EN BANC
Subsequently, Mabato filed a motion to dismiss, upon the ground that the complaint states no
[G.R. No. L-24193. June 28, 1968.]
MAURICIO AGAD, Plaintiff-Appellant, v. SEVERINO MABATO & MABATO & AGAD
COMPANY, Defendants-Appellees.
Angeles, Maskario & Associates, for Plaintiff-Appellant.
Victorio S. Advincula for Defendants-Appellees.
SYLLABUS
1. CIVIL LAW; PARTNERSHIP; PURPOSE TO "OPERATE A FISHPOND" ; APPLICABILITY OF ART.
1773 N.C.C. Where a partnership was formed "to operate a fishpond", not to "engage in a
fishpond business", and the partners contributed P1,000.00 each as their share, Art. 1773 of the
Civil Code does not apply, it appearing that neither a fishpond nor a real right thereto was
contributed to the partnership or become a part of the capital thereof, even if a fishpond or a real
right thereto could become part of its assets.
DECISION
CONCEPCION, J.:
In this appeal, taken by plaintiff Mauricio Agad, from an order of dismissal of the Court of First
Instance of Davao, we are called upon to determine the applicability of Article 1773 of our Civil
Code to the contract of partnership on which the complaint herein is based.
Alleging that he and defendant Severino Mabato are pursuant to a public instrument dated
August 29, 1952, copy of which is attached to the complaint as Annex "A" partners in a
fishpond business, to the capital of which Agad contributed P1,000, with the right to receive 50%
of the profits; that from 1952 up to and including 1956, Mabato who handled the partnership
funds, had yearly rendered accounts of the operations of the partnership; and that, despite
repeated demands, Mabato had failed and refused to render accounts for the years 1957 to 1963,
Agad prayed in his complaint against Mabato and Mabato & Agad Company, filed on June 9, 1964,
that judgment be rendered sentencing Mabato to pay him (Agad) the sum of P14,000, as his
share in the profits of the partnership for the period from 1957 to 1963, in addition to P1,000 as
attorneys fees, and ordering the dissolution of the partnership, as well as the winding up of its
affairs by a receiver to be appointed therefor.
In his answer, Mabato admitted the formal allegations of the complaint and denied the existence
of said partnership, upon the ground that the contract therefor had not been perfected, despite
the execution of Annex "A", because Agad had allegedly failed to give his P1,000 contribution to
the partnership capital. Mabato prayed, therefore, that the complaint be dismissed; that Annex
"A" be declared void ab initio; and that Agad be sentenced to pay actual, moral and exemplary
damages, as well as attorneys fees.
cause of action and that the lower court had no jurisdiction over the subject matter of the case,
because it involves principally the determination of rights over public lands. After due hearing,
the court issued the order appealed from, granting the motion to dismiss the complaint for
failure to state a cause of action. This conclusion was predicated upon the theory that the
contract of partnership, Annex "A", is null and void, pursuant to Art. 1773 of our Civil Code,
because an inventory of the fishpond referred in said instrument had not been attached thereto.
A reconsideration of this order having been denied, Agad brought the matter to us for review by
record on appeal.
Articles 1771 and 1773 of said Code provide:jgc:chanrobles.com.ph
"Art. 1771. A partnership may be constituted in any form, except where immovable property or
real rights are contributed thereto, in which case a public instrument shall be necessary.
"Art. 1773. A contract of partnership is void, whenever immovable property is contributed
thereto, if inventory of said property is not made, signed by the parties, and attached to the
Public instrument."cralaw virtua1aw library
The issue before us hinges on whether or not "immovable property or real rights" have been
contributed to the partnership under consideration. Mabato alleged and the lower court held
that the answer should be in the affirmative, because "it is really inconceivable how a
partnership engaged in the fishpond business could exist without said fishpond property (being)
contributed to the partnership." It should be noted, however, that, as stated in Annex "A" the
partnership was established "to operate a fishpond", not to "engage in a fishpond business."
Moreover, none of the partners contributed either a fishpond or a real right to any fishpond.
Their contributions were limited to the sum of P1,000 each. Indeed, Paragraph 4 of the Annex "A"
provides:jgc:chanrobles.com.ph
"That the capital of the said partnership is Two Thousand (P2,000.00) Pesos Philippine Currency,
of which One Thousand (P1,000.00) pesos has been contributed by Severino Mabato and One
Thousand (P1,000.00) Pesos has been contributed by Mauricio Agad.
x x x"
The operation of the fishpond mentioned in Annex "A" was the purpose of the partnership.
Neither said fishpond nor a real right thereto was contributed to the partnership or became part
of the capital thereof, even if a fishpond or a real right thereto could become part of its assets.
WHEREFORE, we find that said Article 1773 of the Civil Code is not in point and that, the order
appealed from should be, as it is hereby set aside and the case remanded to the lower court for
further proceedings, with the costs of this instance against defendant- appellee, Severino Mabato.
It is so ordered.
 THIRD DIVISION
[G.R. No. 101847. May 27, 1993.]
LOURDES NAVARRO AND MENARDO NAVARRO, Petitioners, v. COURT OF APPEALS, JUDGE
BETHEL KATALBAS-MOSCARDON, Presiding Judge, Regional Trial Court of Bacolod City,
Branch 52, Sixth Judicial Region and Spouses OLIVIA V. YANSON AND RICARDO B.
YANSON, Respondents.
George L. Howard Law Office, for Petitioners.
Geocadin, Vinco, Guance, Laudenorio & Cario Law Office for Private Respondents.
SYLLABUS
REMEDIAL LAW; SUPREME COURT; JURISDICTION; LIMITED PURELY QUESTIONS OF LAW AND
NOT TO FACTUAL ISSUES PASSED UPON BY THE TRIAL COURT. Petitioners have come to us
in a petition for review. However, the petition is focused solely on factual issues which can no
longer be entertained. Petitioners arguments are all directed against the decision of the regional
trial court; not a word is said in regard to the appellate courts disposition of their petition for
annulment of judgment. Verily, petitioners keep on pressing the idea that a partnership exists on
account of the so-called admissions in judicio. The appellate court acted properly in dismissing
the petition for annulment of judgment, the issue raised therein having been directly litigated in,
and passed upon by, the trial court.
DECISION
MELO, J.:
Assailed and sought to be set aside by the petition before us is the Resolution of the Court of
Appeals dated June 20, 1991 which dismissed the petition for annulment of judgment filed by the
Spouses Lourdes and Menardo Navarro, thusly:chanrob1es virtual 1aw library
The instant petition for annulment of decision is DISMISSED.
1. Judgments may be annulled only on the ground of extrinsic or collateral fraud, as distinguished
from intrinsic fraud (Canlas v. Court of Appeals, 164 SCRA 160, 170). No such ground is alleged in
the petition.
2. Even if the judgment rendered by the respondent Court were erroneous, it is not necessarily
void (Chereau v. Fuentebella, 43 Phil. 216). Hence, it cannot be annulled by the proceeding
sought to be commenced by the petitioners.
3. The petitioners remedy against the judgment enforcement of which is sought to be stopped
should have been appeal.
SO ORDERED. (pp. 24-25, Rollo.)
The antecedent facts of the case are as follows:chanrob1es virtual 1aw library
On July 23, 1976, herein private respondent Olivia V. Yanson filed a complaint against petitioner
Lourdes Navarro for "Delivery of Personal Properties With Damages." The complaint
incorporated an application for a writ of replevin. The complaint was later docketed as Civil Case
No. 716 (12562) of the then Court of First Instance of Bacolod (Branch 55) and was subsequently
amended to include private respondents husband, Ricardo B. Yanson, as co-plaintiff, and
petitioners husband, as co-defendant.
On July 27, 1976, then Executive Judge Oscar R. Victoriano (later to be promoted and to retire as
Presiding Justice of the Court of Appeals) approved private respondents application for a writ of
replevin. The Sheriffs Return of Service dated March 3, 1978 affirmed receipt by private
respondents of all the pieces of personal property sought to be recovered from petitioners.
On April 30, 1990, Presiding Judge Bethel Katalbas-Moscardon rendered a decision, disposing as
follows:chanrob1es virtual 1aw library
Accordingly, in the light of the aforegoing findings, all chattels already recovered by plaintiff by
virtue of the Writ of Replevin and as listed in the complaint are hereby sustained to belong to
plaintiff being the owner of these properties; the motor vehicle, particularly that Ford Fiera Jeep
registered in and which had remain in the possession of the defendant is likewise declared to
belong to her, however, said defendant is hereby ordered to reimburse plaintiff the sum of
P6,500.00 representing the amount advanced to pay part of the price therefor; and said
defendant is likewise hereby ordered to return to plaintiff such other equipment[s] as were
brought by the latter to and during the operation of their business as were listed in the complaint
and not recovered as yet by virtue of the previous Writ of Replevin. (p. 12, Rollo.)
Petitioner received a copy of the decision on January 10, 1991 (almost 9 months after its
rendition) and filed on January 16, 1991 a "Motion for Extension of Time To File a Motion for
Reconsideration." This was granted on January 18, 1991. Private respondents filed their
opposition, citing the ruling in the case of Habaluyas Enterprises, Inc. v. Japson (142 SCRA 208
[1986] proscribing the filing of any motion for extension of time to file a motion for new trial or
reconsideration. The trial judge vacated the order dated January 18, 1991 and declared the
decision of April 30, 1990 as final and executory. (Petitioners motion for reconsideration was
subsequently filed on February 1, 1991 or 22 days after the receipt of the decision).
