ART 1761 civil code cases

7/25/2019 ART 1761 civil code cases

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ART 1768: PARTNERSHIP AS JURIDICAL PERSON

THIRD DIVISION

[G.R. No. 143340. Augus 1!" #001$

LILI%ETH SUNGA&CHAN '() CECILIA SUNGA"petitioners,vs. LA*%ERTO T.CHUA" respondent.

D E C I S I O N

GON+AGA&RE,ES" J.:

Before us is a petition for review on certiorariunder Rule 45 of the Rules ofCourt of the Decision!"of the Court of #ppeals dated $anuar% &!' ())) in the caseentitled *a+,erto T- Chua vs-

*ili,eth Sun.a Chan and Cecilia Sun.a and of the Resolution dated /a% (&'())) den%in. the +otion for reconsideration of herein petitioners *ili,eth Sun.aChan and Cecilia Sun.a 0hereafter collectivel% referred to as petitioners1-

The pertinent facts of this case are as follows2

On $une ((' !33(' *a+,erto T- Chua 0hereafter respondent1 led a co+plainta.ainst *ili,eth Sun.a Chan 0hereafter petitioner *ili,eth1 and Cecilia Sun.a0hereafter petitioner Cecilia1' dau.hter and wife' respectivel% of the deceased

$acinto *- Sun.a 0hereafter $acinto1' for indin. 6p of 7artnership #8airs'#ccountin.' #ppraisal and Recover% of Shares and Da+a.es with rit of 7reli+inar%#ttach+ent with the Re.ional Trial Court' Branch !!' Sindan.an' 9a+,oan.a delNorte-

Respondent alle.ed that in !3::' he ver,all% entered into a partnership with$acinto in the distri,ution of Shellane *i;ueed 7etroleu+ C>NT>R 0hereafterShellite1' under the na+e of $acinto as a sole proprietorship- Respondent alle.edl%delivered his initial capital contri,ution of 7!))')))-)) to $acinto while the latter inturn produced 7!))')))-)) as his counterpart contri,ution' with the intention that

the prots would ,e e;uall% divided ,etween the+- The partnership alle.edl% had$acinto as +ana.er' assisted ,% $osephine S% 0hereafter $osephine1' a sister of thewife of respondent' >rlinda S%- #s co+pensation' $acinto would receive a +ana.ersfee or re+uneration of !)? of the .ross prot and $osephine would receive !)? ofthe net prots' in addition to her wa.es and other re+uneration fro+ the ,usiness-

#lle.edl%' fro+ the ti+e that Shellite opened for ,usiness on $ul% @' !3::' its,usiness operation went ;uite well and was prota,le- Respondent clai+ed that hecould attest to the success of their ,usiness ,ecause of the volu+e of orders and


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deliveries of lled Shellane c%linder tanAs supplied ,% 7ilipinas Shell 7etroleu+Corporation- hile $acinto furnished respondent with the +erchandise inventories',alance sheets and net worth of Shellite fro+ !3:: to !3@3' respondent howeversuspected that the a+ount indicated in these docu+ents were understated andundervalued ,% $acinto and $osephine for their own selsh reasons and for taavoidance-

6pon $acintos death in the later part of !3@3' his survivin. wife' petitionerCecilia and particularl% his dau.hter' petitioner *ili,eth' tooA over the operations'control' custod%' disposition and +ana.e+ent of Shellite without respondentsconsent-

Despite respondents repeated de+ands upon petitioners for accountin.'inventor%' appraisal' windin. up and restitution of his net shares in the partnership'petitioners failed to co+pl%- 7etitioner *ili,eth alle.edl% continued the operations ofShellite' convertin. to her own use and advanta.e its properties-

On /arch &!' !33!' respondent clai+ed that after petitioner *ili,eth ran out ofali,is and reasons to evade respondents de+ands' she dis,ursed out of the

partnership funds the a+ount of 7())')))-)) and partiall% paid the sa+e torespondent- 7etitioner *ili,eth alle.edl% infor+ed respondent that the 7())')))-))represented partial pa%+ent of the latters share in the partnership' with a pro+isethat the for+er would +aAe the co+plete inventor% and windin. up of theproperties of the ,usiness esta,lish+ent- Despite such co++it+ent' petitionersalle.edl% failed to co+pl% with their dut% to account' and continued to ,enet fro+the assets and inco+e of Shellite to the da+a.e and preudice of respondent-

On Dece+,er !3' !33(' petitioners led a /otion to Dis+iss on the .round thatthe Securities and >chan.e Co++ission 0S>C1 in /anila' not the Re.ional TrialCourt in 9a+,aon.a del Norte had urisdiction over the action- Respondent opposedthe +otion to dis+iss-

On $anuar% !(' !33&' the trial court ndin. the co+plaint sucient in for+ andsu,stance denied the +otion to dis+iss-

On $anuar% &)' !33&' petitioners led their #nswer with Co+pulsor%Counterclai+s' contendin. that the% are not lia,le for partnership shares'unreceived inco+eEprots' interests' da+a.es and attorne%s fees' that respondentdoes not have a cause of action a.ainst the+' and that the trial court has no

urisdiction over the nature of the action' the S>C ,ein. the a.enc% that has ori.inaland eclusive urisdiction over the case- #s counterclai+' petitioner sou.htattorne%s fees and epenses of liti.ation-

On #u.ust (' !33&' petitioner led a second /otion to Dis+iss this ti+e on the.round that the clai+ for windin. up of partnership a8airs' accountin. and recover%

of shares in partnership a8airs' accountin. and recover% of shares in partnershipassets Eproperties should ,e dis+issed and prosecuted a.ainst the estate ofdeceased $acinto in a pro,ate or intestate proceedin.-

On #u.ust !F' !33&' the trial court denied the second +otion to dis+iss for lacAof +erit-


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On Nove+,er (F' !33&' petitioners led their 7etition for Certiorari' 7rohi,itionand /anda+us with the Court of #ppeals docAeted as C#GRIN< the+ to pa% the plainti8 earned ,ut unreceived inco+e and protsfro+ the partnership fro+ !3@@ to +a% &)' !33(' when the plainti8 learned of theclosure of the store the su+ of 7&5')))-)) per +onth' with le.al rate of interestuntil full% paid

