[G.R. No. 142612.

July 29, 2005]

OSCAR ANGELES and EMERITA ANGELES, petitioners, vs. THE HON.

SECRETARY OF JUSTICE and FELINO MERCADO, respondents.

DECISION
CARPIO, J.:

The Case

This is a petition for certiorari[1] to annul the letter-resolution[2] dated 1

February 2000 of the Secretary of Justice in Resolution No. 155.[3] The
Secretary of Justice affirmed the resolution[4] in I.S. No. 96-939 dated 28
February 1997 rendered by the Provincial Prosecution Office of the
Department of Justice in Santa Cruz, Laguna (Provincial Prosecution Office).
The Provincial Prosecution Office resolved to dismiss the complaint for estafa
filed by petitioners Oscar and Emerita Angeles (Angeles spouses) against
respondent Felino Mercado (Mercado).

Antecedent Facts

On 19 November 1996, the Angeles spouses filed a criminal complaint for

estafa under Article 315 of the Revised Penal Code against Mercado before
the Provincial Prosecution Office. Mercado is the brother-in-law of the Angeles
spouses, being married to Emerita Angeles sister Laura.
In their affidavits, the Angeles spouses claimed that in November 1992,
Mercado convinced them to enter into a contract of antichresis,[5] colloquially
known as sanglaang-perde, covering eight parcels of land (subject land)
planted with fruit-bearing lanzones trees located in Nagcarlan, Laguna and
owned by Juana Suazo. The contract of antichresis was to last for five years
with P210,000 as consideration. As the Angeles spouses stay in Manila during
weekdays and go to Laguna only on weekends, the parties agreed that
Mercado would administer the lands and complete the necessary
paperwork.[6]
 After three years, the Angeles spouses asked for an accounting from
Mercado. Mercado explained that the subject land earned P46,210 in 1993,
which he used to buy more lanzones trees. Mercado also reported that the
trees bore no fruit in 1994. Mercado gave no accounting for 1995. The
Angeles spouses claim that only after this demand for an accounting did they
discover that Mercado had put the contract of sanglaang-perde over the
subject land under Mercado and his spouses names.[7] The relevant portions
of the contract of sanglaang-perde, signed by Juana Suazo alone, read:

xxx

Na alang-alang sa halagang DALAWANG DAAN AT SAMPUNG LIBONG PISO

(P210,000), salaping gastahin, na aking tinanggap sa mag[-]asawa nila G. AT GNG.
FELINO MERCADO, mga nasa hustong gulang, Filipino, tumitira at may pahatirang
sulat sa Bgy. Maravilla, bayan ng Nagcarlan, lalawigan ng Laguna, ay aking
ipinagbili, iniliwat at isinalin sa naulit na halaga, sa nabanggit na mag[-] asawa nila G.
AT GNG. FELINO MERCADO[,] sa kanila ay magmamana, kahalili at ibang dapat
pagliwatan ng kanilang karapatan, ang lahat na ibubunga ng lahat na puno ng
lanzones, hindi kasama ang ibang halaman na napapalooban nito, ng nabanggit na
WALONG (8) Lagay na Lupang Cocal-Lanzonal, sa takdang LIMA (5) NA [sic]
TAON, magpapasimula sa taong 1993, at magtatapos sa taong 1997, kayat pagkatapos
ng lansonesan sa taong 1997, ang pamomosision at pakikinabang sa lahat na puno ng
lanzones sa nabanggit na WALONG (8) Lagay na Lupang Cocal-Lanzonal ay
manunumbalik sa akin, sa akin ay magmamana, kahalili at ibang dapat pagliwatan ng
aking karapatan na ako ay walang ibabalik na ano pa mang halaga, sa mag[-] asawa
nila G. AT GNG. FELINO MERCADO.

Na ako at ang mag[-]asawa nila G. AT GNG. FELINO MERCADO ay nagkasundo na

ako ay bibigyan nila ng LIMA (5) na [sic] kaing na lanzones taon-taon sa loob ng
LIMA (5) na [sic] taon ng aming kasunduang ito.

Na ako at ang mag[-]asawa nila G. AT GNG. FELINO MERCADO ay nagkasundo na

silang mag[-]asawa nila G. AT GNG. FELINO MERCADO ang magpapaalis ng dapo
sa puno ng lansones taon-taon [sic] sa loob ng LIMA (5) [sic] taonng [sic] aming
kasunduang ito.[8]

In his counter-affidavit, Mercado denied the Angeles spouses allegations.

Mercado claimed that there exists an industrial partnership, colloquially known
as sosyo industrial, between him and his spouse as industrial partners and the
Angeles spouses as the financiers. This industrial partnership had existed
since 1991, before the contract of antichresis over the subject land. As the
years passed, Mercado used his and his spouses earnings as part of the
capital in the business transactions which he entered into in behalf of the
Angeles spouses. It was their practice to enter into business transactions with
other people under the name of Mercado because the Angeles spouses did
not want to be identified as the financiers.
Mercado attached bank receipts showing deposits in behalf of Emerita
Angeles and contracts under his name for the Angeles spouses. Mercado also
attached the minutes of the barangay conciliation proceedings held on 7
September 1996. During the barangay conciliation proceedings, Oscar
Angeles stated that there was a written sosyo industrial agreement: capital
would come from the Angeles spouses while the profit would be divided
evenly between Mercado and the Angeles spouses.[9]

The Ruling of the Provincial Prosecution Office

On 3 January 1997, the Provincial Prosecution Office issued a resolution

recommending the filing of criminal information for estafa against Mercado.
This resolution, however, was issued without Mercados counter-affidavit.
Meanwhile, Mercado filed his counter-affidavit on 2 January 1997. On
receiving the 3 January 1997 resolution, Mercado moved for its
reconsideration. Hence, on 26 February 1997, the Provincial Prosecution
Office issued an amended resolution dismissing the Angeles spouses
complaint for estafa against Mercado.
The Provincial Prosecution Office stated thus:

The subject of the complaint hinges on a partnership gone sour. The partnership was
initially unsaddled [with] problems. Management became the source of
misunderstanding including the accounting of profits, which led to further
misunderstanding until it was revealed that the contract with the orchard owner was
only with the name of the respondent, without the names of the complainants.

The accusation of estafa here lacks enough credible evidentiary support to sustain a
prima facie finding.

Premises considered, it is respectfully recommended that the complaint for estafa be

dismissed.

RESPECTFULLY SUBMITTED.[10]
 The Angeles spouses filed a motion for reconsideration, which the
Provincial Prosecution Office denied in a resolution dated 4 August 1997.

The Ruling of the Secretary of Justice

On appeal to the Secretary of Justice, the Angeles spouses emphasized

that the document evidencing the contract of sanglaang-perde with Juana
Suazo was executed in the name of the Mercado spouses, instead of the
Angeles spouses. The Angeles spouses allege that this document alone
proves Mercados misappropriation of their P210,000.
The Secretary of Justice found otherwise. Thus:

Reviewing the records of the case, we are of the opinion that the indictment of
[Mercado] for the crime of estafa cannot be sustained. [The Angeles spouses] failed to
show sufficient proof that [Mercado] deliberately deceived them in the sanglaang
perde transaction. The document alone, which was in the name of [Mercado and his
spouse], failed to convince us that there was deceit or false representation on the part
of [Mercado] that induced the [Angeles spouses] to part with their money. [Mercado]
satisfactorily explained that the [Angeles spouses] do not want to be revealed as the
financiers. Indeed, it is difficult to believe that the [Angeles spouses] would readily
part with their money without holding on to some document to evidence the receipt of
money, or at least to inspect the document involved in the said transaction. Under the
circumstances, we are inclined to believe that [the Angeles spouses] knew from the
very start that the questioned document was not really in their names.

In addition, we are convinced that a partnership truly existed between the [Angeles
spouses] and [Mercado]. The formation of a partnership was clear from the fact that
they contributed money to a common fund and divided the profits among themselves.
Records would show that [Mercado] was able to make deposits for the account of the
[Angeles spouses]. These deposits represented their share in the profits of their
business venture. Although the [Angeles spouses] deny the existence of a partnership,
they, however, never disputed that the deposits made by [Mercado] were indeed for
their account.

The transcript of notes on the dialogue between the [Angeles spouses] and [Mercado]
during the hearing of their barangay conciliation case reveals that the [Angeles
spouses] acknowledged their joint business ventures with [Mercado] although they
assailed the manner by which [Mercado] conducted the business and handled and
distributed the funds. The veracity of this transcript was not raised in issued [sic] by
[the Angeles spouses]. Although the legal formalities for the formation of a
partnership were not adhered to, the partnership relationship of the [Angeles spouses]
and [Mercado] is evident in this case. Consequently, there is no estafa where money is
delivered by a partner to his co-partner on the latters representation that the amount
shall be applied to the business of their partnership. In case of misapplication or
conversion of the money received, the co-partners liability is civil in nature (People v.
Clarin, 7 Phil. 504)

WHEREFORE, the appeal is hereby DISMISSED.[11]

Hence, this petition.

