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THIRD DIVISION

G.R. No. 172690 March 3, 2010

HEIRS OF JOSE LIM, represented by ELENITO LIM, Petitioners, vs.

JULIET VILLA LIM, Respondent.

D E C I S I O N

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Civil Procedure, assailing the Court of Appeals (CA) Decision2 dated June 29, 2005, which reversed and set aside the decision3 of the Regional Trial Court (RTC) of Lucena City,

dated April 12, 2004.

The facts of the case are as follows:

Petitioners are the heirs of the late Jose Lim (Jose), namely: Jose's widow CresenciaPalad (Cresencia); and their children Elenito, Evelia, Imelda, Edelyna and

Edison, all surnamed Lim (petitioners), represented by Elenito Lim (Elenito). They filed a Complaint4 for Partition, Accounting and Damages against respondent Juliet Villa Lim (respondent), widow of the late Elfledo Lim (Elfledo), who was the eldest son of Jose

and Cresencia.

Petitioners alleged that Jose was the liaison officer of Interwood Sawmill in Cagsiay, Mauban, Quezon. Sometime in 1980, Jose, together with his friends Jimmy Yu (Jimmy)

and Norberto Uy (Norberto), formed a partnership to engage in the trucking business. Initially, with a contribution of P50,000.00 each, they purchased a truck to be used in the hauling and transport of lumber of the sawmill. Jose managed the operations of this

trucking business until his death on August 15, 1981. Thereafter, Jose's heirs, including Elfledo, and partners agreed to continue the business under the management of Elfledo.

The shares in the partnership profits and income that formed part of the estate of Jose were held in trust by Elfledo, with petitioners' authority for Elfledo to use, purchase or

acquire properties using said funds.

Petitioners also alleged that, at that time, Elfledo was a fresh commerce graduate serving as his father’s driver in the trucking business. He was never a partner or an investor in the business and merely supervised the purchase of additional trucks using

the income from the trucking business of the partners. By the time the partnership ceased, it had nine trucks, which were all registered in Elfledo's name. Petitioners

asseverated that it was also through Elfledo’s management of the partnership that he was able to purchase numerous real properties by using the profits derived therefrom, all of which were registered in his name and that of respondent. In addition to the nine

trucks, Elfledo also acquired five other motor vehicles.

On May 18, 1995, Elfledo died, leaving respondent as his sole surviving heir. Petitioners claimed that respondent took over the administration of the aforementioned

properties, which belonged to the estate of Jose, without their consent and approval. Claiming that they are co-owners of the properties, petitioners required respondent to submit an accounting of all income, profits and rentals received from the estate of

Elfledo, and to surrender the administration thereof. Respondent refused; thus, the filing of this case.

Respondent traversed petitioners' allegations and claimed that Elfledo was himself a

partner of Norberto and Jimmy. Respondent also claimed that per testimony of Cresencia, sometime in 1980, Jose gave ElfledoP50,000.00 as the latter's capital in an informal partnership with Jimmy and Norberto. When Elfledo and respondent got

married in 1981, the partnership only had one truck; but through the efforts of Elfledo, the business flourished. Other than this trucking business, Elfledo, together with

respondent, engaged in other business ventures. Thus, they were able to buy real properties and to put up their own car assembly and repair business. When Norberto was ambushed and killed on July 16, 1993, the trucking business started to falter. When

Elfledo died on May 18, 1995 due to a heart attack, respondent talked to Jimmy and to the heirs of Norberto, as she could no longer run the business. Jimmy suggested that

three out of the nine trucks be given to him as his share, while the other three trucks be given to the heirs of Norberto. However, Norberto's wife, PaquitaUy, was not interested in the vehicles. Thus, she sold the same to respondent, who paid for them in

installments.

Respondent also alleged that when Jose died in 1981, he left no known assets , and the partnership with Jimmy and Norberto ceased upon his demise. Respondent also

stressed that Jose left no properties that Elfledo could have held in trust. Respondent maintained that all the properties involved in this case were purchased and acquired through her and her husband’s joint efforts and hard work, and without any

participation or contribution from petitioners or from Jose. Respondent submitted that these are conjugal partnership properties; and thus, she had the right to refuse to

render an accounting for the income or profits of their own business.

Trial on the merits ensued. On April 12, 2004, the RTC rendered its decision in favor of petitioners, thus:

WHEREFORE, premises considered, judgment is hereby rendered:

1) Ordering the partition of the above-mentioned properties equally

between the plaintiffs and heirs of Jose Lim and the defendant Juliet Villa-Lim; and

2) Ordering the defendant to submit an accounting of all incomes, profits and rentals received by her from said properties.

SO ORDERED.

Aggrieved, respondent appealed to the CA.

On June 29, 2005, the CA reversed and set aside the RTC's decision, dismissing petitioners' complaint for lack of merit. Undaunted, petitioners filed their Motion for Reconsideration,5 which the CA, however, denied in its Resolution6 dated May 8, 2006.

Hence, this Petition, raising the sole question, viz.:

IN THE APPRECIATION BY THE COURT OF THE EVIDENCE SUBMITTED BY THE PARTIES,

CAN THE TESTIMONY OF ONE OF THE PETITIONERS BE GIVEN GREATER WEIGHT THAN THAT BY A FORMER PARTNER ON THE ISSUE OF THE IDENTITY OF THE OTHER

PARTNERS IN THE PARTNERSHIP?7

In essence, petitioners argue that according to the testimony of Jimmy, the sole surviving partner, Elfledo was not a partner; and that he and Norberto entered into a

partnership with Jose. Thus, the CA erred in not giving that testimony greater weight than that of Cresencia, who was merely the spouse of Jose and not a party to the partnership.8

Respondent counters that the issue raised by petitioners is not proper in a petition for

review on certiorari under Rule 45 of the Rules of Civil Procedure, as it would entail the review, evaluation, calibration, and re-weighing of the factual findings of the CA.

Moreover, respondent invokes the rationale of the CA decision that, in light of the admissions of Cresencia and Edison and the testimony of respondent, the testimony of Jimmy was effectively refuted; accordingly, the CA's reversal of the RTC's findings was

fully justified.9

We resolve first the procedural matter regarding the propriety of the instant Petition.

Verily, the evaluation and calibration of the evidence necessarily involves consideration of factual issues — an exercise that is not appropriate for a petition for review on

certiorari under Rule 45. This rule provides that the parties may raise only questions of law, because the Supreme Court is not a trier of facts. Generally, we are not duty-bound

to analyze again and weigh the evidence introduced in and considered by the tribunals below.10 When supported by substantial evidence, the findings of fact of the CA are conclusive and binding on the parties and are not reviewable by this Court, unless the

case falls under any of the following recognized exceptions:

(1) When the conclusion is a finding grounded entirely on speculation, surmises and conjectures;

(2) When the inference made is manifestly mistaken, absurd or impossible;

(3) Where there is a grave abuse of discretion;

(4) When the judgment is based on a misapprehension of facts;

(5) When the findings of fact are conflicting;

(6) When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee;

(7) When the findings are contrary to those of the trial court;

(8) When the findings of fact are conclusions without citation of specific

evidence on which they are based;

(9) When the facts set forth in the petition as well as in the petitioners' main and reply briefs are not disputed by the respondents; and

(10) When the findings of fact of the Court of Appeals are premised on the

supposed absence of evidence and contradicted by the evidence on record.11

We note, however, that the findings of fact of the RTC are contrary to those of the CA.

Thus, our review of such findings is warranted.

On the merits of the case, we find that the instant Petition is bereft of merit.

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 among them. A contract of

partnership is defined by the Civil Code as one where 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.12

Undoubtedly, the best evidence would have been the contract of partnership or the articles of partnership. Unfortunately, there is none in this case, because the alleged partnership was never formally organized. Nonetheless, we are asked to determine who

between Jose and Elfledowas the "partner" in the trucking business.

A careful review of the records persuades us to affirm the CA decision. The evidence presented by petitioners falls short of the quantum of proof required to establish that:

(1) Jose was the partner and not Elfledo; and (2) all the properties acquired by Elfledoand respondent form part of the estate of Jose, having been derived from the

alleged partnership.

Petitioners heavily rely on Jimmy's testimony. But that testimony is just one piece of evidence against respondent. It must be considered and weighed along with petitioners' other evidence vis-à-vis respondent's contrary evidence. In civil cases, the party having

the burden of proof must establish his case by a preponderance of evidence. "Preponderance of evidence" is the weight, credit, and value of the aggregate evidence

on either side and is usually considered synonymous with the term "greater weight of the evidence" or "greater weight of the credible evidence." "Preponderance of evidence" is a phrase that, in the last analysis, means probability of the truth. It is

evidence that is more convincing to the court as worthy of belief than that which is offered in opposition thereto.13Rule 133, Section 1 of the Rules of Court provides the

guidelines in determining preponderance of evidence, thus:

SECTION I. Preponderance of evidence, how determined. In civil cases, the party having burden of proof must establish his case by a preponderance of evidence. In determining where the preponderance or superior weight of evidence on the issues involved lies, the

court may consider all the facts and circumstances of the case, the witnesses' manner of testifying, their intelligence, their means and opportunity of knowing the facts to which

they are testifying, the nature of the facts to which they testify, the probability or improbability of their testimony, their interest or want of interest, and also their personal credibility so far as the same may legitimately appear upon the trial. The court

may also consider the number of witnesses, though the preponderance is not necessarily with the greater number.

At this juncture, our ruling in Heirs of Tan EngKee v. Court of Appeals 14 is enlightening.

Therein, we cited Article 1769 of the Civil Code, which provides:

Art. 1769. In determining whether a partnership exists, these rules shall apply:

(1) Except as provided by Article 1825, persons who are not partners as to each other are not partners as to third persons;

(2) Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or co-possessors do or do not share any profits

made by the use of the property;

(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or

interest in any property from which the returns are derived;

(4) The receipt by a person of a share of the profits of a business is a prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment:

(a) As a debt by installments or otherwise;

(b) As wages of an employee or rent to a landlord;

(c) As an annuity to a widow or representative of a deceased partner;

(d) As interest on a loan, though the amount of payment vary

with the profits of the business;

(e) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise.

Applying the legal provision to the facts of this case, the following circumstances tend to prove that Elfledo was himself the partner of Jimmy and Norberto: 1) Cresencia

testified that Jose gave Elfledo P50,000.00, as share in the partnership, on a date that coincided with the payment of the initial capital in the partnership;15 (2) Elfledo ran the

affairs of the partnership, wielding absolute control, power and authority, without any intervention or opposition whatsoever from any of petitioners herein;16 (3) all of the properties, particularly the nine trucks of the partnership, were registered in the name

of Elfledo; (4) Jimmy testified that Elfledo did not receive wages or salaries from the partnership, indicating that what he actually received were shares of the profits of the

business;17 and (5) none of the petitioners, as heirs of Jose, the alleged partner, demanded periodic accounting from Elfledo during his lifetime. As repeatedly stressed in Heirs of Tan Eng Kee,18 a demand for periodic accounting is evidence of a partnership.

