Lim vs. Philippine Fishing Gear Industries Inc.
[GR 136448, 3 November Defendant Stasikinocey had an overdraft account with The National City
1999]
FACTS: Lim Tong Lim requested Peter Yao and Antonio Chuato engage in
commercial fishing with him. The three agreed to purchase two fishing boats
but since they do not have the money they borrowed from one Jesus Lim the
brother of Lim Tong Lim. Subsequently, they again borrowed money for the
purchase of fishing nets and other fishing equipments. Yao and Chua
represented themselves as acting in behalf of “Ocean Quest Fishing
Corporation” (OQFC) and they contracted with Philippine Fishing Gear
Industries (PFGI) for the purchase of fishing nets amounting to more than
P500k. However, they were unable to pay PFGI and hence were sued in their
own names as Ocean Quest Fishing Corporation is a non-existent corporation.
Chua admitted his liability while Lim Tong Lim refused such liability alleging
that Chua and Yao acted without his knowledge and consent in representing
themselves as a corporation.
ISSUE: Whether Lim Tong Lim is liable as a partner
HELD: Yes. It is apparent from the factual milieu that the three decided to
engage in a fishing business. Moreover, their Compromise Agreement had
revealed their intention to pay the loan with the proceeds of the sale and to
divide equally among them the excess or loss. The boats and equipment used
for their business entails their common fund. The contribution to such fund
need not be cash or fixed assets; it could be an intangible like credit or
industry. That the parties agreed that any loss or profit from the sale and
operation of the boats would be divided equally among them also shows that
they had indeed formed a partnership. The principle of corporation by
estoppel cannot apply in the case as Lim Tong Lim also benefited from the
use of the nets in the boat, which was an asset of the partnership. Under the
law on estoppel, those acting in behalf of a corporation and those benefited by
it, knowing it to be without valid existence are held liable as general partners.
Hence, the question as to whether such was legally formed for unknown
reasons is immaterial to the case.
Fernando Santos vs Spouses Arsenio and Nieves Reyes
Facts:
This is a petition for review on certiorari assailing CA decision which
affirmed the RTC decision. Santos and Nieves Reyes verbally agreed that
Santos would act as financier while Nieves and Meliton Zabat would act as
solicitors for membership and collectors of loan payment. 70% of the profits
would go to Santos while Nieves and Zabat would get 15% each.
It was a lending venture business.
Nieves introduced Gragera of Monte Maria Corp, who obtained short term
loans for the partnership in consideration of commissions. In 1986, Nieves and
Zabat executed an agreement which formalized their earlier verbal agreement.
But, Santis and Nieves later discovered that Zabat engaged in the same
lending business. Hence, Zabat was expelled from the partnership. On June
1987, Santos filed a complaint for recovery of sum of money and damages
against the respondents, alleging them as employees who misappropriated the
funds. Respondents assert they were partners and not mere employees. Santos
claimed that after discovery of Zabat's activities, he ceased infusing funds
thereby extinguishing the partnership.
Issue:
Whether or not the parties' relationship was one of partnership or of employer-
employee
Held:
Yes they were partners. 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. The "Articles of
Agreement" stipulated that the signatories shall share the profits of the
business in a 70-15-15 manner, with petitioner getting the lion's share. This
stipulation clearly proved the establishment of a partnership.
Indeed, the partnership was established to engage in a money-lending
business, despite the fact that it was formalized only after the Memorandum of
Agreement had been signed by petitioner and Gragera.
PAUL MACDONALD, ET AL., Petitioners,
vs. THE NATIONAL CITY BANK OF NEW YORK, Respondent.
G.R. No. L-7991. May 21, 1956
Facts:
Stasikinocey is a partnership doing business in San Juan, Rizal, and formed by
Alan W. Gorcey, Louis F. da Costa, Jr., William Kusik and Emma Badong
Gavino. The partnership was denied registration in the Securities and
Exchange Commission, and while it is confusing to see in this case that the
Cardinal Rattan, sometimes called the Cardinal Rattan Factory, is treated as a
co-partnership, of which Defendants Gorcey and da Costa are considered
general partners.
Bank of New York, a foreign banking association duly licensed to do business
in the Philippines. On June 3, 1949, the overdraft showed a balance of
P6,134.92 against the Defendant Stasikinocey or the Cardinal Rattan, which
account, due to the failure of the partnership to make the required payment,
was converted into an ordinary loan for which the corresponding promissory
‘joint note non-negotiable’ was executed on June 3, 1949, by Louis F. da
Costa for and in the name of the Cardinal Rattan, Louis F. da Costa and Alan
Gorcey. This promissory note was secured on June 7, 1949, by a chattel
mortgage executed by Louis F. da Costa, Jr., General Partner for and in the
name of Stasikinocey, alleged to be a duly registered Philippine partnership,
doing business under the name and style of Cardinal Rattan, with principal
office at 69 Riverside, San Juan, Rizal.
During the subsistence of the loan, the vehicles were sold to MacDonald and
later on, MacDonald sold 2 of the 3 vehicles to Gonzales. The bank brought
an action for recovery of its credit and foreclosure of the chattel mortgage
upon learning of these transactions.
Issue:
Whether or not the partnership, Stasikinocey is estopped from asserting that it
does not have juridical personality since it is an unregistered commercial
partnership.
Held:
YES. In ruling that an unregistered commercial partnership which has no
independent juridical personality can have a domicile so that a chattel
mortgage registered in that domicile would bind third persons who are
innocent purchasers for value.
Da Costa and Gorcey cannot deny that they are partners of the partnership
Stasikinocey, because in all their transactions with the National City Bank
they represented themselves as such. McDonald cannot disclaim knowledge of
the partnership Stasikinocey because he dealt with said entity in purchasing