Issues

The Angeles spouses ask us to consider the following issues:

1. Whether the Secretary of Justice committed grave abuse of discretion amounting to
lack of jurisdiction in dismissing the appeal of the Angeles spouses;
2. Whether a partnership existed between the Angeles spouses and Mercado even
without any documentary proof to sustain its existence;
3. Assuming that there was a partnership, whether there was misappropriation by
Mercado of the proceeds of the lanzones after the Angeles spouses demanded an
accounting from him of the income at the office of the barangay authorities on 7
September 1996, and Mercado failed to do so and also failed to deliver the
proceeds to the Angeles spouses;
4. Whether the Secretary of Justice should order the filing of the information for estafa
against Mercado.[12]

The Ruling of the Court

The petition has no merit.

Whether the Secretary of Justice Committed

Grave Abuse of Discretion

An act of a court or tribunal may constitute grave abuse of discretion when

the same is performed in a capricious or whimsical exercise of judgment
amounting to lack of jurisdiction. The abuse of discretion must be so patent
and gross as to amount to an evasion of positive duty, or to a virtual refusal to
perform a duty enjoined by law, as where the power is exercised in an
arbitrary and despotic manner because of passion or personal hostility.[13]
The Angeles spouses fail to convince us that the Secretary of Justice
committed grave abuse of discretion when he dismissed their appeal.
Moreover, the Angeles spouses committed an error in procedure when they
failed to file a motion for reconsideration of the Secretary of Justices
resolution. A previous motion for reconsideration before the filing of a petition
for certiorari is necessary unless: (1) the issue raised is one purely of law; (2)
public interest is involved; (3) there is urgency; (4) a question of jurisdiction is
squarely raised before and decided by the lower court; and (5) the order is a
patent nullity.[14] The Angeles spouses failed to show that their case falls under
any of the exceptions. In fact, this present petition for certiorari is dismissible
for this reason alone.

Whether a Partnership Existed

Between Mercado and the Angeles Spouses

The Angeles spouses allege that they had no partnership with Mercado.
The Angeles spouses rely on Articles 1771 to 1773 of the Civil Code, which
state that:

Art. 1771. A partnership may be constituted in any form, except where immovable
property or real rights are contributed thereto, in which case a public instrument shall
be necessary.

Art. 1772. Every contract of partnership having a capital of three thousand pesos or
more, in money or property, shall appear in a public instrument, which must be
recorded in the Office of the Securities and Exchange Commission.

Failure to comply with the requirements of the preceding paragraph shall not affect
the liability of the partnership and the members thereof to third persons.

Art. 1773. A contract of partnership is void, whenever immovable property is

contributed thereto, if an inventory of said property is not made, signed by the parties,
and attached to the public instrument.

The Angeles spouses position that there is no partnership because of the

lack of a public instrument indicating the same and a lack of registration with
the Securities and Exchange Commission (SEC) holds no water. First, the
Angeles spouses contributed money to the partnership and not immovable
property. Second, mere failure to register the contract of partnership with the
SEC does not invalidate a contract that has the essential requisites of a
partnership. The purpose of registration of the contract of partnership is to
give notice to third parties. Failure to register the contract of partnership does
not affect the liability of the partnership and of the partners to third persons.
Neither does such failure to register affect the partnerships juridical
personality. A partnership may exist even if the partners do not use the words
partner or partnership.
Indeed, the Angeles spouses admit to facts that prove the existence of a
partnership: a contract showing a sosyo industrial or industrial partnership,
contribution of money and industry to a common fund, and division of profits
between the Angeles spouses and Mercado.

Whether there was

Misappropriation by Mercado

The Secretary of Justice adequately explained the alleged

misappropriation by Mercado: The document alone, which was in the name of
[Mercado and his spouse], failed to convince us that there was deceit or false
representation on the part of [Mercado] that induced the [Angeles spouses] to
part with their money. [Mercado] satisfactorily explained that the [Angeles
spouses] do not want to be revealed as the financiers.[15]
Even Branch 26 of the Regional Trial Court of Santa Cruz, Laguna which
decided the civil case for damages, injunction and restraining order filed by
the Angeles spouses against Mercado and Leo Cerayban, stated:

xxx [I]t was the practice to have all the contracts of antichresis of their partnership
secured in [Mercados] name as [the Angeles spouses] are apprehensive that, if they
come out into the open as financiers of said contracts, they might be kidnapped by the
New Peoples Army or their business deals be questioned by the Bureau of Internal
Revenue or worse, their assets and unexplained income be sequestered, as xxx Oscar
Angeles was then working with the government.[16]

Furthermore, accounting of the proceeds is not a proper subject for the

present case.
For these reasons, we hold that the Secretary of Justice did not abuse his
discretion in dismissing the appeal of the Angeles spouses.
 WHEREFORE, we AFFIRM the decision of the Secretary of Justice. The
present petition for certiorari is DISMISSED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Azcuna,
JJ., concur

[G.R. No. 126881. October 3, 2000]

HEIRS OF TAN ENG KEE, petitioners, vs. COURT OF APPEALS and

BENGUET LUMBER COMPANY, represented by its President
TAN ENG LAY, respondents.

DECISION
DE LEON, JR., J.:

In this petition for review on certiorari, petitioners pray for the reversal of the
Decision[1] dated March 13, 1996 of the former Fifth Division [2] of the Court of Appeals in
CA-G.R. CV No. 47937, the dispositive portion of which states:

THE FOREGOING CONSIDERED, the appealed decision is hereby set aside, and the
complaint dismissed.

The facts are:

Following the death of Tan Eng Kee on September 13, 1984, Matilde Abubo, the
common-law spouse of the decedent, joined by their children Teresita, Nena, Clarita,
Carlos, Corazon and Elpidio, collectively known as herein petitioners HEIRS OF TAN
ENG KEE, filed suit against the decedents brother TAN ENG LAY on February 19,
1990. The complaint,[3] docketed as Civil Case No. 1983-R in the Regional Trial Court of
Baguio City was for accounting, liquidation and winding up of the alleged partnership
formed after World War II between Tan Eng Kee and Tan Eng Lay. On March 18, 1991,
the petitioners filed an amended complaint[4] impleading private respondent herein
BENGUET LUMBER COMPANY, as represented by Tan Eng Lay. The amended
complaint was admitted by the trial court in its Order dated May 3, 1991. [5]
 The amended complaint principally alleged that after the second World War, Tan
Eng Kee and Tan Eng Lay, pooling their resources and industry together, entered into a
partnership engaged in the business of selling lumber and hardware and construction
supplies. They named their enterprise Benguet Lumber which they jointly managed until
Tan Eng Kees death.Petitioners herein averred that the business prospered due to the
hard work and thrift of the alleged partners. However, they claimed that in 1981, Tan
Eng Lay and his children caused the conversion of the partnership Benguet Lumber into
a corporation called Benguet Lumber Company. The incorporation was purportedly a
ruse to deprive Tan Eng Kee and his heirs of their rightful participation in the profits of
the business. Petitioners prayed for accounting of the partnership assets, and the
dissolution, winding up and liquidation thereof, and the equal division of the net assets
of Benguet Lumber.
After trial, Regional Trial Court of Baguio City, Branch 7 rendered judgment[6]on April
12, 1995, to wit:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered:

a) Declaring that Benguet Lumber is a joint adventure which is akin to a particular

partnership;

b) Declaring that the deceased Tan Eng Kee and Tan Eng Lay are joint adventurers
and/or partners in a business venture and/or particular partnership called Benguet
Lumber and as such should share in the profits and/or losses of the business venture or
particular partnership;

c) Declaring that the assets of Benguet Lumber are the same assets turned over to
Benguet Lumber Co. Inc. and as such the heirs or legal representatives of the deceased
Tan Eng Kee have a legal right to share in said assets;

d) Declaring that all the rights and obligations of Tan Eng Kee as joint adventurer
and/or as partner in a particular partnership have descended to the plaintiffs who are
his legal heirs.

e) Ordering the defendant Tan Eng Lay and/or the President and/or General Manager
of Benguet Lumber Company Inc. to render an accounting of all the assets of Benguet
Lumber Company, Inc. so the plaintiffs know their proper share in the business;

f) Ordering the appointment of a receiver to preserve and/or administer the assets of

Benguet Lumber Company, Inc. until such time that said corporation is finally
liquidated are directed to submit the name of any person they want to be appointed as
receiver failing in which this Court will appoint the Branch Clerk of Court or another
one who is qualified to act as such.
g) Denying the award of damages to the plaintiffs for lack of proof except the
expenses in filing the instant case.

h) Dismissing the counter-claim of the defendant for lack of merit.