Furthermore, petitioners failed to adduce any evidence to show that the real and

personal properties acquired and registered in the names of Elfledo and respondent formed part of the estate of Jose, having been derived from Jose's alleged partnership

with Jimmy and Norberto. They failed to refute respondent's claim that Elfledo and respondent engaged in other businesses. Edison even admitted that Elfledo also sold Interwood lumber as a sideline.19 Petitioners could not offer any credible evidence other

than their bare assertions. Thus, we apply the basic rule of evidence that between documentary and oral evidence, the former carries more weight.20

Finally, we agree with the judicious findings of the CA, to wit:

The above testimonies prove that Elfledo was not just a hired help but one of the

partners in the trucking business, active and visible in the running of its affairs from day one until this ceased operations upon his demise. The extent of his control, administration and management of the partnership and its business, the fact that its

properties were placed in his name, and that he was not paid salary or other compensation by the partners, are indicative of the fact that Elfledo was a partner and a

controlling one at that. It is apparent that the other partners only contributed in the initial capital but had no say thereafter on how the business was ran. Evidently it was through Elfredo’s efforts and hard work that the partnership was able to acquire more

trucks and otherwise prosper. Even the appellant participated in the affairs of the partnership by acting as the bookkeeper sans salary.1avvphi1

It is notable too that Jose Lim died when the partnership was barely a year old, and the

partnership and its business not only continued but also flourished. If it were true that it was Jose Lim and not Elfledo who was the partner, then upon his death the partnership should have

been dissolved and its assets liquidated. On the contrary, these were not done but instead its operation continued under the helm of Elfledo and without any participation from the heirs of Jose Lim.

Whatever properties appellant and her husband had acquired, this was through their

own concerted efforts and hard work. Elfledo did not limit himself to the business of their partnership but engaged in other lines of businesses as well.

In sum, we find no cogent reason to disturb the findings and the ruling of the CA as they

are amply supported by the law and by the evidence on record.

WHEREFORE, the instant Petition is DENIED. The assailed Court of Appeals Decision dated June 29, 2005 is AFFIRMED. Costs against petitioners.

SO ORDERED.

THIRD DIVISION

G.R. NOS. 166299-300 December 13, 2005

AURELIO K. LITONJUA, JR., Petitioner,

vs. 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.

D E C I S I O N

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, 20041 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 asAnnex "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….

xxxxxxxxx

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".

xxxxxxxxx

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].

xxxxxxxxx

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 lispendens …. (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 son s 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.

xxxxxxxxx

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 ANSWERWith 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 assailedResolution 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; and

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 alsoindispensable 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 Decision26 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 [s ix] 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:

xxxxxxxxx

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

utfacias (I give that you may do).37

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).38

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:

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 AppealsAFFIRMED.

Cost against the petitioner.

SO ORDERED.

EN BANC

G.R. No. L-11840 December 10, 1963

ANTONIO C. GOQUIOLAY, ET AL., plaintiffs-appellants, vs.

WASHINGTON Z. SYCIP, ET AL., defendants-appellees.

Norberto J. Quisumbing and Sycip, Salazar and Associates for defendants -appellees. Jose C. Calayco for plaintiffs-appellants..

R E S O L U T I O N

REYES, J.B.L., J.:

The matter now pending is the appellant's motion for reconsideration of our main decision, wherein we have upheld the validity of the sale of the lands owned by the partnership Goquiolay& Tan Sin An, made in 1949 by the widow of the managing

partner, Tan Sin An (Executed in her dual capacity as Administratrix of the husband's estate and as partner in lieu of the husband), in favor of the buyers Washington Sycip

and Betty Lee for the following consideration:

Cash paid P37,000.00

Debts assumed by purchaser:

To Yutivo 62,415.91

To Sing Yee Cuan& Co., 54,310.13

T O T A L

P153,726.04

Appellant Goquiolay, in his motion for reconsideration, insist that, contrary to our holding, Kong Chai Pin, widow of the deceased partner Tan Sin An, never became more than a limited partner, incapacitated by law to manage the affairs of partnership; that

the testimony of her witness Young and Lim belies that she took over the administration of the partnership property; and that, in any event, the sale should be set aside because

it was executed with the intent to defraud appellant of his share in the properties sold.

Three things must be always held in mind in the discussion of this motion to reconsider, being basic and beyond controversy:

(a) That we are dealing here with the transfer of partnership property by one partner, acting in behalf of the firm, to a stranger. There is no question between partners inter se,

and this aspect to the case was expressly reserved in the main decision of 26 July 1960;

(b) That partnership was expressly organized: "to engage in real estate business, either by buying and selling real estate". The Articles of co-partnership, in fact, expressly

provided that:

IV. The object and purpose of the copartnership are as follows:

1. To engage in real estate business, either by buying and selling real estates; to subdivide real estates into lots for the purpose of leasing and selling

them.;

(c) That the properties sold were not part of the contributed capital (which was in cash) but land precisely acquired to be sold, although subject to a mortgage in favor of the original owners, from whom the partnership had acquired them.

With these points firmly in mind, let us turn to the points insisted upon by appellant.

It is first averred that there is "not one iota of evidence" that Kong Chai Pin managed and retained possession of the partnership properties. Suffice it to point out that appellant Goquiolay himself admitted that —

... Mr. Yu Eng Lai asked me if I can just let Mrs. Kong Chai Pin continue to

manage the properties (as) she had no other means of income. Then I said, because I wanted to help Mrs. Kong Chai Pin, she could just do it and

besides I am not interested in agricultural lands. I allowed her to take care of the properties in order to help her and because I believe in God and — wanted to help her.

Q — So the answer to my question is you did not take any

steps?

A — I did not.

Q — And this conversation which you had with Mrs. Yu Eng Lai was few months after 1945?

A — In the year 1945. (Emphasis supplied).

The appellant subsequently ratified this testimony in his deposition of 30 June 1956, pages 8-9, wherein he stated:

that plantation was being occupied at that time by the widow, Mrs. Tan Sin An, and of course they are receiving quiet a lot benefit from the plantation.

Discarding the self-serving expressions, these admissions of Goquiolay are certainly

entitled to greater weight than those of Hernando Young and Rufino Lim, having been made against the party's own interest.

Moreover, the appellant's reference to the testimony of Hernando Young, that the witness found the properties "abandoned and undeveloped", omits to mention that

said part of the testimony started with the question:

Now, you said that about 1942 or 1943 you returned to Davao. Did you meet Mrs. Kong Chai Pin there in Davao at that time?

Similarly, the testimony of Rufino Lim, to the effect that the properties of the

partnership were undeveloped, and the family of the widow (Kong Chai Pin) did not receive any income from the partnership properties, was given in answer to the question:

According to Mr. Goquiolay, during the Japanese occupation Tan Sin an and his family lived on the plantation of the partnership and derived their subsistence from that plantation. What can you say to that? (Dep. 19 July

1956, p. 8).

And also —

What can you say as to the development of these other properties of the partnership which you saw during the occupation? (Dep. p. 13, Emphasis

supplied).

to which witness gave the following answer:

I saw the properties in Mamay still undeveloped. The third property which is in Tigato is about eleven (11) hectares and planted with abaca seedlings

planted by Mr. Sin An. When I went there with Hernando Youngwe saw all the abaca destroyed. The place was occupied by the Japanese Army. They planted camotes and vegetables to feed the Japanese Army. Of course they

never paid any money to Tan Sin An or his family. (Dep., Lim, pp. 13-14. Emphasis supplied).

Plainly, both Young and Lim's testimonies do not belie, or contradict, Goquiolay's

admission that he told Mr. Yu Eng Lai that the widow "could just do it" (i.e., continue to manage the properties). Witnesses Lim and Young referred to the period of Japanese occupation; but Goquiolay's authority was, in fact, given to the widow in 1945,after the

occupation.

Again, the disputed sale by the widow took place in 1949. That Kong Chai Pin carried out no acts of management during the Japanese occupation (1942-1944) does not mean that

she did not do so from 1945 to 1949.

We thus find that Goquiolay did not merely rely on reports from Lim and Young; he actually manifested his willingness that the widow should manage the partnership properties. Whether or not she complied with this authority is a question between her

and the appellant, and is not here involved. But the authority was given, and she did have it when she made the questioned sale, because it was never revoked.

It is argued that the authority given by Goquiolay to the widow Kong Chai Pin was only

to manage the property, and that it did not include the power to alienate, citing Article 1713 of the Civil Code of 1889. What this argument overlooks is that the widow was not a mere agent, because she had become a partner upon her husband's death, as expressly

provided by the articles of copartnership. Even more, granting that by succession to her husband, Tan Sin An, the widow only became a limited partner, Goquiolay's authorization

to manage the partnership property was proof that he considered and recognized her as general partner, at least since 1945. The reason is plain: Under the law (Article 148, last paragraph, Code of Commerce), appellant could not empower the widow, if she were

only a limited partner, to administer the properties of the firm, even as a mere agent:

Limited partners may not perform any act of administration with respect to the interests of the copartnership, not even in the capacity of agents of the

managing partners. (Emphasis supplied).

By seeking authority to manage partnership property, Tan Sin An's widow showed that she desired to be considered a general partner. By authorizing the widow to manage

partnership property (which a limited partner could not be authorized to do), Goquiolay recognized her as such partner, and is now in estoppel to deny her position as a general partner, with authority to administer and alienate partnership property.

Besides, as we pointed out in our main decision, the heir ordinarily (and we did not say

"necessarily") becomes a limited partner for his own protection, because he would normally prefer to avoid any liability in excess of the value of the estate inherited so as

not to jeopardize his personal assets. But this statutory limitation of responsibility being designed to protect the heir, the latter may disregard it and instead elect to become a collective or general partner, with all the rights and privileges of one, and answering for

the debts of the firm not only with the inheritance but also with the heir's personal fortune. This choice pertains exclusively to the heir, and does not require the assent of

the surviving partner.

It must be remember that the articles of co-partnership here involved expressly stipulated that:

In the event of the death of any of the partners at any time before the expiration of said term, the co-partnership shall not be dissolved but will

have to be continued and the deceased partner shall be represented by his heirs or assigns in said co-partnership (Art. XII, Articles of Co-Partnership).

The Articles did not provide that the heirs of the deceased would be

merely limited partners; on the contrary, they expressly stipulated that in case of death of either partner "the co-partnership ... will have to be continued" with the heirs or assigns. It certainly could not be continued if it were to be converted from a general

partnership into a limited partnership, since the difference between the two kinds of associations is fundamental; and specially because the conversion into a

limited association would have the heirs of the deceased partner without a share in the management. Hence, the contractual stipulation does actually contemplate that the

heirs would becomegeneral partners rather than limited ones.

Of course, the stipulation would not bind the heirs of the deceased partner should they refuse to assume personal and unlimited responsibility for the obligations of the firm. The heirs, in other words, can not be compelled to become general partners against

their wishes. But because they are not so compellable, it does not legitimately follow that they may not voluntarily choose to become general partners, waiving the

protective mantle of the general laws of succession. And in the latter event, it is pointless to discuss the legality of any conversion of a limited partner into a general one. The heir never was a limited partner, but chose to be, and became, a general partner

right at the start.

It is immaterial that the heir's name was not included in the firm name, since no conversion of status is involved, and the articles of co-partnership expressly

contemplated the admission of the partner's heirs into the partnership.

It must never be overlooked that this case involved the rights acquired by strangers, and does not deal with the rights existing between partners Goquiolay and the widow of Tan Sin An. The issues between the partners inter sewere expressly reserved in our main

decision. Now, in determining what kind of partner the widow of partner Tan Sin an Had elected to become, strangers had to be guided by her conduct and actuations and those

of appellant Goquiolay. Knowing that by law a limited partner is barred from managing the partnership business or property, third parties (like the purchasers) who found the widow possessing and managing the firm property with the acquiescence (or at least

without apparent opposition) of the surviving partners were perfectly justified in assuming that she had become a general partner, and, therefore, in negotiating with her

as such a partner, having authority to act for, and in behalf of the firm. This belief, be it noted, was shared even by the probate court that approved the sale by the widow of the real property standing in the partnership name. That belief was fostered by the very

inaction of appellant Goquiolay. Note that for seven long years, from partner Tan Sin An's death in 1942 to the sale in 1949, there was more than ample time for Goquiolay to

take up the management of these properties, or at least ascertain how its affairs stood. For seven years Goquiolay could have asserted his alleged rights, and by suitable notice in the commercial registry could have warned strangers that they must deal with him

alone, as sole general partner. But he did nothing of the sort, because he was not interested (supra), and he did not even take steps to pay, or settle the firm debts that

were overdue since before the outbreak of the last war. He did not even take steps, after Tan Sin An died, to cancel, or modify, the provisions of the partnership articles th at he (Goquiolay) would have no intervention in the management of the partnership.

