EN BANC

[G.R. No. L-24193. June 28, 1968.]

MAURICIO AGAD, Plaintiff-Appellant, v. SEVERINO MABATO &

MABATO & AGAD COMPANY, Defendants-Appellees.

Angeles, Maskariño & Associates, for Plaintiff-Appellant.

Victorio S. Advincula for Defendants-Appellees.

SYLLABUS

1. CIVIL LAW; PARTNERSHIP; PURPOSE TO "OPERATE A

FISHPOND" ; APPLICABILITY OF ART. 1773 N.C.C. — Where a
partnership was formed "to operate a fishpond", not to "engage in a
fishpond business", and the partners contributed P1,000.00 each as their
share, Art. 1773 of the Civil Code does not apply, it appearing that neither a
fishpond nor a real right thereto was contributed to the partnership or
become a part of the capital thereof, even if a fishpond or a real right
thereto could become part of its assets.

DECISION

CONCEPCION, J.:

In this appeal, taken by plaintiff Mauricio Agad, from an order of dismissal

of the Court of First Instance of Davao, we are called upon to determine the
applicability of Article 1773 of our Civil Code to the contract of partnership
on which the complaint herein is based.

Alleging that he and defendant Severino Mabato are — pursuant to a

public instrument dated August 29, 1952, copy of which is attached to the
complaint as Annex "A" — partners in a fishpond business, to the capital of
which Agad contributed P1,000, with the right to receive 50% of the profits;
that from 1952 up to and including 1956, Mabato who handled the
partnership funds, had yearly rendered accounts of the operations of the
partnership; and that, despite repeated demands, Mabato had failed and
refused to render accounts for the years 1957 to 1963,

Agad prayed in his complaint against Mabato and Mabato & Agad
Company, filed on June 9, 1964, that judgment be rendered sentencing
Mabato to pay him (Agad) the sum of P14,000, as his share in the profits of
the partnership for the period from 1957 to 1963, in addition to P1,000 as
attorney’s fees, and ordering the dissolution of the partnership, as well as
the winding up of its affairs by a receiver to be appointed therefor.

In his answer, Mabato admitted the formal allegations of the complaint and
denied the existence of said partnership, upon the ground that the contract
therefor had not been perfected, despite the execution of Annex "A",
because Agad had allegedly failed to give his P1,000 contribution to the
partnership capital. Mabato prayed, therefore, that the complaint be
dismissed; that Annex "A" be declared void ab initio; and that Agad be
sentenced to pay actual, moral and exemplary damages, as well as
attorney’s fees.

Subsequently, Mabato filed a motion to dismiss, upon the ground that the
complaint states no cause of action and that the lower court had no
jurisdiction over the subject matter of the case, because it involves
principally the determination of rights over public lands. After due hearing,
the court issued the order appealed from, granting the motion to dismiss
the complaint for failure to state a cause of action. This conclusion was
predicated upon the theory that the contract of partnership, Annex "A", is
null and void, pursuant to Art. 1773 of our Civil Code, because an inventory
of the fishpond referred in said instrument had not been attached thereto. A
reconsideration of this order having been denied, Agad brought the matter
to us for review by record on appeal.

Articles 1771 and 1773 of said Code provide:jgc:chanrobles.com.ph

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

is contributed thereto, if inventory of said property is not made, signed by
the parties, and attached to the Public instrument."cralaw virtua1aw library

The issue before us hinges on whether or not "immovable property or

real rights" have been contributed to the partnership under
consideration.

Mabato alleged and the lower court held that the answer should be in the
affirmative, because "it is really inconceivable how a partnership engaged
in the fishpond business could exist without said fishpond property (being)
contributed to the partnership." It should be noted, however, that, as stated
in Annex "A" the partnership was established "to operate a fishpond", not
to "engage in a fishpond business." Moreover, none of the partners
contributed either a fishpond or a real right to any fishpond. Their
contributions were limited to the sum of P1,000 each. Indeed, Paragraph 4
of the Annex "A" provides:jgc:chanrobles.com.ph

"That the capital of the said partnership is Two Thousand (P2,000.00)

Pesos Philippine Currency, of which One Thousand (P1,000.00) pesos has
been contributed by Severino Mabato and One Thousand (P1,000.00)
Pesos has been contributed by Mauricio Agad.

x       x       x"

The operation of the fishpond mentioned in Annex "A" was the purpose of
the partnership. Neither said fishpond nor a real right thereto was
contributed to the partnership or became part of the capital thereof, even if
a fishpond or a real right thereto could become part of its assets.

WHEREFORE, we find that said Article 1773 of the Civil Code is not in
point and that, the order appealed from should be, as it is hereby set aside
and the case remanded to the lower court for further proceedings, with the
costs of this instance against defendant- appellee, Severino Mabato. It is
so ordered.

Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and

Fernando, JJ., concur.
 THIRD DIVISION

[G.R. No. 101847. May 27, 1993.]

LOURDES NAVARRO AND MENARDO NAVARRO, Petitioners, v.

COURT OF APPEALS, JUDGE BETHEL KATALBAS-MOSCARDON,
Presiding Judge, Regional Trial Court of Bacolod City, Branch 52,
Sixth Judicial Region and Spouses OLIVIA V. YANSON AND RICARDO
B. YANSON, Respondents.

George L. Howard Law Office, for Petitioners.

Geocadin, Vinco, Guance, Laudenorio & Cario Law Office for Private

Respondents.

