 ARTICLE 1775
Associations and societies, whose articles are
kept secret among the members, and wherein
any one of the members may contract in his
own name with third persons, shall have no
juridical personality, and shall governed by the
provisions relating to co-ownership.
Basically, in a partnership, the partners have
juridical personality. Here in article 1775, the
members have no juridical personality so their
provisions are related to co-ownership.
It basically separates the associations and societies
from a real partnership.
 DETERMINING CRITERIA
Clear intention to enter into a
One of the requisites of partnership is the intent to
form a partnership. The partnership relation is
created only by the voluntary agreement of the
partners. .
 CO-OWNERSHIP
Art 484: There is co-ownership whenever the
ownership of an undivided thing or right belongs to
different persons.
Conversion of Co-ownership into a Partnership.
Inheritance of co-owned properties.
Oña vs Commissioner of Internal Revenue
Facts: Julia Buñales died leaving as heirs her
surviving spouse, Lorenzo T. Oña and her five
children. A case was filed for the settlement of her
estate. Later, Oña was appointed administrator of
the estate. Oña then submitted the project of
partition, which was approved by the Court. The
Court appointed Oña to be guardian of the persons
and property of the 3 minor children. No attempt
was made to divide the properties which remained
under the management of Oña who used said
properties in business by leasing or selling them
and investing the income derived from them. As a
result, petitioners' properties and investments
gradually increased. The children usually come
back to Oña for payment of the taxes. However,
petitioners did not actually receive their shares in
the yearly income. The income was always left in
the hands of Oña who, as heretofore pointed out,
invested them in real properties and securities.
Respondent CIR decided that the petitioners
formed an unregistered partnership and therefore,
subject to the corporate income tax and was
assessed. Petitioners protested against the
assessment and asked for reconsideration which
was denied. They then filed a Petition for review of
the decision of the Court of Tax Appeals
Issue: Did the petitioners form an unregistered
partnership and thus subject to corporate taxes?
Ruling: Yes. The petitioners formed an
unregistered partnership. The project of partition
was approved in 1949 yet, the properties remained
under the management of Oña who used said
properties in business by leasing or selling them
and investing the income derived from it which
increased the value of the properties.
The corporate tax law states that in cases of
inheritance, there should be a period when the
heirs can be considered as co-owners rather than
unregistered co-partners.
For tax purposes, the co-ownership of inherited
properties is automatically converted into an
unregistered partnership the moment the said
common properties and/or the incomes derived
therefrom are used as a common fund with intent to
produce profits for the heirs in proportion to their
respective shares in the inheritance as determined
in a project partition either duly executed in an
extrajudicial settlement or approved by the court in
the corresponding testate or intestate proceeding.
From the moment of such partition, the heirs are
entitled already to their respective definite shares of
the estate and the incomes thereof, for each of
them to manage and dispose of as exclusively his
own without the intervention of the other heirs,
therefore he becomes liable individually for all taxes
in connection with his share. If after such partition,
he allows his share to be held in common with his
co-heirs under a single management to be used
with the intent of making profit, even if no document
or instrument were executed for that purpose, an
unregistered partnership is formed.
 ART 523
Possession is the holding of a thing or the
enjoyment of a right.
Viewpoints of Possession:
1. Right to possession or jus possidendi—
possession de facto; incident of ownership
2. Right of possession or jus possessions—
possession de jure; independent of
ownership
Degrees of Possession:
1. Mere holding or having without any right
whatsoever— grammatical degree
2. Possession with juridical title—juridical
possession
3. Possession with just title but not from the
real owner—real possessory right
4. Possession with title of dominium, with a
just title from the owner
Requisites/Elements of Possession:
1. There must be holding or control of a thing
or right
2. There must be a deliberate intention to
possess or animus possidendi
3. The possession must be by virtue of one’s
own right
Classes of Possession:
1. In one’s own name or in that of another
2. In the concept of owner or concept of holder
3. In good faith or in bad faith
Ownership is Different from Possession


A person may be declared the owner but he
may not be entitled to possession
A judgment for ownership doesn't
necessarily include possession as a
necessary incident
 PARTNERSHIP vs CO-OWNERSHIP
Creation
Partnership
By a contract
Object or
Purpose
Realization of
profit
Contribution
Money,
Property,
Industry
Common
Interest
Mutual
Agency
Alienation of
Shares
A partner acts
as an agent of
the other
partners
Consent of all
partners are
required
Co-ownership
By operation of
law
Common
enjoyment of a
thing
None
(a) As a debt by installments 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 all of the said cases, the profits in the business
are not shared as profits as a partner or co-owner
of the business but in some other respects or for
some other purpose.