On February 4, 1991, the trial judge issued a writ of execution (Annex "5", p. 79, Rollo). The
Sheriffs Return of Service (Annex "6", p. 82, Rollo) declared that the writ was "duly served and
satisfied." A receipt for the amount of P6,500.00 issued by Mrs. Lourdes Yanson, co-petitioner in
this case, was likewise submitted by the Sheriff (Annex "7", p. 83, Rollo).
On June 26, 1991, petitioners filed with respondent court a petition for annulment of the trial
courts decision, claiming that the trial judge erred in declaring the non-existence of a
partnership, contrary to the evidence on record.
The appellate court, as aforesaid, outrightly dismissed the petition due to absence of extrinsic or
collateral fraud, observing further that an appeal was the proper remedy.
In the petition before us, petitioners claim that the trial judge ignored evidence that would show
that the parties "clearly intended to form, and (in fact) actually formed a verbal partnership
engaged in the business of Air Freight Service Agency in Bacolod" ; and that the decision
sustaining the writ of replevin is void since "the properties belonging to the partnership do not
actually belong to any of the parties until the final disposition and winding up of the partnership"
(p. 15, Rollo). These issues, however, were extensively discussed by the trial judge in her 16-
page, single-spaced decision.
We agree with respondents that the decision in this case has become final. In fact a writ of
execution had been issued and was promptly satisfied by the payment of P6,500.00 to private
respondents.chanrobles virtual lawlibrary
Having lost their right of appeal, petitioners resorted to annulment proceedings to justify a
belated judicial review of their case. This was, however, correctly thrown out by the Court of
Appeals because petitioners failed to cite extrinsic or collateral fraud to warrant the setting aside
of the trial courts decision. We respect the appellate courts finding in this regard.
Petitioners have come to us in a petition for review. However, the petition is focused solely on
factual issues which can no longer be entertained. Petitioners arguments are all directed against
the decision of the regional trial court; not a word is said in regard to the appellate courts
disposition of their petition for annulment of judgment. Verily, petitioners keep on pressing the
idea that a partnership exists on account of the so-called admissions in judicio. But the factual
premises of the trial court were more than enough to suppress and negate petitioners
submissions along this line:chanrob1es virtual 1aw library
To be resolved by this Court factually involved the issue of whether there was a partnership that
existed between the parties based on their verbal contention; whether the properties that were
commonly used in the operation of Allied Air Freight belonged to this alleged partnership
business; and the status of the parties in this transaction of alleged partnership. On the other
hand, the legal issue revolves on the dissolution and winding up in case a partnership so existed
as well as the issue of ownership over the properties subject matter of recovery.
As a premise, Article 1767 of the New Civil Code defines the contract of partnership to
quote:jgc:chanrobles.com.ph
"ART. 1767. By the contract of partnership two or more persons bind themselves to contribute
money, property, or industry to a common fund, with the intention of dividing the proceeds
among themselves.
x x x"
Corollary to this definition is the provision in determining whether a partnership exist as so
provided under Article 1769, to wit:chanrob1es virtual 1aw library
x x x
Furthermore, the Code provides under Article 1771 and 1772 that while a partnership may be
constituted in any form, a public instrument is necessary where immovables or any rights is
constituted. Likewise, if the partnership involves a capitalization of P3,000.00 or more in money
or property, the same must appear in a public instrument which must be recorded in the Office of
the Securities and Exchange Commission. Failure to comply with these requirements shall not
affect liability of the partners to third persons.chanrobles lawlibrary : rednad
In consideration of the above, it is undeniable that both the plaintiff and the defendant-wife
made admission to have entered into an agreement of operating this Allied Air Freight Agency of
which the plaintiff personally constituted with the Manila Office in a sense that the plaintiff did
supply the necessary equipments and money while her brother Atty. Rodolfo Villaflores was the
Manger and the defendant the Cashier. It was also admitted that part of this agreement was an
equal sharing of whatever proceeds realized. Consequently, the plaintiff brought into this
transaction certain chattels in compliance with her obligation. The same has been done by the
herein brother and the herein defendant who started to work in the business. A cursory
examination of the evidences presented no proof that a partnership, whether oral or written had
been constituted at the inception of this transaction. True it is that even up to the filing of this
complaint whose movables brought by plaintiff for the use in the operation of the business
remain registered in her name.
While there may have been co-ownership or co-possession of some items and/or any sharing of
proceeds by way of advances received by both plaintiff and the defendant, these are not
indicative and supportive of the existence of any partnership between them. Article 1769 of the
New Civil Code is explicit. Even the books and records retrieved by the Commissioner appointed
by the Court did not show proof of the existence of a partnership as conceptualized by law. Such
that if assuming that there were profits realized in 1975 after the two-year deficits were
compensated, this could only be subject to an equal sharing consonant to the agreement to
equally divide any profit realized. However, this Court cannot overlook the fact that the Audit
Report of the appointed Commissioner was not highly reliable in the sense that it was more of his
personal estimate of what is available on hand. Besides, the alleged profits was a difference
found after valuating the assets and not arising from the real operation of the business. In
accounting procedures, strictly, this could not be profit but a net worth.
In view of the above factual findings of the Court it follows inevitably therefore that there being
no partnership that existed, any dissolution, liquidation or winding up is beside the point. The
plaintiff herself had summarily ceased from her contract of agency and it is a personal
prerogative to desist. On the other hand, the assumption by the defendant in negotiating for
herself the continuance of the Agency with the principal in Manila is comparable to plaintiffs.
Any account of plaintiff with the principal as alleged, bore no evidence as no collection was ever
demanded of from her. The alleged P20,000.00 assumption specifically, as would have been
testified to by the defendants husband remain a mere allegation.cralawnad

As to the properties sought to be recovered, the Court sustains the possession by plaintiff of all
equipments and chattels recovered by virtue of the Writ of Replevin. Considering the other
vehicle which appeared registered in the name of the defendant, and to which even she admitted
that part of the purchase price came from the business claimed mutually operated, although the
Court have not as much considered all entries in the Audit report as totally reliable to be
sustained insofar as the operation of the business is concerned, nevertheless, with this admission
of the defendant and the fact that as borne out in said Report there has been disbursed and paid
for this vehicle out of the business funds in the total sum of P6,500.00, it is only fitting and
proper that validity of these disbursements must be sustained as true (Exhs. M-1 to M-3, p. 180,
Records). In this connection and taking into account the earlier agreement that only profits were
to be shared equally, the plaintiff must be reimbursed of this cost if only to allow the defendant
continuous possession of the vehicle in question. It is a fundamental, moral . . . another. (pp. 71-
75, Rollo.)

Withal, the appellate court acted properly in dismissing the petition for annulment of judgment,
the issue raised therein having been directly litigated in, and passed upon by, the trial court.

WHEREFORE, the petition is DISMISSED. The Resolution of the Court of Appeals dated June 20,
1991 is AFFIRMED in all respects.

No special pronouncement is made as to costs.

SO ORDERED.
 THIRD DIVISION
[G.R. No. 134559. December 9, 1999.]
ANTONIA. TORRES assisted by her husband, ANGELO TORRES; and EMETERIA
BARING, Petitioners, v. COURT OF APPEALS and MANUEL TORRES, Respondents.
DECISION
PANGANIBAN, J.:
Courts may not extricate parties from the necessary consequences of their acts. That the terms of
a contract turn out to be financially disadvantageous to them will not relieve them of their
obligations therein. The lack of an inventory of real property will not ipso facto release the
contracting partners from their respective obligations to each other arising from acts executed in
accordance with their agreement.chanrobles virtual lawlibrary
The Case
The Petition for Review on Certiorari before us assails the March 5, 1998 Decision 1 of the Court
of Appeals 2 (CA) in CA-GR CV No. 42378 and its June 25, 1998 Resolution denying
reconsideration. The assailed Decision affirmed the ruling of the Regional Trial Court (RTC) of
Cebu City in Civil Case No R-21208, which disposed as follows:jgc:chanrobles.com.ph
"WHEREFORE, for all the foregoing considerations, the Court, finding for the defendant and
against the plaintiffs, orders the dismissal of the plaintiffs complaint. The counterclaims of the
defendant are likewise ordered dismissed. No pronouncement as to costs." 3
The Facts
Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture
agreement" with Respondent Manuel Torres for the development of a parcel of land into a
subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of
land in favor of respondent, who then had it registered in his name. By mortgaging the property,
respondent obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture
Agreement, was to be used for the development of the subdivision. 4 All three of them also
agreed to share the proceeds from the sale of the subdivided lots.
The project did not push through, and the land was subsequently foreclosed by the bank.
According to petitioners, the project failed because of "respondents lack of funds or means and
skills." They add that respondent used the loan not for the development of the subdivision, but in
furtherance of his own company, Universal Umbrella Company.
