G.R. No. L-21906December 24, 1968INOCENCIA DELUAO and FELIPE DELUAOplaintiffs-appellees,vs.NICANOR CASTEEL and JUAN DEPRA,defendants,NICANOR CASTEEL,defendant-appellant.Aportadera and Palabrica and Pelaez, Jalandoni and Jamir plaintiffs-appellees.Ruiz Law Offices for defendant-appellant.CASTRO,J.:This is an appeal from the order of May 2, 1956, the decision of May 4, 1956 and the order of May 21, 1956, all of the Court of First Instance of Davao, in civil case 629. The basic action is for specific performance, and damages resulting from an alleged breach of contract.In 1940 Nicanor Casteel filed a fishpond application for a big tract of swampy land in the then Sitio of Malalag (now the Municipality of Malalag), Municipality of Padada, Davao. No action was taken thereon by the authorities concerned. During the Japanese occupation, he filed another fishpond application for the same area, but because of the conditions then prevailing, it was not acted upon either. On December 12, 1945 he filed a third fishpond application for the same area, which, after a survey, was found to contain 178.76 hectares. Upon investigation conducted by a representative of the Bureau of Forestry, it was discovered that the area applied for was still needed for firewood production. Hence on May 13, 1946 this third application was disapproved.Despite the said rejection, Casteel did not lose interest. He filed a motion for reconsideration. While this motion was pending resolution, he was advised by the district forester of Davao City that no further action would be taken on his motion, unless he filed a new application for the area concerned. So he filed on May 27, 1947 his fishpond application 1717.Meanwhile, several applications were submitted by other persons for portions of the area covered by Casteel's application.On May 20, 1946 Leoncio Aradillos filed his fishpond application 1202 covering 10 hectares of land found inside the area applied for by Casteel; he was later granted fishpond permit F-289-C covering 9.3 hectares certified as available for fishpond purposes by the Bureau of Forestry.Victor D. Carpio filed on August 8, 1946 his fishpond application 762 over a portion of the land applied for by Casteel. Alejandro Cacam's fishpond application 1276, filed on December 26, 1946, was given due course on December 9, 1947 with the issuance to him of fishpond permit F-539-C to develop 30 hectares of land comprising a portion of the area applied for by Casteel, upon certification of the Bureau of Forestry that the area was likewise available for fishpond purposes. On November 17, 1948 Felipe Deluao filed his own fishpond application for the area covered by Casteel's application.Because of the threat poised upon his position by the above applicants who entered upon and spread themselves within the area, Casteel realized the urgent necessity of expanding his occupation thereof by constructing dikes and cultivating marketable fishes, in order to prevent old and new squatters from usurping the land. But lacking financial resources at that time, he sought financial aid from his uncle Felipe Deluao who then extended loans totalling more or less P27,000 with which to finance the needed improvements on the fishpond. Hence, a wide productive fishpond was built.Moreover, upon learning that portions of the area applied for by him were already occupied by rival applicants, Casteel immediately filed the corresponding protests. Consequently, two administrative cases ensued involving the area in question, to wit: DANR Case 353, entitled "Fp. Ap. No. 661 (now Fp. A. No. 1717), Nicanor Casteel, applicant-appellant versus Fp. A. No. 763, Victorio D. Carpio, applicant-appellant"; and DANR Case 353-B, entitled "Fp. A. No. 661 (now Fp. A. No. 1717), Nicanor Casteel, applicant-protestant versus Fp. Permit No. 289-C, Leoncio Aradillos, Fp. Permit No. 539-C, Alejandro Cacam, Permittees-Respondents."However, despite the finding made in the investigation of the above administrative cases that Casteel had already introduced improvements on portions of the area applied for by him in the form of dikes, fishpond gates, clearings, etc., the Director of Fisheries nevertheless rejected Casteel's application on October 25, 1949, required him to remove all the improvements which he had introduced on the land, and ordered that the land be leased through public auction. Failing to secure a favorable resolution of his motion for reconsideration of the Director's order, Casteel appealed to the Secretary of Agriculture and Natural Resources.In the interregnum, some more incidents occurred. To avoid repetition, they will be taken up in our discussion of the appellant's third assignment of error.On November 25, 1949 Inocencia Deluao (wife of Felipe Deluao) as party of the first part, and Nicanor Casteel as party of the second part, executed a contract denominated a "contract of service" the salient provisions of which are as follows:That the Party of the First Part in consideration of the mutual covenants and agreements made herein to the Party of the Second Part, hereby enter into a contract of service, whereby the Party of the First Part hires and employs the Party of the Second Part on the following terms and conditions, to wit:That the Party of the First Part will finance as she has hereby financed the sum of TWENTY SEVEN THOUSAND PESOS (P27,000.00), Philippine Currency, to the Party of the Second Part who renders only his services for the construction and improvements of a fishpond at Barrio Malalag, Municipality of Padada, Province of Davao, Philippines;That the Party of the Second Part will be the Manager and sole buyer of all the produce of the fish that will be produced from said fishpond;That the Party of the First Part will be the administrator of the same she having financed the construction and improvement of said fishpond;That this contract was the result of a verbal agreement entered into between the Parties sometime in the month of November, 1947, with all the above-mentioned conditions enumerated; ...On the same date the above contract was entered into, Inocencia Deluao executed a special power of attorney in favor of Jesus Donesa, extending to the latter the authority "To represent me in the administration of the fishpond at Malalag, Municipality of Padada, Province of Davao, Philippines, which has been applied for fishpond permit by Nicanor Casteel, but rejected by the Bureau of Fisheries, and to supervise, demand, receive, and collect the value of the fish that is being periodically realized from it...."On November 29, 1949 the Director of Fisheries rejected the application filed by Felipe Deluao on November 17, 1948. Unfazed by this rejection, Deluao reiterated his claim over the same area in the two administrative cases (DANR Cases 353 and 353-B) and asked for reinvestigation of the application of Nicanor Casteel over the subject fishpond. However, by letter dated March 15, 1950 sent to the Secretary of Commerce and Agriculture and Natural Resources (now Secretary of Agriculture and Natural Resources), Deluao withdrew his petition for reinvestigation.On September 15, 1950 the Secretary of Agriculture and Natural Resources issued a decision in DANR Case 353, the dispositive portion of which reads as follows:In view of all the foregoing considerations, Fp. A. No. 661 (now Fp. A. No. 1717) of Nicanor Casteel should be, as hereby it is, reinstated and given due course for the area indicated in the sketch drawn at the back of the last page hereof; and Fp. A. No. 762 of Victorio D. Carpio shall remain rejected.On the same date, the same official issued a decision in DANR Case 353-B, the dispositive portion stating as follows:WHEREFORE, Fishpond Permit No. F-289-C of Leoncio Aradillos and Fishpond Permit No. F-539-C of Alejandro Cacam, should be, as they are hereby cancelled and revoked; Nicanor Casteel is required to pay the improvements introduced thereon by said permittees in accordance with the terms and dispositions contained elsewhere in this decision....Sometime in January 1951 Nicanor Casteel forbade Inocencia Deluao from further administering the fishpond, and ejected the latter's representative (encargado), Jesus Donesa, from the premises.Alleging violation of the contract of service (exhibit A) entered into between Inocencia Deluao and Nicanor Casteel, Felipe Deluao and Inocencia Deluao on April 3, 1951 filed an action in the Court of First Instance of Davao for specific performance and damages against Nicanor Casteel and Juan Depra (who, they alleged, instigated Casteel to violate his contract), praying inter alia, (a) that Casteel be ordered to respect and abide by the terms and conditions of said contract and that Inocencia Deluao be allowed to continue administering the said fishpond and collecting the proceeds from the sale of the fishes caught from time to time; and (b) that the defendants be ordered to pay jointly and severally to plaintiffs the sum of P20,000 in damages.On April 18, 1951 the plaintiffs filed an ex parte motion for the issuance of a preliminary injunction, praying among other things, that during the pendency of the case and upon their filling the requisite bond as may be fixed by the court, a preliminary injunction be issued to restrain Casteel from doing the acts complained of, and that after trial the said injunction be made permanent. The lower court on April 26, 1951 granted the motion, and, two days later, it issued a preliminary mandatory injunction addressed to Casteel, the dispositive portion of which reads as follows:POR EL PRESENTE, queda usted ordenado que, hasta nueva orden, usted, el demandado y todos usu abogados, agentes, mandatarios y demas personas que obren en su ayuda, desista de impedir