to the
EXCHANGE COMMISSION and JOAQUIN L. mechanics of liquidation, and
MISA, respondents. 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
The instant petition seeks a review of the decision respondents-appellees another letter stating:
rendered by the Court of Appeals, dated 26 February
1993, in CA-G.R. SP No. 24638 and No. 24648
"The partnership has ceased to
affirming in toto that of the Securities and Exchange
be mutually satisfactory because
Commission ("SEC") in SEC AC 254.
of the working conditions of our
employees including the
The antecedents of the controversy, summarized by assistant attorneys. All my efforts
respondent Commission and quoted at length by the to ameliorate the below
appellate court in its decision, are hereunder restated. subsistence level of the pay
scale of our employees have
The law firm of ROSS, LAWRENCE, SELPH and been thwarted by the other
CARRASCOSO was duly registered in the partners. Not only have they
Mercantile Registry on 4 January 1937 and refused to give meaningful
reconstituted with the Securities and Exchange increases to the employees,
Commission on 4 August 1948. The SEC records even attorneys, are dressed
show that there were several subsequent down publicly in a loud voice in a
amendments to the articles of partnership on 18 manner that deprived them of
September 1958, to change the firm [name] to their self-respect. The result of
ROSS, SELPH and CARRASCOSO; on 6 July such policies is the formation of
1965 . . . to ROSS, SELPH, SALCEDO, DEL the union, including the assistant
ROSARIO, BITO & MISA; on 18 April 1972 to attorneys."
LOZADA; on 4 December 1972 to SALCEDO, On 30 June 1988, petitioner filed with this
DEL ROSARIO, BITO, MISA & LOZADA; on 11 Commission's Securities Investigation and
March 1977 to DEL ROSARIO, BITO, MISA & Clearing Department (SICD) a petition for
LOZADA; on 7 June 1977 to BITO, MISA & dissolution and liquidation of partnership,
LOZADA; on 19 December 1980, [Joaquin L. docketed as SEC Case No. 3384 praying that the
Misa] appellees Jesus B. Bito and Mariano M. Commission:
Lozada associated themselves together, as
senior partners with respondents-appellees
"1. Decree the formal dissolution
Gregorio F. Ortega, Tomas O. del Castillo, Jr.,
and order the immediate
and Benjamin Bacorro, as junior partners.
liquidation of (the partnership of)
Bito, Misa & Lozada;
On February 17, 1988, petitioner-appellant wrote
the respondents-appellees a letter stating:
"2. Order the respondents to
deliver or pay for petitioner's
I am withdrawing and retiring share in the partnership assets
from the firm of Bito, Misa and plus the profits, rent or interest
attributable to the use of his right On appeal, the SEC en banc reversed the decision of the
in the assets of the dissolved Hearing Officer and held that the withdrawal of Attorney
partnership; Joaquin L. Misa had dissolved the partnership of "Bito,
Misa & Lozada." The Commission ruled that, being a
"3. Enjoin respondents from partnership at will, the law firm could be dissolved by any
using the firm name of Bito, Misa partner at anytime, such as by his withdrawal therefrom,
& Lozada in any of their regardless of good faith or bad faith, since no partner can
correspondence, checks and be forced to continue in the partnership against his will. In
pleadings and to pay petitioners its decision, dated 17 January 1990, the SEC held:
damages for the use thereof
despite the dissolution of the WHEREFORE, premises considered the
partnership in the amount of at appealed order of 31 March 1989 is hereby
least P50,000.00; REVERSED insofar as it concludes that the
partnership of Bito, Misa & Lozada has not been
"4. Order respondents jointly and dissolved. The case is hereby REMANDED to the
severally to pay petitioner Hearing Officer for determination of the
attorney's fees and expense of respective rights and obligations of the parties.2
litigation in such amounts as
maybe proven during the trial The parties sought a reconsideration of the above
and which the Commission may decision. Attorney Misa, in addition, asked for an
deem just and equitable under appointment of a receiver to take over the assets of the
the premises but in no case less dissolved partnership and to take charge of the winding
than ten (10%) per cent of the up of its affairs. On 4 April 1991, respondent SEC issued
value of the shares of petitioner an order denying reconsideration, as well as rejecting the
or P100,000.00; petition for receivership, and reiterating the remand of the
case to the Hearing Officer.