SO ORDERED.

Private respondent sought relief before the Court of Appeals which, on March 13,
1996, rendered the assailed decision reversing the judgment of the trial
court. Petitioners motion for reconsideration[7] was denied by the Court of Appeals in a
Resolution[8] dated October 11, 1996.
Hence, the present petition.
As a side-bar to the proceedings, petitioners filed Criminal Case No. 78856 against
Tan Eng Lay and Wilborn Tan for the use of allegedly falsified documents in a judicial
proceeding.Petitioners complained that Exhibits 4 to 4-U offered by the defendants
before the trial court, consisting of payrolls indicating that Tan Eng Kee was a mere
employee of Benguet Lumber, were fake, based on the discrepancy in the signatures of
Tan Eng Kee. They also filed Criminal Cases Nos. 78857-78870 against Gloria, Julia,
Juliano, Willie, Wilfredo, Jean, Mary and Willy, all surnamed Tan, for alleged falsification
of commercial documents by a private individual. On March 20, 1999, the Municipal
Trial Court of Baguio City, Branch 1, wherein the charges were filed, rendered
judgment[9] dismissing the cases for insufficiency of evidence.
In their assignment of errors, petitioners claim that:
I

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT

THERE WAS NO PARTNERSHIP BETWEEN THE LATE TAN ENG KEE
AND HIS BROTHER TAN ENG LAY BECAUSE:(A) THERE WAS NO FIRM
ACCOUNT; (B) THERE WAS NO FIRM LETTERHEADS SUBMITTED AS
EVIDENCE; (C) THERE WAS NO CERTIFICATE OF PARTNERSHIP; (D)
THERE WAS NO AGREEMENT AS TO PROFITS AND LOSSES; AND (E)
THERE WAS NO TIME FIXED FOR THE DURATION OF THE
PARTNERSHIP (PAGE 13, DECISION).
II

THE HONORABLE COURT OF APPEALS ERRED IN RELYING SOLELY

ON THE SELF-SERVING TESTIMONY OF RESPONDENT TAN ENG LAY
THAT BENGUET LUMBER WAS A SOLE PROPRIETORSHIP AND THAT
TAN ENG KEE WAS ONLY AN EMPLOYEE THEREOF.
III
 THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
FOLLOWING FACTS WHICH WERE DULY SUPPORTED BY EVIDENCE
OF BOTH PARTIES DO NOT SUPPORT THE EXISTENCE OF A
PARTNERSHIP JUST BECAUSE THERE WAS NO ARTICLES OF
PARTNERSHIP DULY RECORDED BEFORE THE SECURITIES AND
EXCHANGE COMMISSION:

a. THAT THE FAMILIES OF TAN ENG KEE AND TAN ENG LAY WERE ALL LIVING
AT THE BENGUET LUMBER COMPOUND;
b. THAT BOTH TAN ENG LAY AND TAN ENG KEE WERE COMMANDING THE
EMPLOYEES OF BENGUET LUMBER;
c. THAT BOTH TAN ENG KEE AND TAN ENG LAY WERE SUPERVISING THE
EMPLOYEES THEREIN;
d. THAT TAN ENG KEE AND TAN ENG LAY WERE THE ONES DETERMINING THE
PRICES OF STOCKS TO BE SOLD TO THE PUBLIC; AND
e. THAT TAN ENG LAY AND TAN ENG KEE WERE THE ONES MAKING ORDERS
TO THE SUPPLIERS (PAGE 18, DECISION).
IV

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT

THERE WAS NO PARTNERSHIP JUST BECAUSE THE CHILDREN OF THE
LATE TAN ENG KEE: ELPIDIO TAN AND VERONICA CHOI, TOGETHER
WITH THEIR WITNESS BEATRIZ TANDOC, ADMITTED THAT THEY DO
NOT KNOW WHEN THE ESTABLISHMENT KNOWN IN BAUGIO CITY AS
BENGUET LUMBER WAS STARTED AS A PARTNERSHIP (PAGE 16-17,
DECISION).
V

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT

THERE WAS NO PARTNERSHIP BETWEEN THE LATE TAN ENG KEE
AND HIS BROTHER TAN ENG LAY BECAUSE THE PRESENT CAPITAL
OR ASSETS OF BENGUET LUMBER IS DEFINITELY MORE THAN
P3,000.00 AND AS SUCH THE EXECUTION OF A PUBLIC INSTRUMENT
CREATING A PARTNERSHIP SHOULD HAVE BEEN MADE AND NO
SUCH PUBLIC INSTRUMENT ESTABLISHED BY THE APPELLEES (PAGE
17, DECISION).

As a premise, we reiterate the oft-repeated rule that findings of facts of the Court of
Appeals will not be disturbed on appeal if such are supported by the evidence.[10] Our
jurisdiction, it must be emphasized, does not include review of factual issues. Thus:
Filing of petition with Supreme Court.-A party desiring to appeal by certiorari from a
judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the
Regional Trial Court or other courts whenever authorized by law, may file with the
Supreme Court a verified petition for review on certiorari. The petition shall raise
only questions of law which must be distinctly set forth.[11] [italics supplied]

Admitted exceptions have been recognized, though, and when present, may compel
us to analyze the evidentiary basis on which the lower court rendered judgment. Review
of factual issues is therefore warranted:

(1) when the factual findings of the Court of Appeals and the trial court are
contradictory;

(2) when the findings are grounded entirely on speculation, surmises, or conjectures;

(3) when the inference made by the Court of Appeals from its findings of fact is
manifestly mistaken, absurd, or impossible;

(4) when there is grave abuse of discretion in the appreciation of facts;

(5) when the appellate court, in making its findings, goes beyond the issues of the
case, and such findings are contrary to the admissions of both appellant and appellee;

(6) when the judgment of the Court of Appeals is premised on a misapprehension of

facts;

(7) when the Court of Appeals fails to notice certain relevant facts which, if properly
considered, will justify a different conclusion;

(8) when the findings of fact are themselves conflicting;

(9) when the findings of fact are conclusions without citation of the specific evidence
on which they are based; and

(10) when the findings of fact of the Court of Appeals are premised on the absence of
evidence but such findings are contradicted by the evidence on record.[12]

In reversing the trial court, the Court of Appeals ruled, to wit:

We note that the Court a quo over extended the issue because while the plaintiffs
mentioned only the existence of a partnership, the Court in turn went beyond that by
justifying the existence of a joint adventure.
When mention is made of a joint adventure, it would presuppose parity of standing
between the parties, equal proprietary interest and the exercise by the parties equally
of the conduct of the business, thus:

xxx xxx xxx xxx

We have the admission that the father of the plaintiffs was not a partner of the
Benguet Lumber before the war. The appellees however argued that (Rollo, p. 104;
Brief, p. 6) this is because during the war, the entire stocks of the pre-war Benguet
Lumber were confiscated if not burned by the Japanese. After the war, because of the
absence of capital to start a lumber and hardware business, Lay and Kee pooled the
proceeds of their individual businesses earned from buying and selling military
supplies, so that the common fund would be enough to form a partnership, both in the
lumber and hardware business. That Lay and Kee actually established the Benguet
Lumber in Baguio City, was even testified to by witnesses. Because of the pooling of
resources, the post-war Benguet Lumber was eventually established. That the father of
the plaintiffs and Lay were partners, is obvious from the fact that: (1) they conducted
the affairs of the business during Kees lifetime, jointly, (2) they were the ones giving
orders to the employees, (3) they were the ones preparing orders from the suppliers,
(4) their families stayed together at the Benguet Lumber compound, and (5) all their
children were employed in the business in different capacities.

xxx xxx xxx xxx

It is obvious that there was no partnership whatsoever. Except for a firm name, there
was no firm account, no firm letterheads submitted as evidence, no certificate of
partnership, no agreement as to profits and losses, and no time fixed for the duration
of the partnership. There was even no attempt to submit an accounting corresponding
to the period after the war until Kees death in 1984. It had no business book, no
written account nor any memorandum for that matter and no license mentioning the
existence of a partnership [citation omitted].

