KILOSBAYAN V. GUINGONA

FACTS:Pursuant to Section 1 of the charter of the PCSO (R.A. No. 1169, as amended by B.P. Blg. 42) which grants it the authority to hold and conduct “charity sweepstakes races, lotteries and other similar activities,” the PCSO decided to establish an on-line lottery system for the purpose of increasing its revenue base and diversifying its sources of funds. Sometime before March 1993, after learning that the PCSO was interested in operating an on-line lottery system, the Berjaya Group Berhad, “a multinational company and one of the ten largest public companies in Malaysia,” “became interested to offer its services and resources to PCSO.” As an initial step, Berjaya Group Berhad (through its individual nominees) organized with some Filipino investors in March 1993 a Philippine corporation known as the Philippine Gaming Management Corporation (PGMC), which “was intended to be the medium through which the technical and management services required for the project would be offered and delivered to PCSO.”

Before August 1993, the PCSO formally issued a Request for Proposal (RFP) for the Lease Contract of an on-line lottery system for the PCSO. On 15 August 1993, PGMC submitted its bid to the PCSO. On 21 October 1993, the Office of the President announced that it had given the respondent PGMC the go-signal to operate the country’s on-line lottery system and that the corresponding implementing contract would be submitted not later than 8 November 1993 “for final clearance and approval by the Chief Executive.”

On 4 November 1993, KILOSBAYAN sent an open letter to President Fidel V. Ramos strongly opposing the setting up of the on-line lottery system on the basis of serious moral and ethical considerations. Considering the denial by the Office of the President of its protest and the statement of Assistant Executive Secretary Renato Corona that “only a court injunction can stop Malacañang,” and the imminent implementation of the Contract of Lease in February 1994, KILOSBAYAN, with its co-petitioners, filed on 28 January 1994 this petition.

Petitioner claims that it is a non-stock domestic corporation composed of civic-spirited citizens, pastors, priests, nuns, and lay leaders. The rest of the petitioners, except Senators Freddie Webb and Wigberto Tañada and Representative Joker P. Arroyo, are suing in their capacities as members of the Board of Trustees of KILOSBAYAN and as taxpayers and concerned citizens. Senators Webb and Tañada and Representative Arroyo are suing in their capacities as members of Congress and as taxpayers and concerned citizens of the Philippines. The public respondents, meanwhile allege that the petitioners have no standing to maintain the instant suit, citing the Court’s resolution in Valmonte vs. Philippine Charity Sweepstakes Office.

ISSUES:1. Whether or not the petitioners have locus standi

2. Whether or the Contract of Lease in the light of Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, which prohibits the PCSO from holding and conducting lotteries “in collaboration, association or joint venture with any person, association, company or entity, whether domestic or foreign.” is legal and valid.

HELD:We find the instant petition to be of transcendental importance to the public. The ramifications of such issues immeasurably affect the social, economic, and moral well-being of the people even in the remotest barangays of the country and the counter-productive and retrogressive effects of the envisioned on-line lottery system are as staggering as the billions in pesos it is expected to raise. The legal standing then of the petitioners deserves recognition and, in the exercise of its sound discretion, this Court hereby brushes aside the procedural barrier which the respondents tried to take advantage of.

The language of Section 1 of R.A. No. 1169 is indisputably clear. The PCSO cannot share its franchise with another by way of collaboration, association or joint venture. Neither can it assign, transfer, or lease such franchise. Whether the contract in question is one of lease or whether the PGMC is merely an independent contractor should not be decided on the basis of the title or designation of the contract but by the intent of the parties, which may be gathered from the provisions of the contract itself. Animus hominis est anima scripti. The intention of the party is the soul of the instrument.

Undoubtedly, from the very inception, the PCSO and the PGMC mutually understood that any arrangement between them would necessarily leave to the PGMC the technical, operations, and management aspects of the on-line lottery system while the PSCO would, primarily, provide the franchise. The so-called Contract of Lease is not, therefore, what it purports to be. Woven therein are provisions which negate its title and betray the true intention of the parties to be in or to have a joint venture for a period of eight years in the operation and maintenance of the on-line lottery system.

We thus declare that the challenged Contract of Lease violates the exception provided for in paragraph B, Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, and is, therefore, invalid for being contrary to law. This conclusion renders unnecessary further discussion on the other issues raised by the petitioners.

KILOSBAYAN v. GUINGONAG.R. No. 113375 May 5, 1994Ponente: DAVIDE, JR., J.

FACTS:The PCSO decided to establish an on- line lottery

system for the purpose of increasing its revenue base and diversifying its sources of funds pursuant to Section 1 of the charter of the PCSO (R.A. No. 1169, as amended by B.P. Blg. 42) which grants it the authority to hold and conduct "charity

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sweepstakes races, lotteries and other similar activities." PCSO is then seeking for a suitable contractor which shall build, at its own expense, all the facilities needed to operate and maintain a nationwide on-line lottery system. PCSO shall lease the facilities for a fixed percentage of quarterly gross receipts. Then subsequently, PGMC submitted its bid. On 21 October 1993, the Office of the President announced that it had given the respondent PGMC the go-signal to operate the country's on-line lottery system. PGMC and PSCO then entered into a contract of lease with certain agreements amongst themselves.