a la demandante Inocencia R. Deluao que continue administrando personalmente la pesqueria objeto de esta causa y que la misma continue recibiendo los productos de la venta de los pescados provenientes de dicha pesqueria, y que, asimismo, se prohibe a dicho demandado Nicanor Casteel a desahuciar mediante fuerza al encargado de los demandantes llamado Jesus Donesa de la pesqueria objeto de la demanda de autos.On May 10, 1951 Casteel filed a motion to dissolve the injunction, alleging among others, that he was the owner, lawful applicant and occupant of the fishpond in question. This motion, opposed by the plaintiffs on June 15, 1951, was denied by the lower court in its order of June 26, 1961.The defendants on May 14, 1951 filed their answer with counterclaim, amended on January 8, 1952, denying the material averments of the plaintiffs' complaint. A reply to the defendants' amended answer was filed by the plaintiffs on January 31, 1952.The defendant Juan Depra moved on May 22, 1951 to dismiss the complaint as to him. On June 4, 1951 the plaintiffs opposed his motion.The defendants filed on October 3, 1951 a joint motion to dismiss on the ground that the plaintiffs' complaint failed to state a claim upon which relief may be granted. The motion, opposed by the plaintiffs on October 12, 1951, was denied for lack of merit by the lower court in its order of October 22, 1951. The defendants' motion for reconsideration filed on October 31, 1951 suffered the same fate when it was likewise denied by the lower court in its order of November 12, 1951.After the issues were joined, the case was set for trial. Then came a series of postponements. The lower court (Branch I, presided by Judge Enrique A. Fernandez) finally issued on March 21, 1956 an order in open court, reading as follows: .Upon petition of plaintiffs, without any objection on the part of defendants, the hearing of this case is hereby transferred to May 2 and 3, 1956 at 8:30 o'clock in the morning.This case was filed on April 3, 1951 andunder any circumstance this Court will not entertain any other transfer of hearing of this caseand if the parties will not be ready on that day set for hearing, the court will take the necessary steps for the final determination of this case. (emphasis supplied)On April 25, 1956 the defendants' counsel received a notice of hearing dated April 21, 1956, issued by the office of the Clerk of Court (thru the special deputy Clerk of Court) of the Court of First Instance of Davao, setting the hearing of the case for May 2 and 3, 1956 before Judge Amador Gomez of Branch II. The defendants, thru counsel, on April 26, 1956 filed a motion for postponement. Acting on this motion, the lower court (Branch II, presided by Judge Gomez) issued an order dated April 27, 1956, quoted as follows:This is a motion for postponement of the hearing of this case set for May 2 and 3, 1956. The motion is filed by the counsel for the defendants and has the conformity of the counsel for the plaintiffs.An examination of the records of this case shows that this case was initiated as early as April 1951 and that the same has been under advisement of the Honorable Enrique A. Fernandez, Presiding Judge of Branch No. I, since September 24, 1953, and that various incidents have already been considered and resolved by Judge Fernandez on various occasions. The last order issued by Judge Fernandez on this case was issued on March 21, 1956, wherein he definitely states that the Court will not entertain any further postponement of the hearing of this case.CONSIDERING ALL THE FOREGOING, the Court believes that the consideration and termination of any incident referring to this case should be referred back to Branch I, so that the same may be disposed of therein. (emphasis supplied)A copy of the abovequoted order was served on the defendants' counsel on May 4, 1956.On the scheduled date of hearing, that is, on May 2, 1956, the lower court (Branch I, with Judge Fernandez presiding), when informed about the defendants' motion for postponement filed on April 26, 1956, issued an order reiterating its previous order handed down in open court on March 21, 1956 and directing the plaintiffs to introduce their evidence ex parte, there being no appearance on the part of the defendants or their counsel. On the basis of the plaintiffs' evidence, a decision was rendered on May 4, 1956 the dispositive portion of which reads as follows:EN SU VIRTUD, el Juzgado dicta de decision a favor de los demandantes y en contra del demandado Nicanor Casteel:(a) Declara permanente el interdicto prohibitorio expedido contra el demandado;(b) Ordena al demandado entregue la demandante la posesion y administracion de la mitad () del "fishpond" en cuestion con todas las mejoras existentes dentro de la misma;(c) Condena al demandado a pagar a la demandante la suma de P200.00 mensualmente en concepto de danos a contar de la fecha de la expiracion de los 30 dias de la promulgacion de esta decision hasta que entregue la posesion y administracion de la porcion del "fishpond" en conflicto;(d) Condena al demandado a pagar a la demandante la suma de P2,000.00 valor de los pescado beneficiados, mas los intereses legales de la fecha de la incoacion de la demanda de autos hasta el completo pago de la obligacion principal;(e) Condena al demandado a pagar a la demandante la suma de P2,000.00, por gastos incurridos por aquella durante la pendencia de esta causa;(f) Condena al demandado a pagar a la demandante, en concepto de honorarios, la suma de P2,000.00;(g) Ordena el sobreseimiento de esta demanda, por insuficiencia de pruebas, en tanto en cuanto se refiere al demandado Juan Depra;(h) Ordena el sobreseimiento de la reconvencion de los demandados por falta de pruebas;(i) Con las costas contra del demandado, Casteel.The defendant Casteel filed a petition for relief from the foregoing decision, alleging,inter alia, lack of knowledge of the order of the courta quosetting the case for trial. The petition, however, was denied by the lower court in its order of May 21, 1956, the pertinent portion of which reads as follows:The duty of Atty. Ruiz, was not to inquire from the Clerk of Court whether the trial of this case has been transferred or not, but to inquire from the presiding Judge, particularly because his motion asking the transfer of this case was not set for hearing and was not also acted upon.Atty. Ruiz knows the nature of the order of this Court dated March 21, 1956, which reads as follows:Upon petition of the plaintiff without any objection on the part of the defendants, the hearing of this case is hereby transferred to May 2 and 3, 1956, at 8:30 o'clock in the morning.This case was filed on April 3, 1951, and under any circumstance this Court will not entertain any other transfer of the hearing of this case, and if the parties will not be ready on the day set for hearing, the Court will take necessary steps for the final disposition of this case.In view of the order above-quoted, the Court will not accede to any transfer of this case and the duty of Atty. Ruiz is no other than to be present in the Sala of this Court and to call the attention of the same to the existence of his motion for transfer.Petition for relief from judgment filed by Atty. Ruiz in behalf of the defendant, not well taken, the same is hereby denied.Dissatisfied with the said ruling, Casteel appealed to the Court of Appeals which certified the case to us for final determination on the ground that it involves only questions of law.Casteel raises the following issues:(1) Whether the lower court committed gross abuse of discretion when it ordered reception of the appellees' evidence in the absence of the appellant at the trial on May 2, 1956, thus depriving the appellant of his day in court and of his property without due process of law;(2) Whether the lower court committed grave abuse of discretion when it denied the verified petition for relief from judgment filed by the appellant on May 11, 1956 in accordance with Rule 38, Rules of Court; and(3) Whether the lower court erred in ordering the issuance ex parte of a writ of preliminary injunction against defendant-appellant, and in not dismissing appellees' complaint.1. The first and second issues must be resolved against the appellant.The record indisputably shows that in the order given in open court on March 21, 1956, the lower court set the case for hearing on May 2 and 3, 1956 at 8:30 o'clock in the morning and empathically stated that, since the case had been pending since April 3, 1951, it would not entertain any further motion for transfer of the scheduled hearing.An order given in open court is presumed received by the parties on the very date and time of promulgation,1and amounts to a legal notification for all legal purposes.2The order of March 21, 1956, given in open court, was a valid notice to the parties, and the notice of hearing dated April 21, 1956 or one month thereafter, was a superfluity. Moreover, as between the order of March 21, 1956, duly promulgated by the lower court, thru Judge Fernandez, and the notice of hearing signed by a "special deputy clerk of court" setting the hearing in another branch of the same court, the former's order was the one legally binding. This is because the incidents of postponements and adjournments are controlled by the court and not by the clerk of court, pursuant to section 4, Rule 31 (now sec. 3, Rule 22) of the Rules of Court.Much less had the clerk of court the authority to interfere with the order of the court or to transfer the cage from one sala to another without authority or order from the court where the case originated and was being tried. He had neither the duty nor prerogative to re-assign the trial of the