12/10/2016 G.R.No.

183374

ThirdDivision

MARSMAN DRYSDALE LAND, G.R.No.183374
INC.,
Petitioner, Present:

CARPIO,*
versus CARPIOMORALES,Chairperson,
BRION,
PHILIPPINE GEOANALYTICS,
INC. AND GOTESCO ABAD,**and
PROPERTIES,INC., VILLARAMA,JR.,JJ.
Respondents.
xx
GOTESCOPROPERTIES,INC.,
Petitioner,
G.R.No.183376

versus

MARSMAN DRYSDALE LAND,
INC. AND PHILIPPINE
GEOANALYTICS,INC., Promulgated:
Respondents. June29,2010

xx

DECISION

CARPIOMORALES,J.:

OnFebruary12,1997,MarsmanDrysdaleLand,Inc.(MarsmanDrysdale)andGotesco
Properties,Inc.(Gotesco)enteredintoaJointVentureAgreement(JVA)fortheconstructionand
[1]
developmentofanofficebuildingonalandownedbyMarsmanDrysdaleinMakatiCity.

TheJVAcontainedthefollowingpertinentprovisions:

SECTION4.CAPITALOFTHEJV

It is the desire of the Parties herein to implement this Agreement by investing in the
PROJECTonaFIFTY(50%)PERCENTFIFTY(50%)PERCENTbasis.

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4.1.Contributionof[MarsmanDrysdale][MarsmanDrysdale]shallcontributetheProperty.

The total appraised value of the Property is PESOS: FOUR HUNDRED TWENTY MILLION
(P420,000,000.00).

Forthispurpose,[MarsmanDrysdale]shalldeliverthePropertyinabuildableconditionwithin
ninety (90) days from signing of this Agreement barring any unforeseen circumstances over
which [Marsman Drysdale] has no control. Buildable condition shall mean that the old
building/structurewhichstandsonthePropertyisdemolishedandtakentogroundlevel.

4.2. Contribution of [Gotesco] [Gotesco] shall contribute the amount of PESOS: FOUR
HUNDREDTWENTY MILLION (P420,000,000.00) in cashwhichshallbepayable as
follows:

4.2.1.TheamountofPESOS:FIFTYMILLION(P50,000,000.00)uponsigningofthis
Agreement.

4.2.2. The balance of PESOS: THREE HUNDRED SEVENTY MILLION
(P370,000,000.00) shall be paid based on progress billings, relative to the
developmentandconstructionoftheBuilding,butshallinnocaseexceedten(10)
months from delivery of the Property in a Buildable condition as defined in
section4.1.

A joint account shall be opened and maintained by both Parties for handling of
saidbalance,amongotherProjectconcerns.

4.3.FundingandFinancing

4.3.1 Construction funding for the Project shall be obtained from the cash
contributionof[Gotesco].
4.3.2SubsequentfundingshallbeobtainedfromthepresellingofunitsintheBuilding
or, when necessary, from loans from various banks or financial institutions.
[Gotesco] shall arrange the required funding from such banks or financial
institutions, under such terms and conditions which will provide financing rates
favorabletotheParties.

4.3.3 [Marsman Drysdale] shall not be obligated to fund the Project as its
contributionislimitedtotheProperty.

4.3.4IfthecostoftheProjectexceedsthecashcontributionof[Gotesco],theproceeds
obtained from the preselling of units and proceeds from loans, the Parties shall
agreeonothersourcesandtermsoffundingsuchexcessassoonaspracticable.

4.3.5xxxx.

4.3.6xxxx.

4.3.7xxxx.