051 ORD>RIN< the+ to wind up the a8airs of the partnership and ter+inate its,usiness activities pursuant to law' after deliverin. to the plainti8 all the interest'shares' participation and e;uit% in the partnership' or the value thereof in +one% or+one%s worth' if the properties are not ph%sicall% divisi,le


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0F1 =INDIN< the+ especiall% *ili,eth Sun.aGChan .uilt% of ,reach of trust and in ,adfaith and hold the+ lia,le to the plainti8 the su+ of 75)')))-)) as +oral andee+plar% da+a.es and'

0:1 DIR>CTIN< the+ to rei+,urse and pa% the su+ of 7(5')))-)) as attorne%s 0sic1and 7(5'))-)) as liti.ation epenses-

NO special pronounce+ents as to COSTS-SO ORD>R>D-&"

On Octo,er (@' !33:' petitioners led a Notice of #ppeal with the trial court'appealin. the case to the Court of #ppeals-

On $anuar% &!' ()))' the Court of #ppeals dis+issed the appeal- The dispositiveportion of the Decision reads2

H>R>=OR>' the instant appeal is dis+issed- The appealed decision is #==IR/>D inall respects-4"

On /a% (&' ()))' the Court of #ppeals denied the +otion for reconsideration

led ,% petitioner-Hence' this petition wherein petitioner relies upon the followin. .rounds2

!- The Court of #ppeals erred in +aAin. a le.al conclusion that there eisteda partnership ,etween respondent *a+,erto T- Chua and the late $acinto*- Sun.a upon the latters invitation and o8er and that upon his death thepartnership assets and ,usiness were taAen over ,% petitioners-

(- The Court of #ppeals erred in +aAin. the le.al conclusion that lachesandEor prescription did not appl% in the instant case-

&- The Court of #ppeals erred in +aAin. the le.al conclusion that there wasco+petent and credi,le evidence to warrant the ndin. of a partnership'

and assu+in. arguendothat indeed there was a partnership' the ndin.of hi.hl% ea..erated a+ounts or values in the partnership assets andprots-5"

7etitioners ;uestion the correctness of the ndin. of the trial court and theCourt of #ppeals that a partnership eisted ,etween respondent and $acinto fro+!3:: until $acintos death- In the a,sence of an% written docu+ent to show suchpartnership ,etween respondent and $acinto' petitioners ar.ue that these courtswere proscri,ed fro+ hearin. the testi+onies of respondent and his witness'

$osephine' to prove the alle.ed partnership three %ears after $acintos death- Tosupport this ar.u+ent' petitioners invoAe the Dead /ans Statute or SurvivorshipRule under Section (&' Rule !&) of the Rules of Court that provides2

SEC. #3- Disqualifcation by reason o death or insanity o adverse party.--7artiesor assi.nors of parties to a case' or persons in whose ,ehalf a case is prosecuted'a.ainst an eecutor or ad+inistrator or other representative of a deceased person'or a.ainst a person of unsound +ind' upon a clai+ or de+and a.ainst the estate ofsuch deceased person' or a.ainst such person of unsound +ind' cannot testif% as toan% +atter of fact occurrin. ,efore the death of such deceased person or ,eforesuch person ,eca+e of unsound +ind-


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7etitioners thus i+plore this Court to rule that the testi+onies of respondent and hisalter e.o' $osephine' should not have ,een ad+itted to prove certain clai+s a.ainsta deceased person 0$acinto1' now represented ,% petitioners-

e are not persuaded-

# partnership +a% ,e constituted in an% for+' ecept where i++ova,le

propert% or real ri.hts are contri,uted thereto' in which case a pu,lic instru+entshall ,e necessar%-F"Hence' ,ased on the intention of the parties' as .athered fro+the facts and ascertained fro+ their lan.ua.e and conduct' a ver,al contract ofpartnership +a% arise-:"The essential points that +ust ,e proven to show that apartnership was a.reed upon are 0!1 +utual contri,ution to a co++on stocA' and0(1 a oint interest in the prots- @"6nderstanda,l% so' in view of the a,sence of awritten contract of partnership ,etween respondent and $acinto' respondentresorted to the introduction of docu+entar% and testi+onial evidence to prove saidpartnership- The crucial issue to settle then is whether or not the Dead /ansStatute applies to this case so as to render inad+issi,le respondents testi+on% andthat of his witness' $osephine-

The Dead /ans Statute provides that if one part% to the alle.ed transaction isprecluded fro+ testif%in. ,% death' insanit%' or other +ental disa,ilities' thesurvivin. part% is not entitled to the undue advanta.e of .ivin. his ownuncontradicted and uneplained account of the transaction- 3"But ,efore this rulecan ,e successfull% invoAed to ,ar the introduction of testi+onial evidence' it isnecessar% that2

!- The witness is a part% or assi.nor of a part% to a case or persons in whose,ehalf a case is prosecuted-

(- The action is a.ainst an eecutor or ad+inistrator or other representativeof a deceased person or a person of unsound +ind

&- The su,ectG+atter of the action is a clai+ or de+and a.ainst the estateof such deceased person or a.ainst person of unsound +ind

4- His testi+on% refers to an% +atter of fact which occurred ,efore thedeath of such deceased person or ,efore such person ,eca+e of unsound+ind-!)"

