PARTNERSHIP, AGENCY, AND TRUST CASES

1.Luzviminda J. Villareal vs. Donaldo Efren C. Ramirez

A share in a partnership can be returned only after the completion of the latter’s
dissolution, liquidation and winding up of the business.

Facts:
Luzviminda J. Villareal, Carmelito Jose and Jesus Jose formed a partnership with a
capital of P750,000 for the operation of a restaurant and catering business under the name
“Aquarius Food House and Catering Services.” Villareal was appointed general manager
and Carmelito Jose, operations manager. Respondent Donaldo Ramirez joined as a
partner on September 5, 1984 with a capital contribution of P250,000  which was paid by
his parents, Respondents Cesar and Carmelita Ramirez. Jesus Jose withdrew from the
partnership and his capital contribution of P250,000 was refunded to him in cash by
agreement of the partners.

In the same month, without prior knowledge of respondents, petitioners closed down the
restaurant, allegedly because of increased rental. The restaurant furniture and equipment
were deposited in the respondents’ house for storage. On March 1, 1987, respondent
spouses wrote petitioners, saying that they were no longer interested in continuing their
partnership or in reopening the restaurant, and that they were accepting the latter’s offer
to return their capital contribution. Respondent wrote another letter informing petitioners
of the deterioration of the restaurant furniture and equipment stored in their house. She
also reiterated the request for the return of their one-third share in the equity of the
partnership. The repeated oral and written requests were, however, left unheeded.

Respondents filed before the RTC for the collection of a sum of money from petitioners.
Petitioners contended that respondents had expressed a desire to withdraw from the
partnership and had called for its dissolution under Articles 1830 and 1831; that
respondents had been paid, upon the turnover to them of furniture and equipment worth
over P400,000; and that the latter had no right to demand a return of their equity because
their share, together with the rest of the capital of the partnership, had been spent as a
result of irreversible business losses.

In their Reply, respondents alleged that had not received any regular report or accounting
from the latter, who had solely managed the business. Respondents also alleged that they
expected the equipment and the furniture stored in their house to be removed by
petitioners as soon as the latter found a better location for the restaurant. RTC 17 ruled
that the parties had voluntarily entered into a partnership, which could be dissolved at any
time. Petitioners clearly intended to dissolve it when they stopped operating the
restaurant. Hence, the trial court rendered a judgment in favor of respondents and
ordering the petitioners to pay jointly and severally.
Issue: WON petitioners are liable to respondents for the latter’s share in the partnership
Held:
The Petition has merit. Both the trial and the appellate courts found that a partnership had
indeed existed, and that it was dissolved on March 1, 1987. They found that the
dissolution took place when respondents informed petitioners of the intention to
discontinue. Respondents consequently demanded from petitioners the return of their
one-third equity in the partnership. We hold that respondents have no right to demand
from petitioners the return of their equity share. Except as managers of the partnership,
petitioners did not personally hold its equity or assets. “The partnership has a juridical
personality separate and distinct from that of each of the partners.” Since the capital was
contributed to the partnership, not to petitioners, it is the partnership that must refund the
equity of the retiring partners.

The amount to be refunded is necessarily limited to its total resources. In other words, it
can only pay out what it has in its coffers, which consists of all its assets. However,
before the partners can be paid their shares, the creditors of the partnership must first be
compensated. After all the creditors have been paid, whatever is left of the partnership
assets becomes available for the payment of the partners’ shares.

Evidently, in the present case, the exact amount of refund equivalent to respondents’ one-
third share in the partnership cannot be determined until all the partnership assets will
have been liquidated.

Fernando Santos vs. Sps Arsenio and Nieves Reyes

 G.R. No. 135813 October 25, 2001 FERNANDO SANTOS, petitioner, vs.
SPOUSES ARSENIO and NIEVES REYES, respondents. FACTS: In June 1986,
Fernando Santos (70%), Nieves Reyes (15%), and Melton Zabat (15%) orally
instituted a partnership with them as partners. Their venture is to set up a lending
business where it was agreed that Santos shall be financier and that Nieves and
Zabat shall contribute their industry.

**The percentages after their names denote their share in the profit. Later,
Nieves introduced Cesar Gragera to Santos. Gragera was the chairman of a
corporation. It was agreed that the partnership shall provide loans to the
employees of Gragera’s corporation and Gragera shall earn commission from
loan payments. In August 1986, the three partners put into writing their verbal
agreement to form the partnership. As earlier agreed, Santos shall finance and
Nieves shall do the daily cash flow more particularly from their dealings with
Gragera, Zabat on the other hand shall be a loan investigator.