4.3.8 AllfundsadvancedbyaParty(orbythirdpartiesinsubstitutionforadvances
fromaParty)shallberepaidbytheJV.

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4.3.9 IfanyPartyagreestomakeanadvancetotheProjectbutfailstodoso(in
wholeorinpart)theotherpartymayadvancetheshortfallandthePartyin
defaultshallindemnifythePartymakingthesubstituteadvanceondemand
for all of its losses, costs and expenses incurred in so doing. (emphasis
suppliedunderscoringintheoriginal)


[2]
ViaTechnicalServicesContract(TSC)datedJuly14,1997, thejointventureengaged
the services of Philippine Geoanalytics, Inc. (PGI) to provide subsurface soil exploration,
laboratory testing, seismic study and geotechnical engineering for the project. PGI, was,
however, able to drill only four of five boreholes needed to conduct its subsurface soil
exploration and laboratory testing, justifying its failure to drill the remaining borehole to the
failure on the part of the joint venture partners to clear the area where the drilling was to be
[3]
made. PGIwasabletocompleteitsseismicstudythough.
PGIthenbilledthejointventureonNovember24,1997forP284,553.50representingthe
costofpartialsubsurfacesoilexplorationandonJanuary15,1998forP250,800representing
[4]
thecostofthecompletedseismicstudy.

[5]
DespiterepeateddemandsfromPGI, thejointventurefailedtopayitsobligations.

Meanwhile, due to unfavorable economic conditions at the time, the joint venture was
[6]
cutshortandtheplannedbuildingprojectwaseventuallyshelved.

PGI subsequently filed on November 11, 1999 a complaint for collection of sum of
money and damages at the Regional Trial Court (RTC) of Quezon City against Marsman
DrysdaleandGotesco.

In its Answer with Counterclaim and Crossclaim, Marsman Drysdale passed the
responsibility of paying PGI to Gotesco which, under the JVA, was solely liable for the
[7]
monetaryexpensesoftheproject.

Gotesco,ontheotherhand,counteredthatPGIhasnocauseofactionagainstitasPGI
hadyettocompletetheservicesenumeratedinthecontractandthatMarsmanDrysdalefailed

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[8]
toclearthepropertyofdebriswhichpreventedPGIfromcompletingitswork.

[9]
ByDecisionofJune2,2004, Branch226oftheQuezonCityRTCrenderedjudgment
infavorofPGI,disposingasfollows:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of
plaintiff[PGI].

Thedefendants[Gotesco]and[MarsmanDrysdale]areorderedtopayplaintiff,jointly:

(1)thesumofP535,353.50withlegalinterestfromthedateofthisdecisionuntilfully
paid

(2)thesumofP200,000.00asexemplarydamages

(3)thesumofP200,000.00asandforattorneysfeesand

(4)costsofsuit.

Thecrossclaimofdefendant[MarsmanDrysdale]againstdefendant[Gotesco]ishereby
GRANTEDasfollows:

a)Defendant[Gotesco]isorderedtoreimbursecodefendant[MarsmanDrysdale]in
theamountofP535,353.[50]inaccordancewiththe[JVA].

b)Defendant[Gotesco]isfurtherorderedtopaycodefendant[MarsmanDrysdale]
thesumofP100,000.00asandforattorneysfees.

SOORDERED.(underscoringintheoriginalemphasissupplied)

MarsmanDrysdalemovedforpartialreconsideration,contendingthatitshouldnothave
been held jointly liable with Gotesco on PGIs claim as well as on the awards of exemplary
damagesandattorneysfees.Themotionwas,byResolutionofOctober28,2005,denied.

Both Marsman Drysdale and Gotesco appealed to the Court of Appeals which, by
[10]
DecisionofJanuary28,2008, affirmedwithmodificationthedecisionofthetrialcourt.
Thustheappellatecourtdisposed:

WHEREFORE, premises considered, the instant appeal is PARTLYGRANTED. The
assailedDecisiondatedJune2,2004andtheResolutiondatedOctober28,2005oftheRTCof
Quezon City, Branch 226, in Civil Case No. Q9939248 are hereby AFFIRMED with
MODIFICATION deleting the award of exemplary damages in favor of [PGI] and the
P100,000.00 attorneys fees in favor of [Marsman Drysdale] and ordering defendantappellant

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[Gotesco]toREIMBURSE[MarsmanDrysdale]50%oftheaggregatesumdue[PGI],insteadof
thelumpsumP535,353.00awardedbytheRTC.TherestoftheDecisionstands.

