Escolar Documentos
Profissional Documentos
Cultura Documentos
SUPREME COURT
Manila
EN BANC
In 1948, however, general partner Suter and limited partner Spirig got
married and, thereafter, on 18 December 1948, limited partner Carlson sold
his share in the partnership to Suter and his wife. The sale was duly
recorded with the Securities and Exchange Commission on 20 December
1948.
The limited partnership had been filing its income tax returns as a
corporation, without objection by the herein petitioner, Commissioner of
Internal Revenue, until in 1959 when the latter, in an assessment,
consolidated the income of the firm and the individual incomes of the
partners-spouses Suter and Spirig resulting in a determination of a
deficiency income tax against respondent Suter in the amount of P2,678.06
for 1954 and P4,567.00 for 1955.
(b) Whether or not the partnership was dissolved after the marriage of the
partners, respondent William J. Suter and Julia Spirig Suter and the
subsequent sale to them by the remaining partner, Gustav Carlson, of his
participation of P2,000.00 in the partnership for a nominal amount of P1.00.
The thesis that the limited partnership, William J. Suter "Morcoin" Co., Ltd.,
has been dissolved by operation of law because of the marriage of the only
general partner, William J. Suter to the originally limited partner, Julia Spirig
one year after the partnership was organized is rested by the appellant upon
the opinion of now Senator Tolentino in Commentaries and Jurisprudence on
Commercial Laws of the Philippines, Vol. 1, 4th Ed., page 58, that reads as
follows:
The petitioner-appellant has evidently failed to observe the fact that William
J. Suter "Morcoin" Co., Ltd. was not a universal partnership, but a particular
one. As appears from Articles 1674 and 1675 of the Spanish Civil Code, of
1889 (which was the law in force when the subject firm was organized in
1947), a universal partnership requires either that the object of the
association be all the present property of the partners, as contributed by
them to the common fund, or else "all that the partners may acquire by
their industry or work during the existence of the partnership". William J.
Suter "Morcoin" Co., Ltd. was not such a universal partnership, since the
contributions of the partners were fixed sums of money, P20,000.00 by
William Suter and P18,000.00 by Julia Spirig and neither one of them was an
industrial partner. It follows that William J. Suter "Morcoin" Co., Ltd. was not
a partnership that spouses were forbidden to enter by Article 1677 of the
Civil Code of 1889.
The former Chief Justice of the Spanish Supreme Court, D. Jose Casan, in
his Derecho Civil, 7th Edition, 1952, Volume 4, page 546, footnote 1, says
with regard to the prohibition contained in the aforesaid Article 1677:
Nor could the subsequent marriage of the partners operate to dissolve it,
such marriage not being one of the causes provided for that purpose either
by the Spanish Civil Code or the Code of Commerce.
The appellant's view, that by the marriage of both partners the company
became a single proprietorship, is equally erroneous. The capital
contributions of partners William J. Suter and Julia Spirig were separately
owned and contributed by them before their marriage; and after they were
joined in wedlock, such contributions remained their respective separate
property under the Spanish Civil Code (Article 1396):
(a) That which is brought to the marriage as his or her own; ....
It being a basic tenet of the Spanish and Philippine law that the partnership
has a juridical personality of its own, distinct and separate from that of its
partners (unlike American and English law that does not recognize such
separate juridical personality), the bypassing of the existence of the limited
partnership as a taxpayer can only be done by ignoring or disregarding clear
statutory mandates and basic principles of our law. The limited partnership's
separate individuality makes it impossible to equate its income with that of
the component members. True, section 24 of the Internal Revenue Code
merges registered general co-partnerships (compañias colectivas) with the
personality of the individual partners for income tax purposes. But this rule
is exceptional in its disregard of a cardinal tenet of our partnership laws, and
can not be extended by mere implication to limited partnerships.
The difference in tax rates between the income of the limited partnership
being consolidated with, and when split from the income of the spouses, is
not a justification for requiring consolidation; the revenue code, as it
presently stands, does not authorize it, and even bars it by requiring the
limited partnership to pay tax on its own income.
EN BANC
REYES, J.:
Plaintiff's complaint was amended three times with respect to the extent and
description of the land sought to be recovered. The original complaint
described the land as a portion of a lot registered in plaintiff's name under
Transfer Certificate of Title No. 37686 of the land record of Rizal Province
and as containing an area of 13 hectares more or less. But the complaint
was amended by reducing the area of 6 hectares, more or less, after the
defendant had indicated the plaintiff's surveyors the portion of land claimed
and occupied by him. The second amendment became necessary and was
allowed following the testimony of plaintiff's surveyors that a portion of the
area was embraced in another certificate of title, which was plaintiff's
Transfer Certificate of Title No. 37677. And still later, in the course of trial,
after defendant's surveyor and witness, Quirino Feria, had testified that the
area occupied and claimed by defendant was about 13 hectares, as shown in
his Exhibit 1, plaintiff again, with the leave of court, amended its complaint
to make its allegations conform to the evidence.