Also, the exhibits support the establishment of only a proprietorship. The certification
dated March 4, 1971, Exhibit 2, mentioned co-defendant Lay as the only registered
owner of the Benguet Lumber and Hardware.His application for registration, effective
1954, in fact mentioned that his business started in 1945 until 1985 (thereafter, the
incorporation). The deceased, Kee, on the other hand, was merely an employee of the
Benguet Lumber Company, on the basis of his SSS coverage effective 1958, Exhibit
3. In the Payrolls, Exhibits 4 to 4-U, inclusive, for the years 1982 to 1983, Kee was
similarly listed only as an employee; precisely, he was on the payroll listing. In the
Termination Notice, Exhibit 5, Lay was mentioned also as the proprietor.
 xxx xxx xxx xxx

We would like to refer to Arts. 771 and 772, NCC, that a partner [sic] may be
constituted in any form, but when an immovable is constituted, the execution of a
public instrument becomes necessary. This is equally true if the capitalization exceeds
P3,000.00, in which case a public instrument is also necessary, and which is to be
recorded with the Securities and Exchange Commission. In this case at bar, we can
easily assume that the business establishment, which from the language of the
appellees, prospered (pars. 5 & 9, Complaint), definitely exceeded P3,000.00, in
addition to the accumulation of real properties and to the fact that it is now a
compound. The execution of a public instrument, on the other hand, was never
established by the appellees.

And then in 1981, the business was incorporated and the incorporators were only Lay
and the members of his family. There is no proof either that the capital assets of the
partnership, assuming them to be in existence, were maliciously assigned or
transferred by Lay, supposedly to the corporation and since then have been treated as
a part of the latters capital assets, contrary to the allegations in pars. 6, 7 and 8 of the
complaint.

These are not evidences supporting the existence of a partnership:

1) That Kee was living in a bunk house just across the lumber store, and then in a
room in the bunk house in Trinidad, but within the compound of the lumber
establishment, as testified to by Tandoc; 2) that both Lay and Kee were seated on a
table and were commanding people as testified to by the son, Elpidio Tan; 3) that both
were supervising the laborers, as testified to by Victoria Choi; and 4) that Dionisio
Peralta was supposedly being told by Kee that the proceeds of the 80 pieces of the G.I.
sheets were added to the business.

Partnership presupposes the following elements [citation omitted]: 1) a contract, either

oral or written. However, if it involves real property or where the capital is P3,000.00
or more, the execution of a contract is necessary; 2) the capacity of the parties to
execute the contract; 3) money property or industry contribution; 4) community of
funds and interest, mentioning equality of the partners or one having a proportionate
share in the benefits; and 5) intention to divide the profits, being the true test of the
partnership. The intention to join in the business venture for the purpose of obtaining
profits thereafter to be divided, must be established. We cannot see these elements
from the testimonial evidence of the appellees.

As can be seen, the appellate court disputed and differed from the trial court which
had adjudged that TAN ENG KEE and TAN ENG LAY had allegedly entered into a joint
adventure. In this connection, we have held that whether a partnership exists is a
factual matter; consequently, since the appeal is brought to us under Rule 45, we
cannot entertain inquiries relative to the correctness of the assessment of the evidence
by the court a quo.[13] Inasmuch as the Court of Appeals and the trial court had reached
conflicting conclusions, perforce we must examine the record to determine if the
reversal was justified.
The primordial issue here is whether Tan Eng Kee and Tan Eng Lay were partners
in Benguet Lumber. A contract of partnership is defined by law as one where:

xxx two or more persons bind themselves to contribute money, property, or industry
to a common fund, with the intention of dividing the profits among themselves.

Two or more persons may also form a partnership for the exercise of a profession.[14]

Thus, in order to constitute a partnership, it must be established that (1) two or more
persons bound themselves to contribute money, property, or industry to a common
fund, and (2) they intend to divide the profits among themselves.[15] The agreement need
not be formally reduced into writing, since statute allows the oral constitution of a
partnership, save in two instances: (1) when immovable property or real rights are
contributed,[16] and (2) when the partnership has a capital of three thousand pesos or
more.[17] In both cases, a public instrument is required.[18] An inventory to be signed by
the parties and attached to the public instrument is also indispensable to the validity of
the partnership whenever immovable property is contributed to the partnership. [19]
The trial court determined that Tan Eng Kee and Tan Eng Lay had entered into a
joint adventure, which it said is akin to a particular partnership. [20] A particular
partnership is distinguished from a joint adventure, to wit:
(a) A joint adventure (an American concept similar to our joint accounts) is a sort of
informal partnership, with no firm name and no legal personality. In a joint account,
the participating merchants can transact business under their own name, and can
be individually liable therefor.
(b) Usually, but not necessarily a joint adventure is limited to a SINGLE
TRANSACTION, although the business of pursuing to a successful termination may
continue for a number of years; a partnership generally relates to a continuing
business of various transactions of a certain kind.[21]
A joint adventure presupposes generally a parity of standing between the joint co-
ventures or partners, in which each party has an equal proprietary interest in the capital
or property contributed, and where each party exercises equal rights in the conduct of
the business.[22] Nonetheless, in Aurbach, et. al. v. Sanitary Wares Manufacturing
Corporation, et. al.,[23] we expressed the view that a joint adventure may be likened to a
particular partnership, thus:

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

Undoubtedly, the best evidence would have been the contract of partnership itself,
or the articles of partnership but there is none. The alleged partnership, though, was
never formally organized. In addition, petitioners point out that the New Civil Code was
not yet in effect when the partnership was allegedly formed sometime in 1945, although
the contrary may well be argued that nothing prevented the parties from complying with
the provisions of the New Civil Code when it took effect on August 30, 1950. But all that
is in the past. The net effect, however, is that we are asked to determine whether a
partnership existed based purely on circumstantial evidence. A review of the record
persuades us that the Court of Appeals correctly reversed the decision of the trial
court. The evidence presented by petitioners falls short of the quantum of proof required
to establish a partnership.
Unfortunately for petitioners, Tan Eng Kee has passed away. Only he, aside from
Tan Eng Lay, could have expounded on the precise nature of the business relationship
between them. In the absence of evidence, we cannot accept as an established fact
that Tan Eng Kee allegedly contributed his resources to a common fund for the purpose
of establishing a partnership. The testimonies to that effect of petitioners witnesses is
directly controverted by Tan Eng Lay. It should be noted that it is not with the number of
witnesses wherein preponderance lies;[24] the quality of their testimonies is to be
considered. None of petitioners witnesses could suitably account for the beginnings of
Benguet Lumber Company, except perhaps for Dionisio Peralta whose deceased wife
was related to Matilde Abubo.[25] He stated that when he met Tan Eng Kee after the
liberation, the latter asked the former to accompany him to get 80 pieces of G.I. sheets
supposedly owned by both brothers.[26] Tan Eng Lay, however, denied knowledge of this
meeting or of the conversation between Peralta and his brother. [27] Tan Eng Lay
consistently testified that he had his business and his brother had his, that it was only
later on that his said brother, Tan Eng Kee, came to work for him. Be that as it may, co-
ownership or co-possession (specifically here, of the G.I. sheets) is not an indicium of
the existence of a partnership.[28]
Besides, it is indeed odd, if not unnatural, that despite the forty years the
partnership was allegedly in existence, Tan Eng Kee never asked for an
accounting. The essence of a partnership is that the partners share in the profits and
losses.[29] Each has the right to demand an accounting as long as the partnership
exists.[30] We have allowed a scenario wherein [i]f excellent relations exist among the
partners at the start of the business and all the partners are more interested in seeing
the firm grow rather than get immediate returns, a deferment of sharing in the profits is
perfectly plausible.[31] But in the situation in the case at bar, the deferment, if any, had
gone on too long to be plausible. A person is presumed to take ordinary care of his
concerns.[32]As we explained in another case:

In the first place, plaintiff did not furnish the supposed P20,000.00 capital. In the
second place, she did not furnish any help or intervention in the management of the
theatre. In the third place, it does not appear that she has even demanded from
defendant any accounting of the expenses and earnings of the business. Were she
really a partner, her first concern should have been to find out how the business was
progressing, whether the expenses were legitimate, whether the earnings were
correct, etc. She was absolutely silent with respect to any of the acts that a partner
should have done; all that she did was to receive her share of P3,000.00 a month,
which cannot be interpreted in any manner than a payment for the use of the premises
which she had leased from the owners. Clearly, plaintiff had always acted in
accordance with the original letter of defendant of June 17, 1945 (Exh. A), which
shows that both parties considered this offer as the real contract between
them.[33] [italics supplied]

A demand for periodic accounting is evidence of a partnership. [34] During his lifetime,
Tan Eng Kee appeared never to have made any such demand for accounting from his
brother, Tang Eng Lay.
This brings us to the matter of Exhibits 4 to 4-U for private respondents, consisting
of payrolls purporting to show that Tan Eng Kee was an ordinary employee of Benguet
Lumber, as it was then called. The authenticity of these documents was questioned by
petitioners, to the extent that they filed criminal charges against Tan Eng Lay and his
wife and children. As aforesaid, the criminal cases were dismissed for insufficiency of
evidence. Exhibits 4 to 4-U in fact shows that Tan Eng Kee received sums as wages of
an employee. In connection therewith, Article 1769 of the Civil Code provides:

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

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

(2) Co-ownership or co-possession does not of itself establish a partnership, whether

such co-owners or co-possessors do or do not share any profits made by the use of the
property;

(3) The sharing of gross returns does not of itself establish a partnership, whether or
not the persons sharing them have a joint or common right or interest in any property
which the returns are derived;

(4) The receipt by a person of a share of the profits of a business is prima

facie evidence that he is a partner in the business, but no such inference shall be
drawn if such profits were received in payment:

(a) As a debt by installment or otherwise;

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

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

(d) As interest on a loan, though the amount of payment vary with the profits
of the business;

(e) As the consideration for the sale of a goodwill of a business or other

property by installments or otherwise.