SOORDERED.(capitalizationandemphasisintheoriginalunderscoringsupplied)


In partly affirming the trial courts decision, the appellate court ratiocinated that
notwithstanding the terms of the JVA, the joint venture cannot avoid payment of PGIs claim
since[theJVA]couldnotaffectthirdpersonslike[PGI]becauseofthebasiccivillawprinciple
of relativity of contracts which provides that contracts can only bind the parties who entered
intoit,anditcannotfavororprejudiceathirdperson,evenifheisawareofsuchcontractand
[11]
hasactedwithknowledgethereof.

[12]
Their motions for partial reconsideration having been denied, Marsman Drysdale
and Gotesco filed separate petitions for review with the Court which were docketed as G.R.
Nos. 183374 and 183376, respectively. By Resolution of September 8, 2008, the Court
consolidatedthepetitions.

InG.R.No.183374,MarsmanDrysdaleimputeserrorontheappellatecourtin

A. ADJUDGING [MARSMAN DRYSDALE] WITH JOINT LIABILITY AFTER
CONCEDINGTHAT[GOTESCO]SHOULDULTIMATELYBESOLELYLIABLETO[PGI].

B.AWARDINGATTORNEYSFEESINFAVOROF[PGI]

C. IGNORING THE FACT THAT [PGI] DID NOT COMPLY WITH THE
REQUIREMENT OF SATISFACTORY PERFORMANCE OF ITS PRESTATION WHICH,
PURSUANT TO THE TECHNICAL SERVICES CONTRACT, IS THE CONDITION SINE
QUANONTOCOMPENSATION.

D. DISREGARDING CLEAR EVIDENCE SHOWING [MARSMAN DRYSDALES]
[13]
ENTITLEMENTTOANAWARDOFATTORNEYSFEES.
On the other hand, in G.R. No. 183376, Gotesco peddles that the appellate court
committederrorwhenit

ORDERED [GOTESCO] TO PAY P535,353.50 AS COST OF THE WORK
PERFORMED BY [PGI] AND P100,000.00 [AS] ATTORNEYS FEES [AND] TO
REIMBURSE [MARSMAN DRYSDALE] 50% OF P535,353.50 AND PAY [MARSMAN
[14]
DRYSDALE]P100,000.00ASATTORNEYSFEES.

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OntheissueofwhetherPGIwasindeedentitledtothepaymentofservicesitrendered,
the Court sees no imperative to reexamine the congruent findings of the trial and appellate
courtsthereon.Undoubtedly,theexerciseinvolvesanexaminationoffactswhichisnormally
beyondtheambitoftheCourtsfunctionsunderapetitionforreview,foritiswellsettledthat
thisCourtisnotatrieroffacts.Whilethisjudicialtenetadmitsofexceptions,suchaswhenthe
findings of facts of the appellate court are contrary to those of the trial courts, or when the
judgmentisbasedonamisapprehensionoffacts,orwhenthefindingsoffactsarecontradicted
[15]
by the evidence on record, these extenuating grounds find no application in the present
petitions.

AT ALL EVENTS, the Court is convinced that PGI had more than sufficiently
establisheditsclaimsagainstthejointventure.Infact,MarsmanDrysdalehadlongrecognized
[16]
PGIs contractual claims when it (PGI) received a Certificate of Payment from the joint
[17] [18]
venturesprojectmanager whichwasendorsedtoGotescoforprocessingandpayment.

ThecoreissuetoberesolvedtheniswhichbetweenjointventurersMarsmanDrysdale
andGotescobearstheliabilitytopayPGIitsunpaidclaims.
ToMarsmanDrysdale,itisGotescosince,undertheJVA,constructionfundingforthe
project was to be obtained from Gotescos cash contribution, as its (Marsman Drysdales)
participationintheventurewaslimitedtotheland.

Gotesco maintains, however, that it has no liability to pay PGI since it was due to the
faultofMarsmanDrysdalethatPGIwasunabletocompleteitsundertaking.