Defendant, in his answer, sets up prescription and title in himself thru "open,
continuous, exclusive and public and notorious possession (of land in
dispute) under claim of ownership, adverse to the entire world by defendant
and his predecessor in interest" from "time in-memorial". The answer further
alleges that registration of the land in dispute was obtained by plaintiff or its
predecessors in interest thru "fraud or error and without knowledge (of) or
interest either personal or thru publication to defendant and/or predecessors
in interest." The answer therefore prays that the complaint be dismissed
with costs and plaintiff required to reconvey the land to defendant or pay its
value.
After trial, the lower court rendered judgment for plaintiff, declaring
defendant to be without any right to the land in question and ordering him
to restore possession thereof to plaintiff and to pay the latter a monthly rent
of P132.62 from January, 1940, until he vacates the land, and also to pay
the costs.
I. The trial court erred in not dismissing the case on the ground that
the case was not brought by the real property in interest.
II. The trial court erred in admitting the third amended complaint.
IV. The trial court erred in including in its decision land not involved in
the litigation.
V. The trial court erred in holding that the land in dispute is covered by
transfer certificates of Title Nos. 37686 and 37677.
Vl. The trial court erred in not finding that the defendant is the true
and lawful owner of the land.
VII. The trial court erred in finding that the defendant is liable to pay
the plaintiff the amount of P132.62 monthly from January, 1940, until
he vacates the premises.
VIII. The trial court erred in not ordering the plaintiff to reconvey the
land in litigation to the defendant.
As to the first assigned error, there is nothing to the contention that the
present action is not brought by the real party in interest, that is, by J. M.
Tuason and Co., Inc. What the Rules of Court require is that an action be
brought in the name of, but not necessarily by, the real party in interest.
(Section 2, Rule 2.) In fact the practice is for an attorney-at-law to bring the
action, that is to file the complaint, in the name of the plaintiff. That practice
appears to have been followed in this case, since the complaint is signed by
the law firm of Araneta and Araneta, "counsel for plaintiff" and commences
with the statement "comes now plaintiff, through its undersigned counsel." It
is true that the complaint also states that the plaintiff is "represented herein
by its Managing Partner Gregorio Araneta, Inc.", another corporation, but
there is nothing against one corporation being represented by another
person, natural or juridical, in a suit in court. The contention that Gregorio
Araneta, Inc. can not act as managing partner for plaintiff on the theory that
it is illegal for two corporations to enter into a partnership is without merit,
for the true rule is that "though a corporation has no power to enter into a
partnership, it may nevertheless enter into a joint venture with another
where the nature of that venture is in line with the business authorized by
its charter." (Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A. L. R., 1043,
citing 2 Fletcher Cyc. of Corp., 1082.) There is nothing in the record to
indicate that the venture in which plaintiff is represented by Gregorio
Araneta, Inc. as "its managing partner" is not in line with the corporate
business of either of them.
Errors II, III, and IV, referring to the admission of the third amended
complaint, may be answered by mere reference to section 4 of Rule 17,
Rules of Court, which sanctions such amendment. It reads:
Under this provision amendment is not even necessary for the purpose of
rendering judgment on issues proved though not alleged. Thus, commenting
on the provision, Chief Justice Moran says in this Rules of Court:
Under this section, American courts have, under the New Federal Rules
of Civil Procedure, ruled that where the facts shown entitled plaintiff to
relief other than that asked for, no amendment to the complaint is
necessary, especially where defendant has himself raised the point on
which recovery is based, and that the appellate court treat the
pleadings as amended to conform to the evidence, although the
pleadings were not actually amended. (I Moran, Rules of Court, 1952
ed., 389-390.)
Our conclusion therefore is that specification of error II, III, and IV are
without merit..
