cases on partnership

8/13/2019 Cases on Partnership

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G.R. No. 159333 July 31, 2006

ARSENIO T. MENDIOLA,petitioner,vs.COURT OF APPEALS, NATIONAL LAOR RELATIONS COMMISSION, PACIFIC FOREST RESOURCES,P!ILS., INC. "#$%o& CELLMAR' A,respondents.

D E C I S I O N

PUNO, J.(

On appeal are the Decision1and Resolution2of the Court of Appeals, dated January 30, 2003 and July 30,2003, respectively, in CA-.R. !" #o. $102%, affir&in' the rulin'3of the #ational (a)or Relations Co&&ission*#(RC+, hich in turn set aside the July 30, 2001 Decisionof the la)or ar)iter. he la)or ar)iter declaredille'al the dis&issal of petitioner fro& e&ploy&ent and aarded separation pay, &oral and e/e&plaryda&a'es, and attorneys fees.

he facts are as follos

"rivate respondent "acific orest Resources, "hils., nc. *"acfor+ is a corporation or'ani4ed and e/istin' under

the las of California, 5!A. t is a su)sidiary of Cellulose 6ar7etin' nternational, a corporation duly or'ani4edunder the las of !eden, ith principal office in othen)ur', !eden.

"rivate respondent "acfor entered into a 8!ide A'ree&ent on Representative Office 7non as "acific orestResources *"hils.+, nc.89ith petitioner Arsenio . 6endiola *A6+, effective 6ay 1, 1::9, 8assu&in' that"acfor-"hils. is already approved )y the !ecurities and ;/chan'e Co&&ission he!ide A'ree&ent outlines the )usiness relationship of the parties ith re'ard to the "hilippine operations of"acfor. "rivate respondent ill esta)lish a "acfor representative office in the "hilippines, to )e 7non as"acfor "hils, and petitioner A6 ill )e its "resident. "etitioners )ase salary and the overhead e/pendituresof the co&pany shall )e )orne )y the representative office and funded )y "acfor?A6, since "acfor "hils. ise@ually oned on a 90-90 e@uity )y A6 and "acfor-usa.

On July 1, 1::9, the !;C 'ranted the application of private respondent "acfor for a license to transact)usiness in the "hilippines under the na&e of "acfor or "acfor "hils.$n its application, private respondent"acfor proposed to esta)lish its representative office in the "hilippines ith the purpose of &onitorin' andcoordinatin' the &ar7et activities for paper products. t also desi'nated petitioner as its resident a'ent in the"hilippines, authori4ed to accept su&&ons and processes in all le'al proceedin's, and all notices affectin' thecorporation.%

n 6arch 1::$, the !ide A'ree&ent as a&ended throu'h a 8Revised Operatin' and "rofit !harin'A'ree&ent for the Representative Office non as "acific orest Resources *"hilippines+,8:here the salaryof petitioner as increased to B$%,000 per annu&. oth a'ree&ents sho that the operational e/penses ill)e )orne )y the representative office and funded )y all parties 8as e@ual partners,8 hile the profits andco&&issions ill )e shared a&on' the&.

n July 2000, petitioner rote evin Daley, ice "resident for Asia of "acfor, see7in' confir&ation of his 90Ee@uity of "acfor "hils.10"rivate respondent "acfor, throu'h Fillia& leason, its "resident, replied thatpetitioner is not a part-oner of "acfor "hils. )ecause the latter is &erely "acfor-5!As representative officeand not an entity separate and distinct fro& "acfor-5!A. 8ts si&ply a theoretical co&pany ith the purposeof dividin' the inco&e 90-90.811"etitioner presu&a)ly 7ne of this arran'e&ent fro& the start, havin' )een theone to propose to private respondent "acfor the settin' up of a representative office, and 8not a )ranch office8in the "hilippines to save on ta/es.12

"etitioner clai&ed that he as all alon' &ade to )elieve that he as in a Goint venture ith the&. He alle'ed heould have )een )etter off re&ainin' as an independent a'ent or representative of "acfor-5!A as A66ar7etin' Corp.13Had he 7non that no Goint venture e/isted, he ould not have alloed "acfor to ta7e theprofita)le )usiness of his on co&pany, A6 6ar7etin' Corp.1"etitioner raised other issues, such as therentals of office furniture, salary of the e&ployees, co&pany car, as ell as co&&issions alle'edly due hi&.he issues ere not resolved, hence, in Octo)er 2000, petitioner rote "acfor-5!A de&andin' pay&ent ofunpaid co&&issions and office furniture and e@uip&ent rentals, a&ountin' to &ore than one &illion dollars.19

On #ove&)er 2$, 2000, private respondent "acfor, throu'h counsel, ordered petitioner to turn over to it allpapers, docu&ents, files, records, and other &aterials in his or A6 6ar7etin' Corporations possession that

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)elon' to "acfor or "acfor "hils.1>On Dece&)er 1%, 2000, private respondent "acfor also re@uired petitionerto re&it &ore than three hundred thousand-peso Christ&as 'iveaay fund for clients of "acfor "hils.1$(astly,private respondent "acfor ithdre all its offers of settle&ent and ordered petitioner to transfer title and turnover to it possession of the service car.1%

"rivate respondent "acfor li7eise sent letters to its clients in the "hilippines, advisin' the& not to deal ith"acfor "hils. n its letter to ntercontinental "aper ndustries, nc., dated #ove&)er 21, 2000, privaterespondent "acfor stated

5ntil further notice, please course all in@uiries and co&&unications for "acific orest Resources*"hilippines+ to

"acific orest Resources200 a&al "la4a, !uite 200Corte 6adera, CA, 5!A ::29*19+ :2$ 1$00 phone*19+ 3%1 39% fa/

"lease do not send any co&&unication to 6r. Arsenio 8oy8 . 6endiola or to the offices ofA6 6ar7etin' Corporation at Roo& 90, Concorde uildin', (e'aspi illa'e, 6a7ati City,

"hilippines.

1:

n another letter addressed to Davao Corru'ated Carton Corp. *DACOR+, dated Dece&)er 2000, privaterespondent directed said client 8to please co&&unicate directly ith us on any further @uestions associatedith these pay&ents or any future )usiness. Do not co&&unicate ith


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hi&self, )esides the dollar salary a'reed upon )y the parties. "rivate respondent also accused petitioner ofdisloyalty and representation of conflictin' interests for havin' continued usin' the "acfor "hils. office foroperations of H;". n addition, petitioner alle'edly solicited )usiness for H;" fro& a co&petitor co&pany ofprivate respondent "acfor.2:

(a)or Ar)iter elipe "ati ruled in favor of petitioner, findin' there as constructive dis&issal. y directin'petitioner to turn over all office records and &aterials, re'ardless of hether he &ay have retained copies,private respondent "acfor virtually deprived petitioner of his Go) )y the 'radual di&inution of his authority asresident &ana'er. "etitioners position as resident &ana'er hose duty, a&on' others, as to &aintain thesecurity of its )usiness transactions and co&&unications as rendered &eanin'less. he dispositive portion ofthe decision of the (a)or Ar)iter reads

FH;R;OR;, pre&ises considered, Gud'&ent is here)y rendered orderin' herein respondentsCell&ar7 A and "acific orest Resources, nc., Gointly and severally to co&pensateco&plainant Arsenio . 6endiola separation pay e@uivalent to at least one &onth for every yearof service, hichever is hi'her (sic), as reinstate&ent is no lon'er feasi)le )y reason of thestrained relations of the parties e@uivalent to five *9+ &onths in the a&ount of B32,000.00 plusthe su& of "290,000.00 pay co&plainant the su& of "900,000.00 as &oral and e/e&plaryda&a'es and ten percent *10E+ of the a&ounts aarded as and for attorneys fees.

All other clai&s are dis&issed for lac7 of )asis.

!O ORD;R;D.30

"rivate respondent "acfor appealed to the #(RC hich ruled in its favor. On Dece&)er 20, 2001, the #(RCset aside the July 30, 2001 decision of the la)or ar)iter, for lac7 of Gurisdiction and lac7 of &erit.31t held thereas no e&ployer-e&ployee relationship )eteen the parties. ased on the to a'ree&ents )eteen theparties, it concluded that petitioner is not an e&ployee of private respondent "acfor, )ut a full co-oner *90?90e@uity+.

he #(RC denied petitioners 6otion for Reconsideration.32

"etitioner as not successful on his appeal to the Court of Appeals. he appellate court upheld the rulin' ofthe #(RC.

"etitioners 6otion for Reconsideration33of the decision of the Court of Appeals as denied.

Hence, this appeal.3

"etitioner assi'ns the folloin' errors

A. he Respondent Court of Appeals co&&itted reversi)le error and a)used its discretion inrenderin' Gud'&ent a'ainst petitioner since Gurisdiction has )een ac@uired over the su)Gect&atter of the case as there e/ists e&ployer-e&ployee relationship )eteen the parties.