Two reasons forestall the application of the Dead /ans Statute to this case-

=irst' petitioners led a co+pulsor% counterclai+!!"a.ainst respondent in theiranswer ,efore the trial court' and with the lin. of their counterclai+' petitionersthe+selves e8ectivel% re+oved this case fro+ the a+,it of the Dead /ans Statute-!("ell entrenched is the rule that when it is the eecutor or ad+inistrator orrepresentatives of the estate that sets up the counterclai+' the plainti8' hereinrespondent' +a% testif% to occurrences ,efore the death of the deceased to defeatthe counterclai+-!&"/oreover' as defendant in the counterclai+' respondent is notdis;ualied fro+ testif%in. as to +atters of fact occurrin. ,efore the death of thedeceased' said action not havin. ,een ,rou.ht a.ainst ,ut ,% the estate orrepresentatives of the deceased-!4"

Second' the testi+on% of $osephine is not covered ,% the Dead /ans Statute forthe si+ple reason that she is not a part% or assi.nor of a part% to a case or personsin whose ,ehalf a case is prosecuted-Records show that respondent o8ered the


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testi+on% of $osephine to esta,lish the eistence of the partnership ,etweenrespondent and $acinto- 7etitioners insistence that $osephine is the alter e.o ofrespondent does not +aAe her an assi.nor ,ecause the ter+ assi.nor of a part%+eans assi.nor of a cause of action which has arisen' and not the assi.nor of ari.ht assi.ned ,efore an% cause of action has arisen-!5"7lainl% then' $osephine is+erel% a witness of respondent' the latter ,ein. the part% plainti8-

e are not convinced ,% petitioners alle.ation that $osephines testi+on% lacAspro,ative value ,ecause she was alle.edl% coerced ,% respondent' her ,rotherGinGlaw' to testif% in his favor- $osephine +erel% declared in court that she wasre;uested ,% respondent to testif% and that if she were not re;uested to do so shewould not have testied- e fail to see how we can conclude fro+ this candidad+ission that $osephines testi+on% is involuntar% when she did not in an% wa%cate.oricall% sa% that she was forced to ,e a witness of respondent- #lso' the factthat $osephine is the sister of the wife of respondent does not di+inish the value ofher testi+on% since relationshipper se' without +ore' does not a8ect the credi,ilit%of witnesses-!F"

7etitioners reliance alone on the Dead /ans Statute to defeat respondents clai+cannot prevail over the factual ndin.s of the trial court and the Court of #ppealsthat a partnership was esta,lished ,etween respondent and $acinto- Based not onl%on the testi+onial evidence' ,ut the docu+entar% evidence as well' the trial courtand the Court of #ppeals considered the evidence for respondent as sucient toprove the for+ation of a partnership' al,eit an infor+al one-

Nota,l%' petitioners did not present an% evidence in their favor durin. trial- B%the wei.ht of udicial precedents' a factual +atter liAe the ndin. of the eistence ofa partnership ,etween respondent and $acinto cannot ,e in;uired into ,% this Courton review-!:"This Court can no lon.er ,e tasAed to .o over the proofs presented ,%the parties and anal%Je' assess and wei.h the+ to ascertain if the trial court andthe appellate court were correct in accordin. superior credit to this or that piece of

evidence of one part% or the other-!@"It +ust ,e also pointed out that petitionersfailed to attend the presentation of evidence of respondent- 7etitioners cannot nowturn to this Court to ;uestion the ad+issi,ilit% and authenticit% of the docu+entar%evidence of respondent when petitioners failed to o,ect to the ad+issi,ilit% of theevidence at the ti+e that such evidence was o8ered-!3"

ith re.ard to petitioners insistence that laches andEor prescription should haveetin.uished respondents clai+' we a.ree with the trial court and the Court of#ppeals that the action for accountin. led ,% respondent three 0&1 %ears after

$acintos death was well within the prescri,ed period- The Civil Code provides that anaction to enforce an oral contract prescri,es in si 0F1 %ears()"while the ri.ht tode+and an accountin. for a partners interest as a.ainst the person continuin. the

,usiness accrues at the date of dissolution' in the a,sence of an% contrar%a.ree+ent-(!"Considerin. that the death of a partner results in the dissolution ofthe partnership(("' in this case' it was after $acintos death that respondent as thesurvivin. partner had the ri.ht to an account of his interest as a.ainst petitioners- It,ears stressin. that while $acintos death dissolved the partnership' the dissolutiondid not i++ediatel% ter+inate the partnership- The Civil Code(&"epressl% providesthat upon dissolution' the partnership continues and its le.al personalit% is retaineduntil the co+plete windin. up of its ,usiness' cul+inatin. in its ter+ination- (4"


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In a desperate ,id to cast dou,t on the validit% of the oral partnership ,etweenrespondent and $acinto' petitioners +aintain that said partnership that had an initialcapital of 7())')))-)) should have ,een re.istered with the Securities and>chan.e Co++ission 0S>C1 since re.istration is +andated ,% the Civil Code- True'#rticle !::( of the Civil Code re;uires that partnerships with a capital of 7&')))-))or +ore +ust re.ister with the S>C' however' this re.istration re;uire+ent is not

+andator%- #rticle !:F@ of the Civil Code(5"eplicitl% provides that the partnershipretains its uridical personalit% even if it fails to re.ister- The failure to re.ister thecontract of partnership does not invalidate the sa+e as a+on. the partners' so lon.as the contract has the essential re;uisites' ,ecause the +ain purpose ofre.istration is to .ive notice to third parties' and it can ,e assu+ed that the+e+,ers the+selves Anew of the contents of their contract-(F"In the case at ,ar'nonGco+pliance with this director% provision of the law will not invalidate thepartnership considerin. that the totalit% of the evidence proves that respondent and

$acinto indeed for.ed the partnership in ;uestion-

-HEREORE' in view of the fore.oin.' the petition is D>NI>D and the appealeddecision is #==IR/>D-

SO ORDERED.

Melo, (Chairman), Vitu, !ananiban, and "andoval-#utierre$, %%., concur-

[G.R. No. 144#14. Ju/ 14" #003$

LU+I*INDA J. ILLAREAL" DIOGENES ILLAREAL '()CAR*ELITO JOSE"petitioners" vs. DONALDO EREN C.

RA*IRE+ '() S2ouss CESAR G. RA*IRE+ JR. '()

CAR*ELITA C. RA*IRE+" respondents.