This laches certainly contributed to confirm the view that the widow of Tan Sin An had, or was given, authority to manage and deal with the firm's properties apart from the

presumption that a general partner dealing with partnership property has to requisite authority from his co-partners (Litton vs. Hill and Ceron, et al., 67 Phil. 513; quoted in our main decision, p. 11).

The stipulation in the articles of partnership that any of the two managing

partners may contract and sign in the name of the partnership with the consent of the other, undoubtedly creates on obligation between the two

partners, which consists in asking the other's consent before contracting for the partnership. This obligation of course is not imposed upon a third person who contracts with the partnership. Neither it is necessary for the

third person to ascertain if the managing partner with whom he contracts has previously obtained the consent of the other. A third person may and

has a right to presume that the partner with whom he contracts has, in the ordinary and natural course of business, the consent of his copartner; for otherwise he would not enter into the contract. The third person would

naturally not presume that the partner with whom he enters into the transaction is violating the articles of partnership, but on the contrary is acting in accordance therewith. And this finds support in the legal

presumption that the ordinary course of business has been followed (No. 18, section 334, Code of Civil Procedure), and that the law has been obeyed

(No. 31, section 334). This last presumption is equally applicable to contracts which have the force of law between the parties. (Litton vs. Hill &Ceron, et al., 67 Phil. 409, 516). (Emphasis supplied.)

It is next urged that the widow, even as a partner, had no authority to sell the real estate of the firm. This argument is lamentably superficial because it fails to differentiate between real estate acquired and held as stock-in-tradeand real estate held merely

as business site (Vivante's "taller o banco social") for the partnership. Where the partnership business is to deal in merchandise and goods, i.e., movable property, the sale of its real property (immovables) is not within the ordinary powers of a partner,

because it is not in line with the normal business of the firm. But where the express and avowed purpose of the partnership is to buy and sell real estate (as in the present case),

the immovables thus acquired by the firm from part of its stock-in-trade, and the sale thereof is in pursuance of partnership purposes, hence within the ordinary powers of the partner. This distinction is supported by the opinion of Gay de Montella1 , in the very

passage quoted in the appellant's motion for reconsideration:

La enajenacionpuedeentrar en lasfacultadesdelgerante, cuandoesconforme a los fines sociales. Peroestafacultad de enajenarlimitada a

lasventasconforme a los fines sociales, vienelimitada a los objetos de comercio o a los productos de la fabricaparaexplotacion de los cuales se ha constituido la Sociedad.Ocurriraunacosaparecidacuando el objeto de la

Sociedadfuese la compra y venta de inmuebles, en cuyocaso el gerenteestariafacultadoparaotorgarlasventasquefuerenecesario. (Montella)

(Emphasis supplied).

The same rule obtains in American law.

In Rosen vs. Rosen, 212 N.Y. Supp. 405, 406, it was held:

a partnership to deal in real estate may be created and either partner has the legal right to sell the firm real estate.

In Chester vs. Dickerson, 54 N. Y. 1, 13 Am. Rep. 550:

And hence, when the partnership business is to deal in real estate, one partner has ample power, as a general agent of the firm, to enter into an executory contract for the

sale of real estate.

And in Revelsky vs. Brown, 92 Ala. 522, 9 South 182, 25 Am. St. Rep. 83:

If the several partners engaged in the business of buying and selling real estate can not bind the firm by purchases or sales of such property made in

the regular course of business, then they are incapable of exercising the essential rights and powers of general partners and their association is not

really a partnership at all, but a several agency.

Since the sale by the widow was in conformity with the express objective of the partnership, "to engage ... in buying and selling real estate" (Art. IV, No. 1 Articles of Copartnership), it can not be maintained that the sale was made in excess of her power

as general partner.

Considerable stress is laid by appellant in the ruling of the Supreme Court of Ohio in McGrath, et al., vs. Cowen, et al., 49 N.E., 338. But the facts of that case are vastly

different from the one before us. In the McGrath case, the Court expressly found that:

The firm was then, and for some time had been, insolvent, in the sense that its property was insufficient to pay its debts, though it still had good credit, and was actively engaged in the prosecution of its business. On that day,

which was Saturday, the plaintiff caused to be prepared, ready for execution, the four chattel mortgages in question, which cover all the

tangible property then belonging to the firm, including the counters, shelving, and other furnishings and fixtures necessary for, and used in carrying on, its business, and signed the same in this form: "In witness whereof, the

said Cowen & McGrath, a firm, and Owen McGrath, surviving partner, of said firm, and Owen McCrath, individually, have hereunto set their hands, this

20th day of May, A.D. 1893. Cowen &Mcgrath, by Owen McGrath. Owen McGrath, Surviving partner of Cowen & McGrath. Owen McGrath." At the same time, the plaintiff had prepared, ready for filing, the petitionfor the

dissolution of the partnership and appointment of a receiver which he subsequently filed, as hereinafter stated. On the day the mortgages were

signed, they were placed in the hands of the mortgagees, which was the first intimation to them that there was any intention to make them. At the timenone of the claims secured by the mortgages were due, except, it may be,

a small part of one of them, andnone of the creditors to whom the mortgages were made had requested security, or were pressing for the

payment of their debts. ... The mortgages appear to be without a sufficient condition of defiance, and contain a stipulation authorizing the mortgagees to take immediate possession of the property, which they did as soon as the

mortgages were filed through the attorney who then represented them, as well as the plaintiff; and the stores were at once closed, and possession

delivered by them to the receiver appointed upon the filing of the petition. The avowed purposes of the plaintiff, in the course pursued by him, was to terminate the partnership, place its properly beyond the control

of the firm, and insure the preference of the mortgagees, all of which was known to them at the time; .... (Cas cit., p. 343, Emphasis supplied).

It is natural that form these facts the Supreme Court of Ohio should draw the conclusion

that the conveyances were made with intent to terminate the partnership, and that they were not within the powers of McGrath as a partner. But there is no similarity between those acts and the sale by the widow of Tan Sin An. In the McGrath case, the sale

included even the fixtures used in the business; in our case, the lands sold were those acquired to be sold. In the McGrath case, none of the creditors were pressing for

payment; in our case, the creditors had been unpaid for more than seven years, and their claims had been approved by the probate court for payment. In the McGrath case, the partnership received nothing beyond the discharge of its debts; in the present case,

not only were its debts assumed by the buyers, but the latter paid, in addition, P37,000.00 in cash to the widow, to the profit of the partnership. Clearly, the McGrath ruling is not applicable.

We will now turn to the question of fraud. No direct evidence of it exists; but appellant point out, as indicia thereof, the allegedly low price paid for the property, and the relationship between the buyers, the creditors of the partnership, and the widow of Tan

Sin An.

First, as to the price: As already noted, this property was actually sold for a total of P153,726.04, of which P37,000.00 was in cash, and the rest in partnership debts assumed

by the purchaser. These debts (62,415.91 to Yutivo, and P54,310.13 to Sing Ye Cuan& Co.) are not questioned; they were approved by the court, and its approval is now final. The claims were, in fact, for the balance on the original purchase price of the land sold (sue

first to La Urbana, later to the BancoHipotecario) plus accrued interests and taxes, redeemed by the two creditors-claimants. To show that the price was inadquate,

appellant relies on the testimony of the realtor Mata, who is 1955, six years after the sale in question, asserted that the land was worth P312,000.00. Taking into account the continued rise of real estate values since liberation, and the fact that the sale in question

was practically a forced sale because the partnership had no other means to pay its legitimate debts, this evidence certainly does not show such "gross inadequacy" as to justify recission of the sale. If at the time of the sale (1949) the price of P153,726.04 was

really low, how is it that appellant was not able to raise the amount, even if the creditor's representative, Yu Khe Thai, had already warned him four years before (1945)

that the creditors wanted their money back, as they were justly entitled to?

It is argued that the land could have been mortgaged to raise the sum needed to discharge the debts. But the lands were already mortgaged, and had been mortgaged

since 1940, first to La Urbana, and then to the BancoHipotecario. Was it reasonable to expect that other persons would loan money to the partnership when it was unable even to pay the taxes on the property, and the interest on the principal since 1940? If it

had been possible to find lenders willing to take a chance on such a bad financial record, would not Goquiolay have taken advantage of it? But the fact is clear on the record that

since liberation until 1949 Goquiolay never lifted a finger to discharge the debts of the partnership. Is he entitled now to cry fraud after the debts were discharged with no help

from him.

With regard to the relationship between the parties, suffice it to say that the Supreme Court has ruled that relationship alone is not a badge of fraud (OriaHnos. vs. McMicking,

21 Phil. 243; also HermandaddelSmo. Nombre de Jesus vs. Sanchez, 40 Off. Gaz., 1685). There is no evidence that the original buyers, Washington Sycip and Betty Lee, were without independent means to purchase the property. That the Yutivos should be

willing to extend credit to them, and not to appellant, is neither illegal nor immoral; at the very least, these buyers did not have a record of inveterate defaults like the

partnership "Tan Sin An&Goquiolay".

Appellant seeks to create the impression that he was the victim of a conspiracy between the Yutivo firm and their component members. But no proof is adduced. If he was such a victim, he could have easily defeated the conspirators by raising money and paying off

the firm's debts between 1945 and 1949; but he did not; he did not even care to look for a purchaser of the partnership assets. Were it true that the conspiracy to defraud him

arose (as he claims) because of his refusal to sell the lands when in 1945 Yu Khe Thai asked him to do so, it is certainly strange that the conspirators should wait 4 years, until 1949, to have the sale effected by the widow of Tan Sin An, and that the sale should

have been routed through the probate court taking cognizance of Tan Sin An's estate, all of which increased the risk that the supposed fraud should be detected.

Neither was there any anomaly in the filing of the claims of Yutivo and Sing Yee Cuan&

Co., (as subrogees of the BancoHipotecario) in proceedings for the settlement of the estate of Tan Sin An. This for two reasons: First, Tan Sin An and the partnership "Tan Sin An &Goquiolay" were solidary (Joint and several)debtors (Exhibits "N", mortgage to the

BancoHipotecario), and Rule 87, section 6 is the effect that:

Where the obligation of the decedent is joint and several with another debtor, the claim shall be filed against the decedent as if he were the only

debtor, without prejudice to the right of the estate to recover contribution from the other debtor. (Emphasis supplied).

Secondly, the solidary obligation was guaranteed by a mortgage on the properties of the

partnership and those of Tan Sim An personally, and a mortgage is indivisible, in the sense that each and every parcel under mortgage answers for the totality of the debt (Civ. Code of 1889, Article 1860; New Civil Code, Art. 2089).

A final and conclusive consideration: The fraud charged not being one used to obtain a

party's consent to a contract (i.e., not being deceit or dolus in contrahendo), if there is fraud at al, it can only be a fraud of creditorsthat gives rise to a rescission of the

offending contract. But by express provision of law (Article 1294, Civil Code of 1889; Article 1383, New Civil Code) "the action for rescission is subsidiary; it can not be instituted except when the party suffering damage has no other legal means to obtain

reparation for the same". Since there is no allegation, or evidence, that Goquiolaycan not obtain reparation from the widow and heirs of Tan Sin An, the present suit to

rescind the sale in question is not maintainable, even if the fraud charged actually did exist.