Let us now pass on the errors V and VI. Admitting, though his attorney, at
the early stage of the trial, that the land in dispute "is that described or
represented in Exhibit A and in Exhibit B enclosed in red pencil with the
name Quirino Bolaños," defendant later changed his lawyer and also his
theory and tried to prove that the land in dispute was not covered by
plaintiff's certificate of title. The evidence, however, is against defendant, for
it clearly establishes that plaintiff is the registered owner of lot No. 4-B-3-C,
situate in barrio Tatalon, Quezon City, with an area of 5,297,429.3 square
meters, more or less, covered by transfer certificate of title No. 37686 of the
land records of Rizal province, and of lot No. 4-B-4, situated in the same
barrio, having an area of 74,789 square meters, more or less, covered by
transfer certificate of title No. 37677 of the land records of the same
province, both lots having been originally registered on July 8, 1914 under
original certificate of title No. 735. The identity of the lots was established by
the testimony of Antonio Manahan and Magno Faustino, witnesses for
plaintiff, and the identity of the portion thereof claimed by defendant was
established by the testimony of his own witness, Quirico Feria. The combined
testimony of these three witnesses clearly shows that the portion claimed by
defendant is made up of a part of lot 4-B-3-C and major on portion of lot 4-
B-4, and is well within the area covered by the two transfer certificates of
title already mentioned. This fact also appears admitted in defendant's
answer to the third amended complaint.
Error No. VIII is but a consequence of the other errors alleged and needs for
further consideration.
During the pendency of this case in this Court appellant, thru other counsel,
has filed a motion to dismiss alleging that there is pending before the Court
of First Instance of Rizal another action between the same parties and for
the same cause and seeking to sustain that allegation with a copy of the
complaint filed in said action. But an examination of that complaint reveals
that appellant's allegation is not correct, for the pretended identity of parties
and cause of action in the two suits does not appear. That other case is one
for recovery of ownership, while the present one is for recovery of
possession. And while appellant claims that he is also involved in that order
action because it is a class suit, the complaint does not show that such is
really the case. On the contrary, it appears that the action seeks relief for
each individual plaintiff and not relief for and on behalf of others. The motion
for dismissal is clearly without merit.
Wherefore, the judgment appealed from is affirmed, with costs against the
plaintiff.
DECISION
KAPUNAN, J.:
In this petition for review on certiorari under Rule 45 of the Revised Rules of
Court, petitioners seek to annul the decision of the Court of Appeals in CA-
G.R. SP. No. 31748 dated 23 May 1994 and its subsequent resolution dated
10 May 1995 denying petitioners’ motion for reconsideration.
The present case involves two separate but interrelated conflicts. The facts
leading to the first controversy are as follows:
The late Manuel A. Torres, Jr. (Judge Torres for brevity) was the majority
stockholder of Tormil Realty & Development Corporation while private
respondents who are the children of Judge Torres’ deceased brother Antonio
A. Torres, constituted the minority stockholders. In particular, their
respective shareholdings and positions in the corporation were as follows:
Name of Stockholder Number of Percentage Position(s)
Shares
Manuel A. Torres, Jr. 100,120 57.21 Dir./Pres./Chair
Milagros P. Torres 33,430 19.10 Dir./Treasurer
Josefina P. Torres 8,290 4.73 Dir./Ass. Cor-Sec.
Ma. Cristina T. Carlos 8,290 4.73 Dir./Cor-Sec.
Antonio P. Torres, Jr. 8,290 4.73 Director
Ma. Jacinta P. Torres 8,290 4.73 Director
Ma. Luisa T. Morales 7,790 4.45 Director
Dante D. Morales 500 .28 Director 1
From the said decision, petitioners filed a motion for reconsideration which
was denied in a resolution issued by the Court of Appeals dated 10 May
1995. 13
Insisting on their cause, petitioners filed the present petition for review
alleging that the Court of Appeals committed the following errors in its
decision:
(1)
WHEN IT RENDERED THE MAY 23, 1994 DECISION, WHICH IS A FULL
LENGTH DECISION, WITHOUT THE EVIDENCE AND THE ORIGINAL RECORD
OF S.E.C. — AC NO. 339 BEING PROPERLY BROUGHT BEFORE IT FOR
REVIEW AND RE-EXAMINATION, AN OMISSION RESULTING IN A CLEAR
TRANSGRESSION OR CURTAILMENT OF THE RIGHTS OF THE HEREIN
PETITIONERS TO PROCEDURAL DUE PROCESS;
(2)
WHEN IT SANCTIONED THE JULY 19, 1993 DECISION OF THE RESPONDENT
S.E.C., WHICH IS VOID FOR HAVING BEEN RENDERED WITHOUT THE
PROPER SUBSTITUTION OF THE DECEASED PRINCIPAL PARTY-RESPONDENT
IN S.E.C.-AC NO. 339 AND CONSEQUENTLY, FOR WANT OF JURISDICTION
OVER THE SAID DECEASED’S TESTATE ESTATE, AND MOREOVER, WHEN IT
SOUGHT TO JUSTIFY THE NON-SUBSTITUTION BY ITS APPLICATION OF THE
CIVIL LAW CONCEPT OF NEGOTIORUM GESTIO;
(3)
WHEN IT FAILED TO SEE, AS A CONSEQUENCE OF THE EVIDENCE AND THE
ORIGINAL RECORD OF S.E.C. — AC NO. 339 NOT HAVING ACTUALLY BEEN
RE-EXAMINED, THAT S.E.C. CASE NO. 3153 INVOLVED A SITUATION
WHERE PERFORMANCE WAS IMPOSSIBLE (AS CONTEMPLATED UNDER
ARTICLE 1191 OF THE CIVIL CODE) AND WAS NOT A MERE CASE OF LESION
OR INADEQUACY OF CAUSE (UNDER ARTICLE 1355 OF THE CIVIL CODE) AS
SO ERRONEOUSLY CHARACTERIZED BY THE RESPONDENT S.E.C.; and,
(4)
WHEN IT FAILED TO SEE, AS A CONSEQUENCE OF THE EVIDENCE AND THE
ORIGINAL RECORD OF S.E.C. — AC NO. 339 NOT HAVING ACTUALLY BEEN
EXAMINED, THAT THE RECORDING BY THE LATE JUDGE MANUEL A.