SYLLABUS

REMEDIAL LAW; SUPREME COURT; JURISDICTION; LIMITED PURELY

QUESTIONS OF LAW AND NOT TO FACTUAL ISSUES PASSED UPON
BY THE TRIAL COURT. — Petitioners have come to us in a petition for
review. However, the petition is focused solely on factual issues which can
no longer be entertained. Petitioners’ arguments are all directed against the
decision of the regional trial court; not a word is said in regard to the
appellate court’s disposition of their petition for annulment of judgment.
Verily, petitioners keep on pressing the idea that a partnership exists on
account of the so-called admissions in judicio. The appellate court acted
properly in dismissing the petition for annulment of judgment, the issue
raised therein having been directly litigated in, and passed upon by, the trial
court.

DECISION

MELO, J.:
Assailed and sought to be set aside by the petition before us is the
Resolution of the Court of Appeals dated June 20, 1991 which dismissed
the petition for annulment of judgment filed by the Spouses Lourdes and
Menardo Navarro, thusly:chanrob1es virtual 1aw library

The instant petition for annulment of decision is DISMISSED.

1. Judgments may be annulled only on the ground of extrinsic or collateral

fraud, as distinguished from intrinsic fraud (Canlas v. Court of Appeals, 164
SCRA 160, 170). No such ground is alleged in the petition.

2. Even if the judgment rendered by the respondent Court were erroneous,

it is not necessarily void (Chereau v. Fuentebella, 43 Phil. 216). Hence, it
cannot be annulled by the proceeding sought to be commenced by the
petitioners.

3. The petitioners’ remedy against the judgment enforcement of which is

sought to be stopped should have been appeal.

SO ORDERED. (pp. 24-25, Rollo.)

The antecedent facts of the case are as follows:chanrob1es virtual 1aw

library

On July 23, 1976, herein private respondent Olivia V. Yanson filed a

complaint against petitioner Lourdes Navarro for "Delivery of Personal
Properties With Damages." The complaint incorporated an application for a
writ of replevin. The complaint was later docketed as Civil Case No. 716
(12562) of the then Court of First Instance of Bacolod (Branch 55) and was
subsequently amended to include private respondent’s husband, Ricardo
B. Yanson, as co-plaintiff, and petitioner’s husband, as co-defendant.

On July 27, 1976, then Executive Judge Oscar R. Victoriano (later to be

promoted and to retire as Presiding Justice of the Court of Appeals)
approved private respondents’ application for a writ of replevin. The
Sheriff’s Return of Service dated March 3, 1978 affirmed receipt by private
respondents of all the pieces of personal property sought to be recovered
from petitioners.

On April 30, 1990, Presiding Judge Bethel Katalbas-Moscardon rendered a

decision, disposing as follows:chanrob1es virtual 1aw library

Accordingly, in the light of the aforegoing findings, all chattels already

recovered by plaintiff by virtue of the Writ of Replevin and as listed in the
complaint are hereby sustained to belong to plaintiff being the owner of
these properties; the motor vehicle, particularly that Ford Fiera Jeep
registered in and which had remain in the possession of the defendant is
likewise declared to belong to her, however, said defendant is hereby
ordered to reimburse plaintiff the sum of P6,500.00 representing the
amount advanced to pay part of the price therefor; and said defendant is
likewise hereby ordered to return to plaintiff such other equipment[s] as
were brought by the latter to and during the operation of their business as
were listed in the complaint and not recovered as yet by virtue of the
previous Writ of Replevin. (p. 12, Rollo.)

Petitioner received a copy of the decision on January 10, 1991 (almost 9

months after its rendition) and filed on January 16, 1991 a "Motion for
Extension of Time To File a Motion for Reconsideration." This was granted
on January 18, 1991. Private respondents filed their opposition, citing the
ruling in the case of Habaluyas Enterprises, Inc. v. Japson (142 SCRA 208
[1986] proscribing the filing of any motion for extension of time to file a
motion for new trial or reconsideration. The trial judge vacated the order
dated January 18, 1991 and declared the decision of April 30, 1990 as final
and executory. (Petitioners’ motion for reconsideration was subsequently
filed on February 1, 1991 or 22 days after the receipt of the decision).

On February 4, 1991, the trial judge issued a writ of execution (Annex "5",
p. 79, Rollo). The Sheriff’s Return of Service (Annex "6", p. 82, Rollo)
declared that the writ was "duly served and satisfied." A receipt for the
amount of P6,500.00 issued by Mrs. Lourdes Yanson, co-petitioner in this
case, was likewise submitted by the Sheriff (Annex "7", p. 83, Rollo).

On June 26, 1991, petitioners filed with respondent court a petition for
annulment of the trial court’s decision, claiming that the trial judge erred in
declaring the non-existence of a partnership, contrary to the evidence on
record.

The appellate court, as aforesaid, outrightly dismissed the petition due to

absence of extrinsic or collateral fraud, observing further that an appeal
was the proper remedy.
In the petition before us, petitioners claim that the trial judge ignored
evidence that would show that the parties "clearly intended to form, and (in
fact) actually formed a verbal partnership engaged in the business of Air
Freight Service Agency in Bacolod" ; and that the decision sustaining the
writ of replevin is void since "the properties belonging to the partnership do
not actually belong to any of the parties until the final disposition and
winding up of the partnership" (p. 15, Rollo). These issues, however, were
extensively discussed by the trial judge in her 16-page, single-spaced
decision.