PREMISES CONSIDERED, the motion for reconsideration is denied.

Bengzon, C.J., Padilla, Concepcion, Barrera and Dizon, JJ., concur. Regala, J., took no part.

EN BANC

G.R. No. L-26937 October 5, 1927

PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs.

SEVERO EUGENIO LO, ET AL., defendants.

SEVERIO EUGENIO LO, NG KHEY LING and YEP SENG, appellants.

Jose Lopez Vito for appellants. Roman Lacson for appellee.

VILLAMOR, J.:

On September 29, 1916, the appellants Severo Eugenio Lo and Ng Khey Ling,

together with J. A. Say Lian Ping, KoTiao Hun, On YemKe Lam and Co SiengPeng formed a commercial partnership under the name of "Tai Sing and Co.," with a capital of

P40,000 contributed by said partners. In the articles of copartnership, Exhibit A, it appears that the partnership was to last for five years from after the date of its organization, and that its purpose was to do business in the City of Iloilo, Province of

Iloilo, or in any other part of the Philippine Islands the partners might desire, under the name of "Tai Sing & Co.," for the purchase and sale of merchandise, goods, and native,

as well as Chinese and Japanese, products, and to carry on such business and speculations as they might consider profitable. One of the partners, J. A. Say Lian Ping was appointed general manager of the partnership, with the appointed general

manager of the partnership, with the powers specified in said articles of copartnership.

On June 4, 1917, general manager A. Say Lian Ping executed a power of attorney (Exhibit C-1) in favor of A. Y. Kelam, authorizing him to act in his stead as manager and

administrator of "Tai Sing & Co.," on July 26, 1918, for, and obtained a loan of P8,000 in current account from the plaintiff bank. (Exhibit C). As security for said loan, he mortgaged certain personal property of "Tai Sing & Co., (Exhibit C.)

This credit was renew several times and on March 25, 1919, A. Y. Kelam, as attorney-

in-fact of "Tai Sing & Co., executed a chattel mortgage in favor of plaintiff bank as security for a loan of P20,000 with interest (Exhibit D). This mortgage was again

renewed on April 16, 1920 and A. Y. Kelam, as attorney-in-fact of "Tai Sing & Co.,

executed another chattel mortgage for the said sum of P20,000 in favor of plaintiff bank. (Exhibit E.) According to this mortgage contract, the P20,000 loan was to earn 9

per cent interest per annum.

On April 20, 1920, Yap Seng, Severo Eugenio Lo, A. Y. Kelam and Ng Khey Ling, the latter represented by M. Pineda Tayenko, executed a power of attorney in favor of Sy Tit

by virtue of which Sy Tit, representing "Tai Sing & Co., obtained a credit of P20,000 from plaintiff bank on January 7, 1921, executing a chattel mortgage on certain personal property belonging to "Tai Sing & Co.

Defendants had been using this commercial credit in a current account with the

plaintiff bank, from the year 1918, to May 22, 1921, and the debit balance of this account, with interest to December 31, 1924, is as follows:

TAI SING & CO.

To your outstanding account (C. O. D.) with us on June 30, 1922 P16,518.74

Interest on same from June 30, 1922 to December 31,1924, at 9 per cent per annum 3,720.86

Total

20, 239.00 =========

This total is the sum claimed in the complaint, together with interest on the P16,518.74 debt, at 9 per cent per annum from January 1, 1925 until fully paid, with the costs of the trial.

Defendant Eugenio Lo sets up, as a general defense, that "Tai Sing & Co. was not a

general partnership, and that the commercial credit in current account which "Tai Sing & Co. obtained from the plaintiff bank had not been authorized by the board of directors of the company, nor was the person who subscribed said contract authorized to make

the same, under the article of copartnership. The other defendants, Yap Sing and Ng Khey Ling, answered the complaint denying each and every one of the allegations

contained therein.

After the hearing, the court found:

(1) That defendants Eugenio Lo, Ng Khey Ling and Yap Seng Co., SiengPeng indebted to plaintiff Philippine National Bank in sum of P22,595.26 to July 29, 1926, with a daily interest of P4.14 on the balance on account of the

partnership "Tai Sing & Co. for the sum of P16,518.74 until September 9, 1922;

(2) Said defendants are ordered jointly and severally to pay the Philippine

National Bank the sum of P22,727.74 up to August 31, 1926, and from the date, P4.14 daily interest on the principal; and

(3) The defendants are furthermore ordered to pay the costs of the

action.1awph!l.net

Defendants appealed, making the following assignments of error:

I. The trial court erred in finding that article 126 of the Code of Commerce at present in force is not mandatory.

II. The trial court erred in finding that the partnership agreement of "Tai

Sing & Co., (Exhibit A), is in accordance with the requirements of article 125 of the Code of Commerce for the organization of a regular partnership.

III. The trial court erred in not admitting J. A. SaiLian Ping's death in China in November, 1917, as a proven fact.

IV. The trial court erred in finding that the death of J. A. Say Lian Ping cannot

extinguish the defendants' obligation to the plaintiff bank, because the last debt incurred by the commercial partnership "Tai Sing & Co., was that

evidence by Exhibit F, signed by Sy Tit as attorney-in-fact of the members of "Tai Sing & Co., by virtue of Exhibit G.

V. The trial court erred in not finding that plaintiff bank was not able to collect its credit from the goods of "Tai Sing & Co., given as security therefor

through its own fault and negligence; and that the action brought by plaintiff is a manifest violation of article 237 of the present Code of

Commerce.

VI. The trial court erred in finding that the current account of "Tai Sing & Co. with plaintiff bank shows a debit balance of P16,518.74, which in addition to interest at 9 per cent per annum from July 29, 1926, amount to P16,595.26,

with a daily interest of P4.14 on the sum of P16,518.74.

VII. The trial court erred in ordering the defendants appellants to pay jointly and severally to the Philippine National Bank the sum of P22,727.74 up to

August 31, 1926, and interest on P16,518.74 from that date until fully paid, with the costs of the action.

VIII. The trial court erred in denying the motion for a new trial filed by

defendants-appellants.

Appellants admit, and it appears from the context of Exhibit A, that the defendant association formed by the defendants is a general partnership, as defined in article 126

of the Code Commerce. This partnership was registered in the mercantile register of the Province of Iloilo. The only anomaly noted in its organization is that instead of adopting

for their firm name the names of all of the partners, of several of them, or only one of them, to be followed in the last two cases, by the words "and to be followed in the last

two cases, by the words "and company" the partners agreed upon "Tai Sing & Co." as the firm name.

In the case of Hung-Man-Yoc, under the name of Kwong-Wo-Sing vs. Kieng-Chiong-Seng, cited by appellants, this court held that, as the company formed by defendants

had existed in fact, though not in law due to the fact that it was not recorded in the register, and having operated and contracted debts in favor of the plaintiff, the same

must be paid by someone. This applies more strongly to the obligations contracted by the defendants, for they formed a partnership which was registered in the mercantile register, and carried on business contracting debts with the plaintiff bank. The

anomalous adoption of the firm name above noted does not affect the liability of the general partners to third parties under article 127 of the Code of Commerce. And the

Supreme Court so held in the case of Jo Chung Cang vs. Pacific Commercial Co., (45 Phil., 142), in which it said that the object of article 126 of the Code of Commerce in requiring a general partnership to transact business under the name of all its members, of several of

them, or of one only, is to protect the public from imposition and fraud; and that the provision of said article 126 is for the protection of the creditors rather than of the

partners themselves. And consequently the doctrine was enunciated that the law must be unlawful and unenforceable only as between the partners and at the instance of the violating party, but not in the sense of depriving innocent parties of their rights who

may have dealt with the offenders in ignorance of the latter having violated the law; and that contracts entered into by commercial associations defectively organized are valid when voluntarily executed by the parties, and the only question is whether or not they

complied with the agreement. Therefore, the defendants cannot invoke in their defense the anomaly in the firm name which they themselves adopted.

As to the alleged death of the manager of the company, Say Lian Ping, before the

attorney-in-fact Ou Yong Kelam executed Exhibits C, D and E, the trial court did not find this fact proven at the hearing. But even supposing that the court had erred, such an

error would not justify the reversal of the judgment, for two reasons at least: (1) Because Ou Yong Kelam was a partner who contracted in the name of the partnership, without any objection of the other partners; and (2) because it appears in the record

that the appellant-partners Severo Eugenio Lo, Ng Khey Ling and Yap Seng, appointed Sy Tit as manager, and he obtained from the plaintiff bank the credit in current account, the debit balance of which is sought to be recovered in this action.

Appellants allege that such of their property as is not included in the partnership assets cannot-be seized for the payment of the debts contracted by the partnership until after the partnership property has been exhausted. The court found that the

partnership property described in the mortgage Exhibit F no loner existe d at the time of the filing of the herein complaint nor has its existence been proven, nor was it offered

to the plaintiff for sale. We find no just reason to reverse this conclusion of the trial court, and this being so, it follows that article 237 of the Code of Commerce, invoked by the appellant, can in no way have any application here.

Appellants also assign error to the action of the trial court in ordering them to pay

plaintiff, jointly and severally, the sums claimed with 9 per cent interes t on P16,518.74, owing from them.

The judgment against the appellants is in accordance with article 127 of the Code of

Commerce which provides that all the members of a general partnership, be they managing partners thereof or not, shall be personally and solidarily liable with all their property, for the results of the transactions made in the name and for the account of

the partnership, under the signature of the latter, and by a person authorized to use it.

As to the amount of the interest suffice it to remember that the credit in current account sued on in this case as been renewed by the parties in such a way that while it

appears in the mortgage Exhibit D executed on March 25, 1919 by the attorney-in-fact Ou Yong Kelam that the P20,000 credit would earn 8 per cent interest annually, yet from that executed on April 16, 1920, Exhibit E, it appears that the P20,000 would earn 9 per

cent interest per annum. The credit was renewed in January, 1921, and in the deed of pledge, Exhibit F, executed by "Tai Sing & Co., represented by the attorney-in-fact Sy Tit,

it appears that this security is for the payment of the sums received by the partnership, not to exceed P20,000 with interest and collection fees. There can be no doubt that the parties agreed upon the rate of interest fixed in the document Exhibit E, namely 9 per

cent per annum.

The judgment appealed from is in accordance with the law, and must therefore be, as it is hereby, affirmed with costs against the appellants. So ordered.

Avanceña, C.J., Johnson, Street, Malcolm, Johns and Romualdez, JJ., concur.

EN BANC

G.R. No. L-9186 April 29, 1957

COLLECTOR OF INTERNAL REVENUE, petitioner,

vs. JUAN ISASI, M. SALUSTIANA ALDECOA, CLAUDIO ZULOAGA, MIREN ZULOAGA, HUGO

P. RODRIGUEZ, and THE COURT OF TAX APPEALS, respondents.

Office of the Solicitor General Ambrosio Padilla, Solicitor Jose Alejandro, Solicitor Conrado T. Limcaoco, Pedro P. Magaliman and Zoilo R. Sandoval for petitioner. Emilio Abello and Hugo P. Rodriguez for respondents.

FELIX, J.:

Juan Isasi, M. SalustianaAldecoa assisted by her husband Jesus Isasi, Claudio Zuloaga, Jr., MirenZuloaga and Hugo P. Rodriguez in his capacity as Liquidator of the Partnership Aldecoa, Zuloaga and Isasi, instituted originally this case against the Collector of Internal

Revenue of the Republic of the Philippines in the Court of First Instance of Negros Occidental (Civil Case No. 2028), but by virtue of the enactment of Republic Act No. 1125,

creating the Court of Tax Appeals, same was remanded to the latter Court in accordance with section 22 of said Act.