case to a different branch of the same court. His duty as such clerk of court, in so far as the incident in question was concerned, was simply to prepare the trial calendar. And this duty devolved upon the clerk of court and not upon the "special deputy clerk of court" who purportedly signed the notice of hearing.It is of no moment that the motion for postponement had the conformity of the appellees' counsel. The postponement of hearings does not depend upon agreement of the parties, but upon the court's discretion.3The record further discloses that Casteel was represented by a total of 12 lawyers, none of whom had ever withdrawn as counsel. Notice to Atty. Ruiz of the order dated March 21, 1956 intransferably setting the case for hearing for May 2 and 3, 1956, was sufficient notice to all the appellant's eleven other counsel of record. This is a well-settled rule in our jurisdiction.4It was the duty of Atty. Ruiz, or of the other lawyers of record, not excluding the appellant himself, to appear before Judge Fernandez on the scheduled dates of hearing Parties and their lawyers have no right to presume that their motions for postponement will be granted.5For indeed, the appellant and his 12 lawyers cannot pretend ignorance of the recorded fact that since September 24, 1953 until the trial held on May 2, 1956, the case was under the advisement of Judge Fernandez who presided over Branch I. There was, therefore, no necessity to "re-assign" the same to Branch II because Judge Fernandez had exclusive control of said case, unless he was legally inhibited to try the case and he was not.There is truth in the appellant's contention that it is the duty of the clerk of court notof the Court to prepare the trial calendar. But the assignment or reassignment of cases already pending in one sala to another sala, and the setting of the date of trial after the trial calendar has been prepared, fall within the exclusive control of the presiding judge.The appellant does not deny the appellees' claim that on May 2 and 3, 1956, the office of the clerk of court of the Court of First Instance of Davao was located directly below Branch I. If the appellant and his counsel had exercised due diligence, there was no impediment to their going upstairs to the second storey of the Court of First Instance building in Davao on May 2, 1956 and checking if the case was scheduled for hearing in the saidsala. The appellant after all admits that on May 2, 1956 his counsel went to the office of the clerk of court.The appellant's statement that parties as a matter of right are entitled to notice of trial, is correct. But he was properly accorded this right. He was notified in open court on March 21, 1956 that the case was definitely and intransferably set for hearing on May 2 and 3, 1956 before Branch I. He cannot argue that, pursuant to the doctrine inSiochi vs. Tirona,6his counsel was entitled to a timely notice of the denial of his motion for postponement. In the cited case the motion for postponement was the first one filed by the defendant; in the case at bar, there had already been a series of postponements. Unlike the case at bar, theSiochicase was not intransferably set for hearing. Finally, whereas the cited case did not spend for a long time, the case at bar was only finally and intransferably set for hearing on March 21, 1956 after almost five years had elapsed from the filing of the complaint on April 3, 1951.The pretension of the appellant and his 12 counsel of record that they lacked ample time to prepare for trial is unacceptable because between March 21, 1956 and May 2, 1956, they had one month and ten days to do so. In effect, the appellant had waived his right to appear at the trial and therefore he cannot be heard to complain that he has been deprived of his property without due process of law.7Verily, the constitutional requirements of due process have been fulfilled in this case: the lower court is a competent court; it lawfully acquired jurisdiction over the person of the defendant (appellant) and the subject matter of the action; the defendant (appellant) was given an opportunity to be heard; and judgment was rendered upon lawful hearing.82. Finally, the appellant contends that the lower court incurred an error in ordering the issuanceex parteof a writ of preliminary injunction against him, and in not dismissing the appellee's complaint. We find this contention meritorious.Apparently, the courta quorelied on exhibit A the so-called "contract of service" and the appellees' contention that it created a contract of co-ownership and partnership between Inocencia Deluao and the appellant over the fishpond in question.Too well-settled to require any citation of authority is the rule that everyone is conclusively presumed to know the law. It must be assumed, conformably to such rule, that the parties entered into the so-called "contract of service" cognizant of the mandatory and prohibitory laws governing the filing of applications for fishpond permits. And since they were aware of the said laws, it must likewise be assumed in fairness to the parties that they did not intend to violate them. This view must perforce negate the appellees' allegation that exhibit A created a contract of co-ownership between the parties over the disputed fishpond. Were we to admit the establishment of a co-ownership violative of the prohibitory laws which will hereafter be discussed, we shall be compelled to declare altogether the nullity of the contract. This would certainly not serve the cause of equity and justice, considering that rights and obligations have already arisen between the parties. We shall therefore construe the contract as one of partnership, divided into two parts namely, a contract of partnership to exploit the fishpond pending its award to either Felipe Deluao or Nicanor Casteel, and a contract of partnership to divide the fishpond between them after such award. The first is valid, the second illegal.It is well to note that when the appellee Inocencia Deluao and the appellant entered into the so-called "contract of service" on November 25, 1949, there were two pending applications over the fishpond. One was Casteel's which was appealed by him to the Secretary of Agriculture and Natural Resources after it was disallowed by the Director of Fisheries on October 25, 1949. The other was Felipe Deluao's application over the same area which was likewise rejected by the Director of Fisheries on November 29, 1949, refiled by Deluao and later on withdrawn by him by letter dated March 15, 1950 to the Secretary of Agriculture and Natural Resources. Clearly, although the fishpond was then in the possession of Casteel, neither he nor, Felipe Deluao was the holder of a fishpond permit over the area. But be that as it may, they were not however precluded from exploiting the fishpond pending resolution of Casteel's appeal or the approval of Deluao's application over the same area whichever event happened first. No law, rule or regulation prohibited them from doing so. Thus, rather than let the fishpond remain idle they cultivated it.The evidence preponderates in favor of the view that the initial intention of the parties was not to form a co-ownership but to establish a partnership Inocencia Deluao as capitalist partner and Casteel as industrial partner the ultimate undertaking of which was to divide into two equal parts such portion of the fishpond as might have been developed by the amount extended by the plaintiffs-appellees, with the further provision that Casteel should reimburse the expenses incurred by the appellees over one-half of the fishpond that would pertain to him. This can be gleaned, among others, from the letter of Casteel to Felipe Deluao on November 15, 1949, which states,inter alia:... [W]ith respect to your allowing me to use your money, same will redound to your benefit becauseyou are the ones interested in half of the work we have done so far, besidesI did not insist on our being partners in my fishpond permit, but it was you "Tatay" Eping the one who wanted that we be partners and it so happened that we became partners because I am poor, but in the midst of my poverty it never occurred to me to be unfair to you. Thereforeso that each of us may be secured, let us have a document prepared to the effect that we are partners in the fishpond that we caused to be made here in Balasinon, but it does not mean that you will treat me as one of your "Bantay" (caretaker) on wage basis but not earning wages at all, while the truth is that we are partners. In the event that you are not amenable to my proposition and consider me as "Bantay" (caretaker) instead, do not blame me if I withdraw all my cases and be left without even a little and you likewise.