. he Respondent Court of Appeals co&&itted reversi)le error and a)used its discretion inrulin' that Gurisdiction over the su)Gect &atter cannot )e aived and &ay )e alle'ed even for thefirst ti&e on appeal or considered )y the court &otu prop


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n a partnership, the &e&)ers )eco&e co-oners of hat is contri)uted to the fir& capital and of all propertythat &ay )e ac@uired there)y and throu'h the efforts of the &e&)ers.3>he property or stoc7 of thepartnership for&s a co&&unity of 'oods, a co&&on fund, in hich each party has a proprietary interest.3$nfact, the #e Civil Code re'ards a partner as a co-oner of specific partnership property.3%;ach partnerpossesses a Goint interest in the hole of partnership property. f the relation does not have this feature, it is notone of partnership.3:his essential ele&ent, the co&&unity of interest, or co-onership of, or Goint interest inpartnership property is a)sent in the relations )eteen petitioner and private respondent "acfor. "etitioner isnot a part-oner of "acfor "hils. Fillia& leason, private respondent "acfors "resident esta)lished this facthen he said that "acfor "hils. is si&ply a 8theoretical co&pany8 for the purpose of dividin' the inco&e 90-90.

He stressed that petitioner 7ne of this arran'e&ent fro& the very start, havin' )een the one to propose toprivate respondent "acfor the settin' up of a representative office, and 8not a )ranch office8 in the "hilippinesto save on ta/es. hus, the parties in this case, &erely shared profits. his alone does not &a7e apartnership.0

esides, a corporation cannot )eco&e a &e&)er of a partnership in the a)sence of e/press authori4ation )ystatute or charter.1his doctrine is )ased on the folloin' considerations *1+ that the &utual a'ency )eteenthe partners, here)y the corporation ould )e )ound )y the acts of persons ho are not its duly appointedand authori4ed a'ents and officers, ould )e inconsistent ith the policy of the la that the corporation shall&ana'e its on affairs separately and e/clusively and, *2+ that such an arran'e&ent ould i&properly allocorporate property to )eco&e su)Gect to ris7s not conte&plated )y the stoc7holders hen they ori'inallyinvested in the corporation.2#o such authori4ation has )een proved in the case at )ar.

e that as it &ay, e hold that on the )asis of the evidence, an e&ployer-e&ployee relationship is present inthe case at )ar. he ele&ents to deter&ine the e/istence of an e&ploy&ent relationship are *a+ the selectionand en'a'e&ent of the e&ployee *)+ the pay&ent of a'es *c+ the poer of dis&issal and *d+ thee&ployers poer to control the e&ployees conduct. he &ost i&portant ele&ent is the e&ployers control ofthe e&ployees conduct, not only as to the result of the or7 to )e done, )ut also as to the &eans and &ethodsto acco&plish it.3

n the instant case, all the fore'oin' ele&ents are present. irst, it as private respondent "acfor hichselected and en'a'ed the services of petitioner as its resident a'ent in the "hilippines. !econd, as stipulatedin their !ide A'ree&ent, private respondent "acfor pays petitioner his salary a&ountin' to B>9,000 per annu&hich as later increased to B$%,000. hird, private respondent "acfor holds the poer of dis&issal, as &ay)e 'leaned throu'h the various &e&oranda it issued a'ainst petitioner, placin' the latter on preventivesuspension hile char'in' hi& ith various offenses, includin' illful diso)edience, serious &isconduct, and'ross ne'lect of duty, and orderin' hi& to sho cause hy no disciplinary action should )e ta7en a'ainst hi&.

(astly and &ost i&portant, private respondent "acfor has the poer of control over the &eans and &ethod ofpetitioner in acco&plishin' his or7.

he poer of control refers &erely to the e/istence of the poer, and not to the actual e/ercise thereof. heprincipal consideration is hether the e&ployer has the ri'ht to control the &anner of doin' the or7, and it isnot the actual e/ercise of the ri'ht )y interferin' ith the or7, )ut the ri'ht to control, hich constitutes thetest of the e/istence of an e&ployer-e&ployee relationship.n the case at )ar, private respondent "acfor, as

e&ployer, clearly possesses such ri'ht of control. "etitioner, as private respondent "acfors resident a'ent inthe "hilippines, is, e/actly so, only an a'ent of the corporation, a representative of "acfor, ho transacts)usiness, and accepts service on its )ehalf.

his ri'ht of control as e/ercised )y private respondent "acfor durin' the period of #ove&)er to Dece&)er2000, hen it directed petitioner to turn over to it all records of "acfor "hils. hen it ordered petitioner to re&itthe Christ&as 'iveaay fund intended for clients of "acfor "hils. and, hen it ithdre all its offers ofsettle&ent and ordered petitioner to transfer title and turn over to it the possession of the service car. t asalso durin' this period hen private respondent "acfor sent letters to its clients in the "hilippines, particularlyntercontinental "aper ndustries, nc. and DACOR, advisin' the& not to deal ith petitioner and?or "acfor"hils. n its letter to DACOR, private respondent "acfor replied to the clients re@uest for an invoice pay&ente/tension, and for&ulated a revised pay&ent pro'ra& for DACOR. his is one un&ista7a)le proof that

private respondent "acfor e/ercises control over the petitioner.

#e/t, e shall deter&ine if petitioner as constructively dis&issed fro& e&ploy&ent.

he evidence shos that hen petitioner insisted on his 90E e@uity in "acfor "hils., and ould not @uithoever, private respondent "acfor )e'an to syste&atically deprive petitioner of his duties and )enefits to&a7e hi& feel that his presence in the co&pany as no lon'er anted. irst, private respondent "acfordirected petitioner to turn over to it all records of "acfor "hils. his ould certainly &a7e the or7 of petitioner

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very difficult, if not i&possi)le. !econd, private respondent "acfor ordered petitioner to re&it the Christ&as'iveaay fund intended for clients of "acfor "hils. hen it ordered petitioner to transfer title and turn over to itthe possession of the service car. t also advised its clients in the "hilippines, particularly ntercontinental"aper ndustries, nc. and DACOR, not to deal ith petitioner and?or "acfor "hils. (astly, private respondent"acfor appointed a ne resident a'ent for "acfor "hils.9

Althou'h there is no reduction of the salary of petitioner, constructive dis&issal is still present )ecausecontinued e&ploy&ent of petitioner is rendered, at the very least, unreasona)le.>here is an act of cleardiscri&ination, insensi)ility or disdain )y the e&ployer that continued e&ploy&ent &ay )eco&e so un)eara)leon the part of the e&ployee so as to foreclose any choice on his part e/cept to resi'n fro& such e&ploy&ent.$

he harassin' acts of the private respondent are unGustified. hey ere underta7en hen petitioner sou'htclarification fro& the private respondent a)out his supposed 90E e@uity on "acfor "hils. "rivate respondent"acfor invo7es its ri'hts as an oner. Alle'edly, its issuance of the fore'oin' directives a'ainst petitioner asa valid e/ercise of &ana'e&ent prero'ative. Fe re&ind private respondent "acfor that the e/ercise of&ana'e&ent prero'ative is not a)solute. 8y its very nature, enco&passin' as it could )e, &ana'e&entprero'ative &ust )e e/ercised in 'ood faith and ith due re'ard to the ri'hts of la)or K verily, ith theprinciples of fair play at heart and Gustice in &ind.8 he e/ercise of &ana'e&ent prero'ative cannot )e utili4edas an i&ple&ent to circu&vent our las and oppress e&ployees.%

As resident a'ent of private respondent corporation, petitioner occupied a position involvin' trust andconfidence. n the li'ht of the strained relations )eteen the parties, the full restoration of an e&ploy&entrelationship )ased on trust and confidence is no lon'er possi)le. He should )e aarded separation pay, in lieuof reinstate&ent.

IN )IE* *!EREOF, the petition is GRANTED. he Court of Appeals January 30, 2003 Decision in CA-.R.!" #o. $102% and July 30, 2003 Resolution, affir&in' the Dece&)er 20, 2001 Decision of the #ational (a)orRelations Co&&ission, are ANNULEDand SET ASIDE. he July 30, 2001 Decision of the (a)or Ar)iterisREINSTATEDith the MODIFICATIONthat the a&ount of "290,000.00 representin' an alle'ed increase inpetitioners salary shall )e deducted fro& the 'rant of separation pay for lac7 of evidence.

SO ORDERED.

G.R. No. 1+0+96 Auu- 1/, 200+

DON PEPE !ENSON ENTERPRISE, &&-#$ y - M"#"#4P"&,MR. ARISTIDES R. SUARE,petitioners,vs.MARIANO DA)ID, JUAN PANGILINAN, MARCIAL DARIT, "#$ MEL7UIADES DE GUMAN,respondent.

D E C I S I O N

CARPIO MORALES, J.(

"etitioner Don "epe Henson ;nterprise, represented )y its &ana'in' partner Aristides R. !uare4, appealsfro& the decision of the Court of Appeals in CA-.R. !" #o. $$>%, 8Don "epe Henson ;nterprise v. 6arianoDavid, et al.8

"etitioner, a partnership, is the re'istered oner of a parcel of a'ricultural land covered )y ransfer Certificateof itle *C+ #o. $093 issued )y the Re'istry of Deeds of An'eles City, containin' an area of &ore or less1: hectares, and located at aran'ay "a&pan', An'eles City.

A portion of the land, ith an a''re'ate area of 9.9 hectares, is )ein' tilled )y petitioners tenantsL

respondents 6ariano David, Juan "an'ilinan, 6arcial Dayrit and 6el@uiades de u4&an.

hat a landlord-tenant relationship e/ists )eteen the parties as settled )y this Court in Don Pepe HensonEnterprises v. Pangilinan


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he correspondin' ;&ancipation "atents and ransfer Certificates of itle ere conse@uently issued inrespondents na&e.