On the other hand, respondent alleged that he used the loan to implement the Agreement. With
the said amount, he was able to effect the survey and the subdivision of the lots. He secured the
Lapu Lapu City Councils approval of the subdivision project which he advertised in a local
newspaper. He also caused the construction of roads, curbs and gutters. Likewise, he entered
into a contract with an engineering firm for the building of sixty low-cost housing units and
actually even set up a model house on one of the subdivision lots. He did all of these for a total
expense of P85,000.chanrobles virtual lawlibrary
Respondent claimed that the subdivision project failed, however, because petitioners and their
relatives had separately caused the annotations of adverse claims on the title to the land, which
eventually scared away prospective buyers. Despite his requests, petitioners refused to cause the
clearing of the claims, thereby forcing him to give up on the project. 5
Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who
were however acquitted. Thereafter, they filed the present civil case which, upon respondents
motion, was later dismissed by the trial court in an Order dated September 6, 1982. On appeal,
however, the appellate court remanded the case for further proceedings. Thereafter, the RTC
issued its assailed Decision, which, as earlier stated, was affirmed by the CA.
Hence, this Petition. 6
Ruling of the Court of Appeals
In affirming the trial court, the Court of Appeals held that petitioners and respondent had formed
a partnership for the development of the subdivision. Thus, they must bear the loss suffered by
the partnership in the same proportion as their share in the profits stipulated in the contract.
Disagreeing with the trial courts pronouncement that losses as well as profits in a joint venture
should be distributed equally, 7 the CA invoked Article 1797 of the Civil Code which
provides:jgc:chanrobles.com.ph
"Article 1797 The losses and profits shall be distributed in conformity with the agreement. If
only the share of each partner in the profits has been agreed upon, the share of each in the losses
shall be in the same proportion."cralaw virtua1aw library
The CA elucidated further:jgc:chanrobles.com.ph
"In the absence of stipulation, the share of each partner in the profits and losses shall be in
proportion to what he may have contributed, but the industrial partner shall not be liable for the
losses. As for the profits, the industrial partner shall receive such share as may be just and
equitable under the circumstances. If besides his services he has contributed capital, he shall also
receive a share in the profits in proportion to his capital." chanrobles.com : virtual law library
The Issue

Petitioners impute to the Court of Appeals the following error:jgc:chanrobles.com.ph
". . . [The] Court of Appeals erred in concluding that the transaction . . . between the petitioners
and respondent was that of a joint venture/partnership, ignoring outright the provision of
Article 1769, and other related provisions of the Civil Code of the Philippines." 8
The Courts Ruling
The Petition is bereft of merit.
Main Issue:chanrob1es virtual 1aw library
Existence of a Partnership
Petitioners deny having formed a partnership with Respondent. They contend that the Joint
Venture Agreement and the earlier Deed of Sale, both of which were the bases of the appellate
courts finding of a partnership, were void.
In the same breath, however, they assert that under those very same contracts, respondent is
liable for his failure to implement the project. Because the agreement entitled them to receive 60
percent of the proceeds from the sale of the subdivision lots, they pray that respondent pay them
damages equivalent to 60 percent of the value of the property. 9
The pertinent portions of the Joint Venture Agreement read as follows:jgc:chanrobles.com.ph
"KNOW ALL MEN BY THESE PRESENTS:jgc:chanrobles.com.ph
"This AGREEMENT, is made and entered into at Cebu City, Philippines, this 5th day of March,
1969, by and between MR. MANUEL R. TORRES, . . . the FIRST PARTY, likewise, MRS. ANTONIA B.
TORRES, and MISS EMETERIA BARING, the SECOND PARTY:chanrob1es virtual 1aw library
WITNESSETH:jgc:chanrobles.com.ph
"That, whereas, the SECOND PARTY, voluntarily offered the FIRST PARTY, this property located
at Lapu-Lapu City, Island of Mactan, under Lot No. 1368 covering TCT No. T-0184 with a total
area of 17,009 square meters, to be sub-divided by the FIRST PARTY;
"Whereas, the FIRST PARTY had given the SECOND PARTY, the sum of: TWENTY THOUSAND
(P20,000.00) Pesos, Philippine Currency, upon the execution of this contract for the property
entrusted by the SECOND PARTY, for sub-division projects and development purposes;
"NOW THEREFORE, for and in consideration of the above covenants and promises herein
contained the respective parties hereto do hereby stipulate and agree as follows:chanrobles
virtual lawlibrary
"ONE: That the SECOND PARTY signed an absolute Deed of Sale . . . dated March 5, 1969, in the
amount of TWENTY FIVE THOUSAND FIVE HUNDRED THIRTEEN & FIFTY CTVS. (P25,513.50)
Philippine Currency, for 1,700 square meters at ONE [PESO] & FIFTY CTVS. (P1.50) Philippine
Currency, in favor of the FIRST PARTY, but the SECOND PARTY did not actually receive the
payment.
"SECOND: That the SECOND PARTY, had received from the FIRST PARTY, the necessary amount
of TWENTY THOUSAND (P20,000.00) pesos, Philippine currency, for their personal obligations
and this particular amount will serve as an advance payment from the FIRST PARTY for the
property mentioned to be sub-divided and to be deducted from the sales.
"THIRD: That the FIRST PARTY, will not collect from the SECOND PARTY, the interest and the
principal amount involving the amount of TWENTY THOUSAND (P20,000.00) Pesos, Philippine
Currency, until the sub-division project is terminated and ready for sale to any interested parties,
and the amount of TWENTY THOUSAND (P20,000.00) pesos, Philippine currency, will be
deducted accordingly.
"FOURTH: That all general expense[s] and all cost[s] involved in the sub-division project should
be paid by the FIRST PARTY, exclusively and all the expenses will not be deducted from the sales
after the development of the sub-division project.
"FIFTH: That the sales of the sub-divided lots will be divided into SIXTY PERCENTUM 60% for
the SECOND PARTY and FORTY PERCENTUM 40% for the FIRST PARTY, and additional profits or
whatever income deriving from the sales will be divided equally according to the . . . percentage
[agreed upon] by both parties.
"SIXTH: That the intended sub-division project of the property involved will start the work and
all improvements upon the adjacent lots will be negotiated in both parties[] favor and all sales
shall [be] decided by both parties.chanroblesvirtual|awlibrary
"SEVENTH: That the SECOND PARTIES, should be given an option to get back the property
mentioned provided the amount of TWENTY THOUSAND (P20,000.00) Pesos, Philippine
Currency, borrowed by the SECOND PARTY, will be paid in full to the FIRST PARTY, including all
necessary improvements spent by the FIRST PARTY, and the FIRST PARTY will be given a grace
period to turnover the property mentioned above.
"That this AGREEMENT shall be binding and obligatory to the parties who executed same freely
and voluntarily for the uses and purposes therein stated." 10
A reading of the terms embodied in the Agreement indubitably shows the existence of a
partnership pursuant to Article 1767 of the Civil Code, which provides:jgc:chanrobles.com.ph
"ARTICLE 1767. By the contract of partnership two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of dividing the
profits among themselves."cralaw virtua1aw library
Under the above-quoted Agreement, petitioners would contribute property to the partnership in
the form of land which was to be developed into a subdivision; while respondent would give, in
addition to his industry, the amount needed for general expenses and other costs. Furthermore,
the income from the said project would be divided according to the stipulated percentage.
Clearly, the contract manifested the intention of the parties to form a partnership. 11
It should be stressed that the parties implemented the contract. Thus, petitioners transferred the
title to the land to facilitate its use in the name of the Respondent. On the other hand, respondent
caused the subject land to be mortgaged, the proceeds of which were used for the survey and the
subdivision of the land. As noted earlier, he developed the roads, the curbs and the gutters of the
subdivision and entered into a contract to construct low-cost housing units on the
property.chanrobles lawlibrary : rednad
Respondents actions clearly belie petitioners contention that he made no contribution to the
partnership. Under Article 1767 of the Civil Code, a partner may contribute not only money or
property, but also industry.
Petitioners Bound by
Terms of Contract
Under Article 1315 of the Civil Code, contracts bind the parties not only to what has been
expressly stipulated, but also to all necessary consequences thereof, as
follows:jgc:chanrobles.com.ph
"ARTICLE 1315. Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and
law."cralaw virtua1aw library
It is undisputed that petitioners are educated and are thus presumed to have understood the
terms of the contract they voluntarily signed. If it was not in consonance with their expectations,
they should have objected to it and insisted on the provisions they wanted.
Courts are not authorized to extricate parties from the necessary consequences of their acts, and
the fact that the contractual stipulations may turn out to be financially disadvantageous will not
relieve parties thereto of their obligations. They cannot now disavow the relationship formed
from such agreement due to their supposed misunderstanding of its terms.
Alleged Nullity of the
Partnership Agreement
Petitioners argue that the Joint Venture Agreement is void under Article 1773 of the Civil Code,
which provides:jgc:chanrobles.com.ph
"ARTICLE 1773. A contract of partnership is void, whenever immovable property is contributed
thereto, if an inventory of said property is not made, signed by the parties, and attached to the
public instrument."cralaw virtua1aw library
They contend that since the parties did not make, sign or attach to the public instrument an
inventory of the real property contributed, the partnership is void.