We agree with respondents that the decision in this case has become final.
In fact a writ of execution had been issued and was promptly satisfied by
the payment of P6,500.00 to private respondents.chanrobles virtual
lawlibrary

Having lost their right of appeal, petitioners resorted to annulment

proceedings to justify a belated judicial review of their case. This was,
however, correctly thrown out by the Court of Appeals because petitioners
failed to cite extrinsic or collateral fraud to warrant the setting aside of the
trial court’s decision. We respect the appellate court’s finding in this regard.

Petitioners have come to us in a petition for review. However, the petition

is focused solely on factual issues which can no longer be entertained.
Petitioners’ arguments are all directed against the decision of the regional
trial court; not a word is said in regard to the appellate court’s disposition of
their petition for annulment of judgment. Verily, petitioners keep on
pressing the idea that a partnership exists on account of the so-called
admissions in judicio. But the factual premises of the trial court were more
than enough to suppress and negate petitioners’ submissions along this
line:chanrob1es virtual 1aw library

To be resolved by this Court factually involved the issue of whether there

was a partnership that existed between the parties based on their
verbal contention; whether the properties that were commonly used in the
operation of Allied Air Freight belonged to this alleged partnership
business; and the status of the parties in this transaction of alleged
partnership. On the other hand, the legal issue revolves on the dissolution
and winding up in case a partnership so existed as well as the issue of
ownership over the properties subject matter of recovery.
As a premise, Article 1767 of the New Civil Code defines the contract of
partnership to quote:jgc:chanrobles.com.ph

"ART. 1767. By the contract of partnership two or more persons bind

themselves to contribute money, property, or industry to a common fund,
with the intention of dividing the proceeds among themselves.

x       x       x"

Corollary to this definition is the provision in determining whether a

partnership exist as so provided under Article 1769, to wit:chanrob1es
virtual 1aw library

x       x       x

Furthermore, the Code provides under Article 1771 and 1772 that while a
partnership may be constituted in any form, a public instrument is
necessary where immovables or any rights is constituted.
Likewise, if the partnership involves a capitalization of P3,000.00
or more in money or property, the same must appear in a public
instrument which must be recorded in the Office of the Securities
and Exchange Commission. Failure to comply with these
requirements shall not affect liability of the partners to third
persons.chanrobles lawlibrary : rednad

In consideration of the above, it is undeniable that both the plaintiff and the
defendant-wife made admission to have entered into an agreement of
operating this Allied Air Freight Agency of which the plaintiff personally
constituted with the Manila Office in a sense that the plaintiff did supply the
necessary equipments and money while her brother Atty. Rodolfo
Villaflores was the Manger and the defendant the Cashier. It was also
admitted that part of this agreement was an equal sharing of whatever
proceeds realized. Consequently, the plaintiff brought into this transaction
certain chattels in compliance with her obligation. The same has been done
by the herein brother and the herein defendant who started to work in the
business. A cursory examination of the evidences presented no proof that a
partnership, whether oral or written had been constituted at the inception of
this transaction. True it is that even up to the filing of this complaint whose
movables brought by plaintiff for the use in the operation of the business
remain registered in her name.

While there may have been co-ownership or co-possession of some items

and/or any sharing of proceeds by way of advances received by both
plaintiff and the defendant, these are not indicative and supportive of the
existence of any partnership between them. Article 1769 of the New Civil
Code is explicit. Even the books and records retrieved by the
Commissioner appointed by the Court did not show proof of the existence
of a partnership as conceptualized by law. Such that if assuming that there
were profits realized in 1975 after the two-year deficits were compensated,
this could only be subject to an equal sharing consonant to the agreement
to equally divide any profit realized. However, this Court cannot overlook
the fact that the Audit Report of the appointed Commissioner was not
highly reliable in the sense that it was more of his personal estimate of
what is available on hand. Besides, the alleged profits was a difference
found after valuating the assets and not arising from the real operation of
the business. In accounting procedures, strictly, this could not be profit but
a net worth.

In view of the above factual findings of the Court it follows inevitably

therefore that there being no partnership that existed, any dissolution,
liquidation or winding up is beside the point. The plaintiff herself had
summarily ceased from her contract of agency and it is a personal
prerogative to desist. On the other hand, the assumption by the defendant
in negotiating for herself the continuance of the Agency with the principal in
Manila is comparable to plaintiff’s. Any account of plaintiff with the principal
as alleged, bore no evidence as no collection was ever demanded of from
her. The alleged P20,000.00 assumption specifically, as would have been
testified to by the defendant’s husband remain a mere allegation.cralawnad

As to the properties sought to be recovered, the Court sustains the

possession by plaintiff of all equipments and chattels recovered by virtue of
the Writ of Replevin. Considering the other vehicle which appeared
registered in the name of the defendant, and to which even she admitted
that part of the purchase price came from the business claimed mutually
operated, although the Court have not as much considered all entries in the
Audit report as totally reliable to be sustained insofar as the operation of
the business is concerned, nevertheless, with this admission of the
defendant and the fact that as borne out in said Report there has been
disbursed and paid for this vehicle out of the business funds in the total
sum of P6,500.00, it is only fitting and proper that validity of these
disbursements must be sustained as true (Exhs. M-1 to M-3, p. 180,
Records). In this connection and taking into account the earlier agreement
that only profits were to be shared equally, the plaintiff must be reimbursed
of this cost if only to allow the defendant continuous possession of the
vehicle in question. It is a fundamental, moral . . . another. (pp. 71-75,
Rollo.)

Withal, the appellate court acted properly in dismissing the petition for
annulment of judgment, the issue raised therein having been directly
litigated in, and passed upon by, the trial court.