But then later, Nieves and Santos found out that Zabat was engaged in another
lending business which competes with their partnership hence Zabat was
expelled. The two continued with the partnership and they took with them Nieves’
husband, Arsenio, who became their loan investigator. Later, Santos accused the
spouses of not remitting Gragera’s commissions to the latter. He sued them for
collection of sum of money. The spouses countered that Santos merely filed the
complaint because he did not want the spouses to get their shares in the profits.
Santos argued that the spouses, insofar as the dealing with Gragera is
concerned, are merely his employees. Santos alleged that there is a distinct
partnership between him and Gragera which is separate from the partnership
formed between him, Zabat and Nieves. The trial court as well as the Court of
Appeals ruled against Santos and ordered the latter to pay the shares of the
spouses.

ISSUE: Whether or not the spouses are partners.

HELD: Yes. Though it is true that the original partnership between Zabat, Santos
and Nieves was terminated when Zabat was expelled, the said partnership was
however considered continued when Nieves and Santos continued engaging as
usual in the lending business even getting Nieves’ husband, who resigned from
the Asian Development Bank, to be their loan investigator – who, in effect,
substituted Zabat.

There is no separate partnership between Santos and Gragera. The latter being
merely a commission agent of the partnership. This is even though the
partnership was formalized shortly after Gragera met with Santos (Note that
Nieves was even the one who introduced Gragera to Santos exactly for the
purpose of setting up a lending agreement between the corporation and the
partnership). HOWEVER, the order of the Court of Appeals directing Santos to
give the spouses their shares in the profit is premature. The accounting made by
the trial court is based on the “total income” of the partnership. Such total income
calculated by the trial court did not consider the expenses sustained by the
partnership. All expenses incurred by the money-lending enterprise of the parties
must first be deducted from the “total income” in order to arrive at the “net profit”
of the partnership. The share of each one of them should be based on this “net
profit” and not from the “gross income” or “total income”.

Marjorie Tocao, et al. vs. Court of Appeals, et al

FACTS:

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

The parties agreed that Belo's name should not appear in any documents
relating to their transactions with West Bend Company. Anay having secured the
distributorship of cookware products from the West Bend Company and
organized the administrative staff and the sales force, the cookware business
took off successfully. They operated under the name of Geminesse Enterprise, a
sole proprietorship registered in Marjorie Tocao's name.

The parties agreed further that Anay would be entitled to: 

(1) ten percent (10%) of the annual net profits of the business; 
(2) overriding commission of six percent (6%) of the overall weekly production; 
(3) thirty percent (30%) of the sales she would make; and 
(4) two percent (2%) for her demonstration services. The agreement was not
reduced to writing on the strength of Belo's assurances that he was sincere,
dependable and honest when it came to financial commitments.

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

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

Anay attempted to contact Belo. She wrote him twice to demand her
overriding commission for the period of January 8, 1988 to February 5, 1988 and
the audit of the company to determine her share in the net profits.

Anay still received her five percent (5%) overriding commission up to December
1987. The following year, 1988, she did not receive the same commission
although the company netted a gross sales of P 13,300,360.00.

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

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

ISSUE:
          Whether the parties formed a partnership

HELD:

          Yes, the parties involved in this case formed a partnership

The Supreme Court held that to be considered a juridical personality, a
partnership must fulfill these requisites:

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

industry to a common fund; and

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

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

contract of partnership is as good as a written one.

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

Therefore, the parties formed a partnership.

 Aurbach v. Sanitary Wares Manufacturing

Corporation
G.R. No. 75875, 15 December 1989

FACTS:

Saniwares (domestic corporation) and ASI (foreign corporation) entered into an agreement
to engage primarily in the business of manufacturing in the Philippines and selling here and
abroad vitreous china and sanitary wares.They also agreed that the business operations in
the Philippines shall be carried on by an incorporated enterprise and that the name of the
corporation shall initially be “Sanitary Wares Manufacturing Corp.”

Unfortunately, with the business successes came the deterioration of the initially harmonious
relationship between the two. The disagreement was allegedly due to Saniwares desire to
expand the export operations which was objected by ASI as it apparently had other
subsidiaries of joint venture groups in countries contemplated by Saniwares.

Several incidents in the annual stockholders’ meeting triggered the filing of separate petitions
by the parties, both parties claiming to be the legitimate directors of the corporation.