This prompted the petitioner KILOSBAYAN, who are suing in their capacities as members of the Board of Trustees of KILOSBAYAN and as taxpayers and concerned citizens, opposed to the online lotto on account of its immorality and illegality. They also said that the lease agreement was not valid on the ground that PCSO is prohibited from holding and conducting charity sweepstakes races, lotteries, and other similar activities "in collaboration, association or joint venture with any person, association, company or entity, foreign or domestic. This ground was contested by PCSO on the ground that what they entered into with PGMC is just a lease contract and not a joint venture.ISSUE: Whether or not the lease agreement was validHELD:

No. Because if we look deeply into the lease agreement between PCSO and PGMC we can see that what they entered into is not simply a lease agreement but in fact a joint venture agreement. Moreover, PCSO is prohibited from holding and conducting charity sweepstakes races, lotteries and other similar activities in collaboration, association or joint venture with any person, association, company or entity, foreign or domestic, according to its charter.

Furthermore, the following provision in their agreement constitutes that PCSO and PGMC in fact entered into a joint venture, instead of a simple lease contract, to wit:(a) Rent is defined in the lease contract as the amount to be paid to the PGMC as compensation for the fulfillment of its obligations under the contract, including, but not limited to the lease of the Facilities. However, this rent is not actually a fixed amount. Although it is stated to be 4.9% of gross receipts from ticket sales, payable net of taxes required by law to be withheld, it may be drastically reduced or, in extreme cases, nothing may be due or demandable at all because the PGMC binds itself to "bear all risks if the revenue from the ticket sales, on an annualized basis, are insufficient to pay the entire prize money." This risk-bearing provision is unusual in a lessor-lessee relationship, but inherent in a joint venture.(b) In the event of pre-termination of the contract by the PCSO, or its suspension of operation of the on-line lottery system in breach of the contract and through no fault of the PGMC, the PCSO binds itself "to promptly, and in any event not later than sixty (60) days, reimburse the Lessor the amount of its total investment cost associated with the On-Line Lottery System, including but not limited to the cost of the Facilities, and further compensate the LESSOR for loss of expected net profit after tax, computed over the unexpired term of the lease." If the contract were indeed one of lease, the payment of the expected profits or rentals for the unexpired portion of the term of the contract would be enough.

(c) The PGMC cannot "directly or indirectly undertake any activity or business in competition with or adverse to the On-Line Lottery System of PCSO unless it obtains the latter's prior written consent." If the PGMC is engaged in the business of leasing equipment and technology for an on-line lottery system, we fail to see any acceptable reason why it should allow a restriction on the pursuit of such business.(d) The PGMC shall provide the PCSO the audited Annual Report sent to its stockholders, and within two years from the effectivity of the contract, cause itself to be listed in the local stock exchange and offer at least 25% of its equity to the public. If the PGMC is merely a lessor, this imposition is unreasonable and whimsical, and could only be tied up to the fact that the PGMC will actually operate and manage the system; hence, increasing public participation in the corporation would enhance public interest.(e) The PGMC shall put up an Escrow Deposit of P300,000,000.00 pursuant to the requirements of the RFP, which it may, at its option, maintain as its initial performance bond required to ensure its faithful compliance with the terms of the contract.(f) The PCSO shall designate the necessary personnel to monitor and audit the daily performance of the on-line lottery system; and promulgate procedural and coordinating rules governing all activities relating to the on-line lottery system. The first further confirms that it is the PGMC which will operate the system and the PCSO may, for the protection of its interest, monitor and audit the daily performance of the system. The second admits the coordinating and cooperative powers and functions of the parties.(g) The PCSO may validly terminate the contract if the PGMC becomes insolvent or bankrupt or is unable to pay its debts, or if it stops or suspends or threatens to stop or suspend payment of all or a material part of its debts.

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BIGLANGAWA and ESPIRITU v.PASTOR B. CONSTANTINOG.R. No. L-9965 August 29, 1960Ponente: BARRERA, J.

FACTS:

On June 25, 1953, respondent Pastor B. Constantino filed with the Court of First Instance of Rizal an amended complaint (docketed as Civil Case No. 2138) against petitioners Lucina Biglangawa and Lucia Espiritu, alleging that Petitioners are owners of a parcel of land and that Plaintiffs appointed Respondent their exclusive agent to develop the land into subdivision lots and to sell them to prospective homeowners; and as compensation for his services, defendants promised to pay him a commission of 20% on the gross sales and a fee of 10% on the collections made by him payable from "the first collections received from the purchasers in respect to each lot sold." Contracts were executed pursuant thereto. Respondent also alleged that Petitioners subsequently terminated the contracts depriving him of his full commission. He later on agreed to a settlement but the said settlement was not faithfully complied with by the petitioners prompting defendant to file the abovementioned complaint.

On April 6, 1955, the Register of Deeds of Bulacan requested petitioners to surrender their owner's copy of Transfer Certificate of Title No. 5459 for annotation of a notice of lis pendens, but petitioners refused to do so. However, on May 17, 1955, when petitioners registered the absolute deed of sale in favor of Carmelita L. Santos covering some of the lots of the subdivision, said official without their knowledge and consent, made the annotation of the lis pendens on petitioners' aforementioned title, as well as on the title issued to Carmelita L. Santos. Petitioners filed with the Court of First Instance of Bulacan, a petition praying for the cancellation of said notice of lis pendens. The CFI ruled in favor of petitioners. Hence, this petition.