"5. Order the respondents to pay
petitioner moral damages with The parties filed with the appellate court separate appeals
the amount of P500,000.00 and (docketed CA-G.R. SP No. 24638 and CA-G.R. SP No.
exemplary damages in the 24648).
amount of P200,000.00.
During the pendency of the case with the Court of
"Petitioner likewise prayed for Appeals, Attorney Jesus Bito and Attorney Mariano
such other and further reliefs that Lozada both died on, respectively, 05 September 1991
the Commission may deem just and 21 December 1991. The death of the two partners,
and equitable under the as well as the admission of new partners, in the law firm
premises." prompted Attorney Misa to renew his application for
receivership (in CA G.R. SP No. 24648). He expressed
On 13 July 1988, respondents-appellees filed concern over the need to preserve and care for the
their opposition to the petition. partnership assets. The other partners opposed the
On 13 July 1988, petitioner filed his Reply to the
Opposition. The Court of Appeals, finding no reversible error on the
part of respondent Commission, AFFIRMED in toto the
On 31 March 1989, the hearing officer rendered SEC decision and order appealed from. In fine, the
appellate court held, per its decision of 26 February 1993,
a decision ruling that:
(a) that Atty. Misa's withdrawal from the partnership had
changed the relation of the parties and inevitably caused
"[P]etitioner's withdrawal from the dissolution of the partnership; (b) that such withdrawal
the law firm Bito, Misa & Lozada was not in bad faith; (c) that the liquidation should be to
did not dissolve the said law the extent of Attorney Misa's interest or participation in the
partnership. Accordingly, the partnership which could be computed and paid in the
petitioner and respondents are manner stipulated in the partnership agreement; (d) that
hereby enjoined to abide by the the case should be remanded to the SEC Hearing Officer
provisions of the Agreement for the corresponding determination of the value of
relative to the matter governing Attorney Misa's share in the partnership assets; and (e)
the liquidation of the shares of that the appointment of a receiver was unnecessary as no
any retiring or withdrawing sufficient proof had been shown to indicate that the
partner in the partnership partnership assets were in any such danger of being lost,
interest."1 removed or materially impaired.
In this petition for review under Rule 45 of the Rules of and represent their principals
Court, petitioners confine themselves to the following and client in all courts of justice
issues: and government departments
and offices in the Philippines,
1. Whether or not the Court of Appeals has erred and elsewhere when legally
in holding that the partnership of Bito, Misa & authorized to do so."
Lozada (now Bito, Lozada, Ortega & Castillo) is a
partnership at will; The "purpose" of the partnership is not the
specific undertaking referred to in the law.
2. Whether or not the Court of Appeals has erred Otherwise, all partnerships, which necessarily
in holding that the withdrawal of private must have a purpose, would all be considered as
respondent dissolved the partnership regardless partnerships for a definite undertaking. There
of his good or bad faith; and 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
3. Whether or not the Court of Appeals has erred
specific undertaking or "project" which has a
in holding that private respondent's demand for
definite or definable period of completion.3
the dissolution of the partnership so that he can
get a physical partition of partnership was not
made in bad faith; 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
to which matters we shall, accordingly, likewise limit
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
A partnership that does not fix its term is a partnership at partner's capability to give it, and the absence of a cause
will. That the law firm "Bito, Misa & Lozada," and now for dissolution provided by the law itself. Verily, any one
"Bito, Lozada, Ortega and Castillo," is indeed such a of the partners may, at his sole pleasure, dictate a
partnership need not be unduly belabored. We quote, with dissolution of the partnership at will. He must, however,
approval, like did the appellate court, the findings and act in good faith, not that the attendance of bad faith can
disquisition of respondent SEC on this matter; viz: prevent the dissolution of the partnership4 but that it can
result in a liability for damages.5
The partnership agreement (amended articles of
19 August 1948) does not provide for a specified In passing, neither would the presence of a period for its
period or undertaking. The "DURATION" clause specific duration or the statement of a particular purpose
simply states: for its creation prevent the dissolution of any partnership
by an act or will of a partner.6 Among partners,7 mutual
"5. DURATION. The partnership agency arises and the doctrine of delectus
shall continue so long as personae allows them to have the power, although not
mutually satisfactory and upon necessarily theright, to dissolve the partnership. An
the death or legal incapacity of unjustified dissolution by the partner can subject him to a
one of the partners, shall be possible action for damages.
