AGUILA vs.

CA
G.R. NO. 127347, NOVEMBER 25, 1999

FACTS:

Petitioner is the manager of A.C. Aguila & Sons, Co., a partnership engaged in lending
activities. Private respondent and her late husband, Ruben M. Abrogar, were the registered
owners of a house and lot. Private respondent, with the consent of her late husband, and A.C.
Aguila & Sons, Co., represented by petitioner, entered into a Memorandum of Agreement,
which states the following: a) property above-mentioned will be purchased by the petitioner, b)
private respondent is given the option to repurchase the said property within a period of 90
days, c) if the private respondent will not be able to repurchase the property within the
stipulated period, he is obliged to surrender the property to the petitioner within 15 days.
Private respondent failed to redeem the property within the 90-day period as provided in the
Memorandum of Agreement. Because of the failure of the private respondent to repurchase
petitioner caused the following: a) cancellation of TCT No. 195101 and the issuance of a new
certificate of title in the name of A.C. Aguila and Sons, Co., b) sending letter demanding that she
vacate the premises within 15 days after receipt of the letter and surrender its possession
peacefully to A.C. Aguila & Sons, Co.

Upon the refusal of private respondent to vacate the subject premises, A.C. Aguila &
Sons, Co. filed an ejectment case against her in the Metropolitan Trial Court, Branch 76,
Marikina, Metro Manila. MTC, decided in favor of the petitioner. Private respondent appealed
first to the Regional Trial Court, Branch 163, Pasig, Metro Manila, then to the Court of Appeals,
and later to this Court, but she lost in all the cases. Private respondent then filed a petition for
declaration of nullity of a deed of sale with the Regional Trial Court, which was later dismissed.
She appealed to the Court of Appeals, which reversed the RTC’s decision. Thus, this petition.

ISSUE:

Whether or not Mr. Aguila is the real party in interest.

HELD:

No. Rule 3, §2 of the Rules of Court of 1964 provides that "every action must be
prosecuted and defended in the name of the real party in interest." Any decision rendered
against a person who is not a real party in interest in the case cannot be executed. Hence, a
complaint filed against such a person should be dismissed for failure to state a cause of action.
Under Art. 1768 of the Civil Code, a partnership "has a juridical personality separate and distinct
from that of each of the partners." Hence, it is the partnership, not its officers or agents, which
should be impleaded in any litigation involving property registered in its name.
OBILLOS vs. CIR
G.R. NO. L-68118, OCTOBER 29, 1985

FACTS:

Jose Obillos, Sr. purchased two lots with areas of 1,124 and 963 square meters located
at Greenhills, San Juan, Rizal. 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. In 1974, or after having held the two lots for
more than a year, the petitioners resold them to the Walled City Securities Corporation and
Olga Cruz Canda for the total sum of P313,050. They derived from the sale a total profit of
P134,341.88 or P33,584 for each of them. They treated the profit as a capital gain and paid an
income tax on one-half thereof or of P16,792. In April, 1980, the Commissioner of Internal
Revenue required the four petitioners to pay corporate income tax on the total profit of
P134,336 in addition to individual income tax on their shares thereof. The petitioners are being
held liable for deficiency income taxes and penalties totalling P127,781.76 on their profit of
P134,336, in addition to the tax on capital gains already paid by them. The Commissioner acted
on the theory that the four petitioners had formed an unregistered partnership or joint venture
within the meaning of sections 24(a) and 84(b) of the Tax Code.

ISSUE:

Whether or not the four petitioners indeed had formed an unregistered partnership or
joint venture.

