G.R. No.

159333

July 31, 2006

ARSENIO T. MENDIOLA, petitioner, vs. COURT OF APPEALS, NATIONAL LA OR RELATIONS COMMISSION, PACIFIC FOREST RESOURCES, P!ILS., INC. "#$%o& CELLMAR' A , respondents. DECISION PUNO, J.( On appeal are the Decision1 and Resolution2 of the Court of Appeals, dated January 30, 2003 and July 30, 2003, respectively, in CA- .R. !" #o. $102%, affir&in' the rulin'3 of the #ational (a)or Relations Co&&ission *#(RC+, ,hich in turn set aside the July 30, 2001 Decision- of the la)or ar)iter. .he la)or ar)iter declared ille'al the dis&issal of petitioner fro& e&ploy&ent and a,arded separation pay, &oral and e/e&plary da&a'es, and attorney0s fees. .he facts are as follo,s1 "rivate respondent "acific 2orest Resources, "hils., 3nc. *"acfor+ is a corporation or'ani4ed and e/istin' under the la,s of California, 5!A. 3t is a su)sidiary of Cellulose 6ar7etin' 3nternational, a corporation duly or'ani4ed under the la,s of !,eden, ,ith principal office in othen)ur', !,eden. "rivate respondent "acfor entered into a 8!ide A'ree&ent on Representative Office 7no,n as "acific 2orest Resources *"hils.+, 3nc.89 ,ith petitioner Arsenio .. 6endiola *A.6+, effective 6ay 1, 1::9, 8assu&in' that "acfor-"hils. is already approved )y the !ecurities and ;/chan'e Co&&ission <!;C= on the said date.8> .he !ide A'ree&ent outlines the )usiness relationship of the parties ,ith re'ard to the "hilippine operations of "acfor. "rivate respondent ,ill esta)lish a "acfor representative office in the "hilippines, to )e 7no,n as "acfor "hils, and petitioner A.6 ,ill )e its "resident. "etitioner0s )ase salary and the overhead e/penditures of the co&pany shall )e )orne )y the representative office and funded )y "acfor?A.6, since "acfor "hils. is e@ually o,ned on a 90-90 e@uity )y A.6 and "acfor-usa. On July 1-, 1::9, the !;C 'ranted the application of private respondent "acfor for a license to transact )usiness in the "hilippines under the na&e of "acfor or "acfor "hils.$ 3n its application, private respondent "acfor proposed to esta)lish its representative office in the "hilippines ,ith the purpose of &onitorin' and coordinatin' the &ar7et activities for paper products. 3t also desi'nated petitioner as its resident a'ent in the "hilippines, authori4ed to accept su&&ons and processes in all le'al proceedin's, and all notices affectin' the corporation.% 3n 6arch 1::$, the !ide A'ree&ent ,as a&ended throu'h a 8Revised Operatin' and "rofit !harin' A'ree&ent for the Representative Office Ano,n as "acific 2orest Resources *"hilippines+,8: ,here the salary of petitioner ,as increased to B$%,000 per annu&. Coth a'ree&ents sho, that the operational e/penses ,ill )e )orne )y the representative office and funded )y all parties 8as e@ual partners,8 ,hile the profits and co&&issions ,ill )e shared a&on' the&. 3n July 2000, petitioner ,rote Aevin Daley, Dice "resident for Asia of "acfor, see7in' confir&ation of his 90E e@uity of "acfor "hils.10 "rivate respondent "acfor, throu'h Fillia& leason, its "resident, replied that petitioner is not a part-o,ner of "acfor "hils. )ecause the latter is &erely "acfor-5!A0s representative office and not an entity separate and distinct fro& "acfor-5!A. 83t0s si&ply a 0theoretical co&pany0 ,ith the purpose of dividin' the inco&e 90-90.811 "etitioner presu&a)ly 7ne, of this arran'e&ent fro& the start, havin' )een the one to propose to private respondent "acfor the settin' up of a representative office, and 8not a )ranch office8 in the "hilippines to save on ta/es.12 "etitioner clai&ed that he ,as all alon' &ade to )elieve that he ,as in a Goint venture ,ith the&. He alle'ed he ,ould have )een )etter off re&ainin' as an independent a'ent or representative of "acfor-5!A as A.6 6ar7etin' Corp.13 Had he 7no,n that no Goint venture e/isted, he ,ould not have allo,ed "acfor to ta7e the profita)le )usiness of his o,n co&pany, A.6 6ar7etin' Corp.1- "etitioner raised other issues, such as the rentals of office furniture, salary of the e&ployees, co&pany car, as ,ell as co&&issions alle'edly due hi&. .he issues ,ere not resolved, hence, in Octo)er 2000, petitioner ,rote "acfor-5!A de&andin' pay&ent of unpaid co&&issions and office furniture and e@uip&ent rentals, a&ountin' to &ore than one &illion dollars.19 On #ove&)er 2$, 2000, private respondent "acfor, throu'h counsel, ordered petitioner to turn over to it all papers, docu&ents, files, records, and other &aterials in his or A.6 6ar7etin' Corporation0s possession that "a'e I 1

)elon' to "acfor or "acfor "hils.1> On Dece&)er 1%, 2000, private respondent "acfor also re@uired petitioner to re&it &ore than three hundred thousand-peso Christ&as 'ivea,ay fund for clients of "acfor "hils. 1$ (astly, private respondent "acfor ,ithdre, all its offers of settle&ent and ordered petitioner to transfer title and turn over to it possession of the service car.1% "rivate respondent "acfor li7e,ise sent letters to its clients in the "hilippines, advisin' the& not to deal ,ith "acfor "hils. 3n its letter to 3ntercontinental "aper 3ndustries, 3nc., dated #ove&)er 21, 2000, private respondent "acfor stated1 5ntil further notice, please course all in@uiries and co&&unications for "acific 2orest Resources *"hilippines+ to1 "acific 2orest Resources 200 .a&al "la4a, !uite 200 Corte 6adera, CA, 5!A :-:29 *-19+ :2$ 1$00 phone *-19+ 3%1 -39% fa/ "lease do not send any co&&unication to 6r. Arsenio 8Coy8 .. 6endiola or to the offices of A.6 6ar7etin' Corporation at Roo& 90-, Concorde Cuildin', (e'aspi Dilla'e, 6a7ati City, "hilippines.1: 3n another letter addressed to Davao Corru'ated Carton Corp. *DADCOR+, dated Dece&)er 2000, private respondent directed said client 8to please co&&unicate directly ,ith us on any further @uestions associated ,ith these pay&ents or any future )usiness. Do not co&&unicate ,ith <"acfor= and?or <A.6=.820 "etitioner construed these directives as a severance of the 8unre'istered partnership8 )et,een hi& and "acfor, and the ter&ination of his e&ploy&ent as resident &ana'er of "acfor "hils.21 3n a &e&orandu& to the e&ployees of "acfor "hils., dated January 2:, 2001, he stated1 3 received a letter fro& "acific 2orest Resources, 3nc. de&andin' the turnover of all records to the& effective Dece&)er 1:, 2000. .he co&pany records ,ere turned over only on January 2>, 2001. .his &eans our Go)s ,ith "acific 2orest ,ere ter&inated effective Dece&)er 1:, 2000. 3 a& concerned a)out your ,elfare. 3 ,ould li7e to help you )y offerin' you to ,or7 ,ith A.6 6ar7etin' Corporation. "lease let &e 7no, if you are interested.22 On the )asis of the 8!ide A'ree&ent,8 petitioner insisted that he and "acfor e@ually o,n "acfor "hils. .hus, it follo,s that he and "acfor li7e,ise o,n, on a 90?90 )asis, "acfor "hils.0 office furniture and e@uip&ent and the service car. He also reiterated his de&and for unpaid co&&issions, and proposed to offset these ,ith the re&ainin' Christ&as 'ivea,ay fund in his possession.23 2urther&ore, he did not rene, the lease contract ,ith "ulp and "aper, 3nc., the lessor of the office pre&ises of "acfor "hils., ,herein he ,as the si'natory to the lease a'ree&ent.2On 2e)ruary 2, 2001, private respondent "acfor placed petitioner on preventive suspension and ordered hi& to sho, cause ,hy no disciplinary action should )e ta7en a'ainst hi&. "rivate respondent "acfor char'ed petitioner ,ith ,illful diso)edience and serious &isconduct for his refusal to turn over the service car and the Christ&as 'ivea,ay fund ,hich he applied to his alle'ed unpaid co&&issions. "rivate respondent also alle'ed loss of confidence and 'ross ne'lect of duty on the part of petitioner for alle'edly allo,in' another corporation o,ned )y petitioner0s relatives, Hi'h ;nd "roducts, 3nc. *H;"3+, to use the sa&e telephone and facsi&ile nu&)ers of "acfor, to possi)ly steal and divert the sales and )usiness of private respondent for H;"30s principal, 3nternational 2orest "roducts, a co&petitor of private respondent.29 "etitioner denied the char'es. He reiterated that he considered the i&port of "acfor "resident Fillia& leason0s letters as a 8cessation of his position and of the e/istence of "acfor "hils.8 He li7e,ise infor&ed private respondent "acfor that A.6 6ar7etin' Corp. no, occupies "acfor "hils.0 office pre&ises,2> and de&anded pay&ent of his separation pay.2$ On 2e)ruary 19, 2001, petitioner filed his co&plaint for ille'al dis&issal, recovery of separation pay, and pay&ent of attorney0s fees ,ith the #(RC. 2% 3n the &eanti&e, private respondent "acfor lod'ed fresh char'es a'ainst petitioner. 3n a &e&orandu& dated 6arch 9, 2001, private respondent directed petitioner to e/plain ,hy he should not )e disciplined for serious &isconduct and conflict of interest. "rivate respondent char'ed petitioner ane, ,ith serious &isconduct for the latter0s alle'ed act of fraud and &isrepresentation in authori4in' the release of an additional peso salary for "a'e I 2

hi&self, )esides the dollar salary a'reed upon )y the parties. "rivate respondent also accused petitioner of disloyalty and representation of conflictin' interests for havin' continued usin' the "acfor "hils.0 office for operations of H;"3. 3n addition, petitioner alle'edly solicited )usiness for H;"3 fro& a co&petitor co&pany of private respondent "acfor.2: (a)or Ar)iter 2elipe "ati ruled in favor of petitioner, findin' there ,as constructive dis&issal. Cy directin' petitioner to turn over all office records and &aterials, re'ardless of ,hether he &ay have retained copies, private respondent "acfor virtually deprived petitioner of his Go) )y the 'radual di&inution of his authority as resident &ana'er. "etitioner0s position as resident &ana'er ,hose duty, a&on' others, ,as to &aintain the security of its )usiness transactions and co&&unications ,as rendered &eanin'less. .he dispositive portion of the decision of the (a)or Ar)iter reads1 FH;R;2OR;, pre&ises considered, Gud'&ent is here)y rendered orderin' herein respondents Cell&ar7 AC and "acific 2orest Resources, 3nc., Gointly and severally to co&pensate co&plainant Arsenio .. 6endiola separation pay e@uivalent to at least one &onth for every year of service, ,hichever is hi'her (sic), as reinstate&ent is no lon'er feasi)le )y reason of the strained relations of the parties e@uivalent to five *9+ &onths in the a&ount of B32,000.00 plus the su& of "290,000.00J pay co&plainant the su& of "900,000.00 as &oral and e/e&plary da&a'es and ten percent *10E+ of the a&ounts a,arded as and for attorney0s fees. All other clai&s are dis&issed for lac7 of )asis. !O ORD;R;D.30 "rivate respondent "acfor appealed to the #(RC ,hich ruled in its favor. On Dece&)er 20, 2001, the #(RC set aside the July 30, 2001 decision of the la)or ar)iter, for lac7 of Gurisdiction and lac7 of &erit.31 3t held there ,as no e&ployer-e&ployee relationship )et,een the parties. Cased on the t,o a'ree&ents )et,een the parties, it concluded that petitioner is not an e&ployee of private respondent "acfor, )ut a full co-o,ner *90?90 e@uity+. .he #(RC denied petitioner0s 6otion for Reconsideration.32 "etitioner ,as not successful on his appeal to the Court of Appeals. .he appellate court upheld the rulin' of the #(RC. "etitioner0s 6otion for Reconsideration33 of the decision of the Court of Appeals ,as denied. Hence, this appeal.3"etitioner assi'ns the follo,in' errors1 A. .he Respondent Court of Appeals co&&itted reversi)le error and a)used its discretion in renderin' Gud'&ent a'ainst petitioner since Gurisdiction has )een ac@uired over the su)Gect &atter of the case as there e/ists e&ployer-e&ployee relationship )et,een the parties. C. .he Respondent Court of Appeals co&&itted reversi)le error and a)used its discretion in rulin' that Gurisdiction over the su)Gect &atter cannot )e ,aived and &ay )e alle'ed even for the first ti&e on appeal or considered )y the court &otu prop<r=io.39 .he first issue is ,hether an e&ployer-e&ployee relationship e/ists )et,een petitioner and private respondent "acfor. "etitioner ar'ues that he is an industrial partner of the partnership he for&ed ,ith private respondent "acfor, and also an e&ployee of the partnership. "etitioner insists that an industrial partner &ay at the sa&e ti&e )e an e&ployee of the partnership, provided there is such an a'ree&ent, ,hich, in this case, is the 8!ide A'ree&ent8 and the 8Revised Operatin' and "rofit !harin' A'ree&ent.8 .he Court of Appeals denied the appeal of petitioner, holdin' that 8the le'al )asis of the co&plaint is not e&ploy&ent )ut perhaps partnership, co-o,nership, or independent contractorship.8 Hence, the (a)or Code cannot apply. Fe hold that petitioner is an e&ployee of private respondent "acfor and that no partnership or co-o,nership e/ists )et,een the parties.

"a'e I 3

3n a partnership, the &e&)ers )eco&e co-o,ners of ,hat is contri)uted to the fir& capital and of all property that &ay )e ac@uired there)y and throu'h the efforts of the &e&)ers.3> .he property or stoc7 of the partnership for&s a co&&unity of 'oods, a co&&on fund, in ,hich each party has a proprietary interest.3$ 3n fact, the #e, Civil Code re'ards a partner as a co-o,ner of specific partnership property. 3% ;ach partner possesses a Goint interest in the ,hole of partnership property. 3f the relation does not have this feature, it is not one of partnership.3: .his essential ele&ent, the co&&unity of interest, or co-o,nership of, or Goint interest in partnership property is a)sent in the relations )et,een petitioner and private respondent "acfor. "etitioner is not a part-o,ner of "acfor "hils. Fillia& leason, private respondent "acfor0s "resident esta)lished this fact ,hen he said that "acfor "hils. is si&ply a 8theoretical co&pany8 for the purpose of dividin' the inco&e 90-90. He stressed that petitioner 7ne, of this arran'e&ent fro& the very start, havin' )een the one to propose to private respondent "acfor the settin' up of a representative office, and 8not a )ranch office8 in the "hilippines to save on ta/es. .hus, the parties in this case, &erely shared profits. .his alone does not &a7e a partnership.-0 Cesides, a corporation cannot )eco&e a &e&)er of a partnership in the a)sence of e/press authori4ation )y statute or charter.-1 .his doctrine is )ased on the follo,in' considerations1 *1+ that the &utual a'ency )et,een the partners, ,here)y the corporation ,ould )e )ound )y the acts of persons ,ho are not its duly appointed and authori4ed a'ents and officers, ,ould )e inconsistent ,ith the policy of the la, that the corporation shall &ana'e its o,n affairs separately and e/clusivelyJ and, *2+ that such an arran'e&ent ,ould i&properly allo, corporate property to )eco&e su)Gect to ris7s not conte&plated )y the stoc7holders ,hen they ori'inally invested in the corporation.-2 #o such authori4ation has )een proved in the case at )ar. Ce that as it &ay, ,e hold that on the )asis of the evidence, an e&ployer-e&ployee relationship is present in the case at )ar. .he ele&ents to deter&ine the e/istence of an e&ploy&ent relationship are1 *a+ the selection and en'a'e&ent of the e&ployeeJ *)+ the pay&ent of ,a'esJ *c+ the po,er of dis&issalJ and *d+ the e&ployer0s po,er to control the e&ployee0s conduct. .he &ost i&portant ele&ent is the e&ployer0s control of the e&ployee0s conduct, not only as to the result of the ,or7 to )e done, )ut also as to the &eans and &ethods to acco&plish it.-3 3n the instant case, all the fore'oin' ele&ents are present. 2irst, it ,as private respondent "acfor ,hich selected and en'a'ed the services of petitioner as its resident a'ent in the "hilippines. !econd, as stipulated in their !ide A'ree&ent, private respondent "acfor pays petitioner his salary a&ountin' to B>9,000 per annu& ,hich ,as later increased to B$%,000. .hird, private respondent "acfor holds the po,er of dis&issal, as &ay )e 'leaned throu'h the various &e&oranda it issued a'ainst petitioner, placin' the latter on preventive suspension ,hile char'in' hi& ,ith various offenses, includin' ,illful diso)edience, serious &isconduct, and 'ross ne'lect of duty, and orderin' hi& to sho, cause ,hy no disciplinary action should )e ta7en a'ainst hi&. (astly and &ost i&portant, private respondent "acfor has the po,er of control over the &eans and &ethod of petitioner in acco&plishin' his ,or7. .he po,er of control refers &erely to the e/istence of the po,er, and not to the actual e/ercise thereof. .he principal consideration is ,hether the e&ployer has the ri'ht to control the &anner of doin' the ,or7, and it is not the actual e/ercise of the ri'ht )y interferin' ,ith the ,or7, )ut the ri'ht to control, ,hich constitutes the test of the e/istence of an e&ployer-e&ployee relationship.-- 3n the case at )ar, private respondent "acfor, as e&ployer, clearly possesses such ri'ht of control. "etitioner, as private respondent "acfor0s resident a'ent in the "hilippines, is, e/actly so, only an a'ent of the corporation, a representative of "acfor, ,ho transacts )usiness, and accepts service on its )ehalf. .his ri'ht of control ,as e/ercised )y private respondent "acfor durin' the period of #ove&)er to Dece&)er 2000, ,hen it directed petitioner to turn over to it all records of "acfor "hils.J ,hen it ordered petitioner to re&it the Christ&as 'ivea,ay fund intended for clients of "acfor "hils.J and, ,hen it ,ithdre, all its offers of settle&ent and ordered petitioner to transfer title and turn over to it the possession of the service car. 3t ,as also durin' this period ,hen private respondent "acfor sent letters to its clients in the "hilippines, particularly 3ntercontinental "aper 3ndustries, 3nc. and DADCOR, advisin' the& not to deal ,ith petitioner and?or "acfor "hils. 3n its letter to DADCOR, private respondent "acfor replied to the client0s re@uest for an invoice pay&ent e/tension, and for&ulated a revised pay&ent pro'ra& for DADCOR. .his is one un&ista7a)le proof that private respondent "acfor e/ercises control over the petitioner. #e/t, ,e shall deter&ine if petitioner ,as constructively dis&issed fro& e&ploy&ent. .he evidence sho,s that ,hen petitioner insisted on his 90E e@uity in "acfor "hils., and ,ould not @uit ho,ever, private respondent "acfor )e'an to syste&atically deprive petitioner of his duties and )enefits to &a7e hi& feel that his presence in the co&pany ,as no lon'er ,anted. 2irst, private respondent "acfor directed petitioner to turn over to it all records of "acfor "hils. .his ,ould certainly &a7e the ,or7 of petitioner "a'e I -

very difficult, if not i&possi)le. !econd, private respondent "acfor ordered petitioner to re&it the Christ&as 'ivea,ay fund intended for clients of "acfor "hils. .hen it ordered petitioner to transfer title and turn over to it the possession of the service car. 3t also advised its clients in the "hilippines, particularly 3ntercontinental "aper 3ndustries, 3nc. and DADCOR, not to deal ,ith petitioner and?or "acfor "hils. (astly, private respondent "acfor appointed a ne, resident a'ent for "acfor "hils.-9 Althou'h there is no reduction of the salary of petitioner, constructive dis&issal is still present )ecause continued e&ploy&ent of petitioner is rendered, at the very least, unreasona)le.-> .here is an act of clear discri&ination, insensi)ility or disdain )y the e&ployer that continued e&ploy&ent &ay )eco&e so un)eara)le on the part of the e&ployee so as to foreclose any choice on his part e/cept to resi'n fro& such e&ploy&ent.-$ .he harassin' acts of the private respondent are unGustified. .hey ,ere underta7en ,hen petitioner sou'ht clarification fro& the private respondent a)out his supposed 90E e@uity on "acfor "hils. "rivate respondent "acfor invo7es its ri'hts as an o,ner. Alle'edly, its issuance of the fore'oin' directives a'ainst petitioner ,as a valid e/ercise of &ana'e&ent prero'ative. Fe re&ind private respondent "acfor that the e/ercise of &ana'e&ent prero'ative is not a)solute. 8Cy its very nature, enco&passin' as it could )e, &ana'e&ent prero'ative &ust )e e/ercised in 'ood faith and ,ith due re'ard to the ri'hts of la)or K verily, ,ith the principles of fair play at heart and Gustice in &ind.8 .he e/ercise of &ana'e&ent prero'ative cannot )e utili4ed as an i&ple&ent to circu&vent our la,s and oppress e&ployees.-% As resident a'ent of private respondent corporation, petitioner occupied a position involvin' trust and confidence. 3n the li'ht of the strained relations )et,een the parties, the full restoration of an e&ploy&ent relationship )ased on trust and confidence is no lon'er possi)le. He should )e a,arded separation pay, in lieu of reinstate&ent. IN )IE* *!EREOF, the petition is GRANTED. .he Court of Appeals0 January 30, 2003 Decision in CA- .R. !" #o. $102% and July 30, 2003 Resolution, affir&in' the Dece&)er 20, 2001 Decision of the #ational (a)or Relations Co&&ission, are ANNULED and SET ASIDE. .he July 30, 2001 Decision of the (a)or Ar)iter isREINSTATED ,ith the MODIFICATION that the a&ount of "290,000.00 representin' an alle'ed increase in petitioner0s salary shall )e deducted fro& the 'rant of separation pay for lac7 of evidence. SO ORDERED.

G.R. No. 1+0+96

Au,u-. 1/, 200+

DON PEPE !ENSON ENTERPRISE, &01&0-0#.0$ 2y 3.- M"#",3#,4P"&.#0&, MR. ARISTIDES R. SUARE5, petitioners, vs. MARIANO DA)ID, JUAN PANGILINAN, MARCIAL DA6RIT, "#$ MEL7UIADES DE GU5MAN, respondent. DECISION CARPIO MORALES, J.( "etitioner Don "epe Henson ;nterprise, represented )y its &ana'in' partner Aristides R. !uare4, appeals fro& the decision of the Court of Appeals in CA- .R. !" #o. -$$>%, 8Don "epe Henson ;nterprise v. 6ariano David, et al.8 "etitioner, a partnership, is the re'istered o,ner of a parcel of a'ricultural land covered )y .ransfer Certificate of .itle *.C.+ #o. -$093 issued )y the Re'istry of Deeds of An'eles City, containin' an area of &ore or less 1: hectares, and located at Caran'ay "a&pan', An'eles City. A portion of the land, ,ith an a''re'ate area of 9.9 hectares, is )ein' tilled )y petitioner0s tenantsL respondents 6ariano David, Juan "an'ilinan, 6arcial Dayrit and 6el@uiades de u4&an. .hat a landlord-tenant relationship e/ists )et,een the parties ,as settled )y this Court in Don Pepe Henson Enterprises v. Pangilinan<1= ,herein herein respondents ,ere held to )e entitled to security of tenure as tenants. Durin' the pendency of that case, ho,ever, the portion tilled )y respondents ,as placed under the Operation (and .ransfer "ro'ra& of the Depart&ent of A'rarian Refor& *DAR+ pursuant to ".D. #o. 2$, the .enant ;&ancipation Decree, resultin' in the issuance of Certificates of (and .ransfer in favor of respondents. "a'e I 9

.he correspondin' ;&ancipation "atents and .ransfer Certificates of .itle ,ere conse@uently issued in respondents0 na&e. 6onths after the pro&ul'ation of this Court0s decision in Don Pepe Henson<2=, petitioner filed on !epte&)er 30, 1:%% a co&plaint, ,hich ,as later a&ended, for 8Declaration of #ullity, Diolation of ".D. #o. %1> and Da&a'es8 a'ainst respondents )efore the Depart&ent of A'rarian Refor& AdGudication Coard *DARAC+ Re'ional Office 333 in !an 2ernando, "a&pan'a. 3n its co&plaint, petitioner raised four causes of action. 2or its first cause of action, petitioner challen'ed the covera'e of its land under ".D. #o. 2$, it alle'in' that the land is devoted to su'arcane production and is, therefore, outside the covera'e of said la, ,hich applies only to 8private a'ricultural lands pri&arily devoted to rice and cornJ8 that the land is e/e&pt fro& ".D. #o. 2$ as it is not o,ned )y the partnership )ut )y each of the partners in co&&on, each of ,ho& is entitled to the retention li&it of $ hectaresJ that the issuance of Certificates of (and .ransfer, the survey )y the Cureau of (ands of the portion of the land a,arded to respondents, and the issuance of ;&ancipation "atents are null and void, prior notice thereof to petitioner not havin' )een 'iven. 2or its second cause of action, petitioner co&plained a)out respondents not payin' rentals nor sharin' their harvest, thus forfeitin' their Certificates of (and .ransfer pursuant to ".D. #o. %1>, 8"ROD3D3# .HA. .;#A#.-2AR6;R!?A R3C5(.5RA( (;!!;;! !HA(( "AM .H; (;A!;HO(D R;#.A(! FH;# .H;M 2A(( D5; A#D "ROD3D3# ";#A(.3;! .H;R;2OR.8 As its third cause of action, petitioner @uestioned the for&ation of the Caran'ay Co&&ittee on (and "roduction as ,ell as its valuation of the land, it alle'in' that the said co&&ittee ,as or'ani4ed ,ithout notice to petitioner and the co&&ittee0s valuation of the land ,as &ade throu'h collusion ,ith e&ployees of the DAR. 2inally, for its fourth cause of action, petitioner clai&ed for da&a'es. Respondents, in their Ans,er ,ith Counterclai&, clai&ed, a&on' other thin's, that ,hile the )ul7 of petitioner0s land is devoted to su'arcane, their far&holdin' is covered )y ".D. #o. 2$ )ecause it has al,ays )een devoted to palay and ve'eta)les, it citin' the decision in Don Pepe Henson<3= and the principle of conclusiveness of Gud'&ent. On their failure to pay rentals, respondents clai&ed that they actually offered to pay the& to petitioner ,hich, did not, ho,ever, accept the sa&e, it havin' refused to reco'ni4e the& as tenants, thus dra,in' the& to consi'n the rentals in court. Respondents thus concluded that since ".D. #o. %1> only conte&plates deliberate non-pay&ent, they cannot )e divested of their far&holdin'. As for petitioner0s alle'ation that it ,as not infor&ed of the for&ation of the Caran'ay Co&&ittee on (and "roduction as ,ell as its clai& that the valuation of the land ,as fraudulently &ade, respondents denied the sa&e. .he "rovincial AdGudicator, )y Decision of 21 2e)ruary 1::2, rendered Gud'&ent in favor of petitioner, the dispositive portion of ,hich reads1 8FH;R;2OR;, 3# D3;F O2 A(( .H; 2OR; O3# , Gud'&ent is here)y rendered in favor of the plaintiff and a'ainst the defendants, as follo,s1 1+ Declarin' the covera'e of defendants0 landholdin's under ".D. #o. 2$ and the Certificates of (and .ransfer and ;&ancipation "atents issued to the& as null and voidJ 2+ Declarin' the defendants to have forfeited their respective ri'hts over the su)Gect landholdin'sJ 3+ Orderin' the defendants to vacate peacefully their respective landholdin's and surrender possessionthereof to plaintiffJ -+ Orderin' defendants to pay plaintiff 1- cavans per hectare?per annu& as lease rentals for a'ricultural years 1:%% to 1::1 N every year thereafter, up to and until they finally vacate the su)Gect landholdin'sJ 9+ Orderin' the defendants to pay to plaintiff the a&ount of "3,000.00 as attorney0s fees. "a'e I >

8#o pronounce&ent as to costs.8 *5nderscorin' supplied+ A''rieved, respondents appealed to the DARAC )efore ,hich they raised the follo,in' issues1 3 FH;.H;R OR #O. .H; 9.9 H;C.AR; (A#DHO(D3# O2 D;2;#DA#.!-A"";((A#.! AR; COD;R;D CM .H; (A#D R;2OR6 "RO RA6 O2 .H; OD;R#6;#. 6OR; !";C323CA((M 5#D;R ".D. #O. 2$ 33 FH;.H;R OR #O. D;2;#DA#.!-A"";((A#.! D3O(A.;D ".D. %1> #O.F3.H!.A#D3# .H; 2AC. .HA. "(A3#.322-A"";((;; R;25!;D .O R;C;3D; R;#.A( "AM6;#. A! 3. DO;! #O. R;CO #3O; .H; 2OR6;R A! 3.! .;#A#.!. 333 FH;.H;R OR #O. .H;R; FA! CO((5!3O# C;.F;;# D;2;#DA#.!-A"";((A#.! A#D C;R.A3# ;6"(OM;;! O2 .H; D;"AR.6;#. O2 A RAR3A# R;2OR6 R; .H; 3!!5A#C; O2 .H; ;6A#C3"A.3O# "A.;#.!. .he DARAC, )y Decision of Octo)er 2-, 1::$, reversed the decision of the "rovincial AdGudicator and dis&issed the co&plaint of petitioner. "etitioner thus appealed to the Court of Appeals on the follo,in' 'rounds1 1+ .HA. .H; HO#ORAC(; ADJ5D3CA.3O# COARD RAD;(M AC5!;D 3.! D3!CR;.3O# A6O5#.3# .O (ACA O2 J5R3!D3C.3O# 3# D;C(AR3# .HA. .H; (A#D !5CJ;C. O2 .H; CA!; FA! "RO";R(M A#D (; A((M COD;R;D 5#D;R ".D. #O. 2$, D;!"3.; .H; C(;AR AD63!!3O# O2 D;#3A( O2 D5; "ROC;!!J 2+ .HA. .H; HO#ORAC(; ADJ5D3CA.3O# COARD RAD;(M AC5!;D 3.! D3!CR;.3O# A6O5#.3# .O (ACA O2 J5R3!D3C.3O# 3# D;C(AR3# .HA. .H; R;!"O#D;#.! D3D #O. D3O(A.; "R;!3D;#.3A( D;CR;; #O. %1>, CM A""(M3# 3.! OF# CO#C(5!3O# A! 3.! CA!3! RA.H;R .HA# .H; ;D3D;#C; "R;!;#.;DJ A#D 3+ .HA. .H; HO#ORAC(; ADJ5D3CA.3O# COARD HA! 3#D;;D AC5!;D 3.! D3!CR;.3O# A6O5#.3# .O (ACA O2 J5R3!D3C.3O# 3# R;D;R!3# .H; D;C3!3O# O2 .H; "ROD3#C3A( ADJ5D3CA.OR F3.HO5. A#M J5!.323AC(; CA!3! 3# (AF A#D 3# 2AC.. Cy Decision of June 2:, 1:::, the Court of Appeals, sustainin' the findin' that the far&holdin' of respondents ,as covered )y ".D. #o. 2$, held, ho,ever, that the issuance of the Certificates of (and .ransfer, ;&ancipation "atents, and .C.s to respondents ,as vitiated due to the violation of petitioner0s ri'ht to due process. !i'nificantly, the appellate court also held that there is no proof that the far&holdin' has )een paid for )y respondents ,ho 8do no<t= even see& to 7no, ho, &uch they paid and for ho, &any years.8 #onetheless, the appellate court held that respondents cannot )e eGected )ecause they ,ere dee&ed o,ners thereof upon the effectivity of ".D. #o. 2$ on 21 Octo)er 1:$2, it citin' Locsin v. Valenzuela<-= ,h3ch held1 8/ / / 3t follo,s that in respect of land su)Gected to Operation (and .ransfer, the tenants-far&ers )eca&e o,ners of the land they tilled as of the effective date of "residential Decree #o. 2$, i.e., 21 Octo)er 1:$2. "endin' full pay&ent of the cost of the land to the old lando,ner )y the (and Can7 of the "hilippines, the leasehold syste& ,as 8provisionally &aintained8 )ut the 8lease rentals8 paid )y the tenants-far&ers prior to such full pay&ent )y the (and Can7 to the old lando,ner, ,ould )e credited no lon'er as rentals )ut rather as 8a&orti4ation pay&ents8 of the price of the land, the un-a&orti4ed portion )ein' paya)le )y the (and Can7. 3n respect of lands )rou'ht ,ithin the covera'e of Operation (and .ransfer, the leasehold syste& ,as le'ally and effectively ter&inated i&&ediately on 21 Octo)er 1:$2 *not,ithstandin' the curious state&ent in Depart&ent Circular #o. % that it ,as 8provisionally &aintained8+. / / / 8<9=

