Torres vs.
CA
FACTS: 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. All three of them also
agreed to share the proceeds from the sale of the subdivided lots. However, the project did not push
through, and the land was subsequently foreclosed by the bank.
According to petitioners, the project failed because the respondent used the loan not for the
development of the subdivision, but in furtherance of his own company, Universal Umbrella Company.
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.
Petitioners filed a criminal case for estafa against respondent and his wife, who were however
acquitted. Thereafter, they filed the present civil case which was dismissed by the trial court. On appeal,
the CA affirmed the trial court’s ruling.
Hence, this Petition. Petitioners contended that the transaction between them and respondent was not
that of a partnership, that the joint venture agreement was void because of the absence of inventory of
immovable properties and for lack of consideration.
ISSUE: 1.) WON the transaction between the petitioners and respondent was a joint
venture/partnership. YES
2.) WON the alleged joint venture agreement is void. NO
3.) WON the agreement is void due to lack of consideration. NO
RULING: 1.) Article 1767 of the Civil Code, which provides:
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 profits among themselves.
Under the joint venture 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.
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.
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.
2.) Petitioners argue that the Joint Venture Agreement is void under Article 1773 of the Civil Code, which
provides:
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.
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, "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. 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.
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.
3.) The Joint Venture Agreement clearly states that the consideration for the sale was the
expectation of profits from the subdivision project. Consideration, more properly denominated as cause,
can take different forms, such as the prestation or promise of a thing or service by another. 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.