 Sharing of Profits must be distinguished from Coownership.
A co-owner is
not an agent of
the other coowners
A co-owner
may transfer
his share w/o
the consent of
others
 PERSONS LIVING TOGETHER W/O THE
BENEFIT OF MARRIAGE CO-OWNERSHIP
Property acquired governed by rules on coownership.
Criterion: Clear intention to enter into a
partnership.
Since there is a presumption: there is a burden of
proof to overcome such presumption.
General rule: Must be proved by the party having
the affirmative issue.
Exception: When there is a presumption it must be
proved by the party denying its existence.
 Degree of Evidence Required:
Preponderance of Evidence: Rule 133, Section 1.
 ARTICLE 1769
Superior weight of Evidence
(3) The Sharing of Gross Returns does not of itself
establish a Partnership whether or not the persons
sharing the profits have a common or joint right or
interest over the properties from which the returns
are derived.
In civil cases, the party having burden of proof must
establish his case by a preponderance of evidence
The mere sharing of gross returns alone does not
indicate partnership because in a partnership, the
partners share profits after satisfying all of the
partnership’s liabilities.
Prima facie – a legal presumption which means on
the face of it
No prima facie evidence of a partnership when
there is a mere sharing of gross returns.
Gross returns on an investment – Since it is a
gross return there can be no presumption of
Partnership
Reason for the Rule: Shares may only be divided
upon deduction of taxes, fees and necessary
charges and all other expenses of the Partnership.
 ARTICLE 1769
(4) The receipt by a person of a share of the profits
of a business is 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.
Exceptions:
Legal intention is the crux of partnership. Parties
may call themselves partners but their contract may
be adjudged something quite different. Conversely,
parties may expressly state that theirs in not a
partnership yet the law may determine otherwise on
the basis of legal intent. However, courts will be
influenced to some extent by what the parties call
their contract.
Those acting as partners are presumed to have
entered into a Partnership.
 TESTS AND INDICIA OF PARTNERSHIP
(Tests and Incidents of Partnership)
1. Share in the profits and losses
2. Equal management rights and conduct of
partnership business
3. Mutual agency
4. Liability of separate property (except a
limited partner)
5. Fiduciary
6. Dissolution the partnership still exists until
the winding up.
 UNLAWFUL PARTNERSHIPS
Art. 1770: Must have a lawful object or purpose,
must be established for the benefit or interest of the
partnership. Confiscation of the state after being
dissolved by a judicial decree. Subject to the
provisions of the Revised Penal Code.
(2) As to Liability of the Partners:
 EFFECT OF UNLAWFUL PARTNERSHIPS:
(3) As to duration:
(a) General
(b) Limited
(a) Partnership at will
(b) Partnership with a fixed term
 Judicial decree is not necessary but it is for
convenience.
.
(4) As to legality of existence
(a) De jure partnerships
 Right to receive the return of his investments.
What the law dictates as forfeited are the profits,
instruments, and proceeds not the capital. The
basis is not the partnership contract because it is
considered as void. Because of unjust
enrichment.
(b) De facto partnerships
(5) As to representation to others:
(a) Ordinary or Real
(b) Ostensible partnerships
 PARTIAL ILLEGALITY
(6) As to publicity
Where a part of the business is legal and part
illegal, an account of that which is legal may be
had. Where, w/o the knowledge or participation of
the partners, the firm’s profits in a lawful business
has been increased by wrongful acts, the innocent
partners are not precluded as against the guilty
partners from recovering their share of the profits.
(a) Secret partnership
 SUBSEQUENT ILLEGALITY
Accounting of what has been earned prior to the
illegality must be made.
 FORMAL REQUISITES FOR A PARTNERSHIP
Art. 1771, Art. 1772, Art. 1773, Art. 1774, Art. 1775.
Antonia Torres and Emeteria Baring v. Court of
Appeals G.R. No. 134559, 09 December 1999.
 CLASSIFICATION OF PARTNERSHIPS
Art 1776:
As to its OBJECT – Partnership is either Universal
or particular
As regards the LIABILITY OF THE PARTNERS –
Partnership may be general or limited
(1) As to extent of the Subject Matter:
(a) Universal Partnership:
1. Of all present property
2. Of all profits
(b) Particular Partnership
(b) Open/Notorious Partnership
(7) As to purpose
(a) Commercial
(b) Professional