ISSUE: Whether respondent's complaint was one for the settlement and adjustment of partnership interest or a partition action or proceeding.

HELD: No. It is true that in paragraph 5 of the amended complaint (supra) appellant claims to have made advances for the expenses incurred in the development and administration of the property. But again he never considered these as contributions to the business as to make him a partner; otherwise, he would have so stated it in his complaint. In fact, after a liquidation of these advances and the commissions due to appellant at the time of the termination of the agency, the whole balance was considered as appellees' indebtedness which appellant consented to be settled in monthly installments (see paragraphs 6, 8, and 9 of the amended complaint).While it is true again that the prayer in a complaint does not determine the nature of the action, it not being a material part of the cause of action, still it logically indicates, as it does in this case, the purpose of the actor. The four

paragraphs of the prayer seeks the recovery of fixed amounts of underpayments and commissions and fees; not liquidation or accounting or partition as now insisted upon by appellant. Appellants's amended complaint, not being "an action affecting the title or the right of possession of real property", nor one "to recover possession of real estate, or to quiet title thereto, or to remove clouds upon the title thereof, or for partition or other proceeding of any kind in court affecting the title to real estate or the use or occupation thereof or the buildings thereon . . .", the same cannot be the basis for annotating a notice of lis pendens on the title of the petitioners-appellees.

NAVARRO VS CA 222 SCRA 675

Private respondent Olivia V. Yanson and Petitioner Lourdes Navarro were engaged in the business of Air Freight Service Agency.

Pursuant to the Agreement which they entered, they agreed to operate the said Agency;

It is the Private Respondent Olivia Yanson who supplies the necessary equipment and money used in the operation of the agency. Her brother in the person of Atty. Rodolfo Villaflores was the manager thereof while petitioner Lourdes Navarro was the Cashier;

In compliance to her obligation as stated in their agreement, private respondent brought into their business certain chattels or movables or personal properties. However, those personal properties remain to be registered in her name

Among the provisions stipulated in their agreement is the equal sharing of whatever proceeds realized from their business;

However, sometime on July 23, 1976, private respondent Olivia V. Yanson, in order for her to recovery the above mentioned personal properties which she brought into their business, filed a complaint against petitioner Lourdes Navarro for "Delivery of Personal Properties With Damages and with an application for a writ of replevin”

Private respondents' application for a writ of replevin was later approved/granted by the trial court.

For her defense, petitioner Navarro argue that she and private respondent Yanson actually formed a verbal partnership which was engaged in the business of Air Freight Service Agency. She contended that the decision sustaining the writ of replevin is void since the properties belonging to the partnership do not actually belong to any of the parties until the final disposition and winding up of the partnership

ISSUE

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1. Whether or not there was a partnership that existed between the parties.

2. Whether the properties that were commonly used in the operation of Allied Air Freight belonged to the alleged partnership business.

RULING

Article 1767 of the New Civil Code defines the contract of partnership:

Art. 1767. By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the proceeds among themselves.

“A cursory examination of the evidences presented no proof that a partnership, whether oral or written had been constituted.”

In fact, those movables brought by the plaintiff for the use in the operation of the business remain registered in her name.

While there may have been co-ownership or co-possession of some items and/or any sharing of proceeds by way of advances received by both plaintiff and the defendant, these are not indicative and supportive of the existence of any partnership between them.

Art. 1769 par. 2 provides:

“Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or co-possessors do or do not share any profits made by the use of the property”

Besides, the alleged profit was a difference found after valuating the assets and not arising from the real operation of the business. In accounting procedures, strictly, this could not be profit but a net worth

OBILLOS VS CIR 139 SCRA 675

- Jose Obillos, Sr. completed payment of two parcels of land. The next day he transferred his rights to his four children, the petitioners, to enable them to build their residences. The Torrens titles issued to them would show that they were co-owners of the two lots.

-  The four brothers and sisters acquired lots with the original purpose to divide it among themselves for residential purposes; when later they found it not feasible to build their residences thereon because of the high cost of construction; they decided to resell the properties to dissolve the co-ownership.

-  Petitioners sold the lots they inherited from their

father and derived a total profit of P33,584 for each of them. They treated the profit as capital gain and paid an income tax thereof. The CIR required petitioners to pay corporate income tax on their shares, 20% tax fraud surcharge and 42% accumulated interest. Deficiency tax was assessed on the theory that they had formed an unregistered partnership or joint venture.

ISSUE

Whether or not the sharing of gross returns constitute partnership

HELD

-  NO.

-  Article 1769(3) of the Civil Code provides that "the sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived".

-  The original intention was merely to collectively purchase the lots and eventually to partition them among themselves to build their residences; and that in fact they had no choice but to resell the same to dissolve the co-ownership.

Obillos found that the division of the profits was merely incidental to the dissolution of the co-ownership which was in the nature of things a temporary state; and that there could not have been any partnership, but merely a co-ownership, since there was lack of intent to form a partnership or joint venture.

-  All co-ownerships are not deemed unregistered pratnership.

