FIRST DIVISION

[G.R. No. L-49982. April 27, 1988.]

ELIGIO ESTANISLAO, JR.,Petitioner, v. THE HONORABLE COURT OF APPEALS, REMEDIOS ESTANISLAO, EMILIO and LEOCADIO SANTIAGO,Respondents.

Agustin O. Benitez forPetitioner.

Benjamin C. Yatco forPrivate Respondents.

SYLLABUS

1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; PARTNERSHIP; FORMED WHERE MEMBERS OF THE SAME FAMILY BOUND THEMSELVES TO CONTRIBUTE MONEY TO A COMMON FUND WITH THE INTENTION OF DIVIDING THE PROFITS AMONG THEMSELVES. The Joint Affidavit of April 11, 1966 (Exhibit A), clearly stipulated by the members of the same family that the P15,000.00 advance rental due to them from SHELL shall augment their "capital investment" in the operation of the gasoline station. Moreover other evidence in the record shows that there was in fact such partnership agreement between the parties. This is attested by the testimonies of private respondent Remedios Estanislao and Atty. Angeles. Petitioner submitted to private respondents periodic accounting of the business. Petitioner gave a written authority to private respondent Remedios Estanislao, his sister, to examine and audit the books of their "common business" (aming negosyo). Respondent Remedios assisted in the running of the business. There is no doubt that the parties hereto formed a partnership when they bound themselves to contribute money to a common fund with the intention of dividing the profits among themselves.

2. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF THE COURT OF APPEALS, GENERALLY CONCLUSIVE ON APPEAL. The findings of facts of the respondent court are conclusive in this proceeding, and its conclusion based on the said facts are in accordance with the applicable law.

D E C I S I O N

GANCAYCO,J.:

By this petition forcertiorarithe Court is asked to determine if a partnership exists between members of the same family arising from their joint ownership of certain properties.

Petitioner and private respondents are brothers and sisters who are co-owners of certain lots at the corner of Annapolis and Aurora Blvd., Quezon City which were then being leased to the Shell Company of the Philippines Limited (SHELL). They agreed to open and operate a gas station thereat to be known as Estanislao Shell Service Station with an initial investment of P15,000.00 to be taken from the advance rentals due to them from SHELL for the occupancy of the said lots owned in common by them. A joint affidavit was executed by them on April 11, 1966 which was prepared by Atty. Democrito Angeles. 1 They agreed to help their brother, petitioner herein, by allowing him to operate and manage the gasoline service station of the family. They negotiated with SHELL. For practical purposes and in order not to run counter to the companys policy of appointing only one dealer, it was agreed that petitioner would apply for the dealership. Respondent Remedios helped in co-managing the business with petitioner from May 3, 1968 up to February 16, 1967.

On May 26, 1966, the parties herein entered into an Additional Cash Pledge Agreement with SHELL wherein it was reiterated that the P15,000.00 advance rental shall be deposited with SHELL to cover advances of fuel to petitioner as dealer with a proviso that said agreement "cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by the co-owners." 2

For sometime, the petitioner submitted financial statements regarding the operation of the business to private respondents, but thereafter petitioner failed to render subsequent accounting. Hence through Atty. Angeles, a demand was made on petitioner to render an accounting of the profits.

The financial report of December 31, 1968 shows that the business was able to make a profit of P87,293.79 and that by the year ending 1969, a profit of P150,000.00 was realized. 3

Thus, on August 25, 1970 private respondents filed a complaint in the Court of First Instance of Rizal against petitioner saying among others that the latter be ordered:jgc:chanrobles.com.ph

"1. to execute a public document embodying all the provisions of the partnership agreement entered into between plaintiffs and defendants provided in Article 1771 of the New Civil Code;

"2. to render a formal accounting of the business operation covering the period from May 6, 1966 up to December 21, 1968 and from January 1, 1969 up to the time the order is issued and that the same be subject to proper audit;

"3. to pay the plaintiffs their lawful shares and participation in the net profits of the business in an amount of no less than P150,000.00 with interest at the rate of 1% per month from date of demand until full payment thereof for the entire duration of the business; and

"4. to pay the plaintiffs the amount of P10,000.00 as attorneys fees and costs of the suit." (pp. 13-14 Record on Appeal.)"

After trial on the merits, on October 15, 1975, Hon. Lino Anover, who was then the temporary presiding judge of Branch IV of the trial court, rendered judgment dismissing the complaint and counterclaim and ordering private respondents to pay petitioner P3,000.00 attorneys fee and costs. Private respondent filed a motion for reconsideration of the decision. On December 1, 1975, Hon. Ricardo Tensuan who was the newly appointed presiding judge of the same branch, set aside the aforesaid decision and rendered another decision in favor of said respondents.chanroblesvirtualawlibrary

The dispositive part thereof reads as follows:chanrob1es virtual 1aw library

WHEREFORE, the Decision of this Court dated October 14, 1975 is hereby reconsidered and a new judgment is hereby rendered in favor of the plaintiffs and as against the defendant:chanrob1es virtual 1aw library

(1) Ordering the defendant to execute a public instrument embodying all the provisions of the partnership agreement entered into between plaintiffs and defendant as provided for in Article 1771, Civil Code of the Philippines;

(2) Ordering the defendant to render a formal accounting of the business operation from April 1969 up to the time this order is issued, the same to be subject to examination and audit by the plaintiff;

(3) Ordering the defendant to pay plaintiffs their lawful shares and participation in the net profits of the business in the amount of P150,000.00, with interest thereon at the rate of One (1%) Per Cent per month from date of demand until full payment thereof;

(4) Ordering the defendant to pay the plaintiffs the sum of P5,000.00 by way of attorneys fees of plaintiffs counsel; as well as the costs of suit." (pp. 161-162. Record on Appeal)."cralaw virtua1aw library

Petitioner then interposed an appeal to the Court of Appeals enumerating seven (7) errors allegedly committed by the trial court. In due course, a decision was rendered by the Court of Appeals on November 28, 1978 affirming in toto the decision of the lower court with costs against petitioner. **

A motion for reconsideration of said decision filed by petitioner was denied on January 30, 1979. Not satisfied therewith, the petitioner now comes to this court by way of this petition forcertiorarialleging that the respondent court erred:jgc:chanrobles.com.ph

"1. In interpreting the legal import of the Joint Affidavit (Exh. "A") vis-a-vis the Additional Cash Pledge Agreement (Exhs. "B-2," "6," and "L"); and

2. In declaring that a partnership was established by and among the petitioner and the private respondents as regards the ownership and/or operation of the gasoline service station business."cralaw virtua1aw library

Petitioner relies heavily on the provisions of the Joint Affidavit of April 11, 1966 (Exhibit A) and the Additional Cash Pledge Agreement of May 20, 1966 (Exhibit 6) which are herein reproduced -

(a) The joint Affidavit of April 11, 1966, Exhibit A reads:jgc:chanrobles.com.ph

"(1) That we are the Lessors of two parcels of land fully described in Transfer Certificates of Title Nos. 45071 and 71244 of the Register of Deeds of Quezon City, in favor of the LESSEE - SHELL COMPANY OF THE PHILIPPINES LIMITED, a corporation duly licensed to do business in the Philippines;

"(2) That we have requested the said SHELL COMPANY OF THE PHILIPPINES LIMITED, advanced rentals in the total amount of FIFTEEN THOUSAND PESOS (P15,000.00) Philippine Currency, so that we can use the said amount to augment our capital investment in the operation of that gasoline station constructed by the said company on our two lots aforesaid by virtue of an outstanding Lease Agreement we have entered into with the said company.

"(3) That the said SHELL COMPANY OF THE PHILIPPINES LIMITED out of its benevolence and desire to help us in augmenting our capital investment in the operation of the said gasoline station, has agreed to give us the said amount of P15,000.00, which amount will partake the nature of ADVANCED RENTALS;

"(4) That we have freely and voluntarily agreed that upon receipt of the said amount of FIFTEEN THOUSAND PESOS (P15,000,00) from the SHELL COMPANY OF THE PHILIPPINES LIMITED, the said sum as ADVANCED RENTALS to us be applied as monthly rentals for the said two lots under our Lease Agreement starting on the 25th of May, 1966 until such time that the said amount of P15,000.00 be applicable, which time to our estimate will cover at four and one-half months from May 25, 1966 or until the 10th of October, 1966 more or less;

"(5) That we have likewise agreed among ourselves that the SHELL COMPANY OF THE PHILIPPINES LIMITED execute an instrument for us to sign embodying our conformity that the said amount that it will generously grant us as requested be applied as ADVANCED RENTALS; and

"(6) FURTHER AFFIANTS SAYETH NOT.