In the light of the aforequoted legal provision, we conclude that Tan Eng Kee was only
an employee, not a partner. Even if the payrolls as evidence were discarded, petitioners
would still be back to square one, so to speak, since they did not present and offer
evidence that would show that Tan Eng Kee received amounts of money allegedly
representing his share in the profits of the enterprise. Petitioners failed to show how
much their father, Tan Eng Kee, received, if any, as his share in the profits of Benguet
Lumber Company for any particular period. Hence, they failed to prove that Tan Eng
Kee and Tan Eng Lay intended to divide the profits of the business between
themselves, which is one of the essential features of a partnership.
Nevertheless, petitioners would still want us to infer or believe the alleged existence
of a partnership from this set of circumstances: that Tan Eng Lay and Tan Eng Kee
were commanding the employees; that both were supervising the employees; that both
were the ones who determined the price at which the stocks were to be sold; and that
both placed orders to the suppliers of the Benguet Lumber Company. They also point
out that the families of the brothers Tan Eng Kee and Tan Eng Lay lived at the Benguet
Lumber Company compound, a privilege not extended to its ordinary employees.
 However, private respondent counters that:

Petitioners seem to have missed the point in asserting that the above enumerated
powers and privileges granted in favor of Tan Eng Kee, were indicative of his being a
partner in Benguet Lumber for the following reasons:

(i) even a mere supervisor in a company, factory or store gives orders and directions
to his subordinates. So long, therefore, that an employees position is higher in rank, it
is not unusual that he orders around those lower in rank.

(ii) even a messenger or other trusted employee, over whom confidence is reposed by
the owner, can order materials from suppliers for and in behalf of Benguet
Lumber. Furthermore, even a partner does not necessarily have to perform this
particular task. It is, thus, not an indication that Tan Eng Kee was a partner.

(iii) although Tan Eng Kee, together with his family, lived in the lumber compound
and this privilege was not accorded to other employees, the undisputed fact remains
that Tan Eng Kee is the brother of Tan Eng Lay.Naturally, close personal relations
existed between them. Whatever privileges Tan Eng Lay gave his brother, and which
were not given the other employees, only proves the kindness and generosity of Tan
Eng Lay towards a blood relative.

(iv) and even if it is assumed that Tan Eng Kee was quarrelling with Tan Eng Lay in
connection with the pricing of stocks, this does not adequately prove the existence of
a partnership relation between them. Even highly confidential employees and the
owners of a company sometimes argue with respect to certain matters which, in no
way indicates that they are partners as to each other.[35]

In the instant case, we find private respondents arguments to be well-taken. Where

circumstances taken singly may be inadequate to prove the intent to form a partnership,
nevertheless, the collective effect of these circumstances may be such as to support a
finding of the existence of the parties intent.[36] Yet, in the case at bench, even the
aforesaid circumstances when taken together are not persuasive indicia of a
partnership. They only tend to show that Tan Eng Kee was involved in the operations of
Benguet Lumber, but in what capacity is unclear. We cannot discount the likelihood that
as a member of the family, he occupied a niche above the rank-and-file employees. He
would have enjoyed liberties otherwise unavailable were he not kin, such as his
residence in the Benguet Lumber Company compound. He would have moral, if not
actual, superiority over his fellow employees, thereby entitling him to exercise powers of
supervision. It may even be that among his duties is to place orders with
suppliers. Again, the circumstances proffered by petitioners do not provide a logical
nexus to the conclusion desired; these are not inconsistent with the powers and duties
of a manager, even in a business organized and run as informally as Benguet Lumber
Company.
 There being no partnership, it follows that there is no dissolution, winding up or
liquidation to speak of. Hence, the petition must fail.
WHEREFORE, the petition is hereby denied, and the appealed decision of the
Court of Appeals is hereby AFFIRMED in toto. No pronouncement as to costs.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur

AURELIO K. LITONJUA, JR., G.R. NOS. 166299-300

Petitioner,

- versus
Present:
EDUARDO K. LITONJUA, SR.,
ROBERT T. YANG, ANGLO
PHILS. MARITIME, INC., PANGANIBAN, J., Chairman
SANDOVAL- GUTIERREZ,
CINEPLEX, INC., DDM
CORONA,
GARMENTS, INC., EDDIE K.
CARPIO MORALES and
LITONJUA SHIPPING GARCIA, JJ.
AGENCY, INC., EDDIE K.
LITONJUA SHIPPING CO.,
INC., LITONJUA SECURITIES, Promulgated:
INC. (formerly E. K. Litonjua
Sec), LUNETA THEATER, INC.,
E & L REALTY, (formerly E & L December 13, 2005
INTL SHIPPING CORP.), FNP
CO., INC., HOME
ENTERPRISES, INC.,
BEAUMONT DEV. REALTY CO.,
INC., GLOED LAND CORP.,
EQUITY TRADING CO., INC.,
3D CORP., L DEV. CORP, LCM
THEATRICAL ENTERPRISES,
INC., LITONJUA SHIPPING
CO. INC., MACOIL INC.,
ODEON REALTY CORP.,
SARATOGA REALTY, INC.,
ACT THEATER INC. (formerly
General Theatrical & Film
Exchange, INC.), AVENUE
REALTY, INC., AVENUE
THEATER, INC. and LVF
PHILIPPINES, INC.,
(Formerly VF PHILIPPINES),
Respondents.
x-------------------------------------------------x

DECISION
GARCIA, J.:

In this petition for review under Rule 45 of the Rules of Court, petitioner
Aurelio K. Litonjua, Jr. seeks to nullify and set aside the Decision of the
Court of Appeals (CA) dated March 31, 2004[1] in consolidated cases C.A.
G.R. Sp. No. 76987 and C.A. G.R. SP. No 78774 and its Resolution dated
December 07, 2004,[2] denying petitioners motion for reconsideration.

The recourse is cast against the following factual backdrop:

Petitioner Aurelio K. Litonjua, Jr. (Aurelio) and herein respondent Eduardo

K. Litonjua, Sr. (Eduardo) are brothers. The legal dispute between them
started when, on December 4, 2002, in the Regional Trial Court (RTC) at
Pasig City, Aurelio filed a suit against his brother Eduardo and herein
respondent Robert T. Yang (Yang) and several corporations for specific
performance and accounting. In his complaint,[3] docketed as Civil Case No.
69235 and eventually raffled to Branch 68 of the court,[4] Aurelio alleged
that, since June 1973, he and Eduardo are into a joint venture/partnership
arrangement in the Odeon Theater business which had expanded thru
investment in Cineplex, Inc., LCM Theatrical Enterprises, Odeon Realty
Corporation (operator of Odeon I and II theatres), Avenue Realty, Inc.,
owner of lands and buildings, among other corporations. Yang is described
in the complaint as petitioners and Eduardos partner in their Odeon
Theater investment.[5] The same complaint also contained the following
material averments:
3.01 On or about 22 June 1973, [Aurelio] and Eduardo entered into a
joint venture/partnership for the continuation of their family business
and common family funds .

3.01.1 This joint venture/[partnership] agreement was contained in a

memorandum addressed by Eduardo to his siblings, parents and other
relatives. Copy of this memorandum is attached hereto and made an
integral part as Annex A and the portion referring to [Aurelio]
submarked as Annex A-1.

3.02 It was then agreed upon between [Aurelio] and Eduardo that in
consideration of [Aurelios] retaining his share in the remaining family
businesses (mostly, movie theaters, shipping and land development) and
contributing his industry to the continued operation of these businesses,
[Aurelio] will be given P1 Million or 10% equity in all these businesses
and those to be subsequently acquired by them whichever is greater. . . .

