Case Summary (G.R. No. L-12541)
Lease Agreement and Termination with Landowners
Mrs. Yulo had leased the land from the Santa Marinas on an indefinite-term basis, cancellable after one year upon 90 days’ written notice. The last lease was signed April 5, 1948. On April 12, 1949 the lessors notified her that the lease would terminate July 31, 1949.
Procedural History of Ejectment and Related Suits
In response, Mrs. Yulo and her husband filed suit on July 3, 1949 to declare the lease indefinite. On August 17, 1949 the landowners sued for ejectment in the Municipal Court of Manila. That court ordered their ejectment on Feb. 9, 1950; the decision was appealed. The two actions were consolidated in the Court of First Instance, which, on appeal from the Municipal Court, dismissed the Yulos’ complaint, declared the lease terminated July 31, 1949, and fixed reasonable rental at P100 monthly. The Court of Appeals affirmed on April 30, 1955.
Initiation of Suit against Yang Chiao Seng
On Oct. 27, 1950 Mrs. Yulo demanded her profit share. Yang replied that he had suspended payments because the ejectment suit left him liable to landowners for unpaid rent, which he retained from her P3,000 payments. On May 26, 1954 Mrs. Yulo sued Yang, alleging a partnership and claiming: (a) P35,000 for profit participation (Nov. 1949–Oct. 1950); (b) P5,000 monthly rent from Jan. 1951; (c) damages of P160,000 and exemplary P5,000; and (d) attorney’s fees of P10,000.
Defendant’s Answer and Counterclaim
Yang denied a partnership existed, asserting the arrangement was a sublease contrived to evade the prohibition against subleasing in Mrs. Yulo’s lease. He contended fair rental was only P1,100. By counterclaim he sought P100,000 damages for losses arising from an attachment of his property.
Trial Court Proceedings and Initial Decision
At the April 19, 1955 hearing, Yang did not appear; the trial court admitted Mrs. Yulo’s evidence in default and ordered Yang to pay P41,000 for profit participation through Dec. 1950, P5,000 monthly rent from Jan. 1951, and P300 for lobby occupation. On Mrs. Yulo’s motion, the court set aside that default judgment, finding the parties had agreed to a joint postponement for possible settlement, and granted a new trial.
Final Trial Court Findings and Judgment
After full trial, the court concluded no partnership existed because Mrs. Yulo never contributed capital or managed the business, and her fixed P3,000 guarantee resembled rent, not profit-sharing. The court deemed the agreement a sublease, held the lobby too narrow for business under Manila ordinances, and dismissed Mrs. Yulo’s complaint. It also dismissed Yang
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Facts of the Offer and Acceptance
- On June 17, 1945, Yang Chiao Seng wrote to Mrs. Rosario U. Yulo proposing a partnership to operate a theatre on former Cine Oro premises in Sta. Cruz, Manila.
- Principal terms of the offer:
• Monthly guaranteed participation of ₱3,000 for Mrs. Yulo, payable quarterly in advance.
• Partnership term from July 1, 1945 to December 31, 1947, terminable earlier upon expropriation, impracticability of use, owner’s construction, or lease termination.
• Mrs. Yulo authorized to conduct lobby businesses so long as patron ingress and egress were unhindered.
• Post-December 31, 1947, improvements to vest in Mrs. Yulo; if partnership ended before 18 months, Yang could remove improvements. - Mrs. Yulo accepted and “Yang & Company, Limited” was formed with capital of ₱100,000 (Yang ₱80,000; Yulo ₱20,000). Profits and losses were to be shared proportionally; Yulo’s liability limited to her capital.
Supplementary Agreement
- In June 1946 parties extended the partnership from January 1, 1948 to December 31, 1950.
- Profits thereafter to be shared 50-50.
- After December 31, 1950, the showhouse building to belong exclusively to Mrs. Yulo.
Lease of the Land
- Mrs. Yulo leased the land from Emilia and Maria Carrion Santa Marina under an indefinite lease, cancellable by either party upon 90 days’ written notice after one year.
- Last lease executed April 5, 1948.
- On April 12, 1949, lessors notified cancellation effective July 31, 1949.
Parallel Proceedings on Lease Validity
- July 3, 1949: Mrs. Yulo and husband sued in CFI Manila to declare the lease indefinite.
- August 17, 1949: Lessors sued in Manila Municipal Court to eject Yulo, her husband, and Yang.
- February 9, 1950: Municipal Court ordered ejectment; appeal to CFI.
- CFI, in consolidated hearing, dismissed Yulo’s case, declared lease terminated July 31, 1949, and fixed rent at ₱100 monthly.
- Both parties appealed; on April 30, 1955, the Court of Appeals affirmed CFI’s decision.