From the agreed stipulation of facts and other pleadings filed by the parties, it appears

that plaintiffs Juan Isasi, M. SalustianaAldecoa, Claudio Zuloaga, Jr., and MirenZuloaga formed a partnership known as "Aldecoa, Zuloaga e Isasi" organized principally for the exploitation, development and utilization of Haciendas Manucao and Conchita, located

in the municipalities of Binalbagan and Hinigaran, Negros, Occidental. The partnersh ip agreement "Escritura de Constitucion de la Sociedad Agricola Aldecoa, Zuloaga e Isasi"

was duly registered on October 27, 1947.

The records show that for the tax years 1948 and 1949, the firm Aldecoa, Zuloaga e Isasi filed its income tax returns and the Collector of Internal Revenue assessed the sum of P26,873.66 against said partnership which the latter paid and that the members of the

partnership filed their individual income tax returns for the years 1948, 1949, 1950 and 1951, in which returns they indicated the shares of the profit or dividends that they

allege to have received from the partnership. On June 30, 1951, the partners agreed to dissolve the partnership and the agreement of dissolution was duly recorded in the Securities and Exchange Commission on October 25, 1951, wherein plaintiff Hugo P.

Rodriguez was appointed as liquidator.

Believing that the partnership "Aldecoa, Zuloaga e Isasi" was a duly registered general co-partnership (sociedadcolectiva) and therefore not subject to income tax under

Section 24 of the National Internal Revenue Code, plaintiffs filed with defendant on July 16, 1951, a claim for the refund of P26,873.66 which the partnership had paid as income tax. The claim for refund not having been acted upon by defendant, a complaint was

filed with the Court of First Instance of Negros Occidental on August 4, 1951, praying the defendant be ordered to return to plaintiffs the aforementioned sum with costs, and for

such other remedies as may be just and equitable in the premises.

On September 14, 1951, the Provincial Fiscal of Negros Occidental answered the complaint admitting some of the averments thereof and at the same time denying plaintiff's allegations that Aldecoa, Zuloaga e Isasi is a general or regular collective

partnership, the truth being said partnership was a limited partner ship and as such cannot be exempt from income tax. The Fiscal further set up the affirmative defense

that it being a civil partnership, whether registered or not, Aldecoa, Zuloaga e Isasi could be taxed as a corporation under Section 24 of the National Internal Revenue Code. He therefore prayed that the complaint be dismissed with costs against plaintiffs.

After the parties had filed their respective memoranda, the of Tax Appeals which took

the case rendered a decision ordering defendant to refund the sum of P26,873.66, without costs, and making the following pronouncements:

In view of the foregoing, we are, therefore, of the opinion and so hold that

the partnership "Aldecoa, Zuloaga e Isasi" was a duly registered general co-partnership (companiacolectiva) with the meaning and contemplation of

sections 24 and 26 of the National Internal Revenue Code and as such it is not liable for income tax as a juridical person although the partners composing it are liable in their individual capacity. Since it is admitted that

during the calendar years 1948, 1949, 1950 and 1951, the plaintiff partners Juan Isasi, M. SalustianaAldecoa, Claudio Zuloaga and Zuloaga of the said partnership had filed their respective individual income tax returns, and in

these returns, the said plaintiff partners indicated the amounts they had received as income from the partnership and paid the income tax assessed

against them by the defendant Collector of Internal Revenue on account thereof, the total amount of P26,873.66 paid by the partnership "Aldecoa, Zuloaga e Isasi" as income tax for the fiscal years from July 1, 1948, to June

30, 1950, is therefore refundable.

From this decision, defendant filed with this Court a petition to review the said decision making the following assignment of errors:

1. That the respondent Court of Tax Appeals erred in holding that the term

"duly registered general co-partnership (sociedadcolectiva)" found in sections 24 and 26 of the National Internal Revenue Code includes civil

partnerships which have adopted the form of compañias colectivas and (were) duly registered;

2. That the respondent Court of Tax Appeals erred in finding that the partnership "Aldecoa, Zuloaga e Isasi" has adopted the form of general

partnership (sociedadcolectiva) under the Code of Commerce; and

3. That the respondent Court of Tax Appeals Erred in holding that the partnership "Aldecoa, Zuloaga e Isasi" was a duly registered general co-

partnership (sociedadcolectiva) within the meaning and contemplation of the aforesaid sections of the Tax Code and was not therefore liable to pay income tax.

The dispute arose from a divergence of opinion as to the proper interpretation and

application of sections 24 and 26 of the National Revenue Code, which reads as follows:

SEC. 24.RATE OF TAX ON CORPORATIONS. — There shall be levied, assessed, collective and paid annually upon the total net income received in

the proceeding taxable year from all sources by every corporation organized in, or existing under the laws of the Philippines no matter how created or organizedbut not including duly registered general co-partnership

(compañiascolectivas), a tax upon such income equal to the sum of the following: . . .

Sec. 26.TAX LIABILITY OF MEMBERS OF DULY REGISTERED GENERAL CO.-

PARTNERSHIPS. — Persons carrying on business in general co-partnership (compañiacolectiva) duly registered in the mercantile registry shall be liable

for income tax only in their individual capacity, and the share of the profits of the registered general co-partnership (compañiacolectiva) to which any

taxable partner would be entitled, whether divided or otherwise, shall be returned for taxation and the tax paid in accordance with the provisions of

this Title.

It shall be noted in the case at bar that the cause of action accrued before the effectivity of the new Civil Code and, therefore, it is to be governed by the pertinent provisions of the old Civil Code (Art. 2253, new Civil Code) and the Code of Commerce, although the

provisions of the latter Code on partnership have been repealed by Article 2270, No. 2, of the new Civil Code.

Under the old codes, there was a distinction between civil and commercial partnership

and since sections 24 and 26 of the Tax Code, under which respondent partners claim their right to be refunded, expressly exempts from corporation tax "duly registered general co-partnerships" (sociedadescolectivas), respondent partners maintain that

their defunct partnership (which by its purposes and scope seemed to partake of the nature of a civil partnership), was dully registered and had the form and style of a

general co-partnership and is, therefore, entitled to the exemption. They also advanced the theory that a partnership, whether civil or commercial, would be entitled to the exemption as long as it is a general partnership, because the Tax Code makes

qualification to this effect.

The issues left for Us to determine in this appeal are: whether the term duly registered general co-partnership (sociedadescolectivas) used in sections 24 and 26 of the Tax

Code includes both the commercial civil ones, and whether the partnership Aldecoa, Zuloaga e Isasi falls within said classification and hence entitled to the benefit granted therein.

There is no dispute that the partnership agreement entered into by the respondent

partners was styled "Escritura de Constitucion de la Sociedad Agricola Limitada Aldecoa, Zuloaga e Isasi", thereby giving said partnership is a limited one. On the other hand, said

agreement specifies that the primary purpose for which the partnership was organized was the exploitation of the two haciendas "Manucao" and "Conchita", as stated in paragraph 3 thereof which declares that:

3.o Que el objeto de la sociedades la rehabilitation de las haciendas citadas y de suspertenencias, y la explotacionagricola de lasmismas, en la forma quecreaoportuno el gerente de la misma, y parallevar a cabodichoobjeto y

los fines generales de la sociedad, la mismapodra:

and petitioner contends, that this clause clearly indicates that respondents' partnership was a civil partnership which justifies petitioner's stand in collecting the taxes in

question. In passing upon this point, We must take into consideration the provision of the old Civil Code which states that:

Art. 1670. Partnerships which on account of the purpose to which they devoted are civil may adopt any of the forms recognized by the Code of

Commerce. In such cases its provisions shall be applicable to them in so far they do no conflict with those of this Code,

and Chief Justice Arellano saw fit to apply this particular provision in his concurring

opinion in the case ofCompañia Agricola de Ultramar vs. Reyes , 4 Phil., 2, by enunciating that:

The civil partnership without ceasing to be, civil by reason of its object maybe created in all forms recognized in the code of Commerce. It may be a

collective or general partnership, a partnership oncomandita or an anonymous partnership. In this case if it will adopt the form of a general

partnership then the provisions of Article 125 to 144 inclusive would be applicable to it. If it would adopt the form a partnership on comandita then Articles 145 to 150 would be applicable and if the form is that of an

anonymous partnership then the provisions of Articles 157 to 174 of the Code of Commerce would be applicable in so far as they are in no conflict

with the articles of the present code.

From the above-quoted opinion, a civil partnership adopting a form recognized by the Code of Commerce (sociedadcolectiva) does not necessarily cease to be a civil partnership. Members of a partnership organized for civil purposes may form

themselves into a general or collective partnership (sociedadcolectiva) which is sanctioned by Sections 125 to 144 of the Code of Commerce and register as such in the

registry in which case their obligations and liabilities will be governed by the provisions of said Code as long as they are not in conflict with the Civil Code. This organization in mercantile form does not transform the civil partnership into a commercial one , but just

the same it is a sociedadcolectiva, and since Sections 24 and 26 of the Tax Code duly registered general co-partnership (Compañiacolectiva)", there is no reason why a civil

organized in accordance with the provisions of the Code of Commerce and duly registered as such should not fall within the exemption provided for in said Sections of the Tax Code.

IN VIEW OF THIS CONCLUSION, we now have to find out whether the partnership

Aldecoa, Zuloaga e Isasi has adopted the form of a general partnership (compañiacolectiva) or of a "Sociedad Agricola Limitada Aldecoa, Zuloaga e Isasi", as the

partners thereof named their own association.

Article 122 of the Code of Commerce prescribes the following:

ART. 122. As a general rule commercial associations shall be established by the adoption of any of the following forms:

1. The regular general co-partnership in which all the partners, under a

collective commercial name, bind themselves participate, in the proportion they establish in the same rights and obligations.

2. The limited co-partnership to which one or more persons contribute a specific amount of capital to a common fund, to become liable for the

business transactions of the firm executed exclusively by others under a collective name.

3. (The provisions of this paragraph have been repealed by the Corporation

Law).

Even a casual scrutiny of the partnership agreement executed by the respondent partners would reveal that they followed the pattern set for the pattern set for the regular co-partnership (Arts. 122, No. 2, 125, 126, 131, 133 and 136 of the Code of

Commerce). They have a firm name — Aldecoa, Zuloaga e Isasi; that firm name was composed of all the surnames of the partners — to which the words "and company" (to

indicate the limited partnership — Art. 146 of the Code of Commerce) is not added; the management of the firm was entrusted to a partner, Don Juan Isasi; the contribution of all the partners was expressly provided therein — there being no person Contributing

a specific amount of capital to a common fund to become liable for the business transactions of the firm executedexclusively by others under a collective name, as is the

case in limited partnerships (Art. 122, No. 2, Code of Commerce); the duration of the partnership was made to last until June 30, 1952; and it allowed its manager, Don Juan Isasi to engage in the same kind of undertaking. It is unmistakable, notwithstanding the

title of the partnership agreement (Escritura de Constitucion de la Sociedad Agricola LimitadaAldecoa, Zuloaga e Isasi), that the partners intended to organize a general

partnership under the Code of Commerce. For this reason, We agree with the Court of Tax Appeals when it states:

To establish a limited partnership there must be at least one general partner and the name of at least one of the general partners must appear in the firm

name. (Articles 122(2), 146, 148, Code of Commerce).If these requisites are not complied with, the partnership, notwithstanding the fact that the

articles of association are entitled "limited partnership" (Jo Chung Cang vs. Pacific Commercial Co., 45 Phil. 142). An examination of the firm name of the partnership "Aldecoa, Zuloaga e Isasi" will readily show that neither of this

requirements have been fulfilled; instead it operated under the name of all its members of some of them, or of only one (without necessarily adding to

the name of names stated in last two cases, the words "and company" (par. 1, Art. 126, Code of Commerce). A limited partnership that has not complied with the law of its creation is not considered a limited partnership at all, but

a general partnership in which all the members are liable (Hechen, Elements of Partnership, p. 412; Gilmore, Partnership, p. 499; 20 R.C.L. 1064).