continued by the surviving
partners." The dissolution of a partnership is the change in the
relation of the parties caused by any partner ceasing to
The hearing officer however opined that the be associated in the carrying on, as might be
partnership is one for a specific undertaking and distinguished from the winding up of, the business.8 Upon
hence not a partnership at will, citing paragraph 2 its dissolution, the partnership continues and its legal
of the Amended Articles of Partnership (19 personality is retained until the complete winding up of its
August 1948): business culminating in its termination.9

"2. Purpose. The purpose for The liquidation of the assets of the partnership following
which the partnership is formed, its dissolution is governed by various provisions of the
is to act as legal adviser and Civil Code; 10 however, an agreement of the partners, like
representative of any individual, any other contract, is binding among them and normally
firm and corporation engaged in takes precedence to the extent applicable over the Code's
commercial, industrial or other general provisions. We here take note of paragraph 8 of
lawful businesses and the "Amendment to Articles of Partnership" reading
occupations; to counsel and thusly:
advise such persons and entities
with respect to their legal and . . . In the event of the death or retirement of any
other affairs; and to appear for 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.

G.R. No. L-49982 April 27, 1988 that by the year ending 1969, a profit of P 150,000.00 was
realized. 3
vs. Thus, on August 25, 1970 private respondents filed a
THE HONORABLE COURT OF APPEALS, REMEDIOS complaint in the Court of First Instance of Rizal against
ESTANISLAO, EMILIO and LEOCADIO petitioner praying among others that the latter be ordered:
SANTIAGO, respondents.
1. to execute a public document
Agustin O. Benitez for petitioner. embodying all the provisions of the
partnership agreement entered into
Benjamin C. Yatco for private respondents. between plaintiffs and defendant as
provided in Article 1771 of the New Civil

GANCAYCO, J.: 2. to render a formal accounting of the

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

G.R. No. L-18703 August 28, 1922 and that was said partners are personally and solidarily
liable for the consequence of the transactions of the
INVOLUNTARY INSOLVENCY OF CAMPOS RUEDA & partnership, it cannot be adjudged insolvent so long as
CO., S. en C., appellee, the partners are not alleged and proven to be insolvent.
vs. From this judgment the petitioners appeal to this court, on
PACIFIC COMMERCIAL CO., ASIATIC PETROLEUM the ground that this finding of the lower court is erroneous.
CORPORATION,petitioners-appellants. The fundamental question that presents itself for decision
is whether or not a limited partnership, such as the
Jose Yulo, Ross and Lawrence and J. A. Wolfson for appellee, which has failed to pay its obligation with three
appellants. creditors for more than thirty days, may be held to have
Antonio Sanz for appellee. 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
The record of this proceeding having been transmitted to
purposes, which personality is recognized in all its acts
this court by virtue of an appeal taken herein, a motion
was presented by the appellants praying this court that and contracts (art. 116, Code of Commerce). This being
this case be considered purely a moot question now, for so and the juridical personality of a limited partnership
being different from that of its members, it must, on
the reason that subsequent to the decision appealed
general principle, answer for, and suffer, the
from, the partnership Campos Rueda & Co., voluntarily
consequence of its acts as such an entity capable of being
filed an application for a judicial decree adjudging itself
the subject of rights and obligations. If, as in the instant
insolvent, which is just what the herein petitioners and
appellants tried to obtain from the lower court in this 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
The motion now before us must be, and is hereby, denied upon which an adjudication of involuntary insolvency can
even under the facts stated by the appellants in their be predicated, this partnership must suffer the
motion aforesaid. The question raised in this case is not consequences of such a failure, and must be adjudged
purely moot one; the fact that a man was insolvent on a insolvent. We are not unmindful of the fact that some
certain day does not justify an inference that he was some courts of the United States have held that a partnership
time prior thereto. may not be adjudged insolvent in an involuntary
insolvency proceeding unless all of its members are
Proof that a man was insolvent on a certain day insolvent, while others have maintained a contrary view.
