G.R. No. 125704.

August 28, 1998

PHILEX MINING CORPORATION, petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, COURT OF APPEALS, and
THE COURT OF TAX APPEALS, respondents.

DECISION

ROMERO, J.:

Petitioner Philex Mining Corp. assails the decision of the Court of Appeals promulgated on April 8, 1996 in CA-G.R.
SP No. 36975[1] affirming the Court of Tax Appeals decision in CTA Case No. 4872 dated March 16, 1995[2] ordering it to
pay the amount ofP110,677,668.52 as excise tax liability for the period from the 2nd quarter of 1991 to the 2ndquarter
of 1992 plus 20% annual interest from August 6, 1994 until fully paid pursuant to Sections 248 and 249 of the Tax Code
of 1977.

The facts show that on August 5, 1992, the BIR sent a letter to Philex asking it to settle its tax liabilities for the
2nd, 3rd and 4th quarter of 1991 as well as the 1st and 2nd quarter of 1992 in the total amount of P123,821,982.52
computed as follows:

PERIOD COVERED BASIC TAX 25% SURCHARGE INTEREST TOTAL EXCISE

TAX DUE

2nd Qtr., 1991 12,911,124.60 3,227,781.15 3,378,116.16 19,517,021.91

3rd Qtr., 1991 14,994,749.21 3,748,687.30 2,978,409.09 21,721,845.60

4th Qtr., 1991 19,406,480.13 4,851,620.03 2,631,837.72 26,889,937.88

------------------- ----------------- ----------------- ---------------------

47,312,353.94 11,828,088.48 8,988,362.97 68,128,805.39

1st Qtr., 1992 23,341,849.94 5,835,462.49 1,710,669.82 30,887,982.25

2nd Qtr., 1992 19,671,691.76 4,917,922.94 215,580.18 24,805,194.88

43,013,541.70 10,753,385.43 1,926,250.00 55,693,177.13

90,325,895.64 22,581,473.91 10,914,612.97 123,821,982.52

========== ========== =========== ===========[3]

In a letter dated August 20, 1992,[4] Philex protested the demand for payment of the tax liabilities stating that it
has pending claims for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount
of P119,977,037.02 plus interest. Therefore, these claims for tax credit/refund should be applied against the tax
liabilities, citing our ruling inCommissioner of Internal Revenue v. Itogon-Suyoc Mines, Inc.[5]

In reply, the BIR, in a letter dated September 7, 1992,[6] found no merit in Philexs position. Since these pending
claims have not yet been established or determined with certainty, it follows that no legal compensation can take
place. Hence, he BIR reiterated its demand that Philex settle the amount plus interest within 30 days from the receipt
of the letter.

In view of the BIRs denial of the offsetting of Philexs claim for VAT input credit/refund against its exercise tax
obligation, Philex raised the issue to the Court of Tax Appeals on November 6, 1992. [7] In the course of the proceedings,
the BIR issued a Tax Credit Certificate SN 001795 in the amount of P13,144,313.88 which, applied to the total tax
liabilities of Philex of P123,821,982.52; effectively lowered the latters tax obligation ofP110,677,688.52.
 Despite the reduction of its tax liabilities, the CTA still ordered Philex to pay the remaining balance
of P110,677,688.52 plus interest, elucidating its reason, to wit:

Thus, for legal compensation to take place, both obligations must be liquidated and demandable. Liquidated debts are
those where the exact amount has already been determined (PARAS, Civil Code of the Philippines, Annotated, Vol. IV,
Ninth Edition, p. 259).In the instant case, the claims of the Petitioner for VAT refund is still pending litigation, and still
has to be determined by this Court (C.T.A. Case No. 4707). A fortiori, the liquidated debtof the Petitioner to the
government cannot, therefore, be set-off against the unliquidated claim which Petitioner conceived to exist in its
favor (see Compaia General de Tabacos vs.French and Unson, No. 14027, November 8, 1918, 39 Phil. 34). [8]

Moreover, the Court of Tax Appeals ruled that taxes cannot be subject to set-off on compensation since claim for
taxes is not a debt or contract.[9] The dispositive portion of the CTA decision[10] provides:

In all the foregoing, this Petition for Review is hereby DENIED for lack of merit and Petitioner is hereby ORDERED to
PAY the Respondent the amount of P110,677,668.52 representing excise tax liability for the period from the
2nd quarter of 1991 to the 2nd quarter of 1992 plus 20% annual interest from August 6, 1994 until fully paid pursuant to
Section 248 and 249 of the Tax Code, as amended.

Aggrieved with the decision, Philex appealed the case before the Court of Appeals docketed as CA-G.R. CV No.
36975.[11] Nonetheless, on April 8, 1996, the Court of Appeals affirmed the Court of Tax Appeals observation. The
pertinent portion of which reads:[12]

WHEREFORE, the appeal by way of petition for review is hereby DISMISSED and the decision dated March 16, 1995 is
AFFIRMED.

Philex filed a motion for reconsideration which was, nevertheless, denied in a Resolution dated July 11, 1996. [13]

However, a few days after the denial of its motion for reconsideration, Philex was able to obtain its VAT input
credit/refund not only for the taxable year 1989 to 1991 but also for 1992 and 1994, computed as follows: [14]

Period Covered By Tax Credit Certificate Date Of Issue Amount

Claims For Vat Number

refund/credit

1994 (2nd Quarter) 007730 11 July 1996 P25,317,534.01

1994 (4th Quarter) 007731 11 July 1996 P21,791,020.61

1989 007732 11 July 1996 P37,322,799.19

1990-1991 007751 16 July 1996 P84,662,787.46

1992 (1st-3rd Quarter) 007755 23 July 1996 P36,501,147.95

In view of the grant of its VAT input credit/refund, Philex now contends that the same should, ipso jure, off-set
its excise tax liabilities[15] since both had already become due and demandable, as well as fully liquidated; [16] hence,
legal compensation can properly take place.

We see no merit in this contention.

In several instances prior to the instant case, we have already made the pronouncement that taxes cannot be
subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of
each other.[17] There is a material distinction between a tax and debt. Debts are due to the Government in its
corporate capacity, while taxes are due to the Government in its sovereign capacity. [18] We find no cogent reason to
deviate from the aforementioned distinction.
 Prescinding from this premise, in Francia v. Intermediate Appellate Court,[19] we categorically held that taxes
cannot be subject to set-off or compensation, thus:

We have consistently ruled that there can be no off-setting of taxes against the claims that the taxpayer may have
against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount
equal to or greater than the tax being collected. The collection of tax cannot await the results of a lawsuit against the
government.

The ruling in Francia has been applied to the subsequent case of Caltex Philippines, Inc. v. Commission on
Audit,[20] which reiterated that:

x x x a taxpayer may not offset taxes due from the claims that he may have against the government. Taxes cannot be
the subject of compensation because the government and taxpayer are not mutually creditors and debtors of each
other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.

Further, Philexs reliance on our holding in Commissioner of Internal Revenue v. Itogon-Suyoc Mines, Inc., wherein
we ruled that a pending refund may be set off against an existing tax liability even though the refund has not yet
been approved by the Commissioner,[21] is no longer without any support in statutory law.

It is important to note that the premise of our ruling in the aforementioned case was anchored on Section 51(d) of
the National Revenue Code of 1939. However, when the National Internal Revenue Code of 1977 was enacted, the same
provision upon which theItogon-Suyoc pronouncement was based was omitted.[22] Accordingly, the doctrine enunciated
in Itogon-Suyoc cannot be invoked by Philex.

Despite the foregoing rulings clearly adverse to Philexs position, it asserts that the imposition of surcharge and
interest for the non-payment of the excise taxes within the time prescribed was unjustified. Philex posits the theory
that it had no obligation to pay the excise liabilities within the prescribed period since, after all, it still has pending
claims for VAT input credit/refund with BIR.[23]

We fail to see the logic of Philexs claim for this is an outright disregard of the basic principle in tax law that taxes
are the lifeblood of the government and so should be collected without unnecessary hindrance. [24] Evidently, to
countenance Philexs whimsical reason would render ineffective our tax collection system. Too simplistic, it finds no
support in law or in jurisprudence.

To be sure, we cannot allow Philex to refuse the payment of its tax liabilities on the ground that it has a pending
tax claim for refund or credit against the government which has not yet been granted. It must be noted that a
distinguishing feature of a tax is that it is compulsory rather than a matter of bargain. [25] Hence, a tax does not depend
upon the consent of the taxpayer.[26] If any payer can defer the payment of taxes by raising the defense that it still has
a pending claim for refund or credit, this would adversely affect the government revenue system. A taxpayer cannot
refuse to pay his taxes when they fall due simply because he has a claim against the government or that the collection
of the tax is contingent on the result of the lawsuit it filed against the government. [27] Moreover, Philex's theory that
would automatically apply its VAT input credit/refund against its tax liabilities can easily give rise to confusion and
abuse, depriving the government of authority over the manner by which taxpayers credit and offset their tax liabilities.

Corollarily, the fact that Philex has pending claims for VAT input claim/refund with the government is immaterial
for the imposition of charges and penalties prescribed under Section 248 and 249 of the Tax Code of 1977. The
payment of the surcharge is mandatory and the BIR is not vested with any authority to waive the collection
thereof.[28] The same cannot be condoned for flimsy reasons,[29] similar to the one advanced by Philex in justifying its
non-payment of its tax liabilities.

Finally, Philex asserts that the BIR violated Section 106(e) [30] of the National Internal Revenue Code of 1977, which
requires the refund of input taxes within 60 days,[31] when it took five years for the latter to grant its tax claim for VAT
input credit/refund.[32]

In this regard, we agree with Philex. While there is no dispute that a claimant has the burden of proof to establish
the factual basis of his or her claim for tax credit or refund, [33]however, once the claimant has submitted all the
required documents, it is the function of the BIR to assess these documents with purposeful dispatch. After all, since
taxpayers owe honesty to government it is but just that government render fair service to the taxpayers. [34]
 In the instant case, the VAT input taxes were paid between 1989 to 1991 but the refund of these erroneously paid
taxes was only granted in 1996. Obviously, had the BIR been more diligent and judicious with their duty, it could have
granted the refund earlier. We need not remind the BIR that simple justice requires the speedy refund of wrongly-held
taxes.[35] Fair dealing and nothing less, is expected by the taxpayer from the BIR in the latter's discharge of its
function. As aptly held in Roxas v. Court of Tax Appeals:[36]

"The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to
minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax
collectot kill the 'hen that lays the golden egg.' And, in the order to maintain the general public's trust and confidence
in the Government this power must be used justly and not treacherously."

Despite our concern with the lethargic manner by which the BIR handled Philex's tax claim, it is a settled rule that
in the performance of governmental function, the State is not bound by the neglect of its agents and officers. Nowhere
is this more true than in the field of taxation.[37] Again, while we understand Philex's predicament, it must be stressed
that the same is not valid reason for the non- payment of its tax liabilities.

To be sure, this is not state that the taxpayer is devoid of remedy against public servants or employees especially
BIR examiners who, in investigating tax claims are seen to drag their feet needlessly. First, if the BIR takes time in
acting upon the taxpayer's claims for refund, the latter can seek judicial remedy before the Court of Tax Appeals in the
manner prescribed by law.[38] Second, if the inaction can be characterized as willful neglect of duty, then recourse
under the Civil Code and the Tax Code can also be availed of.

Article 27 of the Civil Code provides:

"Art. 27. Any person suffering material or moral loss because a public servant or employee refuses or neglects, without
just cause, to perform his official duty may file an action for damages and other relief against the latter, without
prejudice to any disciplinary action that may be taken."

More importantly, Section 269 (c) of the National Internal Revenue Act of 1997 states:

"xxx xxx xxx

(c) wilfully neglecting to give receipts, as by law required for any sum collected in the performance of duty or wilfully
neglecting to perform, any other duties enjoined by law."

Simply put, both provisions abhor official inaction, willful neglect and unreasonable delay in the performance of
official duties.[39] In no uncertain terms must we stress that every public employee or servant must strive to render
service to the people with utmost diligence and efficiency. Insolence and delay have no place in government service.
The BIR, being the government collecting arm, must and should do no less. It simply cannot be apathetic and laggard in
rendering service to the taxpayer if it wishes to remain true to its mission of hastening the country's development. We
take judicial notice of the taxpayer's generally negative perception towards the BIR; hence, it is up to the latter to
prove its detractors wrong.

In sum, while we can never condone the BIR's apparent callousness in performing its duties, still, the same cannot
justify Philex's non-payment of its tax liabilities. The adage "no one should take the law into his own hands" should
have guided Philex's action.

WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED. The assailed decision of the Court
of Appeals dated April 8, 1996 is hereby AFFIRMED.

SO ORDERED.
G.R. No. 172690 March 3, 2010

HEIRS OF JOSE LIM, represented by ELENITO LIM, Petitioners, vs. JULIET VILLA LIM, Respondent.

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Civil Procedure, assailing the
Court of Appeals (CA) Decision[2] dated June 29, 2005, which reversed and set aside the decision [3] 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 Cresencia Palad (Cresencia); and their
children Elenito, Evelia, Imelda, Edelyna and Edison, all surnamed Lim (petitioners), represented by Elenito Lim
(Elenito). They filed a Complaint[4] 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 fathers 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 Elfledos
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 Elfledo P50,000.00 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, Paquita Uy, 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 husbands 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
Resolution[6] 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 Elfledo was 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 Elfledo and 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--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. [13] Rule 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 Eng Kee 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 Elfredos 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.

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 thepartnership 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.
G.R. No. 167379 June 27, 2006

PRIMELINK PROPERTIES AND DEVELOPMENT CORPORATION and RAFAELITO W. LOPEZ, Petitioners,

vs.
MA. CLARITA T. LAZATIN-MAGAT, JOSE SERAFIN T. LAZATIN, JAIME TEODORO T. LAZATIN and JOSE MARCOS T.
LAZATIN, Respondents.

DECISION

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure of the Decision 1 of
the Court of Appeals (CA) in CA-G.R. CV No. 69200 and its Resolution2 denying petitioners motion for reconsideration
thereof.

The factual and procedural antecedents are as follows:

Primelink Properties and Development Corporation (Primelink for brevity) is a domestic corporation engaged in real
estate development. Rafaelito W. Lopez is its President and Chief Executive Officer.3

Ma. Clara T. Lazatin-Magat and her brothers, Jose Serafin T. Lazatin, Jaime T. Lazatin and Jose Marcos T. Lazatin (the
Lazatins for brevity), are co-owners of two (2) adjoining parcels of land, with a combined area of 30,000 square
meters, located in Tagaytay City and covered by Transfer Certificate of Title (TCT) No. T-108484of the Register of
Deeds of Tagaytay City.

On March 10, 1994, the Lazatins and Primelink, represented by Lopez, in his capacity as President, entered into a Joint
Venture Agreement5 (JVA) for the development of the aforementioned property into a residential subdivision to be
known as "Tagaytay Garden Villas." Under the JVA, the Lazatin siblings obliged themselves to contribute the two
parcels of land as their share in the joint venture. For its part, Primelink undertook to contribute money, labor,
personnel, machineries, equipment, contractors pool, marketing activities, managerial expertise and other needed
resources to develop the property and construct therein the units for sale to the public. Specifically, Primelink bound
itself to accomplish the following, upon the execution of the deed:

a.) Survey the land, and prepare the projects master plans, engineering designs, structural and architectural plans, site
development plans, and such other need plans in accordance with existing laws and the rules and regulations of
appropriate government institutions, firms or agencies;

b.) Secure and pay for all the licenses, permits and clearances needed for the projects;

c.) Furnish all materials, equipment, labor and services for the development of the land in preparation for the
construction and sale of the different types of units (single-detached, duplex/twin, cluster and row house);

d.) Guarantee completion of the land development work if not prevented by force majeure or fortuitous event or by
competent authority, or other unavoidable circumstances beyond the DEVELOPERS control, not to exceed three years
from the date of the signing of this Joint Venture Agreement, except the installation of the electrical facilities which is
solely MERALCOS responsibility;

e.) Provide necessary manpower resources, like executive and managerial officers, support personnel and marketing
staff, to handle all services related to land and housing development (administrative and construction) and marketing
(sales, advertising and promotions).6

The Lazatins and Primelink covenanted that they shall be entitled to draw allowances/advances as follows:

1. During the first two years of the Project, the DEVELOPER and the LANDOWNER can draw allowances or make
advances not exceeding a total of twenty percent (20%) of the net revenue for that period, on the basis of sixty
percent (60%) for the DEVELOPER and forty percent (40%) for the LANDOWNERS.
The drawing allowances/advances are limited to twenty percent (20%) of the net revenue for the first two years, in
order to have sufficient reserves or funds to protect and/or guarantee the construction and completion of the different
types of units mentioned above.

2. After two years, the DEVELOPER and the LANDOWNERS shall be entitled to drawing allowances and/or advances
equivalent to sixty percent (60%) and forty percent (40%), respectively, of the total net revenue or income of the sale
of the units.7

They also agreed to share in the profits from the joint venture, thus:

1. The DEVELOPER shall be entitled to sixty percent (60%) of the net revenue or income of the Joint Venture project,
after deducting all expenses incurred in connection with the land development (such as administrative management
and construction expenses), and marketing (such as sales, advertising and promotions), and

2. The LANDOWNERS shall be entitled to forty percent (40%) of the net revenue or income of the Joint Venture project,
after deducting all the above-mentioned expenses.8

Primelink submitted to the Lazatins its Projection of the Sales-Income-Cost of the project:

SALES-INCOME-COST PROJECTION
SELLING PRICE COST PRICE DIFFERENCE INCOME
CLUSTER:
A1 3,200,000 - A2 1,260,000 = 1,940,000 x 24 = P 46,560,000.00
TWIN:
B1 2,500,000 - B2 960,000 = 1,540,000 x 24 = 36,960,000.00
SINGLE:
C1 3,500,000 - C2 1,400,000 = 2,100,000 x 16 = 33,600,000.00
ROW-TYPE TOWNHOMES:
D1 1,600,000 - D2 700,000 = 900,000 x 24 = 21,600,000.00

P138,720,000.00
(GROSS) Total Cash Price (A1+B1+C1+D1) = P231,200,000.00
Total Building Expense (A2+B2+C2+D2) = 92,480,000.00
COMPUTATION OF ADDL. INCOME ON INTEREST
TCP x 30% D/P = P 69,360,000 P 69,360,000.00
Balance = 70% = 161,840,000
x .03069 x 48 = P238,409,740 238,409,740.00
Total Amount (TCP + int. earn.) P307,769,740.00
EXPENSES:
less: A Building expenses P 92,480,000.00
B Commission (8% of TCP) 18,496,000.00
C Admin. & Mgmt. expenses (2% of TCP) 4,624,000.00
D Advertising & Promo exp. (2% of TCP) 4,624,000.00
E Building expenses for the open 12,000,000.00
 spaces and Amenities (Development
cost not incl. Housing) 400 x 30,000 sqms.

TOTAL EXPENSES (A+B+C+D+E) P132,224,000.00

RECONCILIATION OF INCOME VS. EXPENSES
Total Projected Income (incl. income from interest earn.) P307,769,740.00

less: 132,224,000.00
Total Expenses P175,545,740.009

The parties agreed that any unsettled or unresolved misunderstanding or conflicting opinions between the parties
relative to the interpretation, scope and reach, and the enforcement/implementation of any provision of the
agreement shall be referred to Voluntary Arbitration in accordance with the Arbitration Law. 10

The Lazatins agreed to subject the title over the subject property to an escrow agreement. Conformably with the
escrow agreement, the owners duplicate of the title was deposited with the China Banking Corporation. 11However,
Primelink failed to immediately secure a Development Permit from Tagaytay City, and applied the permit only on
August 30, 1995. On October 12, 1995, the City issued a Development Permit to Primelink. 12

In a Letter13 dated April 10, 1997, the Lazatins, through counsel, demanded that Primelink comply with its obligations
under the JVA, otherwise the appropriate action would be filed against it to protect their rights and interests. This
impelled the officers of Primelink to meet with the Lazatins and enabled the latter to review its business
records/papers. In another Letter14 dated October 22, 1997, the Lazatins informed Primelink that they had decided to
rescind the JVA effective upon its receipt of the said letter. The Lazatins demanded that Primelink cease and desist
from further developing the property.

Subsequently, on January 19, 1998, the Lazatins filed, with the Regional Trial Court (RTC) of Tagaytay City, Branch 18,
a complaint for rescission accounting and damages, with prayer for temporary restraining order and/or preliminary
injunction against Primelink and Lopez. The case was docketed as Civil Case No. TG-1776. Plaintiffs alleged, among
others, that, despite the lapse of almost four (4) years from the execution of the JVA and the delivery of the title and
possession of the land to defendants, the land development aspect of the project had not yet been completed, and the
construction of the housing units had not yet made any headway, based on the following facts, namely: (a) of the 50
housing units programmed for Phase I, only the following types of houses appear on the site in these condition: (aa)
single detached, one completed and two units uncompleted; (bb) cluster houses, one unit nearing completion; (cc)
duplex, two units completed and two units unfinished; and (dd) row houses, two units, completed; (b) in Phase II
thereof, all that was done by the defendants was to grade the area; the units so far constructed had been the object of
numerous complaints by their owners/purchasers for poor workmanship and the use of sub-standard materials in their
construction, thus, undermining the projects marketability. Plaintiffs also alleged that defendants had, without
justifiable reason, completely disregarded previously agreed accounting and auditing procedures, checks and balances
system installed for the mutual protection of both parties, and the scheduled regular meetings were seldom held to the
detriment and disadvantage of plaintiffs. They averred that they sent a letter through counsel, demanding compliance
of what was agreed upon under the agreement but defendants refused to heed said demand. After a succession of
letters with still no action from defendants, plaintiffs sent a letter on October 22, 1997, a letter formally rescinding
the JVA.

Plaintiffs also claimed that in a sales-income-costs projection prepared and submitted by defendants, they (plaintiffs)
stood to receive the amount of P70,218,296.00 as their net share in the joint venture project; to date, however, after
almost four (4) years and despite the undertaking in the JVA that plaintiffs shall initially get 20% of the agreed net
revenue during the first two (2) years (on the basis of the 60%-40% sharing) and their full 40% share thereafter,
defendants had yet to deliver these shares to plaintiffs which by conservative estimates would amount to no less
than P40,000,000.00.15

Plaintiffs prayed that, after due proceedings, judgment be rendered in their favor, thus:
WHEREFORE, it is respectfully prayed of this Honorable Court that a temporary restraining order be forthwith issued
enjoining the defendants to immediately stop their land development, construction and marketing of the housing units
in the aforesaid project; after due proceedings, to issue a writ of preliminary injunction enjoining and prohibiting said
land development, construction and marketing of housing units, pending the disposition of the instant case.

After trial, a decision be rendered:

1. Rescinding the Joint Venture Agreement executed between the plaintiffs and the defendants;

2. Immediately restoring to the plaintiffs possession of the subject parcels of land;

3. Ordering the defendants to render an accounting of all income generated as well as expenses incurred and
disbursement made in connection with the project;

4. Making the Writ of Preliminary Injunction permanent;

5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount Forty Million Pesos (P40,000,000.00)
in actual and/or compensatory damages;

6. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of Two Million Pesos (P2,000,000.00)
in exemplary damages;

7. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount equivalent to ten percent (10%) of
the total amount due as and for attorneys fees; and

8. To pay the costs of this suit.

Other reliefs and remedies as are just and equitable are likewise being prayed for.16

Defendants opposed plaintiffs plea for a writ of preliminary injunction on the ground that plaintiffs complaint was
premature, due to their failure to refer their complaint to a Voluntary Arbitrator pursuant to the JVA in relation to
Section 2 of Republic Act No. 876 before filing their complaint in the RTC. They prayed for the dismissal of the
complaint under Section 1(j), Rule 16 of the Rules of Court:

WHEREFORE, it is respectfully prayed that an Order be issued:

a) dismissing the Complaint on the basis of Section 1(j), Rule 16 of the aforecited Rules of Court, or, in the alternative,

b) requiring the plaintiffs to make initiatory step for arbitration by filing the demand to arbitrate, and then asking the
parties to resolve their controversies, pursuant to the Arbitration Law, or in the alternative;

c) staying or suspending the proceedings in captioned case until the completion of the arbitration, and

d) denying the plaintiffs prayer for the issuance of a temporary restraining order or writ of preliminary injunction.

Other reliefs and remedies just and equitable in the premises are prayed for. 17

In the meantime, before the expiration of the reglementary period to answer the complaint, defendants, invoking their
counsels heavy workload, prayed for a 15-day extension18 within which to file their answer. The additional time
prayed for was granted by the RTC.19 However, instead of filing their answer, defendants prayed for a series of 15-day
extensions in eight (8) successive motions for extensions on the same justification. 20 The RTC again granted the
additional time prayed for, but in granting the last extension, it warned against further extension. 21Despite the
admonition, defendants again moved for another 15-day extension,22 which, this time, the RTC denied. No answer
having been filed, plaintiffs moved to declare the defendants in default, 23 which the RTC granted in its Order24 dated
June 24, 1998.

On June 25, 1998, defendants filed, via registered mail, their "Answer with Counterclaim and Opposition to the Prayer
for the Issuance of a Writ of Preliminary Injunction." 25 On July 8, 1998, defendants filed a Motion to Set Aside the Order
of Default.26 This was opposed by plaintiffs.27 In an Order28 dated July 14, 1998, the RTC denied defendants motion to
set aside the order of default and ordered the reception of plaintiffs evidence ex parte. Defendants filed a motion for
reconsideration29 of the July 14, 1998 Order, which the RTC denied in its Order30 dated October 21, 1998.

Defendants thereafter interposed an appeal to the CA assailing the Order declaring them in default, as well as the
Order denying their motion to set aside the order of default, alleging that these were contrary to facts of the case, the
law and jurisprudence.31 On September 16, 1999, the appellate court issued a Resolution32 dismissing the appeal on the
ground that the Orders appealed from were interlocutory in character and, therefore, not appealable. No motion for
reconsideration of the Order of the dismissal was filed by defendants.

In the meantime, plaintiffs adduced ex parte their testimonial and documentary evidence. On April 17, 2000, the RTC
rendered a Decision, the dispositive part of which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows:

1. Ordering the rescission of the Joint Venture Agreement as of the date of filing of this complaint;

2. Ordering the defendants to return possession, including all improvements therein, of the real estate property
belonging to the plaintiffs which is described in, and covered by Transfer Certificate of Title No. T-10848 of the
Register of Deeds of Tagaytay City, and located in Barangay Anulin, City of Tagaytay;

3. Ordering the defendants to turn over all documents, records or papers that have been executed, prepared and
retained in connection with any contract to sell or deed of sale of all lots/units sold during the effectivity of the joint
venture agreement;

4. Ordering the defendants to pay the plaintiffs the sum of P1,041,524.26 representing their share of the net income of
the P2,603,810.64 as of September 30, 1995, as stipulated in the joint venture agreement;

5. Ordering the defendants to pay the plaintiffs attorneys fees in the amount of P104,152.40;

6. Ordering the defendants to pay the costs.

SO ORDERED.33

The trial court anchored its decision on the following findings:

x x x Evidence on record have shown patent violations by the defendants of the stipulations particularly paragraph II
covering Developers (defendant) undertakings, as well as paragraph III and paragraph V of the JVA. These violations
are not limited to those made against the plaintiffs alone as it appears that some of the unit buyers themselves have
their own separate gripes against the defendants as typified by the letters (Exhibits "G" and "H") of Mr. Emmanuel
Enciso.

xxxx

Rummaging through the evidence presented in the course of the testimony of Mrs. Maminta on August 6, 1998 (Exhibits
"N," "O," "P," "Q" and "R" as well as submarkings, pp. 60 to 62, TSN August 6, 1998) this court has observed, and is thus
convinced, that a pattern of what appears to be a scheme or plot to reduce and eventually blot out the net income
generated from sales of housing units by defendants, has been established. Exhibit "P-2" is explicit in declaring that, as
of September 30, 1995, the joint venture project earned a net income of aboutP2,603,810.64. This amount, however,
was drastically reduced in a subsequent financial report submitted by the defendants to P1,954,216.39. Shortly
thereafter, and to the dismay of the plaintiffs, the defendants submitted an income statement and a balance sheet
(Exhibits "R" and "R-1") indicating a net loss of P5,122,906.39 as of June 30, 1997.

Of the reported net income of P2,603,810.64 (Exhibit "P-2") the plaintiffs should have received the sum
ofP1,041,524.26 representing their 40% share under paragraph II and V of the JVA. But this was not to be so. Even
before the plaintiffs could get hold of their share as indicated above, the defendants closed the chance altogether by
declaring a net loss. The court perceives this to be one calculated coup-de-grace that would put to thin air plaintiffs
hope of getting their share in the profit under the JVA.
That this matter had reached the court is no longer a cause for speculation. The way the defendants treated the JVA
and the manner by which they handled the project itself vis--vis their partners, the plaintiffs herein, there is bound to
be certain conflict as the latter repeatedly would received the losing end of the bargain.

Under the intolerable circumstances, the plaintiffs could not have opted for some other recourse but to file the
present action to enforce their rights. x x x34

On May 15, 2000, plaintiffs filed a Motion for Execution Pending Appeal35 alleging defendants dilatory tactics for its
allowance. This was opposed by defendants. 36

On May 22, 2000, the RTC resolved the motion for execution pending appeal in favor of plaintiffs. 37 Upon posting a
bond of P1,000,000.00 by plaintiffs, a writ of execution pending appeal was issued on June 20, 2000. 38

Defendants appealed the decision to the CA on the following assignment of errors:

THE TRIAL COURT ERRED IN DECIDING THE CASE WITHOUT FIRST REFERRING THE COMPLAINT FOR VOLUNTARY
ARBITRATION (RA NO. 876), CONTRARY TO THE MANDATED VOLUNTARY ARBITRATION CLAUSE UNDER THE JOINT
VENTURE AGREEMENT, AND THE DOCTRINE IN "MINDANAO PORTLAND CEMENT CORPORATION V. MCDONOUGH
CONSTRUCTION COMPANY OF FLORIDA" (19 SCRA 814-815).

II

THE TRIAL COURT ERRED IN ISSUING A WRIT OF EXECUTION PENDING APPEAL EVEN IN THE ABSENCE OF GOOD AND
COMPELLING REASONS TO JUSTIFY SAID ISSUANCE, AND DESPITE PRIMELINKS STRONG OPPOSITION THERETO.

III

THE TRIAL COURT ERRED IN REFUSING TO DECIDE PRIMELINKS MOTION TO QUASH THE WRIT OF EXECUTION PENDING
APPEAL AND THE MOTION FOR RECONSIDERATION, ALTHOUGH THE COURT HAS RETAINED ITS JURISDICTION TO RULE ON
ALL QUESTIONS RELATED TO EXECUTION.

IV

THE TRIAL COURT ERRED IN RESCINDING THE JOINT VENTURE AGREEMENT ALTHOUGH PRIMELINK HAS SUBSTANTIALLY
DEVELOPED THE PROJECT AND HAS SPENT MORE OR LESS FORTY MILLION PESOS, AND DESPITE APPELLEES FAILURE TO
PRESENT SUFFICIENT EVIDENCE JUSTIFYING THE SAID RESCISSION.

THE TRIAL COURT ERRED IN DECIDING THAT THE APPELLEES HAVE THE RIGHT TO TAKE OVER THE SUBDIVISION AND TO
APPROPRIATE FOR THEMSELVES ALL THE EXISTING IMPROVEMENTS INTRODUCED THEREIN BY PRIMELINK, ALTHOUGH
SAID RIGHT WAS NEITHER ALLEGED NOR PRAYED FOR IN THE COMPLAINT, MUCH LESS PROVEN DURING THE EX PARTE
HEARING, AND EVEN WITHOUT ORDERING APPELLEES TO FIRST REIMBURSE PRIMELINK OF THE SUBSTANTIAL DIFFERENCE
BETWEEN THE MARKET VALUE OF APPELLEES RAW, UNDEVELOPED AND UNPRODUCTIVE LAND (CONTRIBUTED TO THE
PROJECT) AND THE SUM OF MORE OR LESS FORTY MILLION PESOS WHICH PRIMELINK HAD SPENT FOR THE HORIZONTAL
AND VERTICAL DEVELOPMENT OF THE PROJECT, THEREBY ALLOWING APPELLEES TO UNJUSTLY ENRICH THEMSELVES AT
THE EXPENSE OF PRIMELINK.39

The appeal was docketed in the CA as CA-G.R. CV No. 69200.

On August 9, 2004, the appellate court rendered a decision affirming, with modification, the appealed decision. The
fallo of the decision reads:

WHEREFORE, in view of the foregoing, the assailed decision of the Regional Trial Court of Tagaytay City, Branch 18,
promulgated on April 17, 2000 in Civil Case No. TG-1776, is hereby AFFIRMED. Accordingly, Transfer Certificate of Title
No. T-10848 held for safekeeping by Chinabank pursuant to the Escrow Agreement is ordered released for return to the
plaintiffs-appellees and conformably with the affirmed decision, the cancellation by the Register of Deeds of Tagaytay
City of whatever annotation in TCT No. 10848 by virtue of the Joint Venture Agreement, is now proper.

SO ORDERED.40

Citing the ruling of this Court in Aurbach v. Sanitary Wares Manufacturing Corporation, 41 the appellate court ruled that,
under Philippine law, a joint venture is a form of partnership and is to be governed by the laws of partnership. The
aggrieved parties filed a motion for reconsideration,42 which the CA denied in its Resolution43dated March 7, 2005.

Petitioners thus filed the instant Petition for Review on Certiorari, alleging that:

1) DID THE HONORABLE COURT OF APPEALS COMMIT A FATAL AND REVERSIBLE LEGAL ERROR AND/OR GRAVE ABUSE OF
DISCRETION IN ORDERING THE RETURN TO THE RESPONDENTS OF THE PROPERTY WITH ALL IMPROVEMENTS THEREON,
EVEN WITHOUT ORDERING/REQUIRING THE RESPONDENTS TO FIRST PAY OR REIMBURSE PRIMELINK OF ALL EXPENSES
INCURRED IN DEVELOPING AND MARKETING THE PROJECT, LESS THE ORIGINAL VALUE OF THE PROPERTY, AND THE
SHARE DUE RESPONDENTS FROM THE PROFITS (IF ANY) OF THE JOINT VENTURE PROJECT?

2) IS THE AFORESAID ORDER ILLEGAL AND CONFISCATORY, OPPRESSIVE AND UNCONSCIONABLE, CONTRARY TO THE
TENETS OF GOOD HUMAN RELATIONS AND VIOLATIVE OF EXISTING LAWS AND JURISPRUDENCE ON JUDICIAL NOTICE,
DEFAULT, UNJUST ENRICHMENT AND RESCISSION OF CONTRACT WHICH REQUIRES MUTUAL RESTITUTION, NOT
UNILATERAL APPROPRIATION, OF PROPERTY BELONGING TO ANOTHER?44

Petitioners maintain that the aforesaid portion of the decision which unconditionally awards to respondents "all
improvements" on the project without requiring them to pay the value thereof or to reimburse Primelink for all
expenses incurred therefore is inherently and essentially illegal and confiscatory, oppressive and unconscionable,
contrary to the tenets of good human relations, and will allow respondents to unjustly enrich themselves at Primelinks
expense. At the time respondents contributed the two parcels of land, consisting of 30,000 square meters to the joint
venture project when the JVA was signed on March 10, 1994, the said properties were worth not more than P500.00 per
square meter, the "price tag" agreed upon the parties for the purpose of the JVA. Moreover, before respondents
rescinded the JVA sometime in October/November 1997, the property had already been substantially developed as
improvements had already been introduced thereon; petitioners had likewise incurred administrative and marketing
expenses, among others, amounting to more or less P40,000,000.00.45

Petitioners point out that respondents did not pray in their complaint that they be declared the owners and entitled to
the possession of the improvements made by petitioner Primelink on the property; neither did they adduce evidence to
prove their entitlement to said improvements. It follows, petitioners argue, that respondents were not entitled to the
improvements although petitioner Primelink was declared in default.

They also aver that, under Article 1384 of the New Civil Code, rescission shall be only to the extent necessary to cover
the damages caused and that, under Article 1385 of the same Code, rescission creates the obligation to return the
things which were not object of the contract, together with their fruits, and the price with its interest; consequently,
it can be effected only when respondents can return whatever they may be obliged to return. Respondents who sought
the rescission of the JVA must place petitioner Primelink in the status quo. They insist that respondents cannot rescind
and, at the same time, retain the consideration, or part of the consideration received under the JVA. They cannot have
the benefits of rescission without assuming its burden. All parties must be restored to their original positions as nearly
as possible upon the rescission of a contract. In the event that restoration to the status quo is impossible, rescission
may be granted if the Court can balance the equities and fashion an appropriate remedy that would be equitable to
both parties and afford complete relief.

Petitioners insist that being defaulted in the court a quo would in no way defeat their claim for reimbursement
because "[w]hat matters is that the improvements exist and they cannot be denied." 46 Moreover, they point out, the
ruling of this Court in Aurbach v. Sanitary Wares Manufacturing Corporation 47 cited by the CA is not in point.

On the other hand, the CA ruled that although respondents therein (plaintiffs below) did not specifically pray for their
takeover of the property and for the possession of the improvements on the parcels of land, nevertheless, respondents
were entitled to said relief as a necessary consequence of the ruling of the trial court ordering the rescission of the
JVA. The appellate court cited the ruling of this Court in the Aurbach case and Article 1838 of the New Civil Code, to
wit:
As a general rule, the relation of the parties in joint ventures is governed by their agreement. When the agreement is
silent on any particular issue, the general principles of partnership may be resorted to. 48

Respondents, for their part, assert that Articles 1380 to 1389 of the New Civil Code deal with rescissible contracts.
What applies is Article 1191 of the New Civil Code, which reads:

ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become
impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance
with articles 1385 and 1388 and the Mortgage Law.

They insist that petitioners are not entitled to rescission for the improvements because, as found by the RTC and the

CA, it was petitioner Primelink that enriched itself at the expense of respondents. Respondents reiterate the ruling of
the CA, and argue as follows:

PRIMELINK argued that the LAZATINs in their complaint did not allege, did not prove and did not pray that they are and
should be entitled to take over the development of the project, and that the improvements and existing structures
which were introduced by PRIMELINK after spending more or less Forty Million Pesos be awarded to them. They
merely asked in the complaint that the joint venture agreement be rescinded, and that the parcels of land they
contributed to the project be returned to them.

PRIMELINKs argument lacks merit. The order of the court for PRIMELINK to return possession of the real estate
property belonging to the LAZATINs including all improvements thereon was not a judgment that was different in kind
than what was prayed for by the LAZATINs. The order to return the property with all the improvements thereon is just
a necessary consequence to the order of rescission.

As a general rule, the relation of the parties in joint ventures is governed by their agreement. When the agreement is
silent on any particular issue, the general principles of partnership may be resorted to. In Aurbach v. Sanitary Wares
Manufacturing Corporation, the Supreme Court discussed the following points regarding joint ventures and partnership:

The legal concept of a joint venture is of common law origin. It has no precise legal definition, but it has been
generally understood to mean an organization formed for some temporary purpose. (Gates v. Megargel, 266 Fed. 811
[1920]) It is, in fact, hardly distinguishable from the partnership, since elements are similar community of interest in
the business, sharing of profits and losses, and a mutual right of control. (Blackner v. McDermott, 176 F.2d 498 [1949];
Carboneau v. Peterson, 95 P.2d 1043 [1939]; Buckley v. Chadwick, 45 Cal.2d 183, 288 P.2d 12, 289 P.2d 242 [1955])
The main distinction cited by most opinions in common law jurisdictions is that the partnership contemplates a general
business with some degree of continuity, while the joint venture is formed for the execution of a single transaction,
and is thus of a temporary nature. (Tuffs v. Mann, 116 Cal.App. 170, 2 P.2d 500 [1931]; Harmon v. Martin, 395 III. 595,
71 N.E.2d 74 [1947]; Gates v. Megargel, 266 Fed. 811 [1920]) This observation is not entirely accurate in this
jurisdiction, since under the Civil Code, a partnership may be particular or universal, and a particular partnership may
have for its object a specific undertaking. (Art. 1783, Civil Code). It would seem therefore that, under Philippine law, a
joint venture is a form of partnership and should thus be governed by the laws of partnership. The Supreme Court has,
however, recognized a distinction between these two business forms, and has held that although a corporation cannot
enter into a partnership contract, it may, however, engage in a joint venture with others. (At p. 12, Tuazon v. Bolanos,
95 Phil. 906 [1954]; Campos and Lopez Campos Comments, Notes and Selected Cases, Corporation Code 1981)
(Emphasis Supplied)

The LAZATINs were able to establish fraud on the part of PRIMELINK which, in the words of the court a quo, was a
pattern of what appears to be a scheme or plot to reduce and eventually blot out the net incomes generated from sales
of housing units by the defendants. Under Article 1838 of the Civil Code, where the partnership contract is rescinded
on the ground of the fraud or misrepresentation of one of the parties thereto, the party entitled to rescind is, without
prejudice to any other right is entitled to a lien on, or right of retention of, the surplus of the partnership
property after satisfying the partnership liabilities to third persons for any sum of money paid by him for the purchase
of an interest in the partnership and for any capital or advance contributed by him. In the instant case, the joint
venture still has outstanding liabilities to third parties or the buyers of the property.

It is not amiss to state that title to the land or TCT No. T-10848 which is now held by Chinabank for safekeeping
pursuant to the Escrow Agreement executed between Primelink Properties and Development Corporation and Ma. Clara
T. Lazatin-Magat should also be returned to the LAZATINs as a necessary consequence of the order of rescission of
contract. The reason for the existence of the Escrow Agreement has ceased to exist when the joint venture agreement
was rescinded.49

Respondents stress that petitioners must bear any damages or losses they may have suffered. They likewise stress that
they did not enrich themselves at the expense of petitioners.

In reply, petitioners assert that it is unjust and inequitable for respondents to retain the improvements even if their
share in the P1,041,524.26 of the net income of the property and the sale of the land were to be deducted from the
value of the improvements, plus administrative and marketing expenses in the total amount ofP40,000,000.00.
Petitioners will still be entitled to an accounting from respondents. Respondents cannot deny the existence and nature
of said improvements as they are visible to the naked eye.

The threshold issues are the following: (1) whether respondents are entitled to the possession of the parcels of land
covered by the JVA and the improvements thereon introduced by petitioners as their contribution to the JVA; (2)
whether petitioners are entitled to reimbursement for the value of the improvements on the parcels of land.

The petition has no merit.

On the first issue, we agree with petitioners that respondents did not specifically pray in their complaint below that
possession of the improvements on the parcels of land which they contributed to the JVA be transferred to them.
Respondents made a specific prayer in their complaint that, upon the rescission of the JVA, they be placed in
possession of the parcels of land subject of the agreement, and for other "reliefs and such other remedies as are just
and equitable in the premises." However, the trial court was not precluded from awarding possession of the
improvements on the parcels of land to respondents in its decision. Section 2(c), Rule 7 of the Rules of Court provides
that a pleading shall specify the relief sought but it may add as general prayer for such further or other relief as may
be deemed just and equitable. Even without the prayer for a specific remedy, proper relief may be granted by the
court if the facts alleged in the complaint and the evidence introduced so warrant. 50 The court shall grant relief
warranted by the allegations and the proof even if no such relief is prayed for. 51 The prayer in the complaint for other
reliefs equitable and just in the premises justifies the grant of a relief not otherwise specifically prayed for.52

The trial court was not proscribed from placing respondents in possession of the parcels of land and the improvements
on the said parcels of land. It bears stressing that the parcels of land, as well as the improvements made thereon, were
contributed by the parties to the joint venture under the JVA, hence, formed part of the assets of the joint
venture.53 The trial court declared that respondents were entitled to the possession not only of the parcels of land but
also of the improvements thereon as a consequence of its finding that petitioners breached their agreement and
defrauded respondents of the net income under the JVA.

On the second issue, we agree with the CA ruling that petitioner Primelink and respondents entered into a joint
venture as evidenced by their JVA which, under the Courts ruling in Aurbach, is a form of partnership, and as such is
to be governed by the laws on partnership.

When the RTC rescinded the JVA on complaint of respondents based on the evidence on record that petitioners
willfully and persistently committed a breach of the JVA, the court thereby dissolved/cancelled the partnership. 54With
the rescission of the JVA on account of petitioners fraudulent acts, all authority of any partner to act for the
partnership is terminated except so far as may be necessary to wind up the partnership affairs or to complete
transactions begun but not yet finished.55 On dissolution, the partnership is not terminated but continues until the
winding up of partnership affairs is completed.56 Winding up means the administration of the assets of the partnership
for the purpose of terminating the business and discharging the obligations of the partnership.

The transfer of the possession of the parcels of land and the improvements thereon to respondents was only for a
specific purpose: the winding up of partnership affairs, and the partition and distribution of the net partnership assets
as provided by law.57 After all, Article 1836 of the New Civil Code provides that unless otherwise agreed by the parties
in their JVA, respondents have the right to wind up the partnership affairs:

Art. 1836. Unless otherwise agreed, the partners who have not wrongfully dissolved the partnership or the legal
representative of the last surviving partner, not insolvent, has the right to wind up the partnership affairs, provided,
however, that any partner, his legal representative or his assignee, upon cause shown, may obtain winding up by the
court.

It must be stressed, too, that although respondents acquired possession of the lands and the improvements thereon,
the said lands and improvements remained partnership property, subject to the rights and obligations of the parties,
inter se, of the creditors and of third parties under Articles 1837 and 1838 of the New Civil Code, and subject to the
outcome of the settlement of the accounts between the parties as provided in Article 1839 of the New Civil Code,
absent any agreement of the parties in their JVA to the contrary.58 Until the partnership accounts are determined, it
cannot be ascertained how much any of the parties is entitled to, if at all.

It was thus premature for petitioner Primelink to be demanding that it be indemnified for the value of the
improvements on the parcels of land owned by the joint venture/partnership. Notably, the JVA of the parties does not
contain any provision designating any party to wind up the affairs of the partnership.

Thus, under Article 1837 of the New Civil Code, the rights of the parties when dissolution is caused in contravention of
the partnership agreement are as follows:

(1) Each partner who has not caused dissolution wrongfully shall have:

(a) All the rights specified in the first paragraph of this article, and

(b) The right, as against each partner who has caused the dissolution wrongfully, to damages for breach of the
agreement.

(2) The partners who have not caused the dissolution wrongfully, if they all desire to continue the business in the same
name either by themselves or jointly with others, may do so, during the agreed term for the partnership and for that
purpose may possess the partnership property, provided they secure the payment by bond approved by the court, or
pay to any partner who has caused the dissolution wrongfully, the value of his interest in the partnership at the
dissolution, less any damages recoverable under the second paragraph, No. 1(b) of this article, and in like manner
indemnify him against all present or future partnership liabilities.

(3) A partner who has caused the dissolution wrongfully shall have:

(a) If the business is not continued under the provisions of the second paragraph, No. 2, all the rights of a partner
under the first paragraph, subject to liability for damages in the second paragraph, No. 1(b), of this article.

(b) If the business is continued under the second paragraph, No. 2, of this article, the right as against his co-partners
and all claiming through them in respect of their interests in the partnership, to have the value of his interest in the
partnership, less any damage caused to his co-partners by the dissolution, ascertained and paid to him in cash, or the
payment secured by a bond approved by the court, and to be released from all existing liabilities of the partnership;
but in ascertaining the value of the partners interest the value of the good-will of the business shall not be
considered.

And under Article 1838 of the New Civil Code, the party entitled to rescind is, without prejudice to any other right,
entitled:

(1) To a lien on, or right of retention of, the surplus of the partnership property after satisfying the partnership
liabilities to third persons for any sum of money paid by him for the purchase of an interest in the partnership and for
any capital or advances contributed by him;

(2) To stand, after all liabilities to third persons have been satisfied, in the place of the creditors of the partnership for
any payments made by him in respect of the partnership liabilities; and
(3) To be indemnified by the person guilty of the fraud or making the representation against all debts and liabilities of
the partnership.

The accounts between the parties after dissolution have to be settled as provided in Article 1839 of the New Civil
Code:

Art. 1839. In settling accounts between the partners after dissolution, the following rules shall be observed, subject to
any agreement to the contrary:

(1) The assets of the partnership are:

(a) The partnership property,

(b) The contributions of the partners necessary for the payment of all the liabilities specified in No. 2.

(2) The liabilities of the partnership shall rank in order of payment, as follows:

(a) Those owing to creditors other than partners,

(b) Those owing to partners other than for capital and profits,

(c) Those owing to partners in respect of capital,

(d) Those owing to partners in respect of profits.

(3) The assets shall be applied in the order of their declaration in No. 1 of this article to the satisfaction of the
liabilities.

(4) The partners shall contribute, as provided by article 1797, the amount necessary to satisfy the liabilities.

(5) An assignee for the benefit of creditors or any person appointed by the court shall have the right to enforce the
contributions specified in the preceding number.

(6) Any partner or his legal representative shall have the right to enforce the contributions specified in No. 4, to the
extent of the amount which he has paid in excess of his share of the liability.

(7) The individual property of a deceased partner shall be liable for the contributions specified in No. 4.

(8) When partnership property and the individual properties of the partners are in possession of a court for distribution,
partnership creditors shall have priority on partnership property and separate creditors on individual property, saving
the rights of lien or secured creditors.

(9) Where a partner has become insolvent or his estate is insolvent, the claims against his separate property shall rank
in the following order:

(a) Those owing to separate creditors;

(b) Those owing to partnership creditors;

(c) Those owing to partners by way of contribution.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The assailed Decision and Resolution of the Court of Appeals
in CA-G.R. CV No. 69200 are AFFIRMED insofar as they conform to this Decision of the Court.

Costs against petitioners.

SO ORDERED.
G.R. No. 178782 September 21, 2011

JOSEFINA P. REALUBIT, Petitioner,vs PROSENCIO D. JASO and EDENG. JASO, Respondents.

DECISION

PEREZ, J.:

The validity as well as the consequences of an assignment of rights in a joint venture are at issue in this petition for
review filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure,[1] assailing the 30 April 2007 Decision[2] rendered
by the Court of Appeals (CA) then Twelfth Division in CA-G.R. CV No. 73861,[3] the dispositive portion of which states:

WHEREFORE, the Decision appealed from is SET ASIDE and we order the dissolution of the joint venture between
defendant-appellant Josefina Realubit and Francis Eric Amaury Biondo and the subsequent conduct of accounting,
liquidation of assets and division of shares of the joint venture business.

Let a copy hereof and the records of the case be remanded to the trial court for appropriate proceedings. [4]

The Facts

On 17 March 1994, petitioner Josefina Realubit (Josefina) entered into a Joint Venture Agreement with Francis Eric
Amaury Biondo (Biondo), a French national, for the operation of an ice manufacturing business. With Josefina as the
industrial partner and Biondo as the capitalist partner, the parties agreed that they would each receive 40% of the net
profit, with the remaining 20% to be used for the payment of the ice making machine which was purchased for the
business.[5] For and in consideration of the sum of P500,000.00, however, Biondo subsequently executed a Deed of
Assignment dated 27 June 1997, transferring all his rights and interests in the business in favor of respondent Eden Jaso
(Eden), the wife of respondent Prosencio Jaso. [6] With Biondos eventual departure from the country, the Spouses Jaso
caused their lawyer to send Josefina a letter dated 19 February 1998, apprising her of their acquisition of said
Frenchmans share in the business and formally demanding an accounting and inventory thereof as well as the
remittance of their portion of its profits.[7]

Faulting Josefina with unjustified failure to heed their demand, the Spouses Jaso commenced the instant suit with the
filing of their 3 August 1998 Complaint against Josefina, her husband, Ike Realubit (Ike), and their alleged dummies, for
specific performance, accounting, examination, audit and inventory of assets and properties, dissolution of the joint
venture, appointment of a receiver and damages. Docketed as Civil Case No. 98-0331 before respondent Branch 257 of
the Regional Trial Court (RTC) of Paraaque City, said complaint alleged, among other matters, that the Spouses
Realubit had no gainful occupation or business prior to their joint venture with Biondo; that with the income of the
business which earned not less than P3,000.00 per day, they were, however, able to acquire the two-storey building as
well as the land on which the joint ventures ice plant stands, another building which they used as their office and/or
residence and six (6) delivery vans; and, that aside from appropriating for themselves the income of the business, the
Spouses Realubit have fraudulently concealed the funds and assets thereof thru their relatives, associates or
dummies.[8]

Served with summons, the Spouses Realubit filed their Answer dated 21 October 1998, specifically denying the material
allegations of the foregoing complaint.Claiming that they have been engaged in the tube ice trading business under a
single proprietorship even before their dealings with Biondo, the Spouses Realubit, in turn, averred that their said
business partner had left the country in May 1997 and could not have executed the Deed of Assignment which bears a
signature markedly different from that which he affixed on their Joint Venture Agreement; that they refused the
Spouses Jasos demand in view of the dubious circumstances surrounding their acquisition of Biondos share in the
business which was established at Don Antonio Heights, Commonwealth Avenue, Quezon City; that said business had
already stopped operations on 13 January 1996 when its plant shut down after its power supply was disconnected by
MERALCO for non-payment of utility bills; and, that it was their own tube ice trading business which had been moved
to 66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City that the Spouses Jaso mistook for the ice
manufacturing business established in partnership with Biondo.[9]

The issues thus joined and the mandatory pre-trial conference subsequently terminated, the RTC went on to try the
case on its merits and, thereafter, to render its Decision dated 17 September 2001, discounting the existence of
sufficient evidence from which the income, assets and the supposed dissolution of the joint venture can be adequately
reckoned. Upon the finding, however, that the Spouses Jaso had been nevertheless subrogated to Biondos rights in the
business in view of their valid acquisition of the latters share as capitalist partner, [10] the RTC disposed of the case in
the following wise:

WHEREFORE, defendants are ordered to submit to plaintiffs a complete accounting and inventory of the assets and
liabilities of the joint venture from its inception to the present, to allow plaintiffs access to the books and accounting
records of the joint venture, to deliver to plaintiffs their share in the profits, if any, and to pay the plaintiffs the
amount of P20,000. for moral damages. The claims for exemplary damages and attorneys fees are denied for lack of
basis.[11]

On appeal before the CA, the foregoing decision was set aside in the herein assailed Decision dated 30 April 2007, upon
the following findings and conclusions: (a) the Spouses Jaso validly acquired Biondos share in the business which had
been transferred to and continued its operations at 66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City
and not dissolved as claimed by the Spouses Realubit; (b) absent showing of Josefinas knowledge and consent to the
transfer of Biondos share, Eden cannot be considered as a partner in the business, pursuant to Article 1813 of the Civil
Code of the Philippines; (c) while entitled to Biondos share in the profits of the business, Eden cannot, however,
interfere with the management of the partnership, require information or account of its transactions and inspect its
books; (d) the partnership should first be dissolved before Eden can seek an accounting of its transactions and demand
Biondos share in the business; and, (e) the evidence adduced before the RTC do not support the award of moral
damages in favor of the Spouses Jaso.[12]

The Spouses Realubits motion for reconsideration of the foregoing decision was denied for lack of merit in the CAs 28
June 2007 Resolution,[13] hence, this petition.

The Issues

The Spouses Realubit urge the reversal of the assailed decision upon the negative of the following issues, to wit:

A. WHETHER OR NOT THERE WAS A VALID ASSIGNMENT OF RIGHTS TO THE JOINT VENTURE.

B. WHETHER THE COURT MAY ORDER PETITIONER [JOSEFINA REALUBIT] AS PARTNER IN THE JOINT VENTURE TO
RENDER [A]N ACCOUNTING TO ONE WHO IS NOT A PARTNER IN SAID JOINT VENTURE.

C. WHETHER PRIVATE RESPONDENTS [SPOUSES JASO] HAVE ANY RIGHT IN THE JOINT VENTURE AND IN THE
SEPARATE ICE BUSINESS OF PETITIONER[S].[14]

The Courts Ruling

We find the petition bereft of merit.

The Spouses Realubit argue that, in upholding its validity, both the RTC and the CA inordinately gave premium to the
notarization of the 27 June 1997 Deed of Assignment executed by Biondo in favor of the Spouses Jaso. Calling attention
to the latters failure to present before the RTC said assignor or, at the very least, the witnesses to said document, the
Spouses Realubit maintain that the testimony of Rolando Diaz, the Notary Public before whom the same was
acknowledged, did not suffice to establish its authenticity and/or validity. They insist that notarization did not
automatically and conclusively confer validity on said deed, since it is still entirely possible that Biondo did not
execute said deed or, for that matter, appear before said notary public. [15] The dearth of merit in the Spouses
Realubits position is, however, immediately evident from the settled rule that documents acknowledged before
notaries public are public documents which are admissible in evidence without necessity of preliminary proof as to
their authenticity and due execution.[16]

It cannot be gainsaid that, as a public document, the Deed of Assignment Biondo executed in favor of Eden not only
enjoys a presumption of regularity[17] but is also considered prima facie evidence of the facts therein stated.[18] A party
assailing the authenticity and due execution of a notarized document is, consequently, required to present evidence
that is clear, convincing and more than merely preponderant.[19] In view of the Spouses Realubits failure to discharge
this onus, we find that both the RTC and the CA correctly upheld the authenticity and validity of said Deed of
Assignmentupon the combined strength of the above-discussed disputable presumptions and the testimonies elicited
from Eden[20] and Notary Public Rolando Diaz.[21] As for the Spouses Realubits bare assertion that Biondos signature on
the same document appears to be forged, suffice it to say that, like fraud, [22] forgery is never presumed and must
likewise be proved by clear and convincing evidence by the party alleging the same. [23] Aside from not being borne out
by a comparison of Biondos signatures on the Joint Venture Agreement[24] and the Deed of Assignment,[25] said forgery
is, moreover debunked by Biondos duly authenticated certification dated 17 November 1998, confirming the transfer of
his interest in the business in favor of Eden.[26]

Generally understood to mean an organization formed for some temporary purpose, a joint venture is likened to a
particular partnership or one which has for its object determinate things, their use or fruits, or a specific undertaking,
or the exercise of a profession or vocation.[27] The rule is settled that joint ventures are governed by the law on
partnerships[28] which are, in turn, based on mutual agency or delectus personae.[29] Insofar as a partners conveyance of
the entirety of his interest in the partnership is concerned, Article 1813 of the Civil Code provides as follows:

Art. 1813. A conveyance by a partner of his whole interest in the partnership does not itself dissolve the partnership,
or, as against the other partners in the absence of agreement, entitle the assignee, during the continuance of the
partnership, to interfere in the management or administration of the partnership business or affairs, or to require any
information or account of partnership transactions, or to inspect the partnership books; but it merely entitles the
assignee to receive in accordance with his contracts the profits to which the assigning partners would otherwise be
entitled. However, in case of fraud in the management of the partnership, the assignee may avail himself of the usual
remedies.

In the case of a dissolution of the partnership, the assignee is entitled to receive his assignors interest and may require
an account from the date only of the last account agreed to by all the partners.

From the foregoing provision, it is evident that (t)he transfer by a partner of his partnership interest does not make the
assignee of such interest a partner of the firm, nor entitle the assignee to interfere in the management of the
partnership business or to receive anything except the assignees profits. The assignment does not purport to transfer
an interest in the partnership, but only a future contingent right to a portion of the ultimate residue as the assignor
may become entitled to receive by virtue of his proportionate interest in the capital.[30] Since a partners interest in the
partnership includes his share in the profits,[31] we find that the CA committed no reversible error in ruling that the
Spouses Jaso are entitled to Biondos share in the profits, despite Juanitas lack of consent to the assignment of said
Frenchmans interest in the joint venture. Although Eden did not, moreover, become a partner as a consequence of the
assignment and/or acquire the right to require an accounting of the partnership business, the CA correctly granted her
prayer for dissolution of the joint venture conformably with the right granted to the purchaser of a partners interest
under Article 1831 of theCivil Code.[32]

Considering that they involve questions of fact, neither are we inclined to hospitably entertain the Spouses Realubits
insistence on the supposed fact that Josefinas joint venture with Biondo had already been dissolved and that the ice
manufacturing business at 66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City was merely a continuation
of the same business they previously operated under a single proprietorship. It is well-entrenched doctrine that
questions of fact are not proper subjects of appeal by certiorari under Rule 45 of the Rules of Court as this mode of
appeal is confined to questions of law.[33] Upon the principle that this Court is not a trier of facts, we are not duty
bound to examine the evidence introduced by the parties below to determine if the trial and the appellate courts
correctly assessed and evaluated the evidence on record.[34] Absent showing that the factual findings complained of are
devoid of support by the evidence on record or the assailed judgment is based on misapprehension of facts, the Court
will limit itself to reviewing only errors of law.[35]

Based on the evidence on record, moreover, both the RTC [36] and the CA[37]ruled out the dissolution of the joint venture
and concluded that the ice manufacturing business at the aforesaid address was the same one established by Juanita
and Biondo.As a rule, findings of fact of the CA are binding and conclusive upon this Court, [38]and will not be reviewed
or disturbed on appeal[39] 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 CA, 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 CA
are premised on the supposed absence of evidence and contradicted by the evidence on record. [40] Unfortunately for
the Spouses Realubits cause, not one of the foregoing exceptions applies to the case.
WHEREFORE, the petition is DENIED for lack of merit and the assailed CA Decision dated 30 April 2007 is,
accordingly, AFFIRMED in toto.

SO ORDERED.
G.R. No. 143340. August 15, 2001

LILIBETH SUNGA-CHAN and CECILIA SUNGA, petitioners, vs. LAMBERTO T. CHUA, respondent.

DECISION

GONZAGA-REYES, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court of the Decision [1] of the Court of
Appeals dated January 31, 2000 in the case entitled Lamberto T. Chua vs.

Lilibeth Sunga Chan and Cecilia Sunga and of the Resolution dated May 23, 2000 denying the motion for reconsideration
of herein petitioners Lilibeth Sunga Chan and Cecilia Sunga (hereafter collectively referred to as petitioners).

The pertinent facts of this case are as follows:

On June 22, 1992, Lamberto T. Chua (hereafter respondent) filed a complaint against Lilibeth Sunga Chan (hereafter
petitioner Lilibeth) and Cecilia Sunga (hereafter petitioner Cecilia), daughter and wife, respectively of the deceased
Jacinto L. Sunga (hereafter Jacinto), for Winding Up of Partnership Affairs, Accounting, Appraisal and Recovery of
Shares and Damages with Writ of Preliminary Attachment with the Regional Trial Court, Branch 11, Sindangan,
Zamboanga del Norte.

Respondent alleged that in 1977, he verbally entered into a partnership with Jacinto in the distribution of Shellane
Liquefied Petroleum Gas (LPG) in Manila. For business convenience, respondent and Jacinto allegedly agreed to
register the business name of their partnership, SHELLITE GAS APPLIANCE CENTER (hereafter Shellite), under the name
of Jacinto as a sole proprietorship.Respondent allegedly delivered his initial capital contribution of P100,000.00 to
Jacinto while the latter in turn produced P100,000.00 as his counterpart contribution, with the intention that the
profits would be equally divided between them. The partnership allegedly had Jacinto as manager, assisted by
Josephine Sy (hereafter Josephine), a sister of the wife of respondent, Erlinda Sy. As compensation, Jacinto would
receive a managers fee or remuneration of 10% of the gross profit and Josephine would receive 10% of the net profits,
in addition to her wages and other remuneration from the business.

Allegedly, from the time that Shellite opened for business on July 8, 1977, its business operation went quite well and
was profitable. Respondent claimed that he could attest to the success of their business because of the volume of
orders and deliveries of filled Shellane cylinder tanks supplied by Pilipinas Shell Petroleum Corporation. While Jacinto
furnished respondent with the merchandise inventories, balance sheets and net worth of Shellite from 1977 to 1989,
respondent however suspected that the amount indicated in these documents were understated and undervalued by
Jacinto and Josephine for their own selfish reasons and for tax avoidance.

Upon Jacintos death in the later part of 1989, his surviving wife, petitioner Cecilia and particularly his daughter,
petitioner Lilibeth, took over the operations, control, custody, disposition and management of Shellite without
respondents consent.

Despite respondents repeated demands upon petitioners for accounting, inventory, appraisal, winding up and
restitution of his net shares in the partnership, petitioners failed to comply. Petitioner Lilibeth allegedly continued the
operations of Shellite, converting to her own use and advantage its properties.

On March 31, 1991, respondent claimed that after petitioner Lilibeth ran out of alibis and reasons to evade respondents
demands, she disbursed out of the partnership funds the amount of P200,000.00 and partially paid the same to
respondent. Petitioner Lilibeth allegedly informed respondent that the P200,000.00 represented partial payment of the
latters share in the partnership, with a promise that the former would make the complete inventory and winding up of
the properties of the business establishment. Despite such commitment, petitioners allegedly failed to comply with
their duty to account, and continued to benefit from the assets and income of Shellite to the damage and prejudice of
respondent.

On December 19, 1992, petitioners filed a Motion to Dismiss on the ground that the Securities and Exchange
Commission (SEC) in Manila, not the Regional Trial Court in Zambaonga del Norte had jurisdiction over the
action. Respondent opposed the motion to dismiss.
On January 12, 1993, the trial court finding the complaint sufficient in form and substance denied the motion to
dismiss.

On January 30, 1993, petitioners filed their Answer with Compulsory Counterclaims, contending that they are not liable
for partnership shares, unreceived income/profits, interests, damages and attorneys fees, that respondent does not
have a cause of action against them, and that the trial court has no jurisdiction over the nature of the action, the SEC
being the agency that has original and exclusive jurisdiction over the case. As counterclaim, petitioner sought
attorneys fees and expenses of litigation.

On August 2, 1993, petitioner filed a second Motion to Dismiss this time on the ground that the claim for winding up of
partnership affairs, accounting and recovery of shares in partnership affairs, accounting and recovery of shares
in partnership assets /properties should be dismissed and prosecuted against the estate of deceased Jacinto in a
probate or intestate proceeding.

On August 16, 1993, the trial court denied the second motion to dismiss for lack of merit.

On November 26, 1993, petitioners filed their Petition for Certiorari, Prohibition and Mandamus with the Court of
Appeals docketed as CA-G.R. SP No. 32499 questioning the denial of the motion to dismiss.

On November 29, 1993, petitioners filed with the trial court a Motion to Suspend Pre-trial Conference.

On December 13, 1993, the trial court granted the motion to suspend pre-trial conference.

On November 15, 1994, the Court of Appeals denied the petition for lack of merit.

On January 16, 1995, this Court denied the petition for review on certiorari filed by petitioner, as petitioners failed to
show that a reversible error was committed by the appellate court." [2]

On February 20, 1995, entry of judgment was made by the Clerk of Court and the case was remanded to the trial court
on April 26, 1995.

On September 25, 1995, the trial court terminated the pre-trial conference and set the hearing of the case on January
17, 1996. Respondent presented his evidence while petitioners were considered to have waived their right to present
evidence for their failure to attend the scheduled date for reception of evidence despite notice.

On October 7, 1997, the trial court rendered its Decision ruling for respondent. The dispositive portion of the Decision
reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, as follows:

(1) DIRECTING them to render an accounting in acceptable form under accounting procedures and standards of the
properties, assets, income and profits of the Shellite Gas Appliance Center since the time of death of Jacinto L. Sunga,
from whom they continued the business operations including all businesses derived from the Shellite Gas Appliance
Center; submit an inventory, and appraisal of all these properties, assets, income, profits, etc. to the Court and to
plaintiff for approval or disapproval;

(2) ORDERING them to return and restitute to the partnership any and all properties, assets, income and profits they
misapplied and converted to their own use and advantage that legally pertain to the plaintiff and account for the
properties mentioned in pars. A and B on pages 4-5 of this petition as basis;

(3) DIRECTING them to restitute and pay to the plaintiff shares and interest of the plaintiff in the partnership of the
listed properties, assets and good will (sic) in schedules A, B and C, on pages 4-5 of the petition;

(4) ORDERING them to pay the plaintiff earned but unreceived income and profits from the partnership from 1988 to
may 30, 1992, when the plaintiff learned of the closure of the store the sum of P35,000.00 per month, with legal rate
of interest until fully paid;
(5) ORDERING them to wind up the affairs of the partnership and terminate its business activities pursuant to law, after
delivering to the plaintiff all the interest, shares, participation and equity in the partnership, or the value thereof in
money or moneys worth, if the properties are not physically divisible;

(6) FINDING them especially Lilibeth Sunga-Chan guilty of breach of trust and in bad faith and hold them liable to the
plaintiff the sum of P50,000.00 as moral and exemplary damages; and,

(7) DIRECTING them to reimburse and pay the sum of P25,000.00 as attorneys (sic) and P25,00.00 as litigation
expenses.

NO special pronouncements as to COSTS.

SO ORDERED.[3]

On October 28, 1997, petitioners filed a Notice of Appeal with the trial court, appealing the case to the Court of
Appeals.

On January 31, 2000, the Court of Appeals dismissed the appeal. The dispositive portion of the Decision reads:

WHEREFORE, the instant appeal is dismissed. The appealed decision is AFFIRMED in all respects.[4]

On May 23, 2000, the Court of Appeals denied the motion for reconsideration filed by petitioner.

Hence, this petition wherein petitioner relies upon the following grounds:

1. The Court of Appeals erred in making a legal conclusion that there existed a partnership between respondent
Lamberto T. Chua and the late Jacinto L. Sunga upon the latters invitation and offer and that upon his death the
partnership assets and business were taken over by petitioners.

2. The Court of Appeals erred in making the legal conclusion that laches and/or prescription did not apply in the
instant case.

3. The Court of Appeals erred in making the legal conclusion that there was competent and credible evidence to
warrant the finding of a partnership, and assuming arguendo that indeed there was a partnership, the finding of highly
exaggerated amounts or values in the partnership assets and profits. [5]

Petitioners question the correctness of the finding of the trial court and the Court of Appeals that a partnership existed
between respondent and Jacinto from 1977 until Jacintos death. In the absence of any written document to show such
partnership between respondent and Jacinto, petitioners argue that these courts were proscribed from hearing the
testimonies of respondent and his witness, Josephine, to prove the alleged partnership three years after Jacintos
death. To support this argument, petitioners invoke the Dead Mans Statute or Survivorship Rule under Section 23, Rule
130 of the Rules of Court that provides:

SEC. 23. Disqualification by reason of death or insanity of adverse party.-- Parties or assignors of parties to a case, or
persons in whose behalf a case is prosecuted, against an executor or administrator or other representative of a
deceased person, or against a person of unsound mind, upon a claim or demand against the estate of such deceased
person, or against such person of unsound mind, cannot testify as to any matter of fact occurring before the death of
such deceased person or before such person became of unsound mind.

Petitioners thus implore this Court to rule that the testimonies of respondent and his alter ego, Josephine, should not
have been admitted to prove certain claims against a deceased person (Jacinto), now represented by petitioners.

We are not persuaded.

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. [6] Hence, based on the intention of the parties, as
gathered from the facts and ascertained from their language and conduct, a verbal contract of partnership may
arise.[7] The essential points that must be proven to show that a partnership was agreed upon are (1) mutual
contribution to a common stock, and (2) a joint interest in the profits.[8] Understandably so, in view of the absence of a
written contract of partnership between respondent and Jacinto, respondent resorted to the introduction of
documentary and testimonial evidence to prove said partnership. The crucial issue to settle then is whether or not the
Dead Mans Statute applies to this case so as to render inadmissible respondents testimony and that of his witness,
Josephine.

The Dead Mans Statute provides that if one party to the alleged transaction is precluded from testifying by death,
insanity, or other mental disabilities, the surviving party is not entitled to the undue advantage of giving his own
uncontradicted and unexplained account of the transaction.[9] But before this rule can be successfully invoked to bar
the introduction of testimonial evidence, it is necessary that:

1. The witness is a party or assignor of a party to a case or persons in whose behalf a case is prosecuted.

2. The action is against an executor or administrator or other representative of a deceased person or a person of
unsound mind;

3. The subject-matter of the action is a claim or demand against the estate of such deceased person or against person
of unsound mind;

4. His testimony refers to any matter of fact which occurred before the death of such deceased person or before such
person became of unsound mind.[10]

Two reasons forestall the application of the Dead Mans Statute to this case.

First, petitioners filed a compulsory counterclaim [11] against respondent in their answer before the trial court, and with
the filing of their counterclaim, petitioners themselves effectively removed this case from the ambit of the Dead Mans
Statute.[12] Well entrenched is the rule that when it is the executor or administrator or representatives of the estate
that sets up the counterclaim, the plaintiff, herein respondent, may testify to occurrences before the death of the
deceased to defeat the counterclaim.[13] Moreover, as defendant in the counterclaim, respondent is not disqualified
from testifying as to matters of fact occurring before the death of the deceased, said action not having been brought
against but by the estate or representatives of the deceased.[14]

Second, the testimony of Josephine is not covered by the Dead Mans Statute for the simple reason that she is not a
party or assignor of a party to a case or persons in whose behalf a case is prosecuted.Records show that respondent
offered the testimony of Josephine to establish the existence of the partnership between respondent and
Jacinto. Petitioners insistence that Josephine is the alter ego of respondent does not make her an assignor because the
term assignor of a party means assignor of a cause of action which has arisen, and not the assignor of a right assigned
before any cause of action has arisen.[15] Plainly then, Josephine is merely a witness of respondent, the latter being the
party plaintiff.

We are not convinced by petitioners allegation that Josephines testimony lacks probative value because she was
allegedly coerced by respondent, her brother-in-law, to testify in his favor. Josephine merely declared in court that
she was requested by respondent to testify and that if she were not requested to do so she would not have
testified. We fail to see how we can conclude from this candid admission that Josephines testimony is involuntary when
she did not in any way categorically say that she was forced to be a witness of respondent. Also, the fact that
Josephine is the sister of the wife of respondent does not diminish the value of her testimony since relationship per se,
without more, does not affect the credibility of witnesses.[16]

Petitioners reliance alone on the Dead Mans Statute to defeat respondents claim cannot prevail over the factual
findings of the trial court and the Court of Appeals that a partnership was established between respondent and
Jacinto. Based not only on the testimonial evidence, but the documentary evidence as well, the trial court and the
Court of Appeals considered the evidence for respondent as sufficient to prove the formation of a partnership, albeit
an informal one.

Notably, petitioners did not present any evidence in their favor during trial. By the weight of judicial precedents, a
factual matter like the finding of the existence of a partnership between respondent and Jacinto cannot be inquired
into by this Court on review.[17] This Court can no longer be tasked to go over the proofs presented by the parties and
analyze, assess and weigh them to ascertain if the trial court and the appellate court were correct in according
superior credit to this or that piece of evidence of one party or the other. [18] It must be also pointed out that
petitioners failed to attend the presentation of evidence of respondent. Petitioners cannot now turn to this Court to
question the admissibility and authenticity of the documentary evidence of respondent when petitioners failed to
object to the admissibility of the evidence at the time that such evidence was offered.[19]

With regard to petitioners insistence that laches and/or prescription should have extinguished respondents claim, we
agree with the trial court and the Court of Appeals that the action for accounting filed by respondent three (3) years
after Jacintos death was well within the prescribed period. The Civil Code provides that an action to enforce an oral
contract prescribes in six (6) years[20]while the right to demand an accounting for a partners interest as against the
person continuing the business accrues at the date of dissolution, in the absence of any contrary
agreement.[21] Considering that the death of a partner results in the dissolution of the partnership [22], in this case, it
was after Jacintos death that respondent as the surviving partner had the right to an account of his interest as against
petitioners. It bears stressing that while Jacintos death dissolved the partnership, the dissolution did not immediately
terminate the partnership. The Civil Code[23] expressly provides that upon dissolution, the partnership continues and its
legal personality is retained until the complete winding up of its business, culminating in its termination. [24]

In a desperate bid to cast doubt on the validity of the oral partnership between respondent and Jacinto, petitioners
maintain that said partnership that had an initial capital of P200,000.00 should have been registered with the
Securities and Exchange Commission (SEC) since registration is mandated by the Civil Code. True, Article 1772 of the
Civil Code requires that partnerships with a capital of P3,000.00 or more must register with the SEC, however, this
registration requirement is not mandatory. Article 1768 of the Civil Code[25] explicitly provides that the partnership
retains its juridical personality even if it fails to register. The failure to register the contract of partnership does not
invalidate the same as among the partners, so long as the contract has the essential requisites, because the main
purpose of registration is to give notice to third parties, and it can be assumed that the members themselves knew of
the contents of their contract.[26] In the case at bar, non-compliance with this directory provision of the law will not
invalidate the partnership considering that the totality of the evidence proves that respondent and Jacinto indeed
forged the partnership in question.

WHEREFORE, in view of the foregoing, the petition is DENIED and the appealed decision is AFFIRMED.

SO ORDERED.
G.R. No. 144214. July 14, 2003

LUZVIMINDA J. VILLAREAL, DIOGENES VILLAREAL and CARMELITO JOSE, petitioners, vs. DONALDO EFREN C.
RAMIREZ and Spouses CESAR G. RAMIREZ JR. and CARMELITA C. RAMIREZ, respondents.

DECISION

PANGANIBAN, J.:

A share in a partnership can be returned only after the completion of the latters dissolution, liquidation and
winding up of the business.

The Case

The Petition for Review on Certiorari before us challenges the March 23, 2000 Decision [1]and the July 26, 2000
Resolution[2] of the Court of Appeals[3] (CA) in CA-GR CV No. 41026.The assailed Decision disposed as follows:

WHEREFORE, foregoing premises considered, the Decision dated July 21, 1992 rendered by the Regional Trial Court,
Branch 148, Makati City is hereby SET ASIDE and NULLIFIED and in lieu thereof a new decision is rendered ordering the
[petitioners] jointly and severally to pay and reimburse to [respondents] the amount of P253,114.00. No
pronouncement as to costs.[4]

Reconsideration was denied in the impugned Resolution.

The Facts

On July 25, 1984, Luzviminda J. Villareal, Carmelito Jose and Jesus Jose formed a partnership with a capital
of P750,000 for the operation of a restaurant and catering business under the name Aquarius Food House and Catering
Services.[5] Villareal was appointed general manager and Carmelito Jose, operations manager.

Respondent Donaldo Efren C. Ramirez joined as a partner in the business on September 5, 1984. His capital
contribution of P250,000 was paid by his parents, Respondents Cesar and Carmelita Ramirez. [6]

After Jesus Jose withdrew from the partnership in January 1987, his capital contribution of P250,000 was refunded
to him in cash by agreement of the partners.[7]

In the same month, without prior knowledge of respondents, petitioners closed down the restaurant, allegedly
because of increased rental. The restaurant furniture and equipment were deposited in the respondents house for
storage.[8]

On March 1, 1987, respondent spouses wrote petitioners, saying that they were no longer interested in continuing
their partnership or in reopening the restaurant, and that they were accepting the latters offer to return their capital
contribution.[9]

On October 13, 1987, Carmelita Ramirez wrote another letter informing petitioners of the deterioration of the
restaurant furniture and equipment stored in their house. She also reiterated the request for the return of their one-
third share in the equity of the partnership.The repeated oral and written requests were, however, left unheeded.[10]

Before the Regional Trial Court (RTC) of Makati, Branch 59, respondents subsequently filed a Complaint[11] dated
November 10, 1987, for the collection of a sum of money from petitioners.

In their Answer, petitioners contended that respondents had expressed a desire to withdraw from the partnership
and had called for its dissolution under Articles 1830 and 1831 of the Civil Code; that respondents had been paid, upon
the turnover to them of furniture and equipment worth over P400,000; and that the latter had no right to demand a
return of their equity because their share, together with the rest of the capital of the partnership, had been spent as a
result of irreversible business losses.[12]
 In their Reply, respondents alleged that they did not know of any loan encumbrance on the restaurant. According
to them, if such allegation were true, then the loans incurred by petitioners should be regarded as purely personal and,
as such, not chargeable to the partnership. The former further averred that they had not received any regular report
or accounting from the latter, who had solely managed the business. Respondents also alleged that they expected the
equipment and the furniture stored in their house to be removed by petitioners as soon as the latter found a better
location for the restaurant.[13]

Respondents filed an Urgent Motion for Leave to Sell or Otherwise Dispose of Restaurant Furniture and
Equipment[14] on July 8, 1988. The furniture and the equipment stored in their house were inventoried and appraised
at P29,000.[15] The display freezer was sold for P5,000 and the proceeds were paid to them.[16]

After trial, the RTC[17] ruled that the parties had voluntarily entered into a partnership, which could be dissolved
at any time. Petitioners clearly intended to dissolve it when they stopped operating the restaurant. Hence, the trial
court, in its July 21, 1992 Decision, held them liable as follows: [18]

WHEREFORE, judgment is hereby rendered in favor of [respondents] and against the [petitioners] ordering the
[petitioners] to pay jointly and severally the following:

(a) Actual damages in the amount of P250,000.00

(b) Attorneys fee in the amount of P30,000.00

(c) Costs of suit.

The CA Ruling

The CA held that, although respondents had no right to demand the return of their capital contribution, the
partnership was nonetheless dissolved when petitioners lost interest in continuing the restaurant business with
them. Because petitioners never gave a proper accounting of the partnership accounts for liquidation purposes, and
because no sufficient evidence was presented to show financial losses, the CA computed their liability as follows:

Consequently, since what has been proven is only the outstanding obligation of the partnership in the amount
of P240,658.00, although contracted by the partnership before [respondents] have joined the partnership but in
accordance with Article 1826 of the New Civil Code, they are liable which must have to be deducted from the
remaining capitalization of the said partnership which is in the amount ofP1,000,000.00 resulting in the amount
of P759,342.00, and in order to get the share of [respondents], this amount of P759,342.00 must be divided into three
(3) shares or in the amount of P253,114.00 for each share and which is the only amount which [petitioner] will return
to [respondents] representing the contribution to the partnership minus the outstanding debt thereof.[19]

Hence, this Petition.[20]

Issues

In their Memorandum,[21] petitioners submit the following issues for our consideration:

9.1. Whether the Honorable Court of Appeals decision ordering the distribution of the capital contribution, instead of
the net capital after the dissolution and liquidation of a partnership, thereby treating the capital contribution like a
loan, is in accordance with law and jurisprudence;

9.2. Whether the Honorable Court of Appeals decision ordering the petitioners to jointly and severally pay and
reimburse the amount of [P]253,114.00 is supported by the evidence on record; and

9.3. Whether the Honorable Court of Appeals was correct in making [n]o pronouncement as to costs.[22]

On closer scrutiny, the issues are as follows: (1) whether petitioners are liable to respondents for the latters share
in the partnership; (2) whether the CAs computation ofP253,114 as respondents share is correct; and (3) whether the
CA was likewise correct in not assessing costs.
This Courts Ruling

The Petition has merit.

First Issue:

Share in Partnership

Both the trial and the appellate courts found that a partnership had indeed existed, and that it was dissolved on
March 1, 1987. They found that the dissolution took place when respondents informed petitioners of the intention to
discontinue it because of the formers dissatisfaction with, and loss of trust in, the latters management of the
partnership affairs.These findings were amply supported by the evidence on record. Respondents consequently
demanded from petitioners the return of their one-third equity in the partnership.

We hold that respondents have no right to demand from petitioners the return of their equity share. Except as
managers of the partnership, petitioners did not personally hold its equity or assets. The partnership has a juridical
personality separate and distinct from that of each of the partners. [23] Since the capital was contributed to the
partnership, not to petitioners, it is the partnership that must refund the equity of the retiring partners.[24]

Second Issue:

What Must Be Returned?

Since it is the partnership, as a separate and distinct entity, that must refund the shares of the partners, the
amount to be refunded is necessarily limited to its total resources. In other words, it can only pay out what it has in its
coffers, which consists of all its assets.However, before the partners can be paid their shares, the creditors of the
partnership must first be compensated.[25] After all the creditors have been paid, whatever is left of the partnership
assets becomes available for the payment of the partners shares.

Evidently, in the present case, the exact amount of refund equivalent to respondents one-third share in the
partnership cannot be determined until all the partnership assets will have been liquidated -- in other words, sold and
converted to cash -- and all partnership creditors, if any, paid. The CAs computation of the amount to be refunded to
respondents as their share was thus erroneous.

First, it seems that the appellate court was under the misapprehension that the total capital contribution was
equivalent to the gross assets to be distributed to the partners at the time of the dissolution of the partnership. We
cannot sustain the underlying idea that the capital contribution at the beginning of the partnership remains intact,
unimpaired and available for distribution or return to the partners. Such idea is speculative, conjectural and totally
without factual or legal support.

Generally, in the pursuit of a partnership business, its capital is either increased by profits earned or decreased by
losses sustained. It does not remain static and unaffected by the changing fortunes of the business. In the present case,
the financial statements presented before the trial court showed that the business had made meager
profits.[26]However, notable therefrom is the omission of any provision for the depreciation [27] of the furniture and the
equipment. The amortization of the goodwill[28] (initially valued at P500,000) is not reflected either. Properly taking
these non-cash items into account will show that the partnership was actually sustaining substantial losses, which
consequently decreased the capital of the partnership. Both the trial and the appellate courts in fact recognized the
decrease of the partnership assets to almost nil, but the latter failed to recognize the consequent corresponding
decrease of the capital.

Second, the CAs finding that the partnership had an outstanding obligation in the amount of P240,658 was not
supported by evidence. We sustain the contrary finding of the RTC, which had rejected the contention that the
obligation belonged to the partnership for the following reason:

x x x [E]vidence on record failed to show the exact loan owed by the partnership to its creditors. The balance sheet
(Exh. 4) does not reveal the total loan. The Agreement (Exh. A) par. 6 shows an outstanding obligation of P240,055.00
which the partnership owes to different creditors, while the Certification issued by Mercator Finance (Exh. 8) shows
that it was Sps. Diogenes P. Villareal and Luzviminda J. Villareal, the former being the nominal party defendant in the
instant case, who obtained a loan of P355,000.00 on Oct. 1983, when the original partnership was not yet formed.
 Third, the CA failed to reduce the capitalization by P250,000, which was the amount paid by the partnership to
Jesus Jose when he withdrew from the partnership.

Because of the above-mentioned transactions, the partnership capital was actually reduced. When petitioners and
respondents ventured into business together, they should have prepared for the fact that their investment would either
grow or shrink. In the present case, the investment of respondents substantially dwindled. The original amount
of P250,000 which they had invested could no longer be returned to them, because one third of the partnership
properties at the time of dissolution did not amount to that much.

It is a long established doctrine that the law does not relieve parties from the effects of unwise, foolish or
disastrous contracts they have entered into with all the required formalities and with full awareness of what they were
doing. Courts have no power to relieve them from obligations they have voluntarily assumed, simply because their
contracts turn out to be disastrous deals or unwise investments.[29]

Petitioners further argue that respondents acted negligently by permitting the partnership assets in their custody
to deteriorate to the point of being almost worthless. Supposedly, the latter should have liquidated these sole tangible
assets of the partnership and considered the proceeds as payment of their net capital. Hence, petitioners argue that
the turnover of the remaining partnership assets to respondents was precisely the manner of liquidating the
partnership and fully settling the latters share in the partnership.

We disagree. The delivery of the store furniture and equipment to private respondents was for the purpose of
storage. They were unaware that the restaurant would no longer be reopened by petitioners. Hence, the former cannot
be faulted for not disposing of the stored items to recover their capital investment.

Third Issue:

Costs

Section 1, Rule 142, provides:

SECTION 1. Costs ordinarily follow results of suit. Unless otherwise provided in these rules, costs shall be allowed to
the prevailing party as a matter of course, but the court shall have power, for special reasons, to adjudge that either
party shall pay the costs of an action, or that the same be divided, as may be equitable. No costs shall be allowed
against the Republic of the Philippines unless otherwise provided by law.

Although, as a rule, costs are adjudged against the losing party, courts have discretion, for special reasons, to
decree otherwise. When a lower court is reversed, the higher court normally does not award costs, because the losing
party relied on the lower courts judgment which is presumed to have been issued in good faith, even if found later on
to be erroneous.Unless shown to be patently capricious, the award shall not be disturbed by a reviewing tribunal.

WHEREFORE, the Petition is GRANTED, and the assailed Decision and Resolution SET ASIDE. This disposition is
without prejudice to proper proceedings for the accounting, the liquidation and the distribution of the remaining
partnership assets, if any. No pronouncement as to costs.

SO ORDERED.
G.R. No. 206147, January 13, 2016

MICHAEL C. GUY, Petitioner, v. ATTY. GLENN C. GACOTT, Respondent.

DECISION

MENDOZA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court filed by petitioner Michael C.
Guy (Guy), assailing the June 25, 2012 Decision1 and the March 5, 2013 Resolution2 of the Court of Appeals (CA) in CA-
G.R. CV No. 94816, which affirmed the June 28, 2009 3and February 19, 20104 Orders of the Regional Trial Court, Branch
52, Puerto Princesa City, Palawan (RTC), in Civil Case No. 3108, a case for damages. The assailed RTC orders denied
Guy's Motion to Lift Attachment Upon Personalty5 on the ground that he was not a judgment debtor.

The Facts

It appears from the records that on March 3, 1997, Atty. Glenn Gacott (Gacott) from Palawan purchased two (2) brand
new transreceivers from Quantech Systems Corporation (QSC) in Manila through its employee Rey Medestomas
(Medestomas), amounting to a total of PI 8,000.00. On May 10, 1997, due to major defects, Gacott personally returned
the transreceivers to QSC and requested that they be replaced. Medestomas received the returned transreceivers and
promised to send him the replacement units within two (2) weeks from May 10, 1997.

Time passed and Gacott did not receive the replacement units as promised. QSC informed him that there were no
available units and that it could not refund the purchased price. Despite several demands, both oral and written,
Gacott was never given a replacement or a refund. The demands caused Gacott to incur expenses in the total amount
of P40,936.44. Thus, Gacott filed a complaint for damages. Summons was served upon QSC and Medestomas,
afterwhich they filed their Answer, verified by Medestomas himself and a certain Elton Ong (Ong). QSC and
Medestomas did not present any evidence during the trial.6

In a Decision,7 dated March 16, 2007, the RTC found that the two (2) transreceivers were defective and that QSC and
Medestomas failed to replace the same or return Gacott's money. The dispositive portion of the decision
reads:chanRoblesvirtualLawlibrary

WHEREFORE, judgment is hereby rendered in favor of the plaintiff, ordering the defendants to jointly and severally pay
plaintiff the following:

1. Purchase price plus 6% per annum from March 3,1997 up to and until fully paid ----------------------------------------------
---------- P 18,000.00
2. Actual Damages ----------------------------------- 40,936.44
3. Moral Damages ----------------------------------- 75,000.00
4. Corrective Damages ---------------------------- 100,000.00
5. Attorney's Fees ------------------------------------ 60,000.00
6. Costs.

SO ORDERED.

The decision became final as QSC and Medestomas did not interpose an appeal. Gacott then secured a Writ of
Execution,8 dated September 26, 2007.

During the execution stage, Gacott learned that QSC was not a corporation, but was in fact a general partnership
registered with the Securities and Exchange Commission (SEC). In the articles of partnership,9 Guy was appointed as
General Manager of QSC.

To execute the judgment, Branch Sheriff Ronnie L. Felizarte (Sheriff Felizarte) went to the main office of the
Department of Transportation and Communications, Land Transportation Office (DOTC-LTO), Quezon City, and verified
whether Medestomas, QSC and Guy had personal properties registered therein.10 Upon learning that Guy had vehicles
registered in his name, Gacott instructed the sheriff to proceed with the attachment of one of the motor vehicles of
Guy based on the certification issued by the DOTC-LTO.11
On March 3, 2009, Sheriff Felizarte attached Guy's vehicle by virtue of the Notice of Attachment/Levy upon
Personalty12 served upon the record custodian of the DOTC-LTO of Mandaluyong City. A similar notice was served to
Guy through his housemaid at his residence.

Thereafter, Guy filed his Motion to Lift Attachment Upon Personalty, arguing that he was not a judgment debtor and,
therefore, his vehicle could not be attached. 13 Gacott filed an opposition to the motion.

The RTC Order

On June 28, 2009, the RTC issued an order denying Guy's motion. It explained that considering QSC was not a
corporation, but a registered partnership, Guy should be treated as a general partner pursuant to Section 21 of the
Corporation Code, and he may be held jointly and severally liable with QSC and Medestomas. The trial court wrote:

All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general
partners for all debts, liabilities and damages incurred or arising as a result thereof x x x. Where, by any wrongful act
or omission of any partner acting in the ordinary course of the business of the partnership x x x, loss or injury is caused
to any person, not being a partner in the partnership, or any penalty is incurred, the partnership is liable therefore to
the same extent as the partner so acting or omitting to act. All partners are liable solidarity with the partnership for
everything chargeable to the partnership under Article 1822 and 1823.14cralawlawlibrary

Accordingly, it disposed:

WHEREFORE, with the ample discussion of the matter, this Court finds and so holds that the property of movant
Michael Guy may be validly attached in satisfaction of the liabilities adjudged by this Court against Quantech Co., the
latter being an ostensible Corporation and the movant being considered by this Court as a general partner therein in
accordance with the order of this court impressed in its decision to this case imposing joint and several liability to the
defendants. The Motion to Lift Attachment Upon Personalty submitted by the movant is therefore DENIED for lack of
merit.

SO ORDERED.15

Not satisfied, Guy moved for reconsideration of the denial of his motion. He argued that he was neither impleaded as a
defendant nor validly served with summons and, thus, the trial court did not acquire jurisdiction over his person; that
under Article 1824 of the Civil Code, the partners were only solidarily liable for the partnership liability under
exceptional circumstances; and that in order for a partner to be liable for the debts of the partnership, it must be
shown that all partnership assets had first been exhausted. 16

On February 19, 2010, the RTC issued an order17 denying his motion.

The denial prompted Guy to seek relief before the CA.

The CA Ruling

On June 25, 2012, the CA rendered the assailed decision dismissing Guy's appeal for the same reasons given by the trial
court. In addition thereto, the appellate court stated:chanRoblesvirtualLawlibrary

We hold that Michael Guy, being listed as a general partner of QSC during that time, cannot feign ignorance of the
existence of the court summons. The verified Answer filed by one of the partners, Elton Ong, binds him as a partner
because the Rules of Court does not require that summons be served on all the partners. It is sufficient that service be
made on the "president, managing partner, general manager, corporate secretary, treasurer or in-house counsel." To
Our mind, it is immaterial whether the summons to QSC was served on the theory that it was a corporation. What is
important is that the summons was served on QSC's authorized officer xxx. 18

The CA stressed that Guy, being a partner in QSC, was bound by the summons served upon QSC based on Article 1821 of
the Civil Code. The CA further opined that the law did not require a partner to be actually involved in a suit in order
for him to be made liable. He remained "solidarity liable whether he participated or not, whether he ratified it or not,
or whether he had knowledge of the act or omission." 19

Aggrieved, Guy filed a motion for reconsideration but it was denied by the CA in its assailed resolution, dated March 5,
2013.

Hence, the present petition raising the following

ISSUE

THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN HOLDING THAT PETITIONER GUY IS
SOLIDARILY LIABLE WITH THE PARTNERSHIP FOR DAMAGES ARISING FROM THE BREACH OF THE CONTRACT OF SALE
WITH RESPONDENT GACOTT.20ChanRoblesVirtualawlibrary
cralawlawlibrary

Guy argues that he is not solidarity liable with the partnership because the solidary liability of the partners under
Articles 1822, 1823 and 1824 of the Civil Code only applies when it stemmed from the act of a partner. In this case, the
alleged lapses were not attributable to any of the partners. Guy further invokes Article 1816 of the Civil Code which
states that the liability of the partners to the partnership is merely joint and subsidiary in nature.

In his Comment,21 Gacott countered, among others, that because Guy was a general and managing partner of QSC, he
could not feign ignorance of the transactions undertaken by QSC. Gacott insisted that notice to one partner must be
considered as notice to the whole partnership, which included the pendency of the civil suit against it.

In his Reply,22 Guy contended that jurisdiction over the person of the partnership was not acquired because the
summons was never served upon it or through any of its authorized office. He also reiterated that a partner's liability
was joint and subsidiary, and not solidary.

The Court's Ruling

The petition is meritorious.

The service of summons was

flawed; voluntary appearance
cured the defect

Jurisdiction over the person, or jurisdiction in personam - the power of the court to render a personal judgment or to
subject the parties in a particular action to the judgment and other rulings rendered in the action - is an element of
due process that is essential in all actions, civil as well as criminal, except in actions in rem or quasi in
rem.23 Jurisdiction over the person of the plaintiff is acquired by the mere filing of the complaint in court. As the
initiating party, the plaintiff in a civil action voluntarily submits himself to the jurisdiction of the court. As to the
defendant, the court acquires jurisdiction over his person either by the proper service of the summons, or by his
voluntary appearance in the action.24

Under Section 11, Rule 14 of the 1997 Revised Rules of Civil Procedure, when the defendant is a corporation,
partnership or association organized under the laws of the Philippines with a juridical personality, the service of
summons may be made on the president, managing partner, general manager, corporate secretary, treasurer, or in-
house counsel. Jurisprudence is replete with pronouncements that such provision provides an exclusive
enumeration of the persons authorized to receive summons for juridical entities.25cralawred

The records of this case reveal that QSC was never shown to have been served with the summons through any of the
enumerated authorized persons to receive such, namely: president, managing partner, general manager, corporate
secretary, treasurer or in-house counsel. Service of summons upon persons other than those officers enumerated in
Section 11 is invalid. Even substantial compliance is not sufficient service of summons. The CA was obviously mistaken
when it opined that it was immaterial whether the summons to QSC was served on the theory that it was a
corporation.27
Nevertheless, while proper service of summons is necessary to vest the court jurisdiction over the defendant, the same
is merely procedural in nature and the lack of or defect in the service of summons may be cured by the defendant's
subsequent voluntary submission to the court's jurisdiction through his filing a responsive pleading such as an answer.
In this case, it is not disputed that QSC filed its Answer despite the defective summons. Thus, jurisdiction over its
person was acquired through voluntary appearance.

A partner must be separately

and distinctly impleaded before
he can be bound by a judgment

The next question posed is whether the trial court's jurisdiction over QSC extended to the person of Guy insofar as
holding him solidarity liable with the partnership. After a thorough study of the relevant laws and jurisprudence, the
Court answers in the negative.

Although a partnership is based on delectus personae or mutual agency, whereby any partner can generally represent
the partnership in its business affairs, it is non sequitur that a suit against the partnership is necessarily a suit
impleading each and every partner. It must be remembered that a partnership is a juridical entity that has a distinct
and separate personality from the persons composing it.28

In relation to the rules of civil procedure, it is elementary that a judgment of a court is conclusive and binding only
upon the parties and their successors-in-interest after the commencement of the action in court.29 A decision rendered
on a complaint in a civil action or proceeding does not bind or prejudice a person not impleaded therein, for no person
shall be adversely affected by the outcome of a civil action or proceeding in which he is not a party.30 The principle
that a person cannot be prejudiced by a ruling rendered in an action or proceeding in which he has not been made a
party conforms to the constitutional guarantee of due process of law.31

In Muoz v. Yabut, Jr.,32 the Court declared that a person not impleaded and given the opportunity to take part in the
proceedings was not bound by the decision declaring as null and void the title from which his title to the property had
been derived. The effect of a judgment could not be extended to non-parties by simply issuing an alias writ of
execution against them, for no man should be prejudiced by any proceeding to which he was a stranger.

In Aguila v. Court of Appeals33 the complainant had a cause of action against the partnership. Nevertheless, it was the
partners themselves that were impleaded in the complaint. The Court dismissed the complaint and held that it was the
partnership, not its partners, officers or agents, which should be impleaded for a cause of action against the
partnership itself. The Court added that the partners could not be held liable for the obligations of the partnership
unless it was shown that the legal fiction of a different juridical personality was being used for fraudulent, unfair, or
illegal purposes.34

Here, Guy was never made a party to the case. He did not have any participation in the entire proceeding until his
vehicle was levied upon and he suddenly became QSC's "co-defendant debtor" during the judgment execution stage. It
is a basic principle of law that money judgments are enforceable only against the property incontrovertibly belonging
to the judgment debtor.35 Indeed, the power of the court in executing judgments extends only to properties
unquestionably belonging to the judgment debtor alone. An execution can be issued only against a party and not
against one who did not have his day in court. The duty of the sheriff is to levy the property of the judgment debtor
not that of a third person. For, as the saying goes, one man's goods shall not be sold for another man's debts.36

In the spirit of fair play, it is a better rule that a partner must first be impleaded before he could be prejudiced by the
judgment against the partnership. As will be discussed later, a partner may raise several defenses during the trial to
avoid or mitigate his obligation to the partnership liability. Necessarily, before he could present evidence during the
trial, he must first be impleaded and informed of the case against him. It would be the height of injustice to rob an
innocent partner of his hard-earned personal belongings without giving him an opportunity to be heard. Without any
showing that Guy himself acted maliciously on behalf of the company, causing damage or injury to the complainant,
then he and his personal properties cannot be made directly and solely accountable for the liability of QSC, the
judgment debtor, because he was not a party to the case.

Further, Article 1821 of the Civil Code does not state that there is no need to implead a partner in order to be bound
by the partnership liability. It provides that:chanRoblesvirtualLawlibrary
Notice to any partner of any matter relating to partnership affairs, and the knowledge of the partner acting in the
particular matter, acquired while a partner or then present to his mind, and the knowledge of any other partner who
reasonably could and should have communicated it to the acting partner, operate as notice to or knowledge of the
partnership, except in the case of fraud on the partnership, committed by or with the consent of that partner.

[Emphases and Underscoring Supplied]

A careful reading of the provision shows that notice to any partner, under certain circumstances, operates as notice to
or knowledge to the partnership only. Evidently, it does not provide for the reverse situation, or that notice to the
partnership is notice to the partners. Unless there is an unequivocal law which states that a partner is automatically
charged in a complaint against the partnership, the constitutional right to due process takes precedence and a partner
must first be impleaded before he can be considered as a judgment debtor. To rule otherwise would be a dangerous
precedent, harping in favor of the deprivation of property without ample notice and hearing, which the Court certainly
cannot countenance.

Partners' liability is subsidiary

and generally joint; immediate levy
upon the property of a partner
cannot be made

Granting that Guy was properly impleaded in the complaint, the execution of judgment would be improper. Article
1816 of the Civil Code governs the liability of the partners to third persons, which states that:

Article 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.

[Emphasis supplied]

This provision clearly states that, first, the partners' obligation with respect to the partnership liabilities is subsidiary
in nature. It provides that the partners shall only be liable with their property after all the partnership assets have
been exhausted. To say that one's liability is subsidiary means that it merely becomes secondary and only arises if the
one primarily liable fails to sufficiently satisfy the obligation. Resort to the properties of a partner may be made only
after efforts in exhausting partnership assets have failed or that such partnership assets are insufficient to cover the
entire obligation. The subsidiary nature of the partners' liability with the partnership is one of the valid defenses
against a premature execution of judgment directed to a partner.

In this case, had he been properly impleaded, Guy's liability would only arise after the properties of QSC would have
been exhausted. The records, however, miserably failed to show that the partnership's properties were exhausted. The
report37 of the sheriff showed that the latter went to the main office of the DOTC-LTO in Quezon City and verified
whether Medestomas, QSC and Guy had personal properties registered therein. Gaeott then instructed the sheriff to
proceed with the attachment of one of the motor vehicles of Guy. 38 The sheriff then served the Notice of
Attachment/Levy upon Personalty to the record custodian of the DOTC-LTO of Mandaluyong City. A similar notice was
served to Guy through his housemaid at his residence.

Clearly, no genuine efforts were made to locate the properties of QSC that could have been attached to satisfy the
judgment - contrary to the clear mandate of Article 1816. Being subsidiarily liable, Guy could only be held personally
liable if properly impleaded and after all partnership assets had been exhausted.

Second, Article 1816 provides that the partners' obligation to third persons with respect to the partnership liability
is pro rata or joint. Liability is joint when a debtor is liable only for the payment of only a proportionate part of the
debt. In contrast, a solidary liability makes a debtor liable for the payment of the entire debt. In the same vein,
Article 1207 does not presume solidary liability unless: 1) the obligation expressly so states; or 2) the law or nature
requires solidarity. With regard to partnerships, ordinarily, the liability of the partners is not solidary. 39 The joint
liability of the partners is a defense that can be raised by a partner impleaded in a complaint against the partnership.

In other words, only in exceptional circumstances shall the partners' liability be solidary in nature. Articles 1822, 1823
and 1824 of the Civil Code provide for these exceptional conditions, to wit:chanRoblesvirtualLawlibrary
Article 1822. Where, by 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, loss or injury is caused to any person, not being a partner in the
partnership, or any penalty is incurred, the partnership is liable therefor to the same extent as the partner so acting or
omitting to act.

Article 1823. The partnership is bound to make good the loss:chanRoblesvirtualLawlibrary

(1) Where one partner acting within the scope of his apparent authority receives money or property of a third person
and misapplies it; and

(2) Where the partnership in the course of its business receives money or property of a third person and the money or
property so received is misapplied by any partner while it is in the custody of the partnership.

Article 1824. All partners are liable solidarity with the partnership for everything chargeable to the partnership under
Articles 1822 and 123.

[Emphases Supplied]

In essence, these provisions articulate that it is the act of a partner which caused loss or injury to a third person that
makes all other partners solidarity liable with the partnership because of the words "any wrongful act or omission of
any partner acting in the ordinary course of the business, " "one partner acting within the scope of his apparent
authority" and "misapplied by any partner while it is in the custody of the partnership." The obligation is solidary
because the law protects the third person, who in good faith relied upon the authority of a partner, whether such
authority is real or apparent.40

In the case at bench, it was not shown that Guy or the other partners did a wrongful act or misapplied the money or
property he or the partnership received from Gacott. A third person who transacted with said partnership can hold the
partners solidarity liable for the whole obligation if the case of the third person falls under Articles 1822 or
1823.41 Gacott's claim stemmed from the alleged defective transreceivers he bought from QSC, through the latter's
employee, Medestomas. It was for a breach of warranty in a contractual obligation entered into in the name and for
the account of QSC, not due to the acts of any of the partners. For said reason, it is the general rule under Article 1816
that governs the joint liability of such breach, and not the exceptions under Articles 1822 to 1824. Thus, it was
improper to hold Guy solidarity liable for the obligation of the partnership.

Finally, Section 21 of the Corporation Code,42 as invoked by the RTC, cannot be applied to sustain Guy's liability. The
said provision states that a general partner shall be liable for all debts, liabilities and damages incurred by an
ostensible corporation. It must be read, however, in conjunction with Article 1816 of the Civil Code, which governs the
liabilities of partners against third persons. Accordingly, whether QSC was an alleged ostensible corporation or a duly
registered partnership, the liability of Guy, if any, would remain to be joint and subsidiary because, as previously
stated, all partners 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.

WHEREFORE, the petition is GRANTED. The June 25, 2012 Decision and the March 5, 2013 Resolution of the Court of
Appeals in CA-G.R. CV No. 94816 are hereby REVERSED and SET ASIDE. Accordingly, the Regional Trial Court, Branch
52, Puerto Princesa City, is ORDERED TO RELEASEMichael C. Guy's Suzuki Grand Vitara subject of the Notice of
Levy/Attachment upon Personalty.

SO ORDERED.chanrob
G.R. No. 154486 December 1, 2010

FEDERICO JARANTILLA, JR., Petitioner, vs. ANTONIETA JARANTILLA, BUENAVENTURA REMOTIGUE,SUBSTITUTED BY

CYNTHIA REMOTIGUE, DOROTEO JARANTILLA and TOMAS JARANTILLA, Respondents

DECISION

LEONARDO-DE CASTRO, J.:

This petition for review on certiorari[1] seeks to modify the Decision[2] of the Court of Appeals dated July 30,
2002 in CA-G.R. CV No. 40887, which set aside the Decision[3] dated December 18, 1992 of the Regional Trial Court
(RTC) of Quezon City, Branch 98 in Civil Case No. Q-50464.

The pertinent facts are as follows:

The spouses Andres Jarantilla and Felisa Jaleco were survived by eight children: Federico, Delfin, Benjamin,
Conchita, Rosita, Pacita, Rafael and Antonieta.[4]Petitioner Federico Jarantilla, Jr. is the grandchild of the late
Jarantilla spouses by their son Federico Jarantilla, Sr. and his wife Leda Jamili. [5] Petitioner also has two other
brothers: Doroteo and Tomas Jarantilla.

Petitioner was one of the defendants in the complaint before the RTC while Antonieta Jarantilla, his aunt, was
the plaintiff therein. His co-respondents before he joined his aunt Antonieta in her complaint, were his late aunt
Conchita Jarantillas husband Buenaventura Remotigue, who died during the pendency of the case, his cousin Cynthia
Remotigue, the adopted daughter of Conchita Jarantilla and Buenaventura Remotigue, and his brothers Doroteo and
Tomas Jarantilla.[6]

In 1948, the Jarantilla heirs extrajudicially partitioned amongst themselves the real properties of their
deceased parents.[7] With the exception of the real property adjudicated to Pacita Jarantilla, the heirs also agreed to
allot the produce of the said real properties for the years 1947-1949 for the studies of Rafael and Antonieta
Jarantilla.[8]

In the same year, the spouses Rosita Jarantilla and Vivencio Deocampo entered into an agreement with the
spouses Buenaventura Remotigue and Conchita Jarantilla to provide mutual assistance to each other by way of financial
support to any commercial and agricultural activity on a joint business arrangement. This business relationship proved
to be successful as they were able to establish a manufacturing and trading business, acquire real properties, and
construct buildings, among other things.[9] This partnership ended in 1973 when the parties, in an
Agreement,[10] voluntarily agreed to completely dissolve their joint business relationship/arrangement. [11]

On April 29, 1957, the spouses Buenaventura and Conchita Remotigue executed a document wherein they
acknowledged that while registered only in Buenaventura Remotigues name, they were not the only owners of the
capital of the businesses Manila Athletic Supply (712 Raon Street, Manila), Remotigue Trading (Calle Real, Iloilo City)
and Remotigue Trading (Cotabato City). In this same Acknowledgement of Participating Capital, they stated the
participating capital of their co-owners as of the year 1952, with Antonieta Jarantillas stated as eight thousand pesos
(P8,000.00) and Federico Jarantilla, Jr.s as five thousand pesos (P5,000.00).[12]

The present case stems from the amended complaint [13] dated April 22, 1987 filed by Antonieta Jarantilla
against Buenaventura Remotigue, Cynthia Remotigue, Federico Jarantilla, Jr., Doroteo Jarantilla and Tomas Jarantilla,
for the accounting of the assets and income of the co-ownership, for its partition and the delivery of her share
corresponding to eight percent (8%), and for damages. Antonieta claimed that in 1946, she had entered into an
agreement with Conchita and Buenaventura Remotigue, Rafael Jarantilla, and Rosita and Vivencio Deocampo to engage
in business. Antonieta alleged that the initial contribution of property and money came from the heirs inheritance, and
her subsequent annual investment of seven thousand five hundred pesos (P7,500.00) as additional capital came from
the proceeds of her farm. Antonieta also alleged that from 1946-1969, she had helped in the management of the
business they co-owned without receiving any salary. Her salary was supposedly rolled back into the business as
additional investments in her behalf. Antonieta further claimed co-ownership of certain properties[14] (the subject real
properties) in the name of the defendants since the only way the defendants could have purchased these properties
were through the partnership as they had no other source of income.
 The respondents, including petitioner herein, in their Answer,[15] denied having formed a partnership with
Antonieta in 1946. They claimed that she was in no position to do so as she was still in school at that time. In fact, the
proceeds of the lands they partitioned were devoted to her studies. They also averred that while she may have helped
in the businesses that her older sister Conchita had formed with Buenaventura Remotigue, she was paid her due
salary. They did not deny the existence and validity of the Acknowledgement of Participating Capital and in fact used
this as evidence to support their claim that Antonietas 8% share was limited to the businesses enumerated
therein. With regard to Antonietas claim in their other corporations and businesses, the respondents said these should
also be limited to the number of her shares as specified in the respective articles of incorporation. The respondents
denied using the partnerships income to purchase the subject real properties and said that the certificates of title
should be binding on her.[16]

During the course of the trial at the RTC, petitioner Federico Jarantilla, Jr., who was one of the original
defendants, entered into a compromise agreement [17] with Antonieta Jarantilla wherein he supported Antonietas claims
and asserted that he too was entitled to six percent (6%) of the supposed partnership in the same manner as Antonieta
was. He prayed for a favorable judgment in this wise:

Defendant Federico Jarantilla, Jr., hereby joins in plaintiffs prayer for an accounting from the
other defendants, and the partition of the properties of the co-ownership and the delivery to the
plaintiff and to defendant Federico Jarantilla, Jr. of their rightful share of the assets and properties in
the co-ownership.[18]

The RTC, in an Order[19] dated March 25, 1992, approved the Joint Motion to Approve Compromise
Agreement[20] and on December 18, 1992, decided in favor of Antonieta, to wit:

WHEREFORE, premises above-considered, the Court renders judgment in favor of the plaintiff
Antonieta Jarantilla and against defendants Cynthia Remotigue, Doroteo Jarantilla and Tomas
Jarantilla ordering the latter:

1. to deliver to the plaintiff her 8% share or its equivalent amount on the real properties
covered by TCT Nos. 35655, 338398, 338399 & 335395, all of the Registry of Deeds of
Quezon City; TCT Nos. (18303)23341, 142882 & 490007(4615), all of the Registry of Deeds
of Rizal; and TCT No. T-6309 of the Registry of Deeds of Cotabato based on their present
market value;

2. to deliver to the plaintiff her 8% share or its equivalent amount on the Remotigue Agro-
Industrial Corporation, Manila Athletic Supply, Inc., MAS Rubber Products, Inc. and Buendia
Recapping Corporation based on the shares of stocks present book value;

3. to account for the assets and income of the co-ownership and deliver to plaintiff her
rightful share thereof equivalent to 8%;

4. to pay plaintiff, jointly and severally, the sum of P50,000.00 as moral damages;

5. to pay, jointly and severally, the sum of P50,000.00 as attorneys fees; and

6. to pay, jointly and severally, the costs of the suit.[21]

Both the petitioner and the respondents appealed this decision to the Court of Appeals. The petitioner claimed
that the RTC erred in not rendering a complete judgment and ordering the partition of the co-ownership and giving to
[him] six per centum (6%) of the properties.[22]

While the Court of Appeals agreed to some of the RTCs factual findings, it also established that Antonieta
Jarantilla was not part of the partnership formed in 1946, and that her 8% share was limited to the businesses
enumerated in the Acknowledgement of Participating Capital. On July 30, 2002, the Court of Appeals rendered the
herein challenged decision setting aside the RTCs decision, as follows:

WHEREFORE, the decision of the trial court, dated 18 December 1992 is SET ASIDE and a new one is
hereby entered ordering that:
 (1) after accounting, plaintiff Antonieta Jarantilla be given her share of 8% in the assets and
profits of Manila Athletic Supply, Remotigue Trading in Iloilo City and Remotigue Trading in
Cotabato City;

(2) after accounting, defendant Federico Jarantilla, Jr. be given his share of 6% of the assets
and profits of the above-mentioned enterprises; and, holding that

(3) plaintiff Antonieta Jarantilla is a stockholder in the following corporations to the extent
stated in their Articles of Incorporation:

(a) Rural Bank of Barotac Nuevo, Inc.;

(b) MAS Rubber Products, Inc.;

(c) Manila Athletic Supply, Inc.; and

(d) B. Remotigue Agro-Industrial Development Corp.

(4) No costs.[23]

The respondents, on August 20, 2002, filed a Motion for Partial Reconsideration but the Court of Appeals
denied this in a Resolution[24] dated March 21, 2003.

Antonieta Jarantilla filed before this Court her own petition for review oncertiorari[25] dated September 16,
2002, assailing the Court of Appeals decision on similar grounds and similar assignments of errors as this present
case[26] but it was dismissed on November 20, 2002 for failure to file the appeal within the reglementary period of
fifteen (15) days in accordance with Section 2, Rule 45 of the Rules of Court. [27]

Petitioner filed before us this petition for review on the sole ground that:

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN NOT RULING THAT PETITIONER FEDERICO
JARANTILLA, JR. IS ENTITLED TO A SIX PER CENTUM (6%) SHARE OF THE OWNERSHIP OF THE REAL
PROPERTIES ACQUIRED BY THE OTHER DEFENDANTS USING COMMON FUNDS FROM THE BUSINESSES
WHERE HE HAD OWNED SUCH SHARE.[28]

Petitioner asserts that he was in a partnership with the Remotigue spouses, the Deocampo spouses, Rosita
Jarantilla, Rafael Jarantilla, Antonieta Jarantilla and Quintin Vismanos, as evidenced by the Acknowledgement of
Participating Capital the Remotigue spouses executed in 1957. He contends that from this partnership, several other
corporations and businesses were established and several real properties were acquired. In this petition, he is
essentially asking for his 6% share in the subject real properties. He is relying on the Acknowledgement of Participating
Capital, on his own testimony, and Antonieta Jarantillas testimony to support this contention.

The core issue is whether or not the partnership subject of the Acknowledgement of Participating Capital
funded the subject real properties. In other words, what is the petitioners right over these real properties?

It is a settled rule that in a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure, only
questions of law may be raised by the parties and passed upon by this Court.[29]

A question of law arises when there is doubt as to what the law is on a certain state of facts,
while there is a question of fact when the doubt arises as to the truth or falsity of the alleged
facts. For a question to be one of law, the same must not involve an examination of the probative
value of the evidence presented by the litigants or any of them. The resolution of the issue must rest
solely on what the law provides on the given set of circumstances. Once it is clear that the issue invites
a review of the evidence presented, the question posed is one of fact. Thus, the test of whether a
question is one of law or of fact is not the appellation given to such question by the party raising the
 same; rather, it is whether the appellate court can determine the issue raised without reviewing or
evaluating the evidence, in which case, it is a question of law; otherwise it is a question of fact. [30]

Since the Court of Appeals did not fully adopt the factual findings of the RTC, this Court, in resolving the
questions of law that are now in issue, shall look into the facts only in so far as the two courts a quo differed in their
appreciation thereof.

The RTC found that an unregistered partnership existed since 1946 which was affirmed in the 1957 document,
the Acknowledgement of Participating Capital. The RTC used this as its basis for giving Antonieta Jarantilla an 8% share
in the three businesses listed therein and in the other businesses and real properties of the respondents as they had
supposedly acquired these through funds from the partnership.[31]

The Court of Appeals, on the other hand, agreed with the RTC as to Antonietas 8% share in the business
enumerated in the Acknowledgement of Participating Capital, but not as to her share in the other corporations and real
properties. The Court of Appeals ruled that Antonietas claim of 8% is based on the Acknowledgement of Participating
Capital, a duly notarized document which was specific as to the subject of its coverage. Hence, there was no reason to
pattern her share in the other corporations from her share in the partnerships businesses. The Court of Appeals also
said that her claim in the respondents real properties was more precarious as these were all covered by certificates of
title which served as the best evidence as to all the matters contained therein. [32] Since petitioners claim was
essentially the same as Antonietas, the Court of Appeals also ruled that petitioner be given his 6% share in the same
businesses listed in the Acknowledgement of Participating Capital.

Factual findings of the trial court, when confirmed by the Court of Appeals, are final and conclusive except in
the following cases: (1) when the inference made is manifestly mistaken, absurd or impossible; (2) when there is a
grave abuse of discretion; (3) when the finding is grounded entirely on speculations, surmises or conjectures; (4) when
the judgment of the Court of Appeals is based on 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 of the Court of Appeals 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 Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties
and which, if properly considered, would justify a different conclusion; and (10) when the findings of fact of the Court
of Appeals are premised on the absence of evidence and are contradicted by the evidence on record.[33]

In this case, we find no error in the ruling of the Court of Appeals.

Both the petitioner and Antonieta Jarantilla characterize their relationship with the respondents as a co-ownership,
but in the same breath, assert that a verbal partnership was formed in 1946 and was affirmed in the 1957
Acknowledgement of Participating Capital.

There is a co-ownership when an undivided thing or right belongs to different persons. [34] It is a partnership
when 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.[35] The Court, in Pascual v. The Commissioner of Internal
Revenue,[36] quoted the concurring opinion of Mr. Justice Angelo Bautista inEvangelista v. The Collector of Internal
Revenue[37] to further elucidate on the distinctions between a co-ownership and a partnership, to wit:

I wish however to make the following observation: Article 1769 of the new Civil Code lays down
the rule for determining when a transaction should be deemed a partnership or a co-ownership. Said
article paragraphs 2 and 3, provides;

(2) Co-ownership or co-possession does not 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;

From the above it appears that the fact that those who agree to form a co- ownership share or
do not share any profits made by the use of the property held in common does not convert their
venture into a partnership. Or the sharing of the gross returns does not of itself establish a
 partnership whether or not the persons sharing therein have a joint or common right or interest in the
property. This only means that, aside from the circumstance of profit, the presence of other elements
constituting partnership is necessary, such as the clear intent to form a partnership, the existence of
a juridical personality different from that of the individual partners, and the freedom to transfer or
assign any interest in the property by one with the consent of the others.

It is evident that an isolated transaction whereby two or more persons contribute funds to buy
certain real estate for profit in the absence of other circumstances showing a contrary intention
cannot be considered a partnership.

Persons who contribute property or funds for a common enterprise and agree to share the gross
returns of that enterprise in proportion to their contribution, but who severally retain the title to their
respective contribution, are not thereby rendered partners. They have no common stock or capital,
and no community of interest as principal proprietors in the business itself which the proceeds derived.

A joint purchase of land, by two, does not constitute a co-partnership in respect thereto; nor
does an agreement to share the profits and losses on the sale of land create a partnership; the parties
are only tenants in common.

Where plaintiff, his brother, and another agreed to become owners of a single tract of realty,
holding as tenants in common, and to divide the profits of disposing of it, the brother and the other not
being entitled to share in plaintiffs commission, no partnership existed as between the three parties,
whatever their relation may have been as to third parties.

In order to constitute a partnership inter sese there must be: (a) An intent to form the same;
(b) generally participating in both profits and losses; (c) and such a community of interest, as far as
third persons are concerned as enables each party to make contract, manage the business, and dispose
of the whole property. x x x.

The common ownership of property does not itself create a partnership between the owners,
though they may use it for the purpose of making gains; and they may, without becoming partners,
agree among themselves as to the management, and use of such property and the application of the
proceeds therefrom.[38] (Citations omitted.)

Under Article 1767 of the Civil Code, there are two essential elements in a contract of partnership: (a) an
agreement to contribute money, property or industry to a common fund; and (b) intent to divide the profits among
the contracting parties. The first element is undoubtedly present in the case at bar, for, admittedly, all the parties in
this case have agreed to, and did, contribute money and property to a common fund.Hence, the issue narrows down to
their intent in acting as they did.[39] It is not denied that all the parties in this case have agreed to contribute capital
to a common fund to be able to later on share its profits. They have admitted this fact, agreed to its veracity, and
even submitted one common documentary evidence to prove such partnership - the Acknowledgement of Participating
Capital.

As this case revolves around the legal effects of the Acknowledgement of Participating Capital, it would be
instructive to examine the pertinent portions of this document:

ACKNOWLEDGEMENT OF

PARTICIPATING CAPITAL

KNOW ALL MEN BY THESE PRESENTS:

That we, the spouses Buenaventura Remotigue and Conchita Jarantilla de Remotigue, both of legal
age, Filipinos and residents of Loyola Heights, Quezon City, P.I. hereby state:

That the Manila Athletic Supply at 712 Raon, Manila, the Remotigue Trading of Calle Real, Iloilo City
and the Remotigue Trading, Cotabato Branch, Cotabato, P.I., all dealing in athletic goods and
equipments, and general merchandise are recorded in their respective books with Buenaventura
Remotigue as the registered owner and are being operated by them as such:
 That they are not the only owners of the capital of the three establishments and their
participation in the capital of the three establishments together with the other co-owners as of the
year 1952 are stated as follows:

1. Buenaventura Remotigue (TWENTY-FIVE P25,000.00

THOUSAND)

2. Conchita Jarantilla de Remotigue (TWENTY-FIVE

THOUSAND) 25,000.00

3. Vicencio Deocampo (FIFTEEN THOUSAND) 15,000.00

4. Rosita J. Deocampo (FIFTEEN THOUSAND).... 15,000.00

5. Antonieta Jarantilla (EIGHT THOUSAND).. 8,000.00

6. Rafael Jarantilla (SIX THOUSAND).. ... 6,000.00

7. Federico Jarantilla, Jr. (FIVE THOUSAND).. 5,000.00

8. Quintin Vismanos (TWO THOUSAND)... 2,000.00

That aside from the persons mentioned in the next preceding paragraph, no other person has any
interest in the above-mentioned three establishments.

IN WITNESS WHEREOF, they sign this instrument in the City of Manila, P.I., this 29 th day of April, 1957.

[Sgd.]

BUENAVENTURA REMOTIGUE

[Sgd.]

CONCHITA JARANTILLA DE REMOTIGUE[40]

The Acknowledgement of Participating Capital is a duly notarized document voluntarily executed by Conchita
Jarantilla-Remotigue and Buenaventura Remotigue in 1957. Petitioner does not dispute its contents and is actually
relying on it to prove his participation in the partnership. Article 1797 of the Civil Code 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.

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. (Emphases supplied.)

It is clear from the foregoing that a partner is entitled only to his share as agreed upon, or in the absence of
any such stipulations, then to his share in proportion to his contribution to the partnership. The petitioner himself
claims his share to be 6%, as stated in the Acknowledgement of Participating Capital. However, petitioner fails to
realize that this document specifically enumerated the businesses covered by the partnership: Manila Athletic Supply,
Remotigue Trading in Iloilo City and Remotigue Trading in Cotabato City. Since there was a clear agreement that the
capital the partners contributed went to the three businesses, then there is no reason to deviate from such agreement
and go beyond the stipulations in the document. Therefore, the Court of Appeals did not err in limiting petitioners
share to the assets of the businesses enumerated in the Acknowledgement of Participating Capital.

In Villareal v. Ramirez,[41] the Court held that since a partnership is a separate juridical entity, the shares to
be paid out to the partners is necessarily limited only to its total resources, to wit:

Since it is the partnership, as a separate and distinct entity, that must refund the shares of the
partners, the amount to be refunded is necessarily limited to its total resources. In other words, it can
only pay out what it has in its coffers, which consists of all its assets. However, before the partners can
be paid their shares, the creditors of the partnership must first be compensated. After all the creditors
have been paid, whatever is left of the partnership assets becomes available for the payment of the
partners shares.[42]

There is no evidence that the subject real properties were assets of the partnership referred to in the
Acknowledgement of Participating Capital.

The petitioner further asserts that he is entitled to respondents properties based on the concept of trust. He
claims that since the subject real properties were purchased using funds of the partnership, wherein he has a 6% share,
then law and equity mandates that he should be considered as a co-owner of those properties in such
proportion.[43] In Pigao v. Rabanillo,[44] this Court explained the concept of trusts, to wit:

Express trusts are created by the intention of the trustor or of the parties, while implied trusts come
into being by operation of law, either through implication of an intention to create a trust as a matter
of law or through the imposition of the trust irrespective of, and even contrary to, any such intention.
In turn, implied trusts are either resulting or constructive trusts. Resulting trusts are based on the
equitable doctrine that valuable consideration and not legal title determines the equitable title or
interest and are presumed always to have been contemplated by the parties. They arise from the
nature or circumstances of the consideration involved in a transaction whereby one person thereby
becomes invested with legal title but is obligated in equity to hold his legal title for the benefit of
another.[45]

On proving the existence of a trust, this Court held that:

Respondent has presented only bare assertions that a trust was created. Noting the need to prove the existence
of a trust, this Court has held thus:

As a rule, the burden of proving the existence of a trust is on the party

asserting its existence, and such proof must be clear and satisfactorily show the
existence of the trust and its elements. While implied trusts may be proved by oral
evidence, the evidence must be trustworthy and received by the courts with extreme
caution, and should not be made to rest on loose, equivocal or indefinite declarations.
Trustworthy evidence is required because oral evidence can easily be fabricated. [46]

The petitioner has failed to prove that there exists a trust over the subject real properties. Aside
from his bare allegations, he has failed to show that the respondents used the partnerships money to
purchase the said properties. Even assuming arguendothat some partnership income was used to acquire
these properties, the petitioner should have successfully shown that these funds came from his share in the
partnership profits.After all, by his own admission, and as stated in the Acknowledgement of Participating
Capital, he owned a mere 6% equity in the partnership.

In essence, the petitioner is claiming his 6% share in the subject real properties, by relying on his own self-
serving testimony and the equally biased testimony of Antonieta Jarantilla. Petitioner has not presented evidence,
other than these unsubstantiated testimonies, to prove that the respondents did not have the means to fund their
other businesses and real properties without the partnerships income. On the other hand, the respondents have not
only, by testimonial evidence, proven their case against the petitioner, but have also presented sufficient documentary
evidence to substantiate their claims, allegations and defenses. They presented preponderant proof on how they
acquired and funded such properties in addition to tax receipts and tax declarations. [47] It has been held that while tax
declarations and realty tax receipts do not conclusively prove ownership, they may constitute strong evidence of
ownership when accompanied by possession for a period sufficient for prescription. [48] Moreover, it is a rule in this
jurisdiction that testimonial evidence cannot prevail over documentary evidence. [49] This Court had on several
occasions, expressed our disapproval on using mere self-serving testimonies to support ones claim. In Ocampo v.
Ocampo,[50] a case on partition of a co-ownership, we held that:

Petitioners assert that their claim of co-ownership of the property was sufficiently proved by
their witnesses -- Luisa Ocampo-Llorin and Melita Ocampo. We disagree. Their testimonies cannot
prevail over the array of documents presented by Belen. A claim of ownership cannot be based simply
on the testimonies of witnesses; much less on those of interested parties, self-serving as they are.[51]

It is true that a certificate of title is merely an evidence of ownership or title over the particular property
described therein. Registration in the Torrens system does not create or vest title as registration is not a mode of
acquiring ownership; hence, this cannot deprive an aggrieved party of a remedy in law. [52] However, petitioner asserts
ownership over portions of the subject real properties on the strength of his own admissions and on the testimony of
Antonieta Jarantilla. As held by this Court inRepublic of the Philippines v. Orfinada, Sr.[53]:

Indeed, a Torrens title is generally conclusive evidence of ownership of the land referred to therein,
and a strong presumption exists that a Torrens title was regularly issued and valid. A Torrens title is
incontrovertible against any informacion possessoria, of other title existing prior to the issuance
thereof not annotated on the Torrens title. Moreover, persons dealing with property covered by a
Torrens certificate of title are not required to go beyond what appears on its face. [54]

As we have settled that this action never really was for partition of a co-ownership, to permit petitioners claim
on these properties is to allow a collateral, indirect attack on respondents admitted titles. In the words of the Court of
Appeals, such evidence cannot overpower the conclusiveness of these certificates of title, more so since plaintiffs
[petitioners] claims amount to a collateral attack, which is prohibited under Section 48 of Presidential Decree No.
1529, the Property Registration Decree.[55]

SEC. 48. Certificate not subject to collateral attack. A certificate of title shall not be subject to collateral attack. It
cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law.

This Court has deemed an action or proceeding to be an attack on a title when its objective is to nullify the
title, thereby challenging the judgment pursuant to which the title was decreed. [56] In Aguilar v. Alfaro,[57] this Court
further distinguished between a direct and an indirect or collateral attack, as follows:

A collateral attack transpires when, in another action to obtain a different relief and as an
incident to the present action, an attack is made against the judgment granting the title. This manner
of attack is to be distinguished from a direct attack against a judgment granting the title, through an
action whose main objective is to annul, set aside, or enjoin the enforcement of such judgment if not
yet implemented, or to seek recovery if the property titled under the judgment had been disposed
of. x x x.

Petitioners only piece of documentary evidence is the Acknowledgement of Participating Capital, which as
discussed above, failed to prove that the real properties he is claiming co-ownership of were acquired out of the
proceeds of the businesses covered by such document. Therefore, petitioners theory has no factual or legal leg to
stand on.

WHEREFORE, the Petition is hereby DENIED and the Decision of the Court of Appeals in CA-G.R. CV No. 40887,
dated July 30, 2002 is AFFIRMED.

SO ORDERED.
G.R. No. 109248 July 3, 1995

GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO, petitioners,
vs.
HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L. MISA,respondents.

VITUG, J.:

The instant petition seeks a review of the decision rendered by the Court of Appeals, dated 26 February 1993, in CA-
G.R. SP No. 24638 and No. 24648 affirming in toto that of the Securities and Exchange Commission ("SEC") in SEC AC
254.

The antecedents of the controversy, summarized by respondent Commission and quoted at length by the appellate
court in its decision, are hereunder restated.

The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the Mercantile Registry on 4
January 1937 and reconstituted with the Securities and Exchange Commission on 4 August 1948. The SEC
records show that there were several subsequent amendments to the articles of partnership on 18 September
1958, to change the firm [name] to ROSS, SELPH and CARRASCOSO; on 6 July 1965 . . . to ROSS, SELPH,
SALCEDO, DEL ROSARIO, BITO & MISA; on 18 April 1972 to SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA; on 4
December 1972 to SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA; on 11 March 1977 to DEL ROSARIO, BITO,
MISA & LOZADA; on 7 June 1977 to BITO, MISA & LOZADA; on 19 December 1980, [Joaquin L. Misa] appellees
Jesus B. Bito and Mariano M. Lozada associated themselves together, as senior partners with respondents-
appellees Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners.

On February 17, 1988, petitioner-appellant wrote the respondents-appellees a letter stating:

I am withdrawing and retiring from the firm of Bito, Misa and Lozada, effective at the end of
this month.

"I trust that the accountants will be instructed to make the proper liquidation of my
participation in the firm."

On the same day, petitioner-appellant wrote respondents-appellees another letter stating:

"Further to my letter to you today, I would like to have a meeting with all of you with regard to
the mechanics of liquidation, and more particularly, my interest in the two floors of this
building. I would like to have this resolved soon because it has to do with my own plans."

On 19 February 1988, petitioner-appellant wrote respondents-appellees another letter stating:

"The partnership has ceased to be mutually satisfactory because of the working conditions of
our employees including the assistant attorneys. All my efforts to ameliorate the below
subsistence level of the pay scale of our employees have been thwarted by the other partners.
Not only have they refused to give meaningful increases to the employees, even attorneys, are
dressed down publicly in a loud voice in a manner that deprived them of their self-respect. The
result of such policies is the formation of the union, including the assistant attorneys."

On 30 June 1988, petitioner filed with this Commission's Securities Investigation and Clearing Department
(SICD) a petition for dissolution and liquidation of partnership, docketed as SEC Case No. 3384 praying that the
Commission:

"1. Decree the formal dissolution and order the immediate liquidation of (the partnership of)
Bito, Misa & Lozada;
 "2. Order the respondents to deliver or pay for petitioner's share in the partnership assets plus
the profits, rent or interest attributable to the use of his right in the assets of the dissolved
partnership;

"3. Enjoin respondents from using the firm name of Bito, Misa & Lozada in any of their
correspondence, checks and pleadings and to pay petitioners damages for the use thereof
despite the dissolution of the partnership in the amount of at least P50,000.00;

"4. Order respondents jointly and severally to pay petitioner attorney's fees and expense of
litigation in such amounts as maybe proven during the trial and which the Commission may
deem just and equitable under the premises but in no case less than ten (10%) per cent of the
value of the shares of petitioner or P100,000.00;

"5. Order the respondents to pay petitioner moral damages with the amount of P500,000.00
and exemplary damages in the amount of P200,000.00.

"Petitioner likewise prayed for such other and further reliefs that the Commission may deem
just and equitable under the premises."

On 13 July 1988, respondents-appellees filed their opposition to the petition.

On 13 July 1988, petitioner filed his Reply to the Opposition.

On 31 March 1989, the hearing officer rendered a decision ruling that:

"[P]etitioner's withdrawal from the law firm Bito, Misa & Lozada did not dissolve the said law
partnership. Accordingly, the petitioner and respondents are hereby enjoined to abide by the
provisions of the Agreement relative to the matter governing the liquidation of the shares of
any retiring or withdrawing partner in the partnership interest." 1

On appeal, the SEC en banc reversed the decision of the Hearing Officer and held that the withdrawal of Attorney
Joaquin L. Misa had dissolved the partnership of "Bito, Misa & Lozada." The Commission ruled that, being a partnership
at will, the law firm could be dissolved by any partner at anytime, such as by his withdrawal therefrom, regardless of
good faith or bad faith, since no partner can be forced to continue in the partnership against his will. In its decision,
dated 17 January 1990, the SEC held:

WHEREFORE, premises considered the appealed order of 31 March 1989 is hereby REVERSED insofar as it
concludes that the partnership of Bito, Misa & Lozada has not been dissolved. The case is hereby REMANDED to
the Hearing Officer for determination of the respective rights and obligations of the parties. 2

The parties sought a reconsideration of the above decision. Attorney Misa, in addition, asked for an appointment of a
receiver to take over the assets of the dissolved partnership and to take charge of the winding up of its affairs. On 4
April 1991, respondent SEC issued an order denying reconsideration, as well as rejecting the petition for receivership,
and reiterating the remand of the case to the Hearing Officer.

The parties filed with the appellate court separate appeals (docketed CA-G.R. SP No. 24638 and CA-G.R. SP No. 24648).

During the pendency of the case with the Court of Appeals, Attorney Jesus Bito and Attorney Mariano Lozada both died
on, respectively, 05 September 1991 and 21 December 1991. The death of the two partners, as well as the admission of
new partners, in the law firm prompted Attorney Misa to renew his application for receivership (in CA G.R. SP No.
24648). He expressed concern over the need to preserve and care for the partnership assets. The other partners
opposed the prayer.

The Court of Appeals, finding no reversible error on the part of respondent Commission, AFFIRMED in toto the SEC
decision and order appealed from. In fine, the appellate court held, per its decision of 26 February 1993, (a) that Atty.
Misa's withdrawal from the partnership had changed the relation of the parties and inevitably caused the dissolution of
the partnership; (b) that such withdrawal was not in bad faith; (c) that the liquidation should be to the extent of
Attorney Misa's interest or participation in the partnership which could be computed and paid in the manner stipulated
in the partnership agreement; (d) that the case should be remanded to the SEC Hearing Officer for the corresponding
determination of the value of Attorney Misa's share in the partnership assets; and (e) that the appointment of a
receiver was unnecessary as no sufficient proof had been shown to indicate that the partnership assets were in any
such danger of being lost, removed or materially impaired.

In this petition for review under Rule 45 of the Rules of Court, petitioners confine themselves to the following issues:

1. Whether or not the Court of Appeals has erred in holding that the partnership of Bito, Misa & Lozada (now
Bito, Lozada, Ortega & Castillo) is a partnership at will;

2. Whether or not the Court of Appeals has erred in holding that the withdrawal of private respondent
dissolved the partnership regardless of his good or bad faith; and

3. Whether or not the Court of Appeals has erred in holding that private respondent's demand for the
dissolution of the partnership so that he can get a physical partition of partnership was not made in bad faith;

to which matters we shall, accordingly, likewise limit ourselves.

A partnership that does not fix its term is a partnership at will. That the law firm "Bito, Misa & Lozada," and now "Bito,
Lozada, Ortega and Castillo," is indeed such a partnership need not be unduly belabored. We quote, with approval, like
did the appellate court, the findings and disquisition of respondent SEC on this matter; viz:

The partnership agreement (amended articles of 19 August 1948) does not provide for a specified period or
undertaking. The "DURATION" clause simply states:

"5. DURATION. The partnership shall continue so long as mutually satisfactory and upon the
death or legal incapacity of one of the partners, shall be continued by the surviving partners."

The hearing officer however opined that the partnership is one for a specific undertaking and hence not a
partnership at will, citing paragraph 2 of the Amended Articles of Partnership (19 August 1948):

"2. Purpose. The purpose for which the partnership is formed, is to act as legal adviser and
representative of any individual, firm and corporation engaged in commercial, industrial or
other lawful businesses and occupations; to counsel and advise such persons and entities with
respect to their legal and other affairs; and to appear for and represent their principals and
client in all courts of justice and government departments and offices in the Philippines, and
elsewhere when legally authorized to do so."

The "purpose" of the partnership is not the specific undertaking referred to in the law. Otherwise, all
partnerships, which necessarily must have a purpose, would all be considered as partnerships for a definite
undertaking. There would therefore be no need to provide for articles on partnership at will as none would so
exist. Apparently what the law contemplates, is a specific undertaking or "project" which has a definite or
definable period of completion. 3

The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. The right to
choose with whom a person wishes to associate himself is the very foundation and essence of that partnership. Its
continued existence is, in turn, dependent on the constancy of that mutual resolve, along with each partner's
capability to give it, and the absence of a cause for dissolution provided by the law itself. Verily, any one of the
partners may, at his sole pleasure, dictate a dissolution of the partnership at will. He must, however, act in good faith,
not that the attendance of bad faith can prevent the dissolution of the partnership 4 but that it can result in a liability
for damages. 5

In passing, neither would the presence of a period for its specific duration or the statement of a particular purpose for
its creation prevent the dissolution of any partnership by an act or will of a partner. 6 Among partners, 7 mutual agency
arises and the doctrine of delectus personae allows them to have the power, although not necessarily the right, to
dissolve the partnership. An unjustified dissolution by the partner can subject him to a possible action for damages.

The dissolution of a partnership is the change in the relation of the parties caused by any partner ceasing to be
associated in the carrying on, as might be distinguished from the winding up of, the business. 8 Upon its dissolution, the
partnership continues and its legal personality is retained until the complete winding up of its business culminating in
its termination. 9

The liquidation of the assets of the partnership following its dissolution is governed by various provisions of the Civil
Code; 10 however, an agreement of the partners, like any other contract, is binding among them and normally takes
precedence to the extent applicable over the Code's general provisions. We here take note of paragraph 8 of the
"Amendment to Articles of Partnership" reading thusly:

. . . In the event of the death or retirement of any partner, his interest in the partnership shall be liquidated
and paid in accordance with the existing agreements and his partnership participation shall revert to the Senior
Partners for allocation as the Senior Partners may determine; provided, however, that with respect to the two
(2) floors of office condominium which the partnership is now acquiring, consisting of the 5th and the 6th floors
of the Alpap Building, 140 Alfaro Street, Salcedo Village, Makati, Metro Manila, their true value at the time of
such death or retirement shall be determined by two (2) independent appraisers, one to be appointed (by the
partnership and the other by the) retiring partner or the heirs of a deceased partner, as the case may be. In
the event of any disagreement between the said appraisers a third appraiser will be appointed by them whose
decision shall be final. The share of the retiring or deceased partner in the aforementioned two (2) floor office
condominium shall be determined upon the basis of the valuation above mentioned which shall be paid monthly
within the first ten (10) days of every month in installments of not less than P20,000.00 for the Senior Partners,
P10,000.00 in the case of two (2) existing Junior Partners and P5,000.00 in the case of the new Junior
Partner. 11

The term "retirement" must have been used in the articles, as we so hold, in a generic sense to mean the dissociation
by a partner, inclusive of resignation or withdrawal, from the partnership that thereby dissolves it.

On the third and final issue, we accord due respect to the appellate court and respondent Commission on their
common factual finding, i.e., that Attorney Misa did not act in bad faith. Public respondents viewed his withdrawal to
have been spurred by "interpersonal conflict" among the partners. It would not be right, we agree, to let any of the
partners remain in the partnership under such an atmosphere of animosity; certainly, not against their will. 12Indeed,
for as long as the reason for withdrawal of a partner is not contrary to the dictates of justice and fairness, nor for the
purpose of unduly visiting harm and damage upon the partnership, bad faith cannot be said to characterize the act.
Bad faith, in the context here used, is no different from its normal concept of a conscious and intentional design to do
a wrongful act for a dishonest purpose or moral obliquity.