4.01 from 22 June 1973 to about August 2001, or [in] a span of 28 years,
[Aurelio] and Eduardo had accumulated in their joint venture/partnership
various assets including but not limited to the corporate defendants and
[their] respective assets.

4.02 In addition . . . the joint venture/partnership had also acquired

[various other assets], but Eduardo caused to be registered in the names
of other parties.

xxx xxx xxx

4.04 The substantial assets of most of the corporate defendants consist of

real properties . A list of some of these real properties is attached hereto
and made an integral part as Annex B.
xxx xxx xxx

5.02 Sometime in 1992, the relations between [Aurelio] and Eduardo

became sour so that [Aurelio] requested for an accounting and
liquidation of his share in the joint venture/partnership [but these
demands for complete accounting and liquidation were not heeded].
 xxx xxx xxx

5.05 What is worse, [Aurelio] has reasonable cause to believe that

Eduardo and/or the corporate defendants as well as Bobby [Yang], are
transferring . . . various real properties of the corporations belonging to
the joint venture/partnership to other parties in fraud of [Aurelio]. In
consequence, [Aurelio] is therefore causing at this time the annotation on
the titles of these real properties a notice of lis pendens . (Emphasis in
the original; underscoring and words in bracket added.)

For ease of reference, Annex A-1 of the complaint, which petitioner asserts
to have been meant for him by his brother Eduardo, pertinently reads:

10) JR. (AKL) [Referring to petitioner Aurelio K. Litonjua]:

You have now your own life to live after having been married. .
I am trying my best to mold you the way I work so you can follow the
pattern . You will be the only one left with the company, among us
brothers and I will ask you to stay as I want you to run this office every
time I am away. I want you to run it the way I am trying to run it because
I will be all alone and I will depend entirely to you (sic). My sons will
not be ready to help me yet until about maybe 15/20 years from now.
Whatever is left in the corporation, I will make sure that you get ONE
MILLION PESOS (P1,000,000.00) or ten percent (10%) equity,
whichever is greater. We two will gamble the whole thing of what I have
and what you are entitled to. . It will be you and me alone on this. If ever
I pass away, I want you to take care of all of this. You keep my share for
my two sons are ready take over but give them the chance to run the
company which I have built.
xxx xxx xxx
Because you will need a place to stay, I will arrange to give you first
ONE HUNDRED THOUSANDS PESOS: (P100, 000.00) in cash or
asset, like Lt. Artiaga so you can live better there. The rest I will give
you in form of stocks which you can keep. This stock I assure you is
good and saleable. I will also gladly give you the share of Wack-Wack
and Valley Golf because you have been good. The rest will be in stocks
from all the corporations which I repeat, ten percent (10%) equity. [6]
On December 20, 2002, Eduardo and the corporate respondents, as
defendants a quo, filed a joint ANSWER With Compulsory
Counterclaim denying under oath the material allegations of the complaint,
more particularly that portion thereof depicting petitioner and Eduardo as
having entered into a contract of partnership. As affirmative defenses,
Eduardo, et al., apart from raising a jurisdictional matter, alleged that the
complaint states no cause of action, since no cause of action may be
derived from the actionable document, i.e., Annex A-1, being void under
the terms of Article 1767 in relation to Article 1773 of the Civil
Code, infra. It is further alleged that whatever undertaking Eduardo agreed
to do, if any, under Annex A-1, are unenforceable under the provisions of
the Statute of Frauds.[7]

For his part, Yang - who was served with summons long after the other
defendants submitted their answer moved to dismiss on the ground, inter
alia, that, as to him, petitioner has no cause of action and the complaint
does not state any.[8] Petitioner opposed this motion to dismiss.

On January 10, 2003, Eduardo, et al., filed a Motion to Resolve Affirmative

Defenses.[9] To this motion, petitioner interposed an Opposition with ex-
Parte Motion to Set the Case for Pre-trial.[10]

Acting on the separate motions immediately adverted to above, the

trial court, in an Omnibus Order dated March 5, 2003, denied the
affirmative defenses and, except for Yang, set the case for pre-trial on April
10, 2003.[11]

In another Omnibus Order of April 2, 2003, the same court denied

the motion of Eduardo, et al., for reconsideration[12] and Yangs motion to
dismiss. The following then transpired insofar as Yang is concerned:

1. On April 14, 2003, Yang filed his ANSWER, but expressly reserved the right
to seek reconsideration of the April 2, 2003 Omnibus Order and to pursue his failed
motion to dismiss[13] to its full resolution.
 2. On April 24, 2003, he moved for reconsideration of the Omnibus Order of
April 2, 2003, but his motion was denied in an Order of July 4, 2003.[14]

3. On August 26, 2003, Yang went to the Court of Appeals (CA) in a petition
for certiorari under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No.
78774,[15] to nullify the separate orders of the trial court, the first denying his motion
to dismiss the basic complaint and, the second, denying his motion for
reconsideration.

Earlier, Eduardo and the corporate defendants, on the contention

that grave abuse of discretion and injudicious haste attended the issuance
of the trial courts aforementioned Omnibus Orders dated March 5, and
April 2, 2003, sought relief from the CA via similar recourse. Their petition
for certiorari was docketed as CA G.R. SP No. 76987.

Per its resolution dated October 2, 2003,[16] the CAs 14th Division
ordered the consolidation of CA G.R. SP No. 78774 with CA G.R. SP No.
76987.

Following the submission by the parties of their respective

Memoranda of Authorities, the appellate court came out with the herein
assailed Decision dated March 31, 2004, finding for Eduardo and Yang,
as lead petitioners therein, disposing as follows:

WHEREFORE, judgment is hereby rendered granting the

issuance of the writ of certiorari in these consolidated cases annulling,
reversing and setting aside the assailed orders of the court a quodated
March 5, 2003, April 2, 2003 and July 4, 2003 and the complaint filed by
private respondent [now petitioner Aurelio] against all the petitioners
[now herein respondents Eduardo, et al.] with the court a quo is
hereby dismissed.
SO ORDERED.[17] (Emphasis in the original; words in bracket added.)

Explaining its case disposition, the appellate court stated, inter alia, that
the alleged partnership, as evidenced by the actionable documents,
Annex A and A-1 attached to the complaint, and upon which petitioner
solely predicates his right/s allegedly violated by Eduardo, Yang and the
corporate defendants a quo is void or legally inexistent.
In time, petitioner moved for reconsideration but his motion was
denied by the CA in its equally assailed Resolution of December 7,
2004.[18] .

Hence, petitioners present recourse, on the contention that the CA erred:

A. When it ruled that there was no partnership created by the actionable

document because this was not a public instrument and immovable
properties were contributed to the partnership.

B. When it ruled that the actionable document did not create a

demandable right in favor of petitioner.

C. When it ruled that the complaint stated no cause of action against

[respondent] Robert Yang; and

D. When it ruled that petitioner has changed his theory on appeal when
all that Petitioner had done was to support his pleaded cause of action by
another legal perspective/argument.

The petition lacks merit.

Petitioners demand, as defined in the petitory portion of his

complaint in the trial court, is for delivery or payment to him, as Eduardos
and Yangs partner, of his partnership/joint venture share, after an
accounting has been duly conducted of what he deems to be
partnership/joint venture property.[19]

A partnership exists when two or more persons agree to place their

money, effects, labor, and skill in lawful commerce or business, with the
understanding that there shall be a proportionate sharing of the profits
and losses between them.[20] A contract of partnership is defined by the
Civil Code as one where two or more persons bound themselves to
contribute money, property, or industry to a common fund with the
intention of dividing the profits among themselves.[21] A joint venture, on
 the other hand, is hardly distinguishable from, and may be likened to, a
partnership since their elements are similar, i.e., community of interests
in the business and sharing of profits and losses. Being a form of
partnership, a joint venture is generally governed by the law on
partnership.[22]

The underlying issue that necessarily comes to mind in this

proceedings is whether or not petitioner and respondent Eduardo are
partners in the theatre, shipping and realty business, as one claims but
which the other denies. And the issue bearing on the first assigned error
relates to the question of what legal provision is applicable under the
premises, petitioner seeking, as it were, to enforce the actionable
document - Annex A-1 - which he depicts in his complaint to be the
contract of partnership/joint venture between himself and Eduardo. Clearly,
then, a look at the legal provisions determinative of the existence, or
defining the formal requisites, of a partnership is indicated. Foremost of
these are the following provisions of the Civil Code:

Art. 1771. A partnership may be constituted in any form, except where

immovable property or real rights are contributed thereto, in which case
a public instrument shall be necessary.