We clarify. First, Article 1773 was intended primarily to protect third persons. Thus, the eminent
Arturo M. Tolentino states that under the aforecited provision which is a complement of Article
1771, 12 "the execution of a public instrument would be useless if there is no inventory of the
property contributed, because without its designation and description, they cannot be subject to
inscription in the Registry of Property, and their contribution cannot prejudice third persons.
This will result in fraud to those who contract with the partnership in the belief [in] the efficacy
of the guaranty in which the immovables may consist. Thus, the contract is declared void by the
law when no such inventory is made." The case at bar does not involve third parties who may be
prejudiced.
Second, petitioners themselves invoke the allegedly void contract as basis for their claim that
respondent should pay them 60 percent of the value of the property. 13 They cannot in one
breath deny the contract and in another recognize it, depending on what momentarily suits their
purpose. Parties cannot adopt inconsistent positions in regard to a contract and courts will not
tolerate, much less approve, such practice.chanrobles lawlibrary : rednad
In short, the alleged nullity of the partnership will not prevent courts from considering the Joint
Venture Agreement an ordinary contract from which the parties rights and obligations to each
other may be inferred and enforced.
Partnership Agreement Not the Result
of an Earlier Illegal Contract
Petitioners also contend that the Joint Venture Agreement is void under Article 1422 14 of the
Civil Code, because it is the direct result of an earlier illegal contract, which was for the sale of the
land without valid consideration.
This argument is puerile. The Joint Venture Agreement clearly states that the consideration for
the sale was the expectation of profits from the subdivision project. Its first stipulation states
that petitioners did not actually receive payment for the parcel of land sold to Respondent.
Consideration, more properly denominated as cause, can take different forms, such as the
prestation or promise of a thing or service by another. 15
In this case, the cause of the contract of sale consisted not in the stated peso value of the land, but
in the expectation of profits from the subdivision project, for which the land was intended to be
used. As explained by the trial court, "the land was in effect given to the partnership as
[petitioners] participation therein. . . . There was therefore a consideration for the sale, the
[petitioners] acting in the expectation that, should the venture come into fruition, they [would]
get sixty percent of the net profits."cralaw virtua1aw library

Liability of the Parties

Claiming that respondent was solely responsible for the failure of the subdivision project,
petitioners maintain that he should be made to pay damages equivalent to 60 percent of the
value of the property, which was their share in the profits under the Joint Venture Agreement.

We are not persuaded. True, the Court of Appeals held that petitioners acts were not the cause of
the failure of the project. 16 But it also ruled that neither was respondent responsible therefor.
17 In imputing the blame solely to him, petitioners failed to give any reason why we should
disregard the factual findings of the appellate court relieving him of fault. Verily, factual issues
cannot be resolved in a petition for review under Rule 45, as in this case. Petitioners have not
alleged, not to say shown, that their Petition constitutes one of the exceptions to this doctrine. 18
Accordingly, we find no reversible error in the CAs ruling that petitioners are not entitled to
damages.chanroblesvirtual|awlibrary

WHEREFORE, the Petition is hereby DENIED and the challenged Decision AFFIRMED. Costs
against petitioners.

SO ORDERED.
 FIRST DIVISION
[G.R. NO. 142612. July 29, 2005]
OSCAR ANGELES and EMERITA ANGELES, Petitioners, v. THE HON. SECRETARY OF JUSTICE
and FELINO MERCADO, Respondents.
DECISION
CARPIO, J.:
The Case
This is a Petition for Certiorari1 to annul the letter-resolution2 dated 1 February 2000 of the
Secretary of Justice in Resolution No. 155.3 The Secretary of Justice affirmed the resolution4 in I.S.
No. 96-939 dated 28 February 1997 rendered by the Provincial Prosecution Office of the
Department of Justice in Santa Cruz, Laguna ("Provincial Prosecution Office"). The Provincial
Prosecution Office resolved to dismiss the complaint for estafa filed by petitioners Oscar and
Emerita Angeles ("Angeles spouses") against respondent Felino Mercado ("Mercado").
Antecedent Facts
On 19 November 1996, the Angeles spouses filed a criminal complaint for estafa under Article
315 of the Revised Penal Code against Mercado before the Provincial Prosecution Office. Mercado
is the brother-in-law of the Angeles spouses, being married to Emerita Angeles' sister Laura.
In their affidavits, the Angeles spouses claimed that in November 1992, Mercado convinced them
to enter into a contract of antichresis,5 colloquially known as sanglaang-perde, covering eight
parcels of land ("subject land") planted with fruit-bearing lanzones trees located in Nagcarlan,
Laguna and owned by Juana Suazo. The contract of antichresis was to last for five years
with P210,000 as consideration. As the Angeles spouses stay in Manila during weekdays and go
to Laguna only on weekends, the parties agreed that Mercado would administer the lands and
complete the necessary paperwork.6
After three years, the Angeles spouses asked for an accounting from Mercado. Mercado explained
that the subject land earned P46,210 in 1993, which he used to buy more lanzones trees.
Mercado also reported that the trees bore no fruit in 1994. Mercado gave no accounting for 1995.
The Angeles spouses claim that only after this demand for an accounting did they discover that
Mercado had put the contract of sanglaang-perde over the subject land under Mercado and his
spouse's names.7 The relevant portions of the contract of sanglaang-perde, signed by Juana Suazo
alone, read:
xxx
Na alang-alang sa halagang DALAWANG DAAN AT SAMPUNG LIBONG PISO (P210,000), salaping
gastahin, na aking tinanggap sa mag[-]asawa nila G. AT GNG. FELINO MERCADO, mga nasa
hustong gulang, Filipino, tumitira at may pahatirang sulat sa Bgy. Maravilla, bayan ng Nagcarlan,
lalawigan ng Laguna, ay aking ipinagbili, iniliwat at isinalin sa naulit na halaga, sa nabanggit na
mag[-] asawa nila G. AT GNG. FELINO MERCADO[,] sa kanila ay magmamana, kahalili at ibang
dapat pagliwatan ng kanilang karapatan, ang lahat na ibubunga ng lahat na puno ng lanzones,
hindi kasama ang ibang halaman na napapalooban nito, ng nabanggit na WALONG (8) Lagay na
Lupang Cocal-Lanzonal, sa takdang LIMA (5) NA [sic] TAON, magpapasimula sa taong 1993, at
magtatapos sa taong 1997, kaya't pagkatapos ng lansonesan sa taong 1997, ang pamomosision at
pakikinabang sa lahat na puno ng lanzones sa nabanggit na WALONG (8) Lagay na Lupang Cocal-
Lanzonal ay manunumbalik sa akin, sa akin ay magmamana, kahalili at ibang dapat pagliwatan
ng aking karapatan na ako ay walang ibabalik na ano pa mang halaga, sa mag[-] asawa nila G. AT
GNG. FELINO MERCADO.
Na ako at ang mag[-]asawa nila G. AT GNG. FELINO MERCADO ay nagkasundo na ako ay bibigyan
nila ng LIMA (5) na [sic] kaing na lanzones taon-taon sa loob ng LIMA (5) na [sic] taon ng aming
kasunduang ito.
Na ako at ang mag[-]asawa nila G. AT GNG. FELINO MERCADO ay nagkasundo na silang mag[-
]asawa nila G. AT GNG. FELINO MERCADO ang magpapaalis ng dapo sa puno ng lansones taon-
taon [sic] sa loob ng LIMA (5) [sic] taonng [sic] aming kasunduang ito.8
In his counter-affidavit, Mercado denied the Angeles spouses' allegations. Mercado claimed that
there exists an industrial partnership, colloquially known as sosyo industrial, between him and
his spouse as industrial partners and the Angeles spouses as the financiers. This industrial
partnership had existed since 1991, before the contract of antichresis over the subject land. As
the years passed, Mercado used his and his spouse's earnings as part of the capital in the
business transactions which he entered into in behalf of the Angeles spouses. It was their
practice to enter into business transactions with other people under the name of Mercado
because the Angeles spouses did not want to be identified as the financiers.
Mercado attached bank receipts showing deposits in behalf of Emerita Angeles and contracts
under his name for the Angeles spouses. Mercado also attached the minutes of the barangay
conciliation proceedings held on 7 September 1996. During the barangay conciliation
proceedings, Oscar Angeles stated that there was a written sosyo industrial agreement: capital
would come from the Angeles spouses while the profit would be divided evenly between
Mercado and the Angeles spouses.9
The Ruling of the Provincial Prosecution Office
On 3 January 1997, the Provincial Prosecution Office issued a resolution recommending the filing
of criminal information for estafa against Mercado. This resolution, however, was issued without
Mercado's counter-affidavit.
Meanwhile, Mercado filed his counter-affidavit on 2 January 1997. On receiving the 3 January
1997 resolution, Mercado moved for its reconsideration. Hence, on 26 February 1997, the
Provincial Prosecution Office issued an amended resolution dismissing the Angeles spouses'
complaint for estafa against Mercado.
The Provincial Prosecution Office stated thus:
The subject of the complaint hinges on a partnership gone sour. The partnership was initially
unsaddled [with] problems. Management became the source of misunderstanding including the
accounting of profits, which led to further misunderstanding until it was revealed that the
contract with the orchard owner was only with the name of the respondent, without the names
of the complainants.