According to Aurbach, the actual intention of the parties should be viewed from the
agreement wherein it is clearly stated that the parties’ intention was to form a corporation
and not a joint venture. No other evidence should be admitted on the ground that it
contravenes the parol evidence rule under sec. 7, Rule 130, Revised Rules of Court.
Saniwares on the other hand alleged that the agreement failed to express the true intent of
the parties.

ISSUE:

Whether or not the business established by the parties was a joint venture or a corporation.

RULING:

It was a joint venture. The rule is that whether the parties to a particular contract have
thereby established among themselves a joint venture or some other relation depends upon
their actual intention which is determined in accordance with the rules governing the
interpretation and construction of contracts. In the instant cases, our examination of
important provisions of the Agreement as well as the testimonial evidence presented by the
Lagdameo and Young Group shows that the parties agreed to establish a joint venture and
not a corporation. The history of the organization of Saniwares and the unusual
arrangements which govern its policy making body are all consistent with a joint venture and
not with an ordinary corporation.

According to the unrebutted testimony of Mr. Baldwin Young, he negotiated the Agreement
with ASI in behalf of the Philippine nationals. He testified that ASI agreed to accept the role
of minority vis-a-vis the Philippine National group of investors, on the condition that the
Agreement should contain provisions to protect ASI as the minority.

The legal concept of a joint venture is of common law origin. It has no precise legal definition
but it has been generally understood to mean an organization formed for some temporary
purpose. It is in fact hardly distinguishable from the partnership, since their elements are
similar community of interest in the business, sharing of profits and losses, and a mutual
right of control. The main distinction cited by most opinions in common law jurisdictions is
that the partnership contemplates a general business with some degree of continuity, while
the joint venture is formed for the execution of a single transaction, and is thus of a
temporary nature.

This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a
partnership may be particular or universal, and a particular partnership may have for its
object a specific undertaking. (Art. 1783, Civil Code).

It would seem therefore that under Philippine law, a joint venture is a form of partnership and
should thus be governed by the law of partnerships. The Supreme Court has however
recognized a distinction between these two business forms, and has held that although a
corporation cannot enter into a partnership contract, it may however engage in a joint
venture with others.

Evangelista vs. Collector of Internal Rev- B

Facts:
This is a petition, filed by Eufemia Evangelista
, Manuela Evangelista and Francisca Evangelista,... for review of a decision of the
Court of Tax Appeals,... hold that the petitioners are liable for the income tax, real
estate dealer's tax and the residence tax for the years 1945 to 1949... in the total
amount of  P6,878.34,... It apears from the stipulation submitted by the parties:...
petitioners borrowed from their father the sum of P59,140.00 which amount together
with their personal monies  was used by them for the purpose of buying real
properties,... they appointed their brother Simeon Evangelista to 'manage their
properties with full power to lease; to collect and receive rents; to issue receipts
therefor; in default of such payment, to bring' suits against the defaulting... tenant; to
sign all letters, contracts, etc., for and in their behalf, and to endorse and deposit all
notes and checks for them;... after having bought the above-mentioned real
properties, the petitioners had the same rented or leased to various tenants...
respondent Collector of Internal Revenue demanded the payment, of income tax...
letter of demand and the corresponding assessments were delivered to petitioners
, whereupon they instituted the present case in the Court of Tax Appeals, with a
prayer that "the decision of the respondent contained in. his letter of demand... be
reversed, and that they be absolved from the payment of the taxes in question
Court of Tax Appeals rendered... decision for the respondent
, and, a petition for reconsideration and new trial having been subsequently denied,
the case is now before Us for review at the instance of the petitioners.
Petitioners insist, however, that they are mere co-owners
, not copartners, for, in consequence of the acts performed by them, a legal entity,
with a personality independent of that of its members, did not come into existence,
and some of the characteristics of partnerships... are lacking in the case at bar.
Issues:
whether petitioners are subject to the tax on corporations provided for in section 24
of
National Internal Revenue Code
Ruling:
Article 1767 of the Civil Code of the Philippines provides :
 