-  Co-Ownership who own properties which produce income should not automatically be considered partners of an unregistered partnership, or a corporation, within the purview of the income tax law. To hold otherwise, would be to subject the income of all co-ownerships of inherited properties to the tax on corporations, inasmuch as if a property does not produce an income at all, it is not subject to any kind of income tax, whether the income tax on individuals or the income tax on corporation.

REYES VS CIR 24 SCRA 198

Petitioners (father and son to each other) purchased a lot and building (Gibs Building). The payment thereof was shared equally by petitioners.

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At the time of the purchase, the building was leased to various tenants. Petitioners divided equally the income from rentals of the building as well as the expenses in the operation and maintenance thereof.

The administration of the building was entrusted to an administrator who collected the rents.

Believing that petitioners were partners, respondent Commissioner of Internal Revenue assessed them the sum of P46,647.00 as income tax due for the years 1951 to 1954 and a sum of P25,973.75, covering the years 1955 and 1956.

The basis of the assessment of said income tax due is the provision of the National Internal Revenue Code which imposes an income tax on corporations and corporations includes partnerships.

ISSUE:

Whether or not petitioners are subject to the tax on corporations provided for in section 24 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code

RULING:

Petitioners, in acquiring the Gibbs Building, established a partnership subject to income tax as a corporation under the National Internal Revenue Code.

There are two essential elements of a partnership:

(a) an agreement to contribute money, property or industry to a common fund; and

(b) intent to divide the profits among the contracting parties.

IN the case at bar, all elements are undoubtedly present. Admittedly, petitioners have agreed to and did, contribute money and property to a common fund. Their purpose was to engage in real estate transactions for monetary gain and then divide the same among themselves.

REASONS:

1. the common fund being created purposely not something already found in existence;

2. the lots thus acquired not being devoted to residential purposes or to other personal uses of petitioners;

3. such properties having been under the management of one person with full power to lease, to collect rents, to issue receipts, to bring suits, to sign letters and contracts and to endorse notes and checks;

4. petitioners dividing "equally the income of the building after deducting the expenses of operation and maintenance thereof;

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

PARTNERSHIP: Fortis vs Hermanos

Facts:

Plaintiff Fortis is an employee of defendant Gutierrez Hermanos. The former brought an action to recover a balance due him as salary for the year 1902. He also alleged that he was entitled, as salary, to 5 per cent of the net profits of the business of the defendants for said year. The complaint also contained a cause of action for the sum of 600 pesos, money expended by plaintiff for the defendants during the year 1903.

The lower court ruled in favor of the plaintiff. The total judgment rendered amounted to P13, 025.40, which was reduced to Philippine currency. The defendants moved for new trial but were denied.

They brought the case in the SC thru bill of exceptions; the appellants (defendants) alleged that that the contract made the plaintiff a copartner of the defendants in the business, which they were carrying on.

Issue:

WON the plaintiff is a co-partner of the defendants in the business.

Held:

NO. It was a mere contract of employment. The plaintiff had neither voice nor vote in the management of the affairs of the company. The fact that the compensation received by him was to be determined with reference to the profits made by the defendants in their business did not in any sense make by a partner therein. The articles of partnership between the defendants provided that the profits should be divided among the partners named in a certain proportion. The contract made between the plaintiff and the then manager of the defendant partnership did not in any way vary or modify this provision of the articles of partnership.

Note:

The rule is that, receipt of a person in a share of profits of business is a prima facie evidence that he is a partner. Exception is if the profit is for the payment of wages of an employee.

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Bill of exceptions- A written statement from a trial judge to an appellate court listing a party’s objections or exceptions made during the trial and the grounds on which they were based.

Gatchalian vs. Collector of Internal Revenue [G.R. No. L-45425, April 29, 1939]Post under case digests, Taxation at Friday, March 02, 2012 Posted by Schizophrenic MindFacts: Plaintiffs purchased, in the ordinary course of business, from one of the duly authorized agents of the National Charity Sweepstakes Office one ticket for the sum of two pesos (P2), said ticket was registered in the name of Jose Gatchalian and Company. The ticket won one of the third-prizes in the amount of P50,000. 

Jose Gatchalian was required to file the corresponding income tax return covering the prize won. Defendant-Collector made an assessment against Jose Gatchalian and Co. requesting the payment of the sum of P1,499.94 to the deputy provincial treasurer of Pulilan, Bulacan. Plaintiffs, however through counsel made a request for exemption. It was denied. 

Plaintiffs failed to pay the amount due, hence a warrant of distraint and levy was issued. Plaintiffs paid under protest a part of the tax and penalties to avoid the effects of the warrant. A request that the balance be paid by plaintiffs in installments was made. This was granted on the condition that a bond be filed. 

Plaintiffs failed in their installment payments. Hence a request for execution of the warrant of distraint and levy was made. Plaintiffs paid under protest to avoid the execution. 

A claim for refund was made by the plaintiffs, which was dismissed, hence the appeal. 

Issue: Whether the plaintiffs formed a partnership hence liable for income tax. 