"a'e I $

Hence, instead of orderin' the eGect&ent of respondents, the appellate court annulled respondents0 Certificates of (and .ransfer, ;&ancipation "atents, and .C.s )ut 'ave the& the opportunity to apply ane, for the issuance of such docu&ents, this ti&e ensurin' that due process ,ould )e o)served. .hus the appellate court disposed1 8FH;R;2OR;, the Decision of the DARAC herein revie,ed is here)y rendered *sic+ A##5((3# the ;&ancipation "atents and .ransfer Certificates of .itle issued to the respondents and to 6el@uiades and Adriano de u4&an, F3.HO5. "R;J5D3C; to their applyin' for the issuance of ne, patents and certificates to the&, after o)servance of due process of la,.8 Hence, petitioner0s present petition for revie, under Rule -9 anchored to the follo,in' 'rounds1 1+ .HA. .H; HO#ORAC(; CO5R. O2 A"";A(! RAD;(M AC5!;D 3.! D3!CR;.3O# A6O5#.3# .O (ACA O2 J5R3!D3C.3O# 3# A223R63# .HA. .H; (A#D !5CJ;C. O2 .H; CA!; 3! COD;R;D 5#D;R ".D. #O. 2$, D;!"3.; .H; 2AC. .HA. 3. 3! C(;AR(M A "AR. O2 A (A#DHO(D3# "R36AR3(M D;DO.;D .O .H; C5(.3DA.3O# O2 !5 ARCA#; A#D 3.! AR;A 3! O5.!3D; .H; COD;RA ; O2 .H; (AF A! 2O5#D CM .H; "ROD3#3C3A( ADJ5D3CA.OR O2 .H; D;"AR.6;#. O2 A RAR3A# R;2OR6 3# 3.! D;C3!3O# DA.;D 2;CR5ARM 21, 1::2J 2+ .HA. .H; HO#ORAC(; CO5R. O2 A"";A(! RAD;(M AC5!;D 3.! D3!CR;.3O# A6O5#.3# .O (ACA O2 J5R3!D3C.3O# FH;# 3. R;25!;D .O A""(M ".D. #O. %1> A#D ;J;C. .H; R;!"O#D;#.! 2RO6 ";.3.3O#;R0! (A#D, D;!"3.; .H; C(;AR "RO#O5#C;6;#. O2 .H; (AF A#D ;P3!.3# ;D3D;#C; O# R;CORD. *5nderscorin' supplied+ "etitioner prays for the &odification of the challen'ed decision such that the i&position of a @ualification on the annul&ent of the Certificates of (and .ransfer, ;&ancipation "atents and .C.s, K that it is 8,ithout preGudice to <respondents0= applyin' for the issuance of ne, patents and certificates to the&, after o)servance of due process of la,,8 )e deleted, and that respondents )e ordered eGected. Fith re'ard to the first 'round to ,hich the present petition is anchored, this Court holds that ,hile it is undisputed that the )ul7 of the 1:-hectare land of petitioner is devoted to su'arcane production, the 9.9 hectare portion thereof K the far&holdin' of respondents K is devoted to palay, hence, such far&holdin' is covered )y ".D. #o. 2$. .he petition itself @uotes approvin'ly the Decision of the "rovincial AdGudicator that 85ndisputed is the fact that the 9.9 hectares is devoted to plantin' of palay ,hile the rest of the nineteen *1:+ hectares are devoted to su'arcane production.8<>= *5nderscorin' supplied+ "etitioner0s atte&pt to sho, that the far&holdin' a,arded to respondents is e/e&pt fro& the covera'e of ".D. #o. 2$ in li'ht of its si4e, fails. Fhile the far&holdin' contains only 9.9 hectares, (etter of 3nstruction *(O3+ #o. -$- addressed to the !ecretary of A'rarian Refor& directs as follo,s 1 81. Mou shall underta7e to place under the (and .ransfer "ro'ra& of the 'overn&ent pursuant to "residential Decree #o. 2$, all tenanted rice?corn lands ,ith areas of seven hectares or less )elon'in' to lando,ners ,ho o,n other a'ricultural lands of &ore than seven hectares in a''re'ate areas or lands used for residential, co&&ercial, industrial or other ur)an purposes fro& ,hich they derive ade@uate inco&e to support the&selves and their fa&ilies.8 *5nderscorin' and e&phasis supplied+ 3f the 9.9-hectare far&holdin' is deducted fro& the 1:-hectare property of petitioner, petitioner still has 13.9 hectares of far&land. .he 9.9 hectare far&holdin' of the land ,as thus le'ally disposed to respondents under the Operation (and .ransfer "ro'ra&. !till, petitioner posits that the directive of (O3 -$- not,ithstandin', the far&holdin' is e/e&pt fro& ".D. #o. 2$ as the 1:-hectare land is not o,ned )y the partnership )ut )y at least t,enty-three *23+ partners in co&&on. And since each of these partners is entitled to the $-hectare retention li&it, petitioner concludes that the a''re'ate area of 1: hectares is e/e&pt fro& said la,. "etitioner0s position does not lie. A partnership has a Guridical personality separate fro& the individual partners. <$=.he appellate court has found as a fact that petitioner is the re'istered o,ner of the land.<%= .his Court sees no reason to alter this findin', especially since this is a petition for revie, in ,hich only @uestions of la, should )e entertained as a 'eneral rule. !uffice it to state that petitioner, in so positin', contradicts itself, it havin' "a'e I %

stated in its present petition that it is 8the a)solute o,ner of a parcel of land / / / covered )y .ransfer Certificate of .itle #o. -$093.8<:= .he land )ein' then o,ned )y a sin'le entity, a partnership, it is a&on' those covered )y the Operation (and .ransfer "ro'ra& pursuant to (O3 -$-. As to the second 'round of the petition, petitioner see7s the eGect&ent of respondents fro& the far&holdin' on the )asis of t,o la,s that &ay alternatively )e applied, ".D. #o. %1> if the land is covered )y ".D. #o. 2$, and R.A. 3%--, !ection 3><10= if it is not. 3n vie, of this Court0s findin' that the land is covered )y ".D. 2$, the applica)ility of !ection 3> of R.A. 3%-- is ruled out. .his leaves for consideration the re&ainin' @uestion of ,hether respondents should )e eGected for alle'ed violation of ".D. #o. %1>. "etitioner does not state specifically ,hat section of ".D. #o. %1> it is invo7in'. 3t is 'athered fro& the conte/t of the petition, ho,ever, that it is referrin' to !ection 2 thereof ,hich reads1 8!;C.3O# 2. .hat any a'ricultural lessee of a rice or corn land under "residential Decree #o. 2$ ,hodeli)erately refuses and?or continues to refuse to pay the rentals or a&orti4ation pay&ents ,hen they fall due for a period of t,o *2+ years shall, upon hearin' and final Gud'&ent, forfeit the Certificate of (and .ransfer issued in his favor, if his far&holdin' is already covered )y such Certificate of (and .ransfer and his far&holdin'J8 *5nderscorin' supplied+ .he Court of Appeals, in its challen'ed decision, held1 . . . <.=here is no proof that the petitioner has )een paid for its land. .he respondents do no *sic+ even see& to 7no, ho, &uch they paid and for ho, &any years. 3n fact, they are still insistin' that they are depositin' 0rentals0 in court.<11= Fhile the appellate court did not state ,hether the failure to pay ,as deli)erate and?or continuous, as reflected a)ove, petitioner filed the co&plaint )efore the DARAC Re'ional Office 333 as far )ac7 as !epte&)er 30, 1:%%. #o proof of pay&ent havin' )een proffered and 'iven after the lapse of a considera)le len'th of ti&e fro& the filin' of the co&plaint, it can )e assu&ed that no pay&ent has )een &ade and that such failure to pay ,as either deli)erate or continuin', or )oth. Respondents have asserted thou'h that they have )een payin' throu'h consi'nation )y depositin' rentals in court. .he appellate court ,as not convinced, ho,ever, of the veracity of such clai&, and neither is this Court, no docu&entary evidence havin' )een presented in support thereof. .here )ein' then a deli)erate and?or continuin' refusal to pay a&orti4ation pay&ents, ".D. #o. %1> applies. 3t should )e noted, ho,ever, that !ection 2 thereof covers only those far&holdin's 8already covered )y such Certificate of (and .ransfer8. 3n the present case, the Court of Appeals ruled that the Certificates of (and .ransfer, ;&ancipation "atents, and .C.s issued to respondents ,ere vitiated due to the violation of petitioner0s ri'ht to due process, and should, therefore, )e annulled. !ince this particular rulin' is not )ein' challen'ed )y any party, there appears to )e no reason to distur) it. .he Certificates of (and .ransfer, ;&ancipation "atents and .C.s )ein' void then, it ,ould )e incon'ruous to apply !ection 2 of ".D. #o. %1>. Fhat should apply instead is !ection 3 of the sa&e la, ,hich reads1 8!;C.3O# 3. .hat any a'ricultural lessee ,hose landholdin' is not yet covered )y a Certificate of (and .ransfer and ,ho shall continue not to pay his lease rentals or a&orti4ation pay&ents ,hen they fall due for a period of t,o *2+ years to the lando,ner?a'ricultural lessor shall, upon proper hearin' and Gud'&ent, lose his ri'ht to )e issued a Certificate of (and .ransfer under "residential Decree #o. 2$ and his far&holdin'J8 *;&phasis and underscorin' supplied+ .herefore, in so far as that the appellate court allo,ed respondents to apply for ne, patents and certificates, its decision is not in accordance ,ith !ection 3 of ".D. #o. %1> ,hich operates to deprive respondents of their 8ri'ht to )e issued Certificate<s= of (and .ransfer under ".D. #o. 2$ and <their= far&holdin'.8 On this score, respondents0 eGect&ent is proper. Fhile in Locsin<12= the pertinent portion of ,hich ,as priorly @uoted, this Court held that tenant-far&ers covered )y ".D. #o. 2$ ,ere dee&ed o,ners of the land they tilled as of Octo)er 21, 1:$2, the date of effectivity of the said decree, in respondents0 case, ,hile they li7e,ise ,ere dee&ed o,ners of their far&holdin', their 8o,nership8 ,as su)Gect to the provision of ".D. #o. %1>, !ection 3, ,hich they violated. "a'e I :

*!EREFORE, the challen'ed decision of the Court of Appeals is here)y AFFIRMED 83.9 .90 MODIFICATIONthat the annul&ent of respondents0 Certificates of (and .ransfer, ;&ancipation "atents, and .ransfer Certificates of .itle coverin' their far&holdin' is F3.H "R;J5D3C; to their applyin' for ne, patents and certificates, and they are ordered to peacefully vacate their far&holdin'. SO ORDERED. Foo.#o.010

!;C.3>. Possession of Landholding; Exceptions. #ot,ithstandin' any a'ree&ent as to the period or future surrender of the land, an a'ricultural lessee shall continue in the enGoy&ent and possession of his landholdin' e/cept ,hen his dispossession has )een authori4ed )y the Court in a Gud'&ent that is final and e/ecutory if after due hearin' it is sho,n that1 /// *>+ .he a'ricultural lessee does not pay the lease rental ,hen it falls due1 Provided, .hat if the nonpay&ent of the rental shall )e due to crop failure to the e/tent of seventy-five per centu! as a result of a fortuitous event, the nonpay&ent shall not )e a 'round for dispossession, althou'h the o)li'ation to pay the rental due that particular crop is not there)y e/tin'uishedJ / / /

G.R. No. 1+33+0

Au,u-. 15, 2001

LILI ET! SUNGA4C!AN "#$ CECILIA SUNGA, petitioners, vs. LAM ERTO T. C!UA, respondent. GON5AGA4RE6ES, J.( Cefore us is a petition for revie, on certiorari under Rule -9 of the Rules of Court of the Decision1 of the Court of Appeals dated January 31, 2000 in the case entitled 8(a&)erto .. Chua vs. (ili)eth !un'a Chan and Cecilia !un'a8 and of the Resolution dated 6ay 23, 2000 denyin' the &otion for reconsideration of herein petitioners (ili)eth !un'a and Cecilia !un'a *hereafter collectively referred to as petitioners+. .he pertinent facts of this case are as follo,s1 On June 22, 1::2, (a&)erto .. Chua *hereafter respondent+ filed a co&plaint a'ainst (ili)eth !un'a Chan *hereafter petitioner (ili)eth+ and Cecilia !un'a *hereafter petitioner Cecilia+, dau'hter and ,ife, respectively of the deceased Jacinto (. !un'a *hereafter Jacinto+, for 8Findin' 5p of "artnership Affairs, Accountin', Appraisal and Recovery of !hares and Da&a'es ,ith Frit of "reli&inary Attach&ent8 ,ith the Re'ional .rial Court, Cranch 11, !indan'an, Oa&)oan'a del #orte. Respondent alle'ed that in 1:$$, he ver)ally entered into a partnership ,ith Jacinto in the distri)ution of !hellane (i@uefied "etroleu& as *(" + in 6anila. 2or )usiness convenience, respondent and Jacinto alle'edly a'reed to re'ister the )usiness na&e of their partnership, !H;((3.; A! A""(3A#C; C;#.;R *hereafter !hellite+, under the na&e of Jacinto as a sole proprietorship. Respondent alle'edly delivered his initial capital contri)ution of "100,000.00 to Jacinto ,hile the latter in turn produced "100,000.00 as his counterpart contri)ution, ,ith the intention that the profits ,ould )e e@ually divided )et,een the&. .he partnership alle'edly had Jacinto as &ana'er, assisted )y Josephine !y *hereafter Josephine+, a sister of the ,ife respondent, ;rlinda !y. As co&pensation, Jacinto ,ould receive a &ana'er0s fee or re&uneration of 10E of the 'ross profit and Josephine ,ould receive 10E of the net profits, in addition to her ,a'es and other re&uneration fro& the )usiness. Alle'edly, fro& the ti&e that !hellite opened for )usiness on July %, 1:$$, its )usiness operation ,ent @uite and ,as profita)le. Respondent clai&ed that he could attest to success of their )usiness )ecause of the volu&e of orders and deliveries of filled !hellane cylinder tan7s supplied )y "ilipinas !hell "etroleu& Corporation. Fhile Jacinto furnished respondent ,ith the &erchandise inventories, )alance sheets and net ,orth of !hellite fro& 1:$$ to 1:%:, respondent ho,ever suspected that the a&ount indicated in these docu&ents ,ere understated and undervalued )y Jacinto and Josephine for their o,n selfish reasons and for ta/ avoidance. "a'e I 10

5pon Jacinto0s death in the later part of 1:%:, his survivin' ,ife, petitioner Cecilia and particularly his dau'hter, petitioner (ili)eth, too7 over the operations, control, custody, disposition and &ana'e&ent of !hellite ,ithout respondent0s consent. Despite respondent0s repeated de&ands upon petitioners for accountin', inventory, appraisal, ,indin' up and restitution of his net shares in the partnership, petitioners failed to co&ply. "etitioner (ili)eth alle'edly continued the operations of !hellite, convertin' to her o,n use and advanta'e its properties. On 6arch 31, 1::1, respondent clai&ed that after petitioner (ili)eth ran out the ali)is and reasons to evade respondent0s de&ands, she dis)ursed out of the partnership funds the a&ount of "200,000.00 and partially paid the sa&e to respondent. "etitioner (ili)eth alle'edly infor&ed respondent that the "200,000.00 represented partial pay&ent of the latter0s share in the partnership, ,ith a pro&ise that the for&er ,ould &a7e the co&plete inventory and ,indin' up of the properties of the )usiness esta)lish&ent. Despite such co&&it&ent, petitioners alle'edly failed to co&ply ,ith their duty to account, and continued to )enefit fro& the assets and inco&e of !hellite to the da&a'e and preGudice of respondent. On Dece&)er 1:, 1::2, petitioners filed a 6otion to Dis&iss on the 'round that the !ecurities and ;/chan'e Co&&ission *!;C+ in 6anila, not the Re'ional .rial Court in Oa&)oan'a del #orte had Gurisdiction over the action. Respondent opposed the &otion to dis&iss. On January 12, 1::3, the trial court findin' the co&plaint sufficient in fro& and su)stance denied the &otion to dis&iss. On January 30, 1::3, petitioners filed their Ans,er ,ith Co&pulsory Counter-clai&s, contendin' that they are not lia)le for partnership shares, unreceived inco&e?profits, interests, da&a'es and attorney0s fees, that respondent does not have a cause of action a'ainst the&, and that the trial court has no Gurisdiction over the nature of the action, the !;C )ein' the a'ency that has ori'inal and e/clusive Gurisdiction over the case. As counterclai&, petitioner sou'ht attorney0s fees and e/penses of liti'ation. On Au'ust 2, 1::3, petitioner filed a second 6otion to Dis&iss this ti&e on the 'round that the clai& for ,indin' up of partnership affairs, accountin' and recovery of shares in partnership affairs, accountin' and recovery of shares in partnership assets?properties should )e dis&issed and prosecuted a'ainst the estate of deceased Jacinto in a pro)ate or intestate proceedin'. On Au'ust 1>, 1::3, the trial denied the second &otion to dis&iss for lac7 of &erit. On #ove&)er 2>, 1::3, petitioners filed their "etition for Certiorari, "rohi)ition and 6anda&us ,ith the Court of Appeals doc7eted as CA- .R. !" #o. 32-:: @uestionin' the denial of the &otion to dis&iss. On #ove&)er 2:, 1::3, petitioners filed ,ith the trial court a 6otion to !uspend "re-trial Conference. On Dece&)er 13, 1::3, the trial court 'ranted the &otion to suspend pre-trial conference. On #ove&)er 19, 1::-, the Court of Appeals denied the petition for lac7 of &erit. On January 1>, 1::9, this Court denied the petition for revie, on certiorari filed )y petitioner, 8as petitioners failed to sho, that a reversi)le error ,as co&&itted )y the appellate court.82 On 2e)ruary 20, 1::9, entry of Gud'&ent ,as &ade )y the Cler7 of Court and the case ,as re&anded to the trial court on April 2>, 1::9. On !epte&)er 29, 1::9, the trial court ter&inated the pre-trial conference and set the hearin' of the case of January 1$, 1::>. Respondent presented his evidence ,hile petitioners ,ere considered to have ,aived their ri'ht to present evidence for their failure to attend the scheduled date for reception of evidence despite notice. On Octo)er $, 1::$, the trial court rendered its Decision rulin' for respondent. .he dispositive of the Decision reads1 8FH;R;2OR;, Gud'&ent is here)y rendered in favor of the plaintiff and a'ainst the defendants, as follo,s1 *1+ D3R;C.3# the& to render an accountin' in accepta)le for& under accountin' procedures and standards of the properties, assets, inco&e and profits of the !hellite as Appliance Center !ince the ti&e of death of Jacinto (. !un'a, fro& ,ho& they continued the )usiness operations includin' all )usinesses derived fro& !hellite as "a'e I 11

Appliance Center, su)&it an inventory, and appraisal of all these properties, assets, inco&e, profits etc. to the Court and to plaintiff for approval or disapprovalJ *2+ ORD;R3# the& to return and restitute to the partnership any and all properties, assets, inco&e and profits they &isapplied and converted to their o,n use and advanta'e the le'ally pertain to the plaintiff and account for the properties &entioned in pars. A and C on pa'es --9 of this petition as )asisJ *3+ D3R;C.3# the& to restitute and pay to the plaintiff Q shares and interest of the plaintiff in the partnership of the listed properties, assets and 'ood ,ill *sic+ in schedules A, C and C, on pa'es --9 of the petitionJ *-+ ORD;R3# the& to pay the plaintiff earned )ut unreceived inco&e and profits fro& the partnership fro& 1:%% to 6ay 30, 1::2, ,hen the plaintiff learned of the closure of the store the su& of "39,000.00 per &onth, ,ith le'al rate of interest until fully paidJ *9+ ORD;R3# the& to ,ind up the affairs of the partnership and ter&inate its )usiness activities pursuant to la,, after deliverin' to the plaintiff all the Q interest, shares, participation and e@uity in the partnership, or the value thereof in &oney or &oney0s ,orth, if the properties are not physically divisi)leJ *>+ 23#D3# the& especially (ili)eth !un'a-Chan 'uilty of )reach of trust and in )ad faith and hold the& lia)le to the plaintiff the su& of "90,000.00 as &oral and e/e&plary da&a'esJ and, *$+ D3R;C.3# the& to rei&)urse and pay the su& of "29,000.00 as attorney0s *sic+ and "29,000.00 as liti'ation e/penses. #O special pronounce&ents as to CO!.!. !O ORD;R;D.83 On Octo)er 2%, 1::$, petitioners filed a #otice of Appeal ,ith the trial court, appealin' the case to the Court of Appeals. On January 31, 2000, the Court of Appeals dis&issed the appeal. .he dispositive portion of the Decision reads1 8FH;R;2OR;, the instant appeal is dis&issed. .he appealed decision is A223R6;D in all respects.8On 6ay 23, 2000, the Court of Appeals denied the &otion for reconsideration filed )y petitioner. Hence, this petition ,herein petitioner relies upon follo,in' 'rounds1 81. .he Court of Appeals erred in &a7in' a le'al conclusion that there e/isted a partnership )et,een respondent (a&)erto .. Chua and the late Jacinto (. !un'a upon the latter00 invitation and offer and that upon his death the partnership assets and )usiness ,ere ta7en over )y petitioners. 2. .he Court of Appeals erred in &a7in' the le'al conclusion that laches and?or prescription did not apply in the instant case. 3. .he Court of Appeals erred in &a7in' the le'al conclusion that there ,as co&petent and credi)le evidence to ,arrant the findin' of a partnership, and assu&in' arguendo that indeed there ,as a partnership, the findin' of hi'hly e/a''erated a&ounts or values in the partnership assets and profits.89 "etitioners @uestion the correctness of the findin' of the trial court and the Court of Appeals that a partnership e/isted )et,een respondent and Jacinto fro& 1:$$ until Jacinto0s death. 3n the a)sence of any ,ritten docu&ent to sho, such partnership )et,een respondent and Jacinto, petitioners ar'ues that these courts ,ere proscri)es fro& hearin' the testi&onies of respondent and his ,itness, Josephine, to prove the alle'ed "a'e I 12

partnership three years after Jacinto0s death. .o support this ar'u&ent, petitioners invo7e the 8Dead 6an0s !tatute0 or 8!urvivorship Rule8 under !ection 23, Rule 130 of the Rules of Court that provides1 8SEC. 23. Dis"ualification b# reason of death or insanit# of adverse part#. K "arties or assi'nors of parties to a case, or persons in ,hose )ehalf a case is prosecuted, a'ainst an e/ecutor or ad&inistrator or other representative of a deceased person, or a'ainst a person of unsound &ind, upon a clai& or de&and a'ainst the estate of such deceased person, or a'ainst such person of unsound &ind, cannot testify as to any &atter of fact occurrin' )efore the death of such deceased person or )efore such person )eca&e of unsound &ind.8 "etitioners thus i&plore this Court to rule that the testi&onies of respondent and his alter e'o, Josephine, should not have )een ad&itted to prove certain clai&s a'ainst a deceased person *Jacinto+, no, represented )y petitioners. Fe are not persuaded. A partnership &ay )e constituted in any for&, e/cept ,here i&&ova)le property of real ri'hts are contri)uted thereto, in ,hich case a pu)lic instru&ent shall necessary.> Hence, )ased on the intention of the parties, as 'athered fro& the facts and ascertained fro& their lan'ua'e and conduct, a ver)al contract of partnership &ay arise.$ .he essential profits that &ust )e proven to that a partnership ,as a'reed upon are *1+ &utual contri)ution to a co&&on stoc7, and *2+ a Goint interest in the profits.% 5nderstanda)ly so, in vie, of the a)sence of the ,ritten contract of partnership )et,een respondent and Jacinto, respondent resorted to the introduction of docu&entary and testi&onial evidence to prove said partnership. .he crucial issue to settle then is to ,hether or not the 8Dead 6an0s !tatute8 applies to this case so as to render inad&issi)le respondent0s testi&ony and that of his ,itness, Josephine. .he 8Dead 6an0s !tatute8 provides that if one party to the alle'ed transaction is precluded fro& testifyin' )y death, insanity, or other &ental disa)ilities, the survivin' party is not entitled to the undue advanta'e of 'ivin' his o,n uncontradicted and une/plained account of the transaction.: Cut )efore this rule can )e successfully invo7ed to )ar the introduction of testi&onial evidence, it is necessary that1 81. .he ,itness is a party or assi'nor of a party to case or persons in ,hose )ehalf a case in prosecuted. 2. .he action is a'ainst an e/ecutor or ad&inistrator or other representative of a deceased person or a person of unsound &indJ 3. .he su)Gect-&atter of the action is a clai& or de&and a'ainst the estate of such deceased person or a'ainst person of unsound &indJ -. His testi&ony refers to any &atter of fact of ,hich occurred )efore the death of such deceased person or )efore such person )eca&e of unsound &ind.810 .,o reasons forestall the application of the 8Dead 6an0s !tatute8 to this case. 2irst, petitioners filed a co&pulsory counterclai&11 a'ainst respondents in their ans,er )efore the trial court, and ,ith the filin' of their counterclai&, petitioners the&selves effectively re&oved this case fro& the a&)it of the 8Dead 6an0s !tatute8.12 Fell entrenched is the rule that ,hen it is the e/ecutor or ad&inistrator or representatives of the estates that sets up the counterclai&, the plaintiff, herein respondent, &ay testify to occurrences )efore the death of the deceased to defeat the counterclai&.13 6oreover, as defendant in the counterclai&, respondent is not dis@ualified fro& testifyin' as to &atters of facts occurrin' )efore the death of the deceased, said action not havin' )een )rou'ht a'ainst )ut )y the estate or representatives of the deceased.1!econd, the testi&ony of Josephine is not covered )y the 8Dead 6an0s !tatute8 for the si&ple reason that she is not 8a party or assi'nor of a party to a case or persons in ,hose )ehalf a case is prosecuted.8 Records sho, that respondent offered the testi&ony of Josephine to esta)lish the e/istence of the partnership )et,een respondent and Jacinto. "etitioners0 insistence that Josephine is the alter e'o of respondent does not &a7e her an assi'nor )ecause the ter& 8assi'nor8 of a party &eans 8assi'nor of a cause of action ,hich has arisen, and not the assi'nor of a ri'ht assi'ned )efore any cause of action has arisen.819 "lainly then, Josephine is &erely a ,itness of respondent, the latter )ein' the party plaintiff.

"a'e I 13

Fe are not convinced )y petitioners0 alle'ation that Josephine0s testi&ony lac7s pro)ative value )ecause she ,as alle'edly coerced coerced )y respondent, her )rother-in-la,, to testify in his favor, Josephine &erely declared in court that she ,as re@uested )y respondent to testify and that if she ,ere not re@uested to do so she ,ould not have testified. Fe fail to see ho, ,e can conclude fro& this candid ad&ission that Josephine0s testi&ony is involuntary ,hen she did not in any ,ay cate'orically say that she ,as forced to )e a ,itness of respondent. Also, the fact that Josephine is the sister of the ,ife of respondent does not di&inish the value of her testi&ony since relationship per se, ,ithout &ore, does not affect the credi)ility of ,itnesses.1> "etitioners0 reliance alone on the 8Dead 6an0s !tatute8 to defeat respondent0s clai& cannot prevail over the factual findin's of the trial court and the Court of Appeals that a partnership ,as esta)lished )et,een respondent and Jacinto. Cased not only on the testi&onial evidence, )ut the docu&entary evidence as ,ell, the trial court and the Court of Appeals considered the evidence for respondent as sufficient to prove the for&ation of partnership, al)eit an infor&al one. #ota)ly, petitioners did not present any evidence in their favor durin' trial. Cy the ,ei'ht of Gudicial precedents, a factual &atter li7e the findin' of the e/istence of a partnership )et,een respondent and Jacinto cannot )e in@uired into )y this Court on revie,.1$ .his Court can no lon'er )e tas7ed to 'o over the proofs presented )y the parties and analy4e, assess and ,ei'h the& to ascertain if the trial court and the appellate court ,ere correct in accordin' superior credit to this or that piece of evidence of one party or the other.1% 3t &ust )e also pointed out that petitioners failed to attend the presentation of evidence of respondent. "etitioners cannot no, turn to this Court to @uestion the ad&issi)ility and authenticity of the docu&entary evidence of respondent ,hen petitioners failed to o)Gect to the ad&issi)ility of the evidence at the ti&e that such evidence ,as offered.1: Fith re'ard to petitioners0 insistence that laches and?or prescription should have e/tin'uished respondent0s clai&, ,e a'ree ,ith the trial court and the Court of Appeals that the action for accountin' filed )y respondents three *3+ years after Jacinto0s death ,as ,ell ,ithin the prescri)ed period. .he Civil Code provides that an action to enforce an oral contract prescri)es in si/ *>+ years20 ,hile the ri'ht to de&and an accountin' for a partner0s interest as a'ainst the person continuin' the )usiness accrues at the date of dissolution, in the a)sence of any contrary a'ree&ent.21 Considerin' that the death of a partner results in the dissolution of the partnership22, in this case, it ,as Jacinto0s death that respondent as the survivin' partner had the ri'ht to an account of his interest as a'ainst petitioners. 3t )ears stressin' that ,hile Jacinto0s death dissolved the partnership, the dissolution did not i&&ediately ter&inate the partnership. .he Civil Code23 e/pressly provides that upon dissolution, the partnership continues and its le'al personality is retained until the co&plete ,indin' up of its )usiness, cul&inatin' in its ter&ination.23n a desperate )id to cast dou)t on the validity of the oral partnership )et,een respondent and Jacinto, petitioners &aintain that said partnership that had initial capital of "200,000.00 should have )een re'istered ,ith the !ecurities and ;/chan'e Co&&ission *!;C+ since re'istration is &andated )y the Civil Code, .rue, Article 1$$2 of the Civil Code re@uires that partnerships ,ith a capital of "3,000.00 or &ore &ust re'ister ,ith the !;C, ho,ever, this re'istration re@uire&ent is not &andatory. Article 1$>% of the Civil Code29 e/plicitly provides that the partnership retains its Guridical personality even if it fails to re'ister. .he failure to re'ister the contract of partnership does not invalidate the sa&e as a&on' the partners, so lon' as the contract has the essential re@uisites, )ecause the &ain purpose of re'istration is to 'ive notice to third parties, and it can )e assu&ed that the &e&)ers the&selves 7ne, of the contents of their contract.2> 3n the case at )ar, nonco&pliance ,ith this directory provision of the la, ,ill not invalidate the partnership considerin' that the totality of the evidence proves that respondent and Jacinto indeed for'ed the partnership in @uestion. FH;R;2OR;, in vie, of the fore'oin', the petition is D;#3;D and the appealed decision is A223R6;D. !O ORD;R;D.$%&phi$.n't

G.R. No. 1+2612. July 29, 2005 OSCAR ANGELES "#$ EMERITA ANGELES, "etitioners, vs. T!E !ON. SECRETAR6 OF JUSTICE "#$ FELINO MERCADO, Respondents. "a'e I 1-

DECISION CARPIO, J.( .he Case .his is a petition for certiorari1 to annul the letter-resolution2 dated 1 2e)ruary 2000 of the !ecretary of Justice in Resolution #o. 199.3 .he !ecretary of Justice affir&ed the resolution- in 3.!. #o. :>-:3: dated 2% 2e)ruary 1::$ rendered )y the "rovincial "rosecution Office of the Depart&ent of Justice in !anta Cru4, (a'una *8"rovincial "rosecution Office8+. .he "rovincial "rosecution Office resolved to dis&iss the co&plaint for estafa filed )y petitioners Oscar and ;&erita An'eles *8An'eles spouses8+ a'ainst respondent 2elino 6ercado *86ercado8+. Antecedent 2acts On 1: #ove&)er 1::>, the An'eles spouses filed a cri&inal co&plaint for estafa under Article 319 of the Revised "enal Code a'ainst 6ercado )efore the "rovincial "rosecution Office. 6ercado is the )rother-in-la, of the An'eles spouses, )ein' &arried to ;&erita An'elesR sister (aura. 3n their affidavits, the An'eles spouses clai&ed that in #ove&)er 1::2, 6ercado convinced the& to enter into a contract of antichresis,9 collo@uially 7no,n as sanglaang(perde, coverin' ei'ht parcels of land *8su)Gect land8+ planted ,ith fruit-)earin' lan4ones trees located in #a'carlan, (a'una and o,ned )y Juana !ua4o. .he contract of antichresis ,as to last for five years ,ith "210,000 as consideration. As the An'eles spouses stay in 6anila durin' ,ee7days and 'o to (a'una only on ,ee7ends, the parties a'reed that 6ercado ,ould ad&inister the lands and co&plete the necessary paper,or7.> After three years, the An'eles spouses as7ed for an accountin' fro& 6ercado. 6ercado e/plained that the su)Gect land earned "->,210 in 1::3, ,hich he used to )uy &ore lan4ones trees. 6ercado also reported that the trees )ore no fruit in 1::-. 6ercado 'ave no accountin' for 1::9. .he An'eles spouses clai& that only after this de&and for an accountin' did they discover that 6ercado had put the contract of sanglaang( perde over the su)Gect land under 6ercado and his spouseRs na&es.$ .he relevant portions of the contract of sanglaang(perde, si'ned )y Juana !ua4o alone, read1 /// #a alan'-alan' sa hala'an' DA(AFA# DAA# A. !A6"5# (3CO# "3!O *"210,000+, salapin' 'astahin, na a7in' tinan''ap sa &a'<-=asa,a nila . A. # . 2;(3#O 6;RCADO, &'a nasa huston' 'ulan', 2ilipino, tu&itira at &ay pahatiran' sulat sa C'y. 6aravilla, )ayan n' #a'carlan, lala,i'an n' (a'una, ay a7in' ipina')ili, inili,at at isinalin sa naulit na hala'a, sa na)an''it na &a'<-= asa,a nila . A. # . 2;(3#O 6;RCADO<,= sa 7anila ay &a'&a&ana, 7ahalili at i)an' dapat pa'li,atan n' 7anilan' 7arapatan, an' lahat na i)u)un'a n' lahat na puno n' lan4ones, hindi 7asa&a an' i)an' hala&an na napapaloo)an nito, n' na)an''it na FA(O# *%+ (a'ay na (upan' Cocal-(an4onal, sa ta7dan' (36A *9+ #A <sic= .AO#, &a'papasi&ula sa taon' 1::3, at &a'tatapos sa taon' 1::$, 7ayaRt pa'7atapos n' lansonesan sa taon' 1::$, an' pa&o&osision at pa7i7ina)an' sa lahat na puno n' lan4ones sa na)an''it na FA(O# *%+ (a'ay na (upan' Cocal-(an4onal ay &anunu&)ali7 sa a7in, sa a7in ay &a'&a&ana, 7ahalili at i)an' dapat pa'li,atan n' a7in' 7arapatan na a7o ay ,alan' i)a)ali7 na ano pa &an' hala'a, sa &a'<-= asa,a nila . A. # . 2;(3#O 6;RCADO. #a a7o at an' &a'<-=asa,a nila . A. # . 2;(3#O 6;RCADO ay na'7asundo na a7o ay )i)i'yan nila n' (36A *9+ na <sic= 7ain' na lan4ones taon-taon sa loo) n' (36A *9+ na <sic= taon n' a&in' 7asunduan' ito. #a a7o at an' &a'<-=asa,a nila . A. # . 2;(3#O 6;RCADO ay na'7asundo na silan' &a'<-=asa,a nila . A. # . 2;(3#O 6;RCADO an' &a'papaalis n' dapo sa puno n' lansones taon-taon <sic= sa loo) n' (36A *9+ <sic= taonn' <sic= a&in' 7asunduan' ito.% 3n his counter-affidavit, 6ercado denied the An'eles spousesR alle'ations. 6ercado clai&ed that there e/ists an industrial partnership, collo@uially 7no,n as sos#o industrial, )et,een hi& and his spouse as industrial partners and the An'eles spouses as the financiers. .his industrial partnership had e/isted since 1::1, )efore the contract of antichresis over the su)Gect land. As the years passed, 6ercado used his and his spouseRs earnin's as part of the capital in the )usiness transactions ,hich he entered into in )ehalf of the An'eles spouses. 3t ,as their practice to enter into )usiness transactions ,ith other people under the na&e of 6ercado )ecause the An'eles spouses did not ,ant to )e identified as the financiers. "a'e I 19