The accusation of "estafa" here lacks enough credible evidentiary support to sustain a prima
faciefinding.
Premises considered, it is respectfully recommended that the complaint for estafa be dismissed.
RESPECTFULLY SUBMITTED.10
The Angeles spouses filed a motion for reconsideration, which the Provincial Prosecution Office
denied in a resolution dated 4 August 1997.
The Ruling of the Secretary of Justice
On appeal to the Secretary of Justice, the Angeles spouses emphasized that the document
evidencing the contract of sanglaang-perde with Juana Suazo was executed in the name of the
Mercado spouses, instead of the Angeles spouses. The Angeles spouses allege that this document
alone proves Mercado's misappropriation of their P210,000.
The Secretary of Justice found otherwise. Thus:
Reviewing the records of the case, we are of the opinion that the indictment of [Mercado] for the
crime of estafa cannot be sustained. [The Angeles spouses] failed to show sufficient proof that
[Mercado] deliberately deceived them in the "sanglaang perde" transaction. The document alone,
which was in the name of [Mercado and his spouse], failed to convince us that there was deceit or
false representation on the part of [Mercado] that induced the [Angeles spouses] to part with
their money. [Mercado] satisfactorily explained that the [Angeles spouses] do not want to be
revealed as the financiers. Indeed, it is difficult to believe that the [Angeles spouses] would
readily part with their money without holding on to some document to evidence the receipt of
money, or at least to inspect the document involved in the said transaction. Under the
circumstances, we are inclined to believe that [the Angeles spouses] knew from the very start
that the questioned document was not really in their names.
In addition, we are convinced that a partnership truly existed between the [Angeles spouses] and
[Mercado]. The formation of a partnership was clear from the fact that they contributed money
to a common fund and divided the profits among themselves. Records would show that
[Mercado] was able to make deposits for the account of the [Angeles spouses]. These deposits
represented their share in the profits of their business venture. Although the [Angeles spouses]
deny the existence of a partnership, they, however, never disputed that the deposits made by
[Mercado] were indeed for their account.
The transcript of notes on the dialogue between the [Angeles spouses] and [Mercado] during the
hearing of their barangay conciliation case reveals that the [Angeles spouses] acknowledged
their joint business ventures with [Mercado] although they assailed the manner by which
[Mercado] conducted the business and handled and distributed the funds. The veracity of this
transcript was not raised in issued [sic] by [the Angeles spouses]. Although the legal formalities
for the formation of a partnership were not adhered to, the partnership relationship of the
[Angeles spouses] and [Mercado] is evident in this case. Consequently, there is no estafa where
money is delivered by a partner to his co-partner on the latter's representation that the amount
shall be applied to the business of their partnership. In case of misapplication or conversion of
the money received, the co-partner's liability is civil in nature (People v. Clarin, 7 Phil. 504)
WHEREFORE, the appeal is hereby DISMISSED.11
Hence, this petition.
Issues
The Angeles spouses ask us to consider the following issues:
1. Whether the Secretary of Justice committed grave abuse of discretion amounting to lack of
jurisdiction in dismissing the appeal of the Angeles spouses;
2. Whether a partnership existed between the Angeles spouses and Mercado even without any
documentary proof to sustain its existence;
3. Assuming that there was a partnership, whether there was misappropriation by Mercado of
the proceeds of the lanzones after the Angeles spouses demanded an accounting from him of the
income at the office of the barangay authorities on 7 September 1996, and Mercado failed to do
so and also failed to deliver the proceeds to the Angeles spouses;
4. Whether the Secretary of Justice should order the filing of the information for estafa against
Mercado.12
The Ruling of the Court
The petition has no merit.
Whether the Secretary of Justice Committed
Grave Abuse of Discretion
An act of a court or tribunal may constitute grave abuse of discretion when the same is performed
in a capricious or whimsical exercise of judgment amounting to lack of jurisdiction. The abuse of
discretion must be so patent and gross as to amount to an evasion of positive duty, or to a virtual
refusal to perform a duty enjoined by law, as where the power is exercised in an arbitrary and
despotic manner because of passion or personal hostility.13
The Angeles spouses fail to convince us that the Secretary of Justice committed grave abuse of
discretion when he dismissed their appeal. Moreover, the Angeles spouses committed an error in
procedure when they failed to file a motion for reconsideration of the Secretary of Justice's
resolution. A previous motion for reconsideration before the filing of a Petition for Certiorari is
necessary unless: (1) the issue raised is one purely of law; (2) public interest is involved; (3)
there is urgency; (4) a question of jurisdiction is squarely raised before and decided by the lower
court; and (5) the order is a patent nullity.14 The Angeles spouses failed to show that their case
falls under any of the exceptions. In fact, this present Petition for Certiorari is dismissible for this
reason alone.
Whether a Partnership Existed
Between Mercado and the Angeles Spouses
The Angeles spouses allege that they had no partnership with Mercado. The Angeles spouses rely
on Articles 1771 to 1773 of the Civil Code, which state that:
Art. 1771. A partnership may be constituted in any form, except where immovable property or
real rights are contributed thereto, in which case a public instrument shall be necessary.
Art. 1772. Every contract of partnership having a capital of three thousand pesos or more, in
money or property, shall appear in a public instrument, which must be recorded in the Office of
the Securities and Exchange Commission.
Failure to comply with the requirements of the preceding paragraph shall not affect the liability
of the partnership and the members thereof to third persons.
Art. 1773. A contract of partnership is void, whenever immovable property is contributed
thereto, if an inventory of said property is not made, signed by the parties, and attached to the
public instrument.
The Angeles spouses' position that there is no partnership because of the lack of a public
instrument indicating the same and a lack of registration with the Securities and Exchange
Commission ("SEC") holds no water. First, the Angeles spouses contributed money to the
partnership and not immovable property. Second, mere failure to register the contract of
partnership with the SEC does not invalidate a contract that has the essential requisites of a
partnership. The purpose of registration of the contract of partnership is to give notice to third
parties. Failure to register the contract of partnership does not affect the liability of the
partnership and of the partners to third persons. Neither does such failure to register affect the
partnership's juridical personality. A partnership may exist even if the partners do not use the
words "partner" or "partnership."
Indeed, the Angeles spouses admit to facts that prove the existence of a partnership: a contract
showing a sosyo industrial or industrial partnership, contribution of money and industry to a
common fund, and division of profits between the Angeles spouses and Mercado.
Whether there was
Misappropriation by Mercado
The Secretary of Justice adequately explained the alleged misappropriation by Mercado: "The
document alone, which was in the name of [Mercado and his spouse], failed to convince us that
there was deceit or false representation on the part of [Mercado] that induced the [Angeles
spouses] to part with their money. [Mercado] satisfactorily explained that the [Angeles spouses]
do not want to be revealed as the financiers."15
Even Branch 26 of the Regional Trial Court of Santa Cruz, Laguna which decided the civil case for
damages, injunction and restraining order filed by the Angeles spouses against Mercado and Leo
Cerayban, stated:
xxx [I]t was the practice to have all the contracts of antichresis of their partnership secured in
[Mercado's] name as [the Angeles spouses] are apprehensive that, if they come out into the open
as financiers of said contracts, they might be kidnapped by the New People's Army or their
business deals be questioned by the Bureau of Internal Revenue or worse, their assets and
unexplained income be sequestered, as xxx Oscar Angeles was then working with the
government.16
Furthermore, accounting of the proceeds is not a proper subject for the present case.
For these reasons, we hold that the Secretary of Justice did not abuse his discretion in dismissing
the appeal of the Angeles spouses.
WHEREFORE, we AFFIRM the decision of the Secretary of Justice. The present Petition
for Certiorari is DISMISSED.SO ORDERED.
 THIRD DIVISION
[G.R. NOS. 166299-300 December 13, 2005]
AURELIO K. LITONJUA, JR., Petitioner, v. EDUARDO K. LITONJUA, SR., ROBERT T. YANG,
ANGLO PHILS. MARITIME, INC., CINEPLEX, INC., DDM GARMENTS, INC., EDDIE K. LITONJUA
SHIPPING AGENCY, INC., EDDIE K. LITONJUA SHIPPING CO., INC., LITONJUA SECURITIES,
INC. (formerly E. K. Litonjua Sec), LUNETA THEATER, INC., E & L REALTY, (formerly E & L
INT L SHIPPING CORP.), FNP CO., INC., HOME ENTERPRISES, INC., BEAUMONT DEV. REALTY
CO., INC., GLOED LAND CORP., EQUITY TRADING CO., INC., 3D CORP., "L" DEV. CORP, LCM
THEATRICAL ENTERPRISES, INC., LITONJUA SHIPPING CO. INC., MACOIL INC., ODEON
REALTY CORP., SARATOGA REALTY, INC., ACT THEATER INC. (formerly General Theatrical
& Film Exchange, INC.), AVENUE REALTY, INC., AVENUE THEATER, INC. and LVF
PHILIPPINES, INC., (Formerly VF PHILIPPINES), Respondents.
DECISION
GARCIA, J.:
In this Petition for Review under Rule 45 of the Rules of Court, petitioner Aurelio K. Litonjua, Jr.
seeks to nullify and set aside the Decision of the Court of Appeals (CA) dated March 31, 2004 1 in
consolidated cases C.A. G.R. Sp. No. 76987 and C.A. G.R. SP. No 78774 and its Resolution dated
December 07, 2004,2 denying petitioner's motion for reconsideration.