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". There must be
an unmistakable intention to form a partnership or joint venture. The petitioners’ original
purpose was to divide the lots for residential purposes. If later on they found it not feasible to
build their residences on the lots because of the high cost of construction, then they had no
choice but to resell the same to dissolve the co-ownership. The division of the profit was merely
incidental to the dissolution of the co-ownership which was in the nature of things a temporary
state.
OÑA vs CIR
G.R. NO. L-19342, MAY 25, 1972

FACTS:

The Petitioners are the heirs and family members of the late Julia Buñales. Lorenzo Oña,
surviving spouse, was appointed administrator of the estate as well as the guardians of his
minor children. The project of partition shows that the heirs have undivided one-half (1/2)
interest in ten parcels of land with a total assessed value of P87,860.00, six houses with a total
assessed value of P17,590.00 and an undetermined amount to be collected from the War
Damage Commission. Later, they received from said Commission the amount of P50,000.00,
more or less. This amount was not divided among them but was used in the rehabilitation of
properties owned by them in common. Of the ten parcels of land aforementioned, two were
acquired after the death of the decedent with money borrowed from the Philippine Trust
Company in the amount of P72,173.00. The project of partition was approved by the court on
May 16, 1949 but the properties remained under the management of Lorenzo who used said
properties in business by leasing or selling them and investing the income derived therefrom
and the proceeds from the sales thereof in real properties and securities. As a result,
petitioners' properties and investments gradually increased from P105,450.00 in 1949 to
P480,005.20 in 1956.

Respondent, CIR, decided that petitioners formed an unregistered partnership and

therefore, subject to the corporate income tax, pursuant to Section 24, in relation to Section
84(b), of the Tax Code. Accordingly, he assessed against the petitioners the amounts of
P8,092.00 and P13,899.00 as corporate income taxes for 1955 and 1956, respectively.
Petitioners protested against the assessment and asked for reconsideration of the ruling of
respondent that they have formed an unregistered partnership, which was later denied.

ISSUE:

Whether or not there was indeed an unregistered partnership between the heirs.

HELD:

Yes, only for the year 1955 to 1956. For tax purposes, the co-ownership of inherited
properties is automatically converted into an unregistered partnership the moment the said
common properties and/or the incomes derived therefrom are used as a common fund with
intent to produce profits for the heirs in proportion to their respective shares in the inheritance
as determined in a project partition either duly executed in an extrajudicial settlement or
approved by the court in the corresponding testate or intestate proceeding. For the reason that
from the moment of such partition, the heirs are entitled already to their respective definite
shares of the estate and the incomes thereof, for each of them to manage and dispose of as
exclusively his own without the intervention of the other heirs, and, accordingly he becomes
liable individually for all taxes in connection therewith. If after such partition, he allows his
share to be held in common with his co-heirs under a single management to be used with the
intent of making profit thereby in proportion to his share, there can be no doubt that, even if
no document or instrument were executed for the purpose, for tax purposes, at least, an
unregistered partnership is formed.

PASCUAL vs. CIR

G.R. NO. 78133, October 18, 1988

On June 22, 1965, petitioners bought two (2) parcels of land from Santiago Bernardino, et al.
and on May 28, 1966, they bought another three (3) parcels of land from Juan Roque. The first
two parcels of land were sold by petitioners in 1968 to Marenir Development Corporation,
while the three parcels of land were sold by petitioners to Erlinda Reyes and Maria Samson on
March 19,1970. Petitioners realized a net profit in the sale made in 1968 in the amount of
P165,224.70, while they realized a net profit of P60,000.00 in the sale made in 1970. The
corresponding capital gains taxes were paid by petitioners in 1973 and 1974 by availing of the
tax amnesties granted in the said years. However, in a letter dated March 31, 1979 of then
Acting BIR Commissioner Efren I. Plana, petitioners were assessed and required to pay a total
amount of P107,101.70 as alleged deficiency corporate income taxes for the years 1968 and
1970. Petitioners protested the said assessment in a letter of June 26, 1979 asserting that they
had availed of tax amnesties way back in 1974. In a reply of August 22, 1979, respondent
Commissioner informed petitioners that in the years 1968 and 1970, petitioners as co-owners
in the real estate transactions formed an unregistered partnership or joint venture taxable as a
corporation.