6onths after the pro&ul'ation of this Courts decision in Don Pepe Henson
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8#o pronounce&ent as to costs.8 *5nderscorin' supplied+

A''rieved, respondents appealed to the DARA )efore hich they raised the folloin' issues

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he DARA, )y Decision of Octo)er 2, 1::$, reversed the decision of the "rovincial AdGudicator anddis&issed the co&plaint of petitioner.

"etitioner thus appealed to the Court of Appeals on the folloin' 'rounds

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AD6!!O# O D;#A( O D5; "ROC;!!

2+ HA H; HO#ORA(; ADJ5DCAO# OARD RA;(M A5!;D ! D!CR;O#A6O5## O (AC O J5R!DCO# # D;C(AR# HA H; R;!"O#D;#! DD #OO(A; "R;!D;#A( D;CR;; #O. %1>, M A""(M# ! OF# CO#C(5!O# A! ! A!!RAH;R HA# H; ;D;#C; "R;!;#;D A#D

3+ HA H; HO#ORA(; ADJ5DCAO# OARD HA! #D;;D A5!;D ! D!CR;O#A6O5## O (AC O J5R!DCO# # R;;R!# H; D;C!O# O H; "RO#CA(ADJ5DCAOR FHO5 A#M J5!A(; A!! # (AF A#D # AC.

y Decision of June 2:, 1:::, the Court of Appeals, sustainin' the findin' that the far&holdin' of respondentsas covered )y ".D. #o. 2$, held, hoever, that the issuance of the Certificates of (and ransfer,;&ancipation "atents, and Cs to respondents as vitiated due to the violation of petitioners ri'ht to dueprocess.

!i'nificantly, the appellate court also held that there is no proof that the far&holdin' has )een paid for )yrespondents ho 8do no


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Hence, instead of orderin' the eGect&ent of respondents, the appellate court annulled respondents Certificatesof (and ransfer, ;&ancipation "atents, and Cs )ut 'ave the& the opportunity to apply ane for theissuance of such docu&ents, this ti&e ensurin' that due process ould )e o)served. hus the appellate courtdisposed

8FH;R;OR;, the Decision of the DARA herein revieed is here)y rendered *sic+ A##5((# the;&ancipation "atents and ransfer Certificates of itle issued to the respondents and to 6el@uiadesand Adriano de u4&an, FHO5 "R;J5DC; to their applyin' for the issuance of ne patents andcertificates to the&, after o)servance of due process of la.8

Hence, petitioners present petition for revie under Rule 9 anchored to the folloin' 'rounds

1+ HA H; HO#ORA(; CO5R O A"";A(! RA;(M A5!;D ! D!CR;O#A6O5## O (AC O J5R!DCO# # AR6# HA H; (A#D !5J;C O H;CA!; ! CO;R;D 5#D;R ".D. #O. 2$, D;!"; H; AC HA ! C(;AR(M A "AR O A(A#DHO(D# "R6AR(M D;O;D O H; C5(AO# O !5ARCA#; A#D ! AR;A !O5!D; H; CO;RA; O H; (AF A! O5#D M H; "RO#CA( ADJ5DCAOR OH; D;"AR6;# O ARARA# R;OR6 # ! D;C!O# DA;D ;R5ARM 21, 1::2

2+ HA H; HO#ORA(; CO5R O A"";A(! RA;(M A5!;D ! D!CR;O#

A6O5## O (AC O J5R!DCO# FH;# R;5!;D O A""(M ".D. #O. %1> A#D;J;C H; R;!"O#D;#! RO6 ";O#;R! (A#D, D;!"; H; C(;AR"RO#O5#C;6;# O H; (AF A#D ;P!# ;D;#C; O# R;CORD. *5nderscorin'supplied+

"etitioner prays for the &odification of the challen'ed decision such that the i&position of a @ualification on theannul&ent of the Certificates of (and ransfer, ;&ancipation "atents and Cs, K that it is 8ithout preGudiceto


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stated in its present petition that it is 8the a)solute oner of a parcel of land / / / covered )y ransferCertificate of itle #o. $093.8


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*!EREFORE,the challen'ed decision of the Court of Appeals is here)y AFFIRMED 8 MODIFICATIONthat the annul&ent of respondents Certificates of (and ransfer, ;&ancipation "atents, andransfer Certificates of itle coverin' their far&holdin' is FH "R;J5DC; to their applyin' for ne patentsand certificates, and they are ordered to peacefully vacate their far&holdin'.

SO ORDERED.

Foo#o-

10!;C.3>. Possession of Landholding; Exceptions. #otithstandin' any a'ree&ent as to the periodor future surrender of the land, an a'ricultural lessee shall continue in the enGoy&ent and possession ofhis landholdin' e/cept hen his dispossession has )een authori4ed )y the Court in a Gud'&ent that isfinal and e/ecutory if after due hearin' it is shon that

/ / /

*>+ he a'ricultural lessee does not pay the lease rental hen it falls due Provided, hat if thenonpay&ent of the rental shall )e due to crop failure to the e/tent of seventy-fiveper centu!as a resultof a fortuitous event, the nonpay&ent shall not )e a 'round for dispossession, althou'h the o)li'ationto pay the rental due that particular crop is not there)y e/tin'uished / / /

G.R. No. 1+33+0 Auu- 15, 2001

LILIET! SUNGA4C!AN "#$ CECILIA SUNGA, petitioners,vs.LAMERTO T. C!UA, respondent.

GONAGA4REES, J.(

efore us is a petition for revie on certiorari under Rule 9 of the Rules of Court of the Decision

1

of the Courtof Appeals dated January 31, 2000 in the case entitled 8(a&)erto . Chua vs. (ili)eth !un'a Chan and Cecilia!un'a8 and of the Resolution dated 6ay 23, 2000 denyin' the &otion for reconsideration of herein petitioners(ili)eth !un'a and Cecilia !un'a *hereafter collectively referred to as petitioners+.

he pertinent facts of this case are as follos

On June 22, 1::2, (a&)erto . Chua *hereafter respondent+ filed a co&plaint a'ainst (ili)eth !un'a Chan*hereafter petitioner (ili)eth+ and Cecilia !un'a *hereafter petitioner Cecilia+, dau'hter and ife, respectively ofthe deceased Jacinto (. !un'a *hereafter Jacinto+, for 8Findin' 5p of "artnership Affairs, Accountin',

Appraisal and Recovery of !hares and Da&a'es ith Frit of "reli&inary Attach&ent8 ith the Re'ional rialCourt, ranch 11, !indan'an, a&)oan'a del #orte.

Respondent alle'ed that in 1:$$, he ver)ally entered into a partnership ith Jacinto in the distri)ution of!hellane (i@uefied "etroleu& as *("+ in 6anila. or )usiness convenience, respondent and Jacintoalle'edly a'reed to re'ister the )usiness na&e of their partnership, !H;((; A! A""(A#C; C;#;R*hereafter !hellite+, under the na&e of Jacinto as a sole proprietorship. Respondent alle'edly delivered hisinitial capital contri)ution of "100,000.00 to Jacinto hile the latter in turn produced "100,000.00 as hiscounterpart contri)ution, ith the intention that the profits ould )e e@ually divided )eteen the&. hepartnership alle'edly had Jacinto as &ana'er, assisted )y Josephine !y *hereafter Josephine+, a sister of theife respondent, ;rlinda !y. As co&pensation, Jacinto ould receive a &ana'ers fee or re&uneration of 10Eof the 'ross profit and Josephine ould receive 10E of the net profits, in addition to her a'es and otherre&uneration fro& the )usiness.

Alle'edly, fro& the ti&e that !hellite opened for )usiness on July %, 1:$$, its )usiness operation ent @uiteand as profita)le. Respondent clai&ed that he could attest to success of their )usiness )ecause of thevolu&e of orders and deliveries of filled !hellane cylinder tan7s supplied )y "ilipinas !hell "etroleu&Corporation. Fhile Jacinto furnished respondent ith the &erchandise inventories, )alance sheets and netorth of !hellite fro& 1:$$ to 1:%:, respondent hoever suspected that the a&ount indicated in thesedocu&ents ere understated and undervalued )y Jacinto and Josephine for their on selfish reasons and forta/ avoidance.

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5pon Jacintos death in the later part of 1:%:, his survivin' ife, petitioner Cecilia and particularly his dau'hter,petitioner (ili)eth, too7 over the operations, control, custody, disposition and &ana'e&ent of !hellite ithoutrespondents consent. Despite respondents repeated de&ands upon petitioners for accountin', inventory,appraisal, indin' up and restitution of his net shares in the partnership, petitioners failed to co&ply. "etitioner(ili)eth alle'edly continued the operations of !hellite, convertin' to her on use and advanta'e its properties.

On 6arch 31, 1::1, respondent clai&ed that after petitioner (ili)eth ran out the ali)is and reasons to evaderespondents de&ands, she dis)ursed out of the partnership funds the a&ount of "200,000.00 and partiallypaid the sa&e to respondent. "etitioner (ili)eth alle'edly infor&ed respondent that the "200,000.00represented partial pay&ent of the latters share in the partnership, ith a pro&ise that the for&er ould &a7ethe co&plete inventory and indin' up of the properties of the )usiness esta)lish&ent. Despite suchco&&it&ent, petitioners alle'edly failed to co&ply ith their duty to account, and continued to )enefit fro& theassets and inco&e of !hellite to the da&a'e and preGudice of respondent.

On Dece&)er 1:, 1::2, petitioners filed a 6otion to Dis&iss on the 'round that the !ecurities and ;/chan'eCo&&ission *!;C+ in 6anila, not the Re'ional rial Court in a&)oan'a del #orte had Gurisdiction over theaction. Respondent opposed the &otion to dis&iss.