Held: Yes. According to the stipulation facts the plaintiffs organized a partnership of a civil nature because each of them put up money to buy a sweepstakes ticket for the sole purpose of dividing equally the prize which they may win, as they did in fact in the amount of P50,000. The partnership was not only formed, but upon the organization thereof and the winning of the prize, Jose Gatchalian personally appeared in the office of the Philippines Charity Sweepstakes, in his capacity as co-partner, as such collection the prize, the office issued the check for P50,000 in favor of Jose Gatchalian and company, and the said partner, in the same capacity, collected the said check. All these circumstances repel the idea that the plaintiffs organized and formed a community of property only.

DALION V. CA

[G.R. No. 78903. February 28, 1990.]

FACTS: Petitioner seeks to annul the decision of the CA upholding the validity of the sale of a parcel of land by

petitioner Segundo Dalion (hereafter, “Dalion”) in favor of private respondent Ruperto Sabesaje, Jr.

• Sabesaje sued to recover ownership of a parcel of land, based on a private document of absolute sale, dated July 1, 1965 (Exhibit “A”), allegedly executed by Dalion, who, however denied the fact of sale, contending that the document sued upon is fictitious, his signature thereon, a forgery, and that subject land is conjugal property• he and his wife acquired the said property in 1960 from Saturnina Sabesaje as evidenced by the “Escritura de Venta Absoluta”• The spouses denied claims of Sabesaje that after executing a deed of sale over the parcel of land, they had pleaded with Sabesaje, their relative, to be allowed to administer the land because Dalion did not have any means of livelihood.• They admitted, however, administering since 1958, five (5) parcels of land in Sogod, Southern Leyte, which belonged to Leonardo Sabesaje, grandfather of Sabesaje, who died in 1956• They never received their agreed 10% and 15% — commission on the sales of copra and abaca, respectively.• Sabesaje’s suit, they countered, was intended merely to harass, preempt and forestall Dalion’s threat to sue for these unpaid commissions.Dalions argument: Assuming authenticity of his signature and the genuineness of the document, Dalion nonetheless still impugns the validity of the sale on the ground that the same is embodied in a private document, and did not thus convey title or right to the lot in question since “acts and contracts which have for their object the creation, transmission, modification or extinction of real rights over immovable property must appear in a public instrument” (Art. 1358, par 1, NCC)

ISSUE: a)WON the contract of sale of a parcel of land is valid and b) WON there is necessity of a public document for transfer of ownership thereto.

HELD:This argument is misplaced.

OBLIGATIONS AND CONTRACT; PUBLIC DOCUMENT IS NECESSARY ONLY FOR CONVENIENCE AND NOT FOR VALIDITY OR ENFORCEABILITY. – The provision of Art. 1358 on the necessity of a public document is only for convenience, not for validity or enforceability. It is not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public instrument.

PERFECTION OF CONTRACT; SALE IS PERFECTED BY MERE CONSENT; VENDEE MAY COMPEL TRANSFER OF OWNERSHIP OF THE OBJECT OF SALE. — A contract of sale is a consensual contract, which means that the sale is perfected by mere consent. No particular form is required for its validity. Upon perfection of the contract, the parties may reciprocally demand performance (Art. 1475, NCC), i.e., the vendee may compel transfer of ownership of the object of the sale, and the vendor may require the vendee to pay the thing sold (Art. 1458, NCC).The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje the parcel of land and to execute corresponding formal deed of conveyance in a public document. Under Art. 1498, NCC, when the sale is made through a public instrument, the execution thereof is

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equivalent to the delivery of the thing. Delivery may either be actual (real) or constructive. Thus delivery of a parcel of land may be done by placing the vendee in control and possession of the land (real) or by embodying the sale in a public instrument (constructive).

ACTION FOR RECOVERY OF OWNERSHIP IS PROPER AS IT SEEKS CONSUMMATION OF CONTRACT OF SALE. — As regards petitioners’ contention that the proper action should have been one for specific performance, We believe that the suit for recovery of ownership is proper. As earlier stated, Art. 1475 of the Civil Code gives the parties to a perfected contract of sale the right to reciprocally demand performance, and to observe a particular form, if warranted, (Art. 1357). The trial court, aptly observed that Sabesaje’s complaint sufficiently alleged a cause of action to compel Dalion to execute a formal deed of sale, and the suit for recovery of ownership, which is premised on the binding effect and validity inter partes of the contract of sale, merely seeks consummation of said contract.Moreover, people who witnessed the execution of subject deed positively testified on the authenticity thereof. They categorically stated that it had been executed and signed by the signatories thereto. On the other hand, defendant has affirmatively alleged forgery, but he never presented any witness or evidence to prove his claim of forgery.

TORRES v. CAG.R. No. 134559 December 9, 1999Ponente: PANGANIBAN, J.

FACTS:Petitioners Antonia Torres and Emeteria Baring are

sisters. They entered into a "joint venture agreement" with Respondent Manuel Torres for the development of a parcel of land into a subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of land in favor of respondent, who then had it registered in his name. By mortgaging the property, respondent obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture Agreement, was to be used for the development of the subdivision. All three of them also agreed to share the proceeds from the sale of the subdivided lots. However, the project did not push through despite the effort of Manuel Torres, he even gave additional capital just to develop the parcel of land. Subsequently the bank foreclosed the mortgage.ISSUE:

1. What relationship was formed between the Sisters Torres and Manuel Torres?

2. What will be the extent of their liabilities?

HELD:1. They formed a partnership. In their agreement,

petitioners would contribute property to the partnership in the form of land which was to be developed into a subdivision; while respondent would give, in addition to his industry, the amount needed for general expenses and other costs. Furthermore, the income from the said project would be divided according to the stipulated percentage. Clearly, the

contract manifested the intention of the parties to form a partnership.