Art. 1772. Every contract of partnership having a capital of three

thousand pesos or more, in money or property, shall appear in a public
instrument, which must be recorded in the Office of the Securities and
Exchange Commission.

Failure to comply with the requirement of the preceding paragraph shall

not affect the liability of the partnership and the members thereof to third
persons.

Art. 1773. A contract of partnership is void, whenever immovable

property is contributed thereto, if an inventory of said property is not
made, signed by the parties, and attached to the public instrument.

Annex A-1, on its face, contains typewritten entries, personal in

tone, but is unsigned and undated. As an unsigned document, there can be
no quibbling that Annex A-1 does not meet the public instrumentation
requirements exacted under Article 1771 of the Civil Code. Moreover, being
unsigned and doubtless referring to a partnership involving more than
P3,000.00 in money or property, Annex A-1 cannot be presented for
notarization, let alone registered with the Securities and Exchange
Commission (SEC), as called for under the Article 1772 of the Code. And
inasmuch as the inventory requirement under the succeeding Article 1773
goes into the matter of validity when immovable property is contributed to
the partnership, the next logical point of inquiry turns on the nature of
petitioners contribution, if any, to the supposed partnership.

The CA, addressing the foregoing query, correctly stated that

petitioners contribution consisted of immovables and real rights. Wrote that
court:

A further examination of the allegations in the complaint would

show that [petitioners] contribution to the so-called partnership/joint
venture was his supposed share in the family business that is consisting
of movie theaters, shipping and land development under paragraph 3.02
of the complaint. In other words, his contribution as a partner in the
alleged partnership/joint venture consisted of immovable properties and
real rights. .[23]

Significantly enough, petitioner matter-of-factly concurred with the

appellate courts observation that, prescinding from what he himself alleged
in his basic complaint, his contribution to the partnership consisted of his
share in the Litonjua family businesses which owned variable immovable
properties. Petitioners assertion in his motion for reconsideration[24] of the
CAs decision, that what was to be contributed to the business [of the
partnership] was [petitioners] industry and his share in the family [theatre
and land development] business leaves no room for speculation as to what
petitioner contributed to the perceived partnership.

Lest it be overlooked, the contract-validating inventory requirement

under Article 1773 of the Civil Code applies as long real property or real
rights are initially brought into the partnership. In short, it is really of no
moment which of the partners, or, in this case, who between petitioner
and his brother Eduardo, contributed immovables. In context, the more
important consideration is that real property was contributed, in which case
an inventory of the contributed property duly signed by the parties should
be attached to the public instrument, else there is legally no partnership to
speak of.

Petitioner, in an obvious bid to evade the application of Article 1773,

argues that the immovables in question were not contributed, but were
acquired after the formation of the supposed partnership. Needless to
stress, the Court cannot accord cogency to this specious argument. For, as
earlier stated, petitioner himself admitted contributing his share in the
supposed shipping, movie theatres and realty development family
businesses which already owned immovables even before Annex A-1 was
allegedly executed.

Considering thus the value and nature of petitioners alleged

contribution to the purported partnership, the Court, even if so disposed,
cannot plausibly extend Annex A-1 the legal effects that petitioner so
desires and pleads to be given. Annex A-1, in fine, cannot support the
existence of the partnership sued upon and sought to be enforced. The
legal and factual milieu of the case calls for this disposition. A partnership
may be constituted in any form, save when immovable property or real
rights are contributed thereto or when the partnership has a capital of at
least P3,000.00, in which case a public instrument shall be
necessary.[25] And if only to stress what has repeatedly been articulated, an
inventory to be signed by the parties and attached to the public instrument
is also indispensable to the validity of the partnership whenever immovable
property is contributed to it.

Given the foregoing perspective, what the appellate court wrote in its
assailed Decision[26] about the probative value and legal effect of Annex A-
1commends itself for concurrence:

Considering that the allegations in the complaint showed that [petitioner]

contributed immovable properties to the alleged partnership, the Memorandum
(Annex A of the complaint) which purports to establish the said
 partnership/joint venture is NOT a public instrument and there was NO
inventory of the immovable property duly signed by the parties. As such, the
said Memorandum is null and void for purposes of establishing the existence of
a valid contract of partnership. Indeed, because of the failure to comply with
the essential formalities of a valid contract, the purported partnership/joint
venture is legally inexistent and it produces no effect whatsoever. Necessarily,
a void or legally inexistent contract cannot be the source of any contractual or
legal right. Accordingly, the allegations in the complaint, including the
actionable document attached thereto, clearly demonstrates that [petitioner] has
NO valid contractual or legal right which could be violated by the [individual
respondents] herein. As a consequence, [petitioners] complaint does NOT state
a valid cause of action because NOT all the essential elements of a cause of
action are present. (Underscoring and words in bracket added.)

Likewise well-taken are the following complementary excerpts from the

CAs equally assailed Resolution of December 7, 2004[27] denying petitioners
motion for reconsideration:

Further, We conclude that despite glaring defects in the allegations in the

complaint as well as the actionable document attached thereto (Rollo, p.
191), the [trial] court did not appreciate and apply the legal provisions
which were brought to its attention by herein [respondents] in the their
pleadings. In our evaluation of [petitioners] complaint, the latter
alleged inter alia to have contributed immovable properties to the
alleged partnership but the actionable document is not a public document
and there was no inventory of immovable properties signed by the
parties. Both the allegations in the complaint and the actionable
documents considered, it is crystal clear that [petitioner] has no valid or
legal right which could be violated by [respondents]. (Words in bracket
added.)

Under the second assigned error, it is petitioners posture that Annex A-1,
assuming its inefficacy or nullity as a partnership document,
nevertheless created demandable rights in his favor. As petitioner
succinctly puts it in this petition:

43. Contrariwise, this actionable document, especially its above-quoted

provisions, established an actionable contract even though it may not be
 a partnership. This actionable contract is what is known as an innominate
contract (Civil Code, Article 1307).

44. It may not be a contract of loan, or a mortgage or whatever, but surely the
contract does create rights and obligations of the parties and which rights
and obligations may be enforceable and demandable. Just because the
relationship created by the agreement cannot be specifically labeled or
pigeonholed into a category of nominate contract does not mean it is
void or unenforceable.
Petitioner has thus thrusted the notion of an innominate contract on this
Court - and earlier on the CA after he experienced a reversal of fortune
thereat - as an afterthought. The appellate court, however, cannot really
be faulted for not yielding to petitioners dubious stratagem of altering his
theory of joint venture/partnership to an innominate contract. For, at
bottom, the appellate courts certiorari jurisdiction was circumscribed by
what was alleged to have been the order/s issued by the trial court in
grave abuse of discretion. As respondent Yang pointedly observed,[28] since
the parties basic position had been well-defined, that of petitioner being
that the actionable document established a partnership/joint venture, it is
on those positions that the appellate court exercised its certiorari
jurisdiction. Petitioners act of changing his original theory is an
impermissible practice and constitutes, as the CA aptly declared, an
admission of the untenability of such theory in the first place.

[Petitioner] is now humming a different tune . . . . In a sudden twist of stance,

he has now contended that the actionable instrument may be considered
an innominate contract. xxx Verily, this now changes [petitioners]
theory of the case which is not only prohibited by the Rules but also is
an implied admission that the very theory he himself has adopted, filed
and prosecuted before the respondent court is erroneous.

Be that as it may . . We hold that this new theory contravenes [petitioners]

theory of the actionable document being a partnership document. If
anything, it is so obvious we do have to test the sufficiency of the cause
of action on the basis of partnership law xxx.[29] (Emphasis in the
original; Words in bracket added).
But even assuming in gratia argumenti that Annex A-1 partakes of a
perfected innominate contract, petitioners complaint would still be
dismissible as against Eduardo and, more so, against Yang. It cannot be
over-emphasized that petitioner points to Eduardo as the author of
Annex A-1. Withal, even on this consideration alone, petitioners claim
against Yang is doomed from the very start.