(b) The Additional Cash Pledge Agreement of May 20, 1966, Exhibit 6, is as follows:jgc:chanrobles.com.ph

"WHEREAS, under the lease Agreement dated 13th November, 1963 (identified as doc. Nos. 491 & 1407, Page Nos. 99 & 66, Book Nos. V & 111, Series of 1963 in the Notarial Registers of Notaries Public Rosauro Marquez, and R.D. Liwanag, respectively) executed in favour of SHELL by the herein CO-OWNERS and another Lease Agreement dated 19th March 1964 . . . also executed in favour of SHELL by CO-OWNERS Remedios and MARIA ESTANISLAO for the lessee of adjoining portions of two parcels of land at Aurora Blvd., Annapolis, Quezon City, the CO-OWNERS RECEIVE a total monthly rental of PESOS THREE THOUSAND THREE HUNDRED EIGHTY TWO AND 29/100 (P3,382.29), Philippine Currency;

"WHEREAS, CO-OWNER Eligio Estanislao, Jr. is the Dealer of the Shell Station constructed on the leased land, and as Dealer under the Cash Pledge Agreement dated 11th May 1966, he deposited to SHELL in cash the amount of PESOS TEN THOUSAND (P10,000), Philippine Currency, to secure his purchases on credit of Shell petroleum products; . . .chanroblesvirtualawlibrary

"WHEREAS, said DEALER, in his desire to be granted an increased credit limit up to P25,000, has secured the conformity of his CO-OWNERS to waive and assign to SHELL the total monthly rentals due to all of them to accumulate the equivalent amount of P15,000, commencing 24th May 1966, this P15,000 shall be treated as additional cash deposit to SHELL under the same terms and conditions of the aforementioned Cash Pledge Agreement dated 11th May 1966.

NOW, THEREFORE, for and in consideration of the foregoing premises, and the mutual covenants among the CO-OWNERS herein and SHELL, said parties have agreed and hereby agree as follows:jgc:chanrobles.com.ph

"1. The CO-OWNERS do hereby waive in favour of DEALER the monthly rentals due to all CO-OWNERS, collectively, under the above described two Lease Agreements, one dated 13th November 1963 and the other dated 19th March 1964 to enable DEALER to increase his existing cash deposit to SHELL, from P10,000 to P25,000, for such purpose, the SHELL CO-OWNERS and DEALER hereby irrevocably assign to SHELL the monthly rental of P3,382.29 payable to them respectively as they fall due, monthly, commencing 24th May 1966, until such time that the monthly rentals accumulated, shall be equal to P15,000.

"2. The above stated monthly rentals accumulated shall be treated as additional cash deposit by DEALER to SHELL, thereby increasing his credit limit from P10,000 to P25,000. This agreement, therefore, cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by the CO-OWNERS.

"3. Effective upon the signing of this agreement, SHELL agrees to allow DEALER to purchase from SHELL petroleum products, on credit, up to the amount of P25,000.

"4. This increase in the credit limit shall also be subject to the same terms and conditions of the above-mentioned Cash Pledge Agreement dated 11th May 1966." (Exhs. "B-2," "L," and "6" ;Italics supplied)

In the aforesaid Joint Affidavit of April 11, 1966 (Exhibit A), it is clearly stipulated by the parties that the P15,000.00 advance rental due to them from SHELL shall augment their "capital investment" in the operation of the gasoline station, which advance rentals shall be credited as rentals from May 25, 1966 up to four and one-half months or until 10 October 1966, more or less covering said P15,000.00.

In the subsequent document entitled `Additional Cash Pledge Agreement" above reproduced (Exhibit 6), the private respondents and petitioners assigned to SHELL the monthly rentals due them commencing the 24th of May 1966 until such time that the monthly rentals accumulated equal P15,000.00 which private respondents agree to be a cash deposit of petitioner in favor of SHELL to increase his credit limit as dealer. As above-stated it provided therein that "This agreement, therefore, cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by the CO-OWNERS."cralaw virtua1aw library

Petitioner contends that because of the said stipulation cancelling and superseding that previous Joint Affidavit, whatever partnership agreement there was in said previous agreement had thereby been abrogated. We find no merit in this argument. Said cancelling provision was necessary for the Joint Affidavit speaks of P15,000.00 advance rentals starting May 25, 1966 while the latter agreement also refers to advance rentals of the same amount starting May 24, 1966. There is, therefore, a duplication of reference to the P15,000.00 hence the need to provide in the subsequent document that it "cancels and supersedes" the previous one. True it is that in the latter document, it is silent as to the statement in the Joint Affidavit that the P15,000.00 represents the "capital investment" of the parties in the gasoline station business and it speaks of petitioner as the sole dealer, but this is as it should be for in the latter document SHELL was a signatory and it would be against its policy if in the agreement it should be stated that the business is a partnership with private respondents and not a sole proprietorship of petitioner.chanrobles.com:cralaw:red

Moreover other evidence in the record shows that there was in fact such partnership agreement between the parties. This is attested by the testimonies of private respondent Remedios Estanislao and Atty. Angeles. Petitioner submitted to private respondents periodic accounting of the business. 4 Petitioner gave a written authority to private respondent Remedios Estanislao, his sister, to examine and audit the books of their "common business" (aming negosyo). 5 Respondent Remedios assisted in the running of the business. There is no doubt that the parties hereto formed a partnership when they bound themselves to contribute money to a common fund with the intention of dividing the profits among themselves. 6 The sole dealership by the petitioner and the issuance of all government permits and licenses in the name of petitioner was in compliance with the afore-stated policy of SHELL and the understanding of the parties of having only one dealer of the SHELL products.

Further, the findings of facts of the respondent court are conclusive in this proceeding, and its conclusion based on the said facts are in accordance with the applicable law.

WHEREFORE, the judgment appealed from is AFFIRMED in toto with costs against petitioner. This decision is immediately executory and no motion for extension of time to file a motion for reconsideration shall be entertained.

SO ORDERED.

Narvasa, Cruz and Grio-Aquino,JJ., concur.