On January 12, 1::3, the trial court findin' the co&plaint sufficient in fro& and su)stance denied the &otion todis&iss.

On January 30, 1::3, petitioners filed their Anser ith Co&pulsory Counter-clai&s, contendin' that they arenot lia)le for partnership shares, unreceived inco&e?profits, interests, da&a'es and attorneys fees, thatrespondent does not have a cause of action a'ainst the&, and that the trial court has no Gurisdiction over thenature of the action, the !;C )ein' the a'ency that has ori'inal and e/clusive Gurisdiction over the case. Ascounterclai&, petitioner sou'ht attorneys fees and e/penses of liti'ation.

On Au'ust 2, 1::3, petitioner filed a second 6otion to Dis&iss this ti&e on the 'round that the clai& forindin' up of partnership affairs, accountin' and recovery of shares in partnership affairs, accountin' andrecovery of shares in partnership assets?properties should )e dis&issed and prosecuted a'ainst the estate ofdeceased Jacinto in a pro)ate or intestate proceedin'.

On Au'ust 1>, 1::3, the trial denied the second &otion to dis&iss for lac7 of &erit.

On #ove&)er 2>, 1::3, petitioners filed their "etition for Certiorari, "rohi)ition and 6anda&us ith the Courtof Appeals doc7eted as CA-.R. !" #o. 32:: @uestionin' the denial of the &otion to dis&iss.

On #ove&)er 2:, 1::3, petitioners filed ith the trial court a 6otion to !uspend "re-trial Conference.

On Dece&)er 13, 1::3, the trial court 'ranted the &otion to suspend pre-trial conference.

On #ove&)er 19, 1::, the Court of Appeals denied the petition for lac7 of &erit.

On January 1>, 1::9, this Court denied the petition for revie on certiorari filed )y petitioner, 8as petitioners

failed to sho that a reversi)le error as co&&itted )y the appellate court.82

On e)ruary 20, 1::9, entry of Gud'&ent as &ade )y the Cler7 of Court and the case as re&anded to thetrial court on April 2>, 1::9.

On !epte&)er 29, 1::9, the trial court ter&inated the pre-trial conference and set the hearin' of the case ofJanuary 1$, 1::>. Respondent presented his evidence hile petitioners ere considered to have aived theirri'ht to present evidence for their failure to attend the scheduled date for reception of evidence despite notice.

On Octo)er $, 1::$, the trial court rendered its Decision rulin' for respondent. he dispositive of the Decisionreads

8FH;R;OR;, Gud'&ent is here)y rendered in favor of the plaintiff and a'ainst thedefendants, as follos

*1+ DR;C# the& to render an accountin' in accepta)le for& under accountin'procedures and standards of the properties, assets, inco&e and profits of the !helliteas Appliance Center !ince the ti&e of death of Jacinto (. !un'a, fro& ho& theycontinued the )usiness operations includin' all )usinesses derived fro& !hellite as

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Appliance Center, su)&it an inventory, and appraisal of all these properties, assets,inco&e, profits etc. to the Court and to plaintiff for approval or disapproval

*2+ ORD;R# the& to return and restitute to the partnership any and all properties,assets, inco&e and profits they &isapplied and converted to their on use andadvanta'e the le'ally pertain to the plaintiff and account for the properties &entioned inpars. A and on pa'es -9 of this petition as )asis

*3+ DR;C# the& to restitute and pay to the plaintiff Q shares and interest of theplaintiff in the partnership of the listed properties, assets and 'ood ill *sic+ in schedules

A, and C, on pa'es -9 of the petition

*+ ORD;R# the& to pay the plaintiff earned )ut unreceived inco&e and profits fro&the partnership fro& 1:%% to 6ay 30, 1::2, hen the plaintiff learned of the closure ofthe store the su& of "39,000.00 per &onth, ith le'al rate of interest until fully paid

*9+ ORD;R# the& to ind up the affairs of the partnership and ter&inate its )usinessactivities pursuant to la, after deliverin' to the plaintiff all the Q interest, shares,participation and e@uity in the partnership, or the value thereof in &oney or &oneysorth, if the properties are not physically divisi)le

*>+ #D# the& especially (ili)eth !un'a-Chan 'uilty of )reach of trust and in )adfaith and hold the& lia)le to the plaintiff the su& of "90,000.00 as &oral and e/e&plaryda&a'es and,

*$+ DR;C# the& to rei&)urse and pay the su& of "29,000.00 as attorneys *sic+and "29,000.00 as liti'ation e/penses.

#O special pronounce&ents as to CO!!.

!O ORD;R;D.83

On Octo)er 2%, 1::$, petitioners filed a #otice of Appeal ith the trial court, appealin' the case to the Court ofAppeals.

On January 31, 2000, the Court of Appeals dis&issed the appeal. he dispositive portion of the Decisionreads

8FH;R;OR;, the instant appeal is dis&issed. he appealed decision is AR6;D in allrespects.8

On 6ay 23, 2000, the Court of Appeals denied the &otion for reconsideration filed )y petitioner.

Hence, this petition herein petitioner relies upon folloin' 'rounds

81. he Court of Appeals erred in &a7in' a le'al conclusion that there e/isted a partnership)eteen respondent (a&)erto . Chua and the late Jacinto (. !un'a upon the latter invitationand offer and that upon his death the partnership assets and )usiness ere ta7en over )ypetitioners.

2. he Court of Appeals erred in &a7in' the le'al conclusion that laches and?or prescription didnot apply in the instant case.

3. he Court of Appeals erred in &a7in' the le'al conclusion that there as co&petent andcredi)le evidence to arrant the findin' of a partnership, and assu&in' arguendothat indeed

there as a partnership, the findin' of hi'hly e/a''erated a&ounts or values in the partnershipassets and profits.89

"etitioners @uestion the correctness of the findin' of the trial court and the Court of Appeals that a partnershipe/isted )eteen respondent and Jacinto fro& 1:$$ until Jacintos death. n the a)sence of any rittendocu&ent to sho such partnership )eteen respondent and Jacinto, petitioners ar'ues that these courtsere proscri)es fro& hearin' the testi&onies of respondent and his itness, Josephine, to prove the alle'ed

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partnership three years after Jacintos death. o support this ar'u&ent, petitioners invo7e the 8Dead 6ans!tatute or 8!urvivorship Rule8 under !ection 23, Rule 130 of the Rules of Court that provides

8SEC. 23.Dis"ualification b# reason of death or insanit# of adverse part#. K "arties or assi'norsof parties to a case, or persons in hose )ehalf a case is prosecuted, a'ainst an e/ecutor orad&inistrator or other representative of a deceased person, or a'ainst a person of unsound&ind, upon a clai& or de&and a'ainst the estate of such deceased person, or a'ainst suchperson of unsound &ind, cannot testify as to any &atter of fact occurrin' )efore the death ofsuch deceased person or )efore such person )eca&e of unsound &ind.8

"etitioners thus i&plore this Court to rule that the testi&onies of respondent and his alter e'o, Josephine,should not have )een ad&itted to prove certain clai&s a'ainst a deceased person *Jacinto+, no represented)y petitioners.

Fe are not persuaded.

A partnership &ay )e constituted in any for&, e/cept here i&&ova)le property of real ri'hts are contri)utedthereto, in hich case a pu)lic instru&ent shall necessary.>Hence, )ased on the intention of the parties, as'athered fro& the facts and ascertained fro& their lan'ua'e and conduct, a ver)al contract of partnership &ayarise.$he essential profits that &ust )e proven to that a partnership as a'reed upon are *1+ &utual

contri)ution to a co&&on stoc7, and *2+ a Goint interest in the profits.

%

5nderstanda)ly so, in vie of thea)sence of the ritten contract of partnership )eteen respondent and Jacinto, respondent resorted to theintroduction of docu&entary and testi&onial evidence to prove said partnership. he crucial issue to settle thenis to hether or not the 8Dead 6ans !tatute8 applies to this case so as to render inad&issi)le respondentstesti&ony and that of his itness, Josephine.

he 8Dead 6ans !tatute8 provides that if one party to the alle'ed transaction is precluded fro& testifyin' )ydeath, insanity, or other &ental disa)ilities, the survivin' party is not entitled to the undue advanta'e of 'ivin'his on uncontradicted and une/plained account of the transaction.:ut )efore this rule can )e successfullyinvo7ed to )ar the introduction of testi&onial evidence, it is necessary that

81. he itness is a party or assi'nor of a party to case or persons in hose )ehalf a case in

prosecuted.