does not justify an inference that he was on a day But it must be borne in mind that under the American
some time prior thereto. Many contingencies, common law, partnerships have no juridical personality
such as unwise investments, losing contracts, independent from that of its members; and if now they
misfortune, or accident, might happen to reduce have such personality for the purpose of the insolvency
a person from a state of solvency within a short law, it is only by virtue of general law enacted by the
space of time. (Kimball vs. Dresser, 98 Me., 519; Congress of the United States on July 1, 1898, section 5,
57 Atl. Rep., 767.) paragraph (h), of which reads thus:

A decree of insolvency begins to operate on the date it is In the event of one or more but not all of the
issued. It is one thing to adjudge Campos Rueda & Co. members of a partnership being adjudged
insolvent in December, 1921, as prayed for in this case, bankrupt, the partnership property shall not be
and another to declare it insolvent in July, 1922, as stated administered in bankruptcy, unless by consent of
in the motion. the partner or partners not adjudged bankrupt;
but such partner or partners not adjudged
Turning to the merits of this appeal, we find that this bankrupt shall settle the partnership business as
limited partnership was, and is, indebted to the appellants expeditiously as its nature will permit, and
in various sums amounting to not less than P1,000, account for the interest of the partner or partners
payable in the Philippines, which were not paid more than adjudged bankrupt.
thirty days prior to the date of the filing by the petitioners
of the application for involuntary insolvency now before The general consideration that these partnership had no
us. These facts were sufficient established by the juridical personality and the limitations prescribed in
evidence. subsection (h) above set forth gave rise to the conflict
noted in American decisions, as stated in the case of In
The trial court denied the petition on the ground that it was reSamuels (215 Fed., 845), which mentions the two
not proven, nor alleged, that the members of the aforesaid apparently conflicting doctrines, citing one from In
firm were insolvent at the time the application was filed;
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

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

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 within the provisions of section 396 of the Code of Civil
VARGAS and COMPANY, plaintiff-appellee,
vs. We are of the opinion that neither of these contentions
CHAN HANG CHIU, ET AL., defendants-appellants. can be sustained. As to the first, we may say that it has
been the universal practice in the Philippine Islands since
Rohde and Wright for appellants. American occupation, and was the practice prior to that
Escaler and Salas for appellee. time, to treat companies of the class to which the plaintiff
belongs as legal or juridicial entities and to permit them to
MORELAND, J.: 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
This is an action brought to set aside a judgment of the the Code of Civil Procedure referred to. This very action
justice's court of Manila on the ground that the plaintiff is an illustration of the practice in vogue in the Philippine
here, the defendant in the action in which the judgment Islands. The plaintiff brings this action in the company
was secured, was not served with summons and that, name and not in the name of the members of the firm.
therefore, the justice's court acquired no jurisdiction to Actions against companies of the class to which plaintiff
render the judgment was that the same is null and void. belongs are brought, according to the uninterrupted
Judgment was entered in favor of plaintiff declaring the practice, against such companies in their company names
judgment in controversy void and setting it aside. This and not against the individual partners constituting the
appeal is from that judgment. firm. In the States, in which the individual members of the
firm must be separately served with process, the rule also
It appears from the record that the plaintiff is a merchantile prevails that they must be parties to the action, either
association duly organized under the laws of the plaintiffs or defendant, and that the action cannot be
Philippine Islands and presumably registered as required brought in the name of or against the company itself. This
by law. On the 19th day of August, 1911, an action was follows naturally for the reason that, if it is necessary to
begun by Chan Hang Chiu against the plaintiff in this case serve the partners individually, they are entitled to be
to recover a sum of money. The summons and complaint heard individually in the action and they must, therefore,
were placed in the hands of the sheriff, who certified that be made parties thereto so that they can be heard. It
on the 19th day of August, 1911, he served the same on would be idle to serve process on individual members of
Vargas & Co. by delivering to and leaving with one Jose a partnership if the litigation were to be conducted in the
Macapinlac personally true copies thereof, he being the name of the partnership itself and by the duly constituted
managing agent of said Vargas & Co. at the time of such officials of the partnership exclusively.
