Bastida vs.

Menzi and Company,

58 Philippine Reports 188

Facts: Bastida Offered to assign to Menzi & Co. his contract with Phil Sugar

Centrals Agency and to supervise the mixing of the fertilizer and to obtain other orders

for 50 % of the net profit that Menzi & Co., Inc., might derive therefrom. J.M. Menzi

(gen. manager of Menzi & Co.) accepted the offer. The agreement between the

parties was verbal and was confirmed by the letter of Menzi to the plaintiff on January

10, 1922. Pursuant to the verbal agreement, the defendant corporation on April 27,

1922 entered into a written contract with the plaintiff, marked Exhibit A, which is the

basis of the present action.

Still, the fertilizer business as carried on in the same manner as it was prior to the

written contract, but the net profit that the plaintiff herein shall get would only be 35%.

The Intervention of the plaintiff was limited to supervising the mixing of the fertilizers in

the bodegas of Menzi. Prior to the expiration of the contract (April 27, 1927), the

manager of Menzi notified the plaintiff that the contract for his services would not be

renewed.

Subsequently, when the contract expired, Menzi proceeded to liquidate the Fertilizer

business in question. The plaintiff refused to agree to this. It argued, among others,

that the written contract entered into by the parties is a contract of general regular

commercial partnership, wherein Menzi was the capitalist and the plaintiff the

industrial partner.

Issue: Is the relationship between the petitioner and Menzi that of partners?

Held: The relationship established between the parties was not that of partners, but

that of employer and employee, whereby the plaintiff was to receive 35% of the net

profits of the fertilizer business of Menzi in compensation for his services for

supervising the mixing of the fertilizers.

Neither the provisions of the contract nor the conduct of the parties prior or

subsequent to its execution justified the finding that it was a contract of co-

partnership. The Written contract was, in fact, a continuation of the verbal agreement
between the parties, whereby the plaintiff worked for the defendant corporation for

one--

half of the net profits derived by the corporation form certain fertilizer contracts.

According to Art. 116 of the Code of Commerce, articles of association by which two

or more persons obligate themselves to place in a common fund any property,

industry, or any of these things, in order to obtain profit, shall be commercial, no

matter what it class may be, provided it has been established in accordance with the

provisions of the Code. However In this case, there was no common fund. The

business belonged to Menzi & Co. The Plaintiff was working for Menzi, and instead of

receiving a fixed salary, he was to receive 35% of the net profits as compensation f

his services.

The phrase in the written contract “en sociedad con”, which is used as a basis of th

plaintiff to prove partnership in this case, merely means “en reunion con” or

association with.

It is also important to note that although Menzi agreed to furnish the necessa

financial aid for the fertilizer business, it did not obligate itself to contribute any fixe

sum as capital or to defray at its own expense the cost of securing the necessa

credit.

PASCUAL v. Commissioner of Internal Revenue

G.R. No. 78133 October 18, 1988

GANCAYCO, J.:

FACTS:

On June 22, 1965, petitioners bought two (2) parcels of land from Santiag

Bernardino, et al. and on May 28, 1966, they bought another three (3) parcels of lan

from Juan Roque. The first two parcels of land were sold by petitioners in1968 t

Marenir Development Corporation, while the three parcels of land were sold b

petitioners to Erlinda Reyes and Maria Samson on March 19,1970.Petitioner realize

a net profit in the sale made in 1968 in the amount of P165,224.70, while they realize
a net profit of P60,000 in the sale made in 1970.Thecorresponding capital gains taxe

were paid by petitioners in 1973 and1974 .Respondent Commissioner informe

petitioners that in the years 1968 and1970, petitioners as co-owners in the real esta

transactions formed an unregistered partnership or joint venture taxable as

corporation under Section20(b)and its income was subject to the taxes prescribe

under Section 24, both of the National Internal Revenue Code; that the unregistere

partnership was subject to corporate income tax as distinguished from profits derive

from the partnership by them which is subject to individual income tax.

ISSUE: Whether petitioners formed an unregistered partnership subject to corpora

income tax(partnership vs. co-ownership)

RULING:

Article 1769 of the new Civil Code lays down the rule for determining when

transaction should be deemed a partnership or a co-ownership. Said artic

paragraphs 2 and 3, provides:(2) Co-ownership or co-possession does not itse

establish a partnership, whether such co-owners or co-possessors do or do not sha

any profits made by the use of the property; (3) The sharing of gross returns does n