WHEREFORE, the petition is DISMISSED. The Resolution of the Court of

Appeals dated June 20, 1991 is AFFIRMED in all respects.

No special pronouncement is made as to costs.

SO ORDERED.

THIRD DIVISION

[G.R. No. 134559. December 9, 1999.]

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

EMETERIA BARING, Petitioners, v. COURT OF APPEALS and
MANUEL TORRES, Respondents.

DECISION

PANGANIBAN, J.:

Courts may not extricate parties from the necessary consequences of their
acts. That the terms of a contract turn out to be financially disadvantageous
to them will not relieve them of their obligations therein. The lack of an
inventory of real property will not ipso facto release the contracting partners
from their respective obligations to each other arising from acts executed in
accordance with their agreement.chanrobles virtual lawlibrary

The Case

The Petition for Review on Certiorari before us assails the March 5, 1998

Decision 1 of the Court of Appeals 2 (CA) in CA-GR CV No. 42378 and its
June 25, 1998 Resolution denying reconsideration. The assailed Decision
affirmed the ruling of the Regional Trial Court (RTC) of Cebu City in Civil
Case No R-21208, which disposed as follows:jgc:chanrobles.com.ph

"WHEREFORE, for all the foregoing considerations, the Court, finding for
the defendant and against the plaintiffs, orders the dismissal of the
plaintiff’s complaint. The counterclaims of the defendant are likewise
ordered dismissed. No pronouncement as to costs." 3

The Facts

Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered

into a "joint venture agreement" with Respondent Manuel Torres for the
development of a parcel of land into a subdivision. Pursuant to the contract,
they executed a Deed of Sale covering the said parcel of land in favor of
respondent, who then had it registered in his name. By mortgaging the
property, respondent obtained from Equitable Bank a loan of P40,000
which, under the Joint Venture Agreement, was to be used for the
development of the subdivision. 4 All three of them also agreed to share
the proceeds from the sale of the subdivided lots.

The project did not push through, and the land was subsequently
foreclosed by the bank.

According to petitioners, the project failed because of "respondent’s lack of

funds or means and skills." They add that respondent used the loan not for
the development of the subdivision, but in furtherance of his own company,
Universal Umbrella Company.

On the other hand, respondent alleged that he used the loan to implement
the Agreement. With the said amount, he was able to effect the survey and
the subdivision of the lots. He secured the Lapu Lapu City Council’s
approval of the subdivision project which he advertised in a local
newspaper. He also caused the construction of roads, curbs and gutters.
Likewise, he entered into a contract with an engineering firm for the
building of sixty low-cost housing units and actually even set up a model
house on one of the subdivision lots. He did all of these for a total expense
of P85,000.chanrobles virtual lawlibrary

Respondent claimed that the subdivision project failed, however, because

petitioners and their relatives had separately caused the annotations of
adverse claims on the title to the land, which eventually scared away
prospective buyers. Despite his requests, petitioners refused to cause the
clearing of the claims, thereby forcing him to give up on the project. 5

Subsequently, petitioners filed a criminal case for estafa against

respondent and his wife, who were however acquitted. Thereafter, they
filed the present civil case which, upon respondent’s motion, was later
dismissed by the trial court in an Order dated September 6, 1982. On
appeal, however, the appellate court remanded the case for further
proceedings. Thereafter, the RTC issued its assailed Decision, which, as
earlier stated, was affirmed by the CA.

Hence, this Petition. 6

Ruling of the Court of Appeals

In affirming the trial court, the Court of Appeals held that petitioners and
respondent had formed a partnership for the development of the
subdivision. Thus, they must bear the loss suffered by the partnership in
the same proportion as their share in the profits stipulated in the contract.
Disagreeing with the trial court’s pronouncement that losses as well as
profits in a joint venture should be distributed equally, 7 the CA invoked
Article 1797 of the Civil Code which provides:jgc:chanrobles.com.ph

"Article 1797 — The losses and profits shall be distributed in conformity

with the agreement. If only the share of each partner in the profits has been
agreed upon, the share of each in the losses shall be in the same
proportion."cralaw virtua1aw library
The CA elucidated further:jgc:chanrobles.com.ph

"In the absence of stipulation, the share of each partner in the profits and
losses shall be in proportion to what he may have contributed, but the
industrial partner shall not be liable for the losses. As for the profits, the
industrial partner shall receive such share as may be just and equitable
under the circumstances. If besides his services he has contributed capital,
he shall also receive a share in the profits in proportion to his
capital." chanrobles.com : virtual law library

The Issue

Petitioners impute to the Court of Appeals the following

error:jgc:chanrobles.com.ph

". . . [The] Court of Appeals erred in concluding that the transaction . . .

between the petitioners and respondent was that of a joint
venture/partnership, ignoring outright the provision of Article 1769, and
other related provisions of the Civil Code of the Philippines." 8

The Court’s Ruling

The Petition is bereft of merit.

Main Issue:chanrob1es virtual 1aw library

Existence of a Partnership

Petitioners deny having formed a partnership with Respondent. They

contend that the Joint Venture Agreement and the earlier Deed of Sale,
both of which were the bases of the appellate court’s finding of a
partnership, were void.