2. he action is a'ainst an e/ecutor or ad&inistrator or other representative of a deceasedperson or a person of unsound &ind

3. he su)Gect-&atter of the action is a clai& or de&and a'ainst the estate of such deceasedperson or a'ainst person of unsound &ind

. His testi&ony refers to any &atter of fact of hich occurred )efore the death of suchdeceased person or )efore such person )eca&e of unsound &ind.810

o reasons forestall the application of the 8Dead 6ans !tatute8 to this case.

irst, petitioners filed a co&pulsory counterclai&11a'ainst respondents in their anser )efore the trial court,and ith the filin' of their counterclai&, petitioners the&selves effectively re&oved this case fro& the a&)it ofthe 8Dead 6ans !tatute8.12Fell entrenched is the rule that hen it is the e/ecutor or ad&inistrator orrepresentatives of the estates that sets up the counterclai&, the plaintiff, herein respondent, &ay testify tooccurrences )efore the death of the deceased to defeat the counterclai&.136oreover, as defendant in thecounterclai&, respondent is not dis@ualified fro& testifyin' as to &atters of facts occurrin' )efore the death ofthe deceased, said action not havin' )een )rou'ht a'ainst )ut )y the estate or representatives of thedeceased.1

!econd, the testi&ony of Josephine is not covered )y the 8Dead 6ans !tatute8 for the si&ple reason that sheis not 8a party or assi'nor of a party to a case or persons in hose )ehalf a case is prosecuted.8 Records sho

that respondent offered the testi&ony of Josephine to esta)lish the e/istence of the partnership )eteenrespondent and Jacinto. "etitioners insistence that Josephine is the alter e'o of respondent does not &a7eher an assi'nor )ecause the ter& 8assi'nor8 of a party &eans 8assi'nor of a cause of action hich has arisen,and not the assi'nor of a ri'ht assi'ned )efore any cause of action has arisen.819"lainly then, Josephine is&erely a itness of respondent, the latter )ein' the party plaintiff.

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Fe are not convinced )y petitioners alle'ation that Josephines testi&ony lac7s pro)ative value )ecause sheas alle'edly coerced coerced )y respondent, her )rother-in-la, to testify in his favor, Josephine &erelydeclared in court that she as re@uested )y respondent to testify and that if she ere not re@uested to do soshe ould not have testified. Fe fail to see ho e can conclude fro& this candid ad&ission that Josephinestesti&ony is involuntary hen she did not in any ay cate'orically say that she as forced to )e a itness ofrespondent.

Also, the fact that Josephine is the sister of the ife of respondent does not di&inish the value of her testi&onysince relationshipper se, ithout &ore, does not affect the credi)ility of itnesses.1>

"etitioners reliance alone on the 8Dead 6ans !tatute8 to defeat respondents clai& cannot prevail over thefactual findin's of the trial court and the Court of Appeals that a partnership as esta)lished )eteenrespondent and Jacinto. ased not only on the testi&onial evidence, )ut the docu&entary evidence as ell,the trial court and the Court of Appeals considered the evidence for respondent as sufficient to prove thefor&ation of partnership, al)eit an infor&al one.

#ota)ly, petitioners did not present any evidence in their favor durin' trial. y the ei'ht of Gudicial precedents,a factual &atter li7e the findin' of the e/istence of a partnership )eteen respondent and Jacinto cannot )ein@uired into )y this Court on revie.1$his Court can no lon'er )e tas7ed to 'o over the proofs presented )ythe parties and analy4e, assess and ei'h the& to ascertain if the trial court and the appellate court ere

correct in accordin' superior credit to this or that piece of evidence of one party or the other.

1%

t &ust )e alsopointed out that petitioners failed to attend the presentation of evidence of respondent. "etitioners cannot noturn to this Court to @uestion the ad&issi)ility and authenticity of the docu&entary evidence of respondenthen petitioners failed to o)Gect to the ad&issi)ility of the evidence at the ti&e that such evidence asoffered.1:

Fith re'ard to petitioners insistence that laches and?or prescription should have e/tin'uished respondentsclai&, e a'ree ith the trial court and the Court of Appeals that the action for accountin' filed )y respondentsthree *3+ years after Jacintos death as ell ithin the prescri)ed period. he Civil Code provides that anaction to enforce an oral contract prescri)es in si/ *>+ years20hile the ri'ht to de&and an accountin' for apartners interest as a'ainst the person continuin' the )usiness accrues at the date of dissolution, in thea)sence of any contrary a'ree&ent.21Considerin' that the death of a partner results in the dissolution of the

partnership

22

, in this case, it as Jacintos death that respondent as the survivin' partner had the ri'ht to anaccount of his interest as a'ainst petitioners. t )ears stressin' that hile Jacintos death dissolved thepartnership, the dissolution did not i&&ediately ter&inate the partnership. he Civil Code23e/pressly providesthat upon dissolution, the partnership continues and its le'al personality is retained until the co&plete indin'up of its )usiness, cul&inatin' in its ter&ination.2

n a desperate )id to cast dou)t on the validity of the oral partnership )eteen respondent and Jacinto,petitioners &aintain that said partnership that had initial capital of "200,000.00 should have )een re'isteredith the !ecurities and ;/chan'e Co&&ission *!;C+ since re'istration is &andated )y the Civil Code, rue,

Article 1$$2 of the Civil Code re@uires that partnerships ith a capital of "3,000.00 or &ore &ust re'ister iththe !;C, hoever, this re'istration re@uire&ent is not &andatory. Article 1$>% of the Civil Code29e/plicitlyprovides that the partnership retains its Guridical personality even if it fails to re'ister. he failure to re'ister the

contract of partnership does not invalidate the sa&e as a&on' the partners, so lon' as the contract has theessential re@uisites, )ecause the &ain purpose of re'istration is to 'ive notice to third parties, and it can )eassu&ed that the &e&)ers the&selves 7ne of the contents of their contract.2>n the case at )ar, non-co&pliance ith this directory provision of the la ill not invalidate the partnership considerin' that the totalityof the evidence proves that respondent and Jacinto indeed for'ed the partnership in @uestion.

FH;R;OR;, in vie of the fore'oin', the petition is D;#;D and the appealed decision is AR6;D.

!O ORD;R;D.$%&phi$.n't

G.R. No. 1+2612. July 29, 2005

OSCAR ANGELES "#$ EMERITA ANGELES,"etitioners,vs.T!E !ON. SECRETAR OF JUSTICE "#$ FELINO MERCADO,Respondents.

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D E C I S I O N

CARPIO, J.(

he Case

his is a petition for certiorari1to annul the letter-resolution2dated 1 e)ruary 2000 of the !ecretary of Justicein Resolution #o. 199.3he !ecretary of Justice affir&ed the resolutionin .!. #o. :>-:3: dated 2% e)ruary

1::$ rendered )y the "rovincial "rosecution Office of the Depart&ent of Justice in !anta Cru4, (a'una*8"rovincial "rosecution Office8+. he "rovincial "rosecution Office resolved to dis&iss the co&plaint for estafafiled )y petitioners Oscar and ;&erita An'eles *8An'eles spouses8+ a'ainst respondent elino 6ercado*86ercado8+.

Antecedent acts

On 1: #ove&)er 1::>, the An'eles spouses filed a cri&inal co&plaint for estafa under Article 319 of theRevised "enal Code a'ainst 6ercado )efore the "rovincial "rosecution Office. 6ercado is the )rother-in-laof the An'eles spouses, )ein' &arried to ;&erita An'eles sister (aura.

n their affidavits, the An'eles spouses clai&ed that in #ove&)er 1::2, 6ercado convinced the& to enter into

a contract of antichresis,9

collo@uially 7non as sanglaangperde, coverin' ei'ht parcels of land *8su)Gectland8+ planted ith fruit-)earin' lan4ones trees located in #a'carlan, (a'una and oned )y Juana !ua4o. hecontract of antichresis as to last for five years ith "210,000 as consideration. As the An'eles spouses stayin 6anila durin' ee7days and 'o to (a'una only on ee7ends, the parties a'reed that 6ercado ouldad&inister the lands and co&plete the necessary paperor7.>

After three years, the An'eles spouses as7ed for an accountin' fro& 6ercado. 6ercado e/plained that thesu)Gect land earned ">,210 in 1::3, hich he used to )uy &ore lan4ones trees. 6ercado also reported thatthe trees )ore no fruit in 1::. 6ercado 'ave no accountin' for 1::9. he An'eles spouses clai& that onlyafter this de&and for an accountin' did they discover that 6ercado had put the contract of sanglaang

perde over the su)Gect land under 6ercado and his spouses na&es.$he relevant portions of the contractof sanglaangperde, si'ned )y Juana !ua4o alone, read

///

#a alan'-alan' sa hala'an' DA(AFA# DAA# A !A6"5# (O# "!O *"210,000+, salapin' 'astahin,na a7in' tinan''ap sa &a'


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6ercado attached )an7 receipts shoin' deposits in )ehalf of ;&erita An'eles and contracts under his na&efor the An'eles spouses. 6ercado also attached the &inutes of the )aran'ay conciliation proceedin's held on$ !epte&)er 1::>. Durin' the )aran'ay conciliation proceedin's, Oscar An'eles stated that there as arittensos#o industriala'ree&ent capital ould co&e fro& the An'eles spouses hile the profit ould )edivided evenly )eteen 6ercado and the An'eles spouses.:

he Rulin' of the "rovincial "rosecution Office

On 3 January 1::$, the "rovincial "rosecution Office issued a resolution reco&&endin' the filin' of cri&inalinfor&ation for estafa a'ainst 6ercado. his resolution, hoever, as issued ithout 6ercados counter-affidavit.