2. Petitioners and respondent had formed a partnership for the development of the subdivision. Thus, they must bear the loss suffered by the partnership in the same proportion as their share in the profits stipulated in the contract.

EUFEMIA EVANGELISTA, et. al. v. THE COLLECTOR OF INTERNAL REVENUEG.R. No. L-9996 October 15, 1957Ponente: CONCEPCION, J.

FACTS:Petitioners borrowed money from their father in the sum of P59,1400.00 which they used to buy properties. Some of the properties they purchased include 21 parcels of land with improvements from Mrs. Josefina Oppus, a parcel of land from Insular Investments, Inc., and a parcel of land from Mrs. Velentina Afable. They appointed their brother, Simeon Evangelista, to manage the properties. They then rented and leased said properties and earned income from it. On September 24, 1954 respondent Collector of Internal Revenue demanded the payment of income tax on corporations, real estate dealer's fixed tax and corporation residence tax for the years 1945-1949. The petitioners sought recourse from the Court of Tax appeals reverse the decision of the CIR as contained in his demand letter. The CTA upheld the CIR. Hence, this petition. ISSUE: Whether petitioners are considered to be a partnership and, hence, subject to the tax on corporations. HELD: Yes. Pursuant to the article, the essential elements of a partnership are two, namely: (a) an agreement to contribute money, property or industry to a common fund; and (b) intent to divide the profits among the contracting parties. The first element is undoubtedly present in the case at bar, for, admittedly, petitioners have agreed to, and did, contribute money and property to a common fund. Hence, the issue narrows down to their intent in acting as they did. Upon consideration of all the facts and circumstances surrounding the case, we are fully satisfied that their purpose was to engage in real estate transactions for monetary gain and then divide the same among themselves. For purposes of the tax on corporations, our National Internal Revenue Code, includes these partnerships — with the exception only of duly registered general copartnerships — within the purview of the term "corporation." It is, therefore, clear to our mind that petitioners herein constitute a partnership, insofar as said Code is concerned and are subject to the income tax for corporations.

Catalan Vs. Gatchalian

105 Phil 1270

G.R. No. L-11648 April 22, 1959

 

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Facts:

            Catalan and Gatchalian are partners.  They mortgaged two lots to Dr. Marave together with the improvements thereon to secure a credit from the latter.  The partnership failed to pay the obligation.  The properties were sold to Dr. Marave at a public auction.  Catalan redeemed the property and he contends that title should be cancelled and a new one must be issued in his name.

 

Issue:

            Did Catalan’s redemption of the properties make him the absolute owner of the lands?

 

Ruling:

No.  Under Article 1807 of the NCC every partner becomes a trustee for his copartner with regard to any benefits or profits derived from his act as a partner.  Consequently, when Catalan redeemed the properties in question, he became a trustee and held the same in trust for his copartner Gatchalian, subject to his right to demand from the latter his contribution to the amount of redemption.

UNITED STATES VS EUSEBIO CLARINPOSTED | 0 COMMENTS

US V. CLARIN 7 Phil 504 – Business Organization – Partnership, Agency, Trust – Co-Partner’s Liability – Misappropriation Sometime before 1910, Pedro Larin formed a partnership with Pedro Tarug, Eusebio Clarin and Carlos de Guzman. Larin, being the capitalist, agreed to contribute P172.00 to the partnership and the three others shall use said fund to trade mangoes. The three industrial partners bought mangoes and sell them and they earned P203.00 but they failed to give Larin’s share of the profits. Larin charged them with the crime of estafa, but the provincial fiscal filed an information only against Eusebio Clarin in which he accused him of appropriating to himself not only the P172 but also the share of the profits that belonged to Larin, amounting to P15.50. Clarin was eventually convicted.ISSUE: Whether or not the conviction is correct.HELD: No. The P172.00 having been received by the partnership, the business commenced and profits accrued, the action that lies with the partner who furnished the capital for the recovery of his money is not a criminal action for estafa, but a civil one arising from the partnership contract for a liquidation of the partnership and a levy on its assets if there should be any.The then Penal Code provides that those who are guilty of estafa are those “who, to the prejudice of another, shall appropriate or misapply any money, goods, or any kind of personal property which they may have received as a deposit

on commission for administration or in any other producing the obligation to deliver or return the same,” (as, for example, in commodatum, precarium, and other unilateral contracts which require the return of the same thing received) does not include money received for a partnership; otherwise the result would be that, if the partnership, instead of obtaining profits, suffered losses, as it could not be held liable civilly for the share of the capitalist partner who reserved the ownership of the money brought in by him, it would have to answer to the charge of estafa, for which it would be sufficient to argue that the partnership had received the money under obligation to return it.

LITTON vs. HILL & CERONFacts:

The plaintiff sold and delivered to Carlos Ceron, who is one of the managing partners of Hill & Ceron, a certain number of mining claims.