6ercado attached )an7 receipts sho,in' deposits in )ehalf of ;&erita An'eles and contracts under his na&e for the An'eles spouses. 6ercado also attached the &inutes of the )aran'ay conciliation proceedin's held on $ !epte&)er 1::>. Durin' the )aran'ay conciliation proceedin's, Oscar An'eles stated that there ,as a ,rittensos#o industrial a'ree&ent1 capital ,ould co&e fro& the An'eles spouses ,hile the profit ,ould )e divided evenly )et,een 6ercado and the An'eles spouses.: .he Rulin' of the "rovincial "rosecution Office On 3 January 1::$, the "rovincial "rosecution Office issued a resolution reco&&endin' the filin' of cri&inal infor&ation for estafa a'ainst 6ercado. .his resolution, ho,ever, ,as issued ,ithout 6ercadoRs counteraffidavit. 6ean,hile, 6ercado filed his counter-affidavit on 2 January 1::$. On receivin' the 3 January 1::$ resolution, 6ercado &oved for its reconsideration. Hence, on 2> 2e)ruary 1::$, the "rovincial "rosecution Office issued an a&ended resolution dis&issin' the An'eles spousesR co&plaint for estafa a'ainst 6ercado. .he "rovincial "rosecution Office stated thus1 .he su)Gect of the co&plaint hin'es on a partnership 'one sour. .he partnership ,as initially unsaddled <,ith= pro)le&s. 6ana'e&ent )eca&e the source of &isunderstandin' includin' the accountin' of profits, ,hich led to further &isunderstandin' until it ,as revealed that the contract ,ith the orchard o,ner ,as only ,ith the na&e of the respondent, ,ithout the na&es of the co&plainants. .he accusation of 8estafa8 here lac7s enou'h credi)le evidentiary support to sustain a pri&a facie findin'. "re&ises considered, it is respectfully reco&&ended that the co&plaint for estafa )e dis&issed. R;!";C.25((M !5C63..;D.10 .he An'eles spouses filed a &otion for reconsideration, ,hich the "rovincial "rosecution Office denied in a resolution dated - Au'ust 1::$. .he Rulin' of the !ecretary of Justice On appeal to the !ecretary of Justice, the An'eles spouses e&phasi4ed that the docu&ent evidencin' the contract of sanglaang(perde ,ith Juana !ua4o ,as e/ecuted in the na&e of the 6ercado spouses, instead of the An'eles spouses. .he An'eles spouses alle'e that this docu&ent alone proves 6ercadoRs &isappropriation of their "210,000. .he !ecretary of Justice found other,ise. .hus1 Revie,in' the records of the case, ,e are of the opinion that the indict&ent of <6ercado= for the cri&e of estafa cannot )e sustained. <.he An'eles spouses= failed to sho, sufficient proof that <6ercado= deli)erately deceived the& in the 8san'laan' perde8 transaction. .he docu&ent alone, ,hich ,as in the na&e of <6ercado and his spouse=, failed to convince us that there ,as deceit or false representation on the part of <6ercado= that induced the <An'eles spouses= to part ,ith their &oney. <6ercado= satisfactorily e/plained that the <An'eles spouses= do not ,ant to )e revealed as the financiers. 3ndeed, it is difficult to )elieve that the <An'eles spouses= ,ould readily part ,ith their &oney ,ithout holdin' on to so&e docu&ent to evidence the receipt of &oney, or at least to inspect the docu&ent involved in the said transaction. 5nder the circu&stances, ,e are inclined to )elieve that <the An'eles spouses= 7ne, fro& the very start that the @uestioned docu&ent ,as not really in their na&es. 3n addition, ,e are convinced that a partnership truly e/isted )et,een the <An'eles spouses= and <6ercado=. .he for&ation of a partnership ,as clear fro& the fact that they contri)uted &oney to a co&&on fund and divided the profits a&on' the&selves. Records ,ould sho, that <6ercado= ,as a)le to &a7e deposits for the account of the <An'eles spouses=. .hese deposits represented their share in the profits of their )usiness venture. Althou'h the <An'eles spouses= deny the e/istence of a partnership, they, ho,ever, never disputed that the deposits &ade )y <6ercado= ,ere indeed for their account. .he transcript of notes on the dialo'ue )et,een the <An'eles spouses= and <6ercado= durin' the hearin' of their )aran'ay conciliation case reveals that the <An'eles spouses= ac7no,led'ed their Goint )usiness ventures ,ith <6ercado= althou'h they assailed the &anner )y ,hich <6ercado= conducted the )usiness and handled and distri)uted the funds. .he veracity of this transcript ,as not raised in issued <sic= )y <the An'eles spouses=. "a'e I 1>

Althou'h the le'al for&alities for the for&ation of a partnership ,ere not adhered to, the partnership relationship of the <An'eles spouses= and <6ercado= is evident in this case. Conse@uently, there is no estafa ,here &oney is delivered )y a partner to his co-partner on the latterRs representation that the a&ount shall )e applied to the )usiness of their partnership. 3n case of &isapplication or conversion of the &oney received, the co-partnerRs lia)ility is civil in nature *"eople v. Clarin, $ "hil. 90-+ FH;R;2OR;, the appeal is here)y D3!63!!;D.11 Hence, this petition. 3ssues .he An'eles spouses as7 us to consider the follo,in' issues1 1. Fhether the !ecretary of Justice co&&itted 'rave a)use of discretion a&ountin' to lac7 of Gurisdiction in dis&issin' the appeal of the An'eles spousesJ 2. Fhether a partnership e/isted )et,een the An'eles spouses and 6ercado even ,ithout any docu&entary proof to sustain its e/istenceJ 3. Assu&in' that there ,as a partnership, ,hether there ,as &isappropriation )y 6ercado of the proceeds of the lan4ones after the An'eles spouses de&anded an accountin' fro& hi& of the inco&e at the office of the )aran'ay authorities on $ !epte&)er 1::>, and 6ercado failed to do so and also failed to deliver the proceeds to the An'eles spousesJ -. Fhether the !ecretary of Justice should order the filin' of the infor&ation for estafa a'ainst 6ercado.12 .he Rulin' of the Court .he petition has no &erit. )hether the *ecretar# of +ustice ,o!!itted -rave .buse of Discretion An act of a court or tri)unal &ay constitute grave abuse of discretion ,hen the sa&e is perfor&ed in a capricious or ,hi&sical e/ercise of Gud'&ent a&ountin' to lac7 of Gurisdiction. .he a)use of discretion &ust )e so patent and 'ross as to a&ount to an evasion of positive duty, or to a virtual refusal to perfor& a duty enGoined )y la,, as ,here the po,er is e/ercised in an ar)itrary and despotic &anner )ecause of passion or personal hostility.13 .he An'eles spouses fail to convince us that the !ecretary of Justice co&&itted 'rave a)use of discretion ,hen he dis&issed their appeal. 6oreover, the An'eles spouses co&&itted an error in procedure ,hen they failed to file a &otion for reconsideration of the !ecretary of JusticeRs resolution. A previous &otion for reconsideration )efore the filin' of a petition for certiorari is necessary unless1 *1+ the issue raised is one purely of la,J *2+ pu)lic interest is involvedJ *3+ there is ur'encyJ *-+ a @uestion of Gurisdiction is s@uarely raised )efore and decided )y the lo,er courtJ and *9+ the order is a patent nullity. 1- .he An'eles spouses failed to sho, that their case falls under any of the e/ceptions. 3n fact, this present petition for certiorari is dis&issi)le for this reason alone. )hether a Partnership Existed /et&een 0ercado and the .ngeles *pouses .he An'eles spouses alle'e that they had no partnership ,ith 6ercado. .he An'eles spouses rely on Articles 1$$1 to 1$$3 of the Civil Code, ,hich state that1 Art. 1$$1. A partnership &ay )e constituted in any for&, e/cept ,here i&&ova)le property or real ri'hts are contri)uted thereto, in ,hich case a pu)lic instru&ent shall )e necessary. Art. 1$$2. ;very contract of partnership havin' a capital of three thousand pesos or &ore, in &oney or property, shall appear in a pu)lic instru&ent, ,hich &ust )e recorded in the Office of the !ecurities and ;/chan'e Co&&ission. "a'e I 1$

2ailure to co&ply ,ith the re@uire&ents of the precedin' para'raph shall not affect the lia)ility of the partnership and the &e&)ers thereof to third persons. Art. 1$$3. A contract of partnership is void, ,henever i&&ova)le property is contri)uted thereto, if an inventory of said property is not &ade, si'ned )y the parties, and attached to the pu)lic instru&ent. .he An'eles spousesR position that there is no partnership )ecause of the lac7 of a pu)lic instru&ent indicatin' the sa&e and a lac7 of re'istration ,ith the !ecurities and ;/chan'e Co&&ission *8!;C8+ holds no ,ater. 2irst, the An'eles spouses contri)uted &oney to the partnership and not i&&ova)le property. !econd, &ere failure to re'ister the contract of partnership ,ith the !;C does not invalidate a contract that has the essential re@uisites of a partnership. .he purpose of re'istration of the contract of partnership is to 'ive notice to third parties. 2ailure to re'ister the contract of partnership does not affect the lia)ility of the partnership and of the partners to third persons. #either does such failure to re'ister affect the partnershipRs Guridical personality. A partnership &ay e/ist even if the partners do not use the ,ords 8partner8 or 8partnership.8 3ndeed, the An'eles spouses ad&it to facts that prove the e/istence of a partnership1 a contract sho,in' a sos#o industrial or industrial partnership, contri)ution of &oney and industry to a co&&on fund, and division of profits )et,een the An'eles spouses and 6ercado. )hether there &as 0isappropriation b# 0ercado .he !ecretary of Justice ade@uately e/plained the alle'ed &isappropriation )y 6ercado1 8.he docu&ent alone, ,hich ,as in the na&e of <6ercado and his spouse=, failed to convince us that there ,as deceit or false representation on the part of <6ercado= that induced the <An'eles spouses= to part ,ith their &oney. <6ercado= satisfactorily e/plained that the <An'eles spouses= do not ,ant to )e revealed as the financiers.819 ;ven Cranch 2> of the Re'ional .rial Court of !anta Cru4, (a'una ,hich decided the civil case for da&a'es, inGunction and restrainin' order filed )y the An'eles spouses a'ainst 6ercado and (eo Ceray)an, stated1 /// <3=t ,as the practice to have all the contracts of antichresis of their partnership secured in <6ercadoRs= na&e as <the An'eles spouses= are apprehensive that, if they co&e out into the open as financiers of said contracts, they &i'ht )e 7idnapped )y the #e, "eopleRs Ar&y or their )usiness deals )e @uestioned )y the Cureau of 3nternal Revenue or ,orse, their assets and une/plained inco&e )e se@uestered, as /// Oscar An'eles ,as then ,or7in' ,ith the 'overn&ent.1> 2urther&ore, accountin' of the proceeds is not a proper su)Gect for the present case. 2or these reasons, ,e hold that the !ecretary of Justice did not a)use his discretion in dis&issin' the appeal of the An'eles spouses. *!EREFORE, ,e A223R6 the decision of the !ecretary of Justice. .he present petition for certiorari is D3!63!!;D. !O ORD;R;D. Foo.#o.09

Article 2132 of the Civil Code provides1 8Cy the contract of antichresis the creditor ac@uires the ri'ht to receive the fruits of an i&&ova)le of his de)tor, ,ith the o)li'ation to apply the& to the pay&ent of the interest, if o,in', and thereafter to the principal of his credit.

G.R. NOS. 1662994300 D0:0;20& 13, 2005 AURELIO '. LITONJUA, JR., "etitioner, vs. EDUARDO '. LITONJUA, SR., RO ERT T. 6ANG, ANGLO P!ILS. MARITIME, INC., CINEPLE<, INC., DDM GARMENTS, INC., EDDIE '. LITONJUA S!IPPING AGENC6, INC., EDDIE '. LITONJUA S!IPPING CO., INC., LITONJUA SECURITIES, INC. =>o&;0&ly E. '. L3.o#?u" S0:@, LUNETA T!EATER, INC., E A L REALT6, =>o&;0&ly E A L INTBL S!IPPING CORP.@, FNP CO., INC., !OME ENTERPRISES, INC., "a'e I 1%

EAUMONT DE). REALT6 CO., INC., GLOED LAND CORP., E7UIT6 TRADING CO., INC., 3D CORP., CLC DE). CORP, LCM T!EATRICAL ENTERPRISES, INC., LITONJUA S!IPPING CO. INC., MACOIL INC., ODEON REALT6 CORP., SARATOGA REALT6, INC., ACT T!EATER INC. =>o&;0&ly G0#0&"l T90".&3:"l A F3l; ED:9"#,0, INC.@, A)ENUE REALT6, INC., A)ENUE T!EATER, INC. "#$ L)F P!ILIPPINES, INC., =Fo&;0&ly )F P!ILIPPINES@,Respondents. DECISION GARCIA, J.: 3n this petition for revie, under Rule -9 of the Rules of Court, petitioner Aurelio A. (itonGua, Jr. see7s to nullify and set aside the Decision of the Court of Appeals *CA+ dated 6arch 31, 200-1 in consolidated cases ,... -.1. *p. 2o. 34563 and ,... -.1. *P. 2o 36337 and its Resolution dated Dece&)er 0$, 200-,2 denyin' petitionerRs &otion for reconsideration. .he recourse is cast a'ainst the follo,in' factual )ac7drop1 "etitioner Aurelio A. (itonGua, Jr. *Aurelio+ and herein respondent ;duardo A. (itonGua, !r. *;duardo+ are )rothers. .he le'al dispute )et,een the& started ,hen, on Dece&)er -, 2002, in the Re'ional .rial Court *R.C+ at "asi' City, Aurelio filed a suit a'ainst his )rother ;duardo and herein respondent Ro)ert .. Man' *Man'+ and several corporations for specific perfor&ance and accountin'. 3n his co&plaint,3 doc7eted as Civil Case #o. >:239 and eventually raffled to Cranch >% of the court,- Aurelio alle'ed that, since June 1:$3, he and ;duardo are into a Goint venture?partnership arran'e&ent in the Odeon .heater )usiness ,hich had e/panded thru invest&ent in Cineple/, 3nc., (C6 .heatrical ;nterprises, Odeon Realty Corporation *operator of Odeon 3 and 33 theatres+, Avenue Realty, 3nc., o,ner of lands and )uildin's, a&on' other corporations. Man' is descri)ed in the co&plaint as petitionerRs and ;duardoRs partner in their Odeon .heater invest&ent.9 .he sa&e co&plaint also contained the follo,in' &aterial aver&ents1 3.01 On or a)out 22 June 1:$3, <Aurelio= and ;duardo entered into a Goint venture?partnership for the continuation of their fa&ily )usiness and co&&on fa&ily funds S. 3.01.1 .his Goint venture?<partnership= a'ree&ent ,as contained in a &e&orandu& addressed )y ;duardo to his si)lin's, parents and other relatives. Copy of this &e&orandu& is attached hereto and &ade an inte'ral part asA##0D CAC and the portion referrin' to <Aurelio= su)&ar7ed as A##0D CA418. 3.02 3t ,as then a'reed upon )et,een <Aurelio= and ;duardo that in consideration of <AurelioRs= retainin' his share in the re&ainin' fa&ily )usinesses *&ostly, &ovie theaters, shippin' and land develop&ent+ and contri)utin' his industry to the continued operation of these )usinesses, <Aurelio= ,ill )e 'iven "1 6illion or 10E e@uity in all these )usinesses and those to )e su)se@uently ac@uired )y the& ,hichever is 'reater. . . . -.01 S fro& 22 June 1:$3 to a)out Au'ust 2001, or <in= a span of 2% years, <Aurelio= and ;duardo had accu&ulated in their Goint venture?partnership various assets includin' )ut not li&ited to the corporate defendants and <their= respective assets. -.02 3n addition . . . the Goint venture?partnership S had also ac@uired <various other assets=, )ut ;duardo caused to )e re'istered in the na&es of other partiesS. /// /// /// -.0- .he su)stantial assets of &ost of the corporate defendants consist of real properties S. A list of so&e of these real properties is attached hereto and &ade an inte'ral part as A##0D C 8. /// /// /// 9.02 !o&eti&e in 1::2, the relations )et,een <Aurelio= and ;duardo )eca&e sour so that <Aurelio= re@uested for an accountin' and li@uidation of his share in the Goint venture?partnership <)ut these de&ands for co&plete accountin' and li@uidation ,ere not heeded=. /// /// /// 9.09 Fhat is ,orse, <Aurelio= has reasona)le cause to )elieve that ;duardo and?or the corporate defendants as ,ell as Co))y <Man'=, are transferrin' . . . various real properties of the corporations )elon'in' to the Goint venture?partnership to other parties in fraud of <Aurelio=. 3n conse@uence, <Aurelio= is therefore causin' at this "a'e I 1:

ti&e the annotation on the titles of these real propertiesS a notice of lis pendens E. *;&phasis in the ori'inalJ underscorin' and ,ords in )rac7et added.+ 2or ease of reference, Anne/ "A-1" of the co&plaint, ,hich petitioner asserts to have )een &eant for hi& )y his )rother ;duardo, pertinently reads1 10+ JR. *AA(+ <Referrin' to petitioner Aurelio A. (itonGua=1 Mou have no, your o,n life to live after havin' )een &arried. S. 3 a& tryin' &y )est to &old you the ,ay 3 ,or7 so you can follo, the pattern S. Mou ,ill )e the only one left ,ith the co&pany, a&on' us )rothers and 3 ,ill as7 you to stay as 3 ,ant you to run this office every ti&e 3 a& a,ay. 3 ,ant you to run it the ,ay 3 a& tryin' to run it )ecause 3 ,ill )e all alone and 3 ,ill depend entirely to you *sic+. 6y sons ,ill not )e ready to help &e yet until a)out &ay)e 19?20 years fro& no,. Fhatever is left in the corporation, 3 ,ill &a7e sure that you 'et O#; 63((3O# ";!O! *"1,000,000.00+ or ten percent *10E+ e@uity, ,hichever is 'reater. Fe t,o ,ill 'a&)le the ,hole thin' of ,hat 3 have and ,hat you are entitled to. S. 3t ,ill )e you and &e alone on this. 3f ever 3 pass a,ay, 3 ,ant you to ta7e care of all of this. Mou 7eep &y share for &y t,o sons are ready ta7e over )ut 'ive the& the chance to run the co&pany ,hich 3 have )uilt. /// /// /// Cecause you ,ill need a place to stay, 3 ,ill arran'e to 'ive you first O#; H5#DR;D .HO5!A#D! ";!O!1 *"100, 000.00+ in cash or asset, li7e (t. Artia'a so you can live )etter there. .he rest 3 ,ill 'ive you in for& of stoc7s ,hich you can 7eep. .his stoc7 3 assure you is 'ood and salea)le. 3 ,ill also 'ladly 'ive you the share of Fac7-Fac7 Sand Dalley olf S )ecause you have )een 'ood. .he rest ,ill )e in stoc7s fro& all the corporations ,hich 3 repeat, ten percent *10E+ e@uity. > On Dece&)er 20, 2002, ;duardo and the corporate respondents, as defendants a "uo8 filed a Goint .2*)E1)ith ,o!pulsor# ,ounterclai! denyin' under oath the &aterial alle'ations of the co&plaint, &ore particularly that portion thereof depictin' petitioner and ;duardo as havin' entered into a contract of partnership. As affir&ative defenses, ;duardo, et al., apart fro& raisin' a Gurisdictional &atter, alle'ed that the co&plaint states no cause of action, since no cause of action &ay )e derived fro& the actiona)le docu&ent, i.e., Anne/ "A-1", )ein' void under the ter&s of Article 1$>$ in relation to Article 1$$3 of the Civil Code, infra. 3t is further alle'ed that ,hatever underta7in' ;duardo a'reed to do, if any, under Anne/ "A1", are unenforcea)le under the provisions of the !tatute of 2rauds.$ 2or his part, Man' - ,ho ,as served ,ith su&&ons lon' after the other defendants su)&itted their ans,er K &oved to dis&iss on the 'round, inter alia, that, as to hi&, petitioner has no cause of action and the co&plaint does not state any.% "etitioner opposed this &otion to dis&iss. On January 10, 2003, ;duardo, et al., filed a 0otion to 1esolve .ffir!ative Defenses.: .o this &otion, petitioner interposed an 9pposition &ith ex(Parte 0otion to *et the ,ase for Pre(trial.10 Actin' on the separate &otions i&&ediately adverted to a)ove, the trial court, in an O&ni)us Order dated 6arch 9, 2003, denied the affir&ative defenses and, e/cept for Man', set the case for pre-trial on April 10, 2003.11 3n another O&ni)us Order of April 2, 2003, the sa&e court denied the &otion of ;duardo, et al., for reconsideration12 and Man'Rs &otion to dis&iss. .he follo,in' then transpired insofar as Man' is concerned1 1. On April 1-, 2003, Man' filed his .2*)E18 )ut e/pressly reserved the ri'ht to see7 reconsideration of the April 2, 2003 O&ni)us Order and to pursue his failed &otion to dis&iss13 to its full resolution. 2. On April 2-, 2003, he &oved for reconsideration of the O&ni)us Order of April 2, 2003, )ut his &otion ,as denied in an Order of July -, 2003.13. On Au'ust 2>, 2003, Man' ,ent to the Court of Appeals *CA+ in a petition for certiorari under Rule >9 of the Rules of Court, doc7eted as CA-G.R. SP No. 78774,19 to nullify the separate orders of the trial court, the first denyin' his &otion to dis&iss the )asic co&plaint and, the second, denyin' his &otion for reconsideration. ;arlier, ;duardo and the corporate defendants, on the contention that 'rave a)use of discretion and inGudicious haste attended the issuance of the trial courtRs afore&entioned O&ni)us Orders dated 6arch 9, and April 2, "a'e I 20

2003, sou'ht relief fro& the CA via si&ilar recourse. .heir petition for certiorari ,as doc7eted as CA G.R. SP No. 76987. "er its resolution dated Octo)er 2, 2003,1> the CARs 1-th Division ordered the consolidation of ,. -.1. *P 2o. 36337 ,ith ,. -.1. *P 2o. 34563. 2ollo,in' the su)&ission )y the parties of their respective 6e&oranda of Authorities, the appellate court ca&e out ,ith the herein assailed D0:3-3o# $".0$ M"&:9 31, 200+, findin' for ;duardo and Man', as lead petitioners therein, disposin' as follo,s1 FH;R;2OR;, Gud'&ent is here)y rendered 'rantin' the issuance of the ,rit of certiorari in these consolidated cases annullin', reversin' and settin' aside the assailed orders of the court a @uo dated 6arch 9, 2003, April 2, 2003 and July -, 2003 and the co&plaint filed )y private respondent <no, petitioner Aurelio= a'ainst all the petitioners <no, herein respondents ;duardo, et al.= ,ith the court a @uo is here)y dismissed. !O ORD;R;D.1$ *;&phasis in the ori'inalJ ,ords in )rac7et added.+ ;/plainin' its case disposition, the appellate court stated, inter alia8 that the alle'ed partnership, as evidenced )y the actiona)le docu&ents, Anne/ "A" and "A-1" attached to the co&plaint, and upon ,hich petitioner solely predicates his ri'ht?s alle'edly violated )y ;duardo, Man' and the corporate defendants a "uo is 8void or legall# inexistent8. 3n ti&e, petitioner &oved for reconsideration )ut his &otion ,as denied )y the CA in its e@ually assailedR0-olu.3o# o> D0:0;20& /, 200+.1% . Hence, petitionerRs present recourse, on the contention that the CA erred1 A. Fhen it ruled that there ,as no partnership created )y the actiona)le docu&ent )ecause this ,as not a pu)lic instru&ent and i&&ova)le properties ,ere contri)uted to the partnership. C. Fhen it ruled that the actiona)le docu&ent did not create a de&anda)le ri'ht in favor of petitioner. C. Fhen it ruled that the co&plaint stated no cause of action a'ainst <respondent= Ro)ert Man'J and D. Fhen it ruled that petitioner has chan'ed his theory on appeal ,hen all that "etitioner had done ,as to support his pleaded cause of action )y another le'al perspective?ar'u&ent. .he petition lac7s &erit. "etitionerRs de&and, as defined in the petitory portion of his co&plaint in the trial court, is for delivery or pay&ent to hi&, as ;duardoRs and Man'Rs partner, of his partnership?Goint venture share, after an accountin' has )een duly conducted of ,hat he dee&s to )e partnership?Goint venture property.1: A partnership e/ists ,hen t,o or &ore persons a'ree to place their &oney, effects, la)or, and s7ill in la,ful co&&erce or )usiness, ,ith the understandin' that there shall )e a proportionate sharin' of the profits and losses )et,een the&.20 A contract of partnership is defined )y the Civil Code as one ,here t,o or &ore persons )ound the&selves to contri)ute &oney, property, or industry to a co&&on fund ,ith the intention of dividin' the profits a&on' the&selves.21 A Goint venture, on the other hand, is hardly distin'uisha)le fro&, and &ay )e li7ened to, a partnership since their ele&ents are si&ilar, i.e., co&&unity of interests in the )usiness and sharin' of profits and losses. Cein' a for& of partnership, a Goint venture is 'enerally 'overned )y the la, on partnership.22 .he underlyin' issue that necessarily co&es to &ind in this proceedin's is ,hether or not petitioner and respondent ;duardo are partners in the theatre, shippin' and realty )usiness, as one clai&s )ut ,hich the other denies. And the issue )earin' on the first assi'ned error relates to the @uestion of ,hat le'al provision is applica)le under the pre&ises, petitioner see7in', as it ,ere, to enforce the actiona)le docu&ent - Anne/ 8A-18 - ,hich he depicts in his co&plaint to )e the contract of partnership?Goint venture )et,een hi&self and ;duardo. Clearly, then, a loo7 at the le'al provisions deter&inative of the e/istence, or definin' the for&al re@uisites, of a partnership is indicated. 2ore&ost of these are the follo,in' provisions of the Civil Code1 Art. 1$$1. A partnership &ay )e constituted in any for&, e/cept ,here i&&ova)le property or real ri'hts are contri)uted thereto, in ,hich case a pu)lic instru&ent shall )e necessary. "a'e I 21

Art. 1$$2. ;very contract of partnership havin' a capital of three thousand pesos or &ore, in &oney or property, shall appear in a pu)lic instru&ent, ,hich &ust )e recorded in the Office of the !ecurities and ;/chan'e Co&&ission. 2ailure to co&ply ,ith the re@uire&ent of the precedin' para'raph shall not affect the lia)ility of the partnership and the &e&)ers thereof to third persons. Art. 1$$3. A contract of partnership is void, ,henever i&&ova)le property is contri)uted thereto, if an inventory of said property is not &ade, si'ned )y the parties, and attached to the pu)lic instru&ent. Anne/ 8A-18, on its face, contains type,ritten entries, personal in tone, )ut is unsi'ned and undated. As an unsi'ned docu&ent, there can )e no @ui))lin' that Anne/ 8A-18 does not &eet the pu)lic instru&entation re@uire&ents e/acted under Article 1$$1 of the Civil Code. 6oreover, )ein' unsi'ned and dou)tless referrin' to a partnership involvin' &ore than "3,000.00 in &oney or property, Anne/ CA-1C cannot )e presented for notari4ation, let alone re'istered ,ith the !ecurities and ;/chan'e Co&&ission *!;C+, as called for under the Article 1$$2 of the Code. And inas&uch as the inventory re@uire&ent under the succeedin' Article 1$$3 'oes into the &atter of validity ,hen i&&ova)le property is contri)uted to the partnership, the ne/t lo'ical point of in@uiry turns on the nature of petitionerRs contri)ution, if any, to the supposed partnership. .he CA, addressin' the fore'oin' @uery, correctly stated that petitionerRs contri)ution consisted of i&&ova)les and real ri'hts. Frote that court1 A further e/a&ination of the alle'ations in the co&plaint ,ould sho, that <petitionerRs= contri)ution to the socalled 8partnership?Goint venture8 ,as his supposed share in the fa&ily )usiness that is consistin' of &ovie theaters, shippin' and land develop&ent under para'raph 3.02 of the co&plaint. 3n other ,ords, his contri)ution as a partner in the alle'ed partnership?Goint venture consisted of i&&ova)le properties and real ri'hts. S.23 !i'nificantly enou'h, petitioner &atter-of-factly concurred ,ith the appellate courtRs o)servation that, prescindin' fro& ,hat he hi&self alle'ed in his )asic co&plaint, his contri)ution to the partnership consisted of his share in the (itonGua fa&ily )usinesses ,hich o,ned varia)le i&&ova)le properties. "etitionerRs assertion in his &otion for reconsideration2- of the CARs decision, that 8&hat &as to be contributed to the business :of the partnership; &as :petitioner<s; industr# and his share in the fa!il# :theatre and land develop!ent; business= leaves no roo& for speculation as to ,hat petitioner contri)uted to the perceived partnership. (est it )e overloo7ed, the contract-validatin' inventory re@uire&ent under Article 1$$3 of the Civil Code applies as lon' real property or real ri'hts are initially )rou'ht into the partnership. 3n short, it is really of no &o&ent ,hich of the partners, or, in this case, ,ho )et,een petitioner and his )rother ;duardo, contri)uted i&&ova)les. 3n conte/t, the &ore i&portant consideration is that real property ,as contri)uted, in ,hich case an inventory of the contri)uted property duly si'ned )y the parties should )e attached to the pu)lic instru&ent, else there is le'ally no partnership to spea7 of. "etitioner, in an o)vious )id to evade the application of Article 1$$3, ar'ues that the i&&ova)les in @uestion ,ere not contri)uted, )ut ,ere ac@uired after the for&ation of the supposed partnership. #eedless to stress, the Court cannot accord co'ency to this specious ar'u&ent. 2or, as earlier stated, petitioner hi&self ad&itted contri)utin' his share in the supposed shippin', &ovie theatres and realty develop&ent fa&ily )usinesses ,hich already o,ned i&&ova)les even )efore Anne/ "A-1" ,as alle'edly e/ecuted. Considerin' thus the value and nature of petitionerRs alle'ed contri)ution to the purported partnership, the Court, even if so disposed, cannot plausi)ly e/tend Anne/ 8A-18 the le'al effects that petitioner so desires and pleads to )e 'iven. Anne/ "A-1", in fine, cannot support the e/istence of the partnership sued upon and sou'ht to )e enforced. .he le'al and factual &ilieu of the case calls for this disposition. A partnership &ay )e constituted in any for&, save ,hen i&&ova)le property or real ri'hts are contri)uted thereto or ,hen the partnership has a capital of at least "3,000.00, in ,hich case a pu)lic instru&ent shall )e necessary.29 And if only to stress ,hat has repeatedly )een articulated, an inventory to )e si'ned )y the parties and attached to the pu)lic instru&ent is alsoindispensa)le to the validity of the partnership ,henever i&&ova)le property is contri)uted to it. iven the fore'oin' perspective, ,hat the appellate court ,rote in its assailed Decision2> a)out the pro)ative value and le'al effect of Anne/ "A-1" co&&ends itself for concurrence1 Considerin' that the alle'ations in the co&plaint sho,ed that <petitioner= contri)uted i&&ova)le properties to the alle'ed partnership, the 86e&orandu&8 *Anne/ 8A8 of the co&plaint+ ,hich purports to esta)lish the said 8partnership?Goint venture8 is #O. a pu)lic instru&ent and there ,as #O inventory of the i&&ova)le property "a'e I 22