In the same breath, however, they assert that under those very same
contracts, respondent is liable for his failure to implement the project.
Because the agreement entitled them to receive 60 percent of the proceeds
from the sale of the subdivision lots, they pray that respondent pay them
damages equivalent to 60 percent of the value of the property. 9
The pertinent portions of the Joint Venture Agreement read as
follows:jgc:chanrobles.com.ph

"KNOW ALL MEN BY THESE PRESENTS:jgc:chanrobles.com.ph

"This AGREEMENT, is made and entered into at Cebu City, Philippines,

this 5th day of March, 1969, by and between MR. MANUEL R. TORRES, . .
. the FIRST PARTY, likewise, MRS. ANTONIA B. TORRES, and MISS
EMETERIA BARING, the SECOND PARTY:chanrob1es virtual 1aw library

WITNESSETH:jgc:chanrobles.com.ph

"That, whereas, the SECOND PARTY, voluntarily offered the FIRST

PARTY, this property located at Lapu-Lapu City, Island of Mactan, under
Lot No. 1368 covering TCT No. T-0184 with a total area of 17,009 square
meters, to be sub-divided by the FIRST PARTY;

"Whereas, the FIRST PARTY had given the SECOND PARTY, the sum of:
TWENTY THOUSAND (P20,000.00) Pesos, Philippine Currency, upon the
execution of this contract for the property entrusted by the SECOND
PARTY, for sub-division projects and development purposes;

"NOW THEREFORE, for and in consideration of the above covenants and

promises herein contained the respective parties hereto do hereby stipulate
and agree as follows:chanrobles virtual lawlibrary

"ONE: That the SECOND PARTY signed an absolute Deed of Sale . . .

dated March 5, 1969, in the amount of TWENTY FIVE THOUSAND FIVE
HUNDRED THIRTEEN & FIFTY CTVS. (P25,513.50) Philippine Currency,
for 1,700 square meters at ONE [PESO] & FIFTY CTVS. (P1.50) Philippine
Currency, in favor of the FIRST PARTY, but the SECOND PARTY did not
actually receive the payment.

"SECOND: That the SECOND PARTY, had received from the FIRST
PARTY, the necessary amount of TWENTY THOUSAND (P20,000.00)
pesos, Philippine currency, for their personal obligations and this particular
amount will serve as an advance payment from the FIRST PARTY for the
property mentioned to be sub-divided and to be deducted from the sales.
"THIRD: That the FIRST PARTY, will not collect from the SECOND
PARTY, the interest and the principal amount involving the amount of
TWENTY THOUSAND (P20,000.00) Pesos, Philippine Currency, until the
sub-division project is terminated and ready for sale to any interested
parties, and the amount of TWENTY THOUSAND (P20,000.00) pesos,
Philippine currency, will be deducted accordingly.

"FOURTH: That all general expense[s] and all cost[s] involved in the sub-
division project should be paid by the FIRST PARTY, exclusively and all
the expenses will not be deducted from the sales after the development of
the sub-division project.

"FIFTH: That the sales of the sub-divided lots will be divided into SIXTY
PERCENTUM 60% for the SECOND PARTY and FORTY PERCENTUM
40% for the FIRST PARTY, and additional profits or whatever income
deriving from the sales will be divided equally according to the . . .
percentage [agreed upon] by both parties.

"SIXTH: That the intended sub-division project of the property involved will
start the work and all improvements upon the adjacent lots will be
negotiated in both parties[’] favor and all sales shall [be] decided by both
parties.chanroblesvirtual|awlibrary

"SEVENTH: That the SECOND PARTIES, should be given an option to get

back the property mentioned provided the amount of TWENTY
THOUSAND (P20,000.00) Pesos, Philippine Currency, borrowed by the
SECOND PARTY, will be paid in full to the FIRST PARTY, including all
necessary improvements spent by the FIRST PARTY, and the FIRST
PARTY will be given a grace period to turnover the property mentioned
above.

"That this AGREEMENT shall be binding and obligatory to the parties who
executed same freely and voluntarily for the uses and purposes therein
stated." 10

A reading of the terms embodied in the Agreement indubitably shows the

existence of a partnership pursuant to Article 1767 of the Civil Code, which
provides:jgc:chanrobles.com.ph

"ARTICLE 1767. By the contract of partnership two or more persons bind

themselves to contribute money, property, or industry to a common fund,
with the intention of dividing the profits among themselves."cralaw
virtua1aw library

Under the above-quoted Agreement, petitioners would contribute property

to the partnership in the form of land which was to be developed into a
subdivision; while respondent would give, in addition to his industry, the
amount needed for general expenses and other costs. Furthermore, the
income from the said project would be divided according to the stipulated
percentage. Clearly, the contract manifested the intention of the parties to
form a partnership. 11

It should be stressed that the parties implemented the contract. Thus,

petitioners transferred the title to the land to facilitate its use in the name of
the Respondent. On the other hand, respondent caused the subject land to
be mortgaged, the proceeds of which were used for the survey and the
subdivision of the land. As noted earlier, he developed the roads, the curbs
and the gutters of the subdivision and entered into a contract to construct
low-cost housing units on the property.chanrobles lawlibrary : rednad

Respondent’s actions clearly belie petitioners’ contention that he made no

contribution to the partnership. Under Article 1767 of the Civil Code, a
partner may contribute not only money or property, but also industry.

Petitioners Bound by

Terms of Contract

Under Article 1315 of the Civil Code, contracts bind the parties not only to
what has been expressly stipulated, but also to all necessary
consequences thereof, as follows:jgc:chanrobles.com.ph

"ARTICLE 1315. Contracts are perfected by mere consent, and from that
moment the parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which, according to
their nature, may be in keeping with good faith, usage and law."cralaw
virtua1aw library

It is undisputed that petitioners are educated and are thus presumed to

have understood the terms of the contract they voluntarily signed. If it was
not in consonance with their expectations, they should have objected to it
and insisted on the provisions they wanted.