service. On July 2. 1912, the justice's court rendered
judgment against Vargas & Co. for the sum of 372.28. From what has been said it is apparent that the plaintiff in
Thereafter execution was duly issued and the property of this action is acting contrary to its own contention by
Vargas & Co. levied on for the payment thereof. bringing the action in the name of the company be served
Thereupon Vargas & Co. paid the amount of the judgment with process, then the action should be brought in the
and costs under protest, with notice that it would sue to individual names of the partners and not in the name of
recover the amount paid. The execution was returned the company itself.
satisfied and there the matter rested until the present
action was brought.
Article 35 of the Civil Code provides:
The contention of plaintiff is, and that contention is
The following are judicial persons:
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 1. The corporation, associations, and institutions
partners, delivering to each one of them personally a copy of public interest recognized by law.
thereof; and that the summons in this case having been
served on the managing agent of the company only, the 2. The associations of private interest, be they
service was of no effect as against the company and the civil, commercial, or industrial, to which the law
members thereof and the judgment entered by virtue of grants proper personality, independent of that of
such a service was void. each member thereof.

Plaintiff also contends, and this contention is likewise Article 38 provides: "Judicial persons may acquire and
supported by the court below, that, even admitting that possess property of all kinds, as well as contract
service on the managing agent of the plaintiff is sufficient obligations and institute civil or criminal actions in
service, as a matter of fact no service was really made on accordance with the laws and rules of their
the managing agent of the company but, rather, on an establishment."
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
Article 116 of the Code of Commerce provides in part: the statements contained it the sheriff's certificate of
"After a commercial association has been established, it service. His testimony is rather negative than positive, it
shall have legal representation in all its acts and being at all times possible, in spite of his evidence,
contracts." indeed, in strict accord therewith, that Vargas & Co., of
which the witness was neither official nor manager, could
These provisions have been the foundation of the practice have appointed a managing agent for the company or
followed without interruption for many years that could have removed him without the personal knowledge
association of the class to which plaintiff belongs have an of the witness. The witness had no personal knowledge
independent and separate legal entity sufficient to permit of the relation between the company and Macapinlac. He
them to sue and be sued in the company name and to be never saw the contract existing between them. He did not
served with process through the chief officer or managing hear the agreement between them nor did he know of his
agent thereof or any other official of the company own knowledge what the relations between the company
specified by law. and Macapinlac were. His testimony besides being
negative in character has in it many of the elements of
As to the second contention, we may say that the hearsay and is not at all satisfactory. It would have been
very easy to present one of the members of the company,
presumption is that a judgment rendered by a justice's
or all of them, who engaged Macapinlac, who know the
court is a valid and enforceable judgment where the
relations between him and the company, to testify as to
record discloses that all of the steps necessary to confer
what those relations were and to deny, if that were the
jurisdiction on the court have been taken. In the case
before us it affirmatively appears that the service of fact, that Macapinlac was such an agent or official of the
process was made on the person the sheriff certified was company as is within the purview of section 396 above
referred to. The facts stated in the certificate of the sheriff
the managing agent of the defendant company. The
sheriff's certificate serves asprima facie evidence of the will not be considered as overcome and rebutted except
on clear evidence showing the contrary. The evidence of
existence of the facts stated therein. The record,
therefore, discloses, so far as the fact of service is the bookkeeper, who is the only witness for the company,
concerned, that it was duly made on the managing agent is not satisfactory in any sense and is quite insufficient to
overcome the presumption established by the sheriff's
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 In view of these considerations it is not necessary to
overcome the presumption arising from the sheriff's consider the question presented by the payment by the
certificate before the attack will succeed. Endeavoring to plaintiff company of the judgment.
overcome the presumption referred to, plaintiff offered as
a witness one Tomas O. Segovia, an employee of the The judgment appealed from is reversed and the
plaintiff company. He testified that he was a bookkeeper complaint dismissed on the merits, without costs in this
and that as such he was well acquainted with the instance. So ordered.