As it were, the only portion of Annex A-1 which could perhaps be remotely
regarded as vesting petitioner with a right to demand from respondent
Eduardo the observance of a determinate conduct, reads:

xxx You will be the only one left with the company, among us brothers and I
will ask you to stay as I want you to run this office everytime I am away.
I want you to run it the way I am trying to run it because I will be alone
and I will depend entirely to you, My sons will not be ready to help me
yet until about maybe 15/20 years from now. Whatever is left in the
corporation, I will make sure that you get ONE MILLION PESOS
(P1,000,000.00) or ten percent (10%) equity, whichever is greater.
(Underscoring added)

It is at once apparent that what respondent Eduardo imposed upon himself

under the above passage, if he indeed wrote Annex A-1, is a promise
which is not to be performed within one year from contract execution
on June 22, 1973. Accordingly, the agreement embodied in Annex A-
1 is covered by the Statute of Frauds and ergo unenforceable for
non-compliance therewith.[30] By force of the statute of frauds, an
agreement that by its terms is not to be performed within a year
from the making thereof shall be unenforceable by action, unless the
same, or some note or memorandum thereof, be in writing
and subscribed by the party charged. Corollarily, no action can be
proved unless the requirement exacted by the statute of frauds is
complied with.[31]
Lest it be overlooked, petitioner is the intended beneficiary of the P1 Million
or 10% equity of the family businesses supposedly promised by
Eduardo to give in the near future. Any suggestion that the stated
amount or the equity component of the promise was intended to go
 to a common fund would be to read something not written
in Annex A-1. Thus, even this angle alone argues against the very
idea of a partnership, the creation of which requires two or more
contracting minds mutually agreeing to contribute money, property
or industry to a common fund with the intention of dividing the
profits between or among themselves.[32]
In sum then, the Court rules, as did the CA, that petitioners complaint for
specific performance anchored on an actionable document of partnership
which is legally inexistent or void or, at best, unenforceable does not state
a cause of action as against respondent Eduardo and the corporate
defendants. And if no of action can successfully be maintained against
respondent Eduardo because no valid partnership existed between him and
petitioner, the Court cannot see its way clear on how the same action could
plausibly prosper against Yang. Surely, Yang could not have become a
partner in, or could not have had any form of business relationship with, an
inexistent partnership.

As may be noted, petitioner has not, in his complaint, provide the logical
nexus that would tie Yang to him as his partner. In fact, attendant
circumstances would indicate the contrary. Consider:

1. Petitioner asserted in his complaint that his so-called joint

venture/partnership with Eduardo was for the continuation of their family
business and common family funds which were theretofore being mainly
managed by Eduardo. [33] But Yang denies kinship with the Litonjua family and
petitioner has not disputed the disclaimer.

2. In some detail, petitioner mentioned what he had contributed to the joint

venture/partnership with Eduardo and what his share in the businesses will be.
No allegation is made whatsoever about what Yang contributed, if any, let
alone his proportional share in the profits. But such allegation cannot, however,
be made because, as aptly observed by the CA, the actionable document did not
contain such provision, let alone mention the name of Yang. How, indeed,
could a person be considered a partner when the document purporting to
establish the partnership contract did not even mention his name.

3. Petitioner states in par. 2.01 of the complaint that [he] and Eduardo are
business partners in the [respondent] corporations, while Bobby is his and
 Eduardos partner in their Odeon Theater investment (par. 2.03). This means
that the partnership between petitioner and Eduardo came first; Yang became
their partner in their Odeon Theater investment thereafter. Several paragraphs
later, however, petitioner would contradict himself by alleging that his
investment and that of Eduardo and Yang in the Odeon theater business has
expanded through a reinvestment of profit income and direct investments in
several corporation including but not limited to [six] corporate respondents
This simply means that the Odeon Theatre business came before the corporate
respondents. Significantly enough, petitioner refers to the corporate
respondents as progeny of the Odeon Theatre business.[34]

Needless to stress, petitioner has not sufficiently established in his

complaint the legal vinculum whence he sourced his right to drag Yang into
the fray. The Court of Appeals, in its assailed decision, captured and
formulated the legal situation in the following wise:

[Respondent] Yang, is impleaded because, as alleged in the complaint,

he is a partner of [Eduardo] and the [petitioner] in the Odeon Theater
Investment which expanded through reinvestments of profits and direct
investments in several corporations, thus:

xxx xxx xxx

Clearly, [petitioners] claim against Yang arose from his alleged

partnership with petitioner and the respondent. However, there was NO
allegation in the complaint which directly alleged how the supposed
contractual relation was created between [petitioner] and Yang. More
importantly, however, the foregoing ruling of this Court that the
purported partnership between [Eduardo] is void and legally inexistent
directly affects said claim against Yang. Since [petitioner] is trying to
establish his claim against Yang by linking him to the legally inexistent
partnership . . . such attempt had become futile because there was
NOTHING that would contractually connect [petitioner] and Yang. To
establish a valid cause of action, the complaint should have a statement
of fact upon which to connect [respondent] Yang to the alleged
partnership between [petitioner] and respondent [Eduardo], including
their alleged investment in the Odeon Theater. A statement of facts on
those matters is pivotal to the complaint as they would constitute the
ultimate facts necessary to establish the elements of a cause of action
against Yang. [35]
 Pressing its point, the CA later stated in its resolution denying
petitioners motion for reconsideration the following:

xxx Whatever the complaint calls it, it is the actionable document

attached to the complaint that is controlling. Suffice it to state, We have
not ignored the actionable document As a matter of fact, We emphasized
in our decision that insofar as [Yang] is concerned, he is not even
mentioned in the said actionable document. We are therefore puzzled
how a person not mentioned in a document purporting to establish a
partnership could be considered a partner.[36] (Words in bracket ours).

The last issue raised by petitioner, referring to whether or not he

changed his theory of the case, as peremptorily determined by the CA, has
been discussed at length earlier and need not detain us long. Suffice it to
say that after the CA has ruled that the alleged partnership is inexistent,
petitioner took a different tack. Thus, from a joint venture/partnership
theory which he adopted and consistently pursued in his complaint,
petitioner embraced the innominate contract theory. Illustrative of this shift
is petitioners statement in par. #8 of his motion for reconsideration of the
CAs decision combined with what he said in par. # 43 of this petition, as
follows:

8. Whether or not the actionable document creates a partnership,

joint venture, or whatever, is a legal matter. What is determinative for
purposes of sufficiency of the complainants allegations, is whether the
actionable document bears out an actionable contract be it a partnership,
a joint venture or whatever or some innominate contract It may be noted
that one kind of innominate contract is what is known as du ut facias (I
give that you may do).[37]

43. Contrariwise, this actionable document, especially its above-

quoted provisions, established an actionable contract even though it may
not be a partnership. This actionable contract is what is known as an
innominate contract (Civil Code, Article 1307).[38]
Springing surprises on the opposing party is offensive to the sporting idea
of fair play, justice and due process; hence, the proscription against a
party shifting from one theory at the trial court to a new and different
theory in the appellate court.[39] On the same rationale, an issue which was
neither averred in the complaint cannot be raised for the first time on
appeal.[40] It is not difficult, therefore, to agree with the CA when it made
short shrift of petitioners innominate contract theory on the basis of the
foregoing basic reasons.
Petitioners protestation that his act of introducing the concept of
innominate contract was not a case of changing theories but of supporting
his pleaded cause of action that of the existence of a partnership - by
another legal perspective/argument, strikes the Court as a strained attempt
to rationalize an untenable position. Paragraph 12 of his motion for
reconsideration of the CAs decision virtually relegates partnership as a fall-
back theory. Two paragraphs later, in the same notion, petitioner faults the
appellate court for reading, with myopic eyes, the actionable document
solely as establishing a partnership/joint venture. Verily, the cited
paragraphs are a study of a party hedging on whether or not to pursue
the original cause of action or altogether abandoning the same, thus:

12. Incidentally, assuming that the actionable document created a partnership

between [respondent] Eduardo, Sr. and [petitioner], no immovables were
contributed to this partnership. xxx

14. All told, the Decision takes off from a false premise that the
actionable document attached to the complaint does not establish a
contractual relationship between [petitioner] and Eduardo, Sr. and
Roberto T Yang simply because his document does not create a
partnership or a joint venture. This is a myopic reading of the actionable
document.

Per the Courts own count, petitioner used in his complaint the mixed
words joint venture/partnership nineteen (19) times and the
term partner four (4) times. He made reference to the law of joint
venture/partnership [being applicable] to the business relationship between
[him], Eduardo and Bobby [Yang] and to his rights in all specific properties
of their joint venture/partnership. Given this consideration, petitioners right
of action against respondents Eduardo and Yang doubtless pivots on the
existence of the partnership between the three of them, as purportedly
evidenced by the undated and unsigned AnnexA-1. A void Annex A-1, as
an actionable document of partnership, would strip petitioner of a cause of
action under the premises. A complaint for delivery and accounting of
partnership property based on such void or legally non-existent actionable
document is dismissible for failure to state of action. So, in gist, said the
Court of Appeals. The Court agrees.
WHEREFORE, the instant petition is DENIED and the impugned Decision
and Resolution of the Court of Appeals AFFIRMED.

Cost against the petitioner.