G.R. No. L-12541; August 28, 1959
ROSARIO U. YULO, assisted by her husband JOSE C. YULO, plaintiffs-appellants, vs. YANG CHIAO SENG, defendant-appellee.

FACTS

On June 17, 1945, defendant Yang Chiao Seng wrote to plaintiff Rosario U. Yulo proposing a partnership to operate a theatre on premises she leased. Key terms included: Yang guaranteed Yulo a monthly participation of P3,000 payable quarterly; the partnership was set for two years and six months (July 1, 1945, to December 31, 1947), terminable earlier if Yulo’s lease was cancelled; Yulo could conduct business in the lobby; and improvements would belong to Yulo after the term. The parties subsequently executed formal partnership articles for “Yang & Company, Limited,” with a capital of P100,000 (Yang: P80,000; Yulo: P20,000), profits/losses shared in proportion to capital, and Yulo’s liability limited to her contribution. A 1946 supplementary agreement extended the partnership to December 31, 1950, with profits shared 50-50 and the showhouse building to belong to Yulo thereafter.
Yulo’s lease for the land, which was cancellable by either party with 90 days’ notice after one year, was terminated by the landowners effective July 31, 1949. An ejectment suit ensued, culminating in a Court of Appeals decision on April 30, 1955, affirming the lease’s termination as of July 31, 1949. On October 27, 1950, Yulo demanded her profit share from Yang, who refused, citing the pending ejectment suit and his need to retain rentals for arrears due to the landowners. Yulo filed this action on May 26, 1954, claiming her profit share from December 1949 to December 1950, ownership of the building after December 31, 1950, rentals therefrom, and damages.
The trial court initially ruled for Yulo but set aside its judgment upon Yang’s motion for reconsideration, which cited the parties’ joint petition for postponement for a possible amicable settlement and the Court of Appeals’ ejectment ruling. After a new trial, the court dismissed Yulo’s complaint, finding no true partnership existed because Yulo did not actually contribute her P20,000 capital, did not participate in management, never demanded an accounting, and merely received a fixed monthly P3,000, which indicated a lease arrangement. The court also found the lobby space unusable for business under city ordinances and dismissed Yang’s counterclaim for lack of evidence.

ISSUE

Whether a partnership existed between Yulo and Yang, entitling Yulo to her claimed share in profits and other damages.

RULING

No. The Supreme Court affirmed the trial court’s dismissal, holding that no partnership was created. The requisites of partnership under Article 1767 of the Civil Code are: (1) two or more persons bind themselves to contribute money, property, or industry to a common fund; and (2) an intention to divide profits among themselves. Here, Yulo did not furnish her purported P20,000 capital contribution, did not intervene in the management of the theatre business, and never demanded an accounting of the business operations. Her sole action was to receive the fixed monthly P3,000, which was consistent with the original offer letter and indicative of a payment for the use of the leased premises, not a share in partnership profits. Furthermore, the original agreement stipulated that the arrangement would end upon the termination of Yulo’s lease right, which occurred in July 1949 as confirmed by the Court of Appeals. Therefore, Yulo’s right to the P3,000 monthly participation ceased as of that date. The judgment was affirmed in toto, with costs against plaintiff-appellant.