Moreover, a limited partnership cannot perform any act in the management of the partner interests and cannot even examine the condition and state of partnership administration except at stated times. (Articles 122 (2), 148 and

150, Code of Commerce), unlike the partnership Aldecoa, Zuloaga e Isasi, wherein all the partners exercised powers of management and

administration.

We, therefore, declare that the Partnership "Aldecoa, Zuloaga e Isasi" was a duly registered general co-partnership (sociedadcolectiva) within the meaning and contemplation of sections 24 and 26 of the National Internal Revenue Code.

Wherefore, the decision appealed from is hereby affirmed, without pronouncement as

to costs. It is so ordered.

Montemayor, Bautista Angelo, Labrador, Concepcion and Endencia, JJ., concur.

EN BANC

G.R. No. L-25007 March 2, 1926

PACIFIC COMMERCIAL COMPANY, plaintiff-appellee, vs.

ABOITIZ & MARTINEZ, ET AL., defendants. JOSE MARTINEZ, defendant-appellant.

Espina&Espina for appellant.

Block, Johnston &Greenbaum for appellee.

OSTRAND, J.:

In April, 1919 Arnaldo F. de Silva, Guillermo Aboitiz, Vidal Aboitiz and Jose Martinez formed a "regular, collective, merchantile partnership" with a capital of P40,000 of

which each of the partners Aboitiz and De Silva furnished one -third. The partner Jose Martinez was an industrial partner and furnished no capital; it was provided in the partnership article that he was to receive 30 per cent of the profits and that his

responsibility for losses should not exceed the amount of the profits received by him.

On April 27, 1922, the partnership, through its duly authorized representative, Guillermo Aboitiz, executed a promissory note in favor of the plaintiff the Pacific Commercial

Company for the sum of P23,168.71, with interest at 12 per cent per annum until fully paid as additional sum of 10 per cent as attorney's fees and costs of collection in the event it became necessary to resort to judicial proceedings. As security for the payment of the

note, the partnership executed a chattel mortgage in favor of the plaintiff on certain personal property therein described.

For failure of the partnership to pay the debt the chattel mortgage was foreclosed the

mortgages property sold and the proceeds of the sale, P2,000 was paid over to the plaintiff on December 28, 1923. No further payment on the note appears to have been made and January 4, 1924, the present action was brought for the recovery of the

unpaid balance with interest. Upon trial the court below rendered judgment in favor of the plaintiff and against the partnership for the sum of P27,951.68 and for the payment

of interest on the capital of P21,168.71 at the rate of 10 per cent per annum from the 31st October, 1924, until paid, together with 10 per cent on the amount due for fees for collection in accordance with the terms of the aforesaid note. The judgment further

provided that execution should first issue against the property of the partnership should first issue against the insolvency of the partnership, it might issue against the property

of the partners De Silva and Aboitiz and in the event of their insolvency, then against the property of the industrial partner Jose Martinez. From this judgment Martinez appealed

to this court and here maintains that under article 141 of the Code of Commerce he, as a mere industrial partner, cannot be held responsible for the partnership's debt.

The case is practically identical with that of the CompaniaMaritima vs. Munoz (9 Phil., 326), in which this court held the industrial partners secondarily liable for the debts of

the partnership but on the strength of the vigorous dissenting opinion of Chief Justice Arellano in that case, that appellant argues that the decision therein was erroneous and

should now be overruled. With all due respect for the legal acumen of the first Chief Justice of this Court, we are still of the opinion that the case was correctly decided. Article 127 of the Code of Commerce reads as follows:

All the members of the general copartnership, be they or be they not

managing partners of the same are liable personally and in solidum with all their property for the results of the transaction made in the name and for

the account of the partnership, under the signature of the later, and by a person authorized to make use thereof.

The language of this article is clear and specific that all the members of a general copartnership are liable with all their property for the results of the duly authorized

transactions made in the name and for the account of the partnership. On the other hand, article 141, upon which the appellants relies and which provides that "losses shall

be computed in the same proportion among the capitalist partners without including the industrial partners, unless by special agreement the latter have been constituted as participants therein," is susceptible of two different interpretations of which that given

it in the CompaniaMaritima case, supra, i. e., that it relates merely to the distribution of losses among the partners themselves in the settlement of the partnership affairs and

has no reference to partnership obligations to third parties, appears to us to be the more logical.

There is a marked distinction between a liability and a loss and the inability of a partnership to pay a debt to a third party at a particular time does not necessarily mean

that the partnership business as a whole, has been operated at a loss. The partnership may have outstanding credits which for the moment may have be unavailable for the

payment of debts, but which eventually may be realized upon and yield profits more than sufficient to cover all losses. Bearing this in mind it will be found that there in reality is no conflict between the two articles quoted; one speaks of liabilities, the other of

losses.

The judgment appealed from is affirmed with the costs against the appe llant. So ordered.

Avanceña, C. J., Street, Malcolm, Villamor, Johns, Romualdez, and Villa-Real, JJ., concur.

SECOND DIVISION

G.R. No. L-22493 July 31, 1975

ISLAND SALES, INC., plaintiff-appellee, vs.

UNITED PIONEERS GENERAL CONSTRUCTION COMPANY, ET. AL defendants. BENJAMIN C. DACO,defendant-appellant.

Grey, Buenaventura and Santiago for plaintiff-appellee. Anacleto D. Badoy, Jr. for defendant-appellant.

CONCEPCION JR., J.:

This is an appeal interposed by the defendant Benjamin C. Daco from the decision of the Court of First Instance of Manila, Branch XVI, in Civil Case No. 50682, the dispositive portion of which reads:

WHEREFORE, the Court sentences defendant United Pioneer

General Construction Company to pay plaintiff the sum of P7,119.07 with interest at the rate of 12% per annum until it is

fully paid, plus attorney's fees which the Court fixes in the sum of Eight Hundred Pesos (P800.00) and costs.

The defendants Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim and Augusto Palisoc are sentenced to pay the plaintiff in

this case with the understanding that the judgment against these individual defendants shall be enforced only if the

defendant company has no more leviable properties with which to satisfy the judgment against it. .

The individual defendants shall also pay the costs.

On April 22, 1961, the defendant company, a general partnership duly registered under

the laws of the Philippines, purchased from the plaintiff a motor vehicle on the installment basis and for this purpose executed a promissory note for P9,440.00, payable in twelve (12) equal monthly installments of P786.63, the first installment

payable on or before May 22, 1961 and the subsequent installments on the 22nd day of every month thereafter, until fully paid, with the condition that failure to pay any of said

installments as they fall due would render the whole unpaid balance immediately due and demandable.

Having failed to receive the installment due on July 22, 1961, the plaintiff sued the defendant company for the unpaid balance amounting to P7,119.07. Benjamin C. Daco,

Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc were included as co-defendants in their capacity as general partners of the defendant company.

Daniel A. Guizona failed to file an answer and was consequently declared in default. 1

Subsequently, on motion of the plaintiff, the complaint was dismissed insofar as the

defendant Romulo B. Lumauig is concerned. 2

When the case was called for hearing, the defendants and their counsels failed to appear notwithstanding the notices sent to them. Consequently, the trial court authorized the plaintiff to present its evidence ex-parte 3 , after which the trial court

rendered the decision appealed from.

The defendants Benjamin C. Daco and Noel C. Sim moved to reconsider the decision claiming that since there are five (5) general partners, the joint and subsidiary liability of

each partner should not exceed one-fifth ( 1/ 5 ) of the obligations of the defendant company. But the trial court denied the said motion notwithstanding the conformity of

the plaintiff to limit the liability of the defendants Daco and Sim to only one -fifth ( 1/ 5 ) of the obligations of the defendant company. 4 Hence, this appeal.

The only issue for resolution is whether or not the dismissal of the complaint to favor one of the general partners of a partnership increases the joint and subsidiary liability of

each of the remaining partners for the obligations of the partnership.

Article 1816 of the Civil Code provides:

Art. 1816. All partners including industrial ones, shall be liable pro rata with all their property and after all the

partnership assets have been exhausted, for the contracts which may be entered into in the name and for the account of the partnership, under its signature and by a person authorized

to act for the partnership. However, any partner may enter into a separate obligation to perform a partnership contract.

In the case of Co-Pitco vs. Yulo (8 Phil. 544) this Court held:

The partnership of Yulo and Palacios was engaged in the

operation of a sugar estate in Negros. It was, therefore, a civil partnership as distinguished from a mercantile partnership.

Being a civil partnership, by the express provisions of articles l698 and 1137 of the Civil Code, the partners are not liable each for the whole debt of the partnership. The liability is pro

rata and in this case Pedro Yulo is responsible to plaintiff for only one-half of the debt. The fact that the other partner, Jaime

Palacios, had left the country cannot increase the liability of Pedro Yulo.

In the instant case, there were five (5) general partners when the promissory note in question was executed for and in behalf of the partnership. Since the liability of the

partners is pro rata, the liability of the appellant Benjamin C. Daco shall be limited to only one-fifth ( 1/ 5 ) of the obligations of the defendant company. The fact that the complaint

against the defendant Romulo B. Lumauig was dismissed, upon motion of the plaintiff, does not unmake the said Lumauig as a general partner in the defendant company. In so moving to dismiss the complaint, the plaintiff merely condoned Lumauig's individual

liability to the plaintiff.

WHEREFORE, the appealed decision as thus clarified is hereby AFFIRMED, without pronouncement as to costs.

SO ORDERED.

Makalintal, C.J., Fernando (Chairman), Barredo and Aquino, JJ., concur.

THIRD DIVISION

G.R. No. 134559 December 9, 1999

ANTONIA TORRES assisted by her husband, ANGELO TORRES; and EMETERIA

BARING, petitioners, vs.

COURT OF APPEALS and MANUEL TORRES, respondents.

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.

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:

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 "respondent's 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 LapuLapu City Council's 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.

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 respondent's 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 court's 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:

Art. 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.

The CA elucidated further:

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.

The Issue

Petitioners impute to the Court of Appeals the following error:

. . . [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 Court's Ruling

The Petition is bereft of merit.

Main Issue:

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 court's 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:

KNOW ALL MEN BY THESE PRESENTS:

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:

WITNESSETH:

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:

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.

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:

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 profits among themselves.

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.

Respondent's 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:

Art. 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.

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:

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.

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.

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 [petitioner's] 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."

Liability of the Parties

Claiming that rerpondent 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 CA's ruling that petitioners are not entitled to damages.

WHEREFORE, the Perition is hereby DENIED and the challenged Decision AFFIRMED.

Costs against petitioners.

SO ORDERED

Melo, Vitug, Purisima and Gonzaga-Reyes, JJ., concur.

FIRST DIVISION

[G.R. No. 174149 : September 08, 2010]

J. TIOSEJO INVESTMENT CORP., PETITIONER, VS. SPOUSES BENJAMIN AND ELEANOR

ANG, RESPONDENTS.

D E C I S I O N

PEREZ, J.:

Filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure, the petition for review at bench seeks the reversal of the Resolutions dated 23 May 2006 and 9 August 2006

issued by the Third Division of the Court of Appeals (CA) in CA-G.R. SP No. 93841 which, respectively, dismissed the petition for review of petitioner J. Tiosejo Investment Corp.