duly si'ned )y the parties. As such, the said 86e&orandu&8 S is null and void for purposes of esta)lishin' the e/istence of a valid contract of partnership. 3ndeed, )ecause of the failure to co&ply ,ith the essential for&alities of a valid contract, the purported 8partnership?Goint venture8 is le'ally ine/istent and it produces no effect ,hatsoever. #ecessarily, a void or le'ally ine/istent contract cannot )e the source of any contractual or le'al ri'ht. Accordin'ly, the alle'ations in the co&plaint, includin' the actiona)le docu&ent attached thereto, clearly de&onstrates that <petitioner= has #O valid contractual or le'al ri'ht ,hich could )e violated )y the <individual respondents= herein. As a conse@uence, <petitionerRs= co&plaint does #O. state a valid cause of action )ecause #O. all the essential ele&ents of a cause of action are present. *5nderscorin' and ,ords in )rac7et added.+ (i7e,ise ,ell-ta7en are the follo,in' co&ple&entary e/cerpts fro& the CARs e@ually assailed Resolution of Dece&)er $, 200-2$ denyin' petitionerRs &otion for reconsideration1 2urther, Fe conclude that despite 'larin' defects in the alle'ations in the co&plaint as ,ell as the actiona)le docu&ent attached thereto *Rollo, p. 1:1+, the <trial= court did not appreciate and apply the le'al provisions ,hich ,ere )rou'ht to its attention )y herein <respondents= in the their pleadin's. 3n our evaluation of <petitionerRs= co&plaint, the latter alle'ed inter alia to have contri)uted i&&ova)le properties to the alle'ed partnership )ut the actiona)le docu&ent is not a pu)lic docu&ent and there ,as no inventory of i&&ova)le properties si'ned )y the parties. Coth the alle'ations in the co&plaint and the actiona)le docu&ents considered, it is crystal clear that <petitioner= has no valid or le'al ri'ht ,hich could )e violated )y <respondents=. *Fords in )rac7et added.+ 5nder the second assi'ned error, it is petitionerRs posture that Anne/ 8A-18, assu&in' its inefficacy or nullity as a partnership docu&ent, nevertheless created de&anda)le ri'hts in his favor. As petitioner succinctly puts it in this petition1 -3. Contrari,ise, this actiona)le docu&ent, especially its a)ove-@uoted provisions, esta)lished an actiona)le contract even thou'h it &ay not )e a partnership. .his actiona)le contract is ,hat is 7no,n as an inno&inate contract *Civil Code, Article 130$+. --. 3t &ay not )e a contract of loan, or a &ort'a'e or ,hatever, )ut surely the contract does create ri'hts and o)li'ations of the parties and ,hich ri'hts and o)li'ations &ay )e enforcea)le and de&anda)le. Just )ecause the relationship created )y the a'ree&ent cannot )e specifically la)eled or pi'eonholed into a cate'ory of no&inate contract does not &ean it is void or unenforcea)le. "etitioner has thus thrusted the notion of an inno&inate contract on this Court - and earlier on the CA after he e/perienced a reversal of fortune thereat - as an afterthou'ht. .he appellate court, ho,ever, cannot really )e faulted for not yieldin' to petitionerRs du)ious strata'e& of alterin' his theory of Goint venture?partnership to an inno&inate contract. 2or, at )otto&, the appellate courtRs certiorari Gurisdiction ,as circu&scri)ed )y ,hat ,as alle'ed to have )een the order?s issued )y the trial court in 'rave a)use of discretion. As respondent Man' pointedly o)served,2% since the partiesR )asic position had )een ,ell-defined, that of petitioner )ein' that the actiona)le docu&ent esta)lished a partnership?Goint venture, it is on those positions that the appellate court e/ercised its certiorari Gurisdiction. "etitionerRs act of chan'in' his ori'inal theory is an i&per&issi)le practice and constitutes, as the CA aptly declared, an ad&ission of the untena)ility of such theory in the first place. <"etitioner= is no, hu&&in' a different tune . . . . 3n a sudden t,ist of stance, he has no, contended that the actiona)le instru&ent &ay )e considered an innomina e !on ra! . /// Derily, this no, chan'es <petitionerRs= theory of the case ,hich is not only prohi)ited )y the Rules )ut also is an i&plied ad&ission that the very theory he hi&self S has adopted, filed and prosecuted )efore the respondent court is erroneous. Ce that as it &ay . S. Fe hold that this ne, theory contravenes <petitionerRs= theory of the actiona)le docu&ent )ein' a partnership docu&ent. 3f anythin', it is so o)vious ,e do have to test the sufficiency of the cause of action on the )asis of partnership la, ///.2: *;&phasis in the ori'inalJ Fords in )rac7et added+. Cut even assu&in' in gratia argu!enti that Anne/ 8A-18 parta7es of a perfected inno&inate contract, petitionerRs co&plaint ,ould still )e dis&issi)le as a'ainst ;duardo and, &ore so, a'ainst Man'. 3t cannot )e over-e&phasi4ed that petitioner points to ;duardo as the author of Anne/ 8A-18. Fithal, even on this consideration alone, petitionerRs clai& a'ainst Man' is doo&ed fro& the very start. As it ,ere, the only portion of Anne/ 8A-18 ,hich could perhaps )e re&otely re'arded as vestin' petitioner ,ith a ri'ht to de&and fro& respondent ;duardo the o)servance of a deter&inate conduct, reads1 /// Mou ,ill )e the only one left ,ith the co&pany, a&on' us )rothers and 3 ,ill as7 you to stay as 3 ,ant you to run this office everyti&e 3 a& a,ay. 3 ,ant you to run it the ,ay 3 a& tryin' to run it )ecause 3 ,ill )e alone "a'e I 23

and 3 ,ill depend entirely to you, 6y sons ,ill not )e ready to help &e yet until a)out &ay)e 19?20 years fro& no,.Fhatever is left in the corporation, 3 ,ill &a7e sure that you 'et O#; 63((3O# ";!O! *"1,000,000.00+ or ten percent *10E+ e@uity, ,hichever is 'reater. *5nderscorin' added+ 3t is at once apparent that ,hat respondent ;duardo i&posed upon hi&self under the a)ove passa'e, if he indeed ,rote Anne/ 8A-18, is a pro&ise ,hich is not to )e perfor&ed ,ithin one year fro& 8contract8 e/ecution on June 22, 1:$3. Accordin'ly, the a'ree&ent e&)odied in Anne/ 8A-18 is covered )y the !tatute of 2rauds and ergounenforcea)le for non-co&pliance there,ith.30 Cy force of the statute of frauds, an a'ree&ent that )y its ter&s is not to )e perfor&ed ,ithin a year fro& the &a7in' thereof shall )e unenforcea)le )y action, unless the sa&e, or so&e note or &e&orandu& thereof, )e in ,ritin' and su)scri)ed )y the party char'ed. Corollarily, no action can )e proved unless the re@uire&ent e/acted )y the statute of frauds is co&plied ,ith.31 (est it )e overloo7ed, petitioner is the intended )eneficiary of the "1 6illion or 10E e@uity of the fa&ily )usinesses supposedly pro&ised )y ;duardo to 'ive in the near future. Any su''estion that the stated a&ount or the e@uity co&ponent of the pro&ise ,as intended to 'o to a co&&on fund ,ould )e to read so&ethin' not ,ritten in A##0DCA-1C. .hus, even this an'le alone ar'ues a'ainst the very idea of a partnership, the creation of ,hich re@uires t,o or &ore contractin' &inds &utually a'reein' to contri)ute &oney, property or industry to a co&&on fund ,ith the intention of dividin' the profits )et,een or a&on' the&selves.32 3n su& then, the Court rules, as did the CA, that petitionerRs co&plaint for specific perfor&ance anchored on an actiona)le docu&ent of partnership ,hich is le'ally ine/istent or void or, at )est, unenforcea)le does not state a cause of action as a'ainst respondent ;duardo and the corporate defendants. And if no of action can successfully )e &aintained a'ainst respondent ;duardo )ecause no valid partnership e/isted )et,een hi& and petitioner, the Court cannot see its ,ay clear on ho, the sa&e action could plausi)ly prosper a'ainst Man'. !urely, Man' could not have )eco&e a partner in, or could not have had any for& of )usiness relationship ,ith, an ine/istent partnership. As &ay )e noted, petitioner has not, in his co&plaint, provide the lo'ical ne/us that ,ould tie Man' to hi& as his partner. 3n fact, attendant circu&stances ,ould indicate the contrary. Consider1 1. "etitioner asserted in his co&plaint that his so-called Goint venture?partnership ,ith ;duardo ,as 8for the continuation of their fa&ily )usiness and co&&on fa&ily funds ,hich ,ere theretofore )ein' &ainly &ana'ed )y ;duardo.8 33 Cut Man' denies 7inship ,ith the (itonGua fa&ily and petitioner has not disputed the disclai&er. 2. 3n so&e detail, petitioner &entioned ,hat he had contri)uted to the Goint venture?partnership ,ith ;duardo and ,hat his share in the )usinesses ,ill )e. #o alle'ation is &ade ,hatsoever a)out ,hat Man' contri)uted, if any, let alone his proportional share in the profits. Cut such alle'ation cannot, ho,ever, )e &ade )ecause, as aptly o)served )y the CA, the actiona)le docu&ent did not contain such provision, let alone &ention the na&e of Man'. Ho,, indeed, could a person )e considered a partner ,hen the docu&ent purportin' to esta)lish the partnership contract did not even &ention his na&e. 3. "etitioner states in par. 2.01 of the co&plaint that 8<he= and ;duardo are )usiness partners in the <respondent= corporations,8 ,hile 8Co))y is his and ;duardoRs partner in their Odeon .heater invest&entR *par. 2.03+. .his &eans that the partnership )et,een petitioner and ;duardo ca&e firstJ Man' )eca&e their partner in their Odeon .heater invest&ent thereafter. !everal para'raphs later, ho,ever, petitioner ,ould contradict hi&self )y alle'in' that his 8invest&ent and that of ;duardo and Man' in the Odeon theater )usiness has e/panded throu'h a reinvest&ent of profit inco&e and direct invest&ents in several corporation includin' )ut not li&ited to <si/= corporate respondents8 .his si&ply &eans that the 8Odeon .heatre )usiness8 ca&e )efore the corporate respondents. !i'nificantly enou'h, petitioner refers to the corporate respondents as 8pro'eny8 of the Odeon .heatre )usiness.3#eedless to stress, petitioner has not sufficiently esta)lished in his co&plaint the le'al vinculu! ,hence he sourced his ri'ht to dra' Man' into the fray. .he Court of Appeals, in its assailed decision, captured and for&ulated the le'al situation in the follo,in' ,ise1 <Respondent= Man', S is i&pleaded )ecause, as alle'ed in the co&plaint, he is a 8partner8 of <;duardo= and the <petitioner= in the Odeon .heater 3nvest&ent ,hich e/panded throu'h reinvest&ents of profits and direct invest&ents in several corporations, thus1 /// /// /// Clearly, <petitionerRs= clai& a'ainst S Man' arose fro& his alle'ed partnership ,ith petitioner and the S respondent. Ho,ever, there ,as #O alle'ation in the co&plaint ,hich directly alle'ed ho, the supposed contractual relation ,as created )et,een <petitioner= and SMan'. 6ore i&portantly, ho,ever, the fore'oin' "a'e I 2-

rulin' of this Court that the purported partnership )et,een <;duardo= is void and le'ally ine/istent directly affects said clai& a'ainst SMan'. !ince <petitioner= is tryin' to esta)lish his clai& a'ainst S Man' )y lin7in' hi& to the le'ally ine/istent partnership . . . such atte&pt had )eco&e futile )ecause there ,as #O.H3# that ,ould contractually connect <petitioner= and S Man'. .o esta)lish a valid cause of action, the co&plaint should have a state&ent of fact upon ,hich to connect <respondent= Man' to the alle'ed partnership )et,een <petitioner= and respondent <;duardo=, includin' their alle'ed invest&ent in the Odeon .heater. A state&ent of facts on those &atters is pivotal to the co&plaint as they ,ould constitute the ulti&ate facts necessary to esta)lish the ele&ents of a cause of action a'ainst S Man'. 39 "ressin' its point, the CA later stated in its resolution denyin' petitionerRs &otion for reconsideration the follo,in'1 /// Fhatever the co&plaint calls it, it is the actiona)le docu&ent attached to the co&plaint that is controllin'. !uffice it to state, Fe have not i'nored the actiona)le docu&ent S As a &atter of fact, Fe e&phasi4ed in our decision S that insofar as <Man'= is concerned, he is not even &entioned in the said actiona)le docu&ent. Fe are therefore pu44led ho, a person not &entioned in a docu&ent purportin' to esta)lish a partnership could )e considered a partner.3> *Fords in )rac7et ours+. .he last issue raised )y petitioner, referrin' to ,hether or not he chan'ed his theory of the case, as pere&ptorily deter&ined )y the CA, has )een discussed at len'th earlier and need not detain us lon'. !uffice it to say that after the CA has ruled that the alle'ed partnership is ine/istent, petitioner too7 a different tac7. .hus, fro& a Goint venture?partnership theory ,hich he adopted and consistently pursued in his co&plaint, petitioner e&)raced the inno&inate contract theory. 3llustrative of this shift is petitionerRs state&ent in par. T% of his &otion for reconsideration of the CARs decision co&)ined ,ith ,hat he said in par. T -3 of this petition, as follo,s1 %. Fhether or not the actiona)le docu&ent creates a partnership, Goint venture, or ,hatever, is a le'al &atter. Fhat is deter&inative for purposes of sufficiency of the co&plainantRs alle'ations, is ,hether the actiona)le docu&ent )ears out an actiona)le contract K )e it a partnership, a Goint venture or ,hatever or so&e inno&inate contract S 3t &ay )e noted that one 7ind of inno&inate contract is ,hat is 7no,n as du ut facias *3 'ive that you &ay do+.3$ -3. Contrari,ise, this actiona)le docu&ent, especially its a)ove-@uoted provisions, esta)lished an actiona)le contract even thou'h it &ay not )e a partnership. .his actiona)le contract is ,hat is 7no,n as an inno&inate contract *Civil Code, Article 130$+.3% !prin'in' surprises on the opposin' party is offensive to the sportin' idea of fair play, Gustice and due processJ hence, the proscription a'ainst a party shiftin' fro& one theory at the trial court to a ne, and different theory in the appellate court.3: On the sa&e rationale, an issue ,hich ,as neither averred in the co&plaint cannot )e raised for the first ti&e on appeal.-0 3t is not difficult, therefore, to a'ree ,ith the CA ,hen it &ade short shrift of petitionerRs inno&inate contract theory on the )asis of the fore'oin' )asic reasons. "etitionerRs protestation that his act of introducin' the concept of inno&inate contract ,as not a case of chan'in' theories )ut of supportin' his pleaded cause of action K that of the e/istence of a partnership - )y another le'al perspective?ar'u&ent, stri7es the Court as a strained atte&pt to rationali4e an untena)le position. "ara'raph 12 of his &otion for reconsideration of the CARs decision virtually rele'ates partnership as a fall-)ac7 theory. .,o para'raphs later, in the sa&e notion, petitioner faults the appellate court for readin', ,ith &yopic eyes, the actiona)le docu&ent solely as esta)lishin' a partnership?Goint venture. Derily, the cited para'raphs are a study of a party hed'in' on ,hether or not to pursue the ori'inal cause of action or alto'ether a)andonin' the sa&e, thus1 12. 3ncidentally, assu&in' that the actiona)le docu&ent created a partnership )et,een <respondent= ;duardo, !r. and <petitioner=, no i&&ova)les ,ere contri)uted to this partnership. /// 1-. All told, the Decision ta7es off fro& a false pre&ise that the actiona)le docu&ent attached to the co&plaint does not esta)lish a contractual relationship )et,een <petitioner= and S ;duardo, !r. and Ro)erto . Man' si&ply )ecause his docu&ent does not create a partnership or a Goint venture. .his is S a &yopic readin' of the actiona)le docu&ent. "er the CourtRs o,n count, petitioner used in his co&plaint the &i/ed ,ords 8>oint venture?partnership8 nineteen *1:+ ti&es and the ter& 8partner8 four *-+ ti&es. He &ade reference to the 8la& of >oint venture?partnership :being applicable; to the business relationship @ bet&een :hi!;8 Eduardo and /obb# :Aang;= and to his =rights in all specific properties of their >oint venture?partnership8. iven this consideration, petitionerRs ri'ht of action a'ainst respondents ;duardo and Man' dou)tless pivots on the e/istence of the "a'e I 29

partnership )et,een the three of the&, as purportedly evidenced )y the undated and unsi'ned Anne/ "A-18. A void Anne/ 8A-18, as an actiona)le docu&ent of partnership, ,ould strip petitioner of a cause of action under the pre&ises. A co&plaint for delivery and accountin' of partnership property )ased on such void or le'ally non-e/istent actiona)le docu&ent is dis&issi)le for failure to state of action. !o, in 'ist, said the Court of Appeals. .he Court a'rees. *!EREFORE, the instant petition is DENIED and the i&pu'ned Decision and Resolution of the Court of AppealsAFFIRMED. Cost a'ainst the petitioner.

G.R. No. L425532

F02&u"&y 2F, 1969

COMMISSIONER OF INTERNAL RE)ENUE, petitioner, vs. *ILLIAM J. SUTER "#$ T!E COURT OF TA< APPEALS, respondents. RE6ES, J. .L., J.: A li&ited partnership, na&ed 8Fillia& J. !uter 06orcoin0 Co., (td.,8 ,as for&ed on 30 !epte&)er 1:-$ )y herein respondent Fillia& J. !uter as the 'eneral partner, and Julia !piri' and ustav Carlson, as the li&ited partners. .he partners contri)uted, respectively, "20,000.00, "1%,000.00 and "2,000.00 to the partnership. On 1 Octo)er 1:-$, the li&ited partnership ,as re'istered ,ith the !ecurities and ;/chan'e Co&&ission. .he fir& en'a'ed, a&on' other activities, in the i&portation, &ar7etin', distri)ution and operation of auto&atic phono'raphs, radios, television sets and a&use&ent &achines, their parts and accessories. 3t had an office and held itself out as a li&ited partnership, handlin' and carryin' &erchandise, usin' invoices, )ills and letterheads )earin' its trade-na&e, &aintainin' its o,n )oo7s of accounts and )an7 accounts, and had a @uota allocation ,ith the Central Can7. 3n 1:-%, ho,ever, 'eneral partner !uter and li&ited partner !piri' 'ot &arried and, thereafter, on 1% Dece&)er 1:-%, li&ited partner Carlson sold his share in the partnership to !uter and his ,ife. .he sale ,as duly recorded ,ith the !ecurities and ;/chan'e Co&&ission on 20 Dece&)er 1:-%. .he li&ited partnership had )een filin' its inco&e ta/ returns as a corporation, ,ithout o)Gection )y the herein petitioner, Co&&issioner of 3nternal Revenue, until in 1:9: ,hen the latter, in an assess&ent, consolidated the inco&e of the fir& and the individual inco&es of the partners-spouses !uter and !piri' resultin' in a deter&ination of a deficiency inco&e ta/ a'ainst respondent !uter in the a&ount of "2,>$%.0> for 1:9- and "-,9>$.00 for 1:99. Respondent !uter protested the assess&ent, and re@uested its cancellation and ,ithdra,al, as not in accordance ,ith la,, )ut his re@uest ,as denied. 5na)le to secure a reconsideration, he appealed to the Court of .a/ Appeals, ,hich court, after trial, rendered a decision, on 11 #ove&)er 1:>9, reversin' that of the Co&&issioner of 3nternal Revenue. .he present case is a petition for revie,, filed )y the Co&&issioner of 3nternal Revenue, of the ta/ court0s aforesaid decision. 3t raises these issues1 *a+ Fhether or not the corporate personality of the Fillia& J. !uter 86orcoin8 Co., (td. should )e disre'arded for inco&e ta/ purposes, considerin' that respondent Fillia& J. !uter and his ,ife, Julia !piri' !uter actually for&ed a sin'le ta/a)le unitJ and *)+ Fhether or not the partnership ,as dissolved after the &arria'e of the partners, respondent Fillia& J. !uter and Julia !piri' !uter and the su)se@uent sale to the& )y the re&ainin' partner, ustav Carlson, of his participation of "2,000.00 in the partnership for a no&inal a&ount of "1.00. .he theory of the petitioner, Co&&issioner of 3nternal Revenue, is that the &arria'e of !uter and !piri' and their su)se@uent ac@uisition of the interests of re&ainin' partner Carlson in the partnership dissolved the li&ited partnership, and if they did not, the fiction of Guridical personality of the partnership should )e disre'arded for inco&e ta/ purposes )ecause the spouses have e/clusive o,nership and control of the )usinessJ conse@uently the inco&e ta/ return of respondent !uter for the years in @uestion should have "a'e I 2>

included his and his ,ife0s individual inco&es and that of the li&ited partnership, in accordance ,ith !ection -9 *d+ of the #ational 3nternal Revenue Code, ,hich provides as follo,s1 *d+ Husband and &ife. L 3n the case of &arried persons, ,hether citi4ens, residents or nonresidents, only one consolidated return for the ta/a)le year shall )e filed )y either spouse to cover the inco&e of )oth spousesJ .... 3n refutation of the fore'oin', respondent !uter &aintains, as the Court of .a/ Appeals held, that his &arria'e ,ith li&ited partner !piri' and their ac@uisition of Carlson0s interests in the partnership in 1:-% is not a 'round for dissolution of the partnership, either in the Code of Co&&erce or in the #e, Civil Code, and that since its Guridical personality had not )een affected and since, as a li&ited partnership, as contra distin'uished fro& a duly re'istered 'eneral partnership, it is ta/a)le on its inco&e si&ilarly ,ith corporations, !uter ,as not )ound to include in his individual return the inco&e of the li&ited partnership. Fe find the Co&&issioner0s appeal un&eritorious. .he thesis that the li&ited partnership, Fillia& J. !uter 86orcoin8 Co., (td., has )een dissolved )y operation of la, )ecause of the &arria'e of the only 'eneral partner, Fillia& J. !uter to the ori'inally li&ited partner, Julia !piri' one year after the partnership ,as or'ani4ed is rested )y the appellant upon the opinion of no, !enator .olentino in Co&&entaries and Jurisprudence on Co&&ercial (a,s of the "hilippines, Dol. 1, -th ;d., pa'e 9%, that reads as follo,s1 A hus)and and a ,ife &ay not enter into a contract of general copartnership, )ecause under the Civil Code, ,hich applies in the a)sence of e/press provision in the Code of Co&&erce, persons prohi)ited fro& &a7in' donations to each other are prohi)ited fro& enterin' into universal partnerships. *2 ;chaverri 1:>+ 3t follo,s that the &arria'e of partners necessarily )rin's a)out the dissolution of a pre-e/istin' partnership. *1 uy de 6ontella 9%+ .he petitioner-appellant has evidently failed to o)serve the fact that Fillia& J. !uter 86orcoin8 Co., (td. ,asnot a universal partnership, )ut a particular one. As appears fro& Articles 1>$- and 1>$9 of the !panish Civil Code, of 1%%: *,hich ,as the la, in force ,hen the su)Gect fir& ,as or'ani4ed in 1:-$+, a universal partnership re@uires either that the o)Gect of the association )e all the present propert# of the partners, as contri)uted )y the& to the co&&on fund, or else 8all that the partners &ay ac@uire )y their industr# or &orB durin' the e/istence of the partnership8. Fillia& J. !uter 86orcoin8 Co., (td. ,as not such a universal partnership, since the contri)utions of the partners ,ere fi/ed su&s of &oney, "20,000.00 )y Fillia& !uter and "1%,000.00 )y Julia !piri' and neither one of the& ,as an industrial partner. 3t follo,s that Fillia& J. !uter 86orcoin8 Co., (td. ,as not a partnership that spouses ,ere for)idden to enter )y Article 1>$$ of the Civil Code of 1%%:. .he for&er Chief Justice of the !panish !upre&e Court, D. Jose Casan, in his Derecho Civil, $th ;dition, 1:92, Dolu&e -, pa'e 9->, footnote 1, says ,ith re'ard to the prohi)ition contained in the aforesaid Article 1>$$1 (os conyu'es, se'un esto, no pueden cele)rar entre si el contrato de sociedad universal, pero o podran constituir sociedad particularU Aun@ue el punto ha sido &uy de)atido, nos inclina&os a la tesis per&isiva de los contratos de sociedad particular entre esposos, ya @ue nin'un precepto de nuestro Codi'o los prohi)e, y hay @ue estar a la nor&a 'eneral se'un la @ue toda persona es capa4 para contratar &ientras no sea declarado incapa4 por la ley. (a Gurisprudencia de la Direccion de los Re'istros fue favora)le a esta &is&a tesis en su resolution de 3 de fe)rero de 1:3>, &as parece ca&)iar de ru&)o en la de : de &ar4o de 1:-3. #or could the su)se@uent &arria'e of the partners operate to dissolve it, such &arria'e not )ein' one of the causes provided for that purpose either )y the !panish Civil Code or the Code of Co&&erce. .he appellant0s vie,, that )y the &arria'e of )oth partners the co&pany )eca&e a sin'le proprietorship, is e@ually erroneous. .he capital contri)utions of partners Fillia& J. !uter and Julia !piri' ,ere separately o,ned and contri)uted )y the& before their &arria'eJ and after they ,ere Goined in ,edloc7, such contri)utions re&ained their respective separate property under the !panish Civil Code *Article 13:>+1 .he follo,in' shall )e the exclusive property of each spouse1 *a+ .hat ,hich is )rou'ht to the &arria'e as his or her o,nJ .... "a'e I 2$

.hus, the individual interest of each consort in Fillia& J. !uter 86orcoin8 Co., (td. did not )eco&e co&&on property of )oth after their &arria'e in 1:-%. 3t )ein' a )asic tenet of the !panish and "hilippine la, that the partnership has a Guridical personality of its o,n, distinct and separate fro& that of its partners *unli7e A&erican and ;n'lish la, that does not reco'ni4e such separate Guridical personality+, the )ypassin' of the e/istence of the li&ited partnership as a ta/payer can only )e done )y i'norin' or disre'ardin' clear statutory &andates and )asic principles of our la,. .he li&ited partnership0s separate individuality &a7es it i&possi)le to e@uate its inco&e ,ith that of the co&ponent &e&)ers. .rue, section 2- of the 3nternal Revenue Code &er'es re'istered 'eneral copartnerships *co!paCias colectivas+ ,ith the personality of the individual partners for inco&e ta/ purposes. Cut this rule is e/ceptional in its disre'ard of a cardinal tenet of our partnership la,s, and can not )e e/tended )y &ere i&plication to li&ited partnerships. .he rulin's cited )y the petitioner *Collector of 3nternal Revenue vs. 5niversity of the Disayas, (-1399-, Resolution of 30 Octo)er 1:>-, and Aoppel <"hil.=, 3nc. vs. Matco, $$ "hil. 90-+ as authority for disre'ardin' the fiction of le'al personality of the corporations involved therein are not applica)le to the present case. 3n the cited cases, the corporations ,ere already sub>ect to ta/ ,hen the fiction of their corporate personality ,as piercedJ in the present case, to do so ,ould exe!pt the li&ited partnership fro& inco&e ta/ation )ut ,ould thro, the ta/ )urden upon the partners-spouses in their individual capacities. .he corporations, in the cases cited, &erely served as )usiness conduits or alter egos of the stoc7holders, a factor that Gustified a disre'ard of their corporate personalities for ta/ purposes. .his is not true in the present case. Here, the li&ited partnership is not a &ere )usiness conduit of the partner-spousesJ it ,as or'ani4ed for le'iti&ate )usiness purposesJ it conducted its o,n dealin's ,ith its custo&ers prior to appellee0s &arria'e, and had )een filin' its o,n inco&e ta/ returns as such independent entity. .he chan'e in its &e&)ership, )rou'ht a)out )y the &arria'e of the partners and their su)se@uent ac@uisition of all interest therein, is no 'round for ,ithdra,in' the partnership fro& the covera'e of !ection 2- of the ta/ code, re@uirin' it to pay inco&e ta/. As far as the records sho,, the partners did not enter into &atri&ony and thereafter )uy the interests of the re&ainin' partner ,ith the pre&editated sche&e or desi'n to use the partnership as a )usiness conduit to dod'e the ta/ la,s. Re'ularity, not other,ise, is presu&ed. As the li&ited partnership under consideration is ta/a)le on its inco&e, to re@uire that inco&e to )e included in the individual ta/ return of respondent !uter is to overstretch the letter and intent of the la,. 3n fact, it ,ould even conflict ,ith ,hat it specifically provides in its !ection 2-1 for the appellant Co&&issioner0s stand results in e@ual treat&ent, ta/ ,ise, of a 'eneral copartnership *co!paCia colectiva+ and a li&ited partnership, ,hen the code plainly differentiates the t,o. .hus, the code ta/es the latter on its inco&e, )ut not the for&er, )ecause it is in the case of co!paCias colectivas that the &e&)ers, and not the fir&, are ta/a)le in their individual capacities for any dividend or share of the profit derived fro& the duly re'istered 'eneral partnership *!ection 2>, #.3.R.C.J AraVas, Anno. N Juris. on the #.3.R.C., As A&ended, Dol. 1, pp. %%-%:+.la&phi$.n't Cut it is ar'ued that the inco&e of the li&ited partnership is actually or constructively the inco&e of the spouses and for&s part of the conGu'al partnership of 'ains. .his is not ,holly correct. As pointed out in A'apito vs. 6olo 90 "hil. $$:, and "eople0s Can7 vs. Re'ister of Deeds of 6anila, >0 "hil. 1>$, the fruits of the ,ife0s parapherna )eco&e conGu'al only ,hen no lon'er needed to defray the e/penses for the ad&inistration and preservation of the paraphernal capital of the ,ife. .hen a'ain, the appellant0s ar'u&ent erroneously confines itself to the @uestion of the le'al personality of the li&ited partnership, ,hich is not essential to the inco&e ta/a)ility of the partnership since the la, ta/es the inco&e of even Goint accounts that have no personality of their o,n. 1 Appellant is, li7e,ise, &ista7en in that it assu&es that the conGu'al partnership of 'ains is a ta/a)le unit, ,hich it is not. Fhat is ta/a)le is the 8inco&e of )oth spouses8 *!ection -9 <d= in their individual capacities. .hou'h the a&ount of inco&e *inco&e of the conGu'al partnership vis(a(vis the Goint inco&e of hus)and and ,ife+ &ay )e the sa&e for a 'iven ta/a)le year, their conse@uences ,ould )e different, as their contri)utions in the )usiness partnership are not the sa&e. .he difference in ta/ rates )et,een the inco&e of the li&ited partnership )ein' consolidated ,ith, and ,hen split fro& the inco&e of the spouses, is not a Gustification for re@uirin' consolidationJ the revenue code, as it presently stands, does not authori4e it, and even )ars it )y re@uirin' the li&ited partnership to pay ta/ on its o,n inco&e. 2OR .H; 2OR; O3# R;A!O#!, the decision under revie, is here)y affir&ed. #o costs.

G.R. No. 1/F/F2

S01.0;20& 21, 2011

"a'e I 2%

JOSEFINA P. REALU IT, "etitioner, vs. PROSENCIO D. JASO "#$ EDEN G. JASO, Respondents. DECISION PERE5, J.: .he validity as ,ell as the conse@uences of an assi'n&ent of ri'hts in a Goint venture are at issue in this petition for revie, filed pursuant to Rule -9 of the 1::$ Rules of Civil "rocedure,1 assailin' the 30 April 200$ Decision2rendered )y the Court of AppealsR *CA+ then .,elfth Division in CA- .R. CD #o. $3%>1,3 the dispositive portion of ,hich states1 FH;R;2OR;, the Decision appealed fro& is !;. A!3D; and ,e order the dissolution of the Goint venture )et,een defendant-appellant Josefina Realu)it and 2rancis ;ric A&aury Ciondo and the su)se@uent conduct of accountin', li@uidation of assets and division of shares of the Goint venture )usiness. (et a copy hereof and the records of the case )e re&anded to the trial court for appropriate proceedin's..he 2acts On 1$ 6arch 1::-, petitioner Josefina Realu)it *Josefina+ entered into a Joint Denture A'ree&ent ,ith 2rancis ;ric A&aury Ciondo *Ciondo+, a 2rench national, for the operation of an ice &anufacturin' )usiness. Fith Josefina as the industrial partner and Ciondo as the capitalist partner, the parties a'reed that they ,ould each receive -0E of the net profit, ,ith the re&ainin' 20E to )e used for the pay&ent of the ice &a7in' &achine ,hich ,as purchased for the )usiness.9 2or and in consideration of the su& of "900,000.00, ho,ever, Ciondo su)se@uently e/ecuted a Deed of Assi'n&ent dated 2$ June 1::$, transferrin' all his ri'hts and interests in the )usiness in favor of respondent ;den Jaso *;den+, the ,ife of respondent "rosencio Jaso.> Fith CiondoRs eventual departure fro& the country, the !pouses Jaso caused their la,yer to send Josefina a letter dated 1: 2e)ruary 1::%, apprisin' her of their ac@uisition of said 2rench&anRs share in the )usiness and for&ally de&andin' an accountin' and inventory thereof as ,ell as the re&ittance of their portion of its profits.$ 2aultin' Josefina ,ith unGustified failure to heed their de&and, the !pouses Jaso co&&enced the instant suit ,ith the filin' of their 3 Au'ust 1::% Co&plaint a'ainst Josefina, her hus)and, 37e Realu)it *37e+, and their alle'ed du&&ies, for specific perfor&ance, accountin', e/a&ination, audit and inventory of assets and properties, dissolution of the Goint venture, appoint&ent of a receiver and da&a'es. Doc7eted as Civil Case #o. :%-0331 )efore respondent Cranch 29$ of the Re'ional .rial Court *R.C+ of "araVa@ue City, said co&plaint alle'ed, a&on' other &atters, that the !pouses Realu)it had no 'ainful occupation or )usiness prior to their Goint venture ,ith CiondoJ that ,ith the inco&e of the )usiness ,hich earned not less than "3,000.00 per day, they ,ere, ho,ever, a)le to ac@uire the t,o-storey )uildin' as ,ell as the land on ,hich the Goint ventureRs ice plant stands, another )uildin' ,hich they used as their office and?or residence and si/ *>+ delivery vansJ and, that aside fro& appropriatin' for the&selves the inco&e of the )usiness, the !pouses Realu)it have fraudulently concealed the funds and assets thereof thru their relatives, associates or du&&ies.% !erved ,ith su&&ons, the !pouses Realu)it filed their Ans,er dated 21 Octo)er 1::%, specifically denyin' the &aterial alle'ations of the fore'oin' co&plaint. Clai&in' that they have )een en'a'ed in the tu)e ice tradin' )usiness under a sin'le proprietorship even )efore their dealin's ,ith Ciondo, the !pouses Realu)it, in turn, averred that their said )usiness partner had left the country in 6ay 1::$ and could not have e/ecuted the Deed of Assi'n&ent ,hich )ears a si'nature &ar7edly different fro& that ,hich he affi/ed on their Joint Denture A'ree&entJ that they refused the !pouses JasoRs de&and in vie, of the du)ious circu&stances surroundin' their ac@uisition of CiondoRs share in the )usiness ,hich ,as esta)lished at Don Antonio Hei'hts, Co&&on,ealth Avenue, Wue4on CityJ that said )usiness had already stopped operations on 13 January 1::> ,hen its plant shut do,n after its po,er supply ,as disconnected )y 6;RA(CO for non-pay&ent of utility )illsJ and, that it ,as their o,n tu)e ice tradin' )usiness ,hich had )een &oved to >>-C Cenacle Drive, !anville !u)division, "roGect >, Wue4on City that the !pouses Jaso &istoo7 for the ice &anufacturin' )usiness esta)lished in partnership ,ith Ciondo.: .he issues thus Goined and the &andatory pre-trial conference su)se@uently ter&inated, the R.C ,ent on to try the case on its &erits and, thereafter, to render its Decision dated 1$ !epte&)er 2001, discountin' the e/istence of sufficient evidence fro& ,hich the inco&e, assets and the supposed dissolution of the Goint venture can )e ade@uately rec7oned. 5pon the findin', ho,ever, that the !pouses Jaso had )een nevertheless su)ro'ated to CiondoRs ri'hts in the )usiness in vie, of their valid ac@uisition of the latterRs share as capitalist partner,10 the R.C disposed of the case in the follo,in' ,ise1 "a'e I 2:

FH;R;2OR;, defendants are ordered to su)&it to plaintiffs a co&plete accountin' and inventory of the assets and lia)ilities of the Goint venture fro& its inception to the present, to allo, plaintiffs access to the )oo7s and accountin' records of the Goint venture, to deliver to plaintiffs their share in the profits, if any, and to pay the plaintiffs the a&ount of "20,000. for &oral da&a'es. .he clai&s for e/e&plary da&a'es and attorneyRs fees are denied for lac7 of )asis.11 On appeal )efore the CA, the fore'oin' decision ,as set aside in the herein assailed Decision dated 30 April 200$, upon the follo,in' findin's and conclusions1 *a+ the !pouses Jaso validly ac@uired CiondoRs share in the )usiness ,hich had )een transferred to and continued its operations at >>-C Cenacle Drive, !anville !u)division, "roGect >, Wue4on City and not dissolved as clai&ed )y the !pouses Realu)itJ *)+ a)sent sho,in' of JosefinaRs 7no,led'e and consent to the transfer of CiondoRs share, ;den cannot )e considered as a partner in the )usiness, pursuant to Article 1%13 of the Civil Code of the "hilippinesJ *c+ ,hile entitled to CiondoRs share in the profits of the )usiness, ;den cannot, ho,ever, interfere ,ith the &ana'e&ent of the partnership, re@uire infor&ation or account of its transactions and inspect its )oo7sJ *d+ the partnership should first )e dissolved )efore ;den can see7 an accountin' of its transactions and de&and CiondoRs share in the )usinessJ and, *e+ the evidence adduced )efore the R.C do not support the a,ard of &oral da&a'es in favor of the !pouses Jaso.12 .he !pouses Realu)itRs &otion for reconsideration of the fore'oin' decision ,as denied for lac7 of &erit in the CARs 2% June 200$ Resolution,13 hence, this petition. .he 3ssues .he !pouses Realu)it ur'e the reversal of the assailed decision upon the ne'ative of the follo,in' issues, to ,it1 A. FH;.H;R OR #O. .H;R; FA! A DA(3D A!!3 #6;#. O2 R3 H.! .O .H; JO3#. D;#.5R;. C. FH;.H;R .H; CO5R. 6AM ORD;R ";.3.3O#;R <JO!;23#A R;A(5C3.= A! "AR.#;R 3# .H; JO3#. D;#.5R; .O R;#D;R <A=# ACCO5#.3# .O O#; FHO 3! #O. A "AR.#;R 3# !A3D JO3#. D;#.5R;. C. FH;.H;R "R3DA.; R;!"O#D;#.! <!"O5!;! JA!O= HAD; A#M R3 H. 3# .H; JO3#. D;#.5R; A#D 3# .H; !;"ARA.; 3C; C5!3#;!! O2 ";.3.3O#;R<!=.1.he CourtRs Rulin' Fe find the petition )ereft of &erit. .he !pouses Realu)it ar'ue that, in upholdin' its validity, )oth the R.C and the CA inordinately 'ave pre&iu& to the notari4ation of the 2$ June 1::$ Deed of Assi'n&ent e/ecuted )y Ciondo in favor of the !pouses Jaso. Callin' attention to the latterRs failure to present )efore the R.C said assi'nor or, at the very least, the ,itnesses to said docu&ent, the !pouses Realu)it &aintain that the testi&ony of Rolando Dia4, the #otary "u)lic )efore ,ho& the sa&e ,as ac7no,led'ed, did not suffice to esta)lish its authenticity and?or validity. .hey insist that notari4ation did not auto&atically and conclusively confer validity on said deed, since it is still entirely possi)le that Ciondo did not e/ecute said deed or, for that &atter, appear )efore said notary pu)lic.19 .he dearth of &erit in the !pouses Realu)itRs position is, ho,ever, i&&ediately evident fro& the settled rule that docu&ents ac7no,led'ed )efore notaries pu)lic are pu)lic docu&ents ,hich are ad&issi)le in evidence ,ithout necessity of preli&inary proof as to their authenticity and due e/ecution.1> 3t cannot )e 'ainsaid that, as a pu)lic docu&ent, the Deed of Assi'n&ent Ciondo e/ecuted in favor of ;den not only enGoys a presu&ption of re'ularity1$ )ut is also considered pri&a facie evidence of the facts therein stated.1%A party assailin' the authenticity and due e/ecution of a notari4ed docu&ent is, conse@uently, re@uired to present evidence that is clear, convincin' and &ore than &erely preponderant.1: 3n vie, of the !pouses Realu)itRs failure to dischar'e this onus, ,e find that )oth the R.C and the CA correctly upheld the authenticity and validity of said Deed of Assi'n&ent upon the co&)ined stren'th of the a)ove-discussed disputa)le presu&ptions and the testi&onies elicited fro& ;den20 and #otary "u)lic Rolando Dia4.21 As for the !pousesR Realu)itRs )are assertion that CiondoRs si'nature on the sa&e docu&ent appears to )e for'ed, suffice it to say that, li7e fraud,22 for'ery is never presu&ed and &ust li7e,ise )e proved )y clear and convincin' evidence )y the party alle'in' the sa&e.23Aside fro& not )ein' )orne out )y a co&parison of CiondoRs si'natures on the Joint Denture A'ree&ent2- and the Deed of Assi'n&ent,29 said for'ery is, &oreover de)un7ed )y CiondoRs duly authenticated certification dated 1$ #ove&)er 1::%, confir&in' the transfer of his interest in the )usiness in favor of ;den.2> "a'e I 30

enerally understood to &ean an or'ani4ation for&ed for so&e te&porary purpose, a Goint venture is li7ened to a particular partnership or one ,hich 8has for its o)Gect deter&inate thin's, their use or fruits, or a specific underta7in', or the e/ercise of a profession or vocation.82$ .he rule is settled that Goint ventures are 'overned )y the la, on partnerships2% ,hich are, in turn, )ased on &utual a'ency or delectus personae.2: 3nsofar as a partnerRs conveyance of the entirety of his interest in the partnership is concerned, Article 1%13 of the Civil Code provides as follo,s1 Art. 1%13. A conveyance )y a partner of his ,hole interest in the partnership does not itself dissolve the partnership, or, as a'ainst the other partners in the a)sence of a'ree&ent, entitle the assi'nee, durin' the continuance of the partnership, to interfere in the &ana'e&ent or ad&inistration of the partnership )usiness or affairs, or to re@uire any infor&ation or account of partnership transactions, or to inspect the partnership )oo7sJ )ut it &erely entitles the assi'nee to receive in accordance ,ith his contracts the profits to ,hich the assi'nin' partners ,ould other,ise )e entitled. Ho,ever, in case of fraud in the &ana'e&ent of the partnership, the assi'nee &ay avail hi&self of the usual re&edies. 3n the case of a dissolution of the partnership, the assi'nee is entitled to receive his assi'norRs interest and &ay re@uire an account fro& the date only of the last account a'reed to )y all the partners. 2ro& the fore'oin' provision, it is evident that 8*t+he transfer )y a partner of his partnership interest does not &a7e the assi'nee of such interest a partner of the fir&, nor entitle the assi'nee to interfere in the &ana'e&ent of the partnership )usiness or to receive anythin' e/cept the assi'neeRs profits. .he assi'n&ent does not purport to transfer an interest in the partnership, )ut only a future contin'ent ri'ht to a portion of the ulti&ate residue as the assi'nor &ay )eco&e entitled to receive )y virtue of his proportionate interest in the capital.830 !ince a partnerRs interest in the partnership includes his share in the profits,31 ,e find that the CA co&&itted no reversi)le error in rulin' that the !pouses Jaso are entitled to CiondoRs share in the profits, despite JuanitaRs lac7 of consent to the assi'n&ent of said 2rench&anRs interest in the Goint venture. Althou'h ;den did not, &oreover, )eco&e a partner as a conse@uence of the assi'n&ent and?or ac@uire the ri'ht to re@uire an accountin' of the partnership )usiness, the CA correctly 'ranted her prayer for dissolution of the Goint venture confor&a)ly ,ith the ri'ht 'ranted to the purchaser of a partnerRs interest under Article 1%31 of the Civil Code.32 $%&phi$ Considerin' that they involve @uestions of fact, neither are ,e inclined to hospita)ly entertain the !pouses Realu)itRs insistence on the supposed fact that JosefinaRs Goint venture ,ith Ciondo had already )een dissolved and that the ice &anufacturin' )usiness at >>-C Cenacle Drive, !anville !u)division, "roGect >, Wue4on City ,as &erely a continuation of the sa&e )usiness they previously operated under a sin'le proprietorship. 3t is ,ell-entrenched doctrine that @uestions of fact are not proper su)Gects of appeal )y certiorari under Rule -9 of the Rules of Court as this &ode of appeal is confined to @uestions of la,.33 5pon the principle that this Court is not a trier of facts, ,e are not duty )ound to e/a&ine the evidence introduced )y the parties )elo, to deter&ine if the trial and the appellate courts correctly assessed and evaluated the evidence on record.3- A)sent sho,in' that the factual findin's co&plained of are devoid of support )y the evidence on record or the assailed Gud'&ent is )ased on &isapprehension of facts, the Court ,ill li&it itself to revie,in' only errors of la,.39 Cased on the evidence on record, &oreover, )oth the R.C3> and the CA3$ ruled out the dissolution of the Goint venture and concluded that the ice &anufacturin' )usiness at the aforesaid address ,as the sa&e one esta)lished )y Juanita and Ciondo. As a rule, findin's of fact of the CA are )indin' and conclusive upon this Court,3% and ,ill not )e revie,ed or distur)ed on appeal3: unless the case falls under any of the follo,in' reco'ni4ed e/ceptions1 *1+ ,hen the conclusion is a findin' 'rounded entirely on speculation, sur&ises and conGecturesJ *2+ ,hen the inference &ade is &anifestly &ista7en, a)surd or i&possi)leJ *3+ ,here there is a 'rave a)use of discretionJ *-+ ,hen the Gud'&ent is )ased on a &isapprehension of factsJ *9+ ,hen the findin's of fact are conflictin'J *>+ ,hen the CA, in &a7in' its findin's, ,ent )eyond the issues of the case and the sa&e is contrary to the ad&issions of )oth appellant and appelleeJ *$+ ,hen the findin's are contrary to those of the trial courtJ *%+ ,hen the findin's of fact are conclusions ,ithout citation of specific evidence on ,hich they are )asedJ *:+ ,hen the facts set forth in the petition as ,ell as in the petitioners0 &ain and reply )riefs are not disputed )y the respondentsJ and, *10+ ,hen the findin's of fact of the CA are pre&ised on the supposed a)sence of evidence and contradicted )y the evidence on record.-0 5nfortunately for the !pouses Realu)itRs cause, not one of the fore'oin' e/ceptions applies to the case. FH;R;2OR;, the petition is D;#3;D for lac7 of &erit and the assailed CA Decision dated 30 April 200$ is, accordin'ly, A223R6;D in toto. !O ORD;R;D.

"a'e I 31

G.R. No. 15++F6

D0:0;20& 1, 2010

FEDERICO JARANTILLA, JR., "etitioner, vs. ANTONIETA JARANTILLA, UENA)ENTURA REMOTIGUE, -u2-.3.u.0$ 2y C6NT!IA REMOTIGUE, DOROTEO JARANTILLA "#$ TOMAS JARANTILLA, Respondents. DECISION LEONARDO4DE CASTRO, J.: .his petition for revie, on certiorari1 see7s to &odify the Decision2 of the Court of Appeals dated July 30, 2002 in CA- .R. CD #o. -0%%$, ,hich set aside the Decision3 dated Dece&)er 1%, 1::2 of the Re'ional .rial Court *R.C+ of Wue4on City, Cranch :% in Civil Case #o. W-90->-. .he pertinent facts are as follo,s1 .he spouses Andres Jarantilla and 2elisa Jaleco ,ere survived )y ei'ht children1 2ederico, Delfin, CenGa&in, Conchita, Rosita, "acita, Rafael and Antonieta.- "etitioner 2ederico Jarantilla, Jr. is the 'randchild of the late Jarantilla spouses )y their son 2ederico Jarantilla, !r. and his ,ife (eda Ja&ili.9 "etitioner also has t,o other )rothers1 Doroteo and .o&as Jarantilla. "etitioner ,as one of the defendants in the co&plaint )efore the R.C ,hile Antonieta Jarantilla, his aunt, ,as the plaintiff therein. His co-respondents )efore he Goined his aunt Antonieta in her co&plaint, ,ere his late aunt Conchita JarantillaRs hus)and Cuenaventura Re&oti'ue, ,ho died durin' the pendency of the case, his cousin Cynthia Re&oti'ue, the adopted dau'hter of Conchita Jarantilla and Cuenaventura Re&oti'ue, and his )rothers Doroteo and .o&as Jarantilla.> 3n 1:-%, the Jarantilla heirs e/traGudicially partitioned a&on'st the&selves the real properties of their deceased parents.$ Fith the e/ception of the real property adGudicated to "acita Jarantilla, the heirs also a'reed to allot the produce of the said real properties for the years 1:-$-1:-: for the studies of Rafael and Antonieta Jarantilla.% 3n the sa&e year, the spouses Rosita Jarantilla and Divencio Deoca&po entered into an a'ree&ent ,ith the spouses Cuenaventura Re&oti'ue and Conchita Jarantilla to provide &utual assistance to each other )y ,ay of financial support to any co&&ercial and a'ricultural activity on a Goint )usiness arran'e&ent. .his )usiness relationship proved to )e successful as they ,ere a)le to esta)lish a &anufacturin' and tradin' )usiness, ac@uire real properties, and construct )uildin's, a&on' other thin's.: .his partnership ended in 1:$3 ,hen the parties, in an 8A'ree&ent,810 voluntarily a'reed to co&pletely dissolve their 8Goint )usiness relationship?arran'e&ent.811 On April 2:, 1:9$, the spouses Cuenaventura and Conchita Re&oti'ue e/ecuted a docu&ent ,herein they ac7no,led'ed that ,hile re'istered only in Cuenaventura Re&oti'ueRs na&e, they ,ere not the only o,ners of the capital of the )usinesses 6anila Athletic !upply *$12 Raon !treet, 6anila+, Re&oti'ue .radin' *Calle Real, 3loilo City+ and Re&oti'ue .radin' *Cota)ato City+. 3n this sa&e 8Ac7no,led'e&ent of "articipatin' Capital,8 they stated the participatin' capital of their co-o,ners as of the year 1:92, ,ith Antonieta JarantillaRs stated as ei'ht thousand pesos *"%,000.00+ and 2ederico Jarantilla, Jr.Rs as five thousand pesos *"9,000.00+.12 .he present case ste&s fro& the a&ended co&plaint13 dated April 22, 1:%$ filed )y Antonieta Jarantilla a'ainst Cuenaventura Re&oti'ue, Cynthia Re&oti'ue, 2ederico Jarantilla, Jr., Doroteo Jarantilla and .o&as Jarantilla, for the accountin' of the assets and inco&e of the co-o,nership, for its partition and the delivery of her share correspondin' to ei'ht percent *%E+, and for da&a'es. Antonieta clai&ed that in 1:->, she had entered into an a'ree&ent ,ith Conchita and Cuenaventura Re&oti'ue, Rafael Jarantilla, and Rosita and Divencio Deoca&po to en'a'e in )usiness. Antonieta alle'ed that the initial contri)ution of property and &oney ca&e fro& the heirsR inheritance, and her su)se@uent annual invest&ent of seven thousand five hundred pesos *"$,900.00+ as additional capital ca&e fro& the proceeds of her far&. Antonieta also alle'ed that fro& 1:->-1:>:, she had helped in the &ana'e&ent of the )usiness they co-o,ned ,ithout receivin' any salary. Her salary ,as supposedly rolled )ac7 into the )usiness as additional invest&ents in her )ehalf. Antonieta further clai&ed co-o,nership of certain properties1- *the su)Gect real properties+ in the na&e of the defendants since the only ,ay the defendants could have purchased these properties ,ere throu'h the partnership as they had no other source of inco&e.

"a'e I 32

.he respondents, includin' petitioner herein, in their Ans,er,19 denied havin' for&ed a partnership ,ith Antonieta in 1:->. .hey clai&ed that she ,as in no position to do so as she ,as still in school at that ti&e. 3n fact, the proceeds of the lands they partitioned ,ere devoted to her studies. .hey also averred that ,hile she &ay have helped in the )usinesses that her older sister Conchita had for&ed ,ith Cuenaventura Re&oti'ue, she ,as paid her due salary. .hey did not deny the e/istence and validity of the 8Ac7no,led'e&ent of "articipatin' Capital8 and in fact used this as evidence to support their clai& that AntonietaRs %E share ,as li&ited to the )usinesses enu&erated therein. Fith re'ard to AntonietaRs clai& in their other corporations and )usinesses, the respondents said these should also )e li&ited to the nu&)er of her shares as specified in the respective articles of incorporation. .he respondents denied usin' the partnershipRs inco&e to purchase the su)Gect real properties and said that the certificates of title should )e )indin' on her.1> Durin' the course of the trial at the R.C, petitioner 2ederico Jarantilla, Jr., ,ho ,as one of the ori'inal defendants, entered into a co&pro&ise a'ree&ent1$ ,ith Antonieta Jarantilla ,herein he supported AntonietaRs clai&s and asserted that he too ,as entitled to si/ percent *>E+ of the supposed partnership in the sa&e &anner as Antonieta ,as. He prayed for a favora)le Gud'&ent in this ,ise1 Defendant 2ederico Jarantilla, Jr., here)y Goins in plaintiffRs prayer for an accountin' fro& the other defendants, and the partition of the properties of the co-o,nership and the delivery to the plaintiff and to defendant 2ederico Jarantilla, Jr. of their ri'htful share of the assets and properties in the co-o,nership.1%$avvphi$ .he R.C, in an Order1: dated 6arch 29, 1::2, approved the Joint 6otion to Approve Co&pro&ise A'ree&ent20and on Dece&)er 1%, 1::2, decided in favor of Antonieta, to ,it1 FH;R;2OR;, pre&ises a)ove-considered, the Court renders Gud'&ent in favor of the plaintiff Antonieta Jarantilla and a'ainst defendants Cynthia Re&oti'ue, Doroteo Jarantilla and .o&as Jarantilla orderin' the latter1 1. to deliver to the plaintiff her %E share or its e@uivalent a&ount on the real properties covered )y .C. #os. 39>99, 33%3:%, 33%3:: N 3393:9, all of the Re'istry of Deeds of Wue4on CityJ .C. #os. *1%303+233-1, 1-2%%2 N -:000$*->19+, all of the Re'istry of Deeds of Ri4alJ and .C. #o. .->30: of the Re'istry of Deeds of Cota)ato )ased on their present &ar7et valueJ 2. to deliver to the plaintiff her %E share or its e@uivalent a&ount on the Re&oti'ue A'ro-3ndustrial Corporation, 6anila Athletic !upply, 3nc., 6A! Ru))er "roducts, 3nc. and Cuendia Recappin' Corporation )ased on the shares of stoc7s present )oo7 valueJ 3. to account for the assets and inco&e of the co-o,nership and deliver to plaintiff her ri'htful share thereof e@uivalent to %EJ -. to pay plaintiff, Gointly and severally, the su& of "90,000.00 as &oral da&a'esJ 9. to pay, Gointly and severally, the su& of "90,000.00 as attorneyRs feesJ and >. to pay, Gointly and severally, the costs of the suit.21 Coth the petitioner and the respondents appealed this decision to the Court of Appeals. .he petitioner clai&ed that the R.C 8erred in not renderin' a co&plete Gud'&ent and orderin' the partition of the co-o,nership and 'ivin' to <hi&= si/ per centu& *>E+ of the properties.822 Fhile the Court of Appeals a'reed to so&e of the R.CRs factual findin's, it also esta)lished that Antonieta Jarantilla ,as not part of the partnership for&ed in 1:->, and that her %E share ,as li&ited to the )usinesses enu&erated in the Ac7no,led'e&ent of "articipatin' Capital. On July 30, 2002, the Court of Appeals rendered the herein challen'ed decision settin' aside the R.CRs decision, as follo,s1 FH;R;2OR;, the decision of the trial court, dated 1% Dece&)er 1::2 is !;. A!3D; and a ne, one is here)y entered orderin' that1 *1+ after accountin', plaintiff Antonieta Jarantilla )e 'iven her share of %E in the assets and profits of 6anila Athletic !upply, Re&oti'ue .radin' in 3loilo City and Re&oti'ue .radin' in Cota)ato CityJ *2+ after accountin', defendant 2ederico Jarantilla, Jr. )e 'iven his share of >E of the assets and profits of the a)ove-&entioned enterprisesJ and, holdin' that "a'e I 33

*3+ plaintiff Antonieta Jarantilla is a stoc7holder in the follo,in' corporations to the e/tent stated in their Articles of 3ncorporation1 *a+ Rural Can7 of Carotac #uevo, 3nc.J *)+ 6A! Ru))er "roducts, 3nc.J *c+ 6anila Athletic !upply, 3nc.J and *d+ C. Re&oti'ue A'ro-3ndustrial Develop&ent Corp. *-+ #o costs.23 .he respondents, on Au'ust 20, 2002, filed a 6otion for "artial Reconsideration )ut the Court of Appeals denied this in a Resolution2- dated 6arch 21, 2003. Antonieta Jarantilla filed )efore this Court her o,n petition for revie, on certiorari29 dated !epte&)er 1>, 2002, assailin' the Court of AppealsR decision on 8si&ilar 'rounds and si&ilar assi'n&ents of errors as this present case82> )ut it ,as dis&issed on #ove&)er 20, 2002 for failure to file the appeal ,ithin the re'le&entary period of fifteen *19+ days in accordance ,ith !ection 2, Rule -9 of the Rules of Court.2$ "etitioner filed )efore us this petition for revie, on the sole 'round that1 .H; HO#ORAC(; CO5R. O2 A"";A(! !;R3O5!(M ;RR;D 3# #O. R5(3# .HA. ";.3.3O#;R 2;D;R3CO JARA#.3((A, JR. 3! ;#.3.(;D .O A !3P ";R C;#.56 *>E+ !HAR; O2 .H; OF#;R!H3" O2 .H; R;A( "RO";R.3;! ACW53R;D CM .H; O.H;R D;2;#DA#.! 5!3# CO66O# 25#D! 2RO6 .H; C5!3#;!!;! FH;R; H; HAD OF#;D !5CH !HAR;.2% "etitioner asserts that he ,as in a partnership ,ith the Re&oti'ue spouses, the Deoca&po spouses, Rosita Jarantilla, Rafael Jarantilla, Antonieta Jarantilla and Wuintin Dis&anos, as evidenced )y the Ac7no,led'e&ent of "articipatin' Capital the Re&oti'ue spouses e/ecuted in 1:9$. He contends that fro& this partnership, several other corporations and )usinesses ,ere esta)lished and several real properties ,ere ac@uired. 3n this petition, he is essentially as7in' for his >E share in the su)Gect real properties. He is relyin' on the Ac7no,led'e&ent of "articipatin' Capital, on his o,n testi&ony, and Antonieta JarantillaRs testi&ony to support this contention. .he core issue is ,hether or not the partnership su)Gect of the Ac7no,led'e&ent of "articipatin' Capital funded the su)Gect real properties. 3n other ,ords, ,hat is the petitionerRs ri'ht over these real propertiesU 3t is a settled rule that in a petition for revie, on certiorari under Rule -9 of the Rules of Civil "rocedure, only @uestions of la, &ay )e raised )y the parties and passed upon )y this Court.2: A @uestion of la, arises ,hen there is dou)t as to ,hat the la, is on a certain state of facts, ,hile there is a @uestion of fact ,hen the dou)t arises as to the truth or falsity of the alle'ed facts. 2or a @uestion to )e one of la,, the sa&e &ust not involve an e/a&ination of the pro)ative value of the evidence presented )y the liti'ants or any of the&. .he resolution of the issue &ust rest solely on ,hat the la, provides on the 'iven set of circu&stances. Once it is clear that the issue invites a revie, of the evidence presented, the @uestion posed is one of fact. .hus, the test of ,hether a @uestion is one of la, or of fact is not the appellation 'iven to such @uestion )y the party raisin' the sa&eJ rather, it is ,hether the appellate court can deter&ine the issue raised ,ithout revie,in' or evaluatin' the evidence, in ,hich case, it is a @uestion of la,J other,ise it is a @uestion of fact.30 !ince the Court of Appeals did not fully adopt the factual findin's of the R.C, this Court, in resolvin' the @uestions of la, that are no, in issue, shall loo7 into the facts only in so far as the t,o courts a @uo differed in their appreciation thereof. .he R.C found that an unre'istered partnership e/isted since 1:-> ,hich ,as affir&ed in the 1:9$ docu&ent, the 8Ac7no,led'e&ent of "articipatin' Capital.8 .he R.C used this as its )asis for 'ivin' Antonieta Jarantilla an %E share in the three )usinesses listed therein and in the other )usinesses and real properties of the respondents as they had supposedly ac@uired these throu'h funds fro& the partnership.31 .he Court of Appeals, on the other hand, a'reed ,ith the R.C as to AntonietaRs %E share in the )usiness enu&erated in the Ac7no,led'e&ent of "articipatin' Capital, )ut not as to her share in the other corporations "a'e I 3-

and real properties. .he Court of Appeals ruled that AntonietaRs clai& of %E is )ased on the 8Ac7no,led'e&ent of "articipatin' Capital,8 a duly notari4ed docu&ent ,hich ,as specific as to the su)Gect of its covera'e. Hence, there ,as no reason to pattern her share in the other corporations fro& her share in the partnershipRs )usinesses. .he Court of Appeals also said that her clai& in the respondentsR real properties ,as &ore 8precarious8 as these ,ere all covered )y certificates of title ,hich served as the )est evidence as to all the &atters contained therein.32!ince petitionerRs clai& ,as essentially the sa&e as AntonietaRs, the Court of Appeals also ruled that petitioner )e 'iven his >E share in the sa&e )usinesses listed in the Ac7no,led'e&ent of "articipatin' Capital. 2actual findin's of the trial court, ,hen confir&ed )y the Court of Appeals, are final and conclusive e/cept in the follo,in' cases1 *1+ ,hen the inference &ade is &anifestly &ista7en, a)surd or i&possi)leJ *2+ ,hen there is a 'rave a)use of discretionJ *3+ ,hen the findin' is 'rounded entirely on speculations, sur&ises or conGecturesJ *-+ ,hen the Gud'&ent of the Court of Appeals is )ased on &isapprehension of factsJ *9+ ,hen the findin's of fact are conflictin'J *>+ ,hen the Court of Appeals, in &a7in' its findin's, ,ent )eyond the issues of the case and the sa&e is contrary to the ad&issions of )oth appellant and appelleeJ *$+ ,hen the findin's of the Court of Appeals are contrary to those of the trial courtJ *%+ ,hen the findin's of fact are conclusions ,ithout citation of specific evidence on ,hich they are )asedJ *:+ ,hen the Court of Appeals &anifestly overloo7ed certain relevant facts not disputed )y the parties and ,hich, if properly considered, ,ould Gustify a different conclusionJ and *10+ ,hen the findin's of fact of the Court of Appeals are pre&ised on the a)sence of evidence and are contradicted )y the evidence on record.33 3n this case, ,e find no error in the rulin' of the Court of Appeals. Coth the petitioner and Antonieta Jarantilla characteri4e their relationship ,ith the respondents as a coo,nership, )ut in the sa&e )reath, assert that a ver)al partnership ,as for&ed in 1:-> and ,as affir&ed in the 1:9$ Ac7no,led'e&ent of "articipatin' Capital. .here is a co-o,nership ,hen an undivided thin' or ri'ht )elon's to different persons.3- 3t is a partnership ,hen t,o or &ore persons )ind the&selves to contri)ute &oney, property, or industry to a co&&on fund, ,ith the intention of dividin' the profits a&on' the&selves.39 .he Court, in "ascual v. .he Co&&issioner of 3nternal Revenue,3> @uoted the concurrin' opinion of 6r. Justice An'elo Cautista in ;van'elista v. .he Collector of 3nternal Revenue3$ to further elucidate on the distinctions )et,een a co-o,nership and a partnership, to ,it1 3 ,ish ho,ever to &a7e the follo,in' o)servation1 Article 1$>: of the ne, Civil Code lays do,n the rule for deter&inin' ,hen a transaction should )e dee&ed a partnership or a co-o,nership. !aid article para'raphs 2 and 3, providesJ *2+ Co-o,nership or co-possession does not itself esta)lish a partnership, ,hether such co-o,ners or co-possessors do or do not share any profits &ade )y the use of the propertyJ *3+ .he sharin' of 'ross returns does not of itself esta)lish a partnership, ,hether or not the persons sharin' the& have a Goint or co&&on ri'ht or interest in any property fro& ,hich the returns are derivedJ Dro! the above it appears that the fact that those &ho agree to for! a co( o&nership share or do not share an# profits !ade b# the use of the propert# held in co!!on does not convert their venture into a partnership. 9r the sharing of the gross returns does not of itself establish a partnership &hether or not the persons sharing therein have a >oint or co!!on right or interest in the propert#. Ehis onl# !eans that8 aside fro! the circu!stance of profit8 the presence of other ele!ents constituting partnership is necessar#8 such as the clear intent to for! a partnership8 the existence of a >uridical personalit# different fro! that of the individual partners8 and the freedo! to transfer or assign an# interest in the propert# b# one &ith the consent of the others. Ft is evident that an isolated transaction &hereb# t&o or !ore persons contribute funds to bu# certain real estate for profit in the absence of other circu!stances sho&ing a contrar# intention cannot be considered a partnership. "ersons ,ho contri)ute property or funds for a co&&on enterprise and a'ree to share the 'ross returns of that enterprise in proportion to their contri)ution, )ut ,ho severally retain the title to their respective contri)ution, are not there)y rendered partners. .hey have no co&&on stoc7 or capital, and no co&&unity of interest as principal proprietors in the )usiness itself ,hich the proceeds derived. A Goint purchase of land, )y t,o, does not constitute a co-partnership in respect theretoJ nor does an a'ree&ent to share the profits and losses on the sale of land create a partnershipJ the parties are only tenants in co&&on. "a'e I 39

Fhere plaintiff, his )rother, and another a'reed to )eco&e o,ners of a sin'le tract of realty, holdin' as tenants in co&&on, and to divide the profits of disposin' of it, the )rother and the other not )ein' entitled to share in plaintiffRs co&&ission, no partnership e/isted as )et,een the three parties, ,hatever their relation &ay have )een as to third parties. Fn order to constitute a partnership inter sese there !ust beG (a) .n intent to for! the sa!e; (b) generall# participating in both profits and losses; (c) and such a co!!unit# of interest8 as far as third persons are concerned as enables each part# to !aBe contract8 !anage the business8 and dispose of the &hole propert#. x x x. .he co&&on o,nership of property does not itself create a partnership )et,een the o,ners, thou'h they &ay use it for the purpose of &a7in' 'ainsJ and they &ay, ,ithout )eco&in' partners, a'ree a&on' the&selves as to the &ana'e&ent, and use of such property and the application of the proceeds therefro&.3% *Citations o&itted.+ 5nder Article 1$>$ of the Civil Code, there are t,o essential ele&ents in a contract of partnership1 (a) an agree!ent to contribute !one#8 propert# or industr# to a co!!on fund; and (b) intent to divide the profits a!ong the contracting parties. .he first ele&ent is undou)tedly present in the case at )ar, for, ad&ittedly, all the parties in this case have a'reed to, and did, contri)ute &oney and property to a co&&on fund. Hence8 the issue narro&s do&n to their intent in acting as the# did.3: 3t is not denied that all the parties in this case have a'reed to contri)ute capital to a co&&on fund to )e a)le to later on share its profits. .hey have ad&itted this fact, a'reed to its veracity, and even su)&itted one co&&on docu&entary evidence to prove such partnership - the Ac7no,led'e&ent of "articipatin' Capital. As this case revolves around the le'al effects of the Ac7no,led'e&ent of "articipatin' Capital, it ,ould )e instructive to e/a&ine the pertinent portions of this docu&ent1 ACA#OF(;D ;6;#. O2 "AR.3C3"A.3# CA"3.A( A#OF A(( 6;# CM .H;!; "R;!;#.!1 .hat ,e, the spouses Cuenaventura Re&oti'ue and Conchita Jarantilla de Re&oti'ue, )oth of le'al a'e, 2ilipinos and residents of (oyola Hei'hts, Wue4on City, ".3. here)y state1 .hat the 6anila Athletic !upply at $12 Raon, 6anila, the Re&oti'ue .radin' of Calle Real, 3loilo City and the Re&oti'ue .radin', Cota)ato Cranch, Cota)ato, ".3., all dealin' in athletic 'oods and e@uip&ents, and 'eneral &erchandise are recorded in their respective )oo7s ,ith Cuenaventura Re&oti'ue as the re'istered o,ner and are )ein' operated )y the& as such1 .hat they are not the only o,ners of the capital of the three esta)lish&ents and their participation in the capital of the three esta)lish&ents to'ether ,ith the other co-o,ners as of the year 1:92 are stated as follo,s1 1. Cuenaventura Re&oti'ue *.F;#.M-23D; .HO5!A#D+"29,000.00 2. Conchita Jarantilla de Re&oti'ue *.F;#.M-23D; .HO5!A#D+S 29,000.00 3. Dicencio Deoca&po *232.;;# .HO5!A#D+SS 19,000.00 -. Rosita J. Deoca&po *232.;;# .HO5!A#D+S.... 19,000.00 9. Antonieta Jarantilla *;3 H. .HO5!A#D+SSS.. %,000.00 >. Rafael Jarantilla *!3P .HO5!A#D+SSSSS.. ... >,000.00 $. 2ederico Jarantilla, Jr. *23D; .HO5!A#D+SSS.. 9,000.00 %. Wuintin Dis&anos *.FO .HO5!A#D+SSSS... 2,000.00 .hat aside fro& the persons &entioned in the ne/t precedin' para'raph, no other person has any interest in the a)ove-&entioned three esta)lish&ents. 3# F3.#;!! FH;R;O2, they si'n this instru&ent in the City of 6anila, ".3., this 2:th day of April, 1:9$. "a'e I 3>