two of the vehicles in question through Gorcey and Da Costa. The sale of the
vehicles to MacDonald being void, the sale to Gonzales is also void since a
buyer cannot have a better right than the seller.
ALFREDO AGUILA JR VS COURT OF APPEALS ET AL
GR NO 127347
FACTS:
In April 1991, the spouses Ruben and Felicidad Abrogar entered into a loan
agreement with a lending firm called A.C. Aguila & Sons, Co., a partnership.
The loan was for P200k. To secure the loan, the spouses mortgaged their
house and lot located in a subdivision. The terms of the loan further stipulates
that in case of non-payment, the property shall be automatically appropriated
to the partnership and a deed of sale be readily executed in favor of the
partnership. She does have a 90 day redemption period.
Ruben died, and Felicidad failed to make payment. She refused to turn over
the property and so the firm filed an ejectment case against her (wherein she
lost). She also failed to redeem the property within the period stipulated. She
then filed a civil case against Alfredo Aguila, manager of the firm, seeking for
the declaration of nullity of the deed of sale. The RTC retained the validity of
the deed of sale. The Court of Appeals reversed the RTC. The CA ruled that
the sale is void for it is a pactum commissorium sale which is prohibited under
Art. 2088 of the Civil Code (note the disparity of the purchase price, which is
the loan amount, with the actual value of the property which is after all located
in a subdivision).
ISSUE:
Whether or not the case filed by Felicidad shall prosper.
HELD:
No. Unfortunately, the civil case was filed not against the real party in
interest. As pointed out by Aguila, he is not the real party in interest but rather
it was the partnership A.C. Aguila & Sons, Co. The Rules of Court provide
that “every action must be prosecuted and defended in the name of the real
party in interest.” A real party in interest is one who would be benefited or
injured by the judgment, or who is entitled to the avails of the suit. 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, as in the case at bar.
Under Art. 1768 of the Civil Code, a partnership “has a juridical personality
separate and distinct from that of each of the partners.” The partners cannot be
held liable for the obligations of the partnership unless it is shown that the
legal fiction of a different juridical personality is being used for fraudulent,
unfair, or illegal purposes. In this case, Felicidad has not shown that
A.C. Aguila & Sons, Co., as a separate juridical entity, is being used for
fraudulent, unfair, or illegal purposes. Moreover, the title to the subject
property is in the name of A.C. Aguila & Sons, Co. It is the partnership, not its
officers or agents, which should be impleaded in any litigation involving
property registered in its name. A violation of this rule will result in the
dismissal of the complaint.
Obillos et al vs. CIR/CA
GRN – L68118 October 29, 1985
FACTS:
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 partnership was formed by the siblings thus be assessed of the
corporate tax.
RULING:
Petitioners were co-owners and to consider them partners would obliterate the
distinction between co-ownership and partnership. The petitioners were not
engaged in any joint venture by reason of that isolated transaction.
Art 1769… 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 partnership or joint venture.
LORENZO OÑA V CIR
GR No. L -19342 | May 25, 1972 | J. Barredo
Facts:
Julia Buñales died leaving as heirs her surviving spouse, Lorenzo Oña and her
five children. A civil case was instituted for the settlement of her state, in
which Oña was appointed administrator and later on the guardian of the three
heirs who were still minors when the project for partition was approved. This
shows that the heirs have undivided ½ interest in 10 parcels of land, 6 houses
and money from the War Damage Commission.
Although the project of partition was approved by the Court, no attempt was
made to divide the properties and they remained under the management of
Oña 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. Petitioners returned for income tax purposes
their shares in the net income but they did not actually receive their shares
because this left with Oña who invested them.
Based on these facts, CIR decided that petitioners formed an unregistered
partnership and therefore, subject to the corporate income tax, particularly for
years 1955 and 1956. Petitioners asked for reconsideration, which was denied
hence this petition for review from CTA’s decision.
Issue:
W/N there was a co-ownership or an unregistered partnership
W/N the petitioners are liable for the deficiency corporate income tax
Held:
Unregistered partnership. The Tax Court found that instead of actually
distributing the estate of the deceased among themselves pursuant to the
project of partition, the heirs allowed their properties to remain under the
management of Oña and let him use their shares as part of the common fund
for their ventures, even as they paid corresponding income taxes on their
respective shares.
Yes. 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. The reason is simple. 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.
For purposes of the tax on corporations, our National Internal Revenue Code
includes these partnerships —
The term “partnership” includes a syndicate, group, pool, joint venture or
other unincorporated organization, through or by means of which any
business, financial operation, or venture is carried on… (8 Merten’s Law of
Federal Income Taxation, p. 562 Note 63; emphasis ours.) 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. Judgment affirmed.
Lyons vs. Rosentock
56 P 632
Facts:
Henry W. Elser was engaged in buying, selling, and administering real estate.
E. S. Lyons joined with him, the profits being shared by the two in equal parts.
Lyons, whose regular vocation was that of a missionary, went on leave to the
United States and was gone for nearly a year and a half. Elser made written
statements showing that Lyons was, at that time, half owner with Elser of
three particular pieces of real property.
Concurrently with this act Lyons execute in favor of Elser a general power of
attorney empowering him to manage and dispose of said properties at will and