6eanhile, 6ercado filed his counter-affidavit on 2 January 1::$. On receivin' the 3 January 1::$ resolution,6ercado &oved for its reconsideration. Hence, on 2> e)ruary 1::$, the "rovincial "rosecution Office issuedan a&ended resolution dis&issin' the An'eles spouses co&plaint for estafa a'ainst 6ercado.

he "rovincial "rosecution Office stated thus

he su)Gect of the co&plaint hin'es on a partnership 'one sour. he partnership as initially unsaddled


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Althou'h the le'al for&alities for the for&ation of a partnership ere not adhered to, the partnershiprelationship of the , and 6ercado failed to do so and also failed to deliver the proceedsto the An'eles spouses

. Fhether the !ecretary of Justice should order the filin' of the infor&ation for estafa a'ainst 6ercado.12

he Rulin' of the Court

he petition has no &erit.

hether the *ecretar# of +ustice ,o!!itted

-rave buse of Discretion

An act of a court or tri)unal &ay constitute grave abuse of discretionhen the sa&e is perfor&ed in acapricious or hi&sical e/ercise of Gud'&ent a&ountin' to lac7 of Gurisdiction. he a)use of discretion &ust )eso patent and 'ross as to a&ount to an evasion of positive duty, or to a virtual refusal to perfor& a dutyenGoined )y la, as here the poer is e/ercised in an ar)itrary and despotic &anner )ecause of passion orpersonal hostility.13

he An'eles spouses fail to convince us that the !ecretary of Justice co&&itted 'rave a)use of discretionhen he dis&issed their appeal. 6oreover, the An'eles spouses co&&itted an error in procedure hen they

failed to file a &otion for reconsideration of the !ecretary of Justices resolution. A previous &otion forreconsideration )efore the filin' of a petition for certiorariis necessary unless *1+ the issue raised is one purelyof la *2+ pu)lic interest is involved *3+ there is ur'ency *+ a @uestion of Gurisdiction is s@uarely raised )eforeand decided )y the loer court and *9+ the order is a patent nullity.1he An'eles spouses failed to sho thattheir case falls under any of the e/ceptions. n fact, this present petition for certiorariis dis&issi)le for thisreason alone.

hether a Partnership Existed

/et&een 0ercado and the ngeles *pouses

he An'eles spouses alle'e that they had no partnership ith 6ercado. he An'eles spouses rely on Articles

1$$1 to 1$$3 of the Civil Code, hich state that

Art. 1$$1. A partnership &ay )e constituted in any for&, e/cept here i&&ova)le property or real ri'hts arecontri)uted thereto, in hich case a pu)lic instru&ent shall )e necessary.

Art. 1$$2. ;very contract of partnership havin' a capital of three thousand pesos or &ore, in &oney orproperty, shall appear in a pu)lic instru&ent, hich &ust )e recorded in the Office of the !ecurities and;/chan'e Co&&ission.

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ailure to co&ply ith the re@uire&ents of the precedin' para'raph shall not affect the lia)ility of thepartnership and the &e&)ers thereof to third persons.

Art. 1$$3. A contract of partnership is void, henever i&&ova)le property is contri)uted thereto, if an inventoryof said property is not &ade, si'ned )y the parties, and attached to the pu)lic instru&ent.

he An'eles spouses position that there is no partnership )ecause of the lac7 of a pu)lic instru&ent indicatin'the sa&e and a lac7 of re'istration ith the !ecurities and ;/chan'e Co&&ission *8!;C8+ holds no ater.irst, the An'eles spouses contri)uted &oney to the partnership and not i&&ova)le property. !econd, &erefailure to re'ister the contract of partnership ith the !;C does not invalidate a contract that has the essentialre@uisites of a partnership. he purpose of re'istration of the contract of partnership is to 'ive notice to thirdparties. ailure to re'ister the contract of partnership does not affect the lia)ility of the partnership and of thepartners to third persons. #either does such failure to re'ister affect the partnerships Guridical personality. Apartnership &ay e/ist even if the partners do not use the ords 8partner8 or 8partnership.8

ndeed, the An'eles spouses ad&it to facts that prove the e/istence of a partnership a contract shoin'a sos#o industrialor industrial partnership, contri)ution of &oney and industry to a co&&on fund, and divisionof profits )eteen the An'eles spouses and 6ercado.

hether there &as

0isappropriation b# 0ercado

he !ecretary of Justice ade@uately e/plained the alle'ed &isappropriation )y 6ercado 8he docu&entalone, hich as in the na&e of


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EAUMONT DE). REALT CO., INC., GLOED LAND CORP., E7UIT TRADING CO., INC., 3D CORP., LDE). CORP, LCM T!EATRICAL ENTERPRISES, INC., LITONJUA S!IPPING CO. INC., MACOIL INC.,ODEON REALT CORP., SARATOGA REALT, INC., ACT T!EATER INC. =>o&;&ly G#&"l T"&:"l Fl; E:"#, INC.@, A)ENUE REALT, INC., A)ENUE T!EATER, INC. "#$ L)F P!ILIPPINES, INC.,=Fo&;&ly )F P!ILIPPINES@,Respondents.

D E C I S I O N

GARCIA, J.:

n this petition for revie under Rule 9 of the Rules of Court, petitioner Aurelio . (itonGua, Jr. see7s to nullifyand set aside the Decision of the Court of Appeals *CA+ dated 6arch 31, 2001in consolidated cases ,..-.1. *p. 2o. 34563and ,.. -.1. *P. 2o 36337and its Resolution dated Dece&)er 0$, 200,2denyin'petitioners &otion for reconsideration.

he recourse is cast a'ainst the folloin' factual )ac7drop

"etitioner Aurelio . (itonGua, Jr. *Aurelio+ and herein respondent ;duardo . (itonGua, !r. *;duardo+ are)rothers. he le'al dispute )eteen the& started hen, on Dece&)er , 2002, in the Re'ional rial Court*RC+ at "asi' City, Aurelio filed a suit a'ainst his )rother ;duardo and herein respondent Ro)ert . Man'

*Man'+ and several corporations for specific perfor&ance and accountin'. n his co&plaint,3doc7eted as CivilCase #o. >:239 and eventually raffled to ranch >% of the court,Aurelio alle'ed that, since June 1:$3, heand ;duardo are into a Goint venture?partnership arran'e&ent in the Odeon heater )usiness hich hade/panded thru invest&ent in Cineple/, nc., (C6 heatrical ;nterprises, Odeon Realty Corporation *operatorof Odeon and theatres+, Avenue Realty, nc., oner of lands and )uildin's, a&on' other corporations. Man'is descri)ed in the co&plaint as petitioners and ;duardos partner in their Odeon heater invest&ent.9hesa&e co&plaint also contained the folloin' &aterial aver&ents

3.01 On or a)out 22 June 1:$3,


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ti&e the annotation on the titles of these real propertiesS a notice of lis pendens.*;&phasis in the ori'inalunderscorin' and ords in )rac7et added.+

or ease of reference, Anne/"A-1"of the co&plaint, hich petitioner asserts to have )een &eant for hi& )yhis )rother ;duardo, pertinently reads

10+ JR. *A(+

On Dece&)er 20, 2002, ;duardo and the corporate respondents, as defendants a "uo8filed aGoint2*E1ith ,o!pulsor# ,ounterclai!denyin' under oath the &aterial alle'ations of the co&plaint,&ore particularly that portion thereof depictin' petitioner and ;duardo as havin' entered into a contract ofpartnership. As affir&ative defenses, ;duardo, et al., apart fro& raisin' a Gurisdictional &atter, alle'ed that theco&plaint states no cause of action, since no cause of action &ay )e derived fro& the actiona)le

docu&ent, i.e., Anne/ "A-1",)ein' void under the ter&s of Article 1$>$ in relation to Article 1$$3 of the CivilCode, infra.t is further alle'ed that hatever underta7in' ;duardo a'reed to do, if any, under Anne/ "A-1",are unenforcea)le under the provisions of the !tatute of rauds.$

or his part, Man' - ho as served ith su&&ons lon' after the other defendants su)&itted their anser K&oved to dis&iss on the 'round, inter alia, that, as to hi&, petitioner has no cause of action and the co&plaintdoes not state any.%"etitioner opposed this &otion to dis&iss.

On January 10, 2003, ;duardo, et al., filed a 0otion to 1esolve ffir!ative Defenses.:o this &otion,petitioner interposed an 9pposition &ith exParte 0otion to *et the ,ase for Pretrial. 10

Actin' on the separate &otions i&&ediately adverted to a)ove, the trial court, in an O&ni)us Order dated

6arch 9, 2003, denied the affir&ative defenses and, e/cept for Man', set the case for pre-trial on April 10,2003.11

n another O&ni)us Order of April 2, 2003, the sa&e court denied the &otion of ;duardo, et al., forreconsideration12and Man's &otion to dis&iss. he folloin' then transpired insofar as Man' is concerned

1. On April 1, 2003, Man' filed his2*E18)ut e/pressly reserved the ri'ht to see7 reconsideration of theApril 2, 2003 O&ni)us Order and to pursue his failed &otion to dis&iss13to its full resolution.

2. On April 2, 2003, he &oved for reconsideration of the O&ni)us Order of April 2, 2003, )ut his &otion asdenied in an Order of July , 2003.1

3. On Au'ust 2>, 2003, Man' ent to the Court of Appeals *CA+ in a petition for certiorariunder Rule >9 of theRules of Court, doc7eted as CA-G.R. SP No. 78774,19to nullify the separate orders of the trial court, the firstdenyin' his &otion to dis&iss the )asic co&plaint and, the second, denyin' his &otion for reconsideration.

;arlier, ;duardo and the corporate defendants, on the contention that 'rave a)use of discretion and inGudicioushaste attended the issuance of the trial courts afore&entioned O&ni)us Orders dated 6arch 9, and April 2,

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2003, sou'ht relief fro& the CA viasi&ilar recourse. heir petition for certiorarias doc7eted as CA G.R. SPNo. 76987.