TORRES, JR. OF THE QUESTIONED ASSIGNMENT OF QUALIFYING SHARES
TO HIS NOMINEES, WAS AFFIRMED IN THE STOCK AND TRANSFER BOOK BY
AN ACTING CORPORATE SECRETARY AND MOREOVER, THAT ACTUAL
NOTICE OF SAID ASSIGNMENT WAS TIMELY MADE TO THE OTHER
STOCKHOLDERS. 14
We shall resolve the issues in seriatim.
I
Petitioners insist that the failure to transmit the original records to the Court
of Appeals deprived them of procedural due process. Without the evidence
and the original records of the proceedings before the SEC, the Court of
Appeals, petitioners adamantly state, could not have possibly made a proper
appreciation and correct determination of the issues, particularly the factual
issues, they had raised on appeal. Petitioners also assert that since the
Court of Appeals allegedly gave due course to their petition, the original
records should have been forwarded to said court.
Petitioners anchor their argument on Secs. 8 and 11 of SC Circular 1-91
(dated 27 February 1991) which provides that:
8. WHEN PETITION GIVEN DUE COURSE. — The Court of Appeals shall give
due course to the petition only when it shows prima facie that the court,
commission, board, office or agency concerned has committed errors of fact
or law that would warrant reversal or modification of the order, ruling or
decision sought to be reviewed. The findings of fact of the court commission,
board, office or agency concerned when supported by substantial evidence
shall be final.
xxx xxx xxx
11. TRANSMITTAL OF RECORD. — Within fifteen (15) days from notice that
the petition has been given due course, the court, commission, board, office
or agency concerned shall transmit to the Court of Appeals the original or a
certified copy of the entire record of the proceeding under review. The
record to be transmitted may be abridged by agreement of all parties to the
proceeding. The Court of Appeals may require or permit subsequent
correction or addition to the record.
Petitioners contend that the Court of Appeals had given due course to their
petition as allegedly indicated by the following acts:
a) it granted the restraining order applied for by the herein petitioners, and
after hearing, also the writ of preliminary injunction sought by them; under
the original SC Circular No. 1-91, a petition for review may be given due
course at the onset (paragraph 8) upon a mere prima facie finding of errors
of fact or law having been committed, and such prima facie finding is but
consistent with the grant of the extra-ordinary writ of preliminary injunction;
b) it required the parties to submit “simultaneous memoranda” in its
resolution dated October 15, 1993 (this is in addition to the comment
required to be filed by the respondents) and furthermore declared in the
same resolution that the petition will be decided “on the merits,” instead of
outrightly dismissing the same;
c) it rendered a full length decision, wherein: (aa) it expressly declared the
respondent S.E.C. as having erred in denying the pertinent motions to
suspend proceedings; (bb) it declared the supposed error as having become
a non-issue when the respondent C.A. “proceeded to hear (the) appeal”;
(cc) it formulated and applied its own theory of negotiorum gestio in
justifying the non-substitution of the deceased principal party in S.E.C. — AC
No. 339 and moreover, its theory of di minimis non curat lex (this, without
first determining the true extent of and the correct legal characterization of
the so-called “shortage” of Tormil shares; and, (dd) it expressly affirmed the
assailed decision of respondent S.E.C. 15
Petitioners’ contention is unmeritorious.
There is nothing on record to show that the Court of Appeals gave due
course to the petition. The fact alone that the Court of Appeals issued a
restraining order and a writ of preliminary injunction and required the
parties to submit their respective memoranda does not indicate that the
petition was given due course. The office of an injunction is merely to
preserve the status quo pending the disposition of the case. The court can
require the submission of memoranda in support of the respective claims
and positions of the parties without necessarily giving due course to the
petition. The matter of whether or not to give