ISSUE:

Whether or not there exists an unregistered partnership between the petitioners.

HELD:

No, petitioners are only co-owners. There is clear evidence of co-ownership between
the petitioners. There is no adequate basis to support the proposition that they thereby formed
an unregistered partnership. The two isolated transactions whereby they purchased properties
and sold the same a few years thereafter did not thereby make them partners. They shared in
the gross profits as co- owners and paid their capital gains taxes on their net profits and availed
of the tax amnesty thereby. Under the circumstances, they cannot be considered to have
formed an unregistered partnership which is thereby liable for corporate income tax, as the
respondent commissioner proposes.
HEIRS OF JOSE LIM vs. JULIET LIM
G.R. NO. 172690, March 3, 2010

FACTS:

Petitioners are the heirs of the late Jose Lim (Jose), namely: Jose's widow Cresencia
Palad (Cresencia); and their children Elenito, Evelia, Imelda, Edelyna and Edison, all surnamed
Lim (petitioners), represented by Elenito Lim (Elenito). They filed a Complaint for Partition,
Accounting and Damages against respondent Juliet Villa Lim (respondent), widow of the late
Elfledo Lim (Elfledo), who was the eldest son of Jose and Cresencia. Petitioners alleged that
Jose, together with his friends Jimmy Yu (Jimmy) and Norberto Uy (Norberto), formed a
partnership to engage in the trucking business. Initially, with a contribution of ₱50,000.00 each,
they purchased a truck to be used in the hauling and transport of lumber of the sawmill. Jose
managed the operations of this trucking business until his death on August 15, 1981.
Thereafter, Jose's heirs, including Elfledo, and partners agreed to continue the business under
the management of Elfledo. The shares in the partnership profits and income that formed part
of the estate of Jose were held in trust by Elfledo, with petitioners' authority for Elfledo to use,
purchase or acquire properties using said funds.

Respondent traversed petitioners' allegations and claimed that Elfledo was himself a partner of
Norberto and Jimmy. Respondent also claimed that per testimony of Cresencia, sometime in
1980, Jose gave Elfledo ₱50,000.00 as the latter's capital in an informal partnership with Jimmy
and Norberto.

ISSUE:

Whether it was Elfledo, and not Jose, who is the real partner of Jimmy and Norberto.

HELD:

Yes, the real partner was Elfledo.

Art. 1769. In determining whether a partnership exists, these rules shall apply:
(1) Except as provided by Article 1825, persons who are not partners as to each other
are not partners as to third persons;
(2) 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;
(3) The sharing of gross returns does not of itself establish a partnership, whether or not
the persons sharing them have a joint or common right or interest in any property from
which the returns are derived;
(4) The receipt by a person of a share of the profits of a business is a prima facie
evidence that he is a partner in the business, but no such inference shall be drawn if
such profits were received in payment:
(a) As a debt by installments or otherwise;
 (b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased partner;
(d) As interest on a loan, though the amount of payment vary with the profits of
the business;
(e) As the consideration for the sale of a goodwill of a business or other property
by installments or otherwise.

Elfledo was himself the partner of Jimmy and Norberto in view of the following
circumstances: (1) Cresencia testified that Jose gave Elfledo ₱50,000.00, as share in the
partnership, on a date that coincided with the payment of the initial capital in the
partnership; (2) Elfledo ran the affairs of the partnership, wielding absolute control, power and
authority, without any intervention or opposition whatsoever from any of petitioners
herein; (3) all of the properties, particularly the nine trucks of the partnership, were registered
in the name of Elfledo; (4) Jimmy testified that Elfledo did not receive wages or salaries from
the partnership, indicating that what he actually received were shares of the profits of the
business; and (5) none of the petitioners, as heirs of Jose, the alleged partner, demanded
periodic accounting from Elfledo during his lifetime.