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:

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

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

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 transact business as such, is not a matter of absolute right
but a privilege which may be enjoyed only under such
ANG PUE & COMPANY, ET AL., plaintiffs-appellants, terms as the State may deem necessary to impose. That
vs. the State, through Congress, and in the manner provided
SECRETARY OF COMMERCE AND by law, had the right to enact Republic Act No. 1180 and
INDUSTRY, defendant-appellee. to provide therein that only Filipinos and concerns wholly
owned by Filipinos may engage in the retail business can
Felicisimo E. Escaran for plaintiffs-appellants. not be seriously disputed. That this provision was clearly
Office of the Solicitor General for defendant-appellee. 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
DIZON, J.: their retail business until the expiration of their term or life.

Action for declaratory relief filed in the Court of First To argue that because the original articles of partnership
Instance of Iloilo by Ang Pue & Company, Ang Pue and provided that the partners could extend the term of the
Tan Siong against the Secretary of Commerce and partnership, the provisions of Republic Act 1180 cannot
Industry to secure judgment "declaring that plaintiffs could be adversely affect appellants herein, is to erroneously
extend for five years the term of the partnership pursuant assume that the aforesaid provision constitute a property
to the provisions of plaintiffs' Amendment to the Article of right of which the partners can not be deprived without
Co-partnership." due process or without their consent. The agreement
contain therein must be deemed subject to the law
The answer filed by the defendant alleged, in substance, existing at the time when the partners came to agree
that the extension for another five years of the term of the regarding the extension. In the present case, as already
plaintiffs' partnership would be in violation of the stated, when the partners amended the articles of
provisions of Republic Act No. 1180. partnership, the provisions of Republic Act 1180 were
already in force, and there can be not the slightest doubt
It appears that on May 1, 1953, Ang Pue and Tan Siong, that the right claimed by appellants to extend the original
both Chinese citizens, organized the partnership Ang Pue term of their partnership to another five years would be in
& Company for a term of five years from May 1, 1953, violation of the clear intent and purpose of the law
extendible by their mutual consent. The purpose of the aforesaid.
partnership was "to maintain the business of general
merchandising, buying and selling at wholesale and retail, WHEREFORE, the judgment appealed from is affirmed,
particularly of lumber, hardware and other construction with costs.
materials for commerce, either native or foreign." The
corresponding articles of partnership (Exhibit B) were G.R. No. 78133 October 18, 1988
registered in the Office of the Securities & Exchange
Commission on June 16, 1953.
DRAGON, petitioners,
On June 19, 1954 Republic Act No. 1180 was enacted to vs.
regulate the retail business. It provided, among other THE COMMISSIONER OF INTERNAL REVENUE and
things, that, after its enactment, a partnership not wholly COURT OF TAX APPEALS, respondents.
formed by Filipinos could continue to engage in the retail
business until the expiration of its term.
De la Cuesta, De las Alas and Callanta Law Offices for
On April 15, 1958 — prior to the expiration of the five-year
term of the partnership Ang Pue & Company, but after the
The Solicitor General for respondents
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 GANCAYCO, J.:
Securities & Exchange Commission on April 16, 1958,
registration was refused upon the ground that the The distinction between co-ownership and an
extension was in violation of the aforesaid Act. unregistered partnership or joint venture for income tax
purposes is the issue in this petition.