(JTIC) for having been filed out of time [1] and denied the motion for reconsideration of said dismissal.[2]

The Facts

On 28 December 1995 petitioner entered into a Joint Venture Agreement (JVA) with

Primetown Property Group, Inc. (PPGI) for the development of a residential condominium project to be known asTheMeditel on the former's 9,502 square meter property along Samat St., Highway Hills, Mandaluyong City.[3] With petitioner

contributing the same property to the joint venture and PPGI undertaking to develop the condominium, the JVA provided, among other terms and conditions, that the

developed units shall be shared by the former and the latter at a ratio of 17% -83%, respectively.[4] While both parties were allowed, at their own individual responsibility, to pre-sell the units pertaining to them,[5]PPGI further undertook to use all proceeds

from the pre-selling of its saleable units for the completion of the Condominium Project." [6]

On 17 June 1996, the Housing and Land Use Regulatory Board (HLURB) issued License to Sell No. 96-06-2854 in favor of petitioner and PPGI as project owners.[7] By virtue of said

license, PPGI executedContract to Sell No. 0212 with Spouses Benjamin and Eleanor Ang on 5 February 1997, over the 35.45-square meter condominium unit denominated as Unit A-1006, for the agreed contract price of P52,597.88 per square meter or a total

P2,077,334.25.[8] On the same date PPGI and respondents also executed Contract to Sell No. 0214 over the 12.50 square meter parking space identified as Parking Slot No. 0405,

for the stipulated consideration of P26,400.00 square meters or a total of P313,500.00.[9] On 21 July 1999, respondents filed against petitioner and PPGI the complaint for the

rescission of the aforesaid Contracts to Sell docketed before the HLURB as HLURB Case No. REM 072199-10567. Contending that they were assured by petitioner and PPGI that

the subject condominium unit and parking space would be available for turn-over and occupancy in December 1998, respondents averred, among other matters, that in view of the non-completion of the project according to said representation, respondents

instructed petitioner and PPGI to stop depositing the post-dated checks they issued and to cancel said Contracts to Sell; and, that despite several demands, petitioner and PPGI

have failed and refused to refund the P611,519.52 they already paid under the circumstances. Together with the refund of said amount and interests thereon at the rate of 12% per annum, respondents prayed for the grant of their claims for moral and

exemplary damages as well as attorney's fees and the costs.[10]

Specifically denying the material allegations of the foregoing complaint, PPGI filed its 7 September 1999 answer alleging that the delay in the completion of the project was attributable to the economic crisis which affected the country at the time; that the

unexpected and unforeseen inflation as well as increase in interest rates and cost of building materials constitute force majeure and were beyond its control; that aware of its responsibilities, it offered several alternatives to its buyers like respondents for a

transfer of their investment to its other feasible projects and for the amounts they already paid to be considered as partial payment for the replacement unit/s; and, that

the complaint was prematurely filed in view of the on-going negotiations it is undertaking with its buyers and prospective joint venture partners. Aside from the dismissal of the complaint, PPGI sought the readjustment of the contract price and the

grant of its counterclaims for attorney's fees and litigation expenses.[11]

Petitioner also specifically denied the material allegations of the complaint in separate answer dated 5 February 2002[12] which it amended on 20 May 2002. Calling attention to the fact that its prestation under the JVA consisted in contributing the property on

which The Meditel was to be constructed, petitioner asseverated that, by the terms of the JVA, each party was individually responsible for the marketing and sale of the units

pertaining to its share; that not being privy to the Contracts to Sell executed by PPGI and respondents, it did not receive any portion of the payments made by the latter; and, that without any contributory fault and negligence on its part, PPGI breached its

undertakings under the JVA by failing to complete the condominium project. In addition to the dismissal of the complaint and the grant of its counterclaims for exemplary

damages, attorney's fees, litigation expenses and the costs, petitioner interposed a cross-claim against PPGI for full reimbursement of any sum it may be adjudged liable to pay respondents.[13]

Acting on the position papers and draft decisions subsequently submitted by the

parties,[14] Housing and Land Use (HLU) Arbiter Dunstan T. San Vicente went on to render the 30 July 2003 decision declaring the subject Contracts to Sell cancelled and rescinded on account of the non-completion of the condominium project. On the

ground that the JVA created a partnership liability on their part, petitioner and PPGI, as co-owners of the condominium project, were ordered to pay: (a) respondents' claim for refund of the P611,519.52 they paid, with interest at the rate of 12% per annum from 5

February 1997; (b) damages in the sum of P75,000.00; (c) attorney's fees in the sum of P30,000.00; (d) the costs; and, (e) an administrative fine in the sum of P10,000.00 for

violation of Sec. 20 in relation to Sec. 38 of Presidential Decree No. 957. [15]nbsp; Elevated to the HLURB Board of Commissioners via the petition for review filed by petitioner,[16] the foregoing decision was modified to grant the latter's cross-claim in the

14 September 2004 decision rendered by said administrative body's Second Division in HLURB Case No. REM-A-031007-0240,[17] to wit:

Wherefore, the petition for review of the respondent Corporation is dismissed. However, the decision of the Office below dated July 30, 2003 is modified, hence, its dispositive portion shall read:

1. Declaring the contracts to sell, both dated February 5, 1997, as cancelled and rescinded, and ordering the respondents to immediately pay the complainants the following:

a. The amount of P611,519.52, with interest at the legal rate reckoned from February 5, 1997 until fully paid;

b. Damages of P75,000.00;

c. Attorney's fees equivalent to P30,000.00; and d. The Cost of suit;

2. Ordering respondents to pay this Office administrative fine of P10,000.00 for violation of Section 20 in relation to Section 38 of P.D. 957; and

3. Ordering respondent Primetown to reimburse the entire amount which the respondent Corporation will be constrained to pay the complainants.

So ordered.[18]

With the denial of its motion for reconsideration of the foregoing decision,[19] petitioner filed a Notice of Appeal dated 28 February 2005 which was docketed before the Office

of the President (OP) as O.P. Case No. 05-B-072.[20] On 3 March 2005, the OP issued an order directing petitioner to submit its appeal memorandum within 15 days from receipt

thereof.[21] Acting on the motion therefor filed, the OP also issued another order on the same date, granting petitioner a period of 15 days from 28 February 2005 or until 15 March 2005 within which to file its appeal memorandum.[22] In view of petitioner's filing

of a second motion for extension dated 15 March 2005,[23] the OP issued the 18 March 2005 order granting the former an additional 10 days from 15 March 2005 or until 25

March 2005 within which to file its appeal memorandum, "provided no further extension shall be allowed."[24]Claiming to have received the aforesaid 3 March 2005 order only on 16 March 2005, however, petitioner filed its 31 March 2005 motion seeking

yet another extension of 10 days or until 10 April 2005 within which to file its appeal memorandum.[25]

On 7 April 2005, respondents filed their opposition to the 31 March 2005 motion for extension of petitioner[26] which eventually filed its appeal memorandum by registered

mail on 11 April 2005 in view of the fact that 10 April 2005 fell on a Sunday.[27] On 25 October 2005, the OP rendered a decision dismissing petitioner's appeal on the ground that the latter's appeal memorandum was filed out of time and that the HLURB Board

committed no grave abuse of discretion in rendering the appealed decision.[28] Aggrieved by the denial of its motion for reconsideration of the foregoing decision in

the 3 March 2006 order issued by the OP,[29] petitioner filed before the CA its 29 March 2006 motion for an extension of 15 days from 31 March 2006 or until 15 April 2006 within which to file its petition for review.[30] Accordingly, a non-extendible period of 15 days to

file its petition for review was granted petitioner in the 31 March 2006 resolution issued by the CA Third Division in CA-G.R, SP No. 93841.[31]

Maintaining that 15 April 2006 fell on a Saturday and that pressures of work prevented its counsel from finalizing its petition for review, petitioner filed a motion on 17 April

2006, seeking for an additional time of 10 days or until 27 April 2006 within which to file said pleading.[32] Although petitioner filed by registered mail a motion to admit its

attached petition for review on 19 April 2006,[33] the CA issued the herein assailed 23 May 2006 resolution,[34] disposing of the former's pending motion for extension as well as the petition itself in the following wise:

We resolve to DENY the second extension motion and rule to DISMISS the petition for

being filed late.

Settled is that heavy workload is by no means excusable (Land Bank of the Philippines vs.

Natividad, 458 SCRA 441 [2005]). If the failure of the petitioners' counsel to cope up with heavy workload should be considered a valid justification to sidestep the reglementary

period, there would be no end to litigations so long as counsel had not been sufficiently diligent or experienced (LTS Philippine Corporation vs. Maliwat, 448 SCRA 254, 259-260 [2005], citing Sublay vs. National Labor Relations Commission, 324 SCRA 188 [2000]).

Moreover, lawyers should not assume that their motion for extension or postponement will be granted the length of time they pray for (Ramos vs. Dajoyag, 378 SCRA 229 [2002]).

SO ORDERED.[35]

Petitioner's motion for reconsideration of the foregoing resolution[36] was denied for lack of merit in the CA's second assailed 9 August 2006 resolution,[37] hence, this

petition.

The Issues

Petitioner seeks the reversal of the assailed resolutions on the following grou nds, to wit:

I. THE COURT OF APPEALS ERRED IN DISMISSING THE PETITION ON MERE TECHNICALITY;

II. THE COURT OF APPEALS ERRED IN REFUSING TO RESOLVE THE PETITION ON THE MERITS THEREBY AFFIRMING THE OFFICE OF THE PRESIDENT'S

DECISION (A) DISMISSING JTIC'S APPEAL ON A MERE TECHNICALITY; (B) AFFIRMING THE HLURB BOARD'S DECISION INSOFAR AS IT FOUND JTIC SOLIDARILY LIABLE WITH PRIMETOWN TO PAY SPOUSES ANG DAMAGES,

ATTORNEY'S FEES AND THE COST OF THE SUIT; AND (C) AFFIRMING THE HLURB BOARD'S DECISION INSOFAR AS IT FAILED TO AWARD JITC ITS

COUNTERCLAIMS AGAINST SPOUSES ANG.[38]

The Court's Ruling

We find the petition bereft of merit.

While the dismissal of an appeal on purely technical grounds is concededly frowned

upon,[39] it bears emphasizing that the procedural requirements of the rules on appeal are not harmless and trivial technicalities that litigants can just discard and disregard at will.[40] Neither being a natural right nor a part of due process, the rule is settled that the

right to appeal is merely a statutory privilege which may be exercised only in the manner and in accordance with the provisions of the law.[41] The perfection of an appeal in the

manner and within the period prescribed by law is, in fact, not only mandatory but jurisdictional.[42] Considering that they are requirements which cannot be trifled with as mere technicality to suit the interest of a party,[43] failure to perfect an appeal in the

prescribed manner has the effect of rendering the judgment final and executory.[44]

Fealty to the foregoing principles impels us to discount the error petitioner imputes against the CA for denying its second motion for extension of time for lack of merit and dismissing its petition for review for having been filed out of time. Acting on the 29

March 2006 motion filed for the purpose, after all, the CA had already granted petitioner an inextendible period of 15 days from 31 March 2006 or until 15 April 2006 within which

to file its petition for review. Sec. 4, Rule 43 of the 1997 Rules of Civil Procedure provides as follows:

Sec. 4. Period of appeal. - The appeal shall be taken within fifteen (15) days from notice of the award, judgment, final order or resolution, or from the date of its last publication, if publication is required by law for its effectivity, or of the denial of petitioner's motion

for new trial or reconsideration duly filed in accordance with the governing law of the court or agency a quo. Only one (1) motion for reconsideration shall be allowed. Upon

proper motion and payment of the full amount of the docket fee before the expiration of the reglementary period, the Court of Appeals may grant an additional period of fifteen (15) days only within which to file the petition for review. No further extension

shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days." (Underscoring supplied)

The record shows that, having been granted the 15-day extension sought in its first motion, petitioner filed a second motion for extension praying for an additional 10 days

from 17 April 2006 within which to file its petition for review, on the ground that pressures of work and the demands posed by equally important cases prevented its counsel from finalizing the same. As correctly ruled by the CA, however, heavy

workload cannot be considered as a valid justification to sidestep the reglementary period[45] since to do so would only serve to encourage needless delays and interminable

litigations. Indeed, rules prescribing the time for doing specific acts or for taking certain proceedings are considered absolutely indispensable to prevent needless delays and to orderly and promptly discharge judicial business.[46] Corollary to the principle that the

allowance or denial of a motion for extension of time is addressed to the sound discretion of the court,[47] moreover, lawyers cannot expect that their motions for

extension or postponement will be granted[48] as a matter of course. Although technical rules of procedure are not ends in themselves, they are necessary for

an effective and expeditious administration of justice and cannot, for said reason, be discarded with the mere expediency of claiming substantial merit.[49] This holds

particularly true in the case at bench where, prior to the filing of its petition for revi ew before the CA, petitioner's appeal before the OP was likewise dismissed in view of its failure to file its appeal memorandum within the extensions of time it had been granted

by said office. After being granted an initial extension of 15 days to do the same, the records disclose that petitioner was granted by the OP a second extension of 10 days

from 15 March 2005 or until 25 March 2005 within which to file its appeal memorandum, on the condition that no further extensions shall be allowed. Aside from not heeding said proviso, petitioner had, consequently, no more time to extend when it filed its 31

March 2005 motion seeking yet another extension of 10 days or until 10 April 2005 within which to file its appeal memorandum.