(emphasis supplied)9Pursuant to the foregoing suggestion of the appellant that a document be drawn evidencing their partnership, the appellee Inocencia Deluao and the appellant executed exhibit A which, although denominated a "contract of service," was actually the memorandum of their partnership agreement. That it was not a contract of the services of the appellant, was admitted by the appellees themselves in their letter10to Casteel dated December 19, 1949 wherein they stated that they did not employ him in his (Casteel's) claim but because he used their money in developing and improving the fishpond, his right must be divided between them. Of course, although exhibit A did not specify any wage or share appertaining to the appellant as industrial partner, he was so entitled this being one of the conditions he specified for the execution of the document of partnership.11Further exchanges of letters between the parties reveal the continuing intent to divide the fishpond. In a letter,12dated March 24, 1950, the appellant suggested that they divide the fishpond and the remaining capital, and offered to pay the Deluaos a yearly installment of P3,000 presumably as reimbursement for the expenses of the appellees for the development and improvement of the one-half that would pertain to the appellant. Two days later, the appellee Felipe Deluao replied,13expressing his concurrence in the appellant's suggestion and advising the latter to ask for a reconsideration of the order of the Director of Fisheries disapproving his (appellant's) application, so that if a favorable decision was secured, then they would divide the area.Apparently relying on the partnership agreement, the appellee Felipe Deluao saw no further need to maintain his petition for the reinvestigation of Casteel's application. Thus by letter14dated March 15, 1950 addressed to the Secretary of Agriculture and Natural Resources, he withdrew his petition on the alleged ground that he was no longer interested in the area, but stated however that he wanted his interest to be protected and his capital to be reimbursed by the highest bidder.The arrangement under the so-called "contract of service" continued until the decisions both dated September 15, 1950 were issued by the Secretary of Agriculture and Natural Resources in DANR Cases 353 and 353-B. This development, by itself, brought about the dissolution of the partnership. Moreover, subsequent events likewise reveal the intent of both parties to terminate the partnership because each refused to share the fishpond with the other.Art. 1830(3) of the Civil Code enumerates, as one of the causes for the dissolution of a partnership, "... any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership." The approval of the appellant's fishpond application by the decisions in DANR Cases 353 and 353-B brought to the fore several provisions of law which made the continuation of the partnership unlawful and therefore caused itsipso factodissolution.Act 4003, known as the Fisheries Act, prohibits the holder of a fishpond permit (the permittee) from transferring or subletting the fishpond granted to him, without the previous consent or approval of the Secretary of Agriculture and Natural Resources.15To the same effect is Condition No. 3 of the fishpond permit which states that "The permittee shall not transfer or sublet all or any area herein granted or any rights acquired therein without the previous consent and approval of this Office." Parenthetically, we must observe that in DANR Case 353-B, the permit granted to one of the parties therein, Leoncio Aradillos, was cancelled not solely for the reason that his permit covered a portion of the area included in the appellant's prior fishpond application, but also because, upon investigation, it was ascertained thru the admission of Aradillos himself that due to lack of capital, he allowed one Lino Estepa to develop with the latter's capital the area covered by his fishpond permit F-289-C with the understanding that he (Aradillos) would be given a share in the produce thereof.16Sec. 40 of Commonwealth Act 141, otherwise known as the Public Land Act, likewise provides thatThe lessee shall not assign, encumber, or sublet his rights without the consent of the Secretary of Agriculture and Commerce, and the violation of this condition shall avoid the contract;Provided, That assignment, encumbrance, or subletting for purposes of speculation shall not be permitted in any case:Provided, further, That nothing contained in this section shall be understood or construed to permit the assignment, encumbrance, or subletting of lands leased under this Act, or under any previous Act, to persons, corporations, or associations which under this Act, are not authorized to lease public lands.Finally, section 37 of Administrative Order No. 14 of the Secretary of Agriculture and Natural Resources issued in August 1937, prohibits a transfer or sublease unless first approved by the Director of Lands and under such terms and conditions as he may prescribe. Thus, it states:When a transfer or sub-lease of area and improvement may be allowed. If the permittee or lessee had, unless otherwise specifically provided, held the permit or lease and actually operated and made improvements on the area for at least one year, he/she may request permission to sub-lease or transfer the area and improvements under certain conditions.(a)Transfer subject to approval. A sub-lease or transfer shall only be valid when first approved by the Director under such terms and conditions as may be prescribed, otherwise it shall be null and void. A transfer not previously approved or reported shall be considered sufficient cause for the cancellation of the permit or lease and forfeiture of the bond and for granting the area to a qualified applicant or bidder, as provided in subsection (r) of Sec. 33 of this Order.Since the partnership had for its object the division into two equal parts of the fishpond between the appellees and the appellant after it shall have been awarded to the latter, and therefore it envisaged the unauthorized transfer of one-half thereof to parties other than the applicant Casteel, it was dissolved by the approval of his application and the award to him of the fishpond. The approval was an event which made it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership.The appellees, however, argue that in approving the appellant's application, the Secretary of Agriculture and Natural Resources likewise recognized and/or confirmed their property right to one-half of the fishpond by virtue of the contract of service, exhibit A. But the untenability of this argument would readily surface if one were to consider that the Secretary of Agriculture and Natural Resources did not do so for the simple reason that he does not possess the authority to violate the aforementioned prohibitory laws nor to exempt anyone from their operation.However, assumingin gratia argumentithat the approval of Casteel's application, coupled with the foregoing prohibitory laws, was not enough to cause the dissolutionipso factoof their partnership, succeeding events reveal the intent of both parties to terminate the partnership by refusing to share the fishpond with the other.On December 27, 1950 Casteel wrote17the appellee Inocencia Deluao, expressing his desire to divide the fishpond so that he could administer his own share, such division to be subject to the approval of the Secretary of Agriculture and Natural Resources. By letter dated December 29, 1950,18the appellee Felipe Deluao demurred to Casteel's proposition because there were allegedly no appropriate grounds to support the same and, moreover, the conflict over the fishpond had not been finally resolved.The appellant wrote on January 4, 1951 a last letter19to the appellee Felipe Deluao wherein the former expressed his determination to administer the fishpond himself because the decision of the Government was in his favor and the only reason why administration had been granted to the Deluaos was because he was indebted to them. In the same letter, the appellant forbade Felipe Deluao from sending the couple'sencargado, Jesus Donesa, to the fishpond. In reply thereto, Felipe Deluao wrote a letter20dated January 5, 1951 in which he reiterated his refusal to grant the administration of the fishpond to the appellant, stating as a ground his belief "that only the competent agencies of the government are in a better position to render any equitable arrangement relative to the present case; hence, any action we may privately take may not meet the procedure of legal order."Inasmuch as the erstwhile partners articulated in the aforecited letters their respective resolutions not to share the fishpond with each other in direct violation of the undertaking for which they have established their partnership each must be deemed to have expressly withdrawn from the partnership, thereby causing its dissolution pursuant to art. 1830(2) of the Civil Code which provides,inter alia, that dissolution is caused "by the express will of any partner at any time."In this jurisdiction, the Secretary of Agriculture and Natural Resources possesses executive and administrative powers with regard to the survey, classification, lease, sale or any other form of concession or disposition and management of the lands of the public domain, and, more specifically, with regard to the grant or withholding of licenses, permits, leases and contracts over portions of the public domain to be utilized as fishponds.21, Thus, we held inPajo, et al. vs. Ago, et al. (L-15414, June 30, 1960), and reiterated inGanitano vs. Secretary of Agriculture and Natural Resources, et al.