The recourse is cast against the following factual backdrop:
Petitioner Aurelio K. Litonjua, Jr. (Aurelio) and herein respondent Eduardo K. Litonjua, Sr.
(Eduardo) are brothers. The legal dispute between them started when, on December 4, 2002, in
the Regional Trial Court (RTC) at Pasig City, Aurelio filed a suit against his brother Eduardo and
herein respondent Robert T. Yang (Yang) and several corporations for specific performance and
accounting. In his complaint,3 docketed as Civil Case No. 69235 and eventually raffled to Branch
68 of the court,4 Aurelio alleged that, since June 1973, he and Eduardo are into a joint
venture/partnership arrangement in the Odeon Theater business which had expanded thru
investment in Cineplex, Inc., LCM Theatrical Enterprises, Odeon Realty Corporation (operator of
Odeon I and II theatres), Avenue Realty, Inc., owner of lands and buildings, among other
corporations. Yang is described in the complaint as petitioner's and Eduardo's partner in their
Odeon Theater investment.5 The same complaint also contained the following material
averments:
3.01 On or about 22 June 1973, [Aurelio] and Eduardo entered into a joint venture/partnership
for the continuation of their family business and common family funds '.
3.01.1 This joint venture/[partnership] agreement was contained in a memorandum addressed
by Eduardo to his siblings, parents and other relatives. Copy of this memorandum is attached
hereto and made an integral part as Annex "A" and the portion referring to [Aurelio] submarked
as Annex "A-1".
3.02 It was then agreed upon between [Aurelio] and Eduardo that in consideration of [Aurelio's]
retaining his share in the remaining family businesses (mostly, movie theaters, shipping and land
development) and contributing his industry to the continued operation of these businesses,
[Aurelio] will be given P1 Million or 10% equity in all these businesses and those to be
subsequently acquired by them whichever is greater. . . .
4.01 - from 22 June 1973 to about August 2001, or [in] a span of 28 years, [Aurelio] and Eduardo
had accumulated in their joint venture/partnership various assets including but not limited to
the corporate defendants and [their] respective assets.
4.02 In addition . . . the joint venture/partnership - had also acquired [various other assets], but
Eduardo caused to be registered in the names of other parties'.
xxx xxx xxx
4.04 The substantial assets of most of the corporate defendants consist of real properties '. A list
of some of these real properties is attached hereto and made an integral part as Annex "B".
xxx xxx xxx
5.02 Sometime in 1992, the relations between [Aurelio] and Eduardo became sour so that
[Aurelio] requested for an accounting and liquidation of his share in the joint
venture/partnership [but these demands for complete accounting and liquidation were not
heeded].
xxx
5.05 What is worse, [Aurelio] has reasonable cause to believe that Eduardo and/or the corporate
defendants as well as Bobby [Yang], are transferring . . . various real properties of the
corporations belonging to the joint venture/partnership to other parties in fraud of [Aurelio]. In
consequence, [Aurelio] is therefore causing at this time the annotation on the titles of these real
properties' a notice of lis pendens '. (Emphasis in the original; underscoring and words in bracket
added.)
For ease of reference, Annex"A-1" of the complaint, which petitioner asserts to have been meant
for him by his brother Eduardo, pertinently reads:
10) JR. (AKL) [Referring to petitioner Aurelio K. Litonjua]:
You have now your own life to live after having been married. '.
I am trying my best to mold you the way I work so you can follow the pattern '. You will be the
only one left with the company, among us brothers and I will ask you to stay as I want you to run
this office every time I am away. I want you to run it the way I am trying to run it because I will
be all alone and I will depend entirely to you (sic). My sons will not be ready to help me yet until
about maybe 15/20 years from now. Whatever is left in the corporation, I will make sure that
you get ONE MILLION PESOS (P1,000,000.00) or ten percent (10%) equity, whichever is greater.
We two will gamble the whole thing of what I have and what you are entitled to. '. It will be you
and me alone on this. If ever I pass away, I want you to take care of all of this. You keep my share
for my two sons are ready take over but give them the chance to run the company which I have
built.
xxx xxx xxx
Because you will need a place to stay, I will arrange to give you first ONE HUNDRED THOUSANDS
PESOS: (P100, 000.00) in cash or asset, like Lt. Artiaga so you can live better there. The rest I will
give you in form of stocks which you can keep. This stock I assure you is good and saleable. I will
also gladly give you the share of Wack-Wack 'and Valley Golf - because you have been good. The
rest will be in stocks from all the corporations which I repeat, ten percent (10%) equity.6
On December 20, 2002, Eduardo and the corporate respondents, as defendants a quo, filed a
joint ANSWER With Compulsory Counterclaim denying under oath the material allegations of the
complaint, more particularly that portion thereof depicting petitioner and Eduardo as having
entered into a contract of partnership. As affirmative defenses, Eduardo, et al., apart from raising
a jurisdictional matter, alleged that the complaint states no cause of action, since no cause of
action may be derived from the actionable document, i.e., Annex "A-1", being void under the
terms of Article 1767 in relation to Article 1773 of the Civil Code, infra. It is further alleged that
whatever undertaking Eduardo agreed to do, if any, under Annex "A-1", are unenforceable under
the provisions of the Statute of Frauds.7
For his part, Yang - who was served with summons long after the other defendants submitted
their answer - moved to dismiss on the ground, inter alia, that, as to him, petitioner has no cause
of action and the complaint does not state any.8 Petitioner opposed this motion to dismiss.
On January 10, 2003, Eduardo, et al., filed a Motion to Resolve Affirmative Defenses.9 To this
motion, petitioner interposed an Opposition with ex-Parte Motion to Set the Case for Pre-trial.10
Acting on the separate motions immediately adverted to above, the trial court, in an Omnibus
Order dated March 5, 2003, denied the affirmative defenses and, except for Yang, set the case for
pre-trial on April 10, 2003.11
In another Omnibus Order of April 2, 2003, the same court denied the motion of Eduardo, et al.,
for reconsideration12 and Yang's motion to dismiss. The following then transpired insofar as
Yang is concerned:
1. On April 14, 2003, Yang filed his ANSWER, but expressly reserved the right to seek
reconsideration of the April 2, 2003 Omnibus Order and to pursue his failed motion to
dismiss13 to its full resolution.
2. On April 24, 2003, he moved for reconsideration of the Omnibus Order of April 2, 2003, but his
motion was denied in an Order of July 4, 2003.14
3. On August 26, 2003, Yang went to the Court of Appeals (CA) in a Petition for Certiorari under
Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 78774,15 to nullify the separate orders
of the trial court, the first denying his motion to dismiss the basic complaint and, the second,
denying his motion for reconsideration.
Earlier, Eduardo and the corporate defendants, on the contention that grave abuse of discretion
and injudicious haste attended the issuance of the trial court's aforementioned Omnibus Orders
dated March 5, and April 2, 2003, sought relief from the CA via similar recourse. Their Petition
for Certiorari was docketed as CA G.R. SP No. 76987.
Per its resolution dated October 2, 2003,16 the CA's 14th Division ordered the consolidation of CA
G.R. SP No. 78774 with CA G.R. SP No. 76987.
Following the submission by the parties of their respective Memoranda of Authorities, the
appellate court came out with the herein assailed Decision dated March 31, 2004, finding for
Eduardo and Yang, as lead petitioners therein, disposing as follows:
WHEREFORE, judgment is hereby rendered granting the issuance of the writ of certiorari in
these consolidated cases annulling, reversing and setting aside the assailed orders of the court a
quo dated March 5, 2003, April 2, 2003 and July 4, 2003 and the complaint filed by private
respondent [now petitioner Aurelio] against all the petitioners [now herein respondents
Eduardo, et al.] with the court a quo is hereby dismissed.
SO ORDERED.17 (Emphasis in the original; words in bracket added.)
Explaining its case disposition, the appellate court stated, inter alia, that the alleged partnership,
as evidenced by the actionable documents, Annex "A" and "A-1" attached to the complaint, and
upon which petitioner solely predicates his right/s allegedly violated by Eduardo, Yang and the
corporate defendants a quo is "void or legally inexistent".
In time, petitioner moved for reconsideration but his motion was denied by the CA in its equally
assailed Resolution of December 7, 2004.18 .
Hence, petitioner's present recourse, on the contention that the CA erred:
A. When it ruled that there was no partnership created by the actionable document because this
was not a public instrument and immovable properties were contributed to the partnership.
B. When it ruled that the actionable document did not create a demandable right in favor of
petitioner.
C. When it ruled that the complaint stated no cause of action against [respondent] Robert Yang;
andcralawlibrary
D. When it ruled that petitioner has changed his theory on appeal when all that Petitioner had
done was to support his pleaded cause of action by another legal perspective/argument.
The petition lacks merit.