<!'d.= C5;#AD;#.5RA R;6O.3 5; <!'d.= CO#CH3.A JARA#.3((A D; R;6O.3 5;-0 .he Ac7no,led'e&ent of "articipatin' Capital is a duly notari4ed docu&ent voluntarily e/ecuted )y Conchita Jarantilla-Re&oti'ue and Cuenaventura Re&oti'ue in 1:9$. "etitioner does not dispute its contents and is actually relyin' on it to prove his participation in the partnership. Article 1$:$ of the Civil Code provides1 Art. 1$:$. .he losses and profits shall )e distri)uted in confor&ity ,ith the a'ree&ent. 3f only the share of each partner in the profits has )een a'reed upon, the share of each in the losses shall )e in the sa&e proportion. 3n the a)sence of stipulation, the share of each partner in the profits and losses shall )e in proportion to ,hat he &ay have contri)uted, )ut the industrial partner shall not )e lia)le for the losses. As for the profits, the industrial partner shall receive such share as &ay )e Gust and e@uita)le under the circu&stances. 3f )esides his services he has contri)uted capital, he shall also receive a share in the profits in proportion to his capital. *;&phases supplied.+ 3t is clear fro& the fore'oin' that a partner is entitled only to his share as a'reed upon, or in the a)sence of any such stipulations, then to his share in proportion to his contri)ution to the partnership. .he petitioner hi&self clai&s his share to )e >E, as stated in the Ac7no,led'e&ent of "articipatin' Capital. Ho,ever, petitioner fails to reali4e that this docu&ent specifically enu&erated the )usinesses covered )y the partnership1 6anila Athletic !upply, Re&oti'ue .radin' in 3loilo City and Re&oti'ue .radin' in Cota)ato City. !ince there ,as a clear a'ree&ent that the capital the partners contri)uted ,ent to the three )usinesses, then there is no reason to deviate fro& such a'ree&ent and 'o )eyond the stipulations in the docu&ent. .herefore, the Court of Appeals did not err in li&itin' petitionerRs share to the assets of the )usinesses enu&erated in the Ac7no,led'e&ent of "articipatin' Capital. 3n Dillareal v. Ra&ire4,-1 the Court held that since a partnership is a separate Guridical entity, the shares to )e paid out to the partners is necessarily li&ited only to its total resources, to ,it1 !ince it is the partnership, as a separate and distinct entity, that &ust refund the shares of the partners, the a&ount to )e refunded is necessarily li&ited to its total resources. 3n other ,ords, it can only pay out ,hat it has in its coffers, ,hich consists of all its assets. Ho,ever, )efore the partners can )e paid their shares, the creditors of the partnership &ust first )e co&pensated. After all the creditors have )een paid, ,hatever is left of the partnership assets )eco&es availa)le for the pay&ent of the partnersR shares.-2 .here is no evidence that the su)Gect real properties ,ere assets of the partnership referred to in the Ac7no,led'e&ent of "articipatin' Capital. .he petitioner further asserts that he is entitled to respondentsR properties )ased on the concept of trust. He clai&s that since the su)Gect real properties ,ere purchased usin' funds of the partnership, ,herein he has a >E share, then 8la, and e@uity &andates that he should )e considered as a co-o,ner of those properties in such proportion.8-3 3n "i'ao v. Ra)anillo,-- this Court e/plained the concept of trusts, to ,it1 ;/press trusts are created )y the intention of the trustor or of the parties, ,hile i&plied trusts co&e into )ein' )y operation of la,, either throu'h i&plication of an intention to create a trust as a &atter of la, or throu'h the i&position of the trust irrespective of, and even contrary to, any such intention. 3n turn, i&plied trusts are either resultin' or constructive trusts. Resultin' trusts are )ased on the e@uita)le doctrine that valua)le consideration and not le'al title deter&ines the e@uita)le title or interest and are presu&ed al,ays to have )een conte&plated )y the parties. .hey arise fro& the nature or circu&stances of the consideration involved in a transaction ,here)y one person there)y )eco&es invested ,ith le'al title )ut is o)li'ated in e@uity to hold his le'al title for the )enefit of another.-9 On provin' the e/istence of a trust, this Court held that1 Respondent has presented only )are assertions that a trust ,as created. #otin' the need to prove the e/istence of a trust, this Court has held thus1 8As a rule, the )urden of provin' the e/istence of a trust is on the party assertin' its e/istence, and such proof &ust )e clear and satisfactorily sho, the e/istence of the trust and its ele&ents. Fhile i&plied trusts &ay )e proved )y oral evidence, the evidence &ust )e trust,orthy and received )y the courts ,ith e/tre&e caution, "a'e I 3$

and should not )e &ade to rest on loose, e@uivocal or indefinite declarations. .rust,orthy evidence is re@uired )ecause oral evidence can easily )e fa)ricated.8 -> .he petitioner has failed to prove that there e/ists a trust over the su)Gect real properties. Aside fro& his )are alle'ations, he has failed to sho, that the respondents used the partnershipRs &oney to purchase the said properties. ;ven assu&in' ar'uendo that so&e partnership inco&e ,as used to ac@uire these properties, the petitioner should have successfully sho,n that these funds ca&e fro& his share in the partnership profits. After all, )y his o,n ad&ission, and as stated in the Ac7no,led'e&ent of "articipatin' Capital, he o,ned a &ere >E e@uity in the partnership. 3n essence, the petitioner is clai&in' his >E share in the su)Gect real properties, )y relyin' on his o,n selfservin' testi&ony and the e@ually )iased testi&ony of Antonieta Jarantilla. "etitioner has not presented evidence, other than these unsu)stantiated testi&onies, to prove that the respondents did not have the &eans to fund their other )usinesses and real properties ,ithout the partnershipRs inco&e. On the other hand, the respondents have not only, )y testi&onial evidence, proven their case a'ainst the petitioner, )ut have also presented sufficient docu&entary evidence to su)stantiate their clai&s, alle'ations and defenses. .hey presented preponderant proof on ho, they ac@uired and funded such properties in addition to ta/ receipts and ta/ declarations.-$ 3t has )een held that 8,hile ta/ declarations and realty ta/ receipts do not conclusively prove o,nership, they &ay constitute stron' evidence of o,nership ,hen acco&panied )y possession for a period sufficient for prescription.8-%6oreover, it is a rule in this Gurisdiction that testi&onial evidence cannot prevail over docu&entary evidence.-:.his Court had on several occasions, e/pressed our disapproval on usin' &ere selfservin' testi&onies to support oneRs clai&. 3n Oca&po v. Oca&po,90 a case on partition of a co-o,nership, ,e held that1 "etitioners assert that their clai& of co-o,nership of the property ,as sufficiently proved )y their ,itnesses -(uisa Oca&po-(lorin and 6elita Oca&po. Fe disa'ree. .heir testi&onies cannot prevail over the array of docu&ents presented )y Celen. A clai& of o,nership cannot )e )ased si&ply on the testi&onies of ,itnessesJ &uch less on those of interested parties, self-servin' as they are.91 3t is true that a certificate of title is &erely an evidence of o,nership or title over the particular property descri)ed therein. Re'istration in the .orrens syste& does not create or vest title as re'istration is not a &ode of ac@uirin' o,nershipJ hence, this cannot deprive an a''rieved party of a re&edy in la,. 92 Ho,ever, petitioner asserts o,nership over portions of the su)Gect real properties on the stren'th of his o,n ad&issions and on the testi&ony of Antonieta Jarantilla.$avvphi$ As held )y this Court in Repu)lic of the "hilippines v. Orfinada, !r.931 3ndeed, a .orrens title is 'enerally conclusive evidence of o,nership of the land referred to therein, and a stron' presu&ption e/ists that a .orrens title ,as re'ularly issued and valid. A .orrens title is incontroverti)le a'ainst anyinfor!acion possessoria, of other title e/istin' prior to the issuance thereof not annotated on the .orrens title. 6oreover, persons dealin' ,ith property covered )y a .orrens certificate of title are not re@uired to 'o )eyond ,hat appears on its face.9As ,e have settled that this action never really ,as for partition of a co-o,nership, to per&it petitionerRs clai& on these properties is to allo, a collateral, indirect attac7 on respondentsR ad&itted titles. 3n the ,ords of the Court of Appeals, 8such evidence cannot overpo,er the conclusiveness of these certificates of title, &ore so since plaintiffRs <petitionerRs= clai&s a&ount to a collateral attac7, ,hich is prohi)ited under !ection -% of "residential Decree #o. 192:, the "roperty Re'istration Decree.899 !;C. -%. ,ertificate not sub>ect to collateral attacB. K A certificate of title shall not )e su)Gect to collateral attac7. 3t cannot )e altered, &odified, or cancelled e/cept in a direct proceedin' in accordance ,ith la,. .his Court has dee&ed an action or proceedin' to )e 8an attac7 on a title ,hen its o)Gective is to nullify the title, there)y challen'in' the Gud'&ent pursuant to ,hich the title ,as decreed.89> 3n A'uilar v. Alfaro,9$ this Court further distin'uished )et,een a direct and an indirect or collateral attac7, as follo,s1 A collateral attac7 transpires ,hen, in another action to o)tain a different relief and as an incident to the present action, an attac7 is &ade a'ainst the Gud'&ent 'rantin' the title. .his &anner of attac7 is to )e distin'uished fro& a direct attac7 a'ainst a Gud'&ent 'rantin' the title, throu'h an action ,hose &ain o)Gective is to annul, set aside, or enGoin the enforce&ent of such Gud'&ent if not yet i&ple&ented, or to see7 recovery if the property titled under the Gud'&ent had )een disposed of. / / /. "etitionerRs only piece of docu&entary evidence is the Ac7no,led'e&ent of "articipatin' Capital, ,hich as discussed a)ove, failed to prove that the real properties he is clai&in' co-o,nership of ,ere ac@uired out of the proceeds of the )usinesses covered )y such docu&ent. .herefore, petitionerRs theory has no factual or le'al le' to stand on. "a'e I 3%

FH;R;2OR;, the "etition is here)y DENIED and the Decision of the Court of Appeals in CA- .R. CD #o. -0%%$, dated July 30, 2002 is AFFIRMED. !O ORD;R;D.

G.R. No. 1F33/+

Ju#0 29, 2010

MARSMAN DR6SDALE LAND, INC., "etitioner, vs. P!ILIPPINE GEOANAL6TICS, INC. AND GOTESCO PROPERTIES, INC., Respondents. / - - - - - - - - - - - - - - - - - - - - - - -/ G.R. No. 1F33/6 GOTESCO PROPERTIES, INC., "etitioner, vs. MARSMAN DR6SDALE LAND, INC. AND P!ILIPPINE GEOANAL6TICS, INC., Respondents. DECISION CARPIO MORALES, J.: On 2e)ruary 12, 1::$, 6ars&an Drysdale (and, 3nc. *6ars&an Drysdale+ and otesco "roperties, 3nc. * otesco+ entered into a Joint Denture A'ree&ent *JDA+ for the construction and develop&ent of an office )uildin' on a land o,ned )y 6ars&an Drysdale in 6a7ati City. 1 .he JDA contained the follo,in' pertinent provisions1 !;C.3O# -. CA"3.A( O2 .H; JD 3t is the desire of the "arties herein to i&ple&ent this A'ree&ent )y investin' in the "ROJ;C. on a 232.M *90E+ ";RC;#.- 232.M *90E+ ";RC;#. )asis. -.1. Contri)ution of <6ars&an Drysdale=-<6ars&an Drysdale= shall contri)ute the "roperty. .he total appraised value of the "roperty is ";!O!1 2O5R H5#DR;D .F;#.M 63((3O# *"-20,000,000.00+. 2or this purpose, <6ars&an Drysdale= shall deliver the "roperty in a )uilda)le condition ,ithin ninety *:0+ days fro& si'nin' of this A'ree&ent )arrin' any unforeseen circu&stances over ,hich <6ars&an Drysdale= has no control. Cuilda)le condition shall &ean that the old )uildin'?structure ,hich stands on the "roperty is de&olished and ta7en to 'round level. -.2. Contri)ution of < otesco=- < otesco= shall contri)ute the a&ount of ";!O!1 2O5R H5#DR;D .F;#.M 63((3O# *"-20,000,000.00+ in cash ,hich shall )e paya)le as follo,s1 -.2.1. .he a&ount of ";!O!1 232.M 63((3O# *"90,000,000.00+ upon si'nin' of this A'ree&ent. -.2.2. .he )alance of ";!O!1 .HR;; H5#DR;D !;D;#.M 63((3O# *"3$0,000,000.00+ shall )e paid )ased on pro'ress )illin's, relative to the develop&ent and construction of the Cuildin', )ut shall in no case e/ceed ten *10+ &onths fro& delivery of the "roperty in a Cuilda)le condition as defined in section -.1. A Goint account shall )e opened and &aintained )y )oth "arties for handlin' of said )alance, a&on' other "roGect concerns. -.3. 2undin' and 2inancin' -.3.1 Construction fundin' for the "roGect shall )e o)tained fro& the cash contri)ution of < otesco=.

"a'e I 3:

-.3.2 !u)se@uent fundin' shall )e o)tained fro& the pre-sellin' of units in the Cuildin' or, ,hen necessary, fro& loans fro& various )an7s or financial institutions. < otesco= shall arran'e the re@uired fundin' fro& such )an7s or financial institutions, under such ter&s and conditions ,hich ,ill provide financin' rates favora)le to the "arties. -.3.3 <6ars&an Drysdale= shall not )e o)li'ated to fund the "roGect as its contri)ution is li&ited to the "roperty. -.3.- 3f the cost of the "roGect e/ceeds the cash contri)ution of < otesco=, the proceeds o)tained fro& the presellin' of units and proceeds fro& loans, the "arties shall a'ree on other sources and ter&s of fundin' such e/cess as soon as practica)le. -.3.9 / / / /. -.3.> / / / /. -.3.$ / / / /. -.3.% All funds advanced )y a "arty *or )y third parties in su)stitution for advances fro& a "arty+ shall )e repaid )y the JD. -.3.: 3f any "arty a'rees to &a7e an advance to the "roGect )ut fails to do so *in ,hole or in part+ the other party &ay advance the shortfall and the "arty in default shall inde&nify the "arty &a7in' the su)stitute advance on de&and for all of its losses, costs and e/penses incurred in so doin'. *e&phasis suppliedJ underscorin' in the ori'inal+ Dia .echnical !ervices Contract *.!C+ dated July 1-, 1::$,2 the Goint venture en'a'ed the services of "hilippine eoanalytics, 3nc. *" 3+ to provide su)surface soil e/ploration, la)oratory testin', seis&ic study and 'eotechnical en'ineerin' for the proGect. " 3, ,as, ho,ever, a)le to drill only four of five )oreholes needed to conduct its su)surface soil e/ploration and la)oratory testin', Gustifyin' its failure to drill the re&ainin' )orehole to the failure on the part of the Goint venture partners to clear the area ,here the drillin' ,as to )e &ade.3 " 3 ,as a)le to co&plete its seis&ic study thou'h. " 3 then )illed the Goint venture on #ove&)er 2-, 1::$ for "2%-,993.90 representin' the cost of partial su)surface soil e/plorationJ and on January 19, 1::% for "290,%00 representin' the cost of the co&pleted seis&ic study.Despite repeated de&ands fro& " 3,9 the Goint venture failed to pay its o)li'ations. 6ean,hile, due to unfavora)le econo&ic conditions at the ti&e, the Goint venture ,as cut short and the planned )uildin' proGect ,as eventually shelved.> " 3 su)se@uently filed on #ove&)er 11, 1::: a co&plaint for collection of su& of &oney and da&a'es at the Re'ional .rial Court *R.C+ of Wue4on City a'ainst 6ars&an Drysdale and otesco. 3n its Ans,er ,ith Counterclai& and Cross-clai&, 6ars&an Drysdale passed the responsi)ility of payin' " 3 to otesco ,hich, under the JDA, ,as solely lia)le for the &onetary e/penses of the proGect.$ otesco, on the other hand, countered that " 3 has no cause of action a'ainst it as " 3 had yet to co&plete the services enu&erated in the contractJ and that 6ars&an Drysdale failed to clear the property of de)ris ,hich prevented " 3 fro& co&pletin' its ,or7.% Cy Decision of June 2, 200-,: Cranch 22> of the Wue4on City R.C rendered Gud'&ent in favor of " 3, disposin' as follo,s1 FH;R;2OR;, in vie, of all the fore'oin', Gud'&ent is here)y rendered in favor of plaintiff <" 3=. .he defendants < otesco= and <6ars&an Drysdale= are ordered to pay plaintiff, Gointly1 *1+ the su& of "939,393.90 ,ith le'al interest fro& the date of this decision until fully paidJ *2+ the su& of "200,000.00 as e/e&plary da&a'esJ *3+ the su& of "200,000.00 as and for attorneyRs feesJ and "a'e I -0

*-+ costs of suit. .he cross-clai& of defendant <6ars&an Drysdale= a'ainst defendant < otesco= is here)y follo,s1 RA#.;D as

a+ Defendant < otesco= is ordered to rei&)urse co-defendant <6ars&an Drysdale= in the a&ount of "939,393.<90= in accordance ,ith the <JDA=. )+ Defendant < otesco= is further ordered to pay co-defendant <6ars&an Drysdale= the su& of "100,000.00 as and for attorneyRs fees. !O ORD;R;D. *underscorin' in the ori'inalJ e&phasis supplied+ 6ars&an Drysdale &oved for partial reconsideration, contendin' that it should not have )een held Gointly lia)le ,ith otesco on " 3Rs clai& as ,ell as on the a,ards of e/e&plary da&a'es and attorneyRs fees. .he &otion ,as, )y Resolution of Octo)er 2%, 2009, denied. Coth 6ars&an Drysdale and otesco appealed to the Court of Appeals ,hich, )y Decision of January 2%, 200%,10affir&ed ,ith &odification the decision of the trial court. .hus the appellate court disposed1 FH;R;2OR;, pre&ises considered, the instant appeal is "AR.(M RA#.;D. .he assailed Decision dated June 2, 200- and the Resolution dated Octo)er 2%, 2009 of the R.C of Wue4on City, Cranch 22>, in Civil Case #o. W::-3:2-% are here)y A223R6;D ,ith 6OD323CA.3O# deletin' the a,ard of e/e&plary da&a'es in favor of <" 3= and the "100,000.00 attorneyRs fees in favor of <6ars&an Drysdale= and orderin' defendantappellant < otesco= to R;36C5R!; <6ars&an Drysdale= 90E of the a''re'ate su& due <" 3=, instead of the lu&p su& "939,393.00 a,arded )y the R.C. .he rest of the Decision stands. !O ORD;R;D. *capitali4ation and e&phasis in the ori'inalJ underscorin' supplied+ 3n partly affir&in' the trial courtRs decision, the appellate court ratiocinated that not,ithstandin' the ter&s of the JDA, the Goint venture cannot avoid pay&ent of " 3Rs clai& since 8<the JDA= could not affect third persons li7e <" 3= )ecause of the )asic civil la, principle of relativity of contracts ,hich provides that contracts can only )ind the parties ,ho entered into it, and it cannot favor or preGudice a third person, even if he is a,are of such contract and has acted ,ith 7no,led'e thereof.811 .heir &otions for partial reconsideration havin' )een denied,12 6ars&an Drysdale and otesco filed separate petitions for revie, ,ith the Court ,hich ,ere doc7eted as .R. #os. 1%33$- and 1%33$>, respectively. Cy Resolution of !epte&)er %, 200%, the Court consolidated the petitions. 3n .R. #o. 1%33$-, 6ars&an Drysdale i&putes error on the appellate court in A. SADJ5D 3# <6AR!6A# DRM!DA(;= F3.H JO3#. (3AC3(3.M A2.;R CO#C;D3# < O.;!CO= !HO5(D 5(.36A.;(M C; !O(;(M (3AC(; .O <" 3=. C. SAFARD3# A..OR#;MR! 2;;! 3# 2ADOR O2 <" 3=S .HA.

C. S3 #OR3# .H; 2AC. .HA. <" 3= D3D #O. CO6"(M F3.H .H; R;W53R;6;#. O2 8!A.3!2AC.ORM ";R2OR6A#C;8 O2 3.! "R;!.A.3O# FH3CH, "5R!5A#. .O .H; .;CH#3CA( !;RD3C;! CO#.RAC., 3! .H; CO#D3.3O# !3#; W5A #O# .O CO6";#!A.3O#. D. SD3!R; ARD3# C(;AR ;D3D;#C; !HOF3# A# AFARD O2 A..OR#;MR! 2;;!.13 On the other hand, in .R. #o. 1%33$>, <6AR!6A# DRM!DA(;R!= ;#.3.(;6;#. .O

otesco peddles that the appellate court co&&itted error ,hen it

SORD;R;D < O.;!CO= .O "AM "939,393.90 A! CO!. O2 .H; FORA ";R2OR6;D CM <" 3= A#D "100,000.00 <A!= A..OR#;MR! 2;;! S<A#D= .O R;36C5R!; <6AR!6A# DRM!DA(;= 90E O2 "939,393.90 A#D "AM <6AR!6A# DRM!DA(;= "100,000.00 A! A..OR#;MR! 2;;!. 1On the issue of ,hether " 3 ,as indeed entitled to the pay&ent of services it rendered, the Court sees no i&perative to re-e/a&ine the con'ruent findin's of the trial and appellate courts thereon. 5ndou)tedly, the e/ercise involves an e/a&ination of facts ,hich is nor&ally )eyond the a&)it of the CourtRs functions under a petition for revie,, for it is ,ell-settled that this Court is not a trier of facts. Fhile this Gudicial tenet ad&its of "a'e I -1

e/ceptions, such as ,hen the findin's of facts of the appellate court are contrary to those of the trial courtRs, or ,hen the Gud'&ent is )ased on a &isapprehension of facts, or ,hen the findin's of facts are contradicted )y the evidence on record,19 these e/tenuatin' 'rounds find no application in the present petitions. At all events, the Court is convinced that " 3 had &ore than sufficiently esta)lished its clai&s a'ainst the Goint venture. 3n fact, 6ars&an Drysdale had lon' reco'ni4ed " 3Rs contractual clai&s ,hen it *" 3+ received a Certificate of "ay&ent1> fro& the Goint ventureRs proGect &ana'er1$ ,hich ,as endorsed to otesco for processin' and pay&ent.1% .he core issue to )e resolved then is ,hich )et,een Goint venturers 6ars&an Drysdale and lia)ility to pay " 3 its unpaid clai&s. otesco )ears the

.o 6ars&an Drysdale, it is otesco since, under the JDA, construction fundin' for the proGect ,as to )e o)tained fro& otescoRs cash contri)ution, as its *6ars&an DrysdaleRs+ participation in the venture ,as li&ited to the land. otesco &aintains, ho,ever, that it has no lia)ility to pay " 3 since it ,as due to the fault of 6ars&an Drysdale that " 3 ,as una)le to co&plete its underta7in'. .he Court finds 6ars&an Drysdale and otesco Gointly lia)le to " 3.

" 3 e/ecuted a technical service contract ,ith the Goint venture and ,as never a party to the JDA. Fhile the JDA clearly spelled out, inter alia, the capital contri)utions of 6ars&an Drysdale *land+ and otesco *cash+ as ,ell as the fundin' and financin' &echanis& for the proGect, the sa&e cannot )e used to defeat the la,ful clai& of " 3 a'ainst the t,o Goint venturers-partners. .he .!C clearly listed the Goint venturers 6ars&an Drysdale and otesco as the )eneficial o,ner of the proGect,1:and all )illin' invoices indicated the consortiu& therein as the client. As the appellate court held, Articles 120$ and 120% of the Civil Code, ,hich respectively read1 Art. 120$. .he concurrence of t,o or &ore creditors or of t,o or &ore de)tors in one and the sa&e o)li'ation does not i&ply that each one of the for&er has a ri'ht to de&and, or that each one of the latter is )ound to render, entire co&pliance ,ith the prestations.$avvphi$ .here is a solidary lia)ility only ,hen the o)li'ation e/pressly so states, or ,hen the la, or nature of the o)li'ation re@uires solidarity. Art. 120%. 3f fro& the la,, or the nature or the ,ordin' of the o)li'ations to ,hich the precedin' article refers the contrary does not appear, the credit or de)t shall )e presu&ed to )e divided into as &any e@ual shares as there are creditors or de)tors, the credits or de)ts )ein' considered distinct fro& one another, su)Gect to the Rules of Court 'overnin' the &ultiplicity of suits. *e&phasis and underscorin' supplied+, presu&e that the o)li'ation o,in' to " 3 is Goint )et,een 6ars&an Drysdale and otesco.

.he only ti&e that the JDA &ay )e &ade to apply in the present petitions is ,hen the lia)ility of the Goint venturers to each other ,ould set in. A Goint venture )ein' a for& of partnership, it is to )e 'overned )y the la,s on partnership.20 Article 1$:$ of the Civil Code provides1 Art. 1$:$. .he losses and profits shall )e distri)uted in confor&ity ,ith the a'ree&ent. 3f only the share of each partner in the profits has )een a'reed upon, the share of each in the losses shall )e in the sa&e proportion. 3n the a)sence of stipulation, the share of each in the profits and losses shall )e in proportion to ,hat he &ay have contri)uted, )ut the industrial partner shall not )e lia)le for the losses. As for the profits, the industrial partner shall receive such share as &ay )e Gust and e@uita)le under the circu&stances. 3f )esides his services he has contri)uted capital, he shall also receive a share in the profits in proportion to his capital. *e&phasis and underscorin' supplied+ 3n the JDA, 6ars&an Drysdale and otesco a'reed on a 90-90 ratio on the proceeds of the proGect.21 .hey did not provide for the splittin' of losses, ho,ever. Applyin' the a)ove-@uoted provision of Article 1$:$ then, the sa&e ratio applies in splittin' the "939,393.90 o)li'ation-loss of the Goint venture.

"a'e I -2

.he appellate courtRs decision &ust )e &odified, ho,ever. 6ars&an Drysdale and otesco )ein' Gointly lia)le, there is no need for otesco to rei&)urse 6ars&an Drysdale for 890E of the a''re'ate su& due8 to " 3. Allo,in' 6ars&an Drysdale to recover fro& otesco ,hat it paid to " 3 ,ould not only )e contrary to the la, on partnership on division of losses )ut ,ould parta7e of a clear case of unGust enrich&ent at otescoRs e/pense. .he 'rant )y the lo,er courts of 6ars&an Drysdale cross-clai& a'ainst otesco ,as thus erroneous. 6ars&an DrysdaleRs supplication for the a,ard of attorneyRs fees in its favor &ust )e denied. 3t cannot clai& that it ,as co&pelled to liti'ate or that the civil action or proceedin' a'ainst it ,as clearly unfounded, for the JDA provided that, in the event a party advances funds for the proGect, the Goint venture shall repay the advancin' party. 22 6ars&an Drysdale ,as thus not precluded fro& advancin' funds to pay for " 3Rs contracted services to a)ate any le'al action a'ainst the Goint venture itself. 3t ,as in fact hardline insistence on otesco havin' sole responsi)ility to pay for the o)li'ation, despite the fact that " 3Rs services redounded to the )enefit of the Goint venture, that spa,ned the le'al action a'ainst it and otesco. 2inally, an interest of 12E per annu& on the outstandin' o)li'ation &ust )e i&posed fro& the ti&e of de&and23as the delay in pay&ent &a7es the o)li'ation one of for)earance of &oney, confor&a)ly ,ith this CourtRs rulin' in ;astern !hippin' (ines, 3nc. v. Court of Appeals.2- 6ars&an Drysdale and otesco should )ear le'al interest on their respective o)li'ations. FH;R;2OR;, the assailed Decision and Resolution of the Court of Appeals are A223R6;D ,ith 6OD323CA.3O# in that the order for otesco to rei&)urse 6ars&an Drysdale is D;(;.;D, and interest of 12E per annu& on the respective o)li'ations of 6ars&an Drysdale and otesco is i&posed, co&puted fro& the last de&and or on January 9, 1::: up to the finality of the Decision. 3f the adGud'ed a&ount and the interest re&ain unpaid thereafter, the interest rate shall )e 12E per annu& co&puted fro& the ti&e the Gud'&ent )eco&es final and e/ecutory until it is fully satisfied. .he appealed decision is, in all other respects, affir&ed. Costs a'ainst petitioners 6ars&an Drysdale and !O ORD;R;D. otesco.

G.R. No. 1++21+

July 1+, 2003

LU5)IMINDA J. )ILLAREAL, DIOGENES )ILLAREAL "#$ CARMELITO JOSE, petitioners, vs. DONALDO EFREN C. RAMIRE5 "#$ S1ou-0- CESAR G. RAMIRE5 JR. "#$ CARMELITA C. RAMIRE5,respondents. PANGANI AN, J.( A share in a partnership can )e returned only after the co&pletion of the latter0s dissolution, li@uidation and ,indin' up of the )usiness. Ehe ,ase .he "etition for Revie, on Certiorari )efore us challen'es the 6arch 23, 2000 Decision1 and the July 2>, 2000 Resolution2 of the Court of Appeals3 *CA+ in CA- R CD #o. -102>. .he assailed Decision disposed as follo,s1 8FH;R;2OR;, fore'oin' pre&ises considered, the Decision dated July 21, 1::2 rendered )y the Re'ional .rial Court, Cranch 1-%, 6a7ati City is here)y !;. A!3D; and #5((323;D and in lieu thereof a ne, decision is rendered orderin' the <petitioners= Gointly and severally to pay and rei&)urse to <respondents= the a&ount of "293,11-.00. #o pronounce&ent as to costs.8Reconsideration ,as denied in the i&pu'ned Resolution. Ehe Dacts "a'e I -3

On July 29, 1:%-, (u4vi&inda J. Dillareal, Car&elito Jose and Jesus Jose for&ed a partnership ,ith a capital of "$90,000 for the operation of a restaurant and caterin' )usiness under the na&e 8A@uarius 2ood House and Caterin' !ervices.89 Dillareal ,as appointed 'eneral &ana'er and Car&elito Jose, operations &ana'er. Respondent Donaldo ;fren C. Ra&ire4 Goined as a partner in the )usiness on !epte&)er 9, 1:%-. His capital contri)ution of "290,000 ,as paid )y his parents, Respondents Cesar and Car&elita Ra&ire4.> After Jesus Jose ,ithdre, fro& the partnership in January 1:%$, his capital contri)ution of "290,000 ,as refunded to hi& in cash )y a'ree&ent of the partners.$ 3n the sa&e &onth, ,ithout prior 7no,led'e of respondents, petitioners closed do,n the restaurant, alle'edly )ecause of increased rental. .he restaurant furniture and e@uip&ent ,ere deposited in the respondents0 house for stora'e.% On 6arch 1, 1:%$, respondent spouses ,rote petitioners, sayin' that they ,ere no lon'er interested in continuin' their partnership or in reopenin' the restaurant, and that they ,ere acceptin' the latter0s offer to return their capital contri)ution.: On Octo)er 13, 1:%$, Car&elita Ra&ire4 ,rote another letter infor&in' petitioners of the deterioration of the restaurant furniture and e@uip&ent stored in their house. !he also reiterated the re@uest for the return of their one-third share in the e@uity of the partnership. .he repeated oral and ,ritten re@uests ,ere, ho,ever, left unheeded.10 Cefore the Re'ional .rial Court *R.C+ of 6a7ati, Cranch 9:, respondents su)se@uently filed a Co&plaint11 dated #ove&)er 10, 1:%$, for the collection of a su& of &oney fro& petitioners. 3n their Ans,er, petitioners contended that respondents had e/pressed a desire to ,ithdra, fro& the partnership and had called for its dissolution under Articles 1%30 and 1%31 of the Civil CodeJ that respondents had )een paid, upon the turnover to the& of furniture and e@uip&ent ,orth over "-00,000J and that the latter had no ri'ht to de&and a return of their e@uity )ecause their share, to'ether ,ith the rest of the capital of the partnership, had )een spent as a result of irreversi)le )usiness losses.12 3n their Reply, respondents alle'ed that they did not 7no, of any loan encu&)rance on the restaurant. Accordin' to the&, if such alle'ation ,ere true, then the loans incurred )y petitioners should )e re'arded as purely personal and, as such, not char'ea)le to the partnership. .he for&er further averred that they had not received any re'ular report or accountin' fro& the latter, ,ho had solely &ana'ed the )usiness. Respondents also alle'ed that they e/pected the e@uip&ent and the furniture stored in their house to )e re&oved )y petitioners as soon as the latter found a )etter location for the restaurant.13 Respondents filed an 5r'ent 6otion for (eave to !ell or Other,ise Dispose of Restaurant 2urniture and ;@uip&ent1- on July %, 1:%%. .he furniture and the e@uip&ent stored in their house ,ere inventoried and appraised at "2:,000.19 .he display free4er ,as sold for "9,000 and the proceeds ,ere paid to the&.1> After trial, the R.C 1$ ruled that the parties had voluntarily entered into a partnership, ,hich could )e dissolved at any ti&e. "etitioners clearly intended to dissolve it ,hen they stopped operatin' the restaurant. Hence, the trial court, in its July 21, 1::2 Decision, held there lia)le as follo,s11% 8FH;R;2OR;, Gud'&ent is here)y rendered in favor of <respondents= and a'ainst the <petitioners= orderin' the <petitioners= to pay Gointly and severally the follo,in'1 *a+ Actual da&a'es in the a&ount of "290,000.00 *)+ Attorney0s fee in the a&ount of "30,000.00 *c+ Costs of suit.8 Ehe ,. 1uling .he CA held that, althou'h respondents had no ri'ht to de&and the return of their capital contri)ution, the partnership ,as nonetheless dissolved ,hen petitioners lost interest in continuin' the restaurant )usiness ,ith the&. Cecause petitioners never 'ave a proper accountin' of the partnership accounts for li@uidation purposes, and )ecause no sufficient evidence ,as presented to sho, financial losses, the CA. co&puted their lia)ility as follo,s1 "a'e I --