"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 dividing1 the
profits among- themselves."
Pursuant to this 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,... because:
1.  Said common fund was... created... purposely.  What is more they jointly
borrowed a substantial portion thereof in order to... establish said common fund.
They invested the  same, not merely in one transaction, but in a series of
transactions.
s strongly indicative of a pattern or common design that was not limited to... the
conservation and preservation of the aforementioned common fund
.  In other words, one cannot but perceive a character of habituality peculiar to
business transactions engaged in for... purposes of gain.
The  aforesaid lots  were not  devoted to  residential purposes,... , or to other
personal uses, of petitioners herein.
The properties were leased separately to several persons... properties have been
under the management of one person, namely, Simeon Evangelista
Thus, the affairs relative to said properties have been handled as if the same
belonged to a corporation or business enterprise operated for profit.
as defined in section 84(6) of said Code, "the term corporation includes partnerships,
no matter how created or organized." This qualifying expression clearly indicates that
a joint venture... need not be undertaken in any of the standard forms, or in
conformity with the usual requirements of the law on partnerships, in order that one
couid be deemed constituted for purposes of the tax on corporations. Again,
pursuant to said section 84(6), the term "corporation"... includes, among other, "joint
accounts, (cuentas en participation)" and "associations", none of which his a legal
personality of its own, independent of that of its members. Accordingly, the lawmaker
could not have regarded that personality as a condition... essential to the existence
of the partnerships, therein referred to. In fact, as above stated, "duly registered
general copartnerships" which are possessed of the aforementioned personality
have been expressly excluded by law (sections 24 and 84 [6]) from the... connotation
of the term "corporation." It may not be amiss to add that petitioners' allegation to the
effect that their liability in connection with the leasing of the lots above referred to,
under the management of one person even if true, on which we express no opinion
tends... to increase the similarity between the nature of their venture and that of
corporations, and is, therefore, an additional argument in favor of the imposition of
said tax on corporations.
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.
As regards the residence tax for corporations, section 2 of Commonwealth Act No.
465 provides in part:
 
"Entities liable to residence tax. Every corporation, no matter how created or
organized, whether domestic or resident foreign, engaged in or doing business in the
Philippines shall pay an annual residence tax of five pesos and an annual additional
tax... which, in no case, shall exceed one thousand pesos, in accordance with the
following schedule:    *    *    *.
 
"The term 'corporation' as used in this Act includes joint-stock company, partnership,
joint account (cuentas en participacion), association or insurance company, no
matter how created or organized." (italics ours.)
Considering that the pertinent part of this provision is analogous to that of sections
24 and 84 (b) of our National Internal Revenue Code (Commonwealth Act No. 466),
and that the latter was approved on June 15, 1939, the day immediately after the
approval of said
Commonwealth Act No. 465 (June 14, 1939), it is apparent that the terms
"corporation" and "partnership" are used in both statutes with substantially the same
meaning. Consequently, petitioners are subject, also, to the residence tax for
corporations.
Wherefore, the appealed decision of the Court of Tax Appeals is hereby affirmed
Principles:

Pascual and Dragon v. CIR, G.R. No. 78133, October 18, 1988
25
MAR
[GANCAYCO, J.]

FACTS:

Petitioners bought two (2) parcels of land and a year after, they bought another
three (3) parcels of land. Petitioners subsequently sold the said lots in 1968 and
1970, and realized net profits. 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, the Acting BIR Commissioner assessed and required
Petitioners 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 asserting that they had availed of tax amnesties way back in 1974.
In a reply, 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 under Section
20(b) and its income was subject to the taxes prescribed under Section 24, both
of the National Internal Revenue Code that the unregistered partnership was
subject to corporate income tax as distinguished from profits derived from the
partnership by them which is subject to individual income tax; and that the
availment of tax amnesty under P.D. No. 23, as amended, by petitioners relieved
petitioners of their individual income tax liabilities but did not relieve them from
the tax liability of the unregistered partnership. Hence, the petitioners were
required to pay the deficiency income tax assessed.

ISSUE:

Whether the Petitioners should be treated as an unregistered partnership or a co-

ownership for the purposes of income tax.

RULING:

The Petitioners are simply under the regime of co-ownership and not under
unregistered partnership.

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
profits among themselves (Art. 1767, Civil Code of the Philippines). In the
present case, there is no evidence that petitioners entered into an agreement to
contribute money, property or industry to a common fund, and that they intended
to divide the profits among themselves. 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.
Hence, 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.