SECOND DIVISION[G.R. NO. 159333 : July 31, 2006]ARSENIO T. MENDIOLA,Petitioner,v.COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, PACIFIC FOREST RESOURCES, PHILS., INC. and/or CELLMARK AB,Respondents.D E C I S I O NPUNO,J.:On appeal are the Decision1and Resolution2of the Court of Appeals, dated January 30, 2003 and July 30, 2003, respectively, in CA-G.R. SP No. 71028, affirming the ruling3of the National Labor Relations Commission (NLRC), which in turn set aside the July 30, 2001 Decision4of the labor arbiter. The labor arbiter declared illegal the dismissal of petitioner from employment and awarded separation pay, moral and exemplary damages, and attorney's fees.The facts are as follows:Private respondent Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation organized and existing under the laws of California, USA. It is a subsidiary of Cellulose Marketing International, a corporation duly organized under the laws of Sweden, with principal office in Gothenburg, Sweden.Private respondent Pacfor entered into a "Side Agreement on Representative Office known as Pacific Forest Resources (Phils.), Inc."5with petitioner Arsenio T. Mendiola (ATM), effective May 1, 1995, "assuming that Pacfor-Phils. is already approved by the Securities and Exchange Commission [SEC] on the said date."6The Side Agreement outlines the business relationship of the parties with regard to the Philippine operations of Pacfor. Private respondent will establish a Pacfor representative office in the Philippines, to be known as Pacfor Phils, and petitioner ATM will be its President. Petitioner's base salary and the overhead expenditures of the company shall be borne by the representative office and funded by Pacfor/ATM, since Pacfor Phils. is equally owned on a 50-50 equity by ATM and Pacfor-usa.On July 14, 1995, the SEC granted the application of private respondent Pacfor for a license to transact business in the Philippines under the name of Pacfor or Pacfor Phils.7In its application, private respondent Pacfor proposed to establish its representative office in the Philippines with the purpose of monitoring and coordinating the market activities for paper products. It also designated petitioner as its resident agent in the Philippines, authorized to accept summons and processes in all legal proceedings, and all notices affecting the corporation.8In March 1997, the Side Agreement was amended through a "Revised Operating and Profit Sharing Agreement for the Representative Office Known as Pacific Forest Resources (Philippines),"9where the salary of petitioner was increased to $78,000 per annum. Both agreements show that the operational expenses will be borne by the representative office and funded by all parties "as equal partners," while the profits and commissions will be shared among them.In July 2000, petitioner wrote Kevin Daley, Vice President for Asia of Pacfor, seeking confirmation of his 50% equity of Pacfor Phils.10Private respondent Pacfor, through William Gleason, its President, replied that petitioner is not a part-owner of Pacfor Phils. because the latter is merely Pacfor-USA's representative office and not an entity separate and distinct from Pacfor-USA. "It's simply a 'theoretical company' with the purpose of dividing the income 50-50."11Petitioner presumably knew of this arrangement from the start, having been the one to propose to private respondent Pacfor the setting up of a representative office, and "not a branch office" in the Philippines to save on taxes.12Petitioner claimed that he was all along made to believe that he was in a joint venture with them. He alleged he would have been better off remaining as an independent agent or representative of Pacfor-USA as ATM Marketing Corp.13Had he known that no joint venture existed, he would not have allowed Pacfor to take the profitable business of his own company, ATM Marketing Corp.14Petitioner raised other issues, such as the rentals of office furniture, salary of the employees, company car, as well as commissions allegedly due him. The issues were not resolved, hence, in October 2000, petitioner wrote Pacfor-USA demanding payment of unpaid commissions and office furniture and equipment rentals, amounting to more than one million dollars.15On November 27, 2000, private respondent Pacfor, through counsel, ordered petitioner to turn over to it all papers, documents, files, records, and other materials in his or ATM Marketing Corporation's possession that belong to Pacfor or Pacfor Phils.16On December 18, 2000, private respondent Pacfor also required petitioner to remit more than three hundred thousand-peso Christmas giveaway fund for clients of Pacfor Phils.17Lastly, private respondent Pacfor withdrew all its offers of settlement and ordered petitioner to transfer title and turn over to it possession of the service car.18Private respondent Pacfor likewise sent letters to its clients in the Philippines, advising them not to deal with Pacfor Phils. In its letter to Intercontinental Paper Industries, Inc., dated November 21, 2000, private respondent Pacfor stated:Until further notice, please course all inquiries and communications for Pacific Forest Resources (Philippines) to:Pacific Forest Resources200 Tamal Plaza, Suite 200Corte Madera, CA, USA 94925(415) 927 1700 phone(415) 381 4358 faxPlease do not send any communication to Mr. Arsenio "Boy" T. Mendiola or to the offices of ATM Marketing Corporation at Room 504, Concorde Building, Legaspi Village, Makati City, Philippines.19In another letter addressed to Davao Corrugated Carton Corp. (DAVCOR), dated December 2000, private respondent directed said client "to please communicate directly with us on any further questions associated with these payments or any future business. Do not communicate with [Pacfor] and/or [ATM]."20Petitioner construed these directives as a severance of the "unregistered partnership" between him and Pacfor, and the termination of his employment as resident manager of Pacfor Phils.21In a memorandum to the employees of Pacfor Phils., dated January 29, 2001, he stated:I received a letter from Pacific Forest Resources, Inc. demanding the turnover of all records to them effective December 19, 2000. The company records were turned over only on January 26, 2001. This means our jobs with Pacific Forest were terminated effective December 19, 2000. I am concerned about your welfare. I would like to help you by offering you to work with ATM Marketing Corporation.Please let me know if you are interested.22On the basis of the "Side Agreement," petitioner insisted that he and Pacfor equally own Pacfor Phils. Thus, it follows that he and Pacfor likewise own, on a 50/50 basis, Pacfor Phils.' office furniture and equipment and the service car. He also reiterated his demand for unpaid commissions, and proposed to offset these with the remaining Christmas giveaway fund in his possession.23Furthermore, he did not renew the lease contract with Pulp and Paper, Inc., the lessor of the office premises of Pacfor Phils., wherein he was the signatory to the lease agreement.24On February 2, 2001, private respondent Pacfor placed petitioner on preventive suspension and ordered him to show cause why no disciplinary action should be taken against him. Private respondent Pacfor charged petitioner with willful disobedience and serious misconduct for his refusal to turn over the service car and the Christmas giveaway fund which he applied to his alleged unpaid commissions. Private respondent also alleged loss of confidence and gross neglect of duty on the part of petitioner for allegedly allowing another corporation owned by petitioner's relatives, High End Products, Inc. (HEPI), to use the same telephone and facsimile numbers of Pacfor, to possibly steal and divert the sales and business of private respondent for HEPI's principal, International Forest Products, a competitor of private respondent.25Petitioner denied the charges. He reiterated that he considered the import of Pacfor President William Gleason's letters as a "cessation of his position and of the existence of Pacfor Phils." He likewise informed private respondent Pacfor that ATM Marketing Corp. now occupies Pacfor Phils.' office premises,26and demanded payment of his separation pay.27On February 15, 2001, petitioner filed his complaint for illegal dismissal, recovery of separation pay, and payment of attorney's fees with the NLRC.28In the meantime, private respondent Pacfor lodged fresh charges against petitioner. In a memorandum dated March 5, 2001, private respondent directed petitioner to explain why he should not be disciplined for serious misconduct and conflict of interest. Private respondent charged petitioner anew with serious misconduct for the latter's alleged act of fraud and misrepresentation in authorizing the release of an additional peso salary for himself, besides the dollar salary agreed upon by the parties. Private respondent also accused petitioner of disloyalty and representation of conflicting interests for having continued using the Pacfor Phils.' office for operations of HEPI. In addition, petitioner allegedly solicited business for HEPI from a competitor company of private respondent Pacfor.29Labor Arbiter Felipe Pati ruled in favor of petitioner, finding there was constructive dismissal. By directing petitioner to turn over all office records and materials, regardless of whether he may have retained copies, private respondent Pacfor virtually deprived petitioner of his job by the gradual diminution of his authority as resident manager. Petitioner's position as resident manager whose duty, among others, was to maintain the security of its business transactions and communications was rendered meaningless. The dispositive portion of the decision of the Labor Arbiter reads:WHEREFORE, premises considered, judgment is hereby rendered ordering herein respondents Cellmark AB and Pacific Forest Resources, Inc., jointly and severally to compensate complainant Arsenio T. Mendiola separation pay equivalent to at least one month for every year of service, whichever is higher(sic), as reinstatement is no longer feasible by reason of the strained relations of the parties equivalent to five (5) months in the amount of $32,000.00 plus the sum ofP250,000.00; pay complainant the sum ofP500,000.00 as moral and exemplary damages and ten percent (10%) of the amounts awarded as and for attorney's fees.All other claims are dismissed for lack of basis.SO ORDERED.30Private respondent Pacfor appealed to the NLRC which ruled in its favor. On December 20, 2001, the NLRC set aside the July 30, 2001 decision of the labor arbiter, for lack of jurisdiction and lack of merit.31It held there was no employer-employee relationship between the parties. Based on the two agreements between the parties, it concluded that petitioner is not an employee of private respondent Pacfor, but a full co-owner (50/50 equity).The NLRC denied petitioner's Motion for Reconsideration.32Petitioner was not successful on his appeal to the Court of Appeals. The appellate court upheld the ruling of the NLRC.Petitioner's Motion for Reconsideration33of the decision of the Court of Appeals was denied.Hence, this appeal.34Petitioner assigns the following errors:A. The Respondent Court of Appeals committed reversible error and abused its discretion in rendering judgment against petitioner since jurisdiction has been acquired over the subject matter of the case as there exists employer-employee relationship between the parties.B. The Respondent Court of Appeals committed reversible error and abused its discretion in ruling that jurisdiction over the subject matter cannot be waived and may be alleged even for the first time on appeal or considered by the court motu prop[r]io.35The first issue is whether an employer-employee relationship exists between petitioner and private respondent Pacfor.Petitioner argues that he is an industrial partner of the partnership he formed with private respondent Pacfor, and also an employee of the partnership. Petitioner insists that an industrial partner may at the same time be an employee of the partnership, provided there is such an agreement, which, in this case, is the "Side Agreement" and the "Revised Operating and Profit Sharing Agreement." The Court of Appeals denied the appeal of petitioner, holding that "the legal basis of the complaint is not employment but perhaps partnership, co-ownership, or independent contractorship." Hence, the Labor Code cannot apply.We hold that petitioner is an employee of private respondent Pacfor and that no partnership or co-ownership exists between the parties.In a partnership, the members become co-owners of what is contributed to the firm capital and of all property that may be acquired thereby and through the efforts of the members.36The property or stock of the partnership forms a community of goods, a common fund, in which each party has a proprietary interest.37In fact, the New Civil Code regards a partner as a co-owner of specific partnership property.38Each partner possesses a joint interest in the whole of partnership property. If the relation does not have this feature, it is not one of partnership.39This essential element, the community of interest, or co-ownership of, or joint interest in partnership property is absent in the relations between petitioner and private respondent Pacfor. Petitioner is not a part-owner of Pacfor Phils. William Gleason, private respondent Pacfor's President established this fact when he said that Pacfor Phils. is simply a "theoretical company" for the purpose of dividing the income 50-50. He stressed that petitioner knew of this arrangement from the very start, having been the one to propose to private respondent Pacfor the setting up of a representative office, and "not a branch office" in the Philippines to save on taxes. Thus, the parties in this case, merely shared profits. This alone does not make a partnership.40Besides, a corporation cannot become a member of a partnership in the absence of express authorization by statute or charter.41This doctrine is based on the following considerations: (1) that the mutual agency between the partners, whereby the corporation would be bound by the acts of persons who are not its duly appointed and authorized agents and officers, would be inconsistent with the policy of the law that the corporation shall manage its own affairs separately and exclusively; and, (2) that such an arrangement would improperly allow corporate property to become subject to risks not contemplated by the stockholders when they originally invested in the corporation.42No such authorization has been proved in the case at bar.Be that as it may, we hold that on the basis of the evidence, an employer-employee relationship is present in the case at bar. The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's conduct. The most important element is the employer's control of the employee's conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.43In the instant case, all the foregoing elements are present. First, it was private respondent Pacfor which selected and engaged the services of petitioner as its resident agent in the Philippines. Second, as stipulated in their Side Agreement, private respondent Pacfor pays petitioner his salary amounting to $65,000 per annum which was later increased to $78,000. Third, private respondent Pacfor holds the power of dismissal, as may be gleaned through the various memoranda it issued against petitioner, placing the latter on preventive suspension while charging him with various offenses, including willful disobedience, serious misconduct, and gross neglect of duty, and ordering him to show cause why no disciplinary action should be taken against him.Lastly and most important, private respondent Pacfor has the power of control over the means and method of petitioner in accomplishing his work.The power of control refers merely to the existence of the power, and not to the actual exercise thereof. The principal consideration is whether the employer has the right to control the manner of doing the work, and it is not the actual exercise of the right by interfering with the work, but the right to control, which constitutes the test of the existence of an employer-employee relationship.44In the case at bar, private respondent Pacfor, as employer, clearly possesses such right of control. Petitioner, as private respondent Pacfor's resident agent in the Philippines, is, exactly so, only an agent of the corporation, a representative of Pacfor, who transacts business, and accepts service on its behalf.This right of control was exercised by private respondent Pacfor during the period of November to December 2000, when it directed petitioner to turn over to it all records of Pacfor Phils.; when it ordered petitioner to remit the Christmas giveaway fund intended for clients of Pacfor Phils.; and, when it withdrew all its offers of settlement and ordered petitioner to transfer title and turn over to it the possession of the service car. It was also during this period when private respondent Pacfor sent letters to its clients in the Philippines, particularly Intercontinental Paper Industries, Inc. and DAVCOR, advising them not to deal with petitioner and/or Pacfor Phils. In its letter to DAVCOR, private respondent Pacfor replied to the client's request for an invoice payment extension, and formulated a revised payment program for DAVCOR. This is one unmistakable proof that private respondent Pacfor exercises control over the petitioner.Next, we shall determine if petitioner was constructively dismissed from employment.The evidence shows that when petitioner insisted on his 50% equity in Pacfor Phils., and would not quit however, private respondent Pacfor began to systematically deprive petitioner of his duties and benefits to make him feel that his presence in the company was no longer wanted. First, private respondent Pacfor directed petitioner to turn over to it all records of Pacfor Phils. This would certainly make the work of petitioner very difficult, if not impossible. Second, private respondent Pacfor ordered petitioner to remit the Christmas giveaway fund intended for clients of Pacfor Phils. Then it ordered petitioner to transfer title and turn over to it the possession of the service car. It also advised its clients in the Philippines, particularly Intercontinental Paper Industries, Inc. and DAVCOR, not to deal with petitioner and/or Pacfor Phils. Lastly, private respondent Pacfor appointed a new resident agent for Pacfor Phils.45Although there is no reduction of the salary of petitioner, constructive dismissal is still present because continued employment of petitioner is rendered, at the very least, unreasonable.46There is an act of clear discrimination, insensibility or disdain by the employer that continued employment may become so unbearable on the part of the employee so as to foreclose any choice on his part except to resign from such employment.47The harassing acts of the private respondent are unjustified. They were undertaken when petitioner sought clarification from the private respondent about his supposed 50% equity on Pacfor Phils. Private respondent Pacfor invokes its rights as an owner. Allegedly, its issuance of the foregoing directives against petitioner was a valid exercise of management prerogative. We remind private respondent Pacfor that the exercise of management prerogative is not absolute. "By its very nature, encompassing as it could be, management prerogative must be exercised in good faith and with due regard to the rights of labor - verily, with the principles of fair play at heart and justice in mind." The exercise of management prerogative cannot be utilized as an implement to circumvent our laws and oppress employees.48As resident agent of private respondent corporation, petitioner occupied a position involving trust and confidence. In the light of the strained relations between the parties, the full restoration of an employment relationship based on trust and confidence is no longer possible. He should be awarded separation pay, in lieu of reinstatement.IN VIEW WHEREOF, the petition isGRANTED. The Court of Appeals' January 30, 2003 Decision in CA-G.R. SP No. 71028 and July 30, 2003 Resolution, affirming the December 20, 2001 Decision of the National Labor Relations Commission, areANNULEDandSET ASIDE. The July 30, 2001 Decision of the Labor Arbiter isREINSTATEDwith theMODIFICATIONthat the amount ofP250,000.00 representing an alleged increase in petitioner's salary shall be deducted from the grant of separation pay for lack of evidence.SO ORDERED.SECOND DIVISION

[G.R. No. 127347. November 25, 1999.]

ALFREDO N. AGUILA, JR.,Petitioner, v. HONORABLE COURT OF APPEALS and FELICIDAD S. VDA. DE ABROGAR,Respondents.

D E C I S I O N

MENDOZA,J.:

This is a petition for review oncertiorariof the decision 1 of the Court of Appeals,. dated November 29, 1990, which reversed the decision of the Regional Trial Court, Branch 273, Marikina, Metro Manila, dated April 11, 1995. The trial court dismissed the petition for declaration of nullity of a deed of sale filed by private respondent Felicidad S. Vda. de Abrogar against petitioner Alfredo N. Aguila, Jr.chanrobles virtual lawlibrary

The facts are as follows:chanrob1es virtual 1aw library

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, covered by Transfer Certificate of Title No. 195101, in Marikina, Metro Manila. On April 18, 1991, 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 provided:chanrob1es virtual 1aw library

(1) That the SECOND PARTY [A.C. Aguila & Sons, Co.] shall buy the above-described property from the FIRST PARTY [Felicidad S. Vda. de Abrogar], and pursuant to this agreement, a Deed of Absolute Sale shall be executed by the FIRST PARTY conveying the property to the SECOND PARTY for and in consideration of the sum of Two Hundred Thousand Pesos (P200,000.00), Philippine Currency;

(2) The FIRST PARTY is hereby given by the SECOND PARTY the option to repurchase the said property within a period of ninety (90) days from the execution of this memorandum of agreement effective April 18, 1991, for the amount of TWO HUNDRED THIRTY THOUSAND PESOS (P230,000.00);

(3) In the event that the FIRST PARTY fail to exercise her option to repurchase the said property within a period of ninety (90) days, the FIRST PARTY is obliged to deliver peacefully the possession of the property to the SECOND PARTY within fifteen (15) days after the expiration of the said 90 day grace period;

(4) During the said grace period, the FIRST PARTY obliges herself not to file any lis pendens or whatever claims on the property nor shall be cause the annotation of say claim at the back of the title to the said property;

(5) With the execution of the deed of absolute sale, the FIRST PARTY warrants her ownership of the property and shall defend the rights of the SECOND PARTY against any party whom may have any interests over the property;

(6) All expenses for documentation and other incidental expenses shall be for the account of the FIRST PARTY;

(7) Should the FIRST PARTY fail to deliver peaceful possession of the property to the SECOND PARTY after the expiration of the 15-day grace period given in paragraph 3 above, the FIRST PARTY shall pay an amount equivalent to Five Percent of the principal amount of TWO HUNDRED PESOS (P200.00) or P10,000.00 per month of delay as and for rentals and liquidated damages;

(8) Should the FIRST PARTY fail to exercise her option to repurchase the property within ninety (90) days period above-mentioned, this memorandum of agreement shall be deemed cancelled and the Deed of Absolute Sale, executed by the parties shall be the final contract considered as entered between the parties and the SECOND PARTY shall proceed to transfer ownership of the property above described to its name free from lines and encumbrances. 2

On the same day, April 18, 1991, the parties likewise executed a deed of absolute sale, 3 dated June 11, 1991, wherein private respondent, with the consent of her late husband, sold the subject property to A.C. Aguila & Sons, Co., represented by petitioner, for P200,000.00. In a special power of attorney dated the same day, April 18, 1991, private respondent authorized petitioner to cause the cancellation of TCT No. 195101 and the issuance of a new certificate of title in the name of A.C. Aguila and Sons, Co., in the event she failed to redeem the subject property as provided in the Memorandum of Agreement. 4

Private respondent failed to redeem the property within the 90-day period as provided in the Memorandum of Agreement. Hence, pursuant to the special power of attorney mentioned above, petitioner caused the cancellation of TCT No. 195101 and the issuance of a new certificate of title in the name of A.C. Aguila and Sons, Co. 5

Private respondent then received a letter dated August 10, 1991 from Atty. Lamberto C. Nanquil, counsel for A.C. Aguila & Sons, Co., 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. Otherwise, the latter would bring the appropriate action in court. 6

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. In a decision, dated April 3, 1992, the Metropolitan Trial Court ruled in favor of A.C. Aguila & Sons, Co. on the ground that private respondent did not redeem the subject property before the expiration of the 90-day period provided in the Memorandum of Agreement. 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, Branch 273, Marikina, Metro Manila on December 4, 1993. She alleged that the signature of her husband on the deed of sale was a forgery because he was already dead when the deed was supposed to have been executed on June 11, 1991.

It appears, however, that private respondent had filed a criminal complaint for falsification against petitioner with the Office of the Prosecutor of Quezon City which was dismissed in a resolution, dated February 14, 1994.chanrobles.com : virtual law library

On April 11, 1995, Branch 273 of RTC-Marikina rendered its decision:chanrob1es virtual 1aw library

Plaintiffs claim therefore that the Deed of Absolute Sale is a forgery because they could not personally appear before Notary Public Lamberto C. Nanquil on June 11, 1991 because her husband, Ruben Abrogar, died on May 8, 1991 or one month and 2 days before the execution of the Deed of Absolute Sale, while the plaintiff was still in the Quezon City Medical Center recuperating from wounds which she suffered at the same vehicular accident on May 8, 1991, cannot be sustained. The Court is convinced that the three required documents, to wit: the Memorandum of Agreement, the Special Power of Attorney, and the Deed of Absolute Sale were all signed by the parties on the same date on April 18, 1991. It is a common and accepted business practice of those engaged in money lending to prepare an undated absolute deed of sale in loans of money secured by real estate for various reasons, foremost of which is the evasion of taxes and surcharges. The plaintiff never questioned receiving the sum of P200,000.00 representing her loan from the defendant. Common sense dictates that an established lending and realty firm like the Aguila & Sons, Co. would not part with P200,000.00 to the Abrogar spouses, who are virtual strangers to it, without the simultaneous accomplishment and signing of all the required documents, more particularly the Deed of Absolute Sale, to protect its interest.xxx

WHEREFORE, foregoing premises considered, the case in caption is hereby ORDERED DISMISSED, with costs against the plaintiff.

On appeal, the Court of Appeals reversed. It held:chanrob1es virtual 1aw library

The facts and evidence show that the transaction between plaintiff-appellant and defendant-appellee is indubitably an equitable mortgage. Article 1602 of the New Civil Code finds strong application in the case at bar in the light of the following circumstances.

First: The purchase price for the alleged sale with right to repurchase is unusually inadequate. The property is a two hundred forty (240) sq. m. lot. On said lot, the residential house of plaintiff-appellant stands. The property is inside a subdivision/village. The property is situated in Marikina which is already part of Metro Manila. The alleged sale took place in 1991 when the value of the land had considerably increased.

For this property, defendant-appellee pays only a measly P200,000.00 or P833.33 per square meter for both the land and for the house.

Second: The disputed Memorandum of Agreement specifically provides that plaintiff-appellant is obliged to deliver peacefully the possession of the property to the SECOND PARTY within fifteen (15) days after the expiration of the said ninety (90) day grace period. Otherwise stated, plaintiff-appellant is to retain physical possession of the thing allegedly sold.

In fact, plaintiff-appellant retained possession of the property "sold" as if they were still the absolute owners. There was no provision for maintenance or expenses, much less for payment of rent.

Third: The apparent vendor, plaintiff-appellant herein, continued to pay taxes on the property "sold." It is well-known that payment of taxes accompanied by actual possession of the land covered by the tax declaration, constitute evidence of great weight that a person under whose name the real taxes were declared has a claim of right over the land.

It is well-settled that the presence of even one of the circumstances in Article 1602 of the New Civil Code is sufficient to declare a contract of sale with right to repurchase an equitable mortgage.

Considering that plaintiff-appellant, as vendor, was paid a price which is unusually inadequate, has retained possession of the subject property and has continued paying the realty taxes over the subject property, (circumstances mentioned in par. (1) (2) and (5) of Article 1602 of the New Civil Code), it must be conclusively presumed that the transaction the parties actually entered into is an equitable mortgage, not a sale with right to repurchase. The factors cited are in support to the finding that the Deed of Sale/Memorandum of Agreement with right to repurchase is in actuality an equitable mortgage.

Moreover, it is undisputed that the deed of sale with right of repurchase was executed by reason of the loan extended by defendant-appellee to plaintiff-appellant. The amount of loan being the same with the amount of the purchase price.xxx

Since the real intention of the party is to secure the payment of debt, now deemed to be repurchase price: the transaction shall then be considered to be an equitable mortgage.

Being a mortgage, the transaction entered into by the parties is in the nature of a pactum commissorium which is clearly prohibited by Article 2088 of the New Civil Code. Article 2088 of the New Civil Code reads:chanrob1es virtual 1aw library

ARTICLE 2088. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void.

The aforequoted provision furnishes the two elements for pactum commissorium to exist: (1) that there should be a pledge or mortgage wherein a property is pledged or mortgaged by way of security for the payment of principal obligation; and (2) that there should be a stipulation for an automatic appropriation by the creditor of the thing pledged and mortgaged in the event of non-payment of the principal obligation within the stipulated period.

In this case, defendant-appellee in reality extended a P200,000.00 loan to plaintiff-appellant secured by a mortgage on the property of plaintiff-appellant. The loan was payable within ninety (90) days, the period within which plaintiff-appellant can repurchase the property. Plaintiff-appellant will pay P230,000.00 and not P200,000.00, the P30,000.00 excess is the interest for the loan extended. Failure of plaintiff-appellee to pay the P230,000.00 within the ninety (90) days period, the property shall automatically belong to defendant-appellee by virtue of the deed of sale executed.

Clearly, the agreement entered into by the parties is in the nature of pactum commissorium. Therefore, the deed of sale should be declared void as we hereby so declare to be invalid, for being violative of law.chanroblesvirtual|awlibraryxxx

WHEREFORE, foregoing considered, the appealed decision is hereby REVERSED and SET ASIDE. The questioned Deed of Sale and the cancellation of the TCT No. 195101 issued in favor of plaintiff-appellant and the issuance of TCT No. 267073 issued in favor of defendant-appellee pursuant to the questioned Deed of Sale is hereby declared VOID and is hereby ANNULLED. Transfer Certificate of Title No. 195101 of the Registry of Marikina is hereby ordered REINSTATED. The loan in the amount of P230,000.00 shall be paid within ninety (90) days from the finality of this decision. In case of failure to pay the amount of P230,000.00 from the period therein stated, the property shall be sold at public auction to satisfy the mortgage debt and costs and if there is an excess, the same is to be given to the owner.

Petitioner now contends that: (1) he is not the real party in interest but A.C. Aguila & Co., against which this case should have been brought; (2) the judgment in the ejectment case is a bar to the filing of the complaint for declaration of nullity of a deed of sale in this case; and (3) the contract between A.C. Aguila & Sons, Co. and private respondent is a pacto de retro sale and not an equitable mortgage as held by the appellate court.chanroblesvirtualawlibrary

The petition is meritorious.

Rule 3, 2 of the Rules of Court of 1964, under which the complaint in this case was filed, provided 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. 7 This ruling is now embodied in Rule 3, 2 of the 1997 Revised Rules of Civil Procedure. Any decision rendered against a person who is not a real party in interest in the case cannot be executed. 8 Hence, a complaint filed against such a person should be dismissed for failure to state a cause of action. 9

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. 10 In this case, private respondent 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. and the Memorandum of Agreement was executed between private respondent, with the consent of her late husband, and A. C. Aguila & Sons, Co., represented by petitioner. Hence, 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. 11 We cannot understand why both the Regional Trial Court and the Court of Appeals sidestepped this issue when it was squarely raised before them by petitioner.

Our conclusion that petitioner is not the real party in interest against whom this action should be prosecuted makes it unnecessary to discuss the other issues raised by him in this appeal.

WHEREFORE, the decision of the Court of Appeals is hereby REVERSED and the complaint against petitioner is DISMISSED.chanroblesvirtualawlibrary

SO ORDERED.SECOND DIVISION

[G.R. No. 126881. October 3, 2000.]

HEIRS OF TAN ENG KEE,Petitioners, v. COURT OF APPEALS and BENGUET LUMBER COMPANY, represented by its President TAN ENG LAY,Respondents.

D E C I S I O N

DE LEON, JR.,J.:

In this petition for review oncertiorari, petitioners pray for the reversal of the Decision 1 dated March 13, 1996 of the former Fifth Division 2 of the Court of Appeals in CA-G.R. CV No. 47937, the dispositive portion of which states:chanrob1es virtua1 1aw 1ibrary

THE FOREGOING CONSIDERED, the appealed decision is hereby set aside, and the complaint dismissed.

The facts are:chanrob1es virtua1 1aw 1ibrary

Following the death of Tan Eng Kee on September 13, 1984, Matilde Abubo, the common-law spouse of the decedent, joined by their children Teresita, Nena, Clarita, Carlos, Corazon and Elpidio, collectively known as herein petitioners HEIRS OF TAN ENG KEE, filed suit against the decedents brother TAN ENG LAY on February 19, 1990. The complaint, 3 docketed as Civil Case No. 1983-R in the Regional Trial Court of Baguio City was for accounting, liquidation and winding up of the alleged partnership formed after World War II between Tan Eng Kee and Tan Eng Lay. On March 18, 1991, the petitioners filed an amended complaint 4 impleading private respondent herein BENGUET LUMBER COMPANY, as represented by Tan Eng Lay. The amended complaint was admitted by the trial court in its Order dated May 3, 1991. 5

The amended complaint principally alleged that after the second World War, Tan Eng Kee and Tan Eng Lay, pooling their resources and industry together, entered into a partnership engaged in the business of selling lumber and hardware and construction supplies. They named their enterprise "Benguet Lumber" which they jointly managed until Tan Eng Kees death. Petitioners herein averred that the business prospered due to the hard work and thrift of the alleged partners. However, they claimed that in 1981, Tan Eng Lay and his children caused the conversion of the partnership "Benguet Lumber" into a corporation called "Benguet Lumber Company." The incorporation was purportedly a ruse to deprive Tan Eng Kee and his heirs of their rightful participation in the profits of the business. Petitioners prayed for accounting of the partnership assets, and the dissolution, winding up and liquidation thereof, and the equal division of the net assets of Benguet Lumber.

After trial, Regional Trial Court of Baguio City, Branch 7 rendered judgment 6 on April 12, 1995, to wit:chanrob1es virtual 1aw library

WHEREFORE, in view of all the foregoing, judgment is hereby rendered:chanrob1es virtual 1aw library

a) Declaring that Benguet Lumber is a joint venture which is akin to a particular partnership;

b) Declaring that the deceased Tan Eng Kee and Tan Eng Lay are joint adventurers and/or partners in a business venture and/or particular partnership called Benguet Lumber and as such should share in the profits and/or losses of the business venture or particular partnership;

c) Declaring that the assets of Benguet Lumber are the same assets turned over to Benguet Lumber Co. Inc. and as such the heirs or legal representatives of the deceased Tan Eng Kee have a legal right to share in said assets;

d) Declaring that all the rights and obligations of Tan Eng Kee as joint adventurer and/or as partner in a particular partnership have descended to the plaintiffs who are his legal heirs.

e) Ordering the defendant Tan Eng Lay and/or the President and/or General Manager of Benguet Lumber Company Inc. to render an accounting of all the assets of Benguet Lumber Company, Inc. so the plaintiffs know their proper share in the business;

f) Ordering the appointment of a receiver to preserve and/or administer the assets of Benguet Lumber Company, Inc. until such time that said corporation is finally liquidated are directed to submit the name of any person they want to be appointed as receiver failing in which this Court will appoint the Branch Clerk of Court or another one who is qualified to act as such.

g) Denying the award of damages to the plaintiffs for lack of proof except the expenses in filing the instant case.

h) Dismissing the counter-claim of the defendant for lack of merit.

SO ORDERED.chanrob1es virtua1 1aw 1ibrary

Private respondent sought relief before the Court of Appeals which, on March 13, 1996, rendered the assailed decision reversing the judgment of the trial court. Petitioners motion for reconsideration 7 was denied by the Court of Appeals in a Resolution 8 dated October 11, 1996.

Hence, the present petition.chanrob1es virtua1 1aw 1ibrary

As a side-bar to the proceedings, petitioners filed Criminal Case No. 78856 against Tan Eng Lay and Wilborn Tan for the use of allegedly falsified documents in a judicial proceeding. Petitioners complained that Exhibits "4" to "4-U" offered by the defendants before the trial court, consisting of payrolls indicating that Tan Eng Kee was a mere employee of Benguet Lumber, were fake, based on the discrepancy in the signatures of Tan Eng Kee. They also filed Criminal Cases Nos. 78857-78870 against Gloria, Julia, Juliano, Willie, Wilfredo, Jean, Mary and Willy, all surnamed Tan, for alleged falsification of commercial documents by a private individual. On March 20, 1999, the Municipal Trial Court of Baguio City, Branch 1, wherein the charges were filed, rendered judgment 9 dismissing the cases for insufficiency of evidence.

In their assignment of errors, petitioners claim that:chanrob1es virtual 1aw libraryI

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PARTNERSHIP BETWEEN THE LATE TAN ENG KEE AND HIS BROTHER TAN ENG LAY BECAUSE: (A) THERE WAS NO FIRM ACCOUNT; (B) THERE WAS NO FIRM LETTERHEADS SUBMITTED AS EVIDENCE; (C) THERE WAS NO CERTIFICATE OF PARTNERSHIP; (D) THERE WAS NO AGREEMENT AS TO PROFITS AND LOSSES; AND (E) THERE WAS NO TIME FIXED FOR THE DURATION OF THE PARTNERSHIP (PAGE 13, DECISION).II

THE HONORABLE COURT OF APPEALS ERRED IN RELYING SOLELY ON THE SELF-SERVING TESTIMONY OF RESPONDENT TAN ENG LAY THAT BENGUET LUMBER WAS A SOLE PROPRIETORSHIP AND THAT TAN ENG KEE WAS ONLY AN EMPLOYEE THEREOF.III

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE FOLLOWING FACTS WHICH WERE DULY SUPPORTED BY EVIDENCE OF BOTH PARTIES DO NOT SUPPORT THE EXISTENCE OF A PARTNERSHIP JUST BECAUSE THERE WAS NO ARTICLES OF PARTNERSHIP DULY RECORDED BEFORE THE SECURITIES AND EXCHANGE COMMISSION:chanrob1es virtual 1aw library

a. THAT THE FAMILIES OF TAN ENG KEE AND TAN ENG LAY WERE ALL LIVING AT THE BENGUET LUMBER COMPOUND;

b. THAT BOTH TAN ENG LAY AND TAN ENG KEE WERE COMMANDING THE EMPLOYEES OF BENGUET LUMBER;

c. THAT BOTH TAN ENG KEE AND TAN ENG LAY WERE SUPERVISING THE EMPLOYEES THEREIN;

d. THAT TAN ENG KEE AND TAN ENG LAY WERE THE ONES DETERMINING THE PRICES OF STOCKS TO BE SOLD TO THE PUBLIC; AND

e. THAT TAN ENG LAY AND TAN ENG KEE WERE THE ONES MAKING ORDERS TO THE SUPPLIERS (PAGE 18, DECISION).IV

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PARTNERSHIP JUST BECAUSE THE CHILDREN OF THE LATE TAN ENG KEE: ELPIDIO TAN AND VERONICA CHOI, TOGETHER WITH THEIR WITNESS BEATRIZ TANDOC, ADMITTED THAT THEY DO NOT KNOW WHEN THE ESTABLISHMENT KNOWN IN BAGUIO CITY AS BENGUET LUMBER WAS STARTED AS A PARTNERSHIP (PAGE 16-17, DECISION).V

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PARTNERSHIP BETWEEN THE LATE TAN ENG KEE AND HIS BROTHER TAN ENG LAY BECAUSE THE PRESENT CAPITAL OR ASSETS OF BENGUET LUMBER IS DEFINITELY MORE THAN P3,000.00 AND AS SUCH THE EXECUTION OF A PUBLIC INSTRUMENT CREATING A PARTNERSHIP SHOULD HAVE BEEN MADE AND NO SUCH PUBLIC INSTRUMENT ESTABLISHED BY THE APPELLEES (PAGE 17, DECISION).

As a premise, we reiterate the oft-repeated rule that findings of facts of the Court of Appeals will not be disturbed on appeal if such are supported by the evidence. 10 Our jurisdiction, it must be emphasized, does not include review of factual issues. Thus:chanrob1es virtual 1aw library

Filing of petition with Supreme Court. A party desiring to appeal bycertiorarifrom a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review oncertiorari. The petition shall raise only questions of law which must be distinctly set forth. 11 [Emphasis supplied]

Admitted exceptions have been recognized, though, and when present, may compel us to analyze the evidentiary basis on which the lower court rendered judgment. Review of factual issues is therefore warranted:chanrob1es virtual 1aw library

(1) when the factual findings of the Court of Appeals and the trial court are contradictory;

(2) when the findings are grounded entirely on speculation, surmises, or conjectures;

(3) when the inference made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd, or impossible;

(4) when there is grave abuse of discretion in the appreciation of facts;

(5) when the appellate court, in making its findings, goes beyond the issues of the case, and such findings are contrary to the admissions of both appellant and appellee;

(6) when the judgment of the Court of Appeals is premised on a misapprehension of facts;

(7) when the Court of Appeals fails to notice certain relevant facts which, if properly considered, will justify a different conclusion;

(8) when the findings of fact are themselves conflicting;

(9) when the findings of fact are conclusions without citation of the specific evidence on which they are based; and

(10) when the findings of fact of the Court of Appeals are premised on the absence of evidence but such findings are contradicted by the evidence on record. 12

In reversing the trial court, the Court of Appeals ruled, to wit:chanrob1es virtual 1aw library

We note that the Court a quo over extended the issue because while the plaintiffs mentioned only the existence of a partnership, the Court in turn went beyond that by justifying the existence of a joint venture.

When mention is made of a joint venture, it would presuppose parity of standing between the parties, equal proprietary interest and the exercise by the parties equally of the conduct of the business, thus:chanrob1es virtual 1aw libraryxxx

We have the admission that the father of the plaintiffs was not a partner of the Benguet Lumber before the war. The appellees however argued that (Rollo, p. 104; Brief, p. 6) this is because during the war, the entire stocks of the pre-war Benguet Lumber were confiscated if not burned by the Japanese. After the war, because of the absence of capital to start a lumber and hardware business, Lay and Kee pooled the proceeds of their individual businesses earned from buying and selling military supplies, so that the common fund would be enough to form a partnership, both in the lumber and hardware business. That Lay and Kee actually established the Benguet Lumber in Baguio City, was even testified to by witnesses. Because of the pooling of resources, the post-war Benguet Lumber was eventually established. That the father of the plaintiffs and Lay were partners, is obvious from the fact that: (1) they conducted the affairs of the business during Kees lifetime, jointly, (2) they were the ones giving orders to the employees, (3) they were the ones preparing orders from the suppliers, (4) their families stayed together at the Benguet Lumber compound, and (5) all their children were employed in the business in different capacities.xxx

It is obvious that there was no partnership whatsoever. Except for a firm name, there was no firm account, no firm letterheads submitted as evidence, no certificate of partnership, no agreement as to profits and losses, and no time fixed for the duration of the partnership. There was even no attempt to submit an accounting corresponding to the period after the war until Kees death in 1984. It had no business book, no written account nor any memorandum for that matter and no license mentioning the existence of a partnership [Citation omitted].

Also, the exhibits support the establishment of only a proprietorship. The certification dated March 4, 1971, Exhibit "2", mentioned co-defendant Lay as the only registered owner of the Benguet Lumber and Hardware. His application for registration, effective 1954, in fact mentioned that his business started in 1945 until 1985 (thereafter, the incorporation). The deceased, Kee, on the other hand, was merely an employee of the Benguet Lumber Company, on the basis of his SSS coverage effective 1958, Exhibit "3." In the Payrolls, Exhibits "4" to "4-U", inclusive, for the years 1982 to 1983, Kee was similarly listed only as an employee; precisely, he was on the payroll listing. In the Termination Notice, Exhibit "5", Lay was mentioned also as the proprietor.xxx

We would like to refer to Arts. 771 and 772, NCC, that a partner [sic] may be constituted in any form, but when an immovable is constituted, the execution of a public instrument becomes necessary. This is equally true if the capitalization exceeds P3,000.00, in which case a public instrument is also necessary, and which is to be recorded with the Securities and Exchange Commission. In this case at bar, we can easily assume that the business establishment, which from the language of the appellees, prospered (pars. 5 & 9, Complaint), definitely exceeded P3,000.00, in addition to the accumulation of real properties and to the fact that it is now a compound. The execution of a public instrument, on the other hand, was never established by the appellees.

And then in 1981, the business was incorporated and the incorporators were only Lay and the members of his family. There is no proof either that the capital assets of the partnership, assuming them to be in existence, were maliciously assigned or transferred by Lay, supposedly to the corporation and since then have been treated as a part of the latters capital assets, contrary to the allegations in pars. 6, 7 and 8 of the complaint.chanrob1es virtua1 1aw 1ibrary

These are not evidences supporting the existence of a partnership:chanrob1es virtual 1aw library

1) That Kee was living in a bunk house just across the lumber store, and then in a room in the bunk house in Trinidad, but within the compound of the lumber establishment, as testified to by Tandoc; 2) that both Lay and Kee were seated on a table and were "commanding people" as testified to by the son, Elpidio Tan; 3) that both were supervising the laborers, as testified to by Victoria Choi; and 4) that Dionisio Peralta was supposedly being told by Kee that the proceeds of the 80 pieces of the G.I. sheets were added to the business.chanrob1es virtua1 1aw 1ibrary

Partnership presupposes the following elements [Citation omitted]: 1) a contract, either oral or written. However, if it involves real property or where the capital is P3,000.00 or more, the execution of a contract is necessary; 2) the capacity of the parties to execute the contract; 3) money property or industry contribution; 4) community of funds and interest, mentioning equality of the partners or one having a proportionate share in the benefits; and 5) intention to divide the profits, being the true test of the partnership. The intention to join in the business venture for the purpose of obtaining profits thereafter to be divided, must be established. We cannot see these elements from the testimonial evidence of the appellees.

As can be seen, the appellate court disputed and differed from the trial court which had adjudged that TAN ENG KEE and TAN ENG LAY had allegedly entered into a joint venture. In this connection, we have held that whether a partnership exists is a factual matter; consequently, since the appeal is brought to us under Rule 45, we cannot entertain inquiries relative to the correctness of the assessment of the evidence by the court a quo. 13 Inasmuch as the Court of Appeals and the trial court had reached conflicting conclusions, perforce we must examine the record to determine if the reversal was justified.

The primordial issue here is whether Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber. A contract of partnership is defined by law as one where:chanrob1es virtual 1aw library

. . . 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.

Two or more persons may also form a partnership for the exercise of a profession. 14

Thus, in order to constitute a partnership, it must be established that (1) two or more persons bound themselves to contribute money, property, or industry to a common fund, and (2) they intend to divide the profits among themselves. 15 The agreement need not be formally reduced into writing, since statute allows the oral constitution of a partnership, save in two instances: (1) when immovable property or real rights are contributed, 16 and (2) when the partnership has a capital of three thousand pesos or more. 17 In both cases, a public instrument is required. 18 An inventory to be signed by the parties and attached to the public instrument is also indispensable to the validity of the partnership whenever immovable property is contributed to the partnership. 19

The trial court determined that Tan Eng Kee and Tan Eng Lay had entered into a joint venture, which it said is akin to a particular partnership. 20 A particular partnership is distinguished from a joint adventure, to wit:chanrob1es virtual 1aw library

(a) A joint adventure (an American concept similar to our joint accounts) is a sort of informal partnership, with no firm name and no legal personality. In a joint account, the participating merchants can transact business under their own name, and can be individually liable therefor.

(b) Usually, but not necessarily a joint adventure is limited to a SINGLE TRANSACTION, although the business of pursuing to a successful termination may continue for a number of years; a partnership generally relates to a continuing business of various transactions of a certain kind. 21

A joint venture "presupposes generally a parity of standing between the joint co-ventures or partners, in which each party has an equal proprietary interest in the capital or property contributed, and where each party exercises equal rights in the conduct of the business." 22 Nonetheless, in Aurbach, et. al. v. Sanitary Wares Manufacturing Corporation, et. al., 23 we expressed the view that a joint venture may be likened to a particular partnership, thus:chanrob1es virtual 1aw library

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. (Gates v. Megargel, 266 Fed. 811 [1920]) It is 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. (Blackner v. McDermott, 176 F. 2d. 498, [1949]; Carboneau v. Peterson, 95 P.2d., 1043 [1939]; Buckley v. Chadwick, 45 Cal. 2d. 183, 288 P.2d. 12 289 P.2d. 242 [1955]). The main distinction cited by most opinions in common law jurisdiction 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. (Tufts v. Mann. 116 Cal. App. 170, 2 P. 2d. 500 [1931]; Harmon v. Martin, 395 Ill. 595, 71 NE 2d. 74 [1947]; Gates v. Megargel 266 Fed. 811 [1920]). 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. (At p. 12, Tuazon v. Bolaos, 95 Phil. 906 [1954]) (Campos and Lopez-Campos Comments, Notes and Selected Cases, Corporation Code 1981).

Undoubtedly, the best evidence would have been the contract of partnership itself, or the articles of partnership but there is none. The alleged partnership, though, was never formally organized. In addition, petitioners point out that the New Civil Code was not yet in effect when the partnership was allegedly formed sometime in 1945, although the contrary may well be argued that nothing prevented the parties from complying with the provisions of the New Civil Code when it took effect on August 30, 1950. But all that is in the past. The net effect, however, is that we are asked to determine whether a partnership existed based purely on circumstantial evidence. A review of the record persuades us that the Court of Appeals correctly reversed the decision of the trial court. The evidence presented by petitioners falls short of the quantum of proof required to establish a partnership.

Unfortunately for petitioners, Tan Eng Kee has passed away. Only he, aside from Tan Eng Lay, could have expounded on the precise nature of the business relationship between them. In the absence of evidence, we cannot accept as an established fact that Tan Eng Kee allegedly contributed his resources to a common fund for the purpose of establishing a partnership. The testimonies to that effect of petitioners witnesses is directly controverted by Tan Eng Lay. It should be noted that it is not with the number of witnesses wherein preponderance lies; 24 the quality of their testimonies is to be considered. None of petitioners witnesses could suitably account for the beginnings of Benguet Lumber Company, except perhaps for Dionisio Peralta whose deceased wife was related to Matilde Abubo. 25 He stated that when he met Tan Eng Kee after the liberation, the latter asked the former to accompany him to get 80 pieces of G.I. sheets supposedly owned by both brothers. 26 Tan Eng Lay, however, denied knowledge of this meeting or of the conversation between Peralta and his brother. 27 Tan Eng Lay consistently testified that he had his business and his brother had his, that it was only later on that his said brother, Tan Eng Kee, came to work for him. Be that as it may, co-ownership or co-possession (specifically here, of the G.I. sheets) is not an indicium of the existence of a partnership. 28

Besides, it is indeed odd, if not unnatural, that despite the forty years the partnership was allegedly in existence, Tan Eng Kee never asked for an accounting. The essence of a partnership is that the partners share in the profits and losses. 29 Each has the right to demand an accounting as long as the partnership exists. 30 We have allowed a scenario wherein" [i]f excellent relations exist among the partners at the start of the 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." 31 But in the situation in the case at bar, the deferment, if any, had gone on too long to be plausible. A person is presumed to take ordinary care of his concerns. 32 As we explained in another case:chanrob1es virtual 1aw library

In the first place, plaintiff did not furnish the supposed P20,000.00 capital. In the second place, she did not furnish any help or intervention in the management of the theatre. In the third place, it does not appear that she has even demanded from defendant any accounting of the expenses and earnings of the business. Were she really a partner, her first concern should have been to find out how the business was progressing, whether the expenses were legitimate, whether the earnings were correct, etc. She was absolutely silent with respect to any of the acts that a partner should have done; all that she did was to receive her share of P3,000.00 a month, which cannot be interpreted in any manner than a payment for the use of the premises which she had leased from the owners. Clearly, plaintiff had always acted in accordance with the original letter of defendant of June 17, 1945 (Exh. "A"), which shows that both parties considered this offer as the real contract between them. 33 [Emphasis supplied]

A demand for periodic accounting is evidence of a partnership. 34 During his lifetime, Tan Eng Kee appeared never to have made any such demand for accounting from his brother, Tang Eng Lay.

This brings us to the matter of Exhibits "4" to "4-U" for private respondents, consisting of payrolls purporting to show that Tan Eng Kee was an ordinary employee of Benguet Lumber, as it was then called. The authenticity of these documents was questioned by petitioners, to the extent that they filed criminal charges against Tan Eng Lay and his wife and children. As aforesaid, the criminal cases were dismissed for insufficiency of evidence. Exhibits "4" to "4-U" in fact shows that Tan Eng Kee received sums as wages of an employee. In connection therewith, Article 1769 of the Civil Code provides:chanrob1es virtua1 1aw 1ibrary

In determining whether a partnership exists, these rules shall apply:chanrob1es virtual 1aw library

(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 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:chanrob1es virtual 1aw library

(a) As a debt by installment 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.

In the light of the aforequoted legal provision, we conclude that Tan Eng Kee was only an employee, not a partner. Even if the payrolls as evidence were discarded, petitioners would still be back to square one, so to speak, since they did not present and offer evidence that would show that Tan Eng Kee received amounts of money allegedly representing his share in the profits of the enterprise. Petitioners failed to show how much their father, Tan Eng Kee, received, if any, as his share in the profits of Benguet Lumber Company for any particular period. Hence, they failed to prove that Tan Eng Kee and Tan Eng Lay intended to divide the profits of the business between themselves, which is one of the essential features of a partnership.

Nevertheless, petitioners would still want us to infer or believe the alleged existence of a partnership from this set of circumstances: that Tan Eng Lay and Tan Eng Kee were commanding the employees; that both were supervising the employees; that both were the ones who determined the price at which the stocks were to be sold; and that both placed orders to the suppliers of the Benguet Lumber Company. They also point out that the families of the brothers Tan Eng Kee and Tan Eng Lay lived at the Benguet Lumber Company compound, a privilege not extended to its ordinary employees.

However, private respondent counters that:chanrob1es virtua1 1aw 1ibrary

Petitioners seem to have missed the point in asserting that the above enumerated powers and privileges granted in favor of Tan Eng Kee, were indicative of his being a partner in Benguet Lumber for the following reasons:chanrob1es virtual 1aw library

(i) even a mere supervisor in a company, factory or store gives orders and directions to his subordinates. So long, therefore, that an employees position is higher in rank, it is not unusual that he orders around those lower in rank.

(ii) even a messenger or other trusted employee, over whom confidence is reposed by the owner, can order materials from suppliers for and in behalf of Benguet Lumber. Furthermore, even a partner does not necessarily have to perform this particular task. It is, thus, not an indication that Tan Eng Kee was a partner.

(iii) although Tan Eng Kee, together with his family, lived in the lumber compound and this privilege was not accorded to other employees, the undisputed fact remains that Tan Eng Kee is the brother of Tan Eng Lay. Naturally, close personal relations existed between them. Whatever privileges Tan Eng Lay gave his brother, and which were not given the other employees, only proves the kindness and generosity of Tan Eng Lay towards a blood relative.

(iv) and even if it is assumed that Tan Eng Kee was quarreling with Tan Eng Lay in connection with the pricing of stocks, this does not adequately prove the existence of a partnership relation between them. Even highly confidential employees and the owners of a company sometimes argue with respect to certain matters which, in no way indicates that they are partners as to each other. 35

In the instant case, we find private respondents arguments to be well-taken. Where circumstances taken singly may be inadequate to prove the intent to form a partnership, nevertheless, the collective effect of these circumstances may be such as to support a finding of the existence of the parties intent. 36 Yet, in the case at bench, even the aforesaid circumstances when taken together are not persuasive indicia of a partnership. They only tend to show that Tan Eng Kee was involved in the operations of Benguet Lumber, but in what capacity is unclear. We cannot discount the likelihood that as a member of the family, he occupied a niche above the rank-and-file employees. He would have enjoyed liberties otherwise unavailable were he not kin, such as his residence in the Benguet Lumber Company compound. He would have moral, if not actual, superiority over his fellow employees, thereby entitling him to exercise powers of supervision. It may even be that among his duties is to place orders with suppliers. Again, the circumstances proffered by petitioners do not provide a logical nexus to the conclusion desired; these are not inconsistent with the powers and duties of a manager, even in a business organized and run as informally as Benguet Lumber Company.

There being no partnership, it follows that there is no dissolution, winding up or liquidation to speak of. Hence, the petition must fail.

WHEREFORE, the petition is hereby denied, and the appealed decision of the Court of Appeals is hereby AFFIRMED in toto. No pronouncement as to costs.

SO ORDERED.

G.R. No. 78133 October 18, 1988MARIANO P. PASCUAL and RENATO P. DRAGON,Petitioners, vs.THE COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS,Respondents.De la Cuesta, De las Alas and Callanta Law Offices for petitioners.chanrobles virtual law libraryThe Solicitor General for respondentschanrobles virtual law libraryGANCAYCO,J.:The distinction between co-ownership and an unregistered partnership or joint venture for income tax purposes is the issue in this petition.chanroblesvirtualawlibrarychanrobles virtual law libraryOn 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 toMarenir 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.chanroblesvirtualawlibrarychanrobles virtual law libraryHowever, 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.chanroblesvirtualawlibrarychanrobles virtual law libraryPetitioners protested the said assessment in a letter of June 26, 1979 asserting that they had availed of tax amnesties way back in 1974.chanroblesvirtualawlibrarychanrobles virtual law libraryIn 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 under Section 20(b) and its income was subject to the taxes prescribed under Section 24, both of the National Internal Revenue Code1that 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.chanroblesvirtualawlibrarychanrobles virtual law libraryPetitioners filed a petition for review with the respondent Court of Tax Appeals docketed as CTA Case No. 3045. In due course, the respondent court by a majority decision of March 30, 1987,2affirmed the decision and action taken by respondent commissioner with costs against petitioners.chanroblesvirtualawlibrarychanrobles virtual law libraryIt ruled that on the basis of the principle enunciated inEvangelista3an unregistered partnership was in fact formed by petitioners which like a corporation was subject to corporate income tax distinct from that imposed on the partners.chanroblesvirtualawlibrarychanrobles virtual law libraryIn a separate dissenting opinion, Associate Judge Constante Roaquin stated that considering the circumstances of this case, although there might in fact be a co-ownership between the petitioners, there was no adequate basis for the conclusion that they thereby formed an unregistered partnership which made "hem liable for corporate income tax under the Tax Code.chanroblesvirtualawlibrarychanrobles virtual law libraryHence, this petition wherein petitioners invoke as basis thereof the following alleged errors of the respondent court:A. IN HOLDING AS PRESUMPTIVELY CORRECT THE DETERMINATION OF THE RESPONDENT COMMISSIONER, TO THE EFFECT THAT PETITIONERS FORMED AN UNREGISTERED PARTNERSHIP SUBJECT TO CORPORATE INCOME TAX, AND THAT THE BURDEN OF OFFERING EVIDENCE IN OPPOSITION THERETO RESTS UPON THE PETITIONERS.chanroblesvirtualawlibrarychanrobles virtual law libraryB. IN MAKING A FINDING, SOLELY ON THE BASIS OF ISOLATED SALE TRANSACTIONS, THAT AN UNREGISTERED PARTNERSHIP EXISTED THUS IGNORING THE REQUIREMENTS LAID DOWN BY LAW THAT WOULD WARRANT THE PRESUMPTION/CONCLUSION THAT