Courts are not authorized to extricate parties from the necessary

consequences of their acts, and the fact that the contractual stipulations
may turn out to be financially disadvantageous will not relieve parties
thereto of their obligations. They cannot now disavow the relationship
formed from such agreement due to their supposed misunderstanding of its
terms.

Alleged Nullity of the

Partnership Agreement

Petitioners argue that the Joint Venture Agreement is void under Article
1773 of the Civil Code, which provides:jgc:chanrobles.com.ph

"ARTICLE 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."cralaw
virtua1aw library

They contend that since the parties did not make, sign or attach to the
public instrument an inventory of the real property contributed, the
partnership is void.

We clarify. First, Article 1773 was intended primarily to protect third

persons. Thus, the eminent Arturo M. Tolentino states that under the
aforecited provision which is a complement of Article 1771, 12 "the
execution of a public instrument would be useless if there is no inventory of
the property contributed, because without its designation and description,
they cannot be subject to inscription in the Registry of Property, and their
contribution cannot prejudice third persons. This will result in fraud to those
who contract with the partnership in the belief [in] the efficacy of the
guaranty in which the immovables may consist. Thus, the contract is
declared void by the law when no such inventory is made." The case at bar
does not involve third parties who may be prejudiced.

Second, petitioners themselves invoke the allegedly void contract as basis

for their claim that respondent should pay them 60 percent of the value of
the property. 13 They cannot in one breath deny the contract and in
another recognize it, depending on what momentarily suits their purpose.
Parties cannot adopt inconsistent positions in regard to a contract and
courts will not tolerate, much less approve, such practice.chanrobles
lawlibrary : rednad

In short, the alleged nullity of the partnership will not prevent courts from
considering the Joint Venture Agreement an ordinary contract from which
the parties’ rights and obligations to each other may be inferred and
enforced.

Partnership Agreement Not the Result

of an Earlier Illegal Contract

Petitioners also contend that the Joint Venture Agreement is void under
Article 1422 14 of the Civil Code, because it is the direct result of an earlier
illegal contract, which was for the sale of the land without valid
consideration.

This argument is puerile. The Joint Venture Agreement clearly states that
the consideration for the sale was the expectation of profits from the
subdivision project. Its first stipulation states that petitioners did not actually
receive payment for the parcel of land sold to Respondent. Consideration,
more properly denominated as cause, can take different forms, such as the
prestation or promise of a thing or service by another. 15

In this case, the cause of the contract of sale consisted not in the stated
peso value of the land, but in the expectation of profits from the subdivision
project, for which the land was intended to be used. As explained by the
trial court, "the land was in effect given to the partnership as [petitioner’s]
participation therein. . . . There was therefore a consideration for the sale,
the [petitioners] acting in the expectation that, should the venture come into
fruition, they [would] get sixty percent of the net profits."cralaw virtua1aw
library

Liability of the Parties

Claiming that respondent was solely responsible for the failure of the
subdivision project, petitioners maintain that he should be made to pay
damages equivalent to 60 percent of the value of the property, which was
their share in the profits under the Joint Venture Agreement.

We are not persuaded. True, the Court of Appeals held that petitioners’
acts were not the cause of the failure of the project. 16 But it also ruled that
neither was respondent responsible therefor. 17 In imputing the blame
solely to him, petitioners failed to give any reason why we should disregard
the factual findings of the appellate court relieving him of fault. Verily,
factual issues cannot be resolved in a petition for review under Rule 45, as
in this case. Petitioners have not alleged, not to say shown, that their
Petition constitutes one of the exceptions to this doctrine. 18 Accordingly,
we find no reversible error in the CA’s ruling that petitioners are not entitled
to damages.chanroblesvirtual|awlibrary

WHEREFORE, the Petition is hereby DENIED and the challenged Decision

AFFIRMED. Costs against petitioners.

SO ORDERED.

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

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 certiorari1 to annul the letter-resolution2 dated 1

February 2000 of the Secretary of Justice in Resolution No. 155. 3 The
Secretary of Justice affirmed the resolution4 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 ₱210,000 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 ₱46,210 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 spouse’s 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 (₱210,000), 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, kaya’t 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
spouse’s 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 Mercado’s 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 Mercado’s misappropriation of their ₱210,000.

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 latter’s
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-partner’s 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 Justice’s
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 partnership’s 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 [Mercado’s] 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 People’s 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. NOS. 166299-300 December 13, 2005

AURELIO K. LITONJUA, JR., Petitioner,

vs.
EDUARDO K. LITONJUA, SR., ROBERT T. YANG, ANGLO PHILS.
MARITIME, INC., CINEPLEX, INC., DDM GARMENTS, INC., EDDIE K.
LITONJUA SHIPPING AGENCY, INC., EDDIE K. LITONJUA SHIPPING
CO., INC., LITONJUA SECURITIES, INC. (formerly E. K. Litonjua Sec),
LUNETA THEATER, INC., E & L REALTY, (formerly E & L INT’L
SHIPPING CORP.), FNP CO., INC., HOME ENTERPRISES, INC.,
BEAUMONT DEV. REALTY CO., INC., GLOED LAND CORP., EQUITY
TRADING CO., INC., 3D CORP., "L" DEV. CORP, LCM THEATRICAL
ENTERPRISES, INC., LITONJUA SHIPPING CO. INC., MACOIL INC.,
ODEON REALTY CORP., SARATOGA REALTY, INC., ACT THEATER
INC. (formerly General Theatrical & Film Exchange, INC.), AVENUE
REALTY, INC., AVENUE THEATER, INC. and LVF PHILIPPINES, INC.,
(Formerly VF PHILIPPINES), Respondents.