(L-21167, March 31, 1966), that... [T]he powers granted to the Secretary of Agriculture and Commerce (Natural Resources) by law regarding the disposition of public lands such as granting of licenses, permits, leases, and contracts, or approving, rejecting, reinstating, or cancelling applications, or deciding conflicting applications, are all executive and administrative in nature.It is a well-recognized principle that purely administrative and discretionary functions may not be interfered with by the courts(Coloso v. Board of Accountancy, G.R. No. L-5750, April 20, 1953). In general, courts have no supervising power over the proceedings and action of the administrative departments of the government. This is generally true with respect to acts involving the exercise of judgment or discretion, and findings of fact. (54 Am. Jur. 558-559) Findings of fact by an administrative board or official, following a hearing, are binding upon the courts and will not be disturbed except where the board or official has gone beyond his statutory authority, exercised unconstitutional powers or clearly acted arbitrarily and without regard to his duty or with grave abuse of discretion... (emphasis supplied)In the case at bar, the Secretary of Agriculture and Natural Resources gave due course to the appellant's fishpond application 1717 and awarded to him the possession of the area in question. In view of the finality of the Secretary's decision in DANR Cases 353 and 353-B, and considering the absence of any proof that the said official exceeded his statutory authority, exercised unconstitutional powers, or acted with arbitrariness and in disregard of his duty, or with grave abuse of discretion, we can do no less than respect and maintain unfettered his official acts in the premises. It is a salutary rule that the judicial department should not dictate to the executive department what to do with regard to the administration and disposition of the public domain which the law has entrusted to its care and administration. Indeed, courts cannot superimpose their discretion on that of the land department and compel the latter to do an act which involves the exercise of judgment and discretion.22Therefore, with the view that we take of this case, and even assuming that the injunction was properly issued because present all the requisite grounds for its issuance, its continuation, and, worse, its declaration as permanent, was improper in the face of the knowledge later acquired by the lower court that it was the appellant's application over the fishpond which was given due course. After the Secretary of Agriculture and Natural Resources approved the appellant's application, he became to all intents and purposes the legal permittee of the area with the corresponding right to possess, occupy and enjoy the same. Consequently, the lower court erred in issuing the preliminary mandatory injunction. We cannot overemphasize that an injunction should not be granted to take property out of the possession and control of one party and place it in the hands of another whose title has not been clearly established by law.23However, pursuant to our holding that there was a partnership between the parties for the exploitation of the fishpond before it was awarded to Casteel, this case should be remanded to the lower court for the reception of evidence relative to an accounting from November 25, 1949 to September 15, 1950, in order for the court to determine (a) the profits realized by the partnership, (b) the share (in the profits) of Casteel as industrial partner, (e) the share (in the profits) of Deluao as capitalist partner, and (d) whether the amounts totalling about P27,000 advanced by Deluao to Casteel for the development and improvement of the fishpond have already been liquidated. Besides, since the appellee Inocencia Deluao continued in possession and enjoyment of the fishpond even after it was awarded to Casteel, she did so no longer in the concept of a capitalist partner but merely as creditor of the appellant, and therefore, she must likewise submit in the lower court an accounting of the proceeds of the sales of all the fishes harvested from the fishpond from September 16, 1950 until Casteel shall have been finally given the possession and enjoyment of the same. In the event that the appellee Deluao has received more than her lawful credit of P27,000 (or whatever amounts have been advanced to Casteel), plus 6% interest thereon per annum, then she should reimburse the excess to the appellant.ACCORDINGLY, the judgment of the lower court is set aside. Another judgment is hereby rendered: (1) dissolving the injunction issued against the appellant, (2) placing the latter back in possession of the fishpond in litigation, and (3) remanding this case to the court of origin for the reception of evidence relative to the accounting that the parties must perforce render in the premises, at the termination of which the court shall render judgment accordingly. The appellant's counterclaim is dismissed. No pronouncement as to costs.Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Fernando and Capistrano, JJ.,concur.

[G.R. No. 143340.August 15, 2001]LILIBETH SUNGA-CHAN and CECILIA SUNGA,petitioners,vs.LAMBERTO T. CHUA,respondent.D E C I S I O NGONZAGA-REYES, J.:Before us is a petition for review oncertiorariunder Rule 45 of the Rules of Court of the Decision[1]of the Court of Appeals dated January 31, 2000 in the case entitled Lamberto T. Chua vs.Lilibeth Sunga Chan and Cecilia Sunga and of the Resolution dated May 23, 2000 denying the motion for reconsideration of herein petitioners Lilibeth Sunga Chan and Cecilia Sunga (hereafter collectively referred to as petitioners).The pertinent facts of this case are as follows:On June 22, 1992, Lamberto T. Chua (hereafter respondent) filed a complaint against Lilibeth Sunga Chan (hereafter petitioner Lilibeth) and Cecilia Sunga (hereafter petitioner Cecilia), daughter and wife, respectively of the deceased Jacinto L. Sunga (hereafter Jacinto), for Winding Up of Partnership Affairs, Accounting, Appraisal and Recovery of Shares and Damages with Writ of Preliminary Attachment with the Regional Trial Court, Branch 11, Sindangan, Zamboanga del Norte.Respondent alleged that in 1977, he verbally entered into a partnership with Jacinto in the distribution of Shellane Liquefied Petroleum Gas (LPG) in Manila.For business convenience, respondent and Jacinto allegedly agreed to register the business name of their partnership, SHELLITE GAS APPLIANCE CENTER (hereafter Shellite), under the name of Jacinto as a sole proprietorship.Respondent allegedly delivered his initial capital contribution of P100,000.00 to Jacinto while the latter in turn produced P100,000.00 as his counterpart contribution, with the intention that the profits would be equally divided between them.The partnership allegedly had Jacinto as manager, assisted by Josephine Sy (hereafter Josephine), a sister of the wife of respondent, Erlinda Sy.As compensation, Jacinto would receive a managers fee or remuneration of 10% of the gross profit and Josephine would receive 10% of the net profits, in addition to her wages and other remuneration from the business.Allegedly, from the time that Shellite opened for business on July 8, 1977, its business operation went quite well and was profitable.Respondent claimed that he could attest to the success of their business because of the volume of orders and deliveries of filled Shellane cylinder tanks supplied by Pilipinas Shell Petroleum Corporation.While Jacinto furnished respondent with the merchandise inventories, balance sheets and net worth of Shellite from 1977 to 1989, respondent however suspected that the amount indicated in these documents were understated and undervalued by Jacinto and Josephine for their own selfish reasons and for tax avoidance.Upon Jacintos death in the later part of 1989, his surviving wife, petitioner Cecilia and particularly his daughter, petitioner Lilibeth, took over the operations, control, custody, disposition and management of Shellite without respondents consent.Despite respondents repeated demands upon petitioners for accounting, inventory, appraisal, winding up and restitution of his net shares in the partnership, petitioners failed to comply.Petitioner Lilibeth allegedly continued the operations of Shellite, converting to her own use and advantage its properties.On March 31, 1991, respondent claimed that after petitioner Lilibeth ran out of alibis and reasons to evade respondents demands, she disbursed out of the partnership funds the amount of P200,000.00 and partially paid the same to respondent.Petitioner Lilibeth allegedly informed respondent that the P200,000.00 represented partial payment of the latters share in the partnership, with a promise that the former would make the complete inventory and winding up of the properties of the business establishment.Despite such commitment, petitioners allegedly failed to comply with their duty to account, and continued to benefit from the assets and income of Shellite to the damage and prejudice of respondent.On December 19, 1992, petitioners filed a Motion to Dismiss on the ground that the Securities and Exchange Commission (SEC) in Manila, not the Regional Trial Court in Zambaonga del Norte had jurisdiction over the action.Respondent opposed the motion to dismiss.On January 12, 1993, the trial court finding the complaint sufficient in form and substance denied the motion to dismiss.On January 30, 1993, petitioners filed their Answer with Compulsory Counterclaims, contending that they are not liable for partnership shares, unreceived income/profits, interests, damages and attorneys fees, that respondent does not have a cause of action against them, and that the trial court has no jurisdiction over the nature of the action, the SEC being the agency that has original and exclusive jurisdiction over the case.As counterclaim, petitioner sought attorneys fees and expenses of litigation.On August 2, 1993, petitioner filed a second Motion to Dismiss this time on the ground that the claim for winding up of partnership affairs, accounting and recovery of shares in partnership affairs, accounting and recovery of shares inpartnership assets /properties should be dismissed and prosecuted against the estate of deceased Jacinto in a probate or intestate proceeding.On August 16, 1993, the trial court denied the second motion to dismiss for lack of merit.On November 26, 1993, petitioners filed their Petition for Certiorari, Prohibition and Mandamus with the Court of Appeals docketed as CA-G.R. SP No. 32499 questioning the denial of the motion to dismiss.On November 29, 1993, petitioners filed with the trial court a Motion to Suspend Pre-trial Conference.On December 13, 1993, the trial court granted the motion to suspend pre-trial conference.On November 15, 1994, the Court of Appeals denied the petition for lack of merit.On January 16, 1995, this Court denied the petition for review on certiorari filed by petitioner, as petitioners failed to show that a reversible error was committed by the appellate court."