D E C I S I O N

PANGANI%AN"J.:

# share in a partnership can ,e returned onl% after theco+pletion of the latters dissolution' li;uidation and windin. up of

the ,usiness-

T C's


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The 7etition for Review on Certiorari ,efore us challen.es the

/arch (&' ())) Decision!"and the $ul% (F' ())) Resolution("of the

Court of #ppeals&"0C#1 in C#GR>=OR>' fore.oin. pre+ises considered' the Decision dated $ul%

(!' !33( rendered ,% the Re.ional Trial Court' Branch !4@' /aAati

Cit% is here,% S>T #SID> and N6**I=I>D and in lieu thereof a new

decision is rendered orderin. the petitioners" ointl% and severall%

to pa% and rei+,urse to respondents" the a+ount

of 7(5&'!!4-))- No pronounce+ent as to costs-4"

Reconsideration was denied in the i+pu.ned Resolution-

T '5s

On $ul% (5' !3@4' *uJvi+inda $- Villareal' Car+elito $ose and $esus

$ose for+ed a partnership with a capital of 7:5)'))) for the

operation of a restaurant and caterin. ,usiness under the na+e

#;uarius =ood House and Caterin. Services- 5"Villareal was appointed

.eneral +ana.er and Car+elito $ose' operations +ana.er-

Respondent Donaldo >fren C- Ra+ireJ oined as a partner in the,usiness on Septe+,er 5' !3@4- His capital contri,ution of 7(5)')))

was paid ,% his parents' Respondents Cesar and Car+elita Ra+ireJ-F"

#fter $esus $ose withdrew fro+ the partnership in $anuar% !3@:'

his capital contri,ution of 7(5)'))) was refunded to hi+ in cash ,%

a.ree+ent of the partners-:"

In the sa+e +onth' without prior Anowled.e of respondents'petitioners closed down the restaurant' alle.edl% ,ecause of

increased rental- The restaurant furniture and e;uip+ent were

deposited in the respondents house for stora.e-@"

On /arch !' !3@:' respondent spouses wrote petitioners' sa%in.

that the% were no lon.er interested in continuin. their partnership
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or in reopenin. the restaurant' and that the% were acceptin. the

latters o8er to return their capital contri,ution-3"

On Octo,er !&' !3@:' Car+elita Ra+ireJ wrote another letter

infor+in. petitioners of the deterioration of the restaurant furnitureand e;uip+ent stored in their house- She also reiterated the re;uest

for the return of their oneGthird share in the e;uit% of the

partnership- The repeated oral and written re;uests were' however'

left unheeded-!)"

Before the Re.ional Trial Court 0RTC1 of /aAati' Branch 53'

respondents su,se;uentl% led a Co+plaint!!"dated Nove+,er !)'

!3@:' for the collection of a su+ of +one% fro+ petitioners-

In their #nswer' petitioners contended that respondents had

epressed a desire to withdraw fro+ the partnership and had called

for its dissolution under #rticles !@&) and !@&! of the Civil Code

that respondents had ,een paid' upon the turnover to the+ of

furniture and e;uip+ent worth over 74))'))) and that the latter

had no ri.ht to de+and a return of their e;uit% ,ecause their share'

to.ether with the rest of the capital of the partnership' had ,een

spent as a result of irreversi,le ,usiness losses-!("

In their Repl%' respondents alle.ed that the% did not Anow of an%

loan encu+,rance on the restaurant- #ccordin. to the+' if such

alle.ation were true' then the loans incurred ,% petitioners should

,e re.arded as purel% personal and' as such' not char.ea,le to the

partnership- The for+er further averred that the% had not received

an% re.ular report or accountin. fro+ the latter' who had solel%

+ana.ed the ,usiness- Respondents also alle.ed that the% epected

the e;uip+ent and the furniture stored in their house to ,e re+oved,% petitioners as soon as the latter found a ,etter location for the

restaurant-!&"

Respondents led an 6r.ent /otion for *eave to Sell or

Otherwise Dispose of Restaurant =urniture and >;uip+ent!4"on $ul%

@' !3@@- The furniture and the e;uip+ent stored in their house were
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inventoried and appraised at 7(3')))-!5"The displa% freeJer was sold

for 75'))) and the proceeds were paid to the+- !F"

#fter trial' the RTC!:"ruled that the parties had voluntaril% entered

into a partnership' which could ,e dissolved at an% ti+e- 7etitionersclearl% intended to dissolve it when the% stopped operatin. the

restaurant- Hence' the trial court' in its $ul% (!' !33( Decision' held

the+ lia,le as follows2!@"

H>R>=OR>' ud.+ent is here,% rendered in favor of respondents"

and a.ainst the petitioners" orderin. the petitioners" to pa% ointl%

and severall% the followin.2

0a1 #ctual da+a.es in the a+ount of 7(5)')))-))

0,1 #ttorne%s fee in the a+ount of 7&)')))-))

0c1 Costs of suit-

T CA Ru/(g

The C# held that' althou.h respondents had no ri.ht to de+and

the return of their capital contri,ution' the partnership was

nonetheless dissolved when petitioners lost interest in continuin.

the restaurant ,usiness with the+- Because petitioners never .ave

a proper accountin. of the partnership accounts for li;uidation

purposes' and ,ecause no sucient evidence was presented to

show nancial losses' the C# co+puted their lia,ilit% as follows2

Conse;uentl%' since what has ,een proven is onl% the outstandin.

o,li.ation of the partnership in the a+ount of 7(4)'F5@-))' althou.h

contracted ,% the partnership ,efore respondents" have oined thepartnership ,ut in accordance with #rticle !@(F of the New Civil

Code' the% are lia,le which +ust have to ,e deducted fro+ the

re+ainin. capitaliJation of the said partnership which is in the

a+ount of7!')))')))-)) resultin. in the a+ount of 7:53'&4(-))'

and in order to .et the share of respondents"' this a+ount
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of 7:53'&4(-)) +ust ,e divided into three 0&1 shares or in the

a+ount of 7(5&'!!4-)) for each share and which is the onl% a+ount

which petitioner" will return to respondents" representin. the

contri,ution to the partnership +inus the outstandin. de,t thereof- !3"

Hence' this 7etition-()"