8Conse@uently, since ,hat has )een proven is only the outstandin' o)li'ation of the partnership in the a&ount of "2-0,>9%.00, althou'h contracted )y the partnership )efore <respondents0= have Goined the partnership )ut in accordance ,ith Article 1%2> of the #e, Civil Code, they are lia)le ,hich &ust have to )e deducted fro& the re&ainin' capitali4ation of the said partnership ,hich is in the a&ount of "1,000,000.00 resultin' in the a&ount of "$9:,3-2.00, and in order to 'et the share of <respondents=, this a&ount of "$9:,3-2.00 &ust )e divided into three *3+ shares or in the a&ount of "293,11-.00 for each share and ,hich is the only a&ount ,hich <petitioner= ,ill return to <respondents0= representin' the contri)ution to the partnership &inus the outstandin' de)t thereof.81: Hence, this "etition.20 Fssues 3n their 6e&orandu&,21 petitioners su)&it the follo,in' issues for our consideration1 8:.1. Fhether the Honora)le Court of Appeals0 decision orderin' the distri)ution of the capital contri)ution, instead of the net capital after the dissolution and li@uidation of a partnership, there)y treatin' the capital contri)ution li7e a loan, is in accordance ,ith la, and GurisprudenceJ 8:.2. Fhether the Honora)le Court of Appeals0 decision orderin' the petitioners to Gointly and severally pay and rei&)urse the a&ount of <"=293,11-.00 is supported )y the evidence on recordJ and 8:.3. Fhether the Honora)le Court of Appeals ,as correct in &a7in' <n=o pronounce&ent as to costs.822 On closer scrutiny, the issues are as follo,s1 *1+ ,hether petitioners are lia)le to respondents for the latter0s share in the partnershipJ *2+ ,hether the CA0s co&putation of "293,11- as respondents0 share is correctJ and *3+ ,hether the CA ,as li7e,ise correct in not assessin' costs. Ehis ,ourtHs 1uling .he "etition has &erit. Dirst Fssue1 *hare in Partnership Coth the trial and the appellate courts found that a partnership had indeed e/isted, and that it ,as dissolved on 6arch 1, 1:%$. .hey found that the dissolution too7 place ,hen respondents infor&ed petitioners of the intention to discontinue it )ecause of the for&er0s dissatisfaction ,ith, and loss of trust in, the latter0s &ana'e&ent of the partnership affairs. .hese findin's ,ere a&ply supported )y the evidence on record. Respondents conse@uently de&anded fro& petitioners the return of their one-third e@uity in the partnership. Fe hold that respondents have no ri'ht to de&and fro& petitioners the return of their e@uity share. ;/cept as &ana'ers of the partnership, petitioners did not personally hold its e@uity or assets. 8.he partnership has a Guridical personality separate and distinct fro& that of each of the partners.823 !ince the capital ,as contri)uted to the partnership, not to petitioners, it is the partnership that &ust refund the e@uity of the retirin' partners.2*econd Fssue1 )hat 0ust /e 1eturnedU !ince it is the partnership, as a separate and distinct entity, that &ust refund the shares of the partners, the a&ount to )e refunded is necessarily li&ited to its total resources. 3n other ,ords, it can only pay out ,hat it has in its coffers, ,hich consists of all its assets. Ho,ever, )efore the partners can )e paid their shares, the creditors of the partnership &ust first )e co&pensated.29 After all the creditors have )een paid, ,hatever is left of the partnership assets )eco&es availa)le for the pay&ent of the partners0 shares. ;vidently, in the present case, the e/act a&ount of refund e@uivalent to respondents0 one-third share in the partnership cannot )e deter&ined until all the partnership assets ,ill have )een li@uidated L in other ,ords, sold and converted to cash L and all partnership creditors, if any, paid. .he CA0s co&putation of the a&ount to )e refunded to respondents as their share ,as thus erroneous. 2irst, it see&s that the appellate court ,as under the &isapprehension that the total capital contri)ution ,as e@uivalent to the 'ross assets to )e distri)uted to the partners at the ti&e of the dissolution of the partnership. "a'e I -9

Fe cannot sustain the underlyin' idea that the capital contri)ution at the )e'innin' of the partnership re&ains intact, uni&paired and availa)le for distri)ution or return to the partners. !uch idea is speculative, conGectural and totally ,ithout factual or le'al support. enerally, in the pursuit of a partnership )usiness, its capital is either increased )y profits earned or decreased )y losses sustained. 3t does not re&ain static and unaffected )y the chan'in' fortunes of the )usiness. 3n the present case, the financial state&ents presented )efore the trial court sho,ed that the )usiness had &ade &ea'er profits.2> Ho,ever, nota)le therefro& is the o&ission of any provision for the depreciation2$ of the furniture and the e@uip&ent. .he a&orti4ation of the 'ood,ill2% *initially valued at "900,000+ is not reflected either. "roperly ta7in' these non-cash ite&s into account ,ill sho, that the partnership ,as actually sustainin' su)stantial losses, ,hich conse@uently decreased the capital of the partnership. Coth the trial and the appellate courts in fact reco'ni4ed the decrease of the partnership assets to al&ost nil, )ut the latter failed to reco'ni4e the conse@uent correspondin' decrease of the capital. *econd, the CA0s findin' that the partnership had an outstandin' o)li'ation in the a&ount of "2-0,>9% ,as not supported )y evidence. Fe sustain the contrary findin' of the R.C, ,hich had reGected the contention that the o)li'ation )elon'ed to the partnership for the follo,in' reason1 8/ / / <;=vidence on record failed to sho, the e/act loan o,ed )y the partnership to its creditors. .he )alance sheet *;/h. 0-0+ does not reveal the total loan. .he A'ree&ent *;/h. 0A0+ par. > sho,s an outstandin' o)li'ation of "2-0,099.00 ,hich the partnership o,es to different creditors, ,hile the Certification issued )y 6ercator 2inance *;/h. 0%0+ sho,s that it ,as !ps. Dio'enes ". Dillareal and (u4vi&inda J. Dillareal, the for&er )ein' the no&inal party defendant in the instant case, ,ho o)tained a loan of "399,000.00 on Oct. 1:%3, ,hen the ori'inal partnership ,as not yet for&ed.8 Ehird, the CA failed to reduce the capitali4ation )y "290,000, ,hich ,as the a&ount paid )y the partnership to Jesus Jose ,hen he ,ithdre, fro& the partnership. Cecause of the a)ove-&entioned transactions, the partnership capital ,as actually reduced. Fhen petitioners and respondents ventured into )usiness to'ether, they should have prepared for the fact that their invest&ent ,ould either 'ro, or shrin7. 3n the present case, the invest&ent of respondents su)stantially d,indled. .he ori'inal a&ount of "290,000 ,hich they had invested could no lon'er )e returned to the&, )ecause one third of the partnership properties at the ti&e of dissolution did not a&ount to that &uch. 3t is a lon' esta)lished doctrine that the la, does not relieve parties fro& the effects of un,ise, foolish or disastrous contracts they have entered into ,ith all the re@uired for&alities and ,ith full a,areness of ,hat they ,ere doin'. Courts have no po,er to relieve the& fro& o)li'ations they have voluntarily assu&ed, si&ply )ecause their contracts turn out to )e disastrous deals or un,ise invest&ents.2: "etitioners further ar'ue that respondents acted ne'li'ently )y per&ittin' the partnership assets in their custody to deteriorate to the point of )ein' al&ost ,orthless. !upposedly, the latter should have li@uidated these sole tan'i)le assets of the partnership and considered the proceeds as pay&ent of their net capital. Hence, petitioners ar'ue that the turnover of the re&ainin' partnership assets to respondents ,as precisely the &anner of li@uidatin' the partnership and fully settlin' the latter0s share in the partnership. Fe disa'ree. .he delivery of the store furniture and e@uip&ent to private respondents ,as for the purpose of stora'e. .hey ,ere una,are that the restaurant ,ould no lon'er )e reopened )y petitioners. Hence, the for&er cannot )e faulted for not disposin' of the stored ite&s to recover their capital invest&ent. Ehird Fssue1 ,osts !ection 1, Rule 1-2, provides1 8!;C.3O# 1. ,osts ordinaril# follo& results of suit. L 5nless other,ise provided in these rules, costs shall )e allo,ed to the prevailin' party as a &atter of course, )ut the court shall have po,er, for special reasons, to adGud'e that either party shall pay the costs of an action, or that the sa&e )e divided, as &ay )e e@uita)le. #o costs shall )e allo,ed a'ainst the Repu)lic of the "hilippines unless other,ise provided )y la,.8 Althou'h, as a rule, costs are adGud'ed a'ainst the losin' party, courts have discretion, 8for special reasons,8 to decree other,ise. Fhen a lo,er court is reversed, the hi'her court nor&ally does not a,ard costs, )ecause the losin' party relied on the lo,er court0s Gud'&ent ,hich is presu&ed to have )een issued in 'ood faith, even "a'e I ->

if found later on to )e erroneous. 5nless sho,n to )e patently capricious, the a,ard shall not )e distur)ed )y a revie,in' tri)unal. FH;R;2OR;, the "etition is -1.2EED, and the assailed Decision and Resolution *EE .*FDE. .his disposition is ,ithout preGudice to proper proceedin's for the accountin', the li@uidation and the distri)ution of the re&ainin' partnership assets, if any. #o pronounce&ent as to costs. !O ORD;R;D.
29

Article 1%3: of the Civil Code provides thus1 8Article 1%3:. 3n settlin' accounts )et,een the partners after dissolution, the follo,in' rules shall )e o)served, su)Gect to any a'ree&ent to the contrary1 *1+ .he assets of the partnership are1 *a+ .he partnership property, *)+ .he contri)utions of the partners necessary for the pay&ent of all the lia)ilities specified in #o. 2. *2+ .he lia)ilities of the partnership shall ran7 in order of pay&ent as follo,s1 *a+ .hose o,in' to creditors other than partners, *)+ .hose o,in' to partners other than for capital and profits, *c+ .hose o,in' to partners in respect of capital, *d+ .hose o,in' the partners in respect of profits. *3+ .he assets shall applied in the order of their declaration in #o. 1 of this article to the satisfaction of the lia)ilities. *-+ .he partners shall contri)ute, as provided )y article 1$:$, the a&ount necessary to satisfy the lia)ilities. *9+ An assi'nee for the )enefit of creditors or any person appointed )y the court shall have the ri'ht to enforce the contri)utions specified in the precedin' nu&)er. *>+ Any partner or his le'al representative shall have the ri'ht to enforce the contri)utions specified in #o. -, to the e/tent of the a&ount ,hich he has paid in e/cess of his share of the lia)ility. *$+ .he individual property of a deceased partner shall )e lia)le for the contri)utions specified in #o. -. *%+ Fhen partnership property and the individual properties of the partners are in possession of a court for distri)ution, partnership creditors shall have priority on partnership property, savin' the ri'hts of lien or secured creditors. *:+ Fhere a partner has )eco&e insolvent or his estate is insolvent, the clai&s a'ainst his separate property shall ran7 in the follo,in' order1 *a+ .hose o,in' to separate creditorsJ *)+ .hose o,in' to partnership creditorsJ *c+ .hose o,in' to partnership )y ,ay of contri)ution.8

2$

As an accepted )usiness practice, furniture and e@uip&ent are depreciated over five years to reco'ni4e the decrease in their value due to ,ear and tear. "a'e I -$

2%

As an accepted )usiness practice, 1?9 of the ori'inal value of 'ood,ill is char'ed as a )usiness e/pense every year, such that at the end of five years 'ood,ill no lon'er appears as an asset of the )usiness.

G.R. No. 135F13

O:.o20& 25, 2001

FERNANDO SANTOS, petitioner, vs. SPOUSES ARSENIO "#$ NIE)ES RE6ES, respondents. PANGANI AN, J.( As a 'eneral rule, the factual findin's of the Court of Appeals affir&in' those of the trial court are )indin' on the !upre&e Court. Ho,ever, there are several e/ceptions to this principle. 3n the present case, ,e find occasion to apply )oth the rule and one of the e/ceptions.

Ehe ,ase Cefore us is a "etition for Revie, on Certiorari assailin' the #ove&)er 2%, 1::$ Decision,1 as ,ell as the Au'ust 1$, 1::% and the Octo)er :, 1::% Resolutions,2 issued )y the Court of Appeals *CA+ in CA- R CD #o. 3-$-2. .he Assailed Decision disposed as follo,s1 8FH;R;2OR;, the decision appealed fro& is A223R6;D save as for the counterclai& ,hich is here)y D3!63!!;D. Costs a'ainst <petitioner=.83 Resolvin' respondent0s 6otion for Reconsideration, the Au'ust 1$, 1::% Resolution ruled as follo,s1 8FH;R;2OR;, <respondents0= &otion for reconsideration is RA#.;D. Accordin'ly, the court0s decision dated #ove&)er 2%, 1::$ is here)y 6OD323;D in that the decision appealed fro& is A223R6;D in toto, ,ith costs a'ainst <petitioner=.8.he Octo)er :, 1::% Resolution denied 8for lac7 of &erit8 petitioner0s 6otion for Reconsideration of the Au'ust 1$, 1::% Resolution.9 Ehe Dacts .he events that led to this case are su&&ari4ed )y the CA as follo,s1 8!o&eti&e in June, 1:%>, <"etitioner= 2ernando !antos and <Respondent= #ieves Reyes ,ere introduced to each other )y one 6eliton Oa)at re'ardin' a lendin' )usiness venture proposed )y #ieves. 3t ,as ver)ally a'reed that <petitioner ,ould= act as financier ,hile <#ieves= and Oa)at <,ould= ta7e char'e of solicitation of &e&)ers and collection of loan pay&ents. .he venture ,as launched on June 13, 1:%>, ,ith the understandin' that <petitioner= ,ould receive $0E of the profits ,hile / / / #ieves and Oa)at ,ould earn 19E each. 83n July, 1:%>, / / / #ieves introduced Cesar ra'era to <petitioner=. ra'era, as chair&an of the 6onte 6aria Develop&ent Corporation> *6onte 6aria, for )revity+, sou'ht short-ter& loans for &e&)ers of the corporation. <"etitioner= and ra'era e/ecuted an a'ree&ent providin' funds for 6onte 6aria0s &e&)ers. 5nder the a'ree&ent, 6onte 6aria, represented )y ra'era, ,as entitled to "1.31 co&&ission per thousand paid daily to <petitioner= *;/h. 0A0+/ / / . #ieves 7ept the )oo7s as representative of <petitioner= ,hile <Respondent= Arsenio, hus)and of #ieves, acted as credit investi'ator. 8On Au'ust >, 1:%>, <petitioner=, / / / <#ieves= and Oa)at e/ecuted the 0Article of A'ree&ent0 ,hich for&ali4ed their earlier ver)al arran'e&ent. 8<"etitioner= and <#ieves= later discovered that their partner Oa)at en'a'ed in the sa&e lendin' )usiness in co&petition ,ith their partnership<.= Oa)at ,as there)y e/pelled fro& the partnership. .he operations ,ith 6onte 6aria continued. "a'e I -%

8On June 9, 1:%$, <petitioner= filed a co&plaint for recovery of su& of &oney and da&a'es. <"etitioner= char'ed <respondents=, alle'edly in their capacities as e&ployees of <petitioner=, ,ith havin' &isappropriated funds intended for ra'era for the period July %, 1:%> up to 6arch 31, 1:%$. 5pon ra'era0s co&plaint that his co&&issions ,ere inade@uately re&itted, <petitioner= entrusted "200,000.00 to / / / #ieves to )e 'iven to ra'era/ / / . #ieves alle'edly failed to account for the a&ount. <"etitioner= asserted that after e/a&ination of the records, he found that of the total a&ount of "-,>23,201.:0 entrusted to <respondents=, only "3,0>%,133.20 ,as re&itted to ra'era, there)y leavin' the )alance of "1,999,0>9.$0 unaccounted for. 83n their ans,er, <respondents= asserted that they ,ere partners and not &ere e&ployees of <petitioner=. .he co&plaint, they alle'ed, ,as filed to pree&pt and prevent the& fro& clai&in' their ri'htful share to the profits of the partnership. 8/ / / Arsenio alle'ed that he ,as enticed )y <petitioner= to ta7e the place of Oa)at after <petitioner= learned of Oa)at0s activities. Arsenio resi'ned fro& his Go) at the Asian Develop&ent Can7 to Goin the partnership. 82or her part, / / / #ieves clai&ed that she participated in the )usiness as a partner, as the lendin' activity ,ith 6onte 6aria ori'inated fro& her initiative. ;/cept for the li&ited period of July %, 1:%> throu'h Au'ust 20, 1:%>, she did not handle su&s intended for ra'era. Collections ,ere turned over to ra'era )ecause he 'uaranteed 100E pay&ent of all su&s loaned )y 6onte 6aria. ;ntries she &ade on ,or7sheets ,ere )ased on this assu&ptive 100E collection of all loans. .he loan releases ,ere &ade less ra'era0s a'reed co&&ission. Cecause of this arran'e&ent, she neither received pay&ents fro& )orro,ers nor re&itted any a&ount to ra'era. Her Go) ,as &erely to &a7e ,or7sheets *;/hs. 0190 to 019-DDDDDDDDDD0+ to convey to <petitioner= ho, &uch he ,ould earn if all the su&s 'uaranteed )y ra'era ,ere collected. 8<"etitioner= on the other hand insisted that <respondents= ,ere his &ere e&ployees and not partners ,ith respect to the a'ree&ent ,ith ra'era. He clai&ed that after he discovered Oa)at0s activities, he ceased infusin' funds, there)y causin' the e/tin'uish&ent of the partnership. .he a'ree&ent ,ith ra'era ,as a distinct partnership <fro&= that of <respondent= and Oa)at. <"etitioner= asserted that <respondents= ,ere hired as salaried e&ployees ,ith respect to the partnership )et,een <petitioner= and ra'era. 8<"etitioner= further asserted that in #ieves0 capacity as )oo77eeper, she received all pay&ents fro& ,hich #ieves deducted ra'era0s co&&ission. .he co&&ission ,ould then )e re&itted to ra'era. !he li7e,ise deter&ined loan releases. 8Durin' the pre-trial, the parties narro,ed the issues to the follo,in' points1 ,hether <respondents= ,ere e&ployees or partners of <petitioner=, ,hether <petitioner= entrusted &oney to <respondents= for delivery to ra'era, ,hether the "1,999,0>%.$0 clai&ed under the co&plaint ,as actually re&itted to ra'era and ,hether <respondents= ,ere entitled to their counterclai& for share in the profits.8$ 1uling of the Erial ,ourt 3n its Au'ust 13, 1::1 Decision, the trial court held that respondents ,ere partners, not &ere e&ployees, of petitioner. 3t further ruled that ra'era ,as only a co&&ission a'ent of petitioner, not his partner. "etitioner &oreover failed to prove that he had entrusted any &oney to #ieves. .hus, respondents0 counterclai& for their share in the partnership and for da&a'es ,as 'ranted. .he trial court disposed as follo,s1 83:. 3:.1. 3:.2. FH;R;2OR;, the Court here)y renders Gud'&ent as follo,s1 .H; !;CO#D A6;#D;D CO6"(A3#. dated July 2>, 1:%: is D3!63!!;D. .he <"etitioner= 2;R#A#DO J. !A#.O! is ordered to pay the <Respondent= #3;D;! !. R;M;!, the follo,in'1

3:.2.1. "3,0>-,-2%.00 - .he 19 percent share of the <respondent= #3;D;! !. R;M;! in the profits of her Goint venture ,ith the <petitioner=. 3:.2.2. !i/*>+ percent - As da&a'es fro& Au'ust 3, 1:%$ until the of "3,0>-,-2%.00 is fully paid. "3,0>-,-2%.00 3:.2.3. "90,000.00 - As &oral da&a'es "a'e I -:

3:.2.-. "10,000.00 3:.3.

- As e/e&plary da&a'es

.he <petitioner= 2;R#A#DO J. !A#.O! is ordered to pay the <respondent= AR!;#3O R;M;!, the follo,in'1

3:.3.1. "2,%::,$3:.90 - .he )alance of the 19 percent share of the <respondent= AR!;#3O R;M;! in the profits of his Goint venture ,ith the <petitioner=. 3:.3.2. !i/*>+ percent - As da&a'es fro& Au'ust 3, 1:%$ until the of "2,%::,$3:.90 is fully paid. "2,%::,$3:.90 3:.3.3. "29,000.00 3:.3.-. "10,000.00 3:.-. 3:.-.1. "90,000.00 - As &oral da&a'es - As e/e&plary da&a'es .he <petitioner= 2;R#A#DO J. !A#.O! is ordered to pay the <respondents=1 - As attorney0s feesJ and

3:.-.2. .he cost of the suit.8% 1uling of the ,ourt of .ppeals On appeal, the Decision of the trial court ,as upheld, and the counterclai& of respondents ,as dis&issed. 5pon the latter0s 6otion for Reconsideration, ho,ever, the trial court0s Decision ,as reinstated in toto. !u)se@uently, petitioner0s o,n 6otion for Reconsideration ,as denied in the CA Resolution of Octo)er :, 1::%. .he CA ruled that the follo,in' circu&stances indicated the e/istence of a partnership a&on' the parties1 *1+ it ,as #ieves ,ho )roached to petitioner the idea of startin' a &oney-lendin' )usiness and introduced hi& to ra'eraJ *2+ Arsenio received 8dividends8 or 8profit-shares8 coverin' the period July 19 to Au'ust $, 1:%> *;/h. 8>8+J and *3+ the partnership contract ,as e/ecuted after the A'ree&ent ,ith ra'era and petitioner and thus sho,ed the parties0 intention to consider it as a transaction of the partnership. 3n their co&&on venture, petitioner invested capital ,hile respondents contri)uted industry or services, ,ith the intention of sharin' in the profits of the )usiness. .he CA dis)elieved petitioner0s clai& that #ieves had &isappropriated a total of "200,000 ,hich ,as supposed to )e delivered to ra'era to cover unpaid co&&issions. 3t ,as his tas7 to collect the a&ounts due, ,hile hers ,as &erely to prepare the daily cash flo, reports *;/hs. 819-19DDDDDDDDDD8+ to 7eep trac7 of his collections. Hence, this "etition.: Fssue "etitioner as7s this Court to rule on the follo,in' issues110 8Fhether or not Respondent Court of Appeals acted ,ith 'rave a)use of discretion tanta&ount to e/cess or lac7 of Gurisdiction in1 1. Holdin' that private respondents ,ere partners?Goint venturers and not e&ployees of !antos in connection ,ith the a'ree&ent )et,een !antos and 6onte 6aria? ra'eraJ 2. Affir&in' the findin's of the trial court that the phrase 0Received )y0 on docu&ents si'ned )y #ieves Reyes si'nified receipt of copies of the docu&ents and not of the su&s sho,n thereonJ 3. Affir&in' that the si'nature of #ieves Reyes on ;/hi)it 0;0 ,as a for'eryJ -. 2indin' that ;/hi)it 0H0 <did= not esta)lish receipt )y #ieves Reyes of "200,000.00 for delivery to ra'eraJ 9 Affir&in' the dis&issal of !antos0 <!econd= A&ended Co&plaintJ >. Affir&in' the decision of the trial court, upholdin' private respondents0 counterclai&J "a'e I 90

$. Denyin' !antos0 &otion for reconsideration dated !epte&)er 11, 1::%.8 !uccinctly put, the follo,in' ,ere the issues raised )y petitioner1 *1+ ,hether the parties0 relationship ,as one of partnership or of e&ployer e&ployeeJ *2+ ,hether #ieves &isappropriated the su&s of &oney alle'edly entrusted to her for delivery to ra'era as his co&&issionsJ and *3+ ,hether respondents ,ere entitled to the partnership profits as deter&ined )y the trial court. Ehe ,ourtHs 1uling .he "etition is partly &eritorious. Dirst FssueG /usiness 1elationship "etitioner &aintains that he e&ployed the services of respondent spouses in the &oney-lendin' venture ,ith ra'era, ,ith #ieves as )oo77eeper and Arsenio as credit investi'ator. .hat #ieves introduced ra'era to !antos did not &a7e her a partner. !he ,as only a ,itness to the A'ree&ent )et,een the t,o. !eparate fro& the partnership )et,een petitioner and ra'era ,as that ,hich e/isted a&on' petitioner, #ieves and Oa)at, a partnership that ,as dissolved ,hen Oa)at ,as e/pelled. On the other hand, )oth the CA and the trial court reGected petitioner0s contentions and ruled that the )usiness relationship ,as one of partnership. Fe @uote fro& the CA Decision, as follo,s1 8<Respondents= ,ere industrial partners of <petitioner=/ / / . #ieves herself provided the initiative in the lendin' activities ,ith 6onte 6aria. 3n consonance ,ith the a'ree&ent )et,een appellant, #ieves and Oa)at *later replaced )y Arsenio+, <respondents= contri)uted industry to the co&&on fund ,ith the intention of sharin' in the profits of the partnership. <Respondents= provided services ,ithout ,hich the partnership ,ould not have <had= the ,here,ithal to carry on the purpose for ,hich it ,as or'ani4ed and as such <,ere= considered industrial partners *;van'elista v. A)ad !antos, 91 !CRA -1> <1:$3=+. 8Fhile concededly, the partnership )et,een <petitioner,= #ieves and Oa)at ,as technically dissolved )y the e/pulsion of Oa)at therefro&, the re&ainin' partners si&ply continued the )usiness of the partnership ,ithout under'oin' the procedure relative to dissolution. 3nstead, they invited Arsenio to participate as a partner in their operations. .here ,as therefore, no intent to dissolve the earlier partnership. .he partnership )et,een <petitioner,= #ieves and Arsenio si&ply too7 over and continued the )usiness of the for&er partnership ,ith Oa)at, one of the incidents of ,hich ,as the lendin' operations ,ith 6onte 6aria. /// /// ///

8 ra'era and <petitioner= ,ere not partners. .he &oney-lendin' activities underta7en ,ith 6onte 6aria ,as done in pursuit of the )usiness for ,hich the partnership )et,een <petitioner=, #ieves and Oa)at *later Arsenio+ ,as or'ani4ed. ra'era ,ho represented 6onte 6aria ,as &erely paid co&&issions in e/chan'e for the collection of loans. .he co&&issions ,ere fi/ed on 'ross returns, re'ardless of the e/penses incurred in the operation of the )usiness. .he sharin' of 'ross returns does not in itself esta)lish a partnership.811 Fe a'ree ,ith )oth courts on this point. Cy the contract of partnership, t,o or &ore persons )ind the&selves to contri)ute &oney, property or industry to a co&&on fund, ,ith the intention of dividin' the profits a&on' the&selves.12 .he 8Articles of A'ree&ent8 stipulated that the si'natories shall share the profits of the )usiness in a $0-19-19 &anner, ,ith petitioner 'ettin' the lion0s share.13 .his stipulation clearly proved the esta)lish&ent of a partnership. Fe find no co'ent reason to disa'ree ,ith the lo,er courts that the partnership continued lendin' &oney to the &e&)ers of the 6onte 6aria Co&&unity Develop&ent roup, 3nc., ,hich later on chan'ed its )usiness na&e to "rivate Association for Co&&unity Develop&ent, 3nc. *"ACD3+. #ieves ,as not &erely petitioner0s e&ployee. !he dischar'ed her )oo77eepin' duties in accordance ,ith para'raphs 2 and 3 of the A'ree&ent, ,hich states as follo,s1 82. .hat the !;CO#D "AR.M and .H3RD "AR.M shall handle the solicitation and screenin' of prospective )orro,ers, and shall / / / each )e responsi)le in handlin' the collection of the loan pay&ents of the )orro,ers that they each solicited. "a'e I 91

83. .hat the )oo77eepin' and daily )alancin' of account of the )usiness operation shall )e handled )y the !;CO#D "AR.M.81.he 8!econd "arty8 na&ed in the A'ree&ent ,as none other than #ieves Reyes. On the other hand, Arsenio0s duties as credit investi'ator are su)su&ed under the phrase 8screenin' of prospective )orro,ers.8 Cecause of this A'ree&ent and the dis)urse&ent of &onthly 8allo,ances8 and 8profit shares8 or 8dividends8 *;/h. 8>8+ to Arsenio, ,e uphold the factual findin' of )oth courts that he replaced Oa)at in the partnership. 3ndeed, the partnership ,as esta)lished to en'a'e in a &oney-lendin' )usiness, despite the fact that it ,as for&ali4ed only after the 6e&orandu& of A'ree&ent had )een si'ned )y petitioner and ra'era. Contrary to petitioner0s contention, there is no evidence to sho, that a different )usiness venture is referred to in this A'ree&ent, ,hich ,as e/ecuted on Au'ust >, 1:%>, or a)out a &onth after the 6e&orandu& had )een si'ned )y petitioner and ra'era on July 1-, 1:%>. .he A'ree&ent itself attests to this fact1 8FH;R;A!, the parties have decided to for&ali4e the ter&s of their )usiness relationship in order that their respective interests &ay )e properly defined and esta)lished for their &utual )enefit and understandin'.819 *econd FssueG 2o Proof of 0isappropriation of -rageraHs Inpaid ,o!!ission "etitioner faults the CA findin' that #ieves did not &isappropriate &oney intended for ra'era0s co&&ission. Accordin' to hi&, ra'era re&itted his daily collection to #ieves. .his is sho,n )y ;/hi)it 8C.8 *the 8!chedule of Daily "ay&ents8+, ,hich )ears her si'nature under the ,ords 8received )y.8 2or the period July 1:%> to 6arch 1:%$, ra'era should have earned a total co&&ission of "-,2%2,-2:.30. Ho,ever, only "3,0>%,133.20 ,as received )y hi&. .hus, petitioner infers that she &isappropriated the difference of "1,21-,2:>.10, ,hich represented the unpaid co&&issions. ;/hi)it 8H.8 is an untitled ta)ulation ,hich, accordin' to hi&, sho,s that ra'era ,as also entitled to a co&&ission of "200,000, an a&ount that ,as never delivered )y #ieves.1> On this point, the CA ruled that ;/hi)its 8C,8 82,8 8;8 and 8H8 did not sho, that #ieves received for delivery to ra'era any a&ount fro& ,hich the "1,21-,2:>.10 unpaid co&&ission ,as supposed to co&e, and that such e/hi)its ,ere insufficient proof that she had e&)e44led "200,000. !aid the CA1 8.he presentation of ;/hi)it 8D8 va'uely deno&inated as 0&e&)ers led'er0 does not clearly esta)lish that #ieves received a&ounts fro& 6onte 6aria0s &e&)ers. .he docu&ent does not clearly state ,hat a&ounts the entries thereon represent. 6ore i&portantly, #ieves &ade the entries for the li&ited period of January 11, 1:%$ to 2e)ruary 1$, 1:%$ only ,hile the rest ,ere &ade )y ra'era0s o,n staff. 8#either can ,e 'ive pro)ative value to ;/hi)it 0;0 ,hich alle'edly sho,s ac7no,led'&ent of the re&ittance of co&&issions to Derona on4ales. .he docu&ent is a private one and its due e/ecution and authenticity have not )een duly proved as re@uired in <!=ection 20, Rule 132 of the Rules of Court ,hich states1 0!;C.3O# 20. Proof of Private Docu!ent L Cefore any private docu&ent offered as authentic is received in evidence, its due e/ecution and authenticity &ust )e proved either1 *a+ Cy anyone ,ho sa, the docu&ent e/ecuted or ,rittenJ or *)+ Cy evidence of the 'enuineness of the si'nature or hand,ritin' of the &a7er. 0Any other private docu&ent need only )e identified as that ,hich it is clai&ed to )e.0 8.he court a "uo even ruled that the si'nature thereon ,as a for'ery, as it found that1 0/ / / . Cut #3;D;! denied that ;/h. ;-1 is her si'natureJ she clai&ed that it is a for'ery. .he initial stro7e of ;/h. ;-1 starts fro& up and 'oes do,n,ard. .he initial stro7e of the 'enuine si'natures of #3;D;! *;/hs. A-3, C-1, 2-1, a&on' others+ starts fro& )elo, and 'oes up,ard. .his difference in the start of the initial stro7e of the si'natures ;/hs. ;-1 and of the 'enuine si'natures lends credence to #ieves0 clai& that the si'nature ;/h. ;-1 is a for'ery.0 /// /// ///