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 petitioner’s motion for reconsideration.

The recourse is cast against the following factual backdrop:

Petitioner Aurelio K. Litonjua, Jr. (Aurelio) and herein respondent
Eduardo K. Litonjua, Sr. (Eduardo) are brothers. The legal dispute
between them started when, on December 4, 2002, in the Regional Trial
Court (RTC) at Pasig City, Aurelio filed a suit against his brother Eduardo
and herein respondent Robert T. Yang (Yang) and several corporations for
specific performance and accounting. In his complaint, 3 docketed as Civil
Case No. 69235 and eventually raffled to Branch 68 of the court, 4 Aurelio
alleged that, since June 1973, he and Eduardo are into a joint
venture/partnership arrangement in the Odeon Theater business which had
expanded thru investment in Cineplex, Inc., LCM Theatrical Enterprises,
Odeon Realty Corporation (operator of Odeon I and II theatres), Avenue
Realty, Inc., owner of lands and buildings, among other corporations. Yang
is described in the complaint as petitioner’s and Eduardo’s partner in their
Odeon Theater investment.5 The same complaint also contained the
following material averments:

3.01 On or about 22 June 1973, [Aurelio] and Eduardo entered into a joint
venture/partnership for the continuation of their family business and
common family funds ….

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

memorandum addressed by Eduardo to his siblings, parents and other
relatives. Copy of this memorandum is attached hereto and made an
integral part 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 [Aurelio’s] retaining his share in the remaining family
businesses (mostly, movie theaters, shipping and land development) and
contributing his industry to the continued operation of these businesses,
[Aurelio] will be given P1 Million or 10% equity in all these businesses and
those to be subsequently acquired by them whichever is greater. . . .

4.01 … from 22 June 1973 to about August 2001, or [in] a span of 28

years, [Aurelio] and Eduardo had accumulated in their joint
venture/partnership various assets including but not limited to the corporate
defendants and [their] respective assets.
4.02 In addition . . . the joint venture/partnership … had also acquired
[various other assets], but Eduardo caused to be registered in the names of
other parties….

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 reconsideration12 and Yang’s motion to
dismiss. The following then transpired insofar as Yang is concerned:

1. On April 14, 2003, Yang filed his ANSWER, but expressly reserved the

right to seek reconsideration of the April 2, 2003 Omnibus Order and to
pursue his failed motion to dismiss13 to its full resolution.

2. On April 24, 2003, he moved for reconsideration of the Omnibus Order of

April 2, 2003, but his motion was denied in an Order of July 4, 2003. 14

3. On August 26, 2003, Yang went to the Court of Appeals (CA) in a

petition for certiorari under Rule 65 of the Rules of Court, docketed as CA-
G.R. SP No. 78774,15 to nullify the separate orders of the trial court, the first
denying his motion to dismiss the basic complaint and, the second, denying
his motion for reconsideration.

Earlier, Eduardo and the corporate defendants, on the contention that

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

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

Following the submission by the parties of their respective Memoranda of

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

WHEREFORE, judgment is hereby rendered granting the issuance of the

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

Explaining its case disposition, the appellate court stated, inter alia, that the
alleged partnership, as evidenced by the actionable documents,
Annex "A" and "A-1" attached to the complaint, and upon which petitioner
solely predicates his right/s allegedly violated by Eduardo, Yang and the
corporate defendants a quo is "void or legally inexistent".

In time, petitioner moved for reconsideration but his motion was denied by
the CA in its equally assailed Resolution of December 7, 2004.18 .

Hence, petitioner’s present recourse, on the contention that the CA erred:

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

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

B. When it ruled that the actionable document did not create a demandable
right in favor of petitioner.

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

[respondent] Robert Yang; and

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

The petition lacks merit.

Petitioner’s demand, as defined in the petitory portion of his complaint in

the trial court, is for delivery or payment to him, as Eduardo’s and Yang’s
partner, of his partnership/joint venture share, after an accounting has been
duly conducted of what he deems to be partnership/joint venture property. 19

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

The underlying issue that necessarily comes to mind in this proceedings is

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

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

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

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

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

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

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

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

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

The CA, addressing the foregoing query, correctly stated that petitioner’s
contribution consisted of immovables and real rights. Wrote that court:

A further examination of the allegations in the complaint would show that

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

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

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

Lest it be overlooked, the contract-validating inventory requirement under

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

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

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

Considering thus the value and nature of petitioner’s alleged contribution to

the purported partnership, the Court, even if so disposed, cannot plausibly
extend Annex "A-1" the legal effects that petitioner so desires and pleads
to be given. Annex "A-1", in fine, cannot support the existence of the
partnership sued upon and sought to be enforced. The legal and factual
milieu of the case calls for this disposition. A partnership may be
constituted in any form, save when immovable property or real rights are
contributed thereto or when the partnership has a capital of at least
₱3,000.00, 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 Decision26 about the probative value and legal effect of Annex "A-
1" commends itself for concurrence:

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

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

Likewise well-taken are the following complementary excerpts from the

CA’s equally assailed Resolution of December 7, 2004 27 denying
petitioner’s motion for reconsideration:

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

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

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

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

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

44. It may not be a contract of loan, or a mortgage or whatever, but surely

the contract does create rights and obligations of the parties and which
rights and obligations may be enforceable and demandable. Just because
the relationship created by the agreement cannot be specifically labeled or
pigeonholed into a category of nominate contract does not mean it is void
or unenforceable.

Petitioner has thus thrusted the notion of an innominate contract on this

Court - and earlier on the CA after he experienced a reversal of fortune
thereat - as an afterthought. The appellate court, however, cannot really be
faulted for not yielding to petitioner’s dubious stratagem of altering his
theory of joint venture/partnership to an innominate contract. For, at
bottom, the appellate court’s certiorari jurisdiction was circumscribed by
what was alleged to have been the order/s issued by the trial court in grave
abuse of discretion. As respondent Yang pointedly observed, 28 since the
parties’ basic position had been well-defined, that of petitioner being that
the actionable document established a partnership/joint venture, it is on
those positions that the appellate court exercised its certiorari jurisdiction.
Petitioner’s act of changing his original theory is an impermissible practice
and constitutes, as the CA aptly declared, an admission of the untenability
of such theory in the first place.

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

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

Be that as it may . …. We hold that this new theory contravenes

[petitioner’s] theory of the actionable document being a partnership
document. If anything, it is so obvious we do have to test the sufficiency of
the cause of action on the basis of partnership law xxx. 29 (Emphasis in the
original; Words in bracket added).

But even assuming in gratia argumenti that Annex "A-1" partakes of a

perfected innominate contract, petitioner’s complaint would still be
dismissible as against Eduardo and, more so, against Yang. It cannot be
over-emphasized that petitioner points to Eduardo as the author of Annex
"A-1". Withal, even on this consideration alone, petitioner’s claim against
Yang is doomed from the very start.

As it were, the only portion of Annex "A-1" which could perhaps be

remotely regarded as vesting petitioner with a right to demand from
respondent Eduardo the observance of a determinate conduct, reads:

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

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

under the above passage, if he indeed wrote Annex "A-1", is a promise
which is not to be performed within one year from "contract" execution on
June 22, 1973. Accordingly, the agreement embodied in Annex "A-1" is
covered by the Statute of Frauds and 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 petitioner’s complaint for
specific performance anchored on an actionable document of partnership
which is legally inexistent or void or, at best, unenforceable does not state
a cause of action as against respondent Eduardo and the corporate
defendants. And if no of action can successfully be maintained against
respondent Eduardo because no valid partnership existed between him
and petitioner, the Court cannot see its way clear on how the same action
could plausibly prosper against Yang. Surely, Yang could not have become
a partner in, or could not have had any form of business relationship with,
an inexistent partnership.

As may be noted, petitioner has not, in his complaint, provide the logical
nexus that would tie Yang to him as his partner. In fact, attendant
circumstances would indicate the contrary. Consider:
1. Petitioner asserted in his complaint that his so-called joint
venture/partnership with Eduardo was "for the continuation of their family
business and common family funds which were theretofore being mainly
managed by Eduardo." 33 But Yang denies kinship with the Litonjua family
and petitioner has not disputed the disclaimer.

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

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

3. Petitioner states in par. 2.01 of the complaint that "[he] and Eduardo are
business partners in the [respondent] corporations," while "Bobby is his and
Eduardo’s partner in their Odeon Theater investment’ (par. 2.03). This
means that the partnership between petitioner and Eduardo came first;
Yang became their partner in their Odeon Theater investment thereafter.
Several paragraphs later, however, petitioner would contradict himself by
alleging that his "investment and that of Eduardo and Yang in the Odeon
theater business has expanded through a reinvestment of profit income
and direct investments in several corporation including but not limited to
[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, [petitioner’s] claim against … Yang arose from his alleged

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

Pressing its point, the CA later stated in its resolution denying petitioner’s
motion for reconsideration the following:

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

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

his theory of the case, as peremptorily determined by the CA, has been
discussed at length earlier and need not detain us long. Suffice it to say
that after the CA has ruled that the alleged partnership is inexistent,
petitioner took a different tack. Thus, from a joint venture/partnership theory
which he adopted and consistently pursued in his complaint, petitioner
embraced the innominate contract theory. Illustrative of this shift is
petitioner’s statement in par. #8 of his motion for reconsideration of the
CA’s decision combined with what he said in par. # 43 of this petition, as
follows:
8. Whether or not the actionable document creates a partnership, joint
venture, or whatever, is a legal matter. What is determinative for purposes
of sufficiency of the complainant’s allegations, is whether the actionable
document bears out an actionable contract – be it a partnership, a joint
venture or whatever or some innominate contract … It may be noted that
one kind of innominate contract is what is known as du 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
petitioner’s innominate contract theory on the basis of the foregoing basic
reasons.

Petitioner’s protestation that his act of introducing the concept of

innominate contract was not a case of changing theories but of supporting
his pleaded cause of action – that of the existence of a partnership - by
another legal perspective/argument, strikes the Court as a strained attempt
to rationalize an untenable position. Paragraph 12 of his motion for
reconsideration of the CA’s decision virtually relegates partnership as a fall-
back theory. Two paragraphs later, in the same notion, petitioner faults the
appellate court for reading, with myopic eyes, the actionable document
solely as establishing a partnership/joint venture. Verily, the cited
paragraphs are a study of a party hedging on whether or not to pursue the
original cause of action or altogether abandoning the same, thus:

12. Incidentally, assuming that the actionable document created a

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

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

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

WHEREFORE, the instant petition is DENIED and the impugned Decision

and Resolution of the Court of Appeals AFFIRMED.

Cost against the petitioner.

SO ORDERED.