"er its resolution dated Octo)er 2, 2003,1>the CAs 1th Division ordered the consolidation of , -.1. *P 2o.36337ith , -.1. *P 2o. 34563.

olloin' the su)&ission )y the parties of their respective 6e&oranda of Authorities, the appellate court ca&eout ith the herein assailed D:-o# $"$ M"&: 31, 200+, findin' for ;duardo and Man', as leadpetitioners therein, disposin' as follos

FH;R;OR;, Gud'&ent is here)y rendered 'rantin' the issuance of the rit of certiorari in theseconsolidated cases annullin', reversin' and settin' aside the assailed orders of the court a @uo dated 6arch 9,2003, April 2, 2003 and July , 2003 and the co&plaint filed )y private respondent


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Art. 1$$2. ;very contract of partnership havin' a capital of three thousand pesos or &ore, in &oney orproperty, shall appear in a pu)lic instru&ent, hich &ust )e recorded in the Office of the !ecurities and;/chan'e Co&&ission.

ailure to co&ply ith the re@uire&ent of the precedin' para'raph shall not affect the lia)ility of the partnershipand the &e&)ers thereof to third persons.

Art. 1$$3. A contract of partnership is void, henever i&&ova)le property is contri)uted thereto, if an inventoryof said property is not &ade, si'ned )y the parties, and attached to the pu)lic instru&ent.

Anne/ 8A-18, on its face, contains typeritten entries, personal in tone, )ut is unsi'ned and undated. As anunsi'ned docu&ent, there can )e no @ui))lin' that Anne/ 8A-18 does not &eet the pu)lic instru&entationre@uire&ents e/acted under Article 1$$1 of the Civil Code. 6oreover, )ein' unsi'ned and dou)tless referrin'to a partnership involvin' &ore than "3,000.00 in &oney or property, Anne/ A-1cannot )e presented fornotari4ation, let alone re'istered ith the !ecurities and ;/chan'e Co&&ission *!;C+, as called for under the

Article 1$$2 of the Code. And inas&uch as the inventory re@uire&ent under the succeedin' Article 1$$3 'oesinto the &atter of validity hen i&&ova)le property is contri)uted to the partnership, the ne/t lo'ical point ofin@uiry turns on the nature of petitioners contri)ution, if any, to the supposed partnership.

he CA, addressin' the fore'oin' @uery, correctly stated that petitioners contri)ution consisted of i&&ova)les

and real ri'hts. Frote that court

A further e/a&ination of the alle'ations in the co&plaint ould sho that


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duly si'ned )y the parties. As such, the said 86e&orandu&8 S is null and void for purposes of esta)lishin' thee/istence of a valid contract of partnership. ndeed, )ecause of the failure to co&ply ith the essentialfor&alities of a valid contract, the purported 8partnership?Goint venture8 is le'ally ine/istent and it produces noeffect hatsoever. #ecessarily, a void or le'ally ine/istent contract cannot )e the source of any contractual orle'al ri'ht. Accordin'ly, the alle'ations in the co&plaint, includin' the actiona)le docu&ent attached thereto,clearly de&onstrates that


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and ill depend entirely to you, 6y sons ill not )e ready to help &e yet until a)out &ay)e 19?20 years fro&no.Fhatever is left in the corporation, ill &a7e sure that you 'et O#; 6((O# ";!O! *"1,000,000.00+ orten percent *10E+ e@uity, hichever is 'reater. *5nderscorin' added+

t is at once apparent that hat respondent ;duardo i&posed upon hi&self under the a)ove passa'e, if heindeed rote Anne/ 8A-18, is a pro&ise hich is not to )e perfor&ed ithin one year fro& 8contract8 e/ecutionon June 22, 1:$3. Accordin'ly, the a'ree&ent e&)odied in Anne/ 8A-18 is covered )y the !tatute of raudsand ergounenforcea)le for non-co&pliance thereith.30y force of the statute of frauds, an a'ree&ent that )yits ter&s is not to )e perfor&ed ithin a year fro& the &a7in' thereof shall )e unenforcea)le )y action, unlessthe sa&e, or so&e note or &e&orandu& thereof, )e in ritin' and su)scri)ed )y the party char'ed.Corollarily, no action can )e proved unless the re@uire&ent e/acted )y the statute of frauds is co&plied ith.31

(est it )e overloo7ed, petitioner is the intended )eneficiary of the "1 6illion or 10E e@uity of the fa&ily)usinesses supposedly pro&ised )y ;duardo to 'ive in the near future. Any su''estion that the stated a&ountor the e@uity co&ponent of the pro&ise as intended to 'o to a co&&on fund ould )e to read so&ethin' notritten in A##A-1. hus, even this an'le alone ar'ues a'ainst the very idea of a partnership, the creationof hich re@uires to or &ore contractin' &inds &utually a'reein' to contri)ute &oney, property or industry toa co&&on fund ith the intention of dividin' the profits )eteen or a&on' the&selves.32

n su& then, the Court rules, as did the CA, that petitioners co&plaint for specific perfor&ance anchored on an

actiona)le docu&ent of partnership hich is le'ally ine/istent or void or, at )est, unenforcea)le does not statea cause of action as a'ainst respondent ;duardo and the corporate defendants. And if no of action cansuccessfully )e &aintained a'ainst respondent ;duardo )ecause no valid partnership e/isted )eteen hi&and petitioner, the Court cannot see its ay clear on ho the sa&e action could plausi)ly prosper a'ainstMan'. !urely, Man' could not have )eco&e a partner in, or could not have had any for& of )usinessrelationship ith, an ine/istent partnership.

As &ay )e noted, petitioner has not, in his co&plaint, provide the lo'ical ne/us that ould tie Man' to hi& ashis partner. n fact, attendant circu&stances ould indicate the contrary. Consider

1. "etitioner asserted in his co&plaint that his so-called Goint venture?partnership ith ;duardo as 8for thecontinuation of their fa&ily )usiness and co&&on fa&ily funds hich ere theretofore )ein' &ainly &ana'ed

)y ;duardo.833

ut Man' denies 7inship ith the (itonGua fa&ily and petitioner has not disputed the disclai&er.

2. n so&e detail, petitioner &entioned hat he had contri)uted to the Goint venture?partnership ith ;duardoand hat his share in the )usinesses ill )e. #o alle'ation is &ade hatsoever a)out hat Man' contri)uted, ifany, let alone his proportional share in the profits. ut such alle'ation cannot, hoever, )e &ade )ecause, asaptly o)served )y the CA, the actiona)le docu&ent did not contain such provision, let alone &ention the na&eof Man'. Ho, indeed, could a person )e considered a partner hen the docu&ent purportin' to esta)lish thepartnership contract did not even &ention his na&e.

3. "etitioner states in par. 2.01 of the co&plaint that 8


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rulin' of this Court that the purported partnership )eteen


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partnership )eteen the three of the&, as purportedly evidenced )y the undated and unsi'ned Anne/"A-18. Avoid Anne/ 8A-18, as an actiona)le docu&ent of partnership, ould strip petitioner of a cause of action underthe pre&ises. A co&plaint for delivery and accountin' of partnership property )ased on such void or le'allynon-e/istent actiona)le docu&ent is dis&issi)le for failure to state of action. !o, in 'ist, said the Court of

Appeals. he Court a'rees.

*!EREFORE, the instant petition is DENIED and the i&pu'ned Decision and Resolution of the Court ofAppealsAFFIRMED.

Cost a'ainst the petitioner.

G.R. No. L425532 F&u"&y 2, 1969

COMMISSIONER OF INTERNAL RE)ENUE,petitioner,vs.*ILLIAM J. SUTER "#$ T!E COURT OF TA< APPEALS, respondents.

REES, J..L., J.:

A li&ited partnership, na&ed 8Fillia& J. !uter 6orcoin Co., (td.,8 as for&ed on 30 !epte&)er 1:$)y herein respondent Fillia& J. !uter as the 'eneral partner, and Julia !piri' and ustav Carlson, as theli&ited partners. he partners contri)uted, respectively, "20,000.00, "1%,000.00 and "2,000.00 to thepartnership. On 1 Octo)er 1:$, the li&ited partnership as re'istered ith the !ecurities and ;/chan'eCo&&ission. he fir& en'a'ed, a&on' other activities, in the i&portation, &ar7etin', distri)ution andoperation of auto&atic phono'raphs, radios, television sets and a&use&ent &achines, their parts andaccessories. t had an office and held itself out as a li&ited partnership, handlin' and carryin' &erchandise,usin' invoices, )ills and letterheads )earin' its trade-na&e, &aintainin' its on )oo7s of accounts and )an7accounts, and had a @uota allocation ith the Central an7.

n 1:%, hoever, 'eneral partner !uter and li&ited partner !piri' 'ot &arried and, thereafter, on 1%

Dece&)er 1:%, li&ited partner Carlson sold his share in the partnership to !uter and his ife. he sale asduly recorded ith the !ecurities and ;/chan'e Co&&ission on 20 Dece&)er 1:%.

he li&ited partnership had )een filin' its inco&e ta/ returns as a corporation, ithout o)Gection )y theherein petitioner, Co&&issioner of nternal Revenue, until in 1:9: hen the latter, in an assess&ent,consolidated the inco&e of the fir& and the individual inco&es of the partners-spouses !uter and !piri'resultin' in a deter&ination of a deficiency inco&e ta/ a'ainst respondent !uter in the a&ount of "2,>$%.0> for1:9 and ",9>$.00 for 1:99.

Respondent !uter protested the assess&ent, and re@uested its cancellation and ithdraal, as not inaccordance ith la, )ut his re@uest as denied. 5na)le to secure a reconsideration, he appealed to the Courtof a/ Appeals, hich court, after trial, rendered a decision, on 11 #ove&)er 1:>9, reversin' that of theCo&&issioner of nternal Revenue.

he present case is a petition for revie, filed )y the Co&&issioner of nternal Revenue, of the ta/courts aforesaid decision. t raises these issues

*a+ Fhether or not the corporate personality of the Fillia& J. !uter 86orcoin8 Co., (td. should )edisre'arded for inco&e ta/ purposes, considerin' that respondent Fillia& J. !uter and his ife, Julia !piri'!uter actually for&ed a sin'le ta/a)le unit and

*)+ Fhether or not the partnership as dissolved after the &arria'e of the partners, respondent Fillia&J. !uter and Julia !piri' !uter and the su)se@uent sale to the& )y the re&ainin' partner, ustav Carlson, of

his participation of "2,000.00 in the partnership for a no&inal a&ount of "1.00.

he theory of the petitioner, Co&&issioner of nternal Revenue, is that the &arria'e of !uter and !piri'and their su)se@uent ac@uisition of the interests of re&ainin' partner Carlson in the partnership dissolved theli&ited partnership, and if they did not, the fiction of Guridical personality of the partnership should )edisre'arded for inco&e ta/ purposes )ecause the spouses have e/clusive onership and control of the)usiness conse@uently the inco&e ta/ return of respondent !uter for the years in @uestion should have

"a'e I 2>


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included his and his ifes individual inco&es and that of the li&ited partnership, in accordance ith !ection 9*d+ of the #ational nternal Revenue Code, hich provides as follos

*d+ Husband and &ife. L n the case of &arried persons, hether citi4ens, residents or non-residents, only one consolidated return for the ta/a)le year shall )e filed )y either spouse to cover theinco&e of )oth spouses ....

n refutation of the fore'oin', respondent !uter &aintains, as the Court of a/ Appeals held, that his&arria'e ith li&ited partner !piri' and their ac@uisition of Carlsons interests in the partnership in 1:% is nota 'round for dissolution of the partnership, either in the Code of Co&&erce or in the #e Civil Code, and thatsince its Guridical personality had not )een affected and since, as a li&ited partnership, as contra distin'uishedfro& a duly re'istered 'eneral partnership, it is ta/a)le on its inco&e si&ilarly ith corporations, !uter as not)ound to include in his individual return the inco&e of the li&ited partnership.

Fe find the Co&&issioners appeal un&eritorious.

he thesis that the li&ited partnership, Fillia& J. !uter 86orcoin8 Co., (td., has )een dissolved )yoperation of la )ecause of the &arria'e of the only 'eneral partner, Fillia& J. !uter to the ori'inally li&itedpartner, Julia !piri' one year after the partnership as or'ani4ed is rested )y the appellant upon the opinion ofno !enator olentino in Co&&entaries and Jurisprudence on Co&&ercial (as of the "hilippines, ol. 1, th

;d., pa'e 9%, that reads as follos

A hus)and and a ife &ay not enter into a contract of generalcopartnership, )ecause under theCivil Code, hich applies in the a)sence of e/press provision in the Code of Co&&erce, personsprohi)ited fro& &a7in' donations to each other are prohi)ited fro& enterin' into universalpartnerships.*2 ;chaverri 1:>+ t follos that the &arria'e of partners necessarily )rin's a)out the dissolution of apre-e/istin' partnership. *1 uy de 6ontella 9%+

he petitioner-appellant has evidently failed to o)serve the fact that Fillia& J. !uter 86orcoin8 Co., (td.asnot a universalpartnership, )ut aparticular one. As appears fro& Articles 1>$ and 1>$9 of the !panishCivil Code, of 1%%: *hich as the la in force hen the su)Gect fir& as or'ani4ed in 1:$+,a universal partnership re@uires either that the o)Gect of the association )e all the present propert# of the

partners, as contri)uted )y the& to the co&&on fund, or else 8all that the partners &ay ac@uire )ytheir industr# or &orB durin' the e/istence of the partnership8. Fillia& J. !uter 86orcoin8 Co., (td. as notsuch a universal partnership, since the contri)utions of the partners ere fi/ed su&s of &oney, "20,000.00 )yFillia& !uter and "1%,000.00 )y Julia !piri' and neither one of the& as an industrial partner. t follos thatFillia& J. !uter 86orcoin8 Co., (td. as not a partnership that spouses ere for)idden to enter )y Article 1>$$of the Civil Code of 1%%:.

he for&er Chief Justice of the !panish !upre&e Court, D. Jose Casan, in his Derecho Civil, $th;dition, 1:92, olu&e , pa'e 9>, footnote 1, says ith re'ard to the prohi)ition contained in the aforesaid

Article 1>$$

(os conyu'es, se'un esto, no pueden cele)rar entre si el contrato de sociedad universal, pero o

podran constituir sociedad particularU Aun@ue el punto ha sido &uy de)atido, nos inclina&os a la tesisper&isiva de los contratos de sociedad particular entre esposos, ya @ue nin'un precepto de nuestroCodi'o los prohi)e, y hay @ue estar a la nor&a 'eneral se'un la @ue toda persona es capa4 paracontratar &ientras no sea declarado incapa4 por la ley. (a Gurisprudencia de la Direccion de losRe'istros fue favora)le a esta &is&a tesis en su resolution de 3 de fe)rero de 1:3>, &as parececa&)iar de ru&)o en la de : de &ar4o de 1:3.

#or could the su)se@uent &arria'e of the partners operate to dissolve it, such &arria'e not )ein' one ofthe causes provided for that purpose either )y the !panish Civil Code or the Code of Co&&erce.

he appellants vie, that )y the &arria'e of )oth partners the co&pany )eca&e a sin'le proprietorship,is e@ually erroneous. he capital contri)utions of partners Fillia& J. !uter and Julia !piri' ere separately

oned and contri)uted )y the& before their &arria'e and after they ere Goined in edloc7, suchcontri)utions re&ained their respective separate property under the !panish Civil Code *Article 13:>+

he folloin' shall )e the exclusiveproperty of each spouse

*a+ hat hich is )rou'ht to the &arria'e as his or her on ....

"a'e I 2$


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hus, the individual interest of each consort in Fillia& J. !uter 86orcoin8 Co., (td. did not )eco&eco&&on property of )oth after their &arria'e in 1:%.

t )ein' a )asic tenet of the !panish and "hilippine la that the partnership has a Guridical personality ofits on, distinct and separate fro& that of its partners *unli7e A&erican and ;n'lish la that does notreco'ni4e such separate Guridical personality+, the )ypassin' of the e/istence of the li&ited partnership as ata/payer can only )e done )y i'norin' or disre'ardin' clear statutory &andates and )asic principles of our la.he li&ited partnerships separate individuality &a7es it i&possi)le to e@uate its inco&e ith that of theco&ponent &e&)ers. rue, section 2 of the nternal Revenue Code &er'es re'istered 'eneral co-partnerships *co!paCias colectivas+ ith the personality of the individual partners for inco&e ta/ purposes. utthis rule is e/ceptional in its disre'ard of a cardinal tenet of our partnership las, and can not )e e/tended )y&ere i&plication to li&ited partnerships.

he rulin's cited )y the petitioner *Collector of nternal Revenue vs. 5niversity of the isayas, (-1399,Resolution of 30 Octo)er 1:>, and oppel


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JOSEFINA P. REALUIT,"etitioner,vs.PROSENCIO D. JASO "#$ EDEN G. JASO,Respondents.

D E C I S I O N

PERE, J.:

he validity as ell as the conse@uences of an assi'n&ent of ri'hts in a Goint venture are at issue in thispetition for revie filed pursuant to Rule 9 of the 1::$ Rules of Civil "rocedure,1assailin' the 30 April 200$Decision2rendered )y the Court of Appeals *CA+ then elfth Division in CA-.R. C #o. $3%>1,3thedispositive portion of hich states

FH;R;OR;, the Decision appealed fro& is !; A!D; and e order the dissolution of the Goint venture)eteen defendant-appellant Josefina Realu)it and rancis ;ric A&aury iondo and the su)se@uent conductof accountin', li@uidation of assets and division of shares of the Goint venture )usiness.

(et a copy hereof and the records of the case )e re&anded to the trial court for appropriate proceedin's.

he acts

On 1$ 6arch 1::, petitioner Josefina Realu)it *Josefina+ entered into a Joint enture A'ree&ent ith rancis;ric A&aury iondo *iondo+, a rench national, for the operation of an ice &anufacturin' )usiness. FithJosefina as the industrial partner and iondo as the capitalist partner, the parties a'reed that they ould eachreceive 0E of the net profit, ith the re&ainin' 20E to )e used for the pay&ent of the ice &a7in' &achinehich as purchased for the )usiness.9or and in consideration of the su& of "900,000.00, hoever, iondosu)se@uently e/ecuted a Deed of Assi'n&ent dated 2$ June 1::$, transferrin' all his ri'hts and interests inthe )usiness in favor of respondent ;den Jaso *;den+, the ife of respondent "rosencio Jaso.>Fith iondoseventual departure fro& the country, the !pouses Jaso caused their layer to send Josefina a letter dated 1:e)ruary 1::%, apprisin' her of their ac@uisition of said rench&ans share in the )usiness and for&allyde&andin' an accountin' and inventory thereof as ell as the re&ittance of their portion of its profits.$

aultin' Josefina ith unGustified failure to heed t

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