to represent Lyons fully and amply, to the mutual advantage of both. The
attention of Elser was drawn to a piece of land, referred to as the San Juan
Estate. He obtained the loan of P50,000 to complete the amount needed for the
first payment on the San Juan Estate. The lender insisted that he should
procure the signature of the Fidelity & Surety Co. on the note to be given for
said loan.
Elser mortgaged to the Fidelity & Surety Co. the equity of redemption in the
property owned by himself and Lyons on Carriedo Street to secure the liability
thus assumed by it. The case for the plaintiff supposes that, when Elser placed
a mortgage for P50,000 upon the equity of redemption in the Carriedo
property, Lyons, as half owner of said property became, as it were,
involuntarily the owner of an undivided interest in the property acquired partly
by that money; and it is insisted for him that, in consideration of this fact, he is
entitled to the four hundred forty-six and two-thirds shares of J. K. Pickering
& Company, with the earnings thereon, as claimed in his complaint.
Issue:
Whether there was a general relation of partnership.
RULING:
No. The position of the appellant is, in our opinion, untenable. If Elser had
used any money actually belonging to Lyons in this deal, he would under
article 1724 of the Civil Code and article 264 of the Codeof Commerce, be
obligated to pay interest upon the money so applied to his own use.
Under the law prevailing in this jurisdiction a trust does not ordinarily attach
with respect to property acquired by a person who uses money belonging to
another (Martinez vs. Martinez, 1 Phil., 647; Enriquez vs. Olaguer,25 Phil.,
641.).
Of course, if an actual relation of partnership had existed in the money used,
the case might be different; and much emphasis is laid in the appellant's brief
upon the relation of partnership which, it is claimed, existed. But there was
clearly no general relation of partnership, under article 1678of the Civil Code.
It is clear that Elser, in buying the San Juan Estate, was not acting for any
partnership composed of himself and Lyons, and the law cannot be distorted
into a proposition which would make Lyons a participant in this deal contrary
to his express determination. It seems to be supposed that the doctrines of
equity worked out in the jurisprudence of England and the United States with
reference to trust supply a basis for this action.
The doctrines referred to operate, however, only where money belonging to
one person is used by another for the acquisition of property which should
belong to both; and it takes but little discernment to see that the situation here
involved is not one for the application of that doctrine, for no money
belonging to Lyons or any partnership composed of Elser and Lyons was in
fact used by Elser in the purchase of the San Juan Estate. Of course, if any
damage had been caused to Lyons by the placing of the mortgage upon the
equity of redemption in the Carriedo property, Elser's estate would be liable
for such damage. But it is evident that Lyons was not prejudice by that act.
AURELIO LITONJUA JR VS EDUARDO LITONJUA SR. ET ALGR
NO. 166299-300
FACTS:
Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that Eduardo
entered into a contract of partnership with him. Aurelio showed as evidence a
letter sent to him by Eduardo that the latter is allowing Aurelio to manage
their family business(if Eduardo’s away) and in exchange thereof he will be
giving Aurelio P1 million or 10% equity, whichever is higher. A
memorandum was subsequently made for the said partnership agreement. The
memorandum this time stated that in exchange of Aurelio, who just got
married, retaining his share in the family business (movie theatres, shipping
and land development) and some other immovable properties, he will be given
P1 Million or 10% equity in all these businesses and those to be subsequently
acquired by them whichever is greater. In 1992 however, the relationship
between the brothers went sour. And so Aurelio demanded an accounting and
the liquidation of his share in the partnership. Eduardo did not heed and so
Aurelio sued Eduardo.
ISSUE: Whether or not there exists a partnership.
HELD: No. The partnership is void and legally non-existent. The
documentary evidence presented by Aurelio, i.e. the letter from Eduardo and
the Memorandum, did not prove partnership.
The 1973 letter from Eduardo on its face, contains typewritten entries,
personal in tone, but is unsigned and undated. As an unsigned document, there
can be no quibbling that said letter does not meet the public instrumentation
requirements exacted under Article 1771 (how partnership is constituted) of
the Civil Code. Moreover, being unsigned and doubtless referring to a
partnership involving more than P3,000.00 in money or property, said letter
cannot be presented for notarization, let alone registered with the Securities
and Exchange Commission (SEC), as called for under the Article 1772
(capitalization of a partnership) of the Code. And inasmuch as the inventory
requirement under the succeeding Article 1773 goes into the matter of validity
when immovable property is contributed to the partnership, the next logical
point of inquiry turns on the nature of Aurelio’s contribution, if any, to the
supposed partnership. The Memorandum is also not a proof of the partnership
for the same is not a public instrument and again, no inventory was made of
the immovable property and no inventory was attached to the Memorandum.
Article 1773 of the Civil Code requires that if immovable property is
contributed to the partnership an inventory shall be had and attached to the
contract.
G.R. No. 134559
December 9, 1999
ANTONIA TORRES assisted by her husband, ANGELO TORRES; and
EMETERIA BARING, petitioners, vs. COURT OF APPEALS and
MANUEL TORRES, respondents.
Courts may not extricate parties from the necessary consequences of their
acts. That the terms of a contract turn out to be financially disadvantageous to
them will not relieve them of their obligations therein. The lack of an
inventory of real property will not ipso facto release the contracting partners
from their respective obligations to each other arising from acts executed in
accordance with their agreement.
Facts:
1 Sisters Antonia Torres and Emeteria Baring, herein petitioners, 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.