Petitioner's demand, as defined in the petitory portion of his complaint in the trial court, is for
delivery or payment to him, as Eduardo's and Yang's partner, of his partnership/joint venture
share, after an accounting has been duly conducted of what he deems to be partnership/joint
venture property.19
A partnership exists when two or more persons agree to place their money, effects, labor, and
skill in lawful commerce or business, with the understanding that there shall be a proportionate
sharing of the profits and losses between them.20 A contract of partnership is defined by the Civil
Code as one where two or more persons bound themselves to contribute money, property, or
industry to a common fund with the intention of dividing the profits among themselves.21 A joint
venture, on the other hand, is hardly distinguishable from, and may be likened to, a partnership
since their elements are similar, i.e., community of interests in the business and sharing of profits
and losses. Being a form of partnership, a joint venture is generally governed by the law on
partnership.22
The underlying issue that necessarily comes to mind in this proceedings is whether or not
petitioner and respondent Eduardo are partners in the theatre, shipping and realty business, as
one claims but which the other denies. And the issue bearing on the first assigned error relates to
the question of what legal provision is applicable under the premises, petitioner seeking, as it
were, to enforce the actionable document - Annex "A-1" - which he depicts in his complaint to be
the contract of partnership/joint venture between himself and Eduardo. Clearly, then, a look at
the legal provisions determinative of the existence, or defining the formal requisites, of a
partnership is indicated. Foremost of these are the following provisions of the Civil Code:
Art. 1771. A partnership may be constituted in any form, except where immovable property or
real rights are contributed thereto, in which case a public instrument shall be necessary.
Art. 1772. Every contract of partnership having a capital of three thousand pesos or more, in
money or property, shall appear in a public instrument, which must be recorded in the Office of
the Securities and Exchange Commission.
Failure to comply with the requirement of the preceding paragraph shall not affect the liability of
the partnership and the members thereof to third persons.
Art. 1773. A contract of partnership is void, whenever immovable property is contributed
thereto, if an inventory of said property is not made, signed by the parties, and attached to the
public instrument.
Annex "A-1", on its face, contains typewritten entries, personal in tone, but is unsigned and
undated. As an unsigned document, there can be no quibbling that Annex "A-1" does not meet the
public instrumentation requirements exacted under Article 1771 of the Civil Code. Moreover,
being unsigned and doubtless referring to a partnership involving more than P3,000.00 in money
or property, Annex "A-1" cannot be presented for notarization, let alone registered with the
Securities and Exchange Commission (SEC), as called for under the Article 1772 of the Code. And
inasmuch as the inventory requirement under the succeeding Article 1773 goes into the matter
of validity when immovable property is contributed to the partnership, the next logical point of
inquiry turns on the nature of petitioner's contribution, if any, to the supposed partnership.
The CA, addressing the foregoing query, correctly stated that petitioner's contribution consisted
of immovables and real rights. Wrote that court:
A further examination of the allegations in the complaint would show that [petitioner's]
contribution to the so-called "partnership/joint venture" was his supposed share in the family
business that is consisting of movie theaters, shipping and land development under paragraph
3.02 of the complaint. In other words, his contribution as a partner in the alleged
partnership/joint venture consisted of immovable properties and real rights. '. 23
Significantly enough, petitioner matter-of-factly concurred with the appellate court's observation
that, prescinding from what he himself alleged in his basic complaint, his contribution to the
partnership consisted of his share in the Litonjua family businesses which owned variable
immovable properties. Petitioner's assertion in his motion for reconsideration24 of the CA's
decision, that "what was to be contributed to the business [of the partnership] was [petitioner's]
industry and his share in the family [theatre and land development] business" leaves no room for
speculation as to what petitioner contributed to the perceived partnership.
Lest it be overlooked, the contract-validating inventory requirement under Article 1773 of the
Civil Code applies as long real property or real rights are initially brought into the partnership. In
short, it is really of no moment which of the partners, or, in this case, who between petitioner
and his brother Eduardo, contributed immovables. In context, the more important consideration
is that real property was contributed, in which case an inventory of the contributed property
duly signed by the parties should be attached to the public instrument, else there is legally no
partnership to speak of.
Petitioner, in an obvious bid to evade the application of Article 1773, argues that the immovables
in question were not contributed, but were acquired after the formation of the supposed
partnership. Needless to stress, the Court cannot accord cogency to this specious argument. For,
as earlier stated, petitioner himself admitted contributing his share in the supposed shipping,
movie theatres and realty development family businesses which already owned immovables
even before Annex "A-1" was allegedly executed.
Considering thus the value and nature of petitioner's alleged contribution to the purported
partnership, the Court, even if so disposed, cannot plausibly extend Annex "A-1" the legal effects
that petitioner so desires and pleads to be given. Annex "A-1", in fine, cannot support the
existence of the partnership sued upon and sought to be enforced. The legal and factual milieu of
the case calls for this disposition. A partnership may be constituted in any form, save when
immovable property or real rights are contributed thereto or when the partnership has a capital
of at least P3,000.00, in which case a public instrument shall be necessary.25 And if only to stress
what has repeatedly been articulated, an inventory to be signed by the parties and attached to
the public instrument is also indispensable to the validity of the partnership whenever
immovable property is contributed to it.
Given the foregoing perspective, what the appellate court wrote in its assailed Decision 26 about
the probative value and legal effect of Annex "A-1" commends itself for concurrence:
Considering that the allegations in the complaint showed that [petitioner] contributed
immovable properties to the alleged partnership, the "Memorandum" (Annex "A" of the
complaint) which purports to establish the said "partnership/joint venture" is NOT a public
instrument and there was NO inventory of the immovable property duly signed by the parties. As
such, the said "Memorandum" - is null and void for purposes of establishing the existence of a
valid contract of partnership. Indeed, because of the failure to comply with the essential
formalities of a valid contract, the purported "partnership/joint venture" is legally inexistent and
it produces no effect whatsoever. Necessarily, a void or legally inexistent contract cannot be the
source of any contractual or legal right. Accordingly, the allegations in the complaint, including
the actionable document attached thereto, clearly demonstrates that [petitioner] has NO valid
contractual or legal right which could be violated by the [individual respondents] herein. As a
consequence, [petitioner's] complaint does NOT state a valid cause of action because NOT all the
essential elements of a cause of action are present. (Underscoring and words in bracket added.)
Likewise well-taken are the following complementary excerpts from the CA's equally assailed
Resolution of December 7, 200427 denying petitioner's motion for reconsideration:
Further, We conclude that despite glaring defects in the allegations in the complaint as well as
the actionable document attached thereto (Rollo, p. 191), the [trial] court did not appreciate and
apply the legal provisions which were brought to its attention by herein [respondents] in the
their pleadings. In our evaluation of [petitioner's] complaint, the latter alleged inter alia to have
contributed immovable properties to the alleged partnership but the actionable document is not
a public document and there was no inventory of immovable properties signed by the parties.
Both the allegations in the complaint and the actionable documents considered, it is crystal clear
that [petitioner] has no valid or legal right which could be violated by [respondents]. (Words in
bracket added.)
Under the second assigned error, it is petitioner's posture that Annex "A-1", assuming its
inefficacy or nullity as a partnership document, nevertheless created demandable rights in his
favor. As petitioner succinctly puts it in this petition:
43. Contrariwise, this actionable document, especially its above-quoted provisions, established
an actionable contract even though it may not be a partnership. This actionable contract is what
is known as an innominate contract (Civil Code, Article 1307).
44. It may not be a contract of loan, or a mortgage or whatever, but surely the contract does
create rights and obligations of the parties and which rights and obligations may be enforceable
and demandable. Just because the relationship created by the agreement cannot be specifically
labeled or pigeonholed into a category of nominate contract does not mean it is void or
unenforceable.
Petitioner has thus thrusted the notion of an innominate contract on this Court - and earlier on
the CA after he experienced a reversal of fortune thereat - as an afterthought. The appellate
court, however, cannot really be faulted for not yielding to petitioner's dubious stratagem of
altering his theory of joint venture/partnership to an innominate contract. For, at bottom, the
appellate court's certiorari jurisdiction was circumscribed by what was alleged to have been the
order/s issued by the trial court in grave abuse of discretion. As respondent Yang pointedly
observed,28 since the parties' basic position had been well-defined, that of petitioner being that
the actionable document established a partnership/joint venture, it is on those positions that the
appellate court exercised its certiorari jurisdiction. Petitioner's act of changing his original
theory is an impermissible practice and constitutes, as the CA aptly declared, an admission of the
untenability of such theory in the first place.
[Petitioner] is now humming a different tune . . . . In a sudden twist of stance, he has now
contended that the actionable instrument may be considered an innominate contract. xxx
Verily, this now changes [petitioner's] theory of the case which is not only prohibited by the
Rules but also is an implied admission that the very theory he himself - has adopted, filed and
prosecuted before the respondent court is erroneous.
Be that as it may . '. We hold that this new theory contravenes [petitioner's] theory of the
actionable document being a partnership document. If anything, it is so obvious we do have to
test the sufficiency of the cause of action on the basis of partnership law xxx.29 (Emphasis in the
original; Words in bracket added).
But even assuming in gratia argumenti that Annex "A-1" partakes of a perfected innominate
contract, petitioner's complaint would still be dismissible as against Eduardo and, more so,
against Yang. It cannot be over-emphasized that petitioner points to Eduardo as the author of
Annex "A-1". Withal, even on this consideration alone, petitioner's claim against Yang is doomed
from the very start.