TheCourtfindsMarsmanDrysdaleandGotescojointlyliabletoPGI.

PGIexecutedatechnicalservicecontractwiththejointventureandwasneverapartyto
the JVA. While the JVA clearly spelled out, inter alia, the capital contributions of Marsman
Drysdale (land) and Gotesco (cash) as well as the funding and financing mechanism for the
project, the same cannot be used to defeat the lawful claim of PGI against the two joint
venturerspartners.

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The TSC clearly listed the joint venturers Marsman Drysdale and Gotesco as the
[19]
beneficialowneroftheproject, andallbillinginvoicesindicatedtheconsortiumthereinas
theclient.

Astheappellatecourtheld,Articles1207and1208oftheCivilCode,whichrespectively
read:
Art.1207.Theconcurrenceoftwoormorecreditorsoroftwoormoredebtorsinone
andthesameobligationdoesnotimplythateachoneoftheformerhasarighttodemand,
or that each one of the latter is bound to render, entire compliance with the prestations.
There is a solidary liability only when the obligation expressly so states, or when the law or
natureoftheobligationrequiressolidarity.

Art.1208.If from the law, or the nature or the wording of the obligations to which the
precedingarticlerefersthecontrarydoesnotappear,thecreditordebtshallbepresumedtobe
dividedintoasmanyequalsharesastherearecreditorsordebtors,thecreditsordebtsbeing
considereddistinctfromoneanother,subjecttotheRulesofCourtgoverningthemultiplicityof
suits.(emphasisandunderscoringsupplied),


presumethattheobligationowingtoPGIisjointbetweenMarsmanDrysdaleandGotesco.

The only time that the JVA may be made to apply in the present petitions is when the
liabilityofthejointventurerstoeachotherwouldsetin.

A joint venture being a form of partnership, it is to be governed by the laws on
[20]
partnership. Article1797oftheCivilCodeprovides:

Art.1797.Thelossesandprofitsshallbedistributedinconformitywiththeagreement.If
onlytheshareofeachpartnerintheprofitshasbeenagreedupon,theshareofeachinthe
lossesshallbeinthesameproportion.

In the absence of stipulation, the share of each in the profits and losses shall be in
proportiontowhathemayhavecontributed,buttheindustrialpartnershallnotbeliableforthe
losses. As for the profits, the industrial partner shall receive such share as may be just and
equitableunderthecircumstances.Ifbesideshisserviceshehascontributedcapital,heshallalso
receiveashareintheprofitsinproportiontohiscapital.(emphasisandunderscoringsupplied)


IntheJVA,MarsmanDrysdaleandGotescoagreedona5050ratioontheproceedsof
[21]
theproject. Theydidnotprovideforthesplittingoflosses,however.Applyingtheabove

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quoted provision of Article 1797 then, the same ratio applies in splitting the P535,353.50
obligationlossofthejointventure.
The appellate courts decision must be modified, however. Marsman Drysdale and
Gotescobeingjointlyliable,thereisnoneedforGotescotoreimburseMarsmanDrysdalefor
50%oftheaggregatesumduetoPGI.

Allowing Marsman Drysdale to recover from Gotesco what it paid to PGI would not
only be contrary to the law on partnership on division of losses but would partake of a clear
case of unjust enrichment at Gotescos expense. The grant by the lower courts of Marsman
DrysdalecrossclaimagainstGotescowasthuserroneous.

Marsman Drysdales supplication for the award of attorneys fees in its favor must be
denied.It cannot claim that it was compelled to litigate or that the civil action or proceeding
againstitwasclearlyunfounded,fortheJVAprovidedthat,intheeventapartyadvancesfunds
[22]
fortheproject,thejointventureshallrepaytheadvancingparty.

Marsman Drysdale was thus not precluded from advancing funds to pay for PGIs
contracted services to abate any legal action against the joint venture itself. It was in fact
hardlineinsistenceonGotescohavingsoleresponsibilitytopayfortheobligation,despitethe
fact that PGIs services redounded to the benefit of the joint venture, that spawned the legal
actionagainstitandGotesco.

Finally, an interest of 12% per annum on the outstanding obligation must be imposed
[23]
fromthetimeofdemand asthedelayinpaymentmakestheobligationoneofforbearanceof
money,conformablywiththisCourtsrulinginEasternShippingLines,Inc.v.CourtofAppeals.
[24]
MarsmanDrysdaleandGotescoshouldbearlegalinterestontheirrespectiveobligations.

WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are
AFFIRMED with MODIFICATION in that the order for Gotesco to reimburse Marsman
Drysdale is DELETED, and interest of 12% per annum on the respective obligations of
Marsman Drysdale and Gotesco is imposed, computed from the last demand or on January 5,
1999uptothefinalityoftheDecision.

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Iftheadjudgedamountandtheinterestremainunpaidthereafter,theinterestrateshallbe
12% per annum computed from the time the judgment becomes final and executory until it is
fullysatisfied.Theappealeddecisionis,inallotherrespects,affirmed.

CostsagainstpetitionersMarsmanDrysdaleandGotesco.

SOORDERED.


CONCHITACARPIOMORALES
AssociateJustice
Chairperson

WECONCUR:




ANTONIOT.CARPIOARTUROD.BRION
AssociateJusticeAssociateJustice




ROBERTOA.ABADMARTINS.VILLARAMA,JR.
AssociateJusticeAssociateJustice
CERTIFICATION


Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the
aboveDecisionhadbeenreachedinconsultationbeforethecasewasassignedtothewriterof
theopinionoftheCourtsDivision.



RENATOC.CORONA
ChiefJustice

*AdditionalmemberperRaffledatedJune16,2010.
**AdditionalmemberperSpecialOrderNo.843datedMay17,2010.

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[1]
IRecords,pp.101120.
[2]
Id.atpp.631.
[3]
Id.atp.2.
[4]
Id.atpp.33and36.CoveredbyBillingInvoiceNos.437and526,respectively.
[5]
Id.atpp.222,224,and225ExhibitsEFandG.
[6]
IIRecords,pp.397398.SeealsoTranscriptofStenographicNotes,August21,2001,p.8.
[7]
IRecords,pp.9294.
[8]
Id.atp.70.
[9]
IIRecords,pp.505530.PennedbyJudgeLeahS.DomingoRegala.
[10]
CArollo,pp.274282.PennedbyAssociateJusticeEstelaM.PerlasBernabewithAssociateJusticesPortiaAlioHormachuelos
andLucasP.Bersamin(nowamemberoftheCourt).
[11]
Id.atp.278.
[12]
Id.atp.322.
[13]
Rollo(G.R.No.183374),pp.1920.
[14]
Rollo(G.R.No.183376),p.19.
[15]
LaRosav.AmbassadorHotel,G.R.No.177059,March13,2009,581SCRA340,345346.
[16]
IRecords,pp.218221ExhibitsB,CandD.
[17]
LawrenceCampbell.
[18]
IRecords,p.223ExhibitE2.
[19]
In the Technical Services Contracts SC1 Definitions portion, it was stated that OWNER means MarsmanDrysdale Land,
Inc./GotescoProperties,Inc.,aJointVentureanditsauthorizedrepresentativesandsuccessorsininterest.
[20]
Aurbachv.SanitaryWaresManufacturingCorp.,G.R.No.75875,December15,1989,180SCRA130,146147.
[21]
IRecords,p.107.Section8oftheJVAstatesthat:xxxx.a)proceedsfromtheJVshallbesharedequallyona50:50ratio
betweenthePartiesunlesssuchratioischangedduetoadditionalinvestmentsasprovidedinSection4.3xxxx.
[22]
I Records, p. 105.The JVA states that: x x x x. 4.3.8.All funds advanced by a Party (or by third parties in substitution for
advancesfromaParty)shallberepaidbythe[jointventure].xxxx.
[23]
Vide:IRecords,p.40.ThelastdemandletterfromPGIisdatedJanuary5,1999.
[24]
G.R.No.97412,July12,1994,234SCRA78.

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