1 The project did not push through, and the land was subsequently foreclosed
by the bank.
1 According to petitioners, the project failed because of "respondent's lack of
funds or means and skills." They add that respondent used the loan not for the
development of the subdivision, but in furtherance of his own company,
Universal Umbrella Company.
1 Respondent alleged that he used the loan to implement the Agreement. With
the said amount, he was able to effect the survey and the subdivision of the
lots. He also caused the construction of roads, curbs and gutters. Respondent
claimed that the subdivision project failed, however, because petitioners and
their relatives had separately caused the annotations of adverse claims on the
title to the land, which eventually scared away prospective buyers. Despite his
requests, petitioners refused to cause the clearing of the claims, thereby
forcing him to give up on the project.
Issue:
(1) WON the Agreement shows the existence of a partnership (2) WON the
joint venture is void
HELD: YES, NO
(1) 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 profits among themselves.
Under the above-quoted 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.
It should be stressed that the parties implemented the contract. Thus,
petitioners transferred the title to the land to facilitate its use in the name of
the respondent. On the other hand, respondent caused the subject land to be
mortgaged, the proceeds of which were used for the survey and the
subdivision of the land. As noted earlier, he developed the roads, the curbs
and the gutters of the subdivision and entered into a contract to construct low-
cost housing units on the property.
Respondent's actions clearly belie petitioners' contention that he made no
contribution to the partnership. Under Article 1767 of the Civil Code, a
partner may contribute not only money or property, but also industry.
(2) Art. 1773. A contract of partnership is void, whenever immovable property
is contributed thereto, if an inventory of said property is not made, signed by
the parties, and attached to the public instrument.
They contend that since the parties did not make, sign or attach to the public
instrument an inventory of the real property contributed, the partnership is
void.
We clarify. First, Article 1773 was intended primarily to protect third persons.
Thus, the eminent Arturo M. Tolentino states that under the aforecited
provision which is a complement of Article 1771, 12 "The execution of a
public instrument would be useless if there is no inventory of the property
contributed, because without its designation and description, they cannot be
subject to inscription in the Registry of Property, and their contribution cannot
prejudice third persons. This will result in fraud to those who contract with the
partnership in the belief [in] the efficacy of the guaranty in which the
immovables may consist.
Thus, the contract is declared void by the law when no such inventory is
made." The case at bar does not involve third parties who may be prejudiced.
Second, petitioners themselves invoke the allegedly void contract as basis for
their claim that respondent should pay them 60 percent of the value of the
property. 13 They cannot in one breath deny the contract and in another
recognize it, depending on what momentarily suits their purpose. Parties
cannot adopt inconsistent positions in regard to a contract and courts will not
tolerate, much less approve, such practice.
Frank Bourns v. D.M. Carman
G.R. No. 2880 December 4, 1906
FACTS:
An action to recover the sum of $437.50 balance due on a contract for the
sawing of lumberyard of Lo-Chim-Lim was filed by Bourns (Plaintiff). The
contract was entered into by LoChim-Lim, acting as in his own name with the
plaintiff, and it appears that Lo-Chim-Lim personally agreed to pay for the
work himself. The plaintiff brought the action against LoChim-Lim and his
co-defendants jointly, alleging that at the time the contract was made, they
were the joint proprietors and operators of the said lumber yard engaged in the
purchase and sale of lumber under the name and style of Lo-Chim-Lim, hence
were partners. The lower court dismissed the action on the ground that
defendants D.M.
Carman, Fulgencio and Tan-Tongco, except Vicente Palance and Go-Tauco
were not the partners of Lo-Chim-Lim.
ISSUE: Whether appellants are deemed partners of Lo-Chim-Lim and hence
are liable to Bourns
HELD:
No. The alleged partnership between Lo-Chim-Lim and the appellants was
formed by verbal agreement only. There is no evidence tending to show that
the said agreement was reduced to writing, or that it was ever recorded in a
public instrument. Moreover, the partnership had no corporate name. The
partnership was engaged in business under the name and style of Lo-Chim-
Lim only. Moreover, it does not appear that there was any mutual agreement
between the parties and if there were any, it has not been shown what the
agreement was. The contracts made with the plaintiff were made by Lo-Chim-
Lim individually in his own name, and there is no evidence that the
partnership over contracted in any form. Hence, the partnership is one of
cuentasen participacion. It is but a simple business conducted by Lo-Chim-
Lim exclusively in his own name.
A partnership constituted in such a manner, the existence of which was only
known to those who had an interest in the same, being no mutual agreements
between the partners and without a corporate name indicating to the public in
some way that there were other people besides the one who ostensibly
managed and conducted the business, is exactly the accidental partnership of
cuentas en participacion defined in Art. 239 of the Code of Commerce. Those
who contract with the person under whose name the business of such
partnership of cuentas en participacion is conducted, shall have only a right of
action against such person and not against the other persons interested, and the them. She also argues that the transaction can also be interpreted as a simple
latter, on the other hand, shall have no right of action against the third person loan, with Rosales lending to her the amount stated on an installment basis.
who contracted with the manager unless such manager formally transfers his RTC found Liwanag guilty for the crime of estafa. The Court of Appeals
right to them. affirmed the lower court’s decision