Both partners have the management of the business of the partnership, and that either may contract and sign for the partnership with the consent of the other. Ceron did not obtain Hill’s consent for the purchase of the mining claims.

Litton was unable to collect the balance from Hill & Ceron or from its surety.

The trial court held Ceron personally liable for the unpaid amount. The partnership Hill & Ceron, Robert Hill (the partner of Ceron), and the surety were absolved.

CA affirmed, saying that Ceron did not intend to represent and did not act for the partnership Hill & Ceron.

Issue: who should prove that the consent of the other partner is needed when entering into a contract with third persons?Issue: is the partnership liable?Held: Yes. Under article 226 of the Code of Commerce, the dissolution of a commercial association shall not cause any prejudice to third parties until it has been recorded in the commercial registry. (See also Cardell vs. Mañeru, 14 Phil., 368.) The Supreme Court of Spain held that the dissolution of a partnership by the will of the partners which is not registered in the commercial registry, does not prejudice third persons.Third persons, like the plaintiff, are not bound in entering into a contract with any of the two partners, to ascertain whether or not this partner with whom the transaction is made has the consent of the other partner. The public need not make inquiries as to the agreements had between the partners. Its knowledge is enough that it is contracting with the partnership which is represented by one of the managing partners.

There is a general presumption that each individual partner is an authorized agent for the firm and that he has authority to bind the firm in carrying on the partnership transactions. (Mills vs. Riggle, 112 Pac., 617.)

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The presumption is sufficient to permit third persons to hold the firm liable on transactions entered into by one of members of the firm acting apparently in its behalf and within the scope of his authority. (Le Roy vs.Johnson, 7 U. S. [Law. ed.], 391.)

The kind of business in which the partnership Hill & Ceron is to engage being thus determined, none of the two partners, under article 130 of the Code of Commerce, may legally engage in the business of brokerage in general as stock brokers, security brokers and other activities pertaining to the business of the partnership. Ceron, therefore, could not have entered into the contract of sale of shares with Litton as a private individual, but as a managing partner of Hill & Ceron.

Even if Ceron had not obtained the consent of Hill for the said transaction, it is not enough ground to annul the contract entered by Ceron and Litton.Under the Article 130 of the Code of Commerce, when, not only without the consent but against the will of any of the managing partners, a contract is entered into with a third person who acts in good faith, and the transaction is of the kind of business in which the partnership is engaged, as in the present case, said contract shall not be annulled, without prejudice to the liability of the guilty partner.

ANTONIO PARDO v. THE HERCULES LUMBER and IGNACIO FERRER1924 / Street / Rights and obligations of the partners among themselves > Books, information, accounts

FACTSAntonio Pardo [Hercules Lumber Company stockholder] seeks to obtain a writ of mandamus to compel the company and its acting secretary Ignacio Ferrer to permit him [Pardo] and his duly authorized agent and representative to examine the company’s records and business transactions.

The main ground upon which the defense of the company appears to be rested has reference to the time, or times, within which the right of inspection may be exercised.

Article 10 of the By-laws of the companyo "Every shareholder may examine the books

of the company and other documents pertaining to the same upon the days which the board of directors shall annually fix."

Board Resolution passed at the directors' meeting held on 16 February 1924

o The board also resolved to call the usual general (meeting of shareholders) for March 30 of the present year, with notice to the shareholders that the books of the company are at their disposition from the 15th to 25th of the same month for examination, in appropriate hours.

ISSUES & HOLDING WON the board resolution constitutes a lawful

restriction on the right conferred by statute. NO

WON Pardo lost his right to inspection and examination for the year, since he has not availed himself of the permission [to inspect the company’s books and transactions within the 10 days defined in the board resolution. NO

WON the shareholder’s motive in exercising this right is material. NO

RATIOThe basis of right of inspection is Sec. 51 of Act No. 1459 [Corporation Law].1 In Philpotts v. Philippine Manufacturing Co., and Berry, it was held that the right of examination there conceded to the stockholder may be exercised either by a stockholder in person or by any duly authorized agent or representative.

It may be admitted that the officials in charge of a corporation may deny inspection when sought at unusual hours or under other improper conditions; but neither the executive officers nor the board of directors have the power to deprive a stockholder of the right altogether. A by-law unduly restricting the right of inspection is undoubtedly invalid. Under a statute similar to our own it has been held that the statutory right of inspection is not affected by the adoption by the board of directors of a resolution providing for the closing of transfer books thirty days before an election.

Our statute declares that the right of inspection can be exercised "at reasonable hours." This means at reasonable hours on business days throughout the year, and not merely during some arbitrary period of a few days chosen by the directors.

Additional issue: The motives that prompted Pardo to make inspectionIt is alleged that the information which Pardo seeks is desired for ulterior purposes in connection with a competitive firm with which Pardo is alleged to be connected. It is also insisted that one of Pardo’s purposes is to obtain evidence preparatory to the institution of an action, which he means to bring against the company re: a contract of employment which once existed between the corporation and himself. These suggestions are entirely apart from the issue—the motive of the shareholder exercising the right is immaterial.