Lilibeth Sunga-Chan vs. Lamberto Chua

Facts:
Respondent alleged that in 1977, he verbally entered into a partnership with
Jacinto in the distribution of Shellane Liquefied Petroleum Gas (LPG) in Manila.
For business convenience, respondent and Jacinto allegedly agreed to register
the business name of their partnership,... SHELLITE GAS APPLIANCE CENTER
(hereafter Shellite), under the name of Jacinto as a sole proprietorship.
Respondent allegedly delivered his initial capital contribution of P100,000.00 to
Jacinto while the latter in turn produced P100,000.00 as his counterpart
contribution, with... the intention that the profits would be equally divided between
them. The partnership allegedly had Jacinto as manager, assisted by Josephine
Sy (hereafter Josephine), a sister of the wife of respondent, Erlinda Sy. As
compensation, Jacinto would receive a manager's fee or... remuneration of 10%
of the gross profit and Josephine would receive 10% of the net profits, in addition
to her wages and other remuneration from the business.
Allegedly, from the time that Shellite opened for business on July 8, 1977, its
business operation went quite well and was profitable.
While Jacinto furnished respondent with the merchandise inventories, balance
sheets and net worth of Shellite from 1977 to 1989, respondent however
suspected that the amount indicated in these documents were... understated and
undervalued by Jacinto and Josephine for their own selfish reasons and for tax
avoidance.
Upon Jacinto's death in the later part of 1989, his surviving wife, petitioner Cecilia
and particularly his daughter, petitioner Lilibeth, took over the operations, control,
custody, disposition and management of Shellite without respondent's consent.
Despite respondent's repeated demands upon petitioners for accounting,
inventory, appraisal, winding up and restitution of his net shares in the
partnership, petitioners failed to comply. Petitioner Lilibeth allegedly continued
the operations of Shellite, converting to her own... use and advantage its
properties.
On March 31, 1991, respondent claimed that after petitioner Lilibeth ran out of
alibis and reasons to evade respondent's demands, she disbursed out of the
partnership funds the amount of P200,000.00 and partially paid the same to
respondent. Petitioner Lilibeth allegedly... informed respondent that the
P200,000.00 represented partial payment of the latter's share in the partnership,
with a promise that the former would make the complete inventory and winding
up of the properties of the business establishment. Despite such commitment,
petitioners... allegedly failed to comply with their duty to account, and continued
to benefit from the assets and income of Shellite to the damage and prejudice of
respondent.
On October 7, 1997, the trial court rendered its Decision ruling for respondent.
On January 31, 2000, the Court of Appeals dismissed the appeal.
Issues:
Petitioners question the correctness of the finding of the trial court and the Court
of Appeals that a partnership existed between respondent and Jacinto from 1977
until Jacinto's death.
The crucial issue to settle... then is whether or not the "Dead Man's Statute"
applies to this case so as to render inadmissible respondent's testimony and that
of his witness, Josephine.
Ruling:
A partnership may be constituted in any form, except where immovable property
or real rights are contributed thereto, in which case a public instrument shall be
necessary.[6] Hence, based on the intention of the parties, as gathered from the
facts and... ascertained from their language and conduct, a verbal contract of
partnership may arise.[7] The essential points that must be proven to show that a
partnership was agreed upon are (1) mutual contribution to a common stock, and
(2) a joint interest in the... profits.[8] Understandably so, in view of the absence of
a written contract of partnership between respondent and Jacinto, respondent
resorted to the introduction of documentary and testimonial evidence to prove
said partnership.
The "Dead Man's Statute" provides that if one party to the alleged transaction is
precluded from testifying by death, insanity, or other mental disabilities, the
surviving party is not entitled to the undue advantage of giving his own
uncontradicted and unexplained account of... the transaction.[9] But before this
rule can be successfully invoked to bar the introduction of testimonial evidence, it
is necessary that:
"1.
The witness is a party or assignor of a party to a case or persons in whose behalf
a case is prosecuted.

2.

The action is against an executor or administrator or other representative of a

deceased person or a person of unsound mind;

3.

The subject-matter of the action is a claim or demand against the estate of such
deceased person or against person of unsound mind;

4.

His testimony refers to any matter of fact which occurred before the death of
such deceased person or before such person became of unsound mind."
First, petitioners filed a compulsory counterclaim[11] against respondent in their
answer before the trial court, and with the filing of their counterclaim, petitioners
themselves effectively removed this case from the ambit of the "Dead Man's
Statute".[12] Well entrenched is the rule that when it is the executor or
administrator or representatives of the estate that sets up the counterclaim, the
plaintiff, herein respondent, may testify to occurrences before the death of the
deceased to defeat... the counterclaim.[13] Moreover, as defendant in the
counterclaim, respondent is not disqualified from testifying as to matters of fact
occurring before the death of the deceased, said action not having been brought
against but by the estate or... representatives of the deceased.
Second, the testimony of Josephine is not covered by the "Dead Man's Statute"
for the simple reason that she is not "a party or assignor of a party to a case or
persons in whose behalf a case is prosecuted". Records show that respondent
offered the testimony of Josephine to... establish the existence of the partnership
between respondent and Jacinto. Petitioners' insistence that Josephine is the
alter ego of respondent does not make her an assignor because the term
"assignor" of a party means "assignor of a cause of action which has arisen, and
not... the assignor of a right assigned before any cause of action has arisen."[15]
Plainly then, Josephine is merely a witness of respondent, the latter being the
party plaintiff.
Petitioners' reliance alone on the "Dead Man's Statute" to defeat respondent's
claim cannot prevail over the factual findings of the trial court and the Court of
Appeals that a partnership was established between respondent and Jacinto.
Based not only on the testimonial... evidence, but the documentary evidence as
well, the trial court and the Court of Appeals considered the evidence for
respondent as sufficient to prove the formation of a partnership, albeit an informal
one.
With regard to petitioners' insistence that laches and/or prescription should have
extinguished respondent's claim, we agree with the trial court and the Court of
Appeals that the action for accounting filed by respondent three (3) years after
Jacinto's death was well within the... prescribed period. The Civil Code provides
that an action to enforce an oral contract prescribes in six (6) years[20] while the
right to demand an accounting for a partner's interest as against the person
continuing the business accrues at the date of... dissolution, in the absence of
any contrary agreement.[21] Considering that the death of a partner results in the
dissolution of the partnership[22], in this case, it was after Jacinto's death that
respondent as the surviving partner... had the right to an account of his interest
as against petitioners. It bears stressing that while Jacinto's death dissolved the
partnership, the dissolution did not immediately terminate the partnership. The
Civil Code[23] expressly provides that upon... dissolution, the partnership
continues and its legal personality is retained until the complete winding up of its
business, culminating in its termination.
 Antonia Torres vs CA et, al.

Facts:
Petitioners Torres and Baring entered into a “joint venture agreement”
with Respondent Torres for the development of a parcel of land into a
subdivision. They executed a Deed of Sale covering the said parcel of
land in favor of respondent Manual Torres, who then had it registered in
his name. By mortgaging the property, respondent Manuel Torres
obtained from Equitable Bank a loan of P40,000, which was supposed
to be used for the development of subdivision as per the JVA. However,
the project did not push through and the land was subsequently
foreclosed by the bank.

Petitioners Antonia Torres alleged that it was due to respondent’s lack

of funds/skills that caused the project to fail, and that respondent use
the loan in the furtherance of his own company. On the otherhand,
respondent Manuel Torres alleged that he used the loan to implement
the JVA – surveying and subdivision of lots, approval of the project,
advertisement, and construction of roads and the likes, and that he did
all of these for a total of P85,000.

Petitioners filed a case for estafa against respondent but failed. They
then instituted a civil case. CA held that the two parties formed a
partnership for the development of subdivision and as such, they must
bear the loss suffered by the partnership in the same proportion as their
share in profits. Hence, the petition.

Issue #1:
Whether or not the transaction between petitioner and respondent was
that of joint venture/partnership.

Held:
Yes. There formed a partnership between the two on the basis of joint-
venture agreement and deed of sale. A reading of the terms of
agreement shows the existence of partnership pursuant to Art 1767 of
Civil Code, which states “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 profits among
themselves.” In the 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.

Issue #2:
Whether or not the deed of sale between the two was valid.

Held:
No. Petitioners were wrong in contending that the JVA is void under
Article 1422[14] of the Civil Code, because it is the direct result of an
earlier illegal contract, which was for the sale of the land without valid
consideration.

The Joint Venture Agreement clearly states that the consideration for
the sale was the expectation of profits from the subdivision project. Its
first stipulation states that petitioners did not actually receive payment
for the parcel of land sold to respondent. Consideration, more properly
denominated as cause, can take different forms, such as the prestation
or promise of a thing or service by another.

In this case, the cause of the contract of sale consisted not in the stated
peso value of the land, but in the expectation of profits from the
subdivision project, for which the land was intended to be used. As
explained by the trial court, the land was in effect given to the
partnership as petitioners participation therein. There was therefore a
consideration for the sale, the petitioners acting in the expectation that,
should the venture come into fruition, they would get sixty percent of the
net profits

Hongkong and Shanghai Bank vs Jurado and Co-