CIR vs. Suter ISSUE:

27 SCRA 152
Whether Liwanag can be acquitted from the crime of estafa because she
Facts: and Rosales formed a partnership

A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was HELD:
formed on 30 September 1947 by herein respondent William J. Suter as the
general partner, and Julia Spirig and Gustav Carlson, as the limited partners. No, Liwanag could not be acquitted from the crime of estafa.
The partners contributed, respectively, P20,000.00, P18,000.00 and P2,000.00
to the partnership. On 1 October 1947, the limited partnership was registered The Supreme Court held that Estafa is a crime committed by a person
with the Securities and Exchange Commission. who defrauds another causing him to suffer damages, by means of
unfaithfulness or abuse of confidence, or of false pretenses or fraudulent acts.
In 1948, however, general partner Suter and limited partner Spirig got married
and, thereafter, on 18 December 1948, limited partner Carlson sold his share In the case at hand, even assuming that a contract of partnership was
in the partnership to Suter and his wife. The sale was duly recorded with the indeed entered into by and between the parties, we have ruled that when
Securities and Exchange Commission on 20 December 1948. money or property have been received by a partner for a specific purpose
(such as that obtaining in the instant case) and he later misappropriated it,
The limited partnership had been filing its income tax returns as a corporation, such partner is guilty of estafa.
without objection by the herein petitioner, Commissioner of Internal Revenue,
until in 1959 when the latter, in an assessment, consolidated the income of the
firm and the individual incomes of the partners-spouses Suter and Spirig
resulting in a determination of a deficiency income tax against respondent
Suter in the amount of P2,678.06 for 1954 and P4,567.00 for 1955.