From the decision of the lower court dismissing the action,
with costs, the plaintiffs interposed this appeal. On June 22, 1965, petitioners bought two (2) parcels of
land from Santiago Bernardino, et al. and on May 28,
The question before us is too clear to require an extended 1966, they bought another three (3) parcels of land from
discussion. To organize a corporation or a partnership Juan Roque. The first two parcels of land were sold by
that could claim a juridical personality of its own and 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
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
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
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
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 is more they jointly borrowed a
corporations, the issue hinges on the substantial portion thereof in order to
meaning of the terms corporation and establish said common fund.
partnership as used in sections 24 and
84 of said Code, the pertinent parts of 2. They invested the same, not merely in
which read: one transaction, but in a series of
transactions. On February 2, 1943, they
Sec. 24. Rate of the tax on bought a lot for P100,000.00. On April 3,
corporations.—There shall be levied, 1944, they purchased 21 lots for
assessed, collected, and paid annually P18,000.00. This was soon followed, on
upon the total net income received in the April 23, 1944, by the acquisition of
preceding taxable year from all sources another real estate for P108,825.00. Five
by every corporation organized in, or (5) days later (April 28, 1944), they got a
existing under the laws of the Philippines, fourth lot for P237,234.14. The number of
no matter how created or organized but lots (24) acquired and transcations
not including duly registered general co- undertaken, as well as the brief
partnerships (companies collectives), a interregnum between each, particularly
tax upon such income equal to the sum the last three purchases, is strongly
of the following: ... indicative of a pattern or common design
that was not limited to the conservation
Sec. 84(b). The term "corporation" and preservation of the aforementioned
includes partnerships, no matter how common fund or even of the property
created or organized, joint-stock acquired by petitioners in February,
companies, joint accounts (cuentas en 1943. In other words, one cannot but
participation), associations or insurance perceive a character of habituality
companies, but does not include duly peculiar to business transactions
registered general co-partnerships engaged in for purposes of gain.
(companies colectivas).
3. The aforesaid lots were not devoted to
Article 1767 of the Civil Code of the residential purposes or to other personal
Philippines provides: uses, of petitioners herein. The
properties were leased separately to
several persons, who, from 1945 to 1948
By the contract of partnership two or
inclusive, paid the total sum of
more persons bind themselves to
contribute money, property, or industry to P70,068.30 by way of rentals.
a common fund, with the intention of Seemingly, the lots are still being so let,
for petitioners do not even suggest that
dividing the profits among themselves.
there has been any change in the
utilization thereof.
Pursuant to this article, the essential
elements of a partnership are two,
namely: (a) an agreement to contribute 4. Since August, 1945, the properties
have been under the management of one
money, property or industry to a common
person, namely, Simeon Evangelists,
fund; and (b) intent to divide the profits
among the contracting parties. The first with full power to lease, to collect rents,
to issue receipts, to bring suits, to sign
element is undoubtedly present in the
case at bar, for, admittedly, petitioners letters and contracts, and to indorse and
deposit notes and checks. Thus, the
have agreed to, and did, contribute
affairs relative to said properties have
money and property to a common
been handled as if the same belonged to
fund. Hence, the issue narrows down to
a corporation or business enterprise
their intent in acting as they did. Upon
operated for profit.
consideration of all the facts and
circumstances surrounding the case, we
are fully satisfied that their purpose was 5. The foregoing conditions have existed
to engage in real estate transactions for for more than ten (10) years, or, to be
monetary gain and then divide the same exact, over fifteen (15) years, since the
among themselves, because: first property was acquired, and over
twelve (12) years, since Simeon
1. Said common fund was not something Evangelists became the manager.
they found already in existence. It was
not a property inherited by them pro 6. Petitioners have not testified or
indiviso. They created it purposely. What introduced any evidence, either on their
purpose in creating the set up already (2) Co-ownership or co-possession does
adverted to, or on the causes for its not itself establish a partnership, whether
continued existence. They did not even such co-owners or co-possessors do or
try to offer an explanation therefor. do not share any profits made by the use
of the property;
Although, taken singly, they might not
suffice to establish the intent necessary (3) The sharing of gross returns does not
to constitute a partnership, the collective of itself establish a partnership, whether
effect of these circumstances is such as or not the persons sharing them have a
to leave no room for doubt on the joint or common right or interest in any
existence of said intent in petitioners property from which the returns are
herein. Only one or two of the derived;
aforementioned circumstances were
present in the cases cited by petitioners From the above it appears that the fact
herein, and, hence, those cases are not that those who agree to form a co-
in point. 5 ownership share or do not share any
profits made by the use of the property
In the present case, there is no evidence that petitioners held in common does not convert their
entered into an agreement to contribute money, property venture into a partnership. Or the sharing
or industry to a common fund, and that they intended to of the gross returns does not of itself
divide the profits among themselves. Respondent establish a partnership whether or not the
commissioner and/ or his representative just assumed persons sharing therein have a joint or
these conditions to be present on the basis of the fact that common right or interest in the property.