As it were, the only portion of Annex "A-1" which could perhaps be remotely regarded as vesting
petitioner with a right to demand from respondent Eduardo the observance of a determinate
conduct, reads:
xxx You will be the only one left with the company, among us brothers and I will ask you to stay
as I want you to run this office everytime I am away. I want you to run it the way I am trying to
run it because I will be alone and I will depend entirely to you, My sons will not be ready to help
me yet until about maybe 15/20 years from now. Whatever is left in the corporation, I will make
sure that you get ONE MILLION PESOS (P1,000,000.00) or ten percent (10%) equity, whichever
is greater. (Underscoring added)
It is at once apparent that what respondent Eduardo imposed upon himself under the above
passage, if he indeed wrote Annex "A-1", is a promise which is not to be performed within one
year from "contract" execution on June 22, 1973. Accordingly, the agreement embodied in Annex
"A-1" is covered by the Statute of Frauds and ergounenforceable for non-compliance
therewith.30 By force of the statute of frauds, an agreement that by its terms is not to be
performed within a year from the making thereof shall be unenforceable by action, unless the
same, or some note or memorandum thereof, be in writing and subscribed by the party charged.
Corollarily, no action can be proved unless the requirement exacted by the statute of frauds is
complied with.31
Lest it be overlooked, petitioner is the intended beneficiary of the P1 Million or 10% equity of the
family businesses supposedly promised by Eduardo to give in the near future. Any suggestion
that the stated amount or the equity component of the promise was intended to go to a common
fund would be to read something not written in Annex"A-1". Thus, even this angle alone argues
against the very idea of a partnership, the creation of which requires two or more contracting
minds mutually agreeing to contribute money, property or industry to a common fund with the
intention of dividing the profits between or among themselves.32
In sum then, the Court rules, as did the CA, that petitioner's complaint for specific performance
anchored on an actionable document of partnership which is legally inexistent or void or, at best,
unenforceable does not state a cause of action as against respondent Eduardo and the corporate
defendants. And if no of action can successfully be maintained against respondent Eduardo
because no valid partnership existed between him and petitioner, the Court cannot see its way
clear on how the same action could plausibly prosper against Yang. Surely, Yang could not have
become a partner in, or could not have had any form of business relationship with, an inexistent
partnership.
As may be noted, petitioner has not, in his complaint, provide the logical nexus that would tie
Yang to him as his partner. In fact, attendant circumstances would indicate the contrary.
Consider:
1. Petitioner asserted in his complaint that his so-called joint venture/partnership with Eduardo
was "for the continuation of their family business and common family funds which were
theretofore being mainly managed by Eduardo." 33 But Yang denies kinship with the Litonjua
family and petitioner has not disputed the disclaimer.
2. In some detail, petitioner mentioned what he had contributed to the joint venture/partnership
with Eduardo and what his share in the businesses will be. No allegation is made whatsoever
about what Yang contributed, if any, let alone his proportional share in the profits. But such
allegation cannot, however, be made because, as aptly observed by the CA, the actionable
document did not contain such provision, let alone mention the name of Yang. How, indeed,
could a person be considered a partner when the document purporting to establish the
partnership contract did not even mention his name.
3. Petitioner states in par. 2.01 of the complaint that "[he] and Eduardo are business partners in
the [respondent] corporations," while "Bobby is his and Eduardo's partner in their Odeon
Theater investment' (par. 2.03). This means that the partnership between petitioner and
Eduardo came first; Yang became their partner in their Odeon Theater investment thereafter.
Several paragraphs later, however, petitioner would contradict himself by alleging that his
"investment and that of Eduardo and Yang in the Odeon theater business has expanded through a
reinvestment of profit income and direct investments in several corporation including but not
limited to [six] corporate respondents" This simply means that the "Odeon Theatre business"
came before the corporate respondents. Significantly enough, petitioner refers to the corporate
respondents as "progeny" of the Odeon Theatre business.34
Needless to stress, petitioner has not sufficiently established in his complaint the
legal vinculum whence he sourced his right to drag Yang into the fray. The Court of Appeals, in its
assailed decision, captured and formulated the legal situation in the following wise:
[Respondent] Yang, - is impleaded because, as alleged in the complaint, he is a "partner" of
[Eduardo] and the [petitioner] in the Odeon Theater Investment which expanded through
reinvestments of profits and direct investments in several corporations, thus:
xxx xxx xxx
Clearly, [petitioner's] claim against - Yang arose from his alleged partnership with petitioner and
the 'respondent. However, there was NO allegation in the complaint which directly alleged how
the supposed contractual relation was created between [petitioner] and 'Yang. More importantly,
however, the foregoing ruling of this Court that the purported partnership between [Eduardo] is
void and legally inexistent directly affects said claim against 'Yang. Since [petitioner] is trying to
establish his claim against - Yang by linking him to the legally inexistent partnership . . . such
attempt had become futile because there was NOTHING that would contractually connect
[petitioner] and - Yang. To establish a valid cause of action, the complaint should have a
statement of fact upon which to connect [respondent] Yang to the alleged partnership between
[petitioner] and respondent [Eduardo], including their alleged investment in the Odeon Theater.
A statement of facts on those matters is pivotal to the complaint as they would constitute the
ultimate facts necessary to establish the elements of a cause of action against - Yang.35
Pressing its point, the CA later stated in its resolution denying petitioner's motion for
reconsideration the following:
xxx Whatever the complaint calls it, it is the actionable document attached to the complaint that
is controlling. Suffice it to state, We have not ignored the actionable document - As a matter of
fact, We emphasized in our decision - that insofar as [Yang] is concerned, he is not even
mentioned in the said actionable document. We are therefore puzzled how a person not
mentioned in a document purporting to establish a partnership could be considered a
partner.36 (Words in bracket ours).
The last issue raised by petitioner, referring to whether or not he changed his theory of the case,
as peremptorily determined by the CA, has been discussed at length earlier and need not detain
us long. Suffice it to say that after the CA has ruled that the alleged partnership is inexistent,
petitioner took a different tack. Thus, from a joint venture/partnership theory which he adopted
and consistently pursued in his complaint, petitioner embraced the innominate contract theory.
Illustrative of this shift is petitioner's statement in par. #8 of his motion for reconsideration of
the CA's decision combined with what he said in par. # 43 of this petition, as follows:
8. Whether or not the actionable document creates a partnership, joint venture, or whatever, is a
legal matter. What is determinative for purposes of sufficiency of the complainant's allegations, is
whether the actionable document bears out an actionable contract - be it a partnership, a joint
venture or whatever or some innominate contract - It may be noted that one kind of innominate
contract is what is known as du ut facias (I give that you may do).37
12. Incidentally, assuming that the actionable document created a partnership between
[respondent] Eduardo, Sr. and [petitioner], no immovables were contributed to this partnership.
xxx
14. All told, the Decision takes off from a false premise that the actionable document attached to
the complaint does not establish a contractual relationship between [petitioner] and - Eduardo,
Sr. and Roberto T Yang simply because his document does not create a partnership or a joint
venture. This is - a myopic reading of the actionable document.
Per the Court's own count, petitioner used in his complaint the mixed words "joint
venture/partnership" nineteen (19) times and the term "partner" four (4) times. He made
reference to the "law of joint venture/partnership [being applicable] to the business relationship -
between [him], Eduardo and Bobby [Yang]" and to his "rights in all specific properties of their joint
venture/partnership". Given this consideration, petitioner's right of action against respondents
Eduardo and Yang doubtless pivots on the existence of the partnership between the three of
them, as purportedly evidenced by the undated and unsigned Annex "A-1". A void Annex "A-1",
as an actionable document of partnership, would strip petitioner of a cause of action under the
premises. A complaint for delivery and accounting of partnership property based on such void or
legally non-existent actionable document is dismissible for failure to state of action. So, in gist,
said the Court of Appeals. The Court agrees.
WHEREFORE, the instant petition is DENIED and the impugned Decision and Resolution of the
Court of Appeals AFFIRMED.

43. Contrariwise, this actionable document, especially its above-quoted provisions, established Cost against the petitioner.
an actionable contract even though it may not be a partnership. This actionable contract is what
is known as an innominate contract (Civil Code, Article 1307).38 SO ORDERED.

Springing surprises on the opposing party is offensive to the sporting idea of fair play, justice and
due process; hence, the proscription against a party shifting from one theory at the trial court to
a new and different theory in the appellate court.39 On the same rationale, an issue which was
neither averred in the complaint cannot be raised for the first time on appeal. 40 It is not difficult,
therefore, to agree with the CA when it made short shrift of petitioner's innominate contract
theory on the basis of the foregoing basic reasons.

Petitioner's protestation that his act of introducing the concept of innominate contract was not a
case of changing theories but of supporting his pleaded cause of action - that of the existence of a
partnership - by another legal perspective/argument, strikes the Court as a strained attempt to
rationalize an untenable position. Paragraph 12 of his motion for reconsideration of the CA's
decision virtually relegates partnership as a fall-back theory. Two paragraphs later, in the same
notion, petitioner faults the appellate court for reading, with myopic eyes, the actionable
document solely as establishing a partnership/joint venture. Verily, the cited paragraphs are a
study of a party hedging on whether or not to pursue the original cause of action or altogether
abandoning the same, thus: