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G.R. No.

143340 August 15, 2001 merchandise inventories, balance sheets and net worth of Shellite from 1977
to 1989, respondent however suspected that the amount indicated in these
LILIBETH SUNGA-CHAN and CECILIA SUNGA, petitioners, documents were understated and undervalued by Jacinto and Josephine for
vs. their own selfish reasons and for tax avoidance.
LAMBERTO T. CHUA, respondent.
Upon Jacinto's death in the later part of 1989, his surviving wife, petitioner
GONZAGA-REYES, J.: Cecilia and particularly his daughter, petitioner Lilibeth, took over the
operations, control, custody, disposition and management of Shellite without
respondent's consent. Despite respondent's repeated demands upon
Before us is a petition for review on certiorari under Rule 45 of the Rules of
petitioners for accounting, inventory, appraisal, winding up and restitution of
Court of the Decision1 of the Court of Appeals dated January 31, 2000 in the
his net shares in the partnership, petitioners failed to comply. Petitioner Lilibeth
case entitled "Lamberto T. Chua vs. Lilibeth Sunga Chan and Cecilia Sunga"
allegedly continued the operations of Shellite, converting to her own use and
and of the Resolution dated May 23, 2000 denying the motion for
reconsideration of herein petitioners Lilibeth Sunga and Cecilia Sunga advantage its properties.
(hereafter collectively referred to as petitioners).
On March 31, 1991, respondent claimed that after petitioner Lilibeth ran out
the alibis and reasons to evade respondent's demands, she disbursed out of
The pertinent facts of this case are as follows:
the partnership funds the amount of P200,000.00 and partially paid the same
to respondent. Petitioner Lilibeth allegedly informed respondent that the
On June 22, 1992, Lamberto T. Chua (hereafter respondent) filed a complaint P200,000.00 represented partial payment of the latter's share in the
against Lilibeth Sunga Chan (hereafter petitioner Lilibeth) and Cecilia Sunga partnership, with a promise that the former would make the complete inventory
(hereafter petitioner Cecilia), daughter and wife, respectively of the deceased and winding up of the properties of the business establishment. Despite such
Jacinto L. Sunga (hereafter Jacinto), for "Winding Up of Partnership Affairs, commitment, petitioners allegedly failed to comply with their duty to account,
Accounting, Appraisal and Recovery of Shares and Damages with Writ of and continued to benefit from the assets and income of Shellite to the damage
Preliminary Attachment" with the Regional Trial Court, Branch 11, Sindangan, and prejudice of respondent.
Zamboanga del Norte.
On December 19, 1992, petitioners filed a Motion to Dismiss on the ground
Respondent alleged that in 1977, he verbally entered into a partnership with that the Securities and Exchange Commission (SEC) in Manila, not the
Jacinto in the distribution of Shellane Liquefied Petroleum Gas (LPG) in Regional Trial Court in Zamboanga del Norte had jurisdiction over the action.
Manila. For business convenience, respondent and Jacinto allegedly agreed Respondent opposed the motion to dismiss.
to register the business name of their partnership, SHELLITE GAS
APPLIANCE CENTER (hereafter Shellite), under the name of Jacinto as a sole
On January 12, 1993, the trial court finding the complaint sufficient in from and
proprietorship. Respondent allegedly delivered his initial capital contribution of
substance denied the motion to dismiss.
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, On January 30, 1993, petitioners filed their Answer with Compulsory Counter-
assisted by Josephine Sy (hereafter Josephine), a sister of the wife claims, contending that they are not liable for partnership shares, unreceived
respondent, Erlinda Sy. As compensation, Jacinto would receive a manager's income/profits, interests, damages and attorney's fees, that respondent does
fee or remuneration of 10% of the gross profit and Josephine would receive not have a cause of action against them, and that the trial court has no
10% of the net profits, in addition to her wages and other remuneration from jurisdiction over the nature of the action, the SEC being the agency that has
the business. original and exclusive jurisdiction over the case. As counterclaim, petitioner
sought attorney's fees and expenses of litigation.
Allegedly, from the time that Shellite opened for business on July 8, 1977, its
business operation went quite and was profitable. Respondent claimed that he On August 2, 1993, petitioner filed a second Motion to Dismiss this time on the
could attest to success of their business because of the volume of orders and ground that the claim for winding up of partnership affairs, accounting and
deliveries of filled Shellane cylinder tanks supplied by Pilipinas Shell recovery of shares in partnership affairs, accounting and recovery of shares in
Petroleum Corporation. While Jacinto furnished respondent with the
partnership assets/properties should be dismissed and prosecuted against the submit an inventory, and appraisal of all these properties,
estate of deceased Jacinto in a probate or intestate proceeding. assets, income, profits etc. to the Court and to plaintiff for
approval or disapproval;
On August 16, 1993, the trial denied the second motion to dismiss for lack of
merit. (2) ORDERING them to return and restitute to the partnership
any and all properties, assets, income and profits they
On November 26, 1993, petitioners filed their Petition for Certiorari, Prohibition misapplied and converted to their own use and advantage the
and Mandamus with the Court of Appeals docketed as CA-G.R. SP No. 32499 legally pertain to the plaintiff and account for the properties
questioning the denial of the motion to dismiss. mentioned in pars. A and B on pages 4-5 of this petition as
basis;
On November 29, 1993, petitioners filed with the trial court a Motion to
Suspend Pre-trial Conference. (3) DIRECTING them to restitute and pay to the plaintiff ½
shares and interest of the plaintiff in the partnership of the
listed properties, assets and good will (sic) in schedules A, B
On December 13, 1993, the trial court granted the motion to suspend pre-trial
and C, on pages 4-5 of the petition;
conference.

On November 15, 1994, the Court of Appeals denied the petition for lack of (4) ORDERING them to pay the plaintiff earned but
merit. 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
On January 16, 1995, this Court denied the petition for review on certiorari filed interest until fully paid;
by petitioner, "as petitioners failed to show that a reversible error was
committed by the appellate court."2
(5) ORDERING them to wind up the affairs of the partnership
and terminate its business activities pursuant to law, after
On February 20, 1995, entry of judgment was made by the Clerk of Court and delivering to the plaintiff all the ½ interest, shares,
the case was remanded to the trial court on April 26, 1995. participation and equity in the partnership, or the value thereof
in money or money's worth, if the properties are not physically
On September 25, 1995, the trial court terminated the pre-trial conference and divisible;
set the hearing of the case of January 17, 1996. Respondent presented his
evidence while petitioners were considered to have waived their right to (6) FINDING them especially Lilibeth Sunga-Chan guilty of
present evidence for their failure to attend the scheduled date for reception of breach of trust and in bad faith and hold them liable to the
evidence despite notice. plaintiff the sum of P50,000.00 as moral and exemplary
damages; and,
On October 7, 1997, the trial court rendered its Decision ruling for respondent.
The dispositive of the Decision reads: (7) DIRECTING them to reimburse and pay the sum of
P25,000.00 as attorney's (sic) and P25,000.00 as litigation
"WHEREFORE, judgment is hereby rendered in favor of the plaintiff expenses.
and against the defendants, as follows:
NO special pronouncements as to COSTS.
(1) DIRECTING them to render an accounting in acceptable
form under accounting procedures and standards of the SO ORDERED."3
properties, assets, income and profits of the Shellite Gas
Appliance Center Since the time of death of Jacinto L. Sunga,
On October 28, 1997, petitioners filed a Notice of Appeal with the trial court,
from whom they continued the business operations including
appealing the case to the Court of Appeals.
all businesses derived from Shellite Gas Appliance Center,
On January 31, 2000, the Court of Appeals dismissed the appeal. The Petitioners thus implore this Court to rule that the testimonies of respondent
dispositive portion of the Decision reads: and his alter ego, Josephine, should not have been admitted to prove certain
claims against a deceased person (Jacinto), now represented by petitioners.
"WHEREFORE, the instant appeal is dismissed. The appealed
decision is AFFIRMED in all respects."4 We are not persuaded.

On May 23, 2000, the Court of Appeals denied the motion for reconsideration A partnership may be constituted in any form, except where immovable
filed by petitioner. property of real rights are contributed thereto, in which case a public instrument
shall necessary.6 Hence, based on the intention of the parties, as gathered
Hence, this petition wherein petitioner relies upon following grounds: from the facts and ascertained from their language and conduct, a verbal
contract of partnership may arise.7 The essential profits that must be proven to
"1. The Court of Appeals erred in making a legal conclusion that there that a partnership was agreed upon are (1) mutual contribution to a common
existed a partnership between respondent Lamberto T. Chua and the stock, and (2) a joint interest in the profits.8 Understandably so, in view of the
absence of the written contract of partnership between respondent and
late Jacinto L. Sunga upon the latter'' invitation and offer and that upon
Jacinto, respondent resorted to the introduction of documentary and
his death the partnership assets and business were taken over by
testimonial evidence to prove said partnership. The crucial issue to settle then
petitioners.
is to whether or not the "Dead Man's Statute" applies to this case so as to
render inadmissible respondent's testimony and that of his witness, Josephine.
2. The Court of Appeals erred in making the legal conclusion that
laches and/or prescription did not apply in the instant case.
The "Dead Man's Statute" provides that if one party to the alleged transaction
is precluded from testifying by death, insanity, or other mental disabilities, the
3. The Court of Appeals erred in making the legal conclusion that there surviving party is not entitled to the undue advantage of giving his own
was competent and credible evidence to warrant the finding of a uncontradicted and unexplained account of the transaction. 9 But before this
partnership, and assuming arguendo that indeed there was a rule can be successfully invoked to bar the introduction of testimonial
partnership, the finding of highly exaggerated amounts or values in the evidence, it is necessary that:
partnership assets and profits."5
"1. The witness is a party or assignor of a party to case or persons in
Petitioners question the correctness of the finding of the trial court and the whose behalf a case in prosecuted.
Court of Appeals that a partnership existed between respondent and Jacinto
from 1977 until Jacinto's death. In the absence of any written document to
2. The action is against an executor or administrator or other
show such partnership between respondent and Jacinto, petitioners argues
representative of a deceased person or a person of unsound mind;
that these courts were proscribes from hearing the testimonies of respondent
and his witness, Josephine, to prove the alleged partnership three years after
Jacinto's death. To support this argument, petitioners invoke the "Dead Man's 3. The subject-matter of the action is a claim or demand against the
Statute' or "Survivorship Rule" under Section 23, Rule 130 of the Rules of estate of such deceased person or against person of unsound mind;
Court that provides:
4. His testimony refers to any matter of fact of which occurred before
"SEC. 23. Disqualification by reason of death or insanity of adverse the death of such deceased person or before such person became of
party. – Parties or assignors of parties to a case, or persons in whose unsound mind."10
behalf a case is prosecuted, against an executor or administrator or
other representative of a deceased person, or against a person of Two reasons forestall the application of the "Dead Man's Statute" to this case.
unsound mind, upon a claim or demand against the estate of such
deceased person, or against such person of unsound mind, cannot First, petitioners filed a compulsory counterclaim 11 against respondents in their
testify as to any matter of fact occurring before the death of such answer before the trial court, and with the filing of their counterclaim,
deceased person or before such person became of unsound mind." petitioners themselves effectively removed this case from the ambit of the
"Dead Man's Statute".12 Well entrenched is the rule that when it is the executor
or administrator or representatives of the estates that sets up the counterclaim, superior credit to this or that piece of evidence of one party or the other. 18 It
the plaintiff, herein respondent, may testify to occurrences before the death of must be also pointed out that petitioners failed to attend the presentation of
the deceased to defeat the counterclaim.13 Moreover, as defendant in the evidence of respondent. Petitioners cannot now turn to this Court to question
counterclaim, respondent is not disqualified from testifying as to matters of the admissibility and authenticity of the documentary evidence of respondent
facts occurring before the death of the deceased, said action not having been when petitioners failed to object to the admissibility of the evidence at the time
brought against but by the estate or representatives of the deceased.14 that such evidence was offered.19

Second, the testimony of Josephine is not covered by the "Dead Man's With regard to petitioners' insistence that laches and/or prescription should
Statute" for the simple reason that she is not "a party or assignor of a party to have extinguished respondent's claim, we agree with the trial court and the
a case or persons in whose behalf a case is prosecuted." Records show that Court of Appeals that the action for accounting filed by respondents three (3)
respondent offered the testimony of Josephine to establish the existence of years after Jacinto's death was well within the prescribed period. The Civil
the partnership between respondent and Jacinto. Petitioners' insistence that Code provides that an action to enforce an oral contract prescribes in six (6)
Josephine is the alter ego of respondent does not make her an assignor years20 while the right to demand an accounting for a partner's interest as
because the term "assignor" of a party means "assignor of a cause of action against the person continuing the business accrues at the date of dissolution,
which has arisen, and not the assignor of a right assigned before any cause of in the absence of any contrary agreement.21 Considering that the death of a
action has arisen."15 Plainly then, Josephine is merely a witness of respondent, partner results in the dissolution of the partnership22 , in this case, it was
the latter being the party plaintiff. Jacinto's death that respondent as the surviving partner had the right to an
account of his interest as against petitioners. It bears stressing that while
We are not convinced by petitioners' allegation that Josephine's testimony Jacinto's death dissolved the partnership, the dissolution did not immediately
lacks probative value because she was allegedly coerced coerced by terminate the partnership. The Civil Code23 expressly provides that upon
respondent, her brother-in-law, to testify in his favor, Josephine merely dissolution, the partnership continues and its legal personality is retained until
declared in court that she was requested by respondent to testify and that if the complete winding up of its business, culminating in its termination.24
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 Josephine's testimony In a desperate bid to cast doubt on the validity of the oral partnership between
is involuntary when she did not in any way categorically say that she was respondent and Jacinto, petitioners maintain that said partnership that had
forced to be a witness of respondent. initial capital of P200,000.00 should have been registered with the Securities
and Exchange Commission (SEC) since registration is mandated by the Civil
Also, the fact that Josephine is the sister of the wife of respondent does not Code, True, Article 1772 of the Civil Code requires that partnerships with a
diminish the value of her testimony since relationship per se, without more, capital of P3,000.00 or more must register with the SEC, however, this
does not affect the credibility of witnesses.16 registration requirement is not mandatory. Article 1768 of the Civil
Code25 explicitly provides that the partnership retains its juridical personality
even if it fails to register. The failure to register the contract of partnership does
Petitioners' reliance alone on the "Dead Man's Statute" to defeat respondent's
not invalidate the same as among the partners, so long as the contract has the
claim cannot prevail over the factual findings of the trial court and the Court of
essential requisites, because the main purpose of registration is to give notice
Appeals that a partnership was established between respondent and Jacinto.
Based not only on the testimonial evidence, but the documentary evidence as to third parties, and it can be assumed that the members themselves knew of
well, the trial court and the Court of Appeals considered the evidence for 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
respondent as sufficient to prove the formation of partnership, albeit an
the totality of the evidence proves that respondent and Jacinto indeed forged
informal one.
the partnership in question.
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 WHEREFORE, in view of the foregoing, the petition is DENIED and the
appealed decision is AFFIRMED.
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 SO ORDERED.1âwphi
ascertain if the trial court and the appellate court were correct in according
Before us is a petition for review under Rule 45, seeking to nullify and set aside
the Decision1 and Resolution dated November 6, 2003 and July 6, 2004,
respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 75688. The
impugned CA Decision and Resolution denied the petition for certiorari
interposed by petitioners assailing the Resolutions2 dated November 6, 2002
and January 7, 2003, respectively, of the Regional Trial Court (RTC), Branch
11 in Sindangan, Zamboanga Del Norte in Civil Case No. S-494, a suit for
winding up of partnership affairs, accounting, and recovery of shares
commenced thereat by respondent Lamberto T. Chua.

The Facts

1.nêG.R. No. 164401 June 25, 2008


In 1977, Chua and Jacinto Sunga formed a partnership to engage in the
marketing of liquefied petroleum gas. For convenience, the business, pursued
under the name, Shellite Gas Appliance Center (Shellite), was registered as a
LILIBETH SUNGA-CHAN and CECILIA SUNGA, petitioners, sole proprietorship in the name of Jacinto, albeit the partnership arrangement
called for equal sharing of the net profit.
vs.

THE HONORABLE COURT OF APPEALS; THE HONORABLE PRESIDING


JUDGE, Regional Trial Court, Branch 11, Sindangan, Zamboanga Del Norte; After Jacinto’s death in 1989, his widow, petitioner Cecilia Sunga, and married
THE REGIONAL TRIAL COURT SHERIFF, Branch 11, Sindangan, daughter, petitioner Lilibeth Sunga-Chan, continued with the business without
Zamboanga Del Norte; THE CLERK OF COURT OF MANILA, as Ex-Officio Chua’s consent. Chua’s subsequent repeated demands for accounting and
Sheriff; and LAMBERTO T. CHUA, respondents. winding up went unheeded, prompting him to file on June 22, 1992 a Complaint
for Winding Up of a Partnership Affairs, Accounting, Appraisal and Recovery
of Shares and Damages with Writ of Preliminary Attachment, docketed as Civil
Case No. S-494 of the RTC in Sindangan, Zamboanga del Norte and raffled
to Branch 11 of the court.
DECISION

After trial, the RTC rendered, on October 7, 1997, judgment finding for Chua,
VELASCO, JR., J.:
as plaintiff a quo. The RTC’s decision would subsequently be upheld by the
CA in CA-G.R. CV No. 58751 and by this Court per its Decision dated August
15, 2001 in G.R. No. 143340.3 The corresponding Entry of Judgment4 would
later issue declaring the October 7, 1997 RTC decision final and executory as
The Case of December 20, 2001. The fallo of the RTC’s decision reads:
(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
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and and exemplary damages; and,
against the defendants, as follows:

(7) DIRECTING them to reimburse and pay the sum of P25,000.00 as


(1) DIRECTING them to render an accounting in acceptable form under attorney’s [fee] and P25,000.00 as litigation expenses.
accounting procedures and standards of the properties, assets, income and
profits of [Shellite] since the time of death of Jacinto L. Sunga, from whom they
continued the business operations including all businesses derived from
[Shellite]; submit an inventory, and appraisal of all these properties, assets, NO special pronouncements as to COSTS.
income, profits, etc. to the Court and to plaintiff for approval or disapproval;

SO ORDERED.5 (Emphasis supplied.)


(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;
Via an Order6 dated January 16, 2002, the RTC granted Chua’s motion for
execution. Over a month later, the RTC, acting on another motion of Chua,
issued an amended writ of execution.7

(3) DIRECTING them to restitute and pay to the plaintiff ½ shares and interest
of the plaintiff in the partnership of the listed properties, assets and good will
in schedules A, B and C, on pages 4-5 of the petition;
It seems, however, that the amended writ of execution could not be
immediately implemented, for, in an omnibus motion of April 3, 2002, Chua,
inter alia, asked the trial court to commission a certified public accountant
(CPA) to undertake the accounting work and inventory of the partnership
(4) ORDERING them to pay the plaintiff earned but unreceived income and assets if petitioners refuse to do it within the time set by the court. Chua later
profits from the partnership from 1988 to May 30, 1992, when the plaintiff moved to withdraw his motion and instead ask the admission of an accounting
learned of the closure of the store the sum of P35,000.00 per month, with legal report prepared by CPA Cheryl A. Gahuman. In the report under the heading,
rate of interest until fully paid; Computation of Claims,8 Chua’s aggregate claim, arrived at using the
compounding-of-interest method, amounted to PhP 14,277,344.94.
Subsequently, the RTC admitted and approved the computation of claims in
view of petitioners’ failure and refusal, despite notice, to appear and submit an
(5) ORDERING them to wind up the affairs of the partnership and terminate its accounting report on the winding up of the partnership on the scheduled
business activities pursuant to law, after delivering to the plaintiff all the ½ hearings on April 29 and 30, 2002.9
interest, shares, participation and equity in the partnership, or the value thereof
in money or money’s worth, if the properties are not physically divisible;

After another lengthy proceedings, petitioners, on September 24, 2002,


submitted their own CPA-certified valuation and accounting report. In it,
petitioners limited Chua’s entitlement from the winding up of partnership affairs
to an aggregate amount of PhP 3,154,736.65 only.10 Chua, on the other hand,
submitted a new computation,11 this time applying simple interest on the
various items covered by his claim. Under this methodology, Chua’s aggregate WHEREFORE, the foregoing considered, the Petition is hereby DENIED for
claim went down to PhP 8,733,644.75. lack of merit.

On November 6, 2002, the RTC issued a Resolution,12 rejecting the SO ORDERED.16


accounting report petitioners submitted, while approving the new computation
of claims Chua submitted. The fallo of the resolution reads:

The CA predicated its denial action on the ensuing main premises:

WHEREFORE, premises considered, this Court resolves, as it is hereby


resolved, that the Computation of Claims submitted by the plaintiff dated
October 15, 2002 amounting to P8,733,644.75 be APPROVED in all respects
as the final computation and accounting of the defendants’ liabilities in favor of 1. Petitioners, by not appearing on the hearing dates, i.e., April 29 and 30,
the plaintiff in the above-captioned case, DISAPPROVING for the purpose, in 2002, scheduled to consider Chua’s computation of claims, or rendering, as
its entirety, the computation and accounting filed by the defendants. required, an accounting of the winding up of the partnership, are deemed to
have waived their right to interpose any objection to the computation of claims
thus submitted by Chua.

SO RESOLVED.13
2. The 12% interest added on the amounts due is proper as the unwarranted
keeping by petitioners of Chua’s money passes as an involuntary loan and
forbearance of money.
Petitioners sought reconsideration, but their motion was denied by the RTC
per its Resolution of January 7, 2003.14

3. The reiterative arguments set forth in petitioners’ pleadings below were part
of their delaying tactics. Petitioners had come to the appellate court at least
In due time, petitioners went to the CA on a petition for certiorari15 under Rule thrice and to this Court twice. Petitioners had more than enough time to
65, assailing the November 6, 2002 and January 7, 2003 resolutions of the question the award and it is now too late in the day to change what had become
RTC, the recourse docketed as CA-G.R. SP No. 75688. final and executory.

The Ruling of the CA Petitioners’ motion for reconsideration was rejected by the appellate court
through the assailed Resolution17 dated July 6, 2004. Therein, the CA
explained that the imposition of the 12% interest for forbearance of credit or
money was proper pursuant to paragraph 1 of the October 7, 1997 RTC
As stated at the outset, the CA, in the herein assailed Decision of November decision, as the computation done by CPA Gahuman was made in "acceptable
6, 2003, denied the petition for certiorari, thus: form under accounting procedures and standards of the properties, assets,
income and profits of [Shellite]."18 Moreover, the CA ruled that the imposition
of interest is not based on par. 3 of the October 7, 1997 RTC decision as the III.
phrase "shares and interests" mentioned therein refers not to an imposition of
interest for use of money in a loan or credit, but to a legal share or right. The
appellate court also held that the imposition of interest on the partnership
assets falls under par. 2 in relation to par. 1 of the final RTC decision as the
Whether or not the absolute community of property of spouses Lilibeth Sunga
restitution mentioned therein does not simply mean restoration but also
Chan with her husband Norberto Chan can be lawfully made to answer for the
reparation for the injury or damage committed against the rightful owner of the
liability of Lilibeth Chan under the judgment.19
property.

Significant Intervening Events


Finally, the CA declared the partnership assets referred to in the final decision
as "liquidated claim" since the claim of Chua is ascertainable by mathematical
computation; therefore, interest is recoverable as an element of damage.

In the meantime, pending resolution of the instant petition for review and even
before the resolution by the CA of its CA-G.R. SP No. 75688, the following
relevant events transpired:
The Issues

1. Following the RTC’s approval of Chua’s computation of claims in the amount


Hence, the instant petition with petitioners raising the following issues for our
of PhP 8,733,644.75, the sheriff of Manila levied upon petitioner Sunga-Chan’s
consideration:
property located along Linao St., Paco, Manila, covered by Transfer Certificate
of Title (TCT) No. 208782,20 over which a building leased to the Philippine
National Bank (PNB) stood. In the auction sale of the levied lot, Chua, with a
tender of PhP 8 million,21 emerged as the winning bidder.
I.

2. On January 21, 2005, Chua moved for the issuance of a final deed of sale
Whether or not the Regional Trial Court can [impose] interest on a final and a writ of possession. He also asked the RTC to order the Registry of Deeds
judgment of unliquidated claims. of Manila to cancel TCT No. 208782 and to issue a new certificate. Despite
petitioners’ opposition on the ground of prematurity, a final deed of sale22 was
issued on February 16, 2005.

II.

3. On February 18, 2005, Chua moved for the confirmation of the sheriff’s final
deed of sale and for the issuance of an order for the cancellation of TCT No.
208782. Petitioners again interposed an opposition in which they informed the
Whether or not the Sheriff can enforce the whole divisible obligation under
RTC that this Court had already granted due course to their petition for review
judgment only against one Defendant.
on January 31, 2005;
4. On April 11, 2005, the RTC, via a Resolution, confirmed the sheriff’s final upon which the RTC attached a monetary value of PhP 250,000. Petitioners
deed of sale, ordered the Registry of Deeds of Manila to cancel TCT No. also question the imposition of 12% interest on the claimed monthly profits of
208782, and granted a writ of possession23 in favor of Chua. PhP 35,000, reckoned from 1988 to October 15, 1992. To petitioners, the
imposable rate should only be 6% and computed from the finality of the RTC’s
underlying decision, i.e., from December 20, 2001.

5. On May 3, 2005, petitioners filed before this Court a petition for the issuance
of a temporary restraining order (TRO). On May 24, 2005, the sheriff of Manila
issued a Notice to Vacate24 against petitioners, compelling petitioners to Third on the petitioners’ list of unliquidated claims is the yet-to-be established
repair to this Court anew for the resolution of their petition for a TRO. value of the one-half partnership share and interest adjudicated to Chua,
which, they submit, must first be determined with reasonable certainty in a
judicial proceeding. And in this regard, petitioners, citing Eastern Shipping
Lines, Inc. v. Court of Appeals,29 would ascribe error on the RTC for adding a
12% per annum interest on the approved valuation of the one-half share of the
6. On May 31, 2005, the Court issued a TRO,25 enjoining the RTC and the
assets, inclusive of goodwill, due Chua.
sheriff from enforcing the April 11, 2005 writ of possession and the May 24,
2005 Notice to Vacate. Consequently, the RTC issued an Order26 on June
17, 2005, suspending the execution proceedings before it.

Petitioners are partly correct.

7. Owing to the clashing ownership claims over the leased Paco property,
coupled with the filing of an unlawful detainer suit before the Metropolitan Trial
Court (MeTC) in Manila against PNB, the Court, upon the bank’s motion, For clarity, we reproduce the summary valuations and accounting reports on
allowed, by Resolution27 dated April 26, 2006, the consignation of the monthly the computation of claims certified to by the parties’ respective CPAs. Chua
rentals with the MeTC hearing the ejectment case. claimed the following:

The Court’s Ruling A 50% share on assets (exclusive of goodwill) at fair market value (Schedule
1)

The petition is partly meritorious.


P 1,613,550.00

First Issue: Interest Proper in Forbearance of Credit


B 50% share in the monetary value of goodwill (P500,000 x 50%)

Petitioners, citing Article 221328 of the Civil Code, fault the trial court for
imposing, in the execution of its final judgment, interests on what they 250,000.00
considered as unliquidated claims. Among these was the claim for goodwill
C Legal interest on share of assets from June 1, 1992 to Oct. 15, 2002 at 12% TOTAL AMOUNT
interest per year (Schedule 2)

P 8,733,644.75
2,008,869.75

On the other hand, petitioners acknowledged the following to be due to Chua:


D Unreceived profits from 1988 to 1992 and its corresponding interest from
Jan. 1, 1988 to Oct. 15, 2002 (Schedule 3)

Total Assets – Schedule 1

4,761,225.00

P2,431,956.35

E Damages

50% due to Lamberto Chua

50,000.00

P1,215,978.16

F Attorney’s fees

Total Alleged Profit, Net of Payments Made,

25,000.00 May 1992-Sch. 2

G Litigation fees 1,613,758.49

25,000.00 50% share in the monetary value of goodwill


(500,000 x 50%) came up with the figure of only PhP 3,154,736.65. We highlight the substantial
differences in the accounting reports on the following items, to wit: (1) the
aggregate amount of the partnership assets bearing on the 50% share of Chua
thereon; (2) interests added on Chua’s share of the assets; (3) amount of
profits from 1988 through May 30, 1992, net of alleged payments made to
250,000.00
Chua; and (4) interests added on the amount entered as profits.

Moral and Exemplary Damages


From the foregoing submitted valuation reports, there can be no dispute about
the goodwill earned thru the years by Shellite. In fact, the parties, by their own
judicial admissions, agreed on the monetary value, i.e., PhP 250,000, of this
item. Clearly then, petitioners contradict themselves when they say that such
50,000.00 amount of goodwill is without basis. Thus, the Court is loathed to disturb the
trial court’s approval of the amount of PhP 250,000, representing the monetary
value of the goodwill, to be paid to Chua.

Attorney’s Fee

Neither is the Court inclined to interfere with the CA’s conclusion as to the total
amount of the partnership profit, that is, PhP 1,855,000, generated for the
25,000.00 period January 1988 through May 30, 1992, and the total partnership assets
of PhP 3,227,100, 50% of which, or PhP 1,613,550, pertains to Chua as his
share. To be sure, petitioners have not adduced adequate evidence to belie
the above CA’s factual determination, confirmatory of the trial court’s own.
Needless to stress, it is not the duty of the Court, not being a trier of facts, to
Litigation Fee analyze or weigh all over again the evidence or premises supportive of such
determination, absent, as here, the most compelling and cogent reasons.

25,000.00
This brings us to the question of the propriety of the imposition of interest and,
if proper, the imposable rate of interest applicable.

TOTAL AMOUNT

In Reformina v. Tomol, Jr.,30 the Court held that the legal interest at 12% per
annum under Central Bank (CB) Circular No. 416 shall be adjudged only in
P3,154,736.65 cases involving the loan or forbearance of money. And for transactions
involving payment of indemnities in the concept of damages arising from
default in the performance of obligations in general and/or for money judgment
not involving a loan or forbearance of money, goods, or credit, the governing
provision is Art. 2209 of the Civil Code prescribing a yearly 6% interest. Art.
As may be recalled, the trial court admitted and approved Chua’s computation 2209 pertinently provides:
of claims amounting to PhP 8,733,644.75, but rejected that of petitioners, who
II. – With regard particularly to an award of interest in the concept of actual
and compensatory damages, the rate of interest, as well as the accrual thereof,
Art. 2209. If the obligation consists in the payment of a sum of money, and the is imposed, as follows:
debtor incurs in delay, the indemnity for damages, there being no stipulation
to the contrary, shall be the payment of the interest agreed upon, and in the
absence of stipulation, the legal interest, which is six per cent per annum.
1. When the obligation breached consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the interest due should be that which may
have been stipulated in writing. Furthermore, the interest due shall itself earn
The term "forbearance," within the context of usury law, has been described legal interest from the time it is judicially demanded. In the absence of
as a contractual obligation of a lender or creditor to refrain, during a given stipulation, the rate of interest shall be 12% per annum to be computed from
period of time, from requiring the borrower or debtor to repay the loan or debt default, i.e., from judicial or extrajudicial demand under and subject to the
then due and payable.31 provisions of Article 1169 of the Civil Code.

Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, 2. When an obligation not constituting loans or forbearance of money is
if proper, and the applicable rate, as follows: The 12% per annum rate under breached, an interest on the amount of damages awarded may be imposed at
CB Circular No. 416 shall apply only to loans or forbearance of money, goods, the discretion of the court at the rate of 6% per annum. No interest, however,
or credits, as well as to judgments involving such loan or forbearance of shall be adjudged on unliquidated claims or damages except when or until the
money, goods, or credit, while the 6% per annum under Art. 2209 of the Civil demand can be established with reasonable certainty. Accordingly, where the
Code applies "when the transaction involves the payment of indemnities in the demand is established with reasonable certainty, the interest shall begin to run
concept of damage arising from the breach or a delay in the performance of from the time the claim is made judicially or extrajudicially (Art. 1169, Civil
obligations in general,"32 with the application of both rates reckoned "from the Code) but when such certainty cannot be so reasonably established at the
time the complaint was filed until the [adjudged] amount is fully paid."33 In time the demand is made, the interest shall begin to run only from the date the
either instance, the reckoning period for the commencement of the running of judgment of the court is made (at which time the quantification of damages
the legal interest shall be subject to the condition "that the courts are vested may be deemed to have been reasonably ascertained). The actual base for
with discretion, depending on the equities of each case, on the award of the computation of legal interest shall, in any case, be on the amount finally
interest."34 adjudged.

Otherwise formulated, the norm to be followed in the future on the rates and 3. When the judgment of the court awarding a sum of money becomes final
application thereof is: and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality
until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.35
I. – When an obligation, regardless of its source, is breached, the contravenor
can be held liable for damages. The provisions under Title XVIII on "Damages"
of the Civil Code govern in determining the measure of recoverable damages.
Guided by the foregoing rules, the award to Chua of the amount representing
earned but unremitted profits, i.e.. PhP 35,000 monthly, from January 1988
until May 30, 1992, must earn interest at 6% per annum reckoned from
October 7, 1997, the rendition date of the RTC decision, until December 20,
2001, when the said decision became final and executory. Thereafter, the total
of the monthly profits inclusive of the add on 6% interest shall earn 12% per
annum reckoned from December 20, 2001 until fully paid, as the award for that
item is considered to be, by then, equivalent to a forbearance of credit. PhP 1,613,550.00
Likewise, the PhP 250,000 award, representing the goodwill value of the
business, the award of PhP 50,000 for moral and exemplary damages, PhP
25,000 attorney’s fee, and PhP 25,000 litigation fee shall earn 12% per annum
from December 20, 2001 until fully paid.
(2) 50% share in the monetary value of goodwill

(PhP 500,000 x 50%)


Anent the impasse over the partnership assets, we are inclined to agree with
petitioners’ assertion that Chua’s share and interest on such assets partake of 250,000.00
an unliquidated claim which, until reasonably determined, shall not earn
interest for him. As may be noted, the legal norm for interest to accrue is (3) 12% interest on share of goodwill from December 20, 2001 to October 15,
"reasonably determinable," not, as Chua suggested and the CA declared, 2000
determinable by mathematical computation.
[PhP 250,000 x 0.12 x 299/365 days]

24,575.34
The Court has certainly not lost sight of the fact that the October 7, 1997 RTC
decision clearly directed petitioners to render an accounting, inventory, and (4) Unreceived profits from 1988 to May 30, 1992
appraisal of the partnership assets and then to wind up the partnership affairs
by restituting and delivering to Chua his one-half share of the accounted 1,855,000.00
partnership assets. The directive itself is a recognition that the exact share and
interest of Chua over the partnership cannot be determined with reasonable
(5) 6% interest on unreceived profits from January 1, 1988 to December 20,
precision without going through with the inventory and accounting process. In
200136
fine, a liquidated claim cannot validly be asserted without accounting. In net
effect, Chua’s interest and share over the partnership asset, exclusive of the
goodwill, assumed the nature of a liquidated claim only after the trial court, 1,360,362.50
through its November 6, 2002 resolution, approved the assets inventory and
accounting report on such assets. (6) 12% interest on unreceived profits from December

20, 2001 to October 15, 2002

Considering that Chua’s computation of claim, as approved by the trial court, [PhP 3,215,362.50 x 12% x 299/365 days]
was submitted only on October 15, 2002, no interest in his favor can be added
to his share of the partnership assets. Consequently, the computation of claims
of Chua should be as follows:
316,074.54

(1) 50% share on assets (exclusive of goodwill)


(7) Moral and exemplary damages
at fair market value
For one, the complaint of Chua for winding up of partnership affairs,
accounting, appraisal, and recovery of shares and damages is clearly a suit to
50,000.00 enforce a solidary or joint and several obligation on the part of petitioners. As
it were, the continuance of the business and management of Shellite by
petitioners against the will of Chua gave rise to a solidary obligation, the acts
complained of not being severable in nature. Indeed, it is well-nigh impossible
to draw the line between when the liability of one petitioner ends and the
(8) Attorney’s fee liability of the other starts. In this kind of situation, the law itself imposes
solidary obligation. Art. 1207 of the Civil Code thus provides:

25,000.00
Art. 1207. The concurrence of two or more creditors or of two or more debtors
(9) Litigation fee in one and the same obligation does not imply that each one of the former has
a right to demand, or that each of the latter is bound to render, entire
25,000.00 compliance with the prestation. There is solidary liability only when the
obligation expressly so states, or when the law or the nature of the obligation
(10) 12% interest on moral and exemplary damages, requires solidarity. (Emphasis ours.)

attorney’s fee, and litigation fee from December 20, 2001 to October 15, 2002

[PhP 100,000 x 12% x 299/365 days] Any suggestion that the obligation to undertake an inventory, render an
accounting of partnership assets, and to wind up the partnership affairs is
divisible ought to be dismissed.
9,830.14

TOTAL AMOUNT
For the other, the duty of petitioners to remit to Chua his half interest and share
PhP 5,529,392.52
of the total partnership assets proceeds from petitioners’ indivisible obligation
to render an accounting and inventory of such assets. The need for the
Second Issue: Petitioners’ Obligation Solidary imposition of a solidary liability becomes all the more pronounced considering
the impossibility of quantifying how much of the partnership assets or profits
Petitioners, on the submission that their liability under the RTC decision is was misappropriated by each petitioner.
divisible, impugn the implementation of the amended writ of execution,
particularly the levy on execution of the absolute community property of
spouses petitioner Sunga-Chan and Norberto Chan. Joint, instead of solidary,
liability for any and all claims of Chua is obviously petitioners’ thesis.
And for a third, petitioners’ obligation for the payment of damages and
attorney’s and litigation fees ought to be solidary in nature, they having resisted
in bad faith a legitimate claim and thus compelled Chua to litigate.

Under the circumstances surrounding the case, we hold that the obligation of
petitioners is solidary for several reasons.
Third Issue: Community Property Liable
Primarily anchored as the last issue is the erroneous theory of divisibility of (3) Debts and obligations contracted by either spouse without the consent of
petitioners’ obligation and their joint liability therefor. The Court needs to dwell the other to the extent that the family may have been benefited. (Emphasis
on it lengthily. ours.)

Given the solidary liability of petitioners to satisfy the judgment award, Absent any indication otherwise, the use and appropriation by petitioner
respondent sheriff cannot really be faulted for levying upon and then selling at Sunga-Chan of the assets of Shellite even after the business was discontinued
public auction the property of petitioner Sunga-Chan to answer for the whole on May 30, 1992 may reasonably be considered to have been used for her
obligation of petitioners. The fact that the levied parcel of land is a conjugal or and her husband’s benefit.
community property, as the case may be, of spouses Norberto and Sunga-
Chan does not per se vitiate the levy and the consequent sale of the property.
Verily, said property is not among those exempted from execution under
Section 13,37 Rule 39 of the Rules of Court.
It may be stressed at this juncture that Chua’s legitimate claim against
petitioners, as readjusted in this disposition, amounts to only PhP
5,529,392.52, whereas Sunga-Chan’s auctioned property which Chua
acquired, as the highest bidder, fetched a price of PhP 8 million. In net effect,
And it cannot be overemphasized that the TRO issued by the Court on May Chua owes petitioner Sunga-Chan the amount of PhP 2,470,607.48,
31, 2005 came after the auction sale in question. representing the excess of the purchase price over his legitimate claims.

Parenthetically, the records show that spouses Sunga-Chan and Norberto Following the auction, the corresponding certificate of sale dated January 15,
were married on February 4, 1992, or after the effectivity of the Family Code 2004 was annotated on TCT No. 208782. On January 21, 2005, Chua moved
on August 3, 1988. Withal, their absolute community property may be held for the issuance of a final deed of sale (1) to order the Registry of Deeds of
liable for the obligations contracted by either spouse. Specifically, Art. 94 of Manila to cancel TCT No. 208782; (2) to issue a new TCT in his name; and (3)
said Code pertinently provides: for the RTC to issue a writ of possession in his favor. And as earlier stated, the
RTC granted Chua’s motion, albeit the Court restrained the enforcement of the
RTC’s package of orders via a TRO issued on May 31, 2005.

Art. 94. The absolute community of property shall be liable for: Therefore, subject to the payment by Chua of PhP 2,470,607.48 to petitioner
Sunga-Chan, we affirm the RTC’s April 11, 2005 resolution, confirming the
sheriff’s final deed of sale of the levied property, ordering the Registry of Deeds
of Manila to cancel TCT No. 208782, and issuing a writ of possession in favor
of Chua.
(1) x x x x
WHEREFORE, this petition is PARTLY GRANTED. Accordingly, the assailed
decision and resolution of the CA in CA-G.R. SP No. 75688 are hereby
AFFIRMED with the following MODIFICATIONS:
(2) All debts and obligations contracted during the marriage by the designated
administrator-spouse for the benefit of the community, or by both spouses, or (1) The Resolutions dated November 6, 2002 and January 7, 2003 of the RTC,
by one spouse with the consent of the other. Branch 11 in Sindangan, Zamboanga Del Norte in Civil Case No. S-494, as
effectively upheld by the CA, are AFFIRMED with the modification that the
approved claim of respondent Chua is hereby corrected and adjusted to cover
only the aggregate amount of PhP 5,529,392.52;

(2) Subject to the payment by respondent Chua of PhP 2,470,607.48 to


petitioner Sunga-Chan, the Resolution dated April 11, 2005 of the RTC,
confirming the sheriff’s final deed of sale of the levied property, ordering the
Registry of Deeds of Manila to cancel TCT No. 208782, and issuing a writ of
possession in favor of respondent Chua, is AFFIRMED; and

The TRO issued by the Court on May 31, 2005 in the instant petition is LIFTED.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 154486 December 1, 2010 properties, and construct buildings, among other things.9 This partnership
ended in 1973 when the parties, in an "Agreement,"10 voluntarily agreed to
FEDERICO JARANTILLA, JR., Petitioner, completely dissolve their "joint business relationship/arrangement."11
vs.
ANTONIETA JARANTILLA, BUENAVENTURA REMOTIGUE, substituted On April 29, 1957, the spouses Buenaventura and Conchita Remotigue
by CYNTHIA REMOTIGUE, DOROTEO JARANTILLA and TOMAS executed a document wherein they acknowledged that while registered only in
JARANTILLA, Respondents. Buenaventura Remotigue’s name, they were not the only owners of the capital
of the businesses Manila Athletic Supply (712 Raon Street, Manila),
DECISION Remotigue Trading (Calle Real, Iloilo City) and Remotigue Trading (Cotabato
City). In this same "Acknowledgement of Participating Capital," they stated the
LEONARDO-DE CASTRO, J.: participating capital of their co-owners as of the year 1952, with Antonieta
Jarantilla’s stated as eight thousand pesos (₱8,000.00) and Federico
Jarantilla, Jr.’s as five thousand pesos (₱5,000.00).12
This petition for review on certiorari1 seeks to modify the Decision2 of the Court
of Appeals dated July 30, 2002 in CA-G.R. CV No. 40887, which set aside the
The present case stems from the amended complaint 13 dated April 22, 1987
Decision3 dated December 18, 1992 of the Regional Trial Court (RTC) of
filed by Antonieta Jarantilla against Buenaventura Remotigue, Cynthia
Quezon City, Branch 98 in Civil Case No. Q-50464.
Remotigue, Federico Jarantilla, Jr., Doroteo Jarantilla and Tomas Jarantilla,
for the accounting of the assets and income of the co-ownership, for its
The pertinent facts are as follows: 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
The spouses Andres Jarantilla and Felisa Jaleco were survived by eight agreement with Conchita and Buenaventura Remotigue, Rafael Jarantilla, and
children: Federico, Delfin, Benjamin, Conchita, Rosita, Pacita, Rafael and Rosita and Vivencio Deocampo to engage in business. Antonieta alleged that
Antonieta.4 Petitioner Federico Jarantilla, Jr. is the grandchild of the late the initial contribution of property and money came from the heirs’ inheritance,
Jarantilla spouses by their son Federico Jarantilla, Sr. and his wife Leda and her subsequent annual investment of seven thousand five hundred pesos
Jamili.5 Petitioner also has two other brothers: Doroteo and Tomas Jarantilla. (₱7,500.00) as additional capital came from the proceeds of her farm.
Antonieta also alleged that from 1946-1969, she had helped in the
Petitioner was one of the defendants in the complaint before the RTC while management of the business they co-owned without receiving any salary. Her
Antonieta Jarantilla, his aunt, was the plaintiff therein. His co-respondents salary was supposedly rolled back into the business as additional investments
before he joined his aunt Antonieta in her complaint, were his late aunt in her behalf. Antonieta further claimed co-ownership of certain
Conchita Jarantilla’s husband Buenaventura Remotigue, who died during the properties14 (the subject real properties) in the name of the defendants since
pendency of the case, his cousin Cynthia Remotigue, the adopted daughter of the only way the defendants could have purchased these properties were
Conchita Jarantilla and Buenaventura Remotigue, and his brothers Doroteo through the partnership as they had no other source of income.
and Tomas Jarantilla.6
The respondents, including petitioner herein, in their Answer, 15 denied having
In 1948, the Jarantilla heirs extrajudicially partitioned amongst themselves the formed a partnership with Antonieta in 1946. They claimed that she was in no
real properties of their deceased parents.7 With the exception of the real position to do so as she was still in school at that time. In fact, the proceeds of
property adjudicated to Pacita Jarantilla, the heirs also agreed to allot the the lands they partitioned were devoted to her studies. They also averred that
produce of the said real properties for the years 1947-1949 for the studies of while she may have helped in the businesses that her older sister Conchita
Rafael and Antonieta Jarantilla.8 had formed with Buenaventura Remotigue, she was paid her due salary. They
did not deny the existence and validity of the "Acknowledgement of
In the same year, the spouses Rosita Jarantilla and Vivencio Deocampo Participating Capital" and in fact used this as evidence to support their claim
entered into an agreement with the spouses Buenaventura Remotigue and that Antonieta’s 8% share was limited to the businesses enumerated therein.
Conchita Jarantilla to provide mutual assistance to each other by way of With regard to Antonieta’s claim in their other corporations and businesses,
financial support to any commercial and agricultural activity on a joint business the respondents said these should also be limited to the number of her shares
arrangement. This business relationship proved to be successful as they were as specified in the respective articles of incorporation. The respondents denied
able to establish a manufacturing and trading business, acquire real
using the partnership’s income to purchase the subject real properties and said 6. to pay, jointly and severally, the costs of the suit.21
that the certificates of title should be binding on her.16
Both the petitioner and the respondents appealed this decision to the Court of
During the course of the trial at the RTC, petitioner Federico Jarantilla, Jr., who Appeals. The petitioner claimed that the RTC "erred in not rendering a
was one of the original defendants, entered into a compromise complete judgment and ordering the partition of the co-ownership and giving
agreement17 with Antonieta Jarantilla wherein he supported Antonieta’s claims to [him] six per centum (6%) of the properties."22
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 While the Court of Appeals agreed to some of the RTC’s factual findings, it
judgment in this wise: also established that Antonieta Jarantilla was not part of the partnership
formed in 1946, and that her 8% share was limited to the businesses
Defendant Federico Jarantilla, Jr., hereby joins in plaintiff’s prayer for an enumerated in the Acknowledgement of Participating Capital. On July 30,
accounting from the other defendants, and the partition of the properties of the 2002, the Court of Appeals rendered the herein challenged decision setting
co-ownership and the delivery to the plaintiff and to defendant Federico aside the RTC’s decision, as follows:
Jarantilla, Jr. of their rightful share of the assets and properties in the co-
ownership.181avvphi1 WHEREFORE, the decision of the trial court, dated 18 December 1992 is SET
ASIDE and a new one is hereby entered ordering that:
The RTC, in an Order19 dated March 25, 1992, approved the Joint Motion to
Approve Compromise Agreement20and on December 18, 1992, decided in (1) after accounting, plaintiff Antonieta Jarantilla be given her share of
favor of Antonieta, to wit: 8% in the assets and profits of Manila Athletic Supply, Remotigue
Trading in Iloilo City and Remotigue Trading in Cotabato City;
WHEREFORE, premises above-considered, the Court renders judgment in
favor of the plaintiff Antonieta Jarantilla and against defendants Cynthia (2) after accounting, defendant Federico Jarantilla, Jr. be given his
Remotigue, Doroteo Jarantilla and Tomas Jarantilla ordering the latter: share of 6% of the assets and profits of the above-mentioned
enterprises; and, holding that
1. to deliver to the plaintiff her 8% share or its equivalent amount on
the real properties covered by TCT Nos. 35655, 338398, 338399 & (3) plaintiff Antonieta Jarantilla is a stockholder in the following
335395, all of the Registry of Deeds of Quezon City; TCT Nos. corporations to the extent stated in their Articles of Incorporation:
(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
(a) Rural Bank of Barotac Nuevo, Inc.;
based on their present market value;
(b) MAS Rubber Products, Inc.;
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 (c) Manila Athletic Supply, Inc.; and
based on the shares of stocks present book value;
(d) B. Remotigue Agro-Industrial Development Corp.
3. to account for the assets and income of the co-ownership and
deliver to plaintiff her rightful share thereof equivalent to 8%; (4) No costs.23

4. to pay plaintiff, jointly and severally, the sum of ₱50,000.00 as moral The respondents, on August 20, 2002, filed a Motion for Partial
damages; Reconsideration but the Court of Appeals denied this in a Resolution 24 dated
March 21, 2003.
5. to pay, jointly and severally, the sum of ₱50,000.00 as attorney’s
fees; and Antonieta Jarantilla filed before this Court her own petition for review
on certiorari25 dated September 16, 2002, assailing the Court of Appeals’
decision on "similar grounds and similar assignments of errors as this present Since the Court of Appeals did not fully adopt the factual findings of the RTC,
case"26 but it was dismissed on November 20, 2002 for failure to file the appeal this Court, in resolving the questions of law that are now in issue, shall look
within the reglementary period of fifteen (15) days in accordance with Section into the facts only in so far as the two courts a quo differed in their appreciation
2, Rule 45 of the Rules of Court.27 thereof.

Petitioner filed before us this petition for review on the sole ground that: The RTC found that an unregistered partnership existed since 1946 which was
affirmed in the 1957 document, the "Acknowledgement of Participating
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN NOT Capital." The RTC used this as its basis for giving Antonieta Jarantilla an 8%
RULING THAT PETITIONER FEDERICO JARANTILLA, JR. IS ENTITLED TO share in the three businesses listed therein and in the other businesses and
A SIX PER CENTUM (6%) SHARE OF THE OWNERSHIP OF THE REAL real properties of the respondents as they had supposedly acquired these
PROPERTIES ACQUIRED BY THE OTHER DEFENDANTS USING through funds from the partnership.31
COMMON FUNDS FROM THE BUSINESSES WHERE HE HAD OWNED
SUCH SHARE.28 The Court of Appeals, on the other hand, agreed with the RTC as to
Antonieta’s 8% share in the business enumerated in the Acknowledgement of
Petitioner asserts that he was in a partnership with the Remotigue spouses, Participating Capital, but not as to her share in the other corporations and real
the Deocampo spouses, Rosita Jarantilla, Rafael Jarantilla, Antonieta properties. The Court of Appeals ruled that Antonieta’s claim of 8% is based
Jarantilla and Quintin Vismanos, as evidenced by the Acknowledgement of on the "Acknowledgement of Participating Capital," a duly notarized document
Participating Capital the Remotigue spouses executed in 1957. He contends which was specific as to the subject of its coverage. Hence, there was no
that from this partnership, several other corporations and businesses were reason to pattern her share in the other corporations from her share in the
established and several real properties were acquired. In this petition, he is partnership’s businesses. The Court of Appeals also said that her claim in the
essentially asking for his 6% share in the subject real properties. He is relying respondents’ real properties was more "precarious" as these were all covered
on the Acknowledgement of Participating Capital, on his own testimony, and by certificates of title which served as the best evidence as to all the matters
Antonieta Jarantilla’s testimony to support this contention. contained therein.32 Since petitioner’s claim was essentially the same as
Antonieta’s, the Court of Appeals also ruled that petitioner be given his 6%
share in the same businesses listed in the Acknowledgement of Participating
The core issue is whether or not the partnership subject of the
Capital.
Acknowledgement of Participating Capital funded the subject real properties.
In other words, what is the petitioner’s right over these real properties?
Factual findings of the trial court, when confirmed by the Court of Appeals, are
It is a settled rule that in a petition for review on certiorari under Rule 45 of the 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
Rules of Civil Procedure, only questions of law may be raised by the parties
of discretion; (3) when the finding is grounded entirely on speculations,
and passed upon by this Court.29
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
A question of law arises when there is doubt as to what the law is on a certain conflicting; (6) when the Court of Appeals, in making its findings, went beyond
state of facts, while there is a question of fact when the doubt arises as to the the issues of the case and the same is contrary to the admissions of both
truth or falsity of the alleged facts. For a question to be one of law, the same appellant and appellee; (7) when the findings of the Court of Appeals are
must not involve an examination of the probative value of the evidence contrary to those of the trial court; (8) when the findings of fact are conclusions
presented by the litigants or any of them. The resolution of the issue must rest without citation of specific evidence on which they are based; (9) when the
solely on what the law provides on the given set of circumstances. Once it is Court of Appeals manifestly overlooked certain relevant facts not disputed by
clear that the issue invites a review of the evidence presented, the question the parties and which, if properly considered, would justify a different
posed is one of fact. Thus, the test of whether a question is one of law or of conclusion; and (10) when the findings of fact of the Court of Appeals are
fact is not the appellation given to such question by the party raising the same; premised on the absence of evidence and are contradicted by the evidence on
rather, it is whether the appellate court can determine the issue raised without record.33
reviewing or evaluating the evidence, in which case, it is a question of law;
otherwise it is a question of fact.30
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 but who severally retain the title to their respective contribution, are not thereby
the respondents as a co-ownership, but in the same breath, assert that a rendered partners. They have no common stock or capital, and no community
verbal partnership was formed in 1946 and was affirmed in the 1957 of interest as principal proprietors in the business itself which the proceeds
Acknowledgement of Participating Capital. derived.

There is a co-ownership when an undivided thing or right belongs to different A joint purchase of land, by two, does not constitute a co-partnership in respect
persons.34 It is a partnership when two or more persons bind themselves to thereto; nor does an agreement to share the profits and losses on the sale of
contribute money, property, or industry to a common fund, with the intention of land create a partnership; the parties are only tenants in common.
dividing the profits among themselves.35 The Court, in Pascual v. The
Commissioner of Internal Revenue,36 quoted the concurring opinion of Mr. Where plaintiff, his brother, and another agreed to become owners of a single
Justice Angelo Bautista in Evangelista v. The Collector of Internal tract of realty, holding as tenants in common, and to divide the profits of
Revenue37 to further elucidate on the distinctions between a co-ownership and disposing of it, the brother and the other not being entitled to share in plaintiff’s
a partnership, to wit: commission, no partnership existed as between the three parties, whatever
their relation may have been as to third parties.
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 In order to constitute a partnership inter sese there must be: (a) An intent to
a partnership or a co-ownership. Said article paragraphs 2 and 3, provides; 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
(2) Co-ownership or co-possession does not itself establish a each party to make contract, manage the business, and dispose of the whole
partnership, whether such co-owners or co-possessors do or do not property. x x x.
share any profits made by the use of the property;
The common ownership of property does not itself create a partnership
(3) The sharing of gross returns does not of itself establish a between the owners, though they may use it for the purpose of making gains;
partnership, whether or not the persons sharing them have a joint or and they may, without becoming partners, agree among themselves as to the
common right or interest in any property from which the returns are management, and use of such property and the application of the proceeds
derived; therefrom.38 (Citations omitted.)

From the above it appears that the fact that those who agree to form a co- Under Article 1767 of the Civil Code, there are two essential elements in a
ownership share or do not share any profits made by the use of the property contract of partnership: (a) an agreement to contribute money, property or
held in common does not convert their venture into a partnership. Or the industry to a common fund; and (b) intent to divide the profits among the
sharing of the gross returns does not of itself establish a partnership whether contracting parties. The first element is undoubtedly present in the case at bar,
or not the persons sharing therein have a joint or common right or interest in for, admittedly, all the parties in this case have agreed to, and did, contribute
the property. This only means that, aside from the circumstance of profit, the money and property to a common fund. Hence, the issue narrows down to
presence of other elements constituting partnership is necessary, such as the their intent in acting as they did.39 It is not denied that all the parties in this case
clear intent to form a partnership, the existence of a juridical personality have agreed to contribute capital to a common fund to be able to later on share
different from that of the individual partners, and the freedom to transfer or its profits. They have admitted this fact, agreed to its veracity, and even
assign any interest in the property by one with the consent of the others. submitted one common documentary evidence to prove such partnership - the
Acknowledgement of Participating Capital.
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 As this case revolves around the legal effects of the Acknowledgement of
circumstances showing a contrary intention cannot be considered a Participating Capital, it would be instructive to examine the pertinent portions
partnership. of this document:

Persons who contribute property or funds for a common enterprise and agree ACKNOWLEDGEMENT OF
to share the gross returns of that enterprise in proportion to their contribution, PARTICIPATING CAPITAL
KNOW ALL MEN BY THESE PRESENTS: [Sgd.]
CONCHITA JARANTILLA DE REMOTIGUE40
That we, the spouses Buenaventura Remotigue and Conchita Jarantilla de
Remotigue, both of legal age, Filipinos and residents of Loyola Heights, The Acknowledgement of Participating Capital is a duly notarized document
Quezon City, P.I. hereby state: voluntarily executed by Conchita Jarantilla-Remotigue and Buenaventura
Remotigue in 1957. Petitioner does not dispute its contents and is actually
That the Manila Athletic Supply at 712 Raon, Manila, the Remotigue Trading relying on it to prove his participation in the partnership. Article 1797 of the
of Calle Real, Iloilo City and the Remotigue Trading, Cotabato Branch, Civil Code provides:
Cotabato, P.I., all dealing in athletic goods and equipments, and general
merchandise are recorded in their respective books with Buenaventura Art. 1797. The losses and profits shall be distributed in conformity with the
Remotigue as the registered owner and are being operated by them as such: 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.
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 In the absence of stipulation, the share of each partner in the profits and losses
the other co-owners as of the year 1952 are stated as follows: 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
1. Buenaventura Remotigue (TWENTY-FIVE THOUSAND)₱25,000.00 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.)
2. Conchita Jarantilla de Remotigue (TWENTY-FIVE THOUSAND)…
25,000.00
It is clear from the foregoing that a partner is entitled only to his share as
3. Vicencio Deocampo (FIFTEEN THOUSAND)…… 15,000.00 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.
4. Rosita J. Deocampo (FIFTEEN THOUSAND)….... 15,000.00 However, petitioner fails to realize that this document specifically enumerated
the businesses covered by the partnership: Manila Athletic Supply, Remotigue
5. Antonieta Jarantilla (EIGHT THOUSAND)……….. 8,000.00 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
6. Rafael Jarantilla (SIX THOUSAND)…………….. ... 6,000.00 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
7. Federico Jarantilla, Jr. (FIVE THOUSAND)……….. 5,000.00 not err in limiting petitioner’s share to the assets of the businesses enumerated
in the Acknowledgement of Participating Capital.
8. Quintin Vismanos (TWO THOUSAND)…………... 2,000.00
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
That aside from the persons mentioned in the next preceding paragraph, no
only to its total resources, to wit:
other person has any interest in the above-mentioned three establishments.
Since it is the partnership, as a separate and distinct entity, that must refund
IN WITNESS WHEREOF, they sign this instrument in the City of Manila, P.I.,
the shares of the partners, the amount to be refunded is necessarily limited to
this 29th day of April, 1957.
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
[Sgd.] shares, the creditors of the partnership must first be compensated. After all the
BUENAVENTURA REMOTIGUE 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 In essence, the petitioner is claiming his 6% share in the subject real
partnership referred to in the Acknowledgement of Participating Capital. properties, by relying on his own self-serving testimony and the equally biased
testimony of Antonieta Jarantilla. Petitioner has not presented evidence, other
The petitioner further asserts that he is entitled to respondents’ properties than these unsubstantiated testimonies, to prove that the respondents did not
based on the concept of trust. He claims that since the subject real properties have the means to fund their other businesses and real properties without the
were purchased using funds of the partnership, wherein he has a 6% share, partnership’s income. On the other hand, the respondents have not only, by
then "law and equity mandates that he should be considered as a co-owner of testimonial evidence, proven their case against the petitioner, but have also
those properties in such proportion."43 In Pigao v. Rabanillo,44 this Court presented sufficient documentary evidence to substantiate their claims,
explained the concept of trusts, to wit: 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
Express trusts are created by the intention of the trustor or of the parties, while
receipts do not conclusively prove ownership, they may constitute strong
implied trusts come into being by operation of law, either through implication
evidence of ownership when accompanied by possession for a period
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, sufficient for prescription."48 Moreover, it is a rule in this jurisdiction that
implied trusts are either resulting or constructive trusts. Resulting trusts are testimonial evidence cannot prevail over documentary evidence. 49 This Court
had on several occasions, expressed our disapproval on using mere self-
based on the equitable doctrine that valuable consideration and not legal title
serving testimonies to support one’s claim. In Ocampo v. Ocampo, 50 a case
determines the equitable title or interest and are presumed always to have
on partition of a co-ownership, we held that:
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 Petitioners assert that their claim of co-ownership of the property was
for the benefit of another.45 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 proving the existence of a trust, this Court held that:
on the testimonies of witnesses; much less on those of interested parties, self-
serving as they are.51
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:
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
"As a rule, the burden of proving the existence of a trust is on the party does not create or vest title as registration is not a mode of acquiring
asserting its existence, and such proof must be clear and satisfactorily show ownership; hence, this cannot deprive an aggrieved party of a remedy in
the existence of the trust and its elements. While implied trusts may be proved law.52 However, petitioner asserts ownership over portions of the subject real
by oral evidence, the evidence must be trustworthy and received by the courts properties on the strength of his own admissions and on the testimony of
with extreme caution, and should not be made to rest on loose, equivocal or Antonieta Jarantilla.1avvphi1 As held by this Court in Republic of the
indefinite declarations. Trustworthy evidence is required because oral Philippines v. Orfinada, Sr.53:
evidence can easily be fabricated." 46
Indeed, a Torrens title is generally conclusive evidence of ownership of the
The petitioner has failed to prove that there exists a trust over the subject real land referred to therein, and a strong presumption exists that a Torrens title
properties. Aside from his bare allegations, he has failed to show that the was regularly issued and valid. A Torrens title is incontrovertible against
respondents used the partnership’s money to purchase the said properties. any informacion possessoria, of other title existing prior to the issuance thereof
Even assuming arguendo that some partnership income was used to acquire not annotated on the Torrens title. Moreover, persons dealing with property
these properties, the petitioner should have successfully shown that these covered by a Torrens certificate of title are not required to go beyond what
funds came from his share in the partnership profits. After all, by his own appears on its face.54
admission, and as stated in the Acknowledgement of Participating Capital, he
owned a mere 6% equity in the partnership.
As we have settled that this action never really was for partition of a co-
ownership, to permit petitioner’s 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 Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General
these certificates of title, more so since plaintiff’s [petitioner’s] claims amount Felicisimo R. Rosete and Special Attorneys B. Gatdula, Jr. and T. Temprosa
to a collateral attack, which is prohibited under Section 48 of Presidential Jr. for petitioner.
Decree No. 1529, the Property Registration Decree."55 A. S. Monzon, Gutierrez, Farrales and Ong for respondents.

SEC. 48. Certificate not subject to collateral attack. – A certificate of title shall REYES, J.B.L., J.:
not be subject to collateral attack. It cannot be altered, modified, or cancelled
except in a direct proceeding in accordance with law. A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed
on 30 September 1947 by herein respondent William J. Suter as the general
This Court has deemed an action or proceeding to be "an attack on a title when partner, and Julia Spirig and Gustav Carlson, as the limited partners. The
its objective is to nullify the title, thereby challenging the judgment pursuant to partners contributed, respectively, P20,000.00, P18,000.00 and P2,000.00 to
which the title was decreed."56 In Aguilar v. Alfaro,57 this Court further the partnership. On 1 October 1947, the limited partnership was registered
distinguished between a direct and an indirect or collateral attack, as follows: with the Securities and Exchange Commission. The firm engaged, among
other activities, in the importation, marketing, distribution and operation of
A collateral attack transpires when, in another action to obtain a different relief automatic phonographs, radios, television sets and amusement machines,
and as an incident to the present action, an attack is made against the their parts and accessories. It had an office and held itself out as a limited
judgment granting the title. This manner of attack is to be distinguished from a partnership, handling and carrying merchandise, using invoices, bills and
direct attack against a judgment granting the title, through an action whose letterheads bearing its trade-name, maintaining its own books of accounts and
main objective is to annul, set aside, or enjoin the enforcement of such bank accounts, and had a quota allocation with the Central Bank.
judgment if not yet implemented, or to seek recovery if the property titled under
the judgment had been disposed of. x x x. In 1948, however, general partner Suter and limited partner Spirig got married
and, thereafter, on 18 December 1948, limited partner Carlson sold his share
Petitioner’s only piece of documentary evidence is the Acknowledgement of in the partnership to Suter and his wife. The sale was duly recorded with the
Participating Capital, which as discussed above, failed to prove that the real Securities and Exchange Commission on 20 December 1948.
properties he is claiming co-ownership of were acquired out of the proceeds
of the businesses covered by such document. Therefore, petitioner’s theory The limited partnership had been filing its income tax returns as a corporation,
has no factual or legal leg to stand on. without objection by the herein petitioner, Commissioner of Internal Revenue,
until in 1959 when the latter, in an assessment, consolidated the income of the
WHEREFORE, the Petition is hereby DENIED and the Decision of the Court firm and the individual incomes of the partners-spouses Suter and Spirig
of Appeals in CA-G.R. CV No. 40887, dated July 30, 2002 is AFFIRMED. resulting in a determination of a deficiency income tax against respondent
Suter in the amount of P2,678.06 for 1954 and P4,567.00 for 1955.
SO ORDERED.
Respondent Suter protested the assessment, and requested its cancellation
and withdrawal, as not in accordance with law, but his request was denied.
Unable to secure a reconsideration, he appealed to the Court of Tax Appeals,
which court, after trial, rendered a decision, on 11 November 1965, reversing
that of the Commissioner of Internal Revenue.

The present case is a petition for review, filed by the Commissioner of Internal
Revenue, of the tax court's aforesaid decision. It raises these issues:
G.R. No. L-25532 February 28, 1969
(a) Whether or not the corporate personality of the William J. Suter "Morcoin"
COMMISSIONER OF INTERNAL REVENUE, petitioner, Co., Ltd. should be disregarded for income tax purposes, considering that
vs. respondent William J. Suter and his wife, Julia Spirig Suter actually formed a
WILLIAM J. SUTER and THE COURT OF TAX APPEALS, respondents. single taxable unit; and
(b) Whether or not the partnership was dissolved after the marriage of the from entering into universal partnerships. (2 Echaverri 196) It follows
partners, respondent William J. Suter and Julia Spirig Suter and the that the marriage of partners necessarily brings about the dissolution
subsequent sale to them by the remaining partner, Gustav Carlson, of his of a pre-existing partnership. (1 Guy de Montella 58)
participation of P2,000.00 in the partnership for a nominal amount of P1.00.
The petitioner-appellant has evidently failed to observe the fact that William J.
The theory of the petitioner, Commissioner of Internal Revenue, is that the Suter "Morcoin" Co., Ltd. was not a universal partnership, but a particular one.
marriage of Suter and Spirig and their subsequent acquisition of the interests As appears from Articles 1674 and 1675 of the Spanish Civil Code, of 1889
of remaining partner Carlson in the partnership dissolved the limited (which was the law in force when the subject firm was organized in 1947),
partnership, and if they did not, the fiction of juridical personality of the a universal partnership requires either that the object of the association be all
partnership should be disregarded for income tax purposes because the the present property of the partners, as contributed by them to the common
spouses have exclusive ownership and control of the business; consequently fund, or else "all that the partners may acquire by their industry or work during
the income tax return of respondent Suter for the years in question should the existence of the partnership". William J. Suter "Morcoin" Co., Ltd. was not
have included his and his wife's individual incomes and that of the limited such a universal partnership, since the contributions of the partners were fixed
partnership, in accordance with Section 45 (d) of the National Internal sums of money, P20,000.00 by William Suter and P18,000.00 by Julia Spirig
Revenue Code, which provides as follows: and neither one of them was an industrial partner. It follows that William J.
Suter "Morcoin" Co., Ltd. was not a partnership that spouses were forbidden
(d) Husband and wife. — In the case of married persons, whether to enter by Article 1677 of the Civil Code of 1889.
citizens, residents or non-residents, only one consolidated return for
the taxable year shall be filed by either spouse to cover the income of The former Chief Justice of the Spanish Supreme Court, D. Jose Casan, in his
both spouses; .... Derecho Civil, 7th Edition, 1952, Volume 4, page 546, footnote 1, says with
regard to the prohibition contained in the aforesaid Article 1677:
In refutation of the foregoing, respondent Suter maintains, as the Court of Tax
Appeals held, that his marriage with limited partner Spirig and their acquisition Los conyuges, segun esto, no pueden celebrar entre si el contrato de
of Carlson's interests in the partnership in 1948 is not a ground for dissolution sociedad universal, pero o podran constituir sociedad particular?
of the partnership, either in the Code of Commerce or in the New Civil Code, Aunque el punto ha sido muy debatido, nos inclinamos a la tesis
and that since its juridical personality had not been affected and since, as a permisiva de los contratos de sociedad particular entre esposos, ya
limited partnership, as contra distinguished from a duly registered general que ningun precepto de nuestro Codigo los prohibe, y hay que estar
partnership, it is taxable on its income similarly with corporations, Suter was a la norma general segun la que toda persona es capaz para contratar
not bound to include in his individual return the income of the limited mientras no sea declarado incapaz por la ley. La jurisprudencia de la
partnership. Direccion de los Registros fue favorable a esta misma tesis en su
resolution de 3 de febrero de 1936, mas parece cambiar de rumbo en
We find the Commissioner's appeal unmeritorious. la de 9 de marzo de 1943.

The thesis that the limited partnership, William J. Suter "Morcoin" Co., Ltd., Nor could the subsequent marriage of the partners operate to dissolve it, such
has been dissolved by operation of law because of the marriage of the only marriage not being one of the causes provided for that purpose either by the
general partner, William J. Suter to the originally limited partner, Julia Spirig Spanish Civil Code or the Code of Commerce.
one year after the partnership was organized is rested by the appellant upon
the opinion of now Senator Tolentino in Commentaries and Jurisprudence on The appellant's view, that by the marriage of both partners the company
Commercial Laws of the Philippines, Vol. 1, 4th Ed., page 58, that reads as became a single proprietorship, is equally erroneous. The capital contributions
follows: of partners William J. Suter and Julia Spirig were separately owned and
contributed by them before their marriage; and after they were joined in
A husband and a wife may not enter into a contract wedlock, such contributions remained their respective separate property under
of general copartnership, because under the Civil Code, which applies the Spanish Civil Code (Article 1396):
in the absence of express provision in the Code of Commerce,
persons prohibited from making donations to each other are prohibited The following shall be the exclusive property of each spouse:
(a) That which is brought to the marriage as his or her own; .... copartnership (compañia colectiva) and a limited partnership, when the code
plainly differentiates the two. Thus, the code taxes the latter on its income, but
Thus, the individual interest of each consort in William J. Suter "Morcoin" Co., not the former, because it is in the case of compañias colectivas that the
Ltd. did not become common property of both after their marriage in 1948. members, and not the firm, are taxable in their individual capacities for any
dividend or share of the profit derived from the duly registered general
partnership (Section 26, N.I.R.C.; Arañas, Anno. & Juris. on the N.I.R.C., As
It being a basic tenet of the Spanish and Philippine law that the partnership
Amended, Vol. 1, pp. 88-89).lawphi1.nêt
has a juridical personality of its own, distinct and separate from that of its
partners (unlike American and English law that does not recognize such
separate juridical personality), the bypassing of the existence of the limited But it is argued that the income of the limited partnership is actually or
partnership as a taxpayer can only be done by ignoring or disregarding clear constructively the income of the spouses and forms part of the conjugal
statutory mandates and basic principles of our law. The limited partnership's partnership of gains. This is not wholly correct. As pointed out in Agapito vs.
separate individuality makes it impossible to equate its income with that of the Molo 50 Phil. 779, and People's Bank vs. Register of Deeds of Manila, 60 Phil.
component members. True, section 24 of the Internal Revenue Code merges
registered general co-partnerships (compañias colectivas) with the personality 167, the fruits of the wife's parapherna become conjugal only when no longer
of the individual partners for income tax purposes. But this rule is exceptional needed to defray the expenses for the administration and preservation of the
in its disregard of a cardinal tenet of our partnership laws, and can not be paraphernal capital of the wife. Then again, the appellant's argument
extended by mere implication to limited partnerships. erroneously confines itself to the question of the legal personality of the limited
partnership, which is not essential to the income taxability of the partnership
The rulings cited by the petitioner (Collector of Internal Revenue vs. University since the law taxes the income of even joint accounts that have no personality
of the Visayas, L-13554, Resolution of 30 October 1964, and Koppel [Phil.], of their own. 1 Appellant is, likewise, mistaken in that it assumes that the
Inc. vs. Yatco, 77 Phil. 504) as authority for disregarding the fiction of legal conjugal partnership of gains is a taxable unit, which it is not. What is taxable
personality of the corporations involved therein are not applicable to the is the "income of both spouses" (Section 45 [d] in their individual capacities.
present case. In the cited cases, the corporations were already subject to tax Though the amount of income (income of the conjugal partnership vis-a-vis the
when the fiction of their corporate personality was pierced; in the present case, joint income of husband and wife) may be the same for a given taxable year,
to do so would exempt the limited partnership from income taxation but would their consequences would be different, as their contributions in the business
throw the tax burden upon the partners-spouses in their individual capacities. partnership are not the same.
The corporations, in the cases cited, merely served as business conduits
or alter egos of the stockholders, a factor that justified a disregard of their The difference in tax rates between the income of the limited partnership being
corporate personalities for tax purposes. This is not true in the present case. consolidated with, and when split from the income of the spouses, is not a
Here, the limited partnership is not a mere business conduit of the partner- justification for requiring consolidation; the revenue code, as it presently
spouses; it was organized for legitimate business purposes; it conducted its stands, does not authorize it, and even bars it by requiring the limited
own dealings with its customers prior to appellee's marriage, and had been partnership to pay tax on its own income.
filing its own income tax returns as such independent entity. The change in its
membership, brought about by the marriage of the partners and their FOR THE FOREGOING REASONS, the decision under review is hereby
subsequent acquisition of all interest therein, is no ground for withdrawing the affirmed. No costs.
partnership from the coverage of Section 24 of the tax code, requiring it to pay
income tax. As far as the records show, the partners did not enter into
matrimony and thereafter buy the interests of the remaining partner with the
premeditated scheme or design to use the partnership as a business conduit
to dodge the tax laws. Regularity, not otherwise, is presumed.

As the limited partnership under consideration is taxable on its income, to


require that income to be included in the individual tax return of respondent
Suter is to overstretch the letter and intent of the law. In fact, it would even
conflict with what it specifically provides in its Section 24: for the appellant
Commissioner's stand results in equal treatment, tax wise, of a general
G.R. No. L-59956 October 31, 1984

ISABELO MORAN, JR., petitioner,


vs.
THE HON. COURT OF APPEALS and MARIANO E. PECSON, respondents.

GUTIERREZ, JR., J.:ñé+.£ªwph!1

This is a petition for review on certiorari of the decision of the respondent Court
of Appeals which ordered petitioner Isabelo Moran, Jr. to pay damages to
respondent Mariano E, Pecson.

As found by the respondent Court of Appeals, the undisputed facts indicate


that: têñ.£îhqwâ£

xxx xxx xxx

... on February 22, 1971 Pecson and Moran entered into an


agreement whereby both would contribute P15,000 each for
the purpose of printing 95,000 posters (featuring the
delegates to the 1971 Constitutional Convention), with Moran
actually supervising the work; that Pecson would receive a
commission of P l,000 a month starting on April 15, 1971 up
to December 15, 1971; that on December 15, 1971, a
liquidation of the accounts in the distribution and printing of
the 95,000 posters would be made, that Pecson gave Moran
P10,000 for which the latter issued a receipt; that only a few
posters were printed; that on or about May 28, 1971, Moran
executed in favor of Pecson a promissory note in the amount
of P20,000 payable in two equal installments (P10,000
payable on or before June 15, 1971 and P10,000 payable on
or before June 30, 1971), the whole sum becoming due upon
default in the payment of the first installment on the date due,
complete with the costs of collection.
Private respondent Pecson filed with the Court of First Instance of Manila an (a) Forty-seven thousand five hundred (P47,500) (the amount
action for the recovery of a sum of money and alleged in his complaint three that could have accrued to Pecson under their agreement);
(3) causes of action, namely: (1) on the alleged partnership agreement, the
return of his contribution of P10,000.00, payment of his share in the profits that (b) Eight thousand (P8,000), (the commission for eight
the partnership would have earned, and, payment of unpaid commission; (2) months);
on the alleged promissory note, payment of the sum of P20,000.00; and, (3)
moral and exemplary damages and attorney's fees.
(c) Seven thousand (P7,000) (as a return of Pecson's
investment for the Veteran's Project);
After the trial, the Court of First Instance held that: têñ.£îhqwâ£
(d) Legal interest on (a), (b) and (c) from the date the
From the evidence presented it is clear in the mind of the court complaint was filed (up to the time payment is made)
that by virtue of the partnership agreement entered into by the
parties-plaintiff and defendant the plaintiff did contribute The petitioner contends that the respondent Court of Appeals decided
P10,000.00, and another sum of P7,000.00 for the Voice of
questions of substance in a way not in accord with law and with Supreme Court
the Veteran or Delegate Magazine. Of the expected 95,000
decisions when it committed the following errors:
copies of the posters, the defendant was able to print 2,000
copies only authorized of which, however, were sold at P5.00
each. Nothing more was done after this and it can be said that I
the venture did not really get off the ground. On the other
hand, the plaintiff failed to give his full contribution of THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN
P15,000.00. Thus, each party is entitled to rescind the HOLDING PETITIONER ISABELO C. MORAN, JR. LIABLE TO
contract which right is implied in reciprocal obligations under RESPONDENT MARIANO E. PECSON IN THE SUM OF P47,500 AS THE
Article 1385 of the Civil Code whereunder 'rescission creates SUPPOSED EXPECTED PROFITS DUE HIM.
the obligation to return the things which were the object of the
contract ... II

WHEREFORE, the court hereby renders judgment ordering THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN
defendant Isabelo C. Moran, Jr. to return to plaintiff Mariano HOLDING PETITIONER ISABELO C. MORAN, JR. LIABLE TO
E. Pecson the sum of P17,000.00, with interest at the legal RESPONDENT MARIANO E. PECSON IN THE SUM OF P8,000, AS
rate from the filing of the complaint on June 19, 1972, and the SUPPOSED COMMISSION IN THE PARTNERSHIP ARISING OUT OF
costs of the suit. PECSON'S INVESTMENT.

For insufficiency of evidence, the counterclaim is hereby III


dismissed.
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN
From this decision, both parties appealed to the respondent Court of Appeals. HOLDING PETITIONER ISABELO C. MORAN, JR. LIABLE TO
The latter likewise rendered a decision against the petitioner. The dispositive RESPONDENT MARIANO E. PECSON IN THE SUM OF P7,000 AS A
portion of the decision reads: têñ.£îhqw⣠SUPPOSED RETURN OF INVESTMENT IN A MAGAZINE VENTURE.

PREMISES CONSIDERED, the decision appealed from is IV


hereby SET ASIDE, and a new one is hereby rendered,
ordering defendant-appellant Isabelo C. Moran, Jr. to pay ASSUMING WITHOUT ADMITTING THAT PETITIONER IS AT ALL LIABLE
plaintiff- appellant Mariano E. Pecson: FOR ANY AMOUNT, THE HONORABLE COURT OF APPEALS DID NOT
EVEN OFFSET PAYMENTS ADMITTEDLY RECEIVED BY PECSON FROM
MORAN.
V damages from the time he should have complied with his obligation (Art. 1788,
Civil Code). Thus in Uy v. Puzon (79 SCRA 598), which interpreted Art. 2200
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT of the Civil Code of the Philippines, we allowed a total of P200,000.00
GRANTING THE PETITIONER'S COMPULSORY COUNTERCLAIM FOR compensatory damages in favor of the appellee because the appellant therein
DAMAGES. was remiss in his obligations as a partner and as prime contractor of the
construction projects in question. This case was decided on a particular set of
facts. We awarded compensatory damages in the Uy case because there was
The first question raised in this petition refers to the award of P47,500.00 as
the private respondent's share in the unrealized profits of the partnership. The a finding that the constructing business is a profitable one and that the UP
petitioner contends that the award is highly speculative. The petitioner construction company derived some profits from its contractors in the
construction of roads and bridges despite its deficient capital." Besides, there
maintains that the respondent court did not take into account the great risks
was evidence to show that the partnership made some profits during the
involved in the business undertaking.
periods from July 2, 1956 to December 31, 1957 and from January 1, 1958 up
to September 30, 1959. The profits on two government contracts worth
We agree with the petitioner that the award of speculative damages has no P2,327,335.76 were not speculative. In the instant case, there is no evidence
basis in fact and law. whatsoever that the partnership between the petitioner and the private
respondent would have been a profitable venture. In fact, it was a failure
There is no dispute over the nature of the agreement between the petitioner doomed from the start. There is therefore no basis for the award of speculative
and the private respondent. It is a contract of partnership. The latter in his damages in favor of the private respondent.
complaint alleged that he was induced by the petitioner to enter into a
partnership with him under the following terms and conditions: têñ.£îhqw⣠Furthermore, in the Uy case, only Puzon failed to give his full contribution while
Uy contributed much more than what was expected of him. In this case,
1. That the partnership will print colored posters of the however, there was mutual breach. Private respondent failed to give his entire
delegates to the Constitutional Convention; contribution in the amount of P15,000.00. He contributed only P10,000.00. The
petitioner likewise failed to give any of the amount expected of him. He further
2. That they will invest the amount of Fifteen Thousand Pesos failed to comply with the agreement to print 95,000 copies of the posters.
(P15,000.00) each; Instead, he printed only 2,000 copies.

3. That they will print Ninety Five Thousand (95,000) copies Article 1797 of the Civil Code provides: têñ.£îhqwâ£
of the said posters;
The losses and profits shall be distributed in conformity with
4. That plaintiff will receive a commission of One Thousand the agreement. If only the share of each partner in the profits
Pesos (P1,000.00) a month starting April 15, 1971 up to has been agreed upon, the share of each in the losses shall
December 15, 1971; be in the same proportion.

5. That upon the termination of the partnership on December Being a contract of partnership, each partner must share in the profits and
15, 1971, a liquidation of the account pertaining to the losses of the venture. That is the essence of a partnership. And even with an
distribution and printing of the said 95,000 posters shall be assurance made by one of the partners that they would earn a huge amount
made. of profits, in the absence of fraud, the other partner cannot claim a right to
recover the highly speculative profits. It is a rare business venture guaranteed
The petitioner on the other hand admitted in his answer the existence of the to give 100% profits. In this case, on an investment of P15,000.00, the
partnership. respondent was supposed to earn a guaranteed P1,000.00 a month for eight
months and around P142,500.00 on 95,000 posters costing P2.00 each but
2,000 of which were sold at P5.00 each. The fantastic nature of expected
The rule is, when a partner who has undertaken to contribute a sum of money
profits is obvious. We have to take various factors into account. The failure of
fails to do so, he becomes a debtor of the partnership for whatever he may
the Commission on Elections to proclaim all the 320 candidates of the
have promised to contribute (Art. 1786, Civil Code) and for interests and
Constitutional Convention on time was a major factor. The petitioner
undesirable his best business judgment and felt that it would be a losing P20,000? The evidence indicates that the P20,000 was
venture to go on with the printing of the agreed 95,000 copies of the posters. assigned by Moran to cover the following: têñ.£îhqwâ£
Hidden risks in any business venture have to be considered.
(a) P 7,000 — the amount of
It does not follow however that the private respondent is not entitled to recover the PNB check given by
any amount from the petitioner. The records show that the private respondent Pecson to Moran
gave P10,000.00 to the petitioner. The latter used this amount for the printing representing Pecson's
of 2,000 posters at a cost of P2.00 per poster or a total printing cost of investment in Moran's other
P4,000.00. The records further show that the 2,000 copies were sold at P5.00 project (the publication and
each. The gross income therefore was P10,000.00. Deducting the printing printing of the 'Voice of the
costs of P4,000.00 from the gross income of P10,000.00 and with no evidence Veterans');
on the cost of distribution, the net profits amount to only P6,000.00. This net
profit of P6,000.00 should be divided between the petitioner and the private (b) P10,000 — to cover the
respondent. And since only P4,000.00 was undesirable by the petitioner in return of Pecson's
printing the 2,000 copies, the remaining P6,000.00 should therefore be contribution in the project of
returned to the private respondent. the Posters;

Relative to the second alleged error, the petitioner submits that the award of (c) P3,000 — representing
P8,000.00 as Pecson's supposed commission has no justifiable basis in law. Pecson's commission for
three months (April, May,
Again, we agree with the petitioner. June, 1971).

The partnership agreement stipulated that the petitioner would give the private Of said P20,000 Moran has to pay P7,000 (as a return of
respondent a monthly commission of Pl,000.00 from April 15, 1971 to Pecson's investment for the Veterans' project, for this project
December 15, 1971 for a total of eight (8) monthly commissions. The never left the ground) ...
agreement does not state the basis of the commission. The payment of the
commission could only have been predicated on relatively extravagant profits. As a rule, the findings of facts of the Court of Appeals are final and conclusive
The parties could not have intended the giving of a commission inspite of loss and cannot be reviewed on appeal to this Court (Amigo v. Teves, 96 Phil. 252),
or failure of the venture. Since the venture was a failure, the private respondent provided they are borne out by the record or are based on substantial evidence
is not entitled to the P8,000.00 commission. (Alsua-Betts v. Court of Appeals, 92 SCRA 332). However, this rule admits of
certain exceptions. Thus, in Carolina Industries Inc. v. CMS Stock Brokerage,
Anent the third assigned error, the petitioner maintains that the respondent Inc., et al., (97 SCRA 734), we held that this Court retains the power to review
Court of Appeals erred in holding him liable to the private respondent in the and rectify the findings of fact of the Court of Appeals when (1) the conclusion
sum of P7,000.00 as a supposed return of investment in a magazine venture. is a finding grounded entirely on speculation, surmises and conjectures; (2)
when the inference made is manifestly mistaken absurd and impossible; (3)
In awarding P7,000.00 to the private respondent as his supposed return of where there is grave abuse of discretion; (4) when the judgment is based on a
investment in the "Voice of the Veterans" magazine venture, the respondent misapprehension of facts; and (5) when the court, in making its findings, went
court ruled that: têñ.£îhqw⣠beyond the issues of the case and the same are contrary to the admissions of
both the appellant and the appellee.
xxx xxx xxx
In this case, there is misapprehension of facts. The evidence of the private
respondent himself shows that his investment in the "Voice of Veterans"
... Moran admittedly signed the promissory note of P20,000 in
favor of Pecson. Moran does not question the due execution project amounted to only P3,000.00. The remaining P4,000.00 was the
of said note. Must Moran therefore pay the amount of amount of profit that the private respondent expected to receive.
The records show the following exhibits- têñ.£îhqw⣠M-Promissory note for P7,000 dated March 30, 1971. This is
also defendant's Exhibit E. This document is being offered for
E — Xerox copy of PNB Manager's Check No. 234265 dated the purpose of further showing the transaction as explained in
March 22, 1971 in favor of defendant. Defendant admitted the connection with Exhibits E and L.
authenticity of this check and of his receipt of the proceeds
thereof (t.s.n., pp. 3-4, Nov. 29, 1972). This exhibit is being N-Receipt of plaintiff dated March 30, 1971 for the return of
offered for the purpose of showing plaintiff's capital his P3,000 out of his capital investment of P6,000 (Exh. E) in
investment in the printing of the "Voice of the Veterans" for the P14,000 promissory note (Exh. 2; P). This is also
which he was promised a fixed profit of P8,000. This defendant's Exhibit 4. This document is being offered in
investment of P6,000.00 and the promised profit of P8,000 are support of plaintiff's explanation in connection with Exhibits E,
covered by defendant's promissory note for P14,000 dated L, and M to show the transaction mentioned therein.
March 31, 1971 marked by defendant as Exhibit 2 (t.s.n., pp.
20-21, Nov. 29, 1972), and by plaintiff as Exhibit P. Later, xxx xxx xxx
defendant returned P3,000.00 of the P6,000.00 investment
thereby proportionately reducing the promised profit to
P-Promissory note for P14,000.00. This is also defendant's
P4,000. With the balance of P3,000 (capital) and P4,000
Exhibit 2. It is being offered for the purpose of showing the
(promised profit), defendant signed and executed the
transaction as explained in connection with Exhibits E, L, M,
promissory note for P7,000 marked Exhibit 3 for the defendant
and N above.
and Exhibit M for plaintiff. Of this P7,000, defendant paid
P4,000 representing full return of the capital investment and
P1,000 partial payment of the promised profit. The P3,000 Explaining the above-quoted exhibits, respondent Pecson testified
balance of the promised profit was made part consideration of that: têñ.£îhqwâ£
the P20,000 promissory note (t.s.n., pp. 22-24, Nov. 29,
1972). It is, therefore, being presented to show the Q During the pre-trial of this case, Mr.
consideration for the P20,000 promissory note. Pecson, the defendant presented a
promissory note in the amount of P14,000.00
F — Xerox copy of PNB Manager's check dated May 29, 1971 which has been marked as Exhibit 2. Do you
for P7,000 in favor of defendant. The authenticity of the check know this promissory note?
and his receipt of the proceeds thereof were admitted by the
defendant (t.s.n., pp. 3-4, Nov. 29, 1972). This P 7,000 is part A Yes, sir.
consideration, and in cash, of the P20,000 promissory note
(t.s.n., p. 25, Nov. 29, 1972), and it is being presented to show Q What is this promissory note, in connection
the consideration for the P20,000 note and the existence and with your transaction with the defendant?
validity of the obligation.
A This promissory note is for the printing of
xxx xxx xxx the "Voice of the Veterans".

L-Book entitled "Voice of the Veterans" which is being offered Q What is this "Voice of the Veterans", Mr.
for the purpose of showing the subject matter of the other Pecson?
partnership agreement and in which plaintiff invested the
P6,000 (Exhibit E) which, together with the promised profit of A It is a book.têñ.£îhqwâ£
P8,000 made up for the consideration of the P14,000
promissory note (Exhibit 2; Exhibit P). As explained in
(T.S.N., p. 19, Nov. 29,
connection with Exhibit E. the P3,000 balance of the promised
1972)
profit was later made part consideration of the P20,000
promissory note.
Q And what does the amount of P14,000.00 purposes of Identification I request the same
indicated in the promissory note, Exhibit 2, to be marked as Exhibit M. . .
represent?
Court têñ.£îhqwâ£
A It represents the P6,000.00 cash which I
gave to Mr. Moran, as evidenced by the Mark it as Exhibit M.
Philippine National Bank Manager's check
and the P8,000.00 profit assured me by Mr. Q (continuing) is this the promissory note
Moran which I will derive from the printing of
which you said was executed by Mr. Moran in
this "Voice of the Veterans" book.
connection with your transaction regarding
the printing of the "Voice of the Veterans"?
Q You said that the P6,000.00 of this
P14,000.00 is covered by, a Manager's A Yes, sir. (T.S.N., pp. 20-22, Nov. 29, 1972).
check. I show you Exhibit E, is this the
Manager's check that mentioned?
Q What happened to this promissory note
executed by Mr. Moran, Mr. Pecson?
A Yes, sir.
A Mr. Moran paid me P4,000.00 out of the
Q What happened to this promissory note of
P7,000.00 as shown by the promissory note.
P14,000.00 which you said represented
P6,000.00 of your investment and P8,000.00
promised profits? Q Was there a receipt issued by you covering
this payment of P4,000.00 in favor of Mr.
Moran?
A Latter, Mr. Moran returned to me P3,000.00
which represented one-half (1/2) of the
P6,000.00 capital I gave to him. A Yes, sir.

Q As a consequence of the return by Mr. (T.S.N., p. 23, Nov. 29, 1972).


Moran of one-half (1/2) of the P6,000.00
capital you gave to him, what happened to Q You stated that Mr. Moran paid the amount
the promised profit of P8,000.00? of P4,000.00 on account of the P7,000.00
covered by the promissory note, Exhibit M.
A It was reduced to one-half (1/2) which is What does this P4,000.00 covered by Exhibit
P4,000.00. N represent?

Q Was there any document executed by Mr. A This P4,000.00 represents the P3,000.00
Moran in connection with the Balance of which he has returned of my P6,000.00
P3,000.00 of your capital investment and the capital investment and the P1,000.00
P4,000.00 promised profits? represents partial payment of the P4,000.00
profit that was promised to me by Mr. Moran.
A Yes, sir, he executed a promissory note.
Q And what happened to the balance of
P3,000.00 under the promissory note, Exhibit
Q I show you a promissory note in the amount
M?
of P7,000.00 dated March 30, 1971 which for
A The balance of P3,000.00 and the rest of
the profit was applied as part of the
consideration of the promissory note of
P20,000.00.

(T.S.N., pp. 23-24, Nov. 29, 1972).

The respondent court erred when it concluded that the project never left the
ground because the project did take place. Only it failed. It was the private G.R. No. 30286 September 12, 1929
respondent himself who presented a copy of the book entitled "Voice of the
Veterans" in the lower court as Exhibit "L". Therefore, it would be error to state
that the project never took place and on this basis decree the return of the M. TEAGUE, plaintiff-appellant,
private respondent's investment. vs.
H. MARTIN, J. T. MADDY and L.H. GOLUCKE, defendants-appellees.
As already mentioned, there are risks in any business venture and the failure
of the undertaking cannot entirely be blamed on the managing partner alone, Abad Santos, Camu and Delgado, for appellant.
specially if the latter exercised his best business judgment, which seems to be J.W. Ferrier for appellees.
true in this case. In view of the foregoing, there is no reason to pass upon the
fourth and fifth assignments of errors raised by the petitioner. We likewise find STATEMENT
no valid basis for the grant of the counterclaim.
Plaintiff alleges that about December 23, 1926, he and the defendants
WHEREFORE, the petition is GRANTED. The decision of the respondent formed a partnership for the operation of a fish business and similar
Court of Appeals (now Intermediate Appellate Court) is hereby SET ASIDE commercial transactions, which by mutual contest was called "Malangpaya
and a new one is rendered ordering the petitioner Isabelo Moran, Jr., to pay Fish Co," with a capital of P35,000, of which plaintiff paid P25,000, the
private respondent Mariano Pecson SIX THOUSAND (P6,000.00) PESOS defendant Martin P5,000, P2,500, and Golucke P2,500. That as such
representing the amount of the private respondent's contribution to the partnership, they agreed to share in the profits and losses of the business in
partnership but which remained unused; and THREE THOUSAND proportion to the amount of capital which each contributed. That the plaintiff
(P3,000.00) PESOS representing one half (1/2) of the net profits gained by the was named the general manager to take charge of the business, with full
partnership in the sale of the two thousand (2,000) copies of the posters, with power to do and perform all acts necessary to carry out of the purposes of
interests at the legal rate on both amounts from the date the complaint was the partnership. That there was no agreement as to the duration of the
filed until full payment is made. partnership. That plaintiff wants to dissolve it, but that the defendants refused
to do so. A statement marked Exhibit A, which purports to be a cash book, is
SO ORDERED.1äwphï1.ñët made a part of the complaint. That the partnership purchased and now owns
a lighter called Lapu-Lapu, and a motorship called Barracuda, and other
properties. That the lighter and the motorship are in the possession of the
defendants who are making use of them, to the damage and prejudice of the
plaintiff, for any damage which plaintiff may sustain. That it is for the best
interest of the parties to have a receiver appointed pending this litigation, to
take possession of the properties, and he prays that the Philippine Trust
Company be appointed receiver, and for judgment dissolving the partnership,
with costs.

Each of the defendants filed a separate answer, but the same nature, in
which they admit that about December 10, 1926, the plaintiff and the
defendants formed a partnership for the purpose of the equipment of the
Manila Fish Co., Inc., and the conduct of a fish business. That the terms of
the partnership were never evidenced by a truth and in fact, the partnership Defendant Martin specificaly denies the "plaintiff was named general
was formed under a written plan, of which each member received a copy and manager of the partnership," and alleged "that all the duties and powers of
to which all agreed. That by its terms the amount of the capital was P45,000, the said plaintiff were specifically set forth in the above quoted written
of which the plaintiff agreed to contribute P35,000. That P20,000 of the agreement and that no further or additional powers were ever given the said
capital was to be used for the purchase of the equipment of the Manila Fish plaintiff." But he admits the purchase of the motorship Barracuda, by the
Co., Inc. and the balance placed to the checking account o the new partnership. He denies that Exhibit A is a true or correct statement of the
company. cash received and paid out by or on behalf of the partnership, or that the
partnership over purchased or that it now owns the lighter Lapu-Lapu, "And/
It is then alleged that "the new owners agree to duties as follows: or any other properties" as mentioned in said ninth paragraph, except such
motorship and a smoke in the house," or that the defendants are making use
of any of the properties of the partnership, to the damage and prejudice of
Capt. Maddy will have charger of the Barracuda and the navigating
the plaintiff, or that they do not have any visible means to answer for any
of the same. Salary P300 per month.
damages, and alleges that at the time of the filing of the complaint,
partnership in cold storage, of the value of P6,000, for which he has never
Mr. Martin will have charge of the southern station, cold stores, accounted on the books of the partnership or mentioned in the complaint,
commissary and procuring fish. Salary P300 per month. and defendant prays that plaintiff's complaint be dismissed, and that he be
ordered and required to render an accounting , and to pay to partnership the
Mr. Teague will have charge of selling fish in Manila and purchasing balance of his unpaid subscription amounting to P10,000.
supplies. No salary until business is on paying basis, then the same
as Maddy or Martin. In his answer the defendant Maddy claimed and asserted that there is due
and owing him from the plaintiff P1,385.53, with legal interest, and in his
The principal office shall be in Manila, each party doing any business amended answer, the defendant Martin prays for judgment for P615.49.
shall keep books showing plainly all transactions, the books shall be
available at all time for inspections of any member of the partnership. To all which the plaintiff made a general and specific denial.

If Mr. Martin or Mr. Maddy wishes at some future time to repurchase Upon such issues the lower court on April 30, 1928, rendered the following
a larger share in the business Teague agrees to sell part of his judgment:
shares to each on the basis double the amount originally invested by
each or ten thousand to Martin and five thousand to Maddy.
In view of the foregoing considerations, the court decrees:
This offer will expire after two years.
That the partnership, existing among the parties in this suit, is hereby
declared dissolved; that all the existing properties of the said
That no charge was ever made in the terms of said agreement of partnership are ordered to be sold at public auction; and that all the
copartnership as set forth above except that it was later agreed proceeds and other unexpended funds of the partnership be used,
among the partners that the business of the partnership should be first, to pay he P529.48 tax to the Government of the Philippine
conducted under the trade name "Malangpaya Fish Company." Islands; second, to pay debts owing to third persons; third, to
reimburse the partners for their advances and salaries due; and
That as shown by the foregoing quoted agreement the agreed capital lastly, to return to the partners the amounts they contributed to the
of the copartnership was P45,000 and not P35,000 as stated in the capital of the association and any other remaining such to be
third paragraph of plaintiff's amended complaint, and the plaintiff distributed proportionately among them as profits:
herein, M. Teague, bound himself and agreed to contribute to the
said copartnership the sum of P35,000 and not the sum of P25,000 That the plaintiff immediately render a true and proper account of all
as stated in the third paragraph of his said amended complaint. the money due to and received by him for the partnership.
That the barge Lapu-Lapu as well as the Ford truck No. T-3019 and III. The trial court erred in holding that the appellant had no authority
adding machine belong exclusively to the plaintiff, M. Teague, but to buy the Lapu-Lapu, the Ford truck and the adding machine without
the said plaintiff must return to and reimburse the partnership the the consent of his copartners, for in accordance with article 131 of
sum of P14,032.26 taken from its funds for the purchase and the Code of Commerce the managing partner of a partnership can
equipment of the said barge Lapu-Lapu; and also to return the sum make purchases for the partnership without the knowledge and/or
of P1,230 and P228 used for buying the Ford truck and adding consent of his copartners.
machine, respectively:
IV. The trial court erred in holding that the Lapu-Lapu, the Ford truck
That the sum of P,1512.03 be paid to the defendant, J. T. Maddy, and the adding machine purchased by appellant, as manager of the
and the sum of P615.49 be paid to defendant, H. Martin, for their Malangpaya Fish Company, for and with funds of the partnership, do
advances and their unpaid salaries, with legal interest from October not form part of the assets of the partnership.
27, 1927, until paid; that the plaintiff pay the costs of this action.
V. The trial court erred in requiring the appellant to pay to the
So ordered. partnership the sum of P14,032.26, purchase price, cost of repairs
and equipment of the barge Lapu-Lapu; P1,230 purchase price of
May 16, 1928, plaintiff filed a motion praying for an order "directing the the adding machine, for these properties were purchased for and
court's stenographic notes taken by them of the evidence presented in the they form part of the assets of the partnership.
present case, as soon as possible." This motion was denied on May 19th,
and on May 16th, the court denied the plaintiff's motion for reconsideration. VI. The trial court erred in disapproving appellant's claim for salary
To all of which exceptions were duly taken. and expenses incurred by him for and in connection with the
partnership's business.
June 7, 1928, plaintiff filed a petition praying, for the reasons therein stated,
that the decision of the court in the case be set aside, and that the parties be VII. The trial court erred in approving the claims of appellees J.T.
permitted to again present their testimony and to have the case decided Maddy and H. Martin and in requiring the appellant to pay them the
upon its merits. To which objections were duly made, and on June 28, 1928, sum of P1,512.03 and P615.49 respectively.
the court denied plaintiff's motion for a new trial. To which exceptions were
duly taken, and on July 10, 1928, the plaintiff filed a motion in which he VIII. The trial court erred in not taking cognizance of appellant's claim
prayed that the period for the appeal interposed by the plaintiff be for reimbursement for advances made by him for the partnerships,
suspended, and that the order of June 28, 1928, be set aside, "and that as shown in the statement attached to the complaint marked Exhibit
another be entered ordering the re-taking of the evidence in this case." To A, in which there is a balance in his favor and against the partnership
which objections were also filed and later overruled, from all of which the amounting to over P16,000.
plaintiff appealed and assigns the following errors:
X. Lastly, considering the irregularities committed, the disappearance
I. The trial court erred in not having confined itself, in the of the stenographic notes for a considerable length of time, during
determination of this case, to the question as to whether or not it is which time changes in the testimonies of the witnesses could have
proper to dissolve the partnership and to liquidate its assets, for all been made and the impossibility of having an accurate and complete
other issues raised by appellees are incidental with the process of transcript of the stenographic notes, the trial court erred in denying
liquidation provided for by law. appellant's petition for the retaking of the evidence in this case.

II. The trial court erred in not resolving the primary and most
important question at issue in his case, namely, whether or not the
appellant M. Teague was the manager of the unregistered
partnership Malangpaya Fish Company.