petitioners purchased certain parcels of land and became This only means that, aside from the
co-owners thereof. circumstance of profit, the presence of
other elements constituting partnership is
In Evangelists, there was a series of transactions where necessary, such as the clear intent to
petitioners purchased twenty-four (24) lots showing that form a partnership, the existence of a
the purpose was not limited to the conservation or juridical personality different from that of
preservation of the common fund or even the properties the individual partners, and the freedom
acquired by them. The character of habituality peculiar to to transfer or assign any interest in the
business transactions engaged in for the purpose of gain property by one with the consent of the
was present. others (Padilla, Civil Code of the
Philippines Annotated, Vol. I, 1953 ed.,
In the instant case, petitioners bought two (2) parcels of pp. 635-636)
land in 1965. They did not sell the same nor make any
improvements thereon. In 1966, they bought another It is evident that an isolated transaction
three (3) parcels of land from one seller. It was only 1968 whereby two or more persons contribute
when they sold the two (2) parcels of land after which they funds to buy certain real estate for profit
did not make any additional or new purchase. The in the absence of other circumstances
remaining three (3) parcels were sold by them in 1970. showing a contrary intention cannot be
The transactions were isolated. The character of considered a partnership.
habituality peculiar to business transactions for the
purpose of gain was not present. Persons who contribute property or funds
for a common enterprise and agree to
In Evangelista, the properties were leased out to tenants share the gross returns of that enterprise
for several years. The business was under the in proportion to their contribution, but who
management of one of the partners. Such condition severally retain the title to their respective
existed for over fifteen (15) years. None of the contribution, are not thereby rendered
circumstances are present in the case at bar. The co- partners. They have no common stock or
ownership started only in 1965 and ended in 1970. capital, and no community of interest as
principal proprietors in the business itself
which the proceeds derived. (Elements of
Thus, in the concurring opinion of Mr. Justice Angelo
Bautista in Evangelista he said: the Law of Partnership by Flord D.
Mechem 2nd Ed., section 83, p. 74.)
I wish however to make the following
A joint purchase of land, by two, does not
observation Article 1769 of the new Civil
constitute a co-partnership in respect
Code lays down the rule for determining
thereto; nor does an agreement to share
when a transaction should be deemed a
the profits and losses on the sale of land
partnership or a co-ownership. Said
article paragraphs 2 and 3, provides; create a partnership; the parties are only
tenants in common. (Clark vs. Sideway, And even assuming for the sake of argument that such
142 U.S. 682,12 Ct. 327, 35 L. Ed., unregistered partnership appears to have been formed,
1157.) since there is no such existing unregistered partnership
with a distinct personality nor with assets that can be held
Where plaintiff, his brother, and another liable for said deficiency corporate income tax, then
agreed to become owners of a single petitioners can be held individually liable as partners for
tract of realty, holding as tenants in this unpaid obligation of the partnership p. 7 However, as
common, and to divide the profits of petitioners have availed of the benefits of tax amnesty as
disposing of it, the brother and the other individual taxpayers in these transactions, they are
not being entitled to share in plaintiffs thereby relieved of any further tax liability arising
commission, no partnership existed as therefrom.
between the three parties, whatever their
relation may have been as to third WHEREFROM, the petition is hereby GRANTED and the
parties. (Magee vs. Magee 123 N.E. 673, decision of the respondent Court of Tax Appeals of March
233 Mass. 341.) 30, 1987 is hereby REVERSED and SET ASIDE and
another decision is hereby rendered relieving petitioners
In order to constitute a partnership inter of the corporate income tax liability in this case, without
sese there must be: (a) An intent to form pronouncement as to costs.
the same; (b) generally participating in
both profits and losses; (c) and such a SO ORDERED.
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.)

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