Issus

In their /e+orandu+'(!"petitioners su,+it the followin. issues

for our consideration2

3-!- hether the Honora,le Court of #ppeals decision orderin. the

distri,ution of the capital contri,ution' instead of the net capitalafter the dissolution and li;uidation of a partnership' there,%

treatin. the capital contri,ution liAe a loan' is in accordance with law

and urisprudence

3-(- hether the Honora,le Court of #ppeals decision orderin. the

petitioners to ointl% and severall% pa% and rei+,urse the a+ount of

7"(5&'!!4-)) is supported ,% the evidence on record and

3-&- hether the Honora,le Court of #ppeals was correct in +aAin.n"o pronounce+ent as to costs-(("

On closer scrutin%' the issues are as follows2 0!1 whether

petitioners are lia,le to respondents for the latters share in the

partnership 0(1 whether the C#s co+putation of 7(5&'!!4 as

respondents share is correct and 0&1 whether the C# was liAewise

correct in not assessin. costs-

Ts Cous Ru/(g

The 7etition has +erit-

s Issu:

Share in Partnership
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Both the trial and the appellate courts found that a partnership

had indeed eisted' and that it was dissolved on /arch !'

!3@:- The% found that the dissolution tooA place when respondents

infor+ed petitioners of the intention to discontinue it ,ecause of the

for+ers dissatisfaction with' and loss of trust in' the latters+ana.e+ent of the partnership a8airs- These ndin.s were a+pl%

supported ,% the evidence on record- Respondents conse;uentl%

de+anded fro+ petitioners the return of their oneGthird e;uit% in the

partnership-

e hold that respondents have no ri.ht to de+and fro+

petitioners the return of their e;uit% share- >cept as +ana.ers of

the partnership' petitioners did not personall% hold its e;uit% or

assets- The partnership has a uridical personalit% separate and

distinct fro+ that of each of the partners- (&"Since the capital was

contri,uted to the partnership' not to petitioners' it is the

partnership that +ust refund the e;uit% of the retirin. partners-(4"

S5o() Issu:

What Must Be Returned?

Since it is the partnership' as a separate and distinct entit%' that+ust refund the shares of the partners' the a+ount to ,e refunded

is necessaril% li+ited to its total resources- In other words' it can

onl% pa% out what it has in its co8ers' which consists of all its

assets- However' ,efore the partners can ,e paid their shares' the

creditors of the partnership +ust rst ,e co+pensated- (5"#fter all

the creditors have ,een paid' whatever is left of the partnership

assets ,eco+es availa,le for the pa%+ent of the partners shares-

>videntl%' in the present case' the eact a+ount of refund

e;uivalent to respondents oneGthird share in the partnership cannot

,e deter+ined until all the partnership assets will have ,een

li;uidated GG in other words' sold and converted to cash GG and all

partnership creditors' if an%' paid- The C#s co+putation of the
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a+ount to ,e refunded to respondents as their share was thus

erroneous-

&irst' it see+s that the appellate court was under the

+isapprehension that the total capital contri,ution was e;uivalentto the .ross assets to ,e distri,uted to the partners at the ti+e of

the dissolution of the partnership- e cannot sustain the underl%in.

idea that the capital contri,ution at the ,e.innin. of the partnership

re+ains intact' uni+paired and availa,le for distri,ution or return to

the partners- Such idea is speculative' conectural and totall%

without factual or le.al support-

"vidence on record failed to show the eact loan owed ,% the

partnership to its creditors- The ,alance sheet 0>h- 41 does not
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reveal the total loan- The #.ree+ent 0>h- #1 par- F shows an

outstandin. o,li.ation of 7(4)')55-)) which the partnership owes

to di8erent creditors' while the Certication issued ,% /ercator

=inance 0>h- @1 shows that it was Sps- Dio.enes 7- Villareal and

*uJvi+inda $- Villareal' the for+er ,ein. the no+inal part%defendant in the instant case' who o,tained a loan of 7&55')))-))

on Oct- !3@&' when the ori.inal partnership was not %et for+ed-

'hird' the C# failed to reduce the capitaliJation ,% 7(5)')))'

which was the a+ount paid ,% the partnership to $esus $ose when he

withdrew fro+ the partnership-

Because of the a,oveG+entioned transactions' the partnership

capital was actuall% reduced- hen petitioners and respondentsventured into ,usiness to.ether' the% should have prepared for the

fact that their invest+ent would either .row or shrinA- In the present

case' the invest+ent of respondents su,stantiall% dwindled- The

ori.inal a+ount of 7(5)'))) which the% had invested could no

lon.er ,e returned to the+' ,ecause one third of the partnership

properties at the ti+e of dissolution did not a+ount to that +uch-

It is a lon. esta,lished doctrine that the law does not relieve

parties fro+ the e8ects of unwise' foolish or disastrous contracts

the% have entered into with all the re;uired for+alities and with full

awareness of what the% were doin.- Courts have no power to relieve

the+ fro+ o,li.ations the% have voluntaril% assu+ed' si+pl%

,ecause their contracts turn out to ,e disastrous deals or unwise

invest+ents-(3"

7etitioners further ar.ue that respondents acted ne.li.entl% ,%

per+ittin. the partnership assets in their custod% to deteriorate tothe point of ,ein. al+ost worthless- Supposedl%' the latter should

have li;uidated these sole tan.i,le assets of the partnership and

considered the proceeds as pa%+ent of their net capital- Hence'

petitioners ar.ue that the turnover of the re+ainin. partnership
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15/21

assets to respondents was precisel% the +anner of li;uidatin. the

partnership and full% settlin. the latters share in the partnership-

e disa.ree- The deliver% of the store furniture and e;uip+ent to

private respondents was for the purpose of stora.e- The% wereunaware that the restaurant would no lon.er ,e reopened ,%

petitioners- Hence' the for+er cannot ,e faulted for not disposin. of

the stored ite+s to recover their capital invest+ent-

T) Issu:

Costs

Section !' Rule !4(' provides2

S>CTION !- Costs ordinarily ollo results o suit. 6nless otherwise

provided in these rules' costs shall ,e allowed to the prevailin. part%

as a +atter of course' ,ut the court shall have power' for special

reasons' to adud.e that either part% shall pa% the costs of an

action' or that the sa+e ,e divided' as +a% ,e e;uita,le- No costs

shall ,e allowed a.ainst the Repu,lic of the 7hilippines unless

otherwise provided ,% law-

#lthou.h' as a rule' costs are adud.ed a.ainst the losin. part%'

courts have discretion' for special reasons' to decree

otherwise- hen a lower court is reversed' the hi.her court nor+all%

does not award costs' ,ecause the losin. part% relied on the lower

courts ud.+ent which is presu+ed to have ,een issued in .ood

faith' even if found later on to ,e erroneous-6nless shown to ,e

patentl% capricious' the award shall not ,e distur,ed ,% a reviewin.

tri,unal-

-HEREORE' the 7etition is #*+'D' and the assailed

Decision and Resolution "' *"D.This disposition is without

preudice to proper proceedin.s for the accountin.' the li;uidation

and the distri,ution of the re+ainin. partnership assets' if an%- No

pronounce+ent as to costs-


16/21

SO ORDERED.

[G.R. No. 1#7347. No9 #!" 1;;;$

ALREDO N. AGUILA" JR"petitioner, vs.HONORA%LE COURT O APPEALS

'() ELICIDAD S. DA. DE A%ROGAR" respondents.

D E C I S I O N

*ENDO+A"J.:

This is a petition for review on certiorariof the decision!"of the Court of#ppeals' dated Nove+,er (3' !33)' which reversed the decision of the Re.ional

Trial Court' Branch (:&' /ariAina' /etro /anila' dated #pril !!' !335- The trial courtdis+issed the petition for declaration of nullit% of a deed of sale led ,% privaterespondent =elicidad S- Vda- de #,ro.ar a.ainst petitioner #lfredo N- #.uila' $r-

The facts are as follows2

7etitioner is the +ana.er of #-C- #.uila L Sons' Co-' a partnership en.a.ed inlendin. activities- 7rivate respondent and her late hus,and' Ru,en /- #,ro.ar' werethe re.istered owners of a house and lot' covered ,% Transfer Certicate of Title No-!35!)!' in /ariAina' /etro /anila- On #pril !@' !33!' private respondent' with theconsent of her late hus,and' and #-C- #.uila L Sons' Co-' represented ,% petitioner'entered into a /e+orandu+ of #.ree+ent' which provided2

0!1 That the S>COND 7#RTM #-C- #.uila L Sons' Co-" shall ,u% the a,oveGdescri,edpropert% fro+ the =IRST 7#RTM =elicidad S- Vda- de #,ro.ar"' and pursuant to thisa.ree+ent' a Deed of #,solute Sale shall ,e eecuted ,% the =IRST 7#RTMconve%in. the propert% to the S>COND 7#RTM for and in consideration of the su+ of

Two Hundred Thousand 7esos 07())')))-))1' 7hilippine Currenc%

0(1 The =IRST 7#RTM is here,% .iven ,% the S>COND 7#RTM the option to repurchasethe said propert% within a period of ninet% 03)1 da%s fro+ the eecution of this+e+orandu+ of a.ree+ent e8ective #pril !@' !33!' for the a+ount of TOH6NDR>D THIRTM THO6S#ND 7>SOS 07(&)')))-))1

0&1 In the event that the =IRST 7#RTM fail to eercise her option to repurchase thesaid propert% within a period of ninet% 03)1 da%s' the =IRST 7#RTM is o,li.ed to
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deliver peacefull% the possession of the propert% to the S>COND 7#RTM withinfteen 0!51 da%s after the epiration of the said 3) da% .race period

041 Durin. the said .race period' the =IRST 7#RTM o,li.es herself not to le an% lispendens or whatever clai+s on the propert% nor shall ,e cause the annotation ofsa% clai+ at the ,acA of the title to the said propert%

051 ith the eecution of the deed of a,solute sale' the =IRST 7#RTM warrants herownership of the propert% and shall defend the ri.hts of the S>COND 7#RTM a.ainstan% part% who+ +a% have an% interests over the propert%

0F1 #ll epenses for docu+entation and other incidental epenses shall ,e for theaccount of the =IRST 7#RTM

0:1 Should the =IRST 7#RTM fail to deliver peaceful possession of the propert% to theS>COND 7#RTM after the epiration of the !5Gda% .race period .iven in para.raph &a,ove' the =IRST 7#RTM shall pa% an a+ount e;uivalent to =ive 7ercent of theprincipal a+ount of TO H6NDR>D 7>SOS 07())-))1 or 7!)')))-)) per +onth ofdela% as and for rentals and li;uidated da+a.es

0@1 Should the =IRST 7#RTM fail to eercise her option to repurchase the propert%

within ninet% 03)1 da%s period a,oveG+entioned' this +e+orandu+ of a.ree+entshall ,e dee+ed cancelled and the Deed of #,solute Sale' eecuted ,% the partiesshall ,e the nal contract considered as entered ,etween the parties and theS>COND 7#RTM shall proceed to transfer ownership of the propert% a,ove descri,edto its na+e free fro+ lines and encu+,rances-("

On the sa+e da%' #pril !@' !33!' the parties liAewise eecuted a deed ofa,solute sale'&"dated $une !!' !33!' wherein private respondent' with the consentof her late hus,and' sold the su,ect propert% to #-C- #.uila L Sons' Co-'represented ,% petitioner' for 7())')))-))- In a special power of attorne% dated thesa+e da%' #pril !@' !33!' private respondent authoriJed petitioner to cause thecancellation of TCT No- !35!)! and the issuance of a new certicate of title in the

na+e of #-C- #.uila and Sons' Co-' in the event she failed to redee+ the su,ectpropert% as provided in the /e+orandu+ of #.ree+ent- 4"

7rivate respondent failed to redee+ the propert% within the 3)Gda% period asprovided in the /e+orandu+ of #.ree+ent- Hence' pursuant to the special powerof attorne% +entioned a,ove' petitioner caused the cancellation of TCT No- !35!)!and the issuance of a new certicate of title in the na+e of #-C- #.uila and Sons'Co-5"

7rivate respondent then received a letter dated #u.ust !)' !33! fro+ #tt%-*a+,erto C- Nan;uil' counsel for #-C- #.uila L Sons' Co-' de+andin. that shevacate the pre+ises within !5 da%s after receipt of the letter and surrender itspossession peacefull% to #-C- #.uila L Sons' Co- Otherwise' the latter would ,rin.

the appropriate action in court-F"

6pon the refusal of private respondent to vacate the su,ect pre+ises' #-C-#.uila L Sons' Co- led an eect+ent case a.ainst her in the /etropolitan TrialCourt' Branch :F' /ariAina' /etro /anila- In a decision' dated #pril &' !33(' the/etropolitan Trial Court ruled in favor of #-C- #.uila L Sons' Co- on the .round thatprivate respondent did not redee+ the su,ect propert% ,efore the epiration of the3)Gda% period provided in the /e+orandu+ of #.ree+ent- 7rivate respondent
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appealed rst to the Re.ional Trial Court' Branch !F&' 7asi.' /etro /anila' then tothe Court of #ppeals' and later to this Court' ,ut she lost in all the cases-

7rivate respondent then led a petition for declaration of nullit% of a deed ofsale with the Re.ional Trial Court' Branch (:&' /ariAina' /etro /anila on Dece+,er4' !33&- She alle.ed that the si.nature of her hus,and on the deed of sale was a

for.er% ,ecause he was alread% dead when the deed was supposed to have ,eeneecuted on $une !!' !33!-

It appears' however' that private respondent had led a cri+inal co+plaint forfalsication a.ainst petitioner with the Oce of the 7rosecutor of ueJon Cit% whichwas dis+issed in a resolution' dated =e,ruar% !4' !334-

On #pril !!' !335' Branch (:& of RTCG/ariAina rendered its decision2

7lainti8s clai+ therefore that the Deed of #,solute Sale is a for.er% ,ecause the%could not personall% appear ,efore Notar% 7u,lic *a+,erto C- Nan;uil on $une !!'!33! ,ecause her hus,and' Ru,en #,ro.ar' died on /a% @' !33! or one +onth and( da%s ,efore the eecution of the Deed of #,solute Sale' while the plainti8 was stillin the ueJon Cit% /edical Center recuperatin. fro+ wounds which she su8ered atthe sa+e vehicular accident on /a% @' !33!' cannot ,e sustained- The Court isconvinced that the three re;uired docu+ents' to wit2 the /e+orandu+ of#.ree+ent' the Special 7ower of #ttorne%' and the Deed of #,solute Sale were allsi.ned ,% the parties on the sa+e date on #pril !@' !33!- It is a co++on andaccepted ,usiness practice of those en.a.ed in +one% lendin. to prepare anundated a,solute deed of sale in loans of +one% secured ,% real estate for variousreasons' fore+ost of which is the evasion of taes and surchar.es- The plainti8never ;uestioned receivin. the su+ of 7())')))-)) representin. her loan fro+ thedefendant- Co++on sense dictates that an esta,lished lendin. and realt% r+ liAethe #.uila L Sons' Co- would not part with 7())')))-)) to the #,ro.ar spouses' whoare virtual stran.ers to it' without the si+ultaneous acco+plish+ent and si.nin. of

all the re;uired docu+ents' +ore particularl% the Deed of #,solute Sale' to protectits interest-

- - - -

H>R>=OR>' fore.oin. pre+ises considered' the case in caption is here,%ORD>R>D DIS/ISS>D' with costs a.ainst the plainti8-

On appeal' the Court of #ppeals reversed- It held2

The facts and evidence show that the transaction ,etween plainti8Gappellant anddefendantGappellee is indu,ita,l% an e;uita,le +ort.a.e- #rticle !F)( of the NewCivil Code nds stron. application in the case at ,ar in the li.ht of the followin.circu+stances-

=irst2 The purchase price for the alle.ed sale with ri.ht to repurchase is unusuall%inade;uate- The propert% is a two hundred fort% 0(4)1 s;- +- lot- On said lot' theresidential house of plainti8Gappellant stands- The propert% is inside asu,divisionEvilla.e- The propert% is situated in /ariAina which is alread% part of/etro /anila- The alle.ed sale tooA place in !33! when the value of the land hadconsidera,l% increased-

=or this propert%' defendantGappellee pa%s onl% a +easl% 7())')))-)) or 7@&&-&&per s;uare +eter for ,oth the land and for the house-


19/21

Second2 The disputed /e+orandu+ of #.ree+ent specicall% provides thatplainti8Gappellant is o,li.ed to deliver peacefull% the possession of the propert% tothe S>COND 7#RTM within fteen 0!51 da%s after the epiration of the said ninet%03)1 da% .race period- Otherwise stated' plainti8Gappellant is to retain ph%sicalpossession of the thin. alle.edl% sold-

In fact' plainti8Gappellant retained possession of the propert% sold as if the% werestill the a,solute owners- There was no provision for +aintenance or epenses'+uch less for pa%+ent of rent-

Third2 The apparent vendor' plainti8Gappellant herein' continued to pa% taes on thepropert% sold- It is wellGAnown that pa%+ent of taes acco+panied ,% actualpossession of the land covered ,% the ta declaration' constitute evidence of .reatwei.ht that a person under whose na+e the real taes were declared has a clai+ ofri.ht over the land-

It is wellGsettled that the presence of even one of the circu+stances in #rticle !F)(of the New Civil Code is sucient to declare a contract of sale with ri.ht torepurchase an e;uita,le +ort.a.e-

Considerin. that plainti8Gappellant' as vendor' was paid a price which is unusuall%inade;uate' has retained possession of the su,ect propert% and has continuedpa%in. the realt% taes over the su,ect propert%' 0circu+stances +entioned in par-0!1 0(1 and 051 of #rticle !F)( of the New Civil Code1' it +ust ,e conclusivel%presu+ed that the transaction the parties actuall% entered into is an e;uita,le+ort.a.e' not a sale with ri.ht to repurchase- The factors cited are in support to thendin. that the Deed of SaleE/e+orandu+ of #.ree+ent with ri.ht to repurchase isin actualit% an e;uita,le +ort.a.e-

/oreover' it is undisputed that the deed of sale with ri.ht of repurchase waseecuted ,% reason of the loan etended ,% defendantGappellee to plainti8Gappellant- The a+ount of loan ,ein. the sa+e with the a+ount of the purchaseprice-

- - - -

Since the real intention of the part% is to secure the pa%+ent of de,t' now dee+edto ,e repurchase price2 the transaction shall then ,e considered to ,e an e;uita,le+ort.a.e-

Bein. a +ort.a.e' the transaction entered into ,% the parties is in the nature of apactu+ co++issoriu+ which is clearl% prohi,ited ,% #rticle ()@@ of the New CivilCode- #rticle ()@@ of the New Civil Code reads2

#RT- ()@@- The creditor cannot appropriate the thin.s .iven ,% wa% of pled.e or+ort.a.e' or dispose of the+- #n% stipulation to the contrar% is null and void-

The afore;uoted provision furnishes the two ele+ents for pactu+ co++issoriu+ to

eist2 0!1 that there should ,e a pled.e or +ort.a.e wherein a propert% is pled.edor +ort.a.ed ,% wa% of securit% for the pa%+ent of principal o,li.ation and 0(1that there should ,e a stipulation for an auto+atic appropriation ,% the creditor ofthe thin. pled.ed and +ort.a.ed in the event of nonGpa%+ent of the principalo,li.ation within the stipulated period-

In this case' defendantGappellee in realit% etended a 7())')))-)) loan to plainti8Gappellant secured ,% a +ort.a.e on the propert% of plainti8Gappellant- The loan waspa%a,le within ninet% 03)1 da%s' the period within which plainti8Gappellant can


20/21

repurchase the propert%- 7lainti8Gappellant will pa% 7(&)')))-)) and not7())')))-))' the 7&)')))-)) ecess is the interest for the loan etended- =ailure ofplainti8Gappellee to pa% the 7(&)')))')) within the ninet% 03)1 da%s period' thepropert% shall auto+aticall% ,elon. to defendantGappellee ,% virtue of the deed ofsale eecuted-

Clearl%' the a.ree+ent entered into ,% the parties is in the nature of pactu+co++issoriu+- Therefore' the deed of sale should ,e declared void as we here,% sodeclare to ,e invalid' for ,ein. violative of law-

- - - -

H>R>=OR>' fore.oin. considered' the appealed decision is here,% R>V>RS>D andS>T #SID>- The ;uestioned Deed of Sale and the cancellation of the TCT No- !35!)!issued in favor of plainti8Gappellant and the issuance of TCT No- (F:):& issued infavor of defendantGappellee pursuant to the ;uestioned Deed of Sale is here,%declared VOID and is here,% #NN6**>D- Transfer Certicate of Title No- !35!)! ofthe Re.istr% of /ariAina is here,% ordered R>INST#T>D- The loan in the a+ount of7(&)')))-)) shall ,e paid within ninet% 03)1 da%s fro+ the nalit% of this

decision- In case of failure to pa% the a+ount of 7(&)')))-)) fro+ the periodtherein stated' the propert% shall ,e sold at pu,lic auction to satisf% the +ort.a.ede,t and costs and if there is an ecess' the sa+e is to ,e .iven to the owner-

7etitioner now contends that2 0!1 he is not the real part% in interest ,ut #-C-#.uila L Co-' a.ainst which this case should have ,een ,rou.ht 0(1 the ud.+ent inthe eect+ent case is a ,ar to the lin. of the co+plaint for declaration of nullit% ofa deed of sale in this case and 0&1 the contract ,etween #-C- #.uila L Sons' Co- andprivate respondent is apacto de retro sale and not an e;uita,le +ort.a.e as held,% the appellate court-

The petition is +eritorious-

Rule &' ( of the Rules of Court of !3F4' under which the co+plaint in this casewas led' provided that ever% action +ust ,e prosecuted and defended in the na+eof the real part% in interest- # real part% in interest is one who would ,e ,eneted orinured ,% the ud.+ent' or who is entitled to the avails of the suit-:"This rulin. isnow e+,odied in Rule &' ( of the !33: Revised Rules of Civil 7rocedure- #n%decision rendered a.ainst a person who is not a real part% in interest in the casecannot ,e eecuted-@"Hence' a co+plaint led a.ainst such a person should ,edis+issed for failure to state a cause of action-3"

6nder #rt- !:F@ of the Civil Code' a partnership has a uridical personalit%separate and distinct fro+ that of each of the partners- The partners cannot ,e heldlia,le for the o,li.ations of the partnership unless it is shown that the le.al ction ofa di8erent uridical personalit% is ,ein. used for fraudulent' unfair' or ille.al

purposes-!)"In this case' private respondent has not shown that #-C- #.uila L Sons'Co-' as a separate uridical entit%' is ,ein. used for fraudulent' unfair' or ille.alpurposes- /oreover' the title to the su,ect propert% is in the na+e of #-C- #.uila LSons' Co- and the /e+orandu+ of #.ree+ent was eecuted ,etween privaterespondent' with the consent of her late hus,and' and #- C- #.uila L Sons' Co-'represented ,% petitioner- Hence' it is the partnership' not its ocers or a.ents'which should ,e i+pleaded in an% liti.ation involvin. propert% re.istered in itsna+e- # violation of this rule will result in the dis+issal of the co+plaint-!!"e
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cannot understand wh% ,oth the Re.ional Trial Court and the Court of #ppealssidestepped this issue when it was s;uarel% raised ,efore the+ ,% petitioner-

Our conclusion that petitioner is not the real part% in interest a.ainst who+ thisaction should ,e prosecuted +aAes it unnecessar% to discuss the other issues raised,% hi+ in this appeal-

-HEREORE' the decision of the Court of #ppeals is here,% R>V>RS>D and theco+plaint a.ainst petitioner is DIS/ISS>D-

SO ORDERED.

ellosillo, (Chairman), /uisumbin, uena, andDe 0eon, %r., %%., concur.

ART 1761 civil code cases

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Transcript of ART 1761 civil code cases