WHEREFORE, the decision appealed from is AFFIRMED. No pronouncement on costs.

SO ORDERED.
G.R. No. 136448. November 3, 1999

LIM TONG LIM, petitioner, vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC., respondent.

DECISION

PANGANIBAN, J.:

A partnership may be deemed to exist among parties who agree to borrow money to pursue a business and to
divide the profits or losses that may arise therefrom, even if it is shown that they have not contributed any capital of
their own to a "common fund." Their contribution may be in the form of credit or industry, not necessarily cash or fixed
assets. Being partners, they are all liable for debts incurred by or on behalf of the partnership. The liability for a
contract entered into on behalf of an unincorporated association or ostensible corporation may lie in a person who may
not have directly transacted on its behalf, but reaped benefits from that contract.

The Case

In the Petition for Review on Certiorari before us, Lim Tong Lim assails the November 26, 1998 Decision of the Court of
Appeals in CA-GR CV 41477,[1] which disposed as follows:

WHEREFORE, [there being] no reversible error in the appealed decision, the same is hereby affirmed. [2]

The decretal portion of the Quezon City Regional Trial Court (RTC) ruling, which was affirmed by the CA, reads as
follows:

WHEREFORE, the Court rules:

1. That plaintiff is entitled to the writ of preliminary attachment issued by this Court on September 20, 1990;

2. That defendants are jointly liable to plaintiff for the following amounts, subject to the modifications as hereinafter
made by reason of the special and unique facts and circumstances and the proceedings that transpired during the trial
of this case;

a. P532,045.00 representing [the] unpaid purchase price of the fishing nets covered by the Agreement plus P68,000.00
representing the unpaid price of the floats not covered by said Agreement;

b. 12% interest per annum counted from date of plaintiffs invoices and computed on their respective amounts as
follows:

i. Accrued interest of P73,221.00 on Invoice No. 14407 for P385,377.80 dated February 9, 1990;

ii. Accrued interest of P27,904.02 on Invoice No. 14413 for P146,868.00 dated February 13, 1990;

iii. Accrued interest of P12,920.00 on Invoice No. 14426 for P68,000.00 dated February 19, 1990;

c. P50,000.00 as and for attorneys fees, plus P8,500.00 representing P500.00 per appearance in court;

d. P65,000.00 representing P5,000.00 monthly rental for storage charges on the nets counted from September 20, 1990
(date of attachment) to September 12, 1991 (date of auction sale);

e. Cost of suit.

With respect to the joint liability of defendants for the principal obligation or for the unpaid price of nets and floats in
the amount of P532,045.00 and P68,000.00, respectively, or for the total amount ofP600,045.00, this Court noted that
these items were attached to guarantee any judgment that may be rendered in favor of the plaintiff but, upon
agreement of the parties, and, to avoid further deterioration of the nets during the pendency of this case, it was
ordered sold at public auction for not less thanP900,000.00 for which the plaintiff was the sole and winning bidder. The
proceeds of the sale paid for by plaintiff was deposited in court. In effect, the amount of P900,000.00 replaced the
attached property as a guaranty for any judgment that plaintiff may be able to secure in this case with the ownership
and possession of the nets and floats awarded and delivered by the sheriff to plaintiff as the highest bidder in the
public auction sale. It has also been noted that ownership of the nets [was] retained by the plaintiff until full payment
[was] made as stipulated in the invoices; hence, in effect, the plaintiff attached its own properties. It [was] for this
reason also that this Court earlier ordered the attachment bond filed by plaintiff to guaranty damages to defendants to
be cancelled and for theP900,000.00 cash bidded and paid for by plaintiff to serve as its bond in favor of defendants.

From the foregoing, it would appear therefore that whatever judgment the plaintiff may be entitled to in this case will
have to be satisfied from the amount of P900,000.00 as this amount replaced the attached nets and
floats. Considering, however, that the total judgment obligation as computed above would amount to
only P840,216.92, it would be inequitable, unfair and unjust to award the excess to the defendants who are not
entitled to damages and who did not put up a single centavo to raise the amount of P900,000.00 aside from the fact
that they are not the owners of the nets and floats. For this reason, the defendants are hereby relieved from any and
all liabilities arising from the monetary judgment obligation enumerated above and for plaintiff to retain possession
and ownership of the nets and floats and for the reimbursement of the P900,000.00 deposited by it with the Clerk of
Court.

SO ORDERED. [3]

The Facts

On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract dated
February 7, 1990, for the purchase of fishing nets of various sizes from the Philippine Fishing Gear Industries, Inc.
(herein respondent). They claimed that they were engaged in a business venture with Petitioner Lim Tong Lim, who
however was not a signatory to the agreement. The total price of the nets amounted to P532,045. Four hundred pieces
of floats worth P68,000 were also sold to the Corporation.[4]

The buyers, however, failed to pay for the fishing nets and the floats; hence, private respondent filed a collection
suit against Chua, Yao and Petitioner Lim Tong Lim with a prayer for a writ of preliminary attachment. The suit was
brought against the three in their capacities as general partners, on the allegation that Ocean Quest Fishing
Corporation was a nonexistent corporation as shown by a Certification from the Securities and Exchange
Commission.[5] On September 20, 1990, the lower court issued a Writ of Preliminary Attachment, which the sheriff
enforced by attaching the fishing nets on board F/B Lourdes which was then docked at the Fisheries Port, Navotas,
Metro Manila.

Instead of answering the Complaint, Chua filed a Manifestation admitting his liability and requesting a reasonable
time within which to pay. He also turned over to respondent some of the nets which were in his possession. Peter Yao
filed an Answer, after which he was deemed to have waived his right to cross-examine witnesses and to present
evidence on his behalf, because of his failure to appear in subsequent hearings. Lim Tong Lim, on the other hand, filed
an Answer with Counterclaim and Crossclaim and moved for the lifting of the Writ of Attachment. [6] The trial court
maintained the Writ, and upon motion of private respondent, ordered the sale of the fishing nets at a public
auction.Philippine Fishing Gear Industries won the bidding and deposited with the said court the sales proceeds
of P900,000.[7]

On November 18, 1992, the trial court rendered its Decision, ruling that Philippine Fishing Gear Industries was
entitled to the Writ of Attachment and that Chua, Yao and Lim, as general partners, were jointly liable to pay
respondent.[8]

The trial court ruled that a partnership among Lim, Chua and Yao existed based (1) on the testimonies of the
witnesses presented and (2) on a Compromise Agreement executed by the three [9] in Civil Case No. 1492-MN which
Chua and Yao had brought against Lim in the RTC of Malabon, Branch 72, for (a) a declaration of nullity of commercial
documents; (b) a reformation of contracts; (c) a declaration of ownership of fishing boats; (d) an injunction and (e)
damages.[10] The Compromise Agreement provided:

a) That the parties plaintiffs & Lim Tong Lim agree to have the four (4) vessels sold in the amount ofP5,750,000.00
including the fishing net. This P5,750,000.00 shall be applied as full payment forP3,250,000.00 in favor of JL Holdings
Corporation and/or Lim Tong Lim;
b) If the four (4) vessel[s] and the fishing net will be sold at a higher price than P5,750,000.00 whatever will be the
excess will be divided into 3: 1/3 Lim Tong Lim; 1/3 Antonio Chua; 1/3 Peter Yao;

c) If the proceeds of the sale the vessels will be less than P5,750,000.00 whatever the deficiency shall be shouldered
and paid to JL Holding Corporation by 1/3 Lim Tong Lim; 1/3 Antonio Chua; 1/3 Peter Yao.[11]

The trial court noted that the Compromise Agreement was silent as to the nature of their obligations, but that
joint liability could be presumed from the equal distribution of the profit and loss.[12]

Lim appealed to the Court of Appeals (CA) which, as already stated, affirmed the RTC.

Ruling of the Court of Appeals

In affirming the trial court, the CA held that petitioner was a partner of Chua and Yao in a fishing business and
may thus be held liable as a such for the fishing nets and floats purchased by and for the use of the partnership. The
appellate court ruled:

The evidence establishes that all the defendants including herein appellant Lim Tong Lim undertook a partnership for a
specific undertaking, that is for commercial fishing x x x. Obviously, the ultimate undertaking of the defendants was to
divide the profits among themselves which is what a partnership essentially is x x x. By a 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 (Article 1767, New Civil Code).[13]

Hence, petitioner brought this recourse before this Court.[14]

The Issues

In his Petition and Memorandum, Lim asks this Court to reverse the assailed Decision on the following grounds:

I THE COURT OF APPEALS ERRED IN HOLDING, BASED ON A COMPROMISE AGREEMENT THAT CHUA, YAO AND PETITIONER
LIM ENTERED INTO IN A SEPARATE CASE, THAT A PARTNERSHIP AGREEMENT EXISTED AMONG THEM.

II SINCE IT WAS ONLY CHUA WHO REPRESENTED THAT HE WAS ACTING FOR OCEAN QUEST FISHING CORPORATION WHEN
HE BOUGHT THE NETS FROM PHILIPPINE FISHING, THE COURT OF APPEALS WAS UNJUSTIFIED IN IMPUTING LIABILITY TO
PETITIONER LIM AS WELL.

III THE TRIAL COURT IMPROPERLY ORDERED THE SEIZURE AND ATTACHMENT OF PETITIONER LIMS GOODS.

In determining whether petitioner may be held liable for the fishing nets and floats purchased from respondent,
the Court must resolve this key issue: whether by their acts, Lim, Chua and Yao could be deemed to have entered into
a partnership.

This Courts Ruling

The Petition is devoid of merit.

First and Second Issues: Existence of a Partnership and Petitioner's Liability

In arguing that he should not be held liable for the equipment purchased from respondent, petitioner controverts
the CA finding that a partnership existed between him, Peter Yao and Antonio Chua. He asserts that the CA based its
finding on the Compromise Agreement alone. Furthermore, he disclaims any direct participation in the purchase of the
nets, alleging that the negotiations were conducted by Chua and Yao only, and that he has not even met the
representatives of the respondent company. Petitioner further argues that he was a lessor, not a partner, of Chua and
Yao, for the "Contract of Lease" dated February 1, 1990, showed that he had merely leased to the two the main asset
of the purported partnership -- the fishing boat F/B Lourdes. The lease was for six months, with a monthly rental
of P37,500 plus 25 percent of the gross catch of the boat.
 We are not persuaded by the arguments of petitioner. The facts as found by the two lower courts clearly showed
that there existed a partnership among Chua, Yao and him, pursuant to Article 1767 of the Civil Code which provides:

Article 1767 - By the contract of partnership, two or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the profits among themselves.

Specifically, both lower courts ruled that a partnership among the three existed based on the following factual
findings:[15]

(1) That Petitioner Lim Tong Lim requested Peter Yao who was engaged in commercial fishing to join him, while
Antonio Chua was already Yaos partner;

(2) That after convening for a few times, Lim Chua, and Yao verbally agreed to acquire two fishing boats, the FB
Lourdes and the FB Nelson for the sum of P3.35 million;

(3) That they borrowed P3.25 million from Jesus Lim, brother of Petitioner Lim Tong Lim, to finance the venture.

(4) That they bought the boats from CMF Fishing Corporation, which executed a Deed of Sale over these two (2) boats
in favor of Petitioner Lim Tong Lim only to serve as security for the loan extended by Jesus Lim;

(5) That Lim, Chua and Yao agreed that the refurbishing , re-equipping, repairing, dry docking and other expenses for
the boats would be shouldered by Chua and Yao;

(6) That because of the unavailability of funds, Jesus Lim again extended a loan to the partnership in the amount of P1
million secured by a check, because of which, Yao and Chua entrusted the ownership papers of two other boats,
Chuas FB Lady Anne Mel and Yaos FB Tracy to Lim Tong Lim.

(7) That in pursuance of the business agreement, Peter Yao and Antonio Chua bought nets from Respondent Philippine
Fishing Gear, in behalf of "Ocean Quest Fishing Corporation," their purported business name.

(8) That subsequently, Civil Case No. 1492-MN was filed in the Malabon RTC, Branch 72 by Antonio Chua and Peter Yao
against Lim Tong Lim for (a) declaration of nullity of commercial documents; (b) reformation of contracts; (c)
declaration of ownership of fishing boats; (4) injunction; and (e) damages.

(9) That the case was amicably settled through a Compromise Agreement executed between the parties-litigants the
terms of which are already enumerated above.

From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had decided to engage in a
fishing business, which they started by buying boats worth P3.35 million, financed by a loan secured from Jesus Lim
who was petitioners brother. In their Compromise Agreement, they subsequently revealed their intention to pay the
loan with the proceeds of the sale of the boats, and to divide equally among them the excess or loss. These boats, the
purchase and the repair of which were financed with borrowed money, fell under the term common fund under Article
1767. The contribution to such fund need not be cash or fixed assets; it could be an intangible like credit or
industry. That the parties agreed that any loss or profit from the sale and operation of the boats would be divided
equally among them also shows that they had indeed formed a partnership.

Moreover, it is clear that the partnership extended not only to the purchase of the boat, but also to that of the
nets and the floats. The fishing nets and the floats, both essential to fishing, were obviously acquired in furtherance of
their business. It would have been inconceivable for Lim to involve himself so much in buying the boat but not in the
acquisition of the aforesaid equipment, without which the business could not have proceeded.

Given the preceding facts, it is clear that there was, among petitioner, Chua and Yao, a partnership engaged in
the fishing business. They purchased the boats, which constituted the main assets of the partnership, and they agreed
that the proceeds from the sales and operations thereof would be divided among them.

We stress that under Rule 45, a petition for review like the present case should involve only questions of
law. Thus, the foregoing factual findings of the RTC and the CA are binding on this Court, absent any cogent proof that
the present action is embraced by one of the exceptions to the rule. [16] In assailing the factual findings of the two
lower courts, petitioner effectively goes beyond the bounds of a petition for review under Rule 45.

Compromise Agreement Not the Sole Basis of Partnership

Petitioner argues that the appellate courts sole basis for assuming the existence of a partnership was the
Compromise Agreement. He also claims that the settlement was entered into only to end the dispute among them, but
not to adjudicate their preexisting rights and obligations. His arguments are baseless. The Agreement was but an
embodiment of the relationship extant among the parties prior to its execution.

A proper adjudication of claimants rights mandates that courts must review and thoroughly appraise all relevant
facts. Both lower courts have done so and have found, correctly, a preexisting partnership among the parties. In
implying that the lower courts have decided on the basis of one piece of document alone, petitioner fails to appreciate
that the CA and the RTC delved into the history of the document and explored all the possible consequential
combinations in harmony with law, logic and fairness. Verily, the two lower courts factual findings mentioned above
nullified petitioners argument that the existence of a partnership was based only on the Compromise Agreement.

Petitioner Was a Partner, Not a Lessor

We are not convinced by petitioners argument that he was merely the lessor of the boats to Chua and Yao, not a
partner in the fishing venture. His argument allegedly finds support in the Contract of Lease and the registration
papers showing that he was the owner of the boats, including F/B Lourdeswhere the nets were found.

His allegation defies logic. In effect, he would like this Court to believe that he consented to the sale of his
own boats to pay a debt of Chua and Yao, with the excess of the proceeds to be divided among the three of them. No
lessor would do what petitioner did. Indeed, his consent to the sale proved that there was a preexisting partnership
among all three.

Verily, as found by the lower courts, petitioner entered into a business agreement with Chua and Yao, in which
debts were undertaken in order to finance the acquisition and the upgrading of the vessels which would be used in
their fishing business. The sale of the boats, as well as the division among the three of the balance remaining after the
payment of their loans, proves beyond cavil thatF/B Lourdes, though registered in his name, was not his own property
but an asset of the partnership.It is not uncommon to register the properties acquired from a loan in the name of the
person the lender trusts, who in this case is the petitioner himself. After all, he is the brother of the creditor, Jesus
Lim.

We stress that it is unreasonable indeed, it is absurd -- for petitioner to sell his property to pay a debt he did not
incur, if the relationship among the three of them was merely that of lessor-lessee, instead of partners.

Corporation by Estoppel

Petitioner argues that under the doctrine of corporation by estoppel, liability can be imputed only to Chua and
Yao, and not to him. Again, we disagree.

Section 21 of the Corporation Code of the Philippines provides:

Sec. 21. Corporation by estoppel. - All persons who assume to act as a corporation knowing it to be without authority
to do so shall be liable as general partners for all debts, liabilities and damages incurred or arising as a result
thereof: Provided however, That when any such ostensible corporation is sued on any transaction entered by it as a
corporation or on any tort committed by it as such, it shall not be allowed to use as a defense its lack of corporate
personality.

One who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof on the ground
that there was in fact no corporation.

Thus, even if the ostensible corporate entity is proven to be legally nonexistent, a party may be estopped from
denying its corporate existence. The reason behind this doctrine is obvious - an unincorporated association has no
personality and would be incompetent to act and appropriate for itself the power and attributes of a corporation as
provided by law; it cannot create agents or confer authority on another to act in its behalf; thus, those who act or
purport to act as its representatives or agents do so without authority and at their own risk. And as it is an elementary
principle of law that a person who acts as an agent without authority or without a principal is himself regarded as the
principal, possessed of all the right and subject to all the liabilities of a principal, a person acting or purporting to act
on behalf of a corporation which has no valid existence assumes such privileges and obligations and becomes personally
liable for contracts entered into or for other acts performed as such agent. [17]

The doctrine of corporation by estoppel may apply to the alleged corporation and to a third party.In the first
instance, an unincorporated association, which represented itself to be a corporation, will be estopped from denying
its corporate capacity in a suit against it by a third person who relied in good faith on such representation. It cannot
allege lack of personality to be sued to evade its responsibility for a contract it entered into and by virtue of which
it received advantages and benefits.

On the other hand, a third party who, knowing an association to be unincorporated, nonetheless treated it as a
corporation and received benefits from it, may be barred from denying its corporate existence in a suit brought
against the alleged corporation. In such case, all those who benefited from the transaction made by the ostensible
corporation, despite knowledge of its legal defects, may be held liable for contracts they impliedly assented to or took
advantage of.

There is no dispute that the respondent, Philippine Fishing Gear Industries, is entitled to be paid for the nets it
sold. The only question here is whether petitioner should be held jointly [18] liable with Chua and Yao. Petitioner
contests such liability, insisting that only those who dealt in the name of the ostensible corporation should be held
liable. Since his name does not appear on any of the contracts and since he never directly transacted with the
respondent corporation, ergo, he cannot be held liable.

Unquestionably, petitioner benefited from the use of the nets found inside F/B Lourdes, the boat which has
earlier been proven to be an asset of the partnership. He in fact questions the attachment of the nets, because the
Writ has effectively stopped his use of the fishing vessel.

It is difficult to disagree with the RTC and the CA that Lim, Chua and Yao decided to form a corporation. Although
it was never legally formed for unknown reasons, this fact alone does not preclude the liabilities of the three as
contracting parties in representation of it. Clearly, under the law on estoppel, those acting on behalf of a corporation
and those benefited by it, knowing it to be without valid existence, are held liable as general partners.

Technically, it is true that petitioner did not directly act on behalf of the corporation. However, having reaped
the benefits of the contract entered into by persons with whom he previously had an existing relationship, he is
deemed to be part of said association and is covered by the scope of the doctrine of corporation by estoppel. We
reiterate the ruling of the Court in Alonso v. Villamor:[19]

A litigation is not a game of technicalities in which one, more deeply schooled and skilled in the subtle art of
movement and position , entraps and destroys the other. It is, rather, a contest in which each contending party fully
and fairly lays before the court the facts in issue and then, brushing aside as wholly trivial and indecisive all
imperfections of form and technicalities of procedure, asks that justice be done upon the merits. Lawsuits, unlike
duels, are not to be won by a rapiers thrust. Technicality, when it deserts its proper office as an aid to justice and
becomes its great hindrance and chief enemy, deserves scant consideration from courts. There should be no vested
rights in technicalities.

Third Issue: Validity of Attachment

Finally, petitioner claims that the Writ of Attachment was improperly issued against the nets. We agree with the
Court of Appeals that this issue is now moot and academic. As previously discussed,F/B Lourdes was an asset of the
partnership and that it was placed in the name of petitioner, only to assure payment of the debt he and his partners
owed. The nets and the floats were specifically manufactured and tailor-made according to their own design, and were
bought and used in the fishing venture they agreed upon. Hence, the issuance of the Writ to assure the payment of the
price stipulated in the invoices is proper. Besides, by specific agreement, ownership of the nets remained with
Respondent Philippine Fishing Gear, until full payment thereof.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

SO ORDERED.