"a'e I 92

8#ieves0 testi&ony that the schedules of daily pay&ent *;/hs. 0C0 and 020+ ,ere )ased on the predeter&ined 100E collection as 'uaranteed )y ra'era is credi)le and clearly in accord ,ith the evidence. A perusal of ;/hs. 8C8 and 828 as ,ell as ;/hs. 0190 to 19-DDDDDDDDDD0 reveal that the entries ,ere indeed )ased on the 100E assu&ptive collection 'uaranteed )y ra'era. .hus, the total a&ount recorded on ;/h. 0C0 is e/actly the nu&)er of )orro,ers &ultiplied )y the proGected collection of "190.00 per )orro,er. .his holds true for ;/h. 02.0 8Corollarily, #ieves0 e/planation that the docu&ents ,ere pro for!a and that she si'ned the& not to si'nify that she collected the a&ounts )ut that she received the docu&ents the&selves is &ore )elieva)le than <petitioner0s= assertion that she actually handled the a&ounts. 8Contrary to <petitioner0s= assertion, ;/hi)it 0H0 does not une@uivocally esta)lish that / / / #ieves received "200,000.00 as co&&ission for ra'era. As correctly stated )y the court a "uo, the docu&ent sho,ed a li@uidation of PJ7K.KKK KK and not "200,000.00. 8Accordin'ly, ,e find #ieves0 testi&ony that after Au'ust 20, 1:%>, all collections ,ere &ade )y ra'era )elieva)le and ,orthy of credence. !ince ra'era 'uaranteed a daily 100E pay&ent of the loans, he too7 char'e of the collections. As <petitioner0s= representative, #ieves &erely prepared the daily cash flo, reports *;/h. 0190 to 019 DDDDDDDDDD0+ to ena)le <petitioner= to 7eep trac7 of ra'era0s operations. ra'era on the other hand devised the schedule of daily pay&ent *;/hs. 0C0 and 020+ to record the proGected 'ross daily collections. 8As aptly o)served )y the court a "uo1 02>.1. As )et,een the versions of !A#.O! and #3;D;! on ho, the co&&issions of RA ;RA <,ere= paid to hi&<,= that of #3;D;! is &ore lo'ical and practical and therefore, &ore )elieva)le. !A#.O!0 version ,ould have 'iven rise to this i&pro)a)le situation1 RA ;RA ,ould collect the daily a&orti4ations and then 'ive the& to #3;D;!J #3;D;! ,ould 'et RA ;RA0s co&&issions fro& the a&orti4ations and then 'ive such co&&ission to RA ;RA.801$ .hese findin's are in har&ony ,ith the trial court0s rulin', ,hich ,e @uote )elo,1 821. ;/h. H does not prove that !A#.O! 'ave to #3;D;! and the latter received "200,000.00 for delivery to RA ;RA. ;/h. H sho,s under its si/th colu&n 0ADD3.3O#A( CA!H0 that the additional cash ,as "2-0,000.00. 3f ;/h. H ,ere the li@uidation of the "200,000.00 as alle'ed )y !A#.O!, then his clai& is not true. .his is so )ecause it is a li@uidation of the su& of "2-0,000.00. 821.1. !A#.O! clai&ed that he learned of #3;D;!0 failure to 'ive the "200,000.00 to RA ;RA ,hen he received the latter0s letter co&plainin' of its delayed release. Assu&in' as true !A#.O!0 clai& that he 'ave "200,000.00 to RA ;RA, there is no co&petent evidence that #3;D;! did not 'ive it to RA ;RA. .he only proof that #3;D;! did not 'ive it is the letter. Cut !A#.O! did not even present the letter in evidence. He did not e/plain ,hy he did not. 821.2. .he evidence sho,s that all &oney transactions of the &oney-lendin' )usiness of !A#.O! ,ere covered )y petty cash vouchers. 3t is therefore stran'e ,hy !A#.O! did not present any voucher or receipt coverin' the "200,000.00.81% 3n su&, the lo,er courts found it un)elieva)le that #ieves had e&)e44led "1,999,0>%.$0 fro& the partnership. !he did not re&it "1,21-,2:>.10 to ra'era, )ecause he had deducted his co&&issions )efore re&ittin' his collections. ;/hi)its 8C8 and 828 are &erely co&putations of ,hat ra'era should collect for the dayJ they do not sho, that #ieves received the a&ounts stated therein. #either is there sufficient proof that she &isappropriated "200,000, )ecause ;/hi)it 8H.8 does not indicate that such a&ount ,as received )y herJ in fact, it sho,s a different fi'ure. "etitioner has utterly failed to de&onstrate ,hy a revie, of these factual findin's is ,arranted. Fellentrenched is the )asic rule that factual findin's of the Court of Appeals affir&in' those of the trial court are )indin' and conclusive on the !upre&e Court.1: Althou'h there are e/ceptions to this rule, petitioner has not satisfactorily sho,n that any of the& is applica)le to this issue. Ehird FssueG .ccounting of Partnership "a'e I 93

"etitioner refuses any lia)ility for respondents0 clai&s on the profits of the partnership. He &aintains that 8)oth )usiness propositions ,ere flops,8 as his invest&ents ,ere 8consu&ed and eaten up )y the co&&issions orchestrated to )e due ra'era8 L a situation that 8could not have )een rendered possi)le ,ithout co&plicity )et,een #ieves and ra'era.8 Respondent spouses, on the other hand, postulate that petitioner instituted the action )elo, to avoid pay&ent of the de&ands of #ieves, )ecause so&eti&e in 6arch 1:%$, she 8si'nified to petitioner that it ,as a)out ti&e to 'et her share of the profits ,hich had already accu&ulated to so&e "3 &illion.8 Respondents add that ,hile the partnership has not declared dividends or li@uidated its earnin's, the profits are already reflected on paper. .o prove the counterclai& of #ieves, the spouses sho, that fro& June 13, 1:%> up to April 1:, 1:%$, the profit totaled "20,-2:,920 *;/hs. 8108 et se@. and 8198 et se@.+. Cased on that inco&e, her 19 percent share under the Goint venture a&ounts to "3,0>-,-2% *;/h. 810-3-38+J and Arsenio0s, "2,02>,000 &inus the "30,000 ,hich ,as already advanced to hi& *"etty Cash Douchers, ;/hs. 8>, >-A to >-C8+. .he CA ori'inally held that respondents0 counterclai& ,as pre&ature, pendin' an accountin' of the partnership. Ho,ever, in its assailed Resolution of Au'ust 1$, 1::%, it turned volte face. Affir&in' the trial court0s rulin' on the counterclai&, it held as follo,s1 8Fe earlier ruled that there is still need for an accountin' of the profits and losses of the partnership )efore ,e can rule ,ith certainty as to the respective shares of the partners. 5pon a further revie, of the records of this case, ho,ever, there appears to )e sufficient )asis to deter&ine the a&ount of shares of the parties and da&a'es incurred )y <respondents=. .he fact is that the court a "uo already &ade such a deter&ination <in its= decision dated Au'ust 13, 1::1 on the )asis of the facts on record.820 .he trial court0s rulin' alluded to a)ove is @uoted )elo,1 82$. .he defendants0 counterclai& for the pay&ent of their share in the profits of their Goint venture ,ith !A#.O! is supported )y the evidence. 82$.1. #3;D;! testified that1 Her clai& to a share in the profits is )ased on the a'ree&ent *;/hs. 9, 9-A and 9-C+. .he profits are sho,n in the ,or7in' papers *;/hs. 10 to 10-3, inclusive+ ,hich she prepared. ;/hs. 10 to 10-3 *inclusive+ ,ere )ased on the daily cash flo, reports of ,hich ;/h. 3 is a sa&ple. .he ori'inals of the daily cash flo, reports *;/hs. 3 and 19 to 19-D*10+ ,ere 'iven to !A#.O!. .he Goint venture had a net profit of "20,-2:,920.00 *;/h. 10-3-1+, fro& its operations fro& June 13, 1:%> to April 1:, 1:%$ *;/h. 1-3--+. !he had a share of "3,0>-,-2%.00 *;/h. 10-3-3+ and AR!;#3O, a)out "2,:2>,000.00, in the profits. 82$.1.1 !A#.O! never denied #3;D;!0 testi&ony that the &oney-lendin' )usiness he ,as en'a'ed in netted a profit and that the ori'inals of the daily case flo, reports ,ere furnished to hi&. !A#.O! ho,ever alle'ed that the &oney-lendin' operation of his Goint venture ,ith #3;D;! and OACA. resulted in a loss of a)out half a &illion pesos to hi&. Cut such loss, even if true, does not ne'ate #3;D;!0 clai& that overall, the Goint venture a&on' the& L !A#.O!, #3;D;! and AR!;#3O L netted a profit. .here is no reason for the Court to dou)t the veracity of <the testi&ony of= #3;D;!. 82$.2 .he "2>,2>0.90 ,hich AR!;#3O received as part of his share in the profits *;/hs. >, >-A and >C+ should )e deducted fro& his total share.821 After a close e/a&ination of respondents0 e/hi)its, ,e find reason to disa'ree ,ith the CA. ;/hi)it 8103822 sho,s that the partnership earned a 8total inco&e8 of "20,-2:,920 for the period June 13, 1:%> until April 1:, 1:%$. .his entry is derived fro& the su& of the a&ounts under the follo,in' colu&n headin's1 82-Day Advance Collection,8 8!ervice 2ee,8 8#otarial 2ee,8 8Application 2ee,8 8#et 3nterest 3nco&e8 and 83nterest 3nco&e on 3nvest&ent.8 !uch entries represent the collections of the &oney-lendin' )usiness or its 'ross inco&e. .he 8total inco&e8 sho,n on ;/hi)it 810-38 did not consider the e/penses sustained )y the partnership. 2or instance, it did not factor in the 8'ross loan releases8 representin' the &oney loaned to clients. !ince the )usiness is &oney-lendin', such releases are co&para)le ,ith the inventory or supplies in other )usiness enterprises. #oticea)ly &issin' fro& the co&putation of the 8total inco&e8 is the deduction of the ,ee7ly allo,ance dis)ursed to respondents. ;/hi)its 838 et se@. and 8J8 et se@.23 sho, that Arsenio received allo,ances fro& July 1:, 1:%> to 6arch 2$, 1:%$ in the a''re'ate a&ount of "29,900J and #ieves, fro& July 12, 1:%> to 6arch 2$, 1:%$, in the total a&ount of "29,>00. .hese allo,ances are different fro& the profit already received )y "a'e I 9-

Arsenio. .hey represent e/penses that should have )een deducted fro& the )usiness profits. .he point is that all e/penses incurred )y the &oney-lendin' enterprise of the parties &ust first )e deducted fro& the 8total inco&e8 in order to arrive at the 8net profit8 of the partnership. .he share of each one of the& should )e )ased on this 8net profit8 and not fro& the 8'ross inco&e8 or 8total inco&e8 reflected in ;/hi)it 810-3,8 ,hich the t,o courts invaria)ly referred to as 8cash flo,8 sheets. !i&ilarly, ;/hi)its 8198 et se@.,2- ,hich are the 8Daily Cashflo, Reports,8 do not reflect the )usiness e/penses incurred )y the parties, )ecause they sho, only the daily cash collections. Contrary to the rulin's of )oth the trial and the appellate courts, respondents0 e/hi)its do not reflect the co!plete financial condition of the &oney-lendin' )usiness. .he lo,er courts o)viously la)ored over a &ista7en notion that ;/hi)it 8 10-3-18 represented the 8net profits8 earned )y the partnership. 2or the purpose of deter&inin' the profit that should 'o to an industrial partner *,ho shares in the profits )ut is not lia)le for the losses+, the 'ross inco&e fro& all the transactions carried on )y the fir& &ust )e added to'ether, and fro& this su& &ust )e su)tracted the e/penses or the losses sustained in the )usiness. Only in the difference representin' the net profits does the industrial partner share. Cut if, on the contrary, the losses e/ceed the inco&e, the industrial partner does not share in the losses.29 Fhen the Gud'&ent of the CA is pre&ised on a &isapprehension of facts or a failure to notice certain relevant facts that ,ould other,ise Gustify a different conclusion, as in this particular issue, a revie, of its factual findin's &ay )e conducted, as an e/ception to the 'eneral rule applied to the first t,o issues.2> .he trial court has the advanta'e of o)servin' the ,itnesses ,hile they are testifyin', an opportunity not availa)le to appellate courts. .hus, its assess&ent of the credi)ility of ,itnesses and their testi&onies are accorded 'reat ,ei'ht, even finality, ,hen supported )y su)stantial evidenceJ &ore so ,hen such assess&ent is affir&ed )y the CA. Cut ,hen the issue involves the evaluation of e/hi)its or docu&ents that are attached to the case records, as in the third issue, the rule &ay )e rela/ed. 5nder that situation, this Court has a si&ilar opportunity to inspect, e/a&ine and evaluate those records, independently of the lo,er courts. Hence, ,e dee& the a,ard of the partnership share, as co&puted )y the trial court and adopted )y the CA, to )e inco&plete and not )indin' on this Court. FH;R;2OR;, the "etition is partly RA#.;D. .he assailed #ove&)er 2%, 1::$ Decision is A223R6;D, )ut the challen'ed Resolutions dated Au'ust 1$, 1::% and Octo)er :, 1::% are R;D;R!;D and !;. A!3D;. #o costs. !O ORD;R;D.

G.R. No. 12633+

NoG0;20& 23, 2001

EMILIO EMNACE, petitioner, vs. COURT OF APPEALS, ESTATE OF )ICENTE TA ANAO, S!ER*IN TA ANAO, )ICENTE *ILLIAM TA ANAO, JANETTE TA ANAO DEPOSO6, )ICENTA MA6 TA ANAO )ARELA, ROSELA TA ANAO "#$ )INCENT TA ANAO, respondents. 6NARES4SANTIAGO, J.: "etitioner ;&ilio ;&nace, Dicente .a)anao and Jacinto Divina'racia ,ere partners in a )usiness concern 7no,n as 6a. #el&a 2ishin' 3ndustry. !o&eti&e in January of 1:%>, they decided to dissolve their partnership and e/ecuted an a'ree&ent of partition and distri)ution of the partnership properties a&on' the&, conse@uent to Jacinto Divina'racia0s ,ithdra,al fro& the partnership.1 A&on' the assets to )e distri)uted ,ere five *9+ fishin' )oats, si/ *>+ vehicles, t,o *2+ parcels of land located at !to. #iVo and .alisay, #e'ros Occidental, and cash deposits in the local )ranches of the Can7 of the "hilippine 3slands and "rudential Can7. .hrou'hout the e/istence of the partnership, and even after Dicente .a)anao0s unti&ely de&ise in 1::-, petitioner failed to su)&it to .a)anao0s heirs any state&ent of assets and lia)ilities of the partnership, and to render an accountin' of the partnership0s finances. "etitioner also rene'ed on his pro&ise to turn over to .a)anao0s heirs the deceased0s 1?3 share in the total assets of the partnership, a&ountin' to "30,000,000.00, or the su& of "10,000,000.00, despite for&al de&and for pay&ent thereof.2

"a'e I 99

Conse@uently, .a)anao0 s heirs, respondents herein, filed a'ainst petitioner an action for accountin', pay&ent of shares, division of assets and da&a'es.3 3n their co&plaint, respondents prayed as follo,s1 1. Defendant )e ordered to render the proper accountin' of all the assets and lia)ilities of the partnership at )arJ and 2. After due notice and hearin' defendant )e ordered to pay?re&it?deliver?surrender?yield to the plaintiffs the follo,in'1 A. #o less than One .hird *1?3+ of the assets, properties, dividends, cash, land*s+, fishin' vessels, truc7s, &otor vehicles, and other for&s and su)stance of treasures ,hich )elon' and?or should )elon', had accrued and?or &ust accrue to the partnershipJ C. #o less than .,o Hundred .housand "esos *"200,000.00+ as &oral da&a'esJ C. Attorney0s fees e@uivalent to .hirty "ercent *30E+ of the entire share?a&ount?a,ard ,hich the Honora)le Court &ay resolve the plaintiffs as entitled to plus "1,000.00 for every appearance in court."etitioner filed a &otion to dis&iss the co&plaint on the 'rounds of i&proper venue, lac7 of Gurisdiction over the nature of the action or suit, and lac7 of capacity of the estate of .a)anao to sue.9 On Au'ust 30, 1::-, the trial court denied the &otion to dis&iss. 3t held that venue ,as properly laid )ecause, ,hile realties ,ere involved, the action ,as directed a'ainst a particular person on the )asis of his personal lia)ilityJ hence, the action is not only a personal action )ut also an action in persona!. As re'ards petitioner0s ar'u&ent of lac7 of Gurisdiction over the action )ecause the prescri)ed doc7et fee ,as not paid considerin' the hu'e a&ount involved in the clai&, the trial court noted that a re@uest for accountin' ,as &ade in order that the e/act value of the partnership &ay )e ascertained and, thus, the correct doc7et fee &ay )e paid. 2inally, the trial court held that the heirs of .a)anao had ari'ht to sue in their o,n na&es, in vie, of the provision of Article $$$ of the Civil Code, ,hich states that the ri'hts to the succession are trans&itted fro& the &o&ent of the death of the decedent.> .he follo,in' day, respondents filed an a&ended co&plaint,$ incorporatin' the additional prayer that petitioner )e ordered to 8sell all *the partnership0s+ assets and thereafter pay?re&it?deliver?surrender?yield to the plaintiffs8 their correspondin' share in the proceeds thereof. 3n due ti&e, petitioner filed a &anifestation and &otion to dis&iss,%ar'uin' that the trial court did not ac@uire Gurisdiction over the case due to the plaintiffs0 failure to pay the proper doc7et fees. 2urther, in a supple&ent to his &otion to dis&iss,: petitioner also raised prescription as an additional 'round ,arrantin' the outri'ht dis&issal of the co&plaint. On June 19, 1::9, the trial court issued an Order,10 denyin' the &otion to dis&iss inas&uch as the 'rounds raised therein ,ere )asically the sa&e as the earlier &otion to dis&iss ,hich has )een denied. Anent the issue of prescription, the trial court ruled that prescription )e'ins to run only upon the dissolution of the partnership ,hen the final accountin' is done. Hence, prescription has not set in the a)sence of a final accountin'. 6oreover, an action )ased on a ,ritten contract prescri)es in ten years fro& the ti&e the ri'ht of action accrues. "etitioner filed a petition for certiorari )efore the Court of Appeals,11 raisin' the follo,in' issues1 3. Fhether or not respondent Jud'e acted ,ithout Gurisdiction or ,ith 'rave a)use of discretion in ta7in' co'ni4ance of a case despite the failure to pay the re@uired doc7et feeJ 33. Fhether or not respondent Jud'e acted ,ithout Gurisdiction or ,ith 'rave a)use of discretion in insistin' to try the case ,hich involve *sic+ a parcel of land situated outside of its territorial GurisdictionJ 333. Fhether or not respondent Jud'e acted ,ithout Gurisdiction or ,ith 'rave a)use of discretion in allo,in' the estate of the deceased to appear as party plaintiff, ,hen there is no intestate case and filed )y one ,ho ,as never appointed )y the court as ad&inistratri/ of the estatesJ and 3D. Fhether or not respondent Jud'e acted ,ithout Gurisdiction or ,ith 'rave a)use of discretion in not dis&issin' the case on the 'round of prescription. On Au'ust %, 1::>, the Court of Appeals rendered the assailed decision,12 dis&issin' the petition for certiorari, upon a findin' that no 'rave a)use of discretion a&ountin' to lac7 or e/cess of Gurisdiction ,as co&&itted )y the trial court in issuin' the @uestioned orders denyin' petitioner0s &otions to dis&iss. "a'e I 9>

#ot satisfied, petitioner filed the instant petition for revie,, raisin' the sa&e issues resolved )y the Court of Appeals, na&ely1 3. 2ailure to pay the proper doc7et feeJ

33. "arcel of land su)Gect of the case pendin' )efore the trial court is outside the said court0s territorial GurisdictionJ 333. 3D. (ac7 of capacity to sue on the part of plaintiff heirs of Dicente .a)anaoJ and "rescription of the plaintiff heirs0 cause of action.

3t can )e readily seen that respondents0 pri&ary and ulti&ate o)Gective in institutin' the action )elo, ,as to recover the decedent0s 1?3 share in the partnership0 s assets. Fhile they as7 for an accountin' of the partnership0 s assets and finances, ,hat they are actually as7in' is for the trial court to co&pel petitioner to pay and turn over their share, or the e@uivalent value thereof, fro& the proceeds of the sale of the partnership assets. .hey also assert that until and unless a proper accountin' is done, the e/act value of the partnership0 s assets, as ,ell as their correspondin' share therein, cannot )e ascertained. Conse@uently, they feel Gustified in not havin' paid the co&&ensurate doc7et fee as re@uired )y the Rules of Court.$%&phi$.n't Fe do not a'ree. .he trial court does not have to e&ploy 'uess,or7 in ascertainin' the esti&ated value of the partnership0s assets, for respondents the&selves voluntarily pe''ed the ,orth thereof at .hirty 6illion "esos *"30,000,000.00+. Hence, this case is one ,hich is really not )eyond pecuniary esti&ation, )ut rather parta7es of the nature of a si&ple collection case ,here the value of the su)Gect assets or a&ount de&anded is pecuniarily deter&ina)le.13 Fhile it is true that the e/act value of the partnership0s total assets cannot )e sho,n ,ith certainty at the ti&e of filin', respondents can and &ust ascertain, throu'h infor&ed and practical esti&ation, the a&ount they e/pect to collect fro& the partnership, particularly fro& petitioner, in order to deter&ine the proper a&ount of doc7et and other fees.1- 3t is thus i&perative for respondents to pay the correspondin' doc7et fees in order that the trial court &ay ac@uire Gurisdiction over the action.19 #evertheless, unli7e in the case of 0anchester Develop!ent ,orp. v. ,ourt of .ppeals81> ,here there ,as clearly an effort to defraud the 'overn&ent in avoidin' to pay the correct doc7et fees, ,e see no atte&pt to cheat the courts on the part of respondents. 3n fact, the lo,er courts have noted their e/pressed desire to re&it to the court 8any paya)le )alance or lien on ,hatever a,ard ,hich the Honora)le Court &ay 'rant the& in this case should there )e any deficiency in the pay&ent of the doc7et fees to )e co&puted )y the Cler7 of Court.81$ .here is evident ,illin'ness to pay, and the fact that the doc7et fee paid so far is inade@uate is not an indication that they are tryin' to avoid payin' the re@uired a&ount, )ut &ay si&ply )e due to an ina)ility to pay at the ti&e of filin'. .his consideration &ay have &oved the trial court and the Court of Appeals to declare that the unpaid doc7et fees shall )e considered a lien on the Gud'&ent a,ard. "etitioner, ho,ever, ar'ues that the trial court and the Court of Appeals erred in condonin' the non-pay&ent of the proper le'al fees and in allo,in' the sa&e to )eco&e a lien on the &onetary or property Gud'&ent that &ay )e rendered in favor of respondents. .here is &erit in petitioner0s assertion. .he third para'raph of !ection 1>, Rule 1-1 of the Rules of Court states that1 .he le'al fees shall )e a lien on the &onetary or property Gud'&ent in favor of the pauper-liti'ant. Respondents cannot invo7e the a)ove provision in their favor )ecause it specifically applies to pauper-liti'ants. #o,here in the records does it appear that respondents are liti'atin' as paupers, and as such are e/e&pted fro& the pay&ent of court fees.1% .he rule applica)le to the case at )ar is !ection 9*a+ of Rule 1-1 of the Rules of Court, ,hich defines the t,o 7inds of clai&s as1 *1+ those ,hich are i&&ediately ascertaina)leJ and *2+ those ,hich cannot )e i&&ediately ascertained as to the e/act a&ount. .his second class of clai&s, ,here the e/act a&ount still has to )e finally deter&ined )y the courts )ased on evidence presented, falls s@uarely under the third para'raph of said !ection 9*a+, ,hich provides1 3n case the value of the property or estate or the su& clai&ed is less or &ore in accordance ,ith the appraisal of the court, the difference of fee shall )e refunded or paid as the case &ay )e. *5nderscorin' ours+ 3n Pilipinas *hell Petroleu! ,orporation v. ,ourt of .ppeals81: this Court pronounced that the a)ove-@uoted provision 8clearly conte&plates an 3nitial pay&ent of the filin' fees correspondin' to the esti&ated a&ount of "a'e I 9$

the clai& su)Gect to adGust&ent as to ,hat later &ay )e proved.820 6oreover, ,e reiterated therein the principle that the pay&ent of filin' fees cannot )e &ade contin'ent or dependent on the result of the case. .hus, an initial pay&ent of the doc7et fees )ased on an esti&ated a&ount &ust )e paid si&ultaneous ,ith the filin' of the co&plaint. Other,ise, the court ,ould stand to lose the filin' fees should the Gud'&ent later turn out to )e adverse to any clai& of the respondent heirs. .he &atter of pay&ent of doc7et fees is not a &ere triviality. .hese fees are necessary to defray court e/penses in the handlin' of cases. Conse@uently, in order to avoid tre&endous losses to the Gudiciary, and to the 'overn&ent as ,ell, the pay&ent of doc7et fees cannot )e &ade dependent on the outco&e of the case, e/cept ,hen the clai&ant is a pauper-liti'ant. Applied to the instant case, respondents have a specific clai& - 1?3 of the value of all the partnership assets )ut they did not alle'e a specific a&ount. .hey did, ho,ever, esti&ate the partnership0s total assets to )e ,orth .hirty 6illion "esos *"30,000,000.00+, in a letter21 addressed to petitioner. Respondents cannot no, say that they are una)le to &a7e an esti&ate, for the said letter and the ad&issions therein for& part of the records of this case. .hey cannot avoid payin' the initial doc7et fees )y conveniently o&ittin' the said a&ount in their a&ended co&plaint. .his esti&ate can )e &ade the )asis for the initial doc7et fees that respondents should pay. ;ven if it ,ere later esta)lished that the a&ount proved ,as less or &ore than the a&ount alle'ed or esti&ated, Rule 1-1, !ection 9*a+ of the Rules of Court specifically provides that the court &ay refund the 0e/cess or e/act additional fees should the initial pay&ent )e insufficient. 3t is clear that it is only the difference )et,een the a&ount finally a,arded and the fees paid upon filin' of this co&plaint that is su)Gect to adGust&ent and ,hich &ay )e su)Gected to alien. 3n the oft-@uoted case of *un Fnsurance 9ffice8 Ltd. v. Hon. 0axi!iano .suncion822 this Court held that ,hen the specific clai& 8has )een left for the deter&ination )y the court, the additional filin' fee therefor shall constitute a lien on the Gud'&ent and it shall )e the responsi)ility of the Cler7 of Court or his duly authori4ed deputy to enforce said lien and assess and collect the additional fee.8 Clearly, the rules and Gurisprudence conte&plate the initial pay&ent of filin' and doc7et fees )ased on the esti&ated clai&s of the plaintiff, and it is only ,hen there is a deficiency that a lien &ay )e constituted on the Gud'&ent a,ard until such additional fee is collected. Cased on the fore'oin', the trial court erred in not dis&issin' the co&plaint outri'ht despite their failure to pay the proper doc7et fees. #evertheless, as in other procedural rules, it &ay )e li)erally construed in certain cases if only to secure a Gust and speedy disposition of an action. Fhile the rule is that the pay&ent of the doc7et fee in the proper a&ount should )e adhered to, there are certain e/ceptions ,hich &ust )e strictly construed.23 3n recent rulin's, this Court has rela/ed the strict adherence to the 0anchester doctrine, allo,in' the plaintiff to pay the proper doc7et fees ,ithin a reasona)le ti&e )efore the e/piration of the applica)le prescriptive or re'le&entary period.23n the recent case of 2ational *teel ,orp. v. ,ourt of .ppeals829 this Court held that1 .he court ac@uires Gurisdiction over the action if the filin' of the initiatory pleadin' is acco&panied )y the pay&ent of the re@uisite fees, or, if the fees are not paid at the ti&e of the filin' of the pleadin', as of the ti&e of full pay&ent of the fees ,ithin such reasona)le ti&e as the court &ay 'rant, unless, of course, prescription has set in the &eanti&e. 3t does not follo,, ho,ever, that the trial court should have dis&issed the co&plaint for failure of private respondent to pay the correct a&ount of doc7et fees. Althou'h the pay&ent of the proper doc7et fees is a Gurisdictional re@uire&ent, the trial court &ay allo, the plaintiff in an action to pay the sa&e ,ithin a reasona)le ti&e )efore the e/piration of the applica)le prescriptive or re'le&entary period. 3f the plaintiff fails to co&ply ,ithin this re@uire&ent, the defendant should ti&ely raise the issue of Gurisdiction or else he ,ould )e considered in estoppel. 3n the latter case, the )alance )et,een the appropriate doc7et fees and the a&ount actually paid )y the plaintiff ,ill )e considered a lien or any a,ard he &ay o)tain in his favor. *5nderscorin' ours+ Accordin'ly, the trial court in the case at )ar should deter&ine the proper doc7et fee )ased on the esti&ated a&ount that respondents see7 to collect fro& petitioner, and direct the& to pay the sa&e ,ithin a reasona)le ti&e, provided the applica)le prescriptive or re'le&entary period has not yet e/pired, 2ailure to co&ply there,ith, and upon &otion )y petitioner, the i&&ediate dis&issal of the co&plaint shall issue on Gurisdictional 'rounds.

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On the &atter of i&proper venue, ,e find no error on the part of the trial court and the Court of Appeals in holdin' that the case )elo, is a personal action ,hich, under the Rules, &ay )e co&&enced and tried ,here the defendant resides or &ay )e found, or ,here the plaintiffs reside, at the election of the latter.2> "etitioner, ho,ever, insists that venue ,as i&properly laid since the action is a real action involvin' a parcel of land that is located outside the territorial Gurisdiction of the court a "uo. .his contention is not ,ell-ta7en. .he records indu)ita)ly sho, that respondents are as7in' that the assets of the partnership )e accounted for, sold and distri)uted accordin' to the a'ree&ent of the partners. .he fact that t,o of the assets of the partnership are parcels of land does not &aterially chan'e the nature of the action. 3t is an action in persona! )ecause it is an action a'ainst a person, na&ely, petitioner, on the )asis of his personal lia)ility. 3t is not an action in re! ,here the action is a'ainst the thin' itself instead of a'ainst the person.2$ 2urther&ore, there is no sho,in' that the parcels of land involved in this case are )ein' disputed. 3n fact, it is only incidental that part of the assets of the partnership under li@uidation happen to )e parcels of land. .he ti&e-tested case of ,laridades v. 0ercader8 et al.82% settled this issue thus1 .he fact that plaintiff prays for the sale of the assets of the partnership, includin' the fishpond in @uestion, did not chan'e the nature or character of the action, such sale )ein' &erely a necessary incident of the li@uidation of the partnership, ,hich should precede and?or is part of its process of dissolution. .he action filed )y respondents not only see7s redress a'ainst petitioner. 3t also see7s the enforce&ent of, and petitioner0s co&pliance ,ith, the contract that the partners e/ecuted to for&ali4e the partnership0s dissolution, as ,ell as to i&ple&ent the li@uidation and partition of the partnership0s assets. Clearly, it is a personal action that, in effect, clai&s a de)t fro& petitioner and see7s the perfor&ance of a personal duty on his part.2: 3n fine, respondents0 co&plaint see7in' the li@uidation and partition of the assets of the partnership ,ith da&a'es is a personal action ,hich &ay )e filed in the proper court ,here any of the parties reside.30 Cesides, venue has nothin' to do ,ith Gurisdiction for venue touches &ore upon the su)stance or &erits of the case.31 As it is, venue in this case ,as properly laid and the trial court correctly ruled so. On the third issue, petitioner asserts that the survivin' spouse of Dicente .a)anao has no le'al capacity to sue since she ,as never appointed as ad&inistratri/ or e/ecutri/ of his estate. "etitioner0s o)Gection in this re'ard is &isplaced. .he survivin' spouse does not need to )e appointed as e/ecutri/ or ad&inistratri/ of the estate )efore she can file the action. !he and her children are co&plainants in their o,n ri'ht as successors of Dicente .a)anao. 2ro& the very &o&ent of Dicente .a)anao0 s death, his ri'hts insofar as the partnership ,as concerned ,ere trans&itted to his heirs, for ri'hts to the succession are trans&itted fro& the &o&ent of death of the decedent.32 Fhatever clai&s and ri'hts Dicente .a)anao had a'ainst the partnership and petitioner ,ere trans&itted to respondents )y operation of la,, &ore particularly )y succession, ,hich is a &ode of ac@uisition )y virtue of ,hich the property, ri'hts and o)li'ations to the e/tent of the value of the inheritance of a person are trans&itted.336oreover, respondents )eca&e o,ners of their respective hereditary shares fro& the &o&ent Dicente .a)anao died.3A prior settle&ent of the estate, or even the appoint&ent of !alvacion .a)anao as e/ecutri/ or ad&inistratri/, is not necessary for any of the heirs to ac@uire le'al capacity to sue. As successors ,ho stepped into the shoes of their decedent upon his death, they can co&&ence any action ori'inally pertainin' to the decedent.39 2ro& the &o&ent of his death, his ri'hts as a partner and to de&and fulfill&ent of petitioner0s o)li'ations as outlined in their dissolution a'ree&ent ,ere trans&itted to respondents. .hey, therefore, had the capacity to sue and see7 the court0s intervention to co&pel petitioner to fulfill his o)li'ations. 2inally, petitioner contends that the trial court should have dis&issed the co&plaint on the 'round of prescription, ar'uin' that respondents0 action prescri)ed four *-+ years after it accrued in 1:%>. .he trial court and the Court of Appeals 'ave scant consideration to petitioner0s hollo, ar'u&ents, and ri'htly so. .he three *3+ final sta'es of a partnership are1 *1+ dissolutionJ *2+ ,indin'-upJ and *3+ ter&ination. 3> .he partnership, althou'h dissolved, continues to e/ist and its le'al personality is retained, at ,hich ti&e it co&pletes the ,indin' up of its affairs, includin' the partitionin' and distri)ution of the net partnership assets to the partners.3$ 2or as lon' as the partnership e/ists, any of the partners &ay de&and an accountin' of the partnership0s )usiness. "rescription of the said ri'ht starts to run only upon the dissolution of the partnership ,hen the final accountin' is done.3%

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Contrary to petitioner0s protestations that respondents0 ri'ht to in@uire into the )usiness affairs of the partnership accrued in 1:%>, prescri)in' four *-+ years thereafter, prescription had not even )e'un to run in the a)sence of a final accountin'. Article 1%-2 of the Civil Code provides1 .he ri'ht to an account of his interest shall accrue to any partner, or his le'al representative as a'ainst the ,indin' up partners or the survivin' partners or the person or partnership continuin' the )usiness, at the date of dissolution, in the a)sence of any a'ree&ent to the contrary. Applied in relation to Articles 1%0$ and 1%0:, ,hich also deal ,ith the duty to account, the a)ove-cited provision states that the ri'ht to de&and an accountin' accrues at the date of dissolution in the a)sence of any a'ree&ent to the contrary. Fhen a final accountin' is &ade, it is only then that prescription )e'ins to run. 3n the case at )ar, no final accountin' has )een &ade, and that is precisely ,hat respondents are see7in' in their action )efore the trial court, since petitioner has failed or refused to render an accountin' of the partnership0s )usiness and assets. Hence, the said action is not )arred )y prescription. 3n fine, the trial court neither erred nor a)used its discretion ,hen it denied petitioner0s &otions to dis&iss. (i7e,ise, the Court of Appeals did not co&&it reversi)le error in upholdin' the trial court0s orders. "recious ti&e has )een lost Gust to settle this preli&inary issue, ,ith petitioner resurrectin' the very sa&e ar'u&ents fro& the trial court all the ,ay up to the !upre&e Court. .he liti'ation of the &erits and su)stantial issues of this controversy is no, lon' overdue and &ust proceed ,ithout further delay. *!EREFORE, in vie, of all the fore'oin', the instant petition is DENIED for lac7 of &erit, and the case isREMANDED to the Re'ional .rial Court of Cadi4 City, Cranch >0, ,hich is ORDERED to deter&ine the proper doc7et fee )ased on the esti&ated a&ount that plaintiffs therein see7 to collect, and direct said plaintiffs to pay the sa&e ,ithin a reasona)le ti&e, provided the applica)le prescriptive or re'le&entary period has not yet e/pired. .hereafter, the trial court is ORDERED to conduct the appropriate proceedin's in Civil Case #o. -1>-C. Costs a'ainst petitioner. SO ORDERED.

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"a'e I >1