Respondent Suter protested the assessment, and requested its cancellation and
withdrawal, as not in accordance with law, but his request was denied. Unable
to secure a reconsideration, he appealed to the Court of Tax Appeals, which
court, after trial, rendered a decision, on 11 November 1965, reversing that of
the Commissioner of Internal Revenue.

Issue:

1 Whether or not the corporate personality of the William J. Suter "Morcoin"

Co., Ltd. should be disregarded for income tax purposes, considering that
respondent William J. Suter and his wife, Julia SpirigSuter actually formed a
single taxable unit; and

(b) Whether or not the partnership was dissolved after the marriage of the
partners, respondent William J. Suter and Julia Spirig Suter and the
subsequent sale to them by the remaining partner, Gustav Carlson, of his
participation of P2, 000.00 in the partnership for a nominal amount of P1.00.

Held:

(1) Partners retained their separate interest- the view that by the
marriage of Suter and Spirig became a single proprietorship is erroneous.
Their capital contributions were separately owned and contributed by them
before their marriage and after they were joined in wedlock, such
contributions remained their respective separate property. Thus the individual
interest of Suter and Spirig did not become a common property of both after
their marriage. The change in the membership of the firm is no ground for
withdrawing the partnership from the coverage of section 24 of the National
Internal Revenue code requiring it to pay income tax. Suter and spirig did not
enter to matrimony and thereafter buy the interest of Carlson with the
premeditated scheme or design to use the partnership as a business conduit to
dodge the tax laws.

(2) Partnership as a particular one- the firm was not a universal partnership,
but a particular one. It follows that the partnership was not one that the
spouses were not forbidden to enter nor could the subsequent marriage of the
partners operate to dissolve it, such marriage not being one of the causes
provided for that purpose by law.

LIWANAG v. CA
G.R. No. 114398; October 24, 1997

FACTS:

Petitioner Carmen Liwanag and a certain Thelma Tabligan went to the

house of complainant Isidora Rosales (Rosales) and asked her to join them in
the business of buying and selling cigarettes. Convinced of the feasibility of
the venture, Rosales readily agreed. Under their agreement, Rosales would
give the money needed to buy the cigarettes while Liwanag and Tabligan
would act as her agents, with a corresponding 40% commission to her if the
goods are sold; otherwise the money would be returned to Rosales.
Consequently, Rosales gave several cash advances to Liwanag and Tabligan
amounting to P633,650.00.

Alarmed that Liwanag was no longer visiting her regarding their business and
believing that the amounts she advanced were being misappropriated, Rosales
filed a case of estafa against Liwanag.

Liwanag advances the theory that the intention of the parties was to enter into
a contract of partnership, wherein Rosales would contribute the funds while
she would buy and sell the cigarettes, and later divide the profits between