With the foregoing procedural antecedents, the initial 15-day extension granted by the CA and the injunction under Sec. 4, Rule 43 of the 1997 Rules of Civil Procedure against

further extensions "except for the most compelling reason", it was clearly inexcusable for petitioner to expediently plead its counsel's heavy workload as ground for seeking an additional extension of 10 days within which to file its petition for review. To our

mind, petitioner would do well to remember that, rather than the low gate to which parties are unreasonably required to stoop, procedural rules are designed for the

orderly conduct of proceedings and expeditious settlement of cases in the courts of law. Like all rules, they are required to be followed[50] and utter disregard of the same cannot be expediently rationalized by harping on the policy of liberal

construction[51] which was never intended as an unfettered license to disregard the letter of the law or, for that matter, a convenient excuse to substitute substantial

compliance for regular adherence thereto. When it comes to compliance with time rules, the Court cannot afford inexcusable delay.[52]

Even prescinding from the foregoing procedural considerations, we also find that the HLURB Arbiter and Board correctly held petitioner liable alongside PPG I for

respondents' claims and the P10,000.00 administrative fine imposed pursuant to Section 20 in relation to Section 38 of P.D. 957. By the express terms of the JVA, it appears that petitioner not only retained ownership of the property pending completion of the

condominium project[53] but had also bound itself to answer liabilities proceeding from contracts entered into by PPGI with third parties. Article VIII, Section 1 of the JVA

distinctly provides as follows:

"Sec. 1.Rescission and damages. Non-performance by either party of its obligations under this Agreement shall be excused when the same is due to Force Majeure. In such

cases, the defaulting party must exercise due diligence to minimize the breach and to remedy the same at the soonest possible time. In the event that either party defaults or

breaches any of the provisions of this Agreement other than by reason of Force Majeure, the other party shall have the right to terminate this Agreement by giving notice to the defaulting party, without prejudice to the filing of a civil case for damages

arising from the breach of the defaulting party. In the event that the Developer shall be rendered unable to complete the Condominium

Project, and such failure is directly and solely attributable to the Developer, the Owner shall send written notice to the Developer to cause the completion of the Condominium

Project. If the developer fails to comply within One Hundred Eighty (180) days from such notice or, within such time, indicates its incapacity to complete the Project, the Owner shall have the right to take over the construction and cause the completion

thereof. If the Owner exercises its right to complete the Condominium Project under these circumstances, this Agreement shall be automatically rescinded upon written

notice to the Developer and the latter shall hold the former free and harmless from any and all liabilities to third persons arising from such rescission. In any case, the Owner shall respect and strictly comply with any covenant entered into by the Developer and

third parties with respect to any of its units in the Condominium Project. To enable the owner to comply with this contingent liability, the Developer shall furnish the Owner

with a copy of its contracts with the said buyers on a month-to-month basis. Finally, in case the Owner would be constrained to assume the obligations of the Developer to its own buyers, the Developer shall lose its right to ask for indemnity for whatever it may

have spent in the Development of the Project.

Nevertheless, with respect to the buyers of the Developer for the First Phase, the area intended for the Second Phase shall not be bound and/or subjected to the said covenants and/or any other liability incurred by the Developer in connection with the

development of the first phase." (Underscoring supplied)

Viewed in the light of the foregoing provision of the JVA, petitioner cannot avoid liability by claiming that it was not in any way privy to the Contracts to Sell executed by PPGI and respondents. As correctly argued by the latter, moreover, a joint venture is

considered in this jurisdiction as a form of partnership and is, accordingly, governed by the law of partnerships.[54] Under Article 1824 of theCivil Code of the Philippines , all

partners are solidarily liable with the partnership for everything chargeable to the partnership, including loss or injury caused to a third person or penalties incurred due to

any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of his co-partners.[55] Whether innocent or guilty, all the partners are solidarily liable with the partnership itself.[56]

WHEREFORE, premises considered, the petition for review is DENIED for lack of merit.

SO ORDERED.

Corona, C.J., (Chairperson), Velasco, Jr., Leonardo-De Castro, and Mendoza,* JJ., concur.

EN BANC

G.R. No. L-4765 January 20, 1909

ANG SENG QUEN, ET AL., plaintiffs-appellees, vs.

JUAN TE CHICO, ET AL., defendants-appellants.

Kincaid and Hurd, for appellants. C.W. O'Brien, Mañalac, Gabriel and Diaz, Frederick Garfield Waite, and Claro Reyes Panlilio,

for appellees.

WILLARD, J.:

A former appeal in this case is reported in 7 Phil. Rep., 541. The judgment there appealed from was affirmed as to the defendant Uy Su Liong but was reversed and a new trial

ordered as to the defendants Juan Te Chico and Cu UngJeng. In the opinion upon that appeal the court said (p. 544):

There was evidence in the court below tending to prove the allegations of the complaint against some at least of the defendants, which evidence

made out a prima facie case in favor of the plaintiffs.

Upon the second trial the plaintiffs introduced the same evidence that was introduced at the first trial and there appeared, moreover, a letter written by the then manager of

the business at Iloilo, Ong Bun Po, to the manager at Manila, in which he said:

The debts we owed Hoc Jua Bee you must ask for an extension of time to pay him until our business becomes better. If not, we are hard in getting money to pay in cash.

The additional evidence introduced by the defendants at the second trial did not in any way destroy the prima facie case made by the plaintiffs. The court below entered judgment for the amount claimed in favor of the plaintiffs and against the defendants

Juan Te Chico, Trinidad JuradoTe Quim Jua, Cu UngJeng, Ang Ban Gui, and Ang Ban Bi. From this judgment Juan Te Chico and Cu UngJeng have appealed. The others have not appealed.

The additional evidence introduced by the defendants not having affected the force of the plaintiff's testimony, the latter were entitled to judgment against some of the defendants. The question is, whether they are entitled to judgment against the two

appellants.

That the plaintiffs as individuals can maintain this action, although their partnership articles were not recorded in the registry, has been settled by the decisions of this court.

(Prautch vs. Jones, 8 Phil. Rep., 1.) The defendant partnership was devoted entirely to commercial transactions, to the buying and selling of personal property with a view to profit. It was, therefore, a commercial partnership and the liability of the members

thereof must be determined by the Code of Commerce. (Hung-Man-Yoc vs. Kieng-Chiong-Seng, 6 Phil. Rep., 498.)

Considerable evidence was presented in the court below to show the custom among

Chinese merchants in the Philippines relating to the organization of commercial partnerships, such evidence tending to show that in such organizations they disregarded entirely the provisions of the Code of Commerce, and it is apparently

claimed that custom has the effect of law and that the rights of Chinese merchants and persons dealing with them must be determined not by the law in force in the Islands

relating to commercial partnerships, but by such customs as they may see fit to follow, which customs are directly contrary to the provisions of the Code of Commerce. No argument is necessary to show that there is nothing whatever in this contention.

We will first consider the liability of Cu UngJeng.

The contract between the defendants was evidenced by the notarial document made on

the 22nd of December, 1902, by the terms of which Juan Te Chico, Cu UngJeng, and Ang Ban Gui formed a special partnership (sociedad en comandita), the general partner being

Juan Te Chico and the special partners being Cu UngJeng and Ang Ban Gui. Each of the partners contributed 4,000 pesos as capital, the name of the partnership was declared to be Te Chico, sociedad en comandita, and the entire management of the business was

entrusted to Juan Te Chico. The articles of partnership were never recorded in the mercantile registry. The partnership, therefore, never acquired any juridical personality.

Article 24 of the Code of Commerce is as follows:

Articles constituting associations not recorded shall be binding between the members who execute the same; but they shall not prejudice third persons, who, however, may make use thereof in so far as advantageous.

But this article does not aid the plaintiffs so far as Cu UngJeng is concerned because his liability is, by the terms thereof, limited to the amount of money which he invested and

under the provisions of the Code of Commerce relating to special partnerships (sociedades en comandita) no personal liability can be imposed upon a special partner

who has actually contributed to the capital of the partnership the amount which he agreed to contribute. If, however, that document be eliminated from the case and it be considered that the contract between the parties was the entry made in the books of

the company when it was first organized in 1899, the case would then fall directly within the decision of Hung-Man-Yoc vs. Kieng-Chiong-Seng (6 Phil. Rep., 498) above cited. In

that case it is said (p. 500):

The agent Yu-Yec-Pin himself and some of his so-called partners have merely noted in the books of the partnership, which by the way, were not introduced in evidence, the capital which each had contributed.

In that case it was held that one of the partners, Chua Che Co, who had contributed a

part of the capital but who had taken no part in the management of the business, who had made no contract with the plaintiffs, and whose name did not appear in the

partnership title, was not responsible for the debts of the concern. T hose facts all appear in the case at bar.

The name under which the defendant partnership or business was operated prior to 1902 was Sam Jap Jim & Co. Although the name indicated in the articles of partnership

of 1902 was Te Chico, sociedad en comandita, yet it seems that the business was still carried on in the name of Sam Jap Jim & Co. The name of Cu UngJeng does not appear in

either one of these designations. He took no part whatever in the management of the business of the company, either in Iloilo or Manila. He never made any contract with the plaintiffs in connection with the business of the defendant company. He, therefore, can

not be held liable for its debts.

Mere participation in the profits of a commercial partnerships by a person does not necessarily make such person liable for the debts of the partnership.

(Bourns vs. Carman, 7 Phil. Rep., 117; Fortis vs. Gutierrez Hermanos, 6 Phil. Rep., 100.)

As to Juan Te Chico, it is apparent that the judgment must be affirmed. He was the sole manager of the business and carried it on, either personally or through his agents, and in

accordance with the provisions of article 120 of the Code of Commerce is personally responsible for the debts of the partnership.

The judgment of the court below so far as it relates to Juan Te Chico is affirmed, with the costs of this instance against him. So far as it relates to Cu UngJeng, it is reversed

and he is acquitted of the complaint, with the costs of the first instance against the plaintiffs. No costs will be allowed to him in this court.

Arellano, C.J., Torres, Mapa, and Tracey, JJ., concur.

Johnson and Carson, JJ., reverse their votes.