ROSARIO U. YULO vs. YANG CHIAO SENG – G.R. No. L-12541, August 28, 1959

Facts:
On 17 June 1945, defendant Yang Chiao Seng proposed to Mrs. Rosario Yulo the formation of a partnership between them to run and operate a theatre in Manila. Plaintiff Mrs. Yulo accepted. The parties executed a partnership agreement establishing “Yang & Company, Limited”. The capital is fixed at PhP 100,000, PhP 80,000 of which is to be furnished by Yang Chiao Seng and PhP 20,000, by Mrs. Yulo. The partnership was extended for three more years (1 January 1958 to 31 December 1950) The land on which the theatre was constructed was leased by Mrs.Yulo from Emilia Carrion Santa and Maria Carrion Santa Marina. In the contract of lease, it was stipulated that the lease shall continue for an indefinite period of time, but that after one year the lease may be canceled by either party by written notice to the other party at least 90 days before the date of cancellation. The last contract was executed between the owners and Mrs. Yulo on 5 April 1948. But on 12 April 1949, Mrs. Yulo was notified of the owner’s desire to cancel the contract of the lease on 31 July 1949.

On 3 July 1949, Mrs.Yulo and her husband brought a civil action in the CFI Manila to declare the lease of the premises one for an indefinite period. On 17 August 1949, the owners brought an action in the Municipal Court of Manila against Mrs.Yulo and Yang Chiao Seng to eject them from the premises. The Municipal Court of Manila ordered the ejectment of Mrs.Yulo and Mr.Yang. The CFI declared the contract of lease terminated as of 31 July 1949. Both parties appealed, but CA affirmed CFI’s judgment on 30 April 1955.

On 27 October 2, 1950, Mrs. Yulo demanded from Yang Chiao Seng her share in the business’s profits. Still, the latter refused because of the pendency of the ejectment suit by the owners of the land against Mrs. Yulo. In view of the refusal of Yang to pay, Mrs. Yulo instituted this action on May 26, 1954, alleging the existence of a partnership between them, and that defendant Yang Chiao Seng had refused to pay her share from December 1949 to December 1950; that after December 31, 1950, the partnership between Mrs. Yulo and Yang terminated, as a result of which, plaintiff became the absolute owner of the building occupied by the Cine Astor; that the reasonable rental that the defendant should pay therefor from January 1951 is P5,000; that the defendant has acted maliciously and refuses to pay the participation of the plaintiff in the profits of the business. Yang answered alleging that the real agreement between the plaintiff and the defendant was one of lease and not of partnership; that the partnership was adopted as a subterfuge to get around the prohibition contained in the contract of lease between the owners and the plaintiff against the sublease of the said property.

Issue:
Whether there was a partnership created between Yulo and Yang.

Held:
No, there was no partnership created between the plaintiff and the defendant because the defendant has not actually contributed the sum mentioned in the Articles of Partnership, or any other amount. The real agreement between the plaintiff and the defendant is not one of a partnership but one of a lease for the reason that under the agreement the plaintiff did not share either in the profits or in the losses of the business as required by Article 1769 of the Civil Code; and that the fact that plaintiff was granted a “guaranteed participation” in the profits also belies the supposed existence of a partnership between them.

The agreement was a sublease, not a partnership. The following are the requisites of partnership: (1) two or more persons who bind themselves to contribute money, property, or industry to a common fund; (2) intention on the part of the partners to divide the profits among themselves. (Art. 1767, Civil Code).

Here, the plaintiff did not furnish the supposed P20,000 capital. She also did not furnish any help or intervention in the management of the theatre. It does not appear that she has ever demanded from the defendant any accounting of the expenses and earnings of the business. Was 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 a month, which can not be interpreted in any manner than a payment for the use of the premises which she had leased from the

Where one of the parties to a contract does not contribute the capital he is supposed to contribute to a common fund; does not furnish any help or intervention in the management of the business subject of the contract; does not demand from the other party an accounting of the expenses and earnings of the business; and is absolutely silent with respect to any of the acts that a partner should have done, but, on the other hand, receives a fixed monthly sum from the other party, the contract between the parties is one of lease and not of partnership owners.