1 Section 51. All business corporations shall keep and carefully preserve a record of all business transactions, and a minute of all meetings of directors, members, or stockholders, in which shall be set forth in detail the time and place of holding the meeting, how authorized, the notice given, whether the meeting was regular or special, if special its object, those present and absent, and every act done or ordered done at the meeting. On the demand of any director, member, or stockholder, the time when any director, member, or stockholder entered or left the meeting must be noted on the minutes, and on a similar demand, the yeas and nays must be taken on any motion or proposition and a record thereof carefully made. The protest of any director, member, or stockholder on any action or proposed action must be recorded in full on his demand.

The record of all business transactions of the corporation and the minutes of any meeting shall be open to the inspection of any director, member, or stockholder of the corporation at reasonable hours.

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Writ of mandamus will issue

1.) DAN FUE LEUNG, petitioner, vs. HON. INTERMEDIATE APPELLATE COURT and LEUNG YIU, respondents.

G.R. No. 70926 January 31, 1989

GUTIERREZ, JR., J.:

FACTS:

The petitioner asks for the reversal of the decision of the then Intermediate Appellate Court in AC-G.R. No. CV-00881 which affirmed the decision of the then Court of First Instance of Manila, Branch II in Civil Case No. 116725 declaring private respondent Leung Yiu a partner of petitioner Dan Fue Leung in the business of Sun Wah Panciteria and ordering the petitioner to pay to the private respondent his share in the annual profits of the said restaurant.

This case originated from a complaint filed by respondent Leung Yiu with the then Court of First Instance of Manila, Branch II to recover the sum equivalent to twenty-two percent (22%) of the annual profits derived from the operation of Sun Wah Panciteria since October, 1955 from petitioner Dan Fue Leung.

The Sun Wah Panciteria, a restaurant, located at Florentino Torres Street, Sta. Cruz, Manila, was established sometime in October, 1955. It was registered as a single proprietorship and its licenses and permits were issued to and in favor of petitioner Dan Fue Leung as the sole proprietor. Respondent Leung Yiu adduced evidence during the trial of the case to show that Sun Wah Panciteria was actually a partnership and that he was one of the partners having contributed P4,000.00 to its initial establishment.

The private respondents evidence is summarized as follows:

About the time the Sun Wah Panciteria started to become operational, the private respondent gave P4,000.00 as his contribution to the partnership. This is evidenced by a receipt wherein the petitioner acknowledged his acceptance of the P4,000.00 by affixing his signature thereto. Furthermore, the private respondent received from the petitioner the amount of P12,000.00 covered by the latter's Equitable Banking Corporation Check from the profits of the operation of the restaurant for the year 1974

The petitioner denied having received from the private respondent the amount of P4,000.00. He contested and impugned the genuineness of the receipt. His evidence is summarized as follows:

The petitioner did not receive any contribution at the time he started the Sun Wah Panciteria. He used his savings from his

salaries as an employee at Camp Stotsenberg in Clark Field and later as waiter at the Toho Restaurant amounting to a little more than P2,000.00 as capital in establishing Sun Wah Panciteria. Petitioner presented various government licenses and permits showing the Sun Wah Panciteria was and still is a single proprietorship solely owned and operated by himself alone. Fue Leung also flatly denied having issued to the private respondent the receipt (Exhibit G) and the Equitable Banking Corporation's Check No. 13389470 B in the amount of P12,000.00 (Exhibit B).

ISSUE: WON Private respondent is a partner of the petitioner in Sun Wah Panciteria?

HELD:

The private respondent is a partner of the petitioner in Sun Wah Panciteria. The requisites of a partnership which are — 1) two or more persons bind themselves to contribute money, property, or industry to a common fund; and 2) intention on the part of the partners to divide the profits among themselves (Article 1767, Civil Code; Yulo v. Yang Chiao Cheng, 106 Phil. 110)-have been established. As stated by the respondent, a partner shares not only in profits but also in the losses of the firm. If excellent relations exist among the partners at the start of business and all the partners are more interested in seeing the firm grow rather than get immediate returns, a deferment of sharing in the profits is perfectly plausible. It would be incorrect to state that if a partner does not assert his rights anytime within ten years from the start of operations, such rights are irretrievably lost. The private respondent's cause of action is premised upon the failure of the petitioner to give him the agreed profits in the operation of Sun Wah Panciteria. In effect the private respondent was asking for an accounting of his interests in the partnership.

It is Article 1842 of the Civil Code in conjunction with Articles 1144 and 1155 which is applicable. Article 1842 states:

The right to an account of his interest shall accrue to any partner, or his legal representative as against the winding up partners or the surviving partners or the person or partnership continuing the business, at the date of dissolution, in the absence or any agreement to the contrary.

Regarding the prescriptive period within which the private respondent may demand an accounting, Articles 1806, 1807, and 1809 show that the right to demand an accounting exists as long as the partnership exists. Prescription begins to run only upon the dissolution of the partnership when the final accounting is done.

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Considering the facts of this case, the Court may decree a dissolution of the partnership under Article 1831 of the Civil Code which, in part, provides:

Art. 1831. On application by or for a partner the court shall decree a dissolution whenever:

xxx xxx xxx

(3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business;

(4) A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him;

xxx xxx xxx

(6) Other circumstances render a dissolution equitable.

There shall be a liquidation and winding up of partnership affairs, return of capital, and other incidents of dissolution because the continuation of the partnership has become inequitable.

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