[2]On February 20, 1995, entry of judgment was made by the Clerk of Court and the case was remanded to the trial court on April 26, 1995.On September 25, 1995, the trial court terminated the pre-trial conference and set the hearing of the case on January 17, 1996.Respondent presented his evidence while petitioners were considered to have waived their right to present evidence for their failure to attend the scheduled date for reception of evidence despite notice.On October 7, 1997, the trial court rendered its Decision ruling for respondent.The dispositive portion of the Decision reads:WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, as follows:(1)DIRECTING them to render an accounting in acceptable form under accounting procedures and standards of the properties, assets, income and profits of the Shellite Gas Appliance Center since the time of death of Jacinto L. Sunga, from whom they continued the business operations including all businesses derived from the Shellite Gas Appliance Center; submit an inventory, and appraisal of all these properties, assets, income, profits, etc. to the Court and to plaintiff for approval or disapproval;(2)ORDERING them to return and restitute to the partnership any and all properties, assets, income and profits they misapplied and converted to their own use and advantage that legally pertain to the plaintiff and account for the properties mentioned in pars. A and B on pages 4-5 of this petition as basis;(3)DIRECTING them to restitute and pay to the plaintiff shares and interest of the plaintiff in the partnership of the listed properties, assets and good will (sic) in schedules A, B and C, on pages 4-5 of the petition;(4)ORDERING them to pay the plaintiff earned but unreceived income and profits from the partnership from 1988 to may 30, 1992, when the plaintiff learned of the closure of the store the sum of P35,000.00 per month, with legal rate of interest until fully paid;(5)ORDERING them to wind up the affairs of the partnership and terminate its business activities pursuant to law, after delivering to the plaintiff all the interest, shares, participation and equity in the partnership, or the value thereof in money or moneys worth, if the properties are not physically divisible;(6)FINDING them especially Lilibeth Sunga-Chan guilty of breach of trust and in bad faith and hold them liable to the plaintiff the sum of P50,000.00 as moral and exemplary damages; and,(7)DIRECTING them to reimburse and pay the sum ofP25,000.00 as attorneys (sic) and P25,00.00 as litigation expenses.NO special pronouncements as to COSTS.SO ORDERED.[3]On October 28, 1997, petitioners filed a Notice of Appeal with the trial court, appealing the case to the Court of Appeals.On January 31, 2000, the Court of Appeals dismissed the appeal.The dispositive portion of the Decision reads:WHEREFORE, the instant appeal is dismissed.The appealed decision is AFFIRMED in all respects.[4]On May 23, 2000, the Court of Appeals denied the motion for reconsideration filed by petitioner.Hence, this petition wherein petitioner relies upon the following grounds:1.The Court of Appeals erred in making a legal conclusion that there existed a partnership between respondent Lamberto T. Chua and the late Jacinto L. Sunga upon the latters invitation and offer and that upon his death the partnership assets and business were taken over by petitioners.2.The Court of Appeals erred in making the legal conclusion that laches and/or prescription did not apply in the instant case.3.The Court of Appeals erred in making the legal conclusion that there was competent and credible evidence to warrant the finding of a partnership, and assumingarguendothat indeed there was a partnership, the finding of highly exaggerated amounts or values in the partnership assets and profits.[5]Petitioners question the correctness of the finding of the trial court and the Court of Appeals that a partnership existed between respondent and Jacinto from 1977 until Jacintos death.In the absence of any written document to show such partnership between respondent and Jacinto, petitioners argue that these courts were proscribed from hearing the testimonies of respondent and his witness, Josephine, to prove the alleged partnership three years after Jacintos death.To support this argument, petitioners invoke the Dead Mans Statute or Survivorship Rule under Section 23, Rule 130 of the Rules of Court that provides:SEC. 23.Disqualification by reason of death or insanity of adverse party.--Parties or assignors of parties to a case, or persons in whose behalf a case is prosecuted, against an executor or administrator or other representative of a deceased person, or against a person of unsound mind, upon a claim or demand against the estate of such deceased person, or against such person of unsound mind, cannot testify as to any matter of fact occurring before the death of such deceased person or before such person became of unsound mind.Petitioners thus implore this Court to rule that the testimonies of respondent and his alter ego, Josephine, should not have been admitted to prove certain claims against a deceased person (Jacinto), now represented by petitioners.We are not persuaded.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.[6]Hence, based on the intention of the parties, as gathered from the facts and ascertained from their language and conduct, a verbal contract of partnership may arise.[7]The essential points that must be proven to show that a partnership was agreed upon are (1) mutual contribution to a common stock, and (2) a joint interest in the profits.[8]Understandably so, in view of the absence of a written contract of partnership between respondent and Jacinto, respondent resorted to the introduction of documentary and testimonial evidence to prove said partnership.The crucial issue to settle then is whether or not the Dead Mans Statute applies to this case so as to render inadmissible respondents testimony and that of his witness, Josephine.The Dead Mans Statute provides that if one party to the alleged transaction is precluded from testifying by death, insanity, or other mental disabilities, the surviving party is not entitled to the undue advantage of giving his own uncontradicted and unexplained account of the transaction.[9]But before this rule can be successfully invoked to bar the introduction of testimonial evidence, it is necessary that:1.The witness is a party or assignor of a party to a case or persons in whose behalf a case is prosecuted.2.The action is against an executor or administrator or other representative of a deceased person or a person of unsound mind;3.The subject-matter of the action is a claim or demand against the estate of such deceased person or against person of unsound mind;4.His testimony refers to any matter of fact which occurred before the death of such deceased person or before such person became of unsound mind.[10]Two reasons forestall the application of the Dead Mans Statute to this case.First, petitioners filed a compulsory counterclaim[11]against respondent in their answer before the trial court, and with the filing of their counterclaim, petitioners themselves effectively removed this case from the ambit of the Dead Mans Statute.[12]Well entrenched is the rule that when it is the executor or administrator or representatives of the estate that sets up the counterclaim, the plaintiff, herein respondent, may testify to occurrences before the death of the deceased to defeat the counterclaim.[13]Moreover, as defendant in the counterclaim, respondent is not disqualified from testifying as to matters of fact occurring before the death of the deceased, said action not having been brought against but by the estate or representatives of the deceased.[14]Second, the testimony of Josephine is not covered by the Dead Mans Statute for the simple reason that she is not a party or assignor of a party to a case or persons in whose behalf a case is prosecuted.Records show that respondent offered the testimony of Josephine to establish the existence of the partnership between respondent and Jacinto.Petitioners insistence that Josephine is the alter ego of respondent does not make her an assignor because the term assignor of a party means assignor of a cause of action which has arisen, and not the assignor of a right assigned before any cause of action has arisen.[15]Plainly then, Josephine is merely a witness of respondent, the latter being the party plaintiff.We are not convinced by petitioners allegation that Josephines testimony lacks probative value because she was allegedly coerced by respondent, her brother-in-law, to testify in his favor. Josephine merely declared in court that she was requested by respondent to testify and that if she were not requested to do so she would not have testified.We fail to see how we can conclude from this candid admission that Josephines testimony is involuntary when she did not in any way categorically say that she was forced to be a witness of respondent.Also, the fact that Josephine is the sister of the wife of respondent does not diminish the value of her testimony since relationshipper se, without more, does not affect the credibility of witnesses.[16]Petitioners reliance alone on the Dead Mans Statute to defeat respondents claim cannot prevail over the factual findings of the trial court and the Court of Appeals that a partnership was established between respondent and Jacinto.Based not only on the testimonial evidence, but the documentary evidence as well, the trial court and the Court of Appeals considered the evidence for respondent as sufficient to prove the formation of a partnership, albeit an informal one.Notably, petitioners did not present any evidence in their favor during trial. By the weight of judicial precedents, a factual matter like the finding of the existence of a partnership between respondent and Jacinto cannot be inquired into by this Court on review.[17]This Court can no longer be tasked to go over the proofs presented by the parties and analyze, assess and weigh them to ascertain if the trial court and the appellate court were correct in according superior credit to this or that piece of evidence of one party or the other.[18]It must be also pointed out that petitioners failed to attend the presentation of evidence of respondent.Petitioners cannot now turn to this Court to question the admissibility and authenticity of the documentary evidence of respondent when petitioners failed to object to the admissibility of the evidence at the time that such evidence was offered.[19]With regard to petitioners insistence that laches and/or prescription should have extinguished respondents claim, we agree with the trial court and the Court of Appeals that the action for accounting filed by respondent three (3) years after Jacintos death was well within the prescribed period.The Civil Code provides that an action to enforce an oral contract prescribes in six (6) years[20]while the right to demand an accounting for a partners interest as against the person continuing the business accrues at the date of dissolution, in the absence of any contrary agreement.[21]Considering that the death of a partner results in the dissolution of the partnership[22], in this case, it was after Jacintos death that respondent as the surviving partner had the right to an account of his interest as against petitioners.It bears stressing that while Jacintos death dissolved the partnership, the dissolution did not immediately terminate the partnership.The Civil Code[23]expressly provides that upon dissolution, the partnership continues and its legal personality is retained until the complete winding up of its business, culminating in its termination.[24]In a desperate bid to cast doubt on the validity of the oral partnership between respondent and Jacinto, petitioners maintain that said partnership that had an initial capital of P200,000.00 should have been registered with the Securities and Exchange Commission (SEC) since registration is mandated by the Civil Code.True, Article 1772 of the Civil Code requires that partnerships with a capital of P3,000.00 or more must register with the SEC, however, this registration requirement is not mandatory.Article 1768 of the Civil Code[25]explicitly provides that the partnership retains its juridical personality even if it fails to register.The failure to register the contract of partnership does not invalidate the same as among the partners, so long as the contract has the essential requisites, because the main purpose of registration is to give notice to third parties, and it can be assumed that the members themselves knew of the contents of their contract.[26]In the case at bar, non-compliance with this directory provision of the law will not invalidate the partnership considering that the totality of the evidence proves that respondent and Jacinto indeed forged the partnership in question.WHEREFORE, in view of the foregoing, the petition is DENIED and the appealed decision is AFFIRMED.SO ORDERED.

G.R. No. L-24193 June 28, 1968MAURICIO AGAD,plaintiff-appellant,vs.SEVERINO MABATO and MABATO and AGAD COMPANY,defendants-appellees.Angeles, Maskarino and Associates for plaintiff-appellant.Victorio S. Advincula for defendants-appellees.CONCEPCION,C.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 voidab 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: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.The issue before us hinges on whether or not "immovable property or real rights" have beencontributedto 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 thefishpond businesscould 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 "tooperatea 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 Annex "A" provides: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 x x x x x xThe 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.

SCAR ANGELES and EMERITA ANGELES,petitioners, vs. THE HON. SECRETARY OF JUSTICE and FELINO MERCADO,respondents.D E C I S I O NCARPIO,J.:The CaseThis is a petition forcertiorari[1]to annul the letter-resolution[2]dated 1 February 2000 of the Secretary of Justice in Resolution No. 155.[3]The Secretary of Justice affirmed the resolution[4]in I.S. No. 96-939 dated 28 February 1997 rendered by the Provincial Prosecution Office of the Department of Justice in Santa Cruz, Laguna (Provincial Prosecution Office). The Provincial Prosecution Office resolved to dismiss the complaint for estafa filed by petitioners Oscar and Emerita Angeles (Angeles spouses) against respondent Felino Mercado (Mercado).Antecedent FactsOn 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 assanglaang-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 withP210,000 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 earnedP46,210 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 ofsanglaang-perdeover the subject land under Mercado and his spouses names.[7]The relevant portions of the contract ofsanglaang-perde, signed by Juana Suazo alone, read:xxxNa alang-alang sa halagang DALAWANG DAAN AT SAMPUNG LIBONG PISO (P210,000), salaping gastahin, na aking tinanggap sa mag[-]asawa nila G. AT GNG. FELINO MERCADO, mga nasa hustong gulang, Filipino, tumitira at may pahatirang sulat sa Bgy. Maravilla, bayan ng Nagcarlan, lalawigan ng Laguna, ay aking ipinagbili, iniliwat at isinalin sa naulit na halaga, sa nabanggit na mag[-] asawa nila G. AT GNG. FELINO MERCADO[,] sa kanila ay magmamana, kahalili at ibang dapat pagliwatan ng kanilang karapatan, ang lahat na ibubunga ng lahat na puno ng lanzones, hindi kasama ang ibang halaman na napapalooban nito, ng nabanggit na WALONG (8) Lagay na Lupang Cocal-Lanzonal, sa takdang LIMA (5) NA [sic] TAON, magpapasimula sa taong 1993, at magtatapos sa taong 1997, kayat pagkatapos ng lansonesan sa taong 1997, ang pamomosision at pakikinabang sa lahat na puno ng lanzones sa nabanggit na WALONG (8) Lagay na Lupang Cocal-Lanzonal ay manunumbalik sa akin, sa akin ay magmamana, kahalili at ibang dapat pagliwatan ng aking karapatan na ako ay walang ibabalik na ano pa mang halaga, sa mag[-] asawa nila G. AT GNG. FELINO MERCADO.Na ako at ang mag[-]asawa nila G. AT GNG. FELINO MERCADO ay nagkasundo na ako ay bibigyan nila ng LIMA (5) na [sic] kaing na lanzones taon-taon sa loob ng LIMA (5) na [sic] taon ng aming kasunduang ito.Na ako at ang mag[-]asawa nila G. AT GNG. FELINO MERCADO ay nagkasundo na silang mag[-]asawa nila G. AT GNG. FELINO MERCADO ang magpapaalis ng dapo sa puno ng lansones taon-taon [sic] sa loob ng LIMA (5) [sic] taonng [sic] aming kasunduang ito.[8]In his counter-affidavit, Mercado denied the Angeles spouses allegations. Mercado claimed that there exists an industrial partnership, colloquially known assosyo industrial, between him and his spouse as industrial partners and the Angeles spouses as the financiers. This industrial partnership had existed since 1991, before the contract of antichresis over the subject land. As the years passed, Mercado used his and his spouses earnings as part of the capital in the business transactions which he entered into in behalf of the Angeles spouses. It was their practice to enter into business transactions with other people under the name of Mercado because the Angeles spouses did not want to be identified as the financiers.Mercado attached bank receipts showing deposits in behalf of Emerita Angeles and contracts under his name for the Angeles spouses. Mercado also attached the minutes of the barangay conciliation proceedings held on 7 September 1996. During the barangay conciliation proceedings, Oscar Angeles stated that there was a writtensosyo industrialagreement: 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 OfficeOn 3 January 1997, the Provincial Prosecution Office issued a resolution recommending the filing of criminal information for estafa against Mercado. This resolution, however, was issued without Mercados counter-affidavit.Meanwhile, Mercado filed his counter-affidavit on 2 January 1997. On receiving the 3 January 1997 resolution, Mercado moved for its reconsideration. Hence, on 26 February 1997, the Provincial Prosecution Office issued an amended resolution dismissing the Angeles spouses complaint for estafa against Mercado.The Provincial Prosecution Office stated thus:The subject of the complaint hinges on a partnership gone sour. The partnership was initially unsaddled [with] problems. Management became the source of misunderstanding including the accounting of profits, which led to further misunderstanding until it was revealed that the contract with the orchard owner was only with the name of the respondent, without the names of the complainants.The accusation of estafa here lacks enough credible evidentiary support to sustain a prima facie finding.Premises considered, it is respectfully recommended that the complaint for estafa be dismissed.RESPECTFULLY SUBMITTED.[10]The Angeles spouses filed a motion for reconsideration, which the Provincial Prosecution Office denied in a resolution dated 4 August 1997.The Ruling of the Secretary of JusticeOn appeal to the Secretary of Justice, the Angeles spouses emphasized that the document evidencing the contract ofsanglaang-perdewith Juana Suazo was executed in the name of the Mercado spouses, instead of the Angeles spouses. The Angeles spouses allege that this document alone proves Mercados misappropriation of theirP210,000.The Secretary of Justice found otherwise. Thus:Reviewing the records of the case, we are of the opinion that the indictment of [Mercado] for the crime of estafa cannot be sustained. [The Angeles spouses] failed to show sufficient proof that [Mercado] deliberately deceived them in the sanglaang perde transaction. The document alone, which was in the name of [Mercado and his spouse], failed to convince us that there was deceit or false representation on the part of [Mercado] that induced the [Angeles spouses] to part with their money. [Mercado] satisfactorily explained that the [Angeles spouses] do not want to be revealed as the financiers. Indeed, it is difficult to believe that the [Angeles spouses] would readily part with their money without holding on to some document to evidence the receipt of money, or at least to inspect the document involved in the said transaction. Under the circumstances, we are inclined to believe that [the Angeles spouses] knew from the very start that the questioned document was not really in their names.In addition, we are convinced that a partnership truly existed between the [Angeles spouses] and [Mercado]. The formation of a partnership was clear from the fact that they contributed money to a common fund and divided the profits among themselves. Records would show that [Mercado] was able to make deposits for the account of the [Angeles spouses]. These deposits represented their share in the profits of their business venture. Although the [Angeles spouses] deny the existence of a partnership, they, however, never disputed that the deposits made by [Mercado] were indeed for their account.The transcript of notes on the dialogue between the [Angeles spouses] and [Mercado] during the hearing of their barangay conciliation case reveals that the [Angeles spouses] acknowledged their joint business ventures with [Mercado] although they assailed the manner by which [Mercado] conducted the business and handled and distributed the funds. The veracity of this transcript was not raised in issued [sic] by [the Angeles spouses]. Although the legal formalities for the formation of a partnership were not adhered to, the partnership relationship of the [Angeles spouses] and [Mercado] is evident in this case. Consequently, there is no estafa where money is delivered by a partner to his co-partner on the latters representation that the amount shall be applied to the business of their partnership. In case of misapplication or conversion of the money received, the co-partners liability is civil in nature (People v. Clarin, 7 Phil. 504)WHEREFORE, the appeal is hereby DISMISSED.[11]Hence, this petition.IssuesThe 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 CourtThe petition has no merit.Whether the Secretary of Justice CommittedGrave Abuse of DiscretionAn act of a court or tribunal may constitutegrave abuse of discretionwhen the same is performed in a capricious or whimsical exercise of judgment amounting to lack of jurisdiction. The abuse of discretion must be so patent and gross as to amount to an evasion of positive duty, or to a virtual refusal to perform a duty enjoined by law, as where the power is exercised in an arbitrary and despotic manner because of passion or personal hostility.[13]The Angeles spouses fail to convince us that the Secretary of Justice committed grave abuse of discretion when he dismissed their appeal. Moreover, the Angeles spouses committed an error in procedure when they failed to file a motion for reconsideration of the Secretary of Justices resolution. A previous motion for reconsideration before the filing of a petition forcertiorariis 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 forcertiorariis dismissible for this reason alone.Whether a Partnership ExistedBetween Mercado and the Angeles SpousesThe Angeles spouses allege that they had no partnership with Mercado. The Angeles spouses rely on Articles 1771 to 1773 of the Civil Code, which state that:Art. 1771. A partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be necessary.Art. 1772. Every contract of partnership having a capital of three thousand pesos or more, in money or property, shall appear in a public instrument, which must be recorded in the Office of the Securities and Exchange Commission.Failure to comply with the requirements of the preceding paragraph shall not affect the liability of the partnership and the members thereof to third persons.Art. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument.The Angeles spouses position that there is no partnership because of the lack of a public instrument indicating the same and a lack of registration with the Securities and Exchange Commission (SEC) holds no water. First, the Angeles spouses contributed money to the partnership and not immovable property. Second, mere failure to register the contract of partnership with the SEC does not invalidate a contract that has the essential requisites of a partnership. The purpose of registration of the contract of partnership is to give notice to third parties. Failure to register the contract of partnership does not affect the liability of the partnership and of the partners to third persons. Neither does such failure to register affect the partnerships juridical personality. A partnership may exist even if the partnersdo not use the words partner or partnership.Indeed, the Angeles spouses admit to facts that prove the existence of a partnership: a contract showing asosyo industrialor industrial partnership, contribution of money and industry to a common fund, and division of profits between the Angeles spouses and Mercado.Whether there wasMisappropriation by MercadoThe Secretary of Justice adequately explained the alleged misappropriation by Mercado: The document alone, which was in the name of [Mercado and his spouse], failed to convince us that there was deceit or false representation on the part of [Mercado] that induced the [Angeles spouses] to part with their money. [Mercado] satisfactorily explained that the [Angeles spouses] do not want to be revealed as the financiers.[15]Even Branch 26 of the Regional Trial Court of Santa Cruz, Laguna which decided the civil case for damages, injunction and restraining order filed by the Angeles spouses against Mercado and Leo Cerayban, stated:xxx [I]t was the practice to have all the contracts of antichresis of their partnership secured in [Mercados] name as [the Angeles spouses] are apprehensive that, if they come out into the open as financiers of said contracts, they might be kidnapped by the New Peoples Army or their business deals be questioned by the Bureau of Internal Revenue or worse, their assets and unexplained income be sequestered, as xxx Oscar Angeles was then working with the government.[16]Furthermore, accounting of the proceeds is not a proper subject for the present case.For these reasons, we hold that the Secretary of Justice did not abuse his discretion in dismissing the appeal of the Angeles spouses.WHEREFORE, we AFFIRM the decision of the Secretary of Justice. The present petition forcertiorariis DISMISSED.

[G.R. No. 134559.December 9, 1999]ANTONIA TORRES, assisted by her husband, ANGELO TORRES; and EMETERIA BARING,petitioners, vs. COURT OF APPEALS and MANUEL TORRES,respondents.D E C I S I O NPANGANIBAN,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 notipso factorelease the contracting partners from their respective obligationsto each otherarising from acts executed in accordance with their agreement.The CaseThe Petition for Review on Certiorari before us assails the March 5, 1998 Decision[1]Second Divisionof 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:WHEREFORE, for all the foregoing considerations, the Court, finding for the defendant and against the plaintiffs, orders the dismissal of the plaintiffs complaint.The counterclaims of the defendant are likewise ordered dismissed.No pronouncement as to costs.[3]The FactsSisters 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 ofP40,000 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 respondents 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 Councils 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 ofP85,000.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 AppealsIn 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 courts 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: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.The CA elucidated further: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.The IssuePetitioners impute to the Court of Appeals the following error:x x x [The] Court of Appeals erred in concluding that the transaction x x x 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 Courts RulingThe Petition is bereft of merit.Main Issue:Existence of a PartnershipPetitioners 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 courts 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:KNOW ALL MEN BY THESE PRESENTS:This AGREEMENT, is made and entered into at Cebu City, Philippines, this 5th day of March, 1969, by and between MR. MANUEL R. TORRES, x x x the FIRST PARTY, likewise, MRS. ANTONIA B. TORRES, and MISS EMETERIA BARING, x x x the SECOND PARTY:W I T N E S S E T H: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:ONE:That the SECOND PARTY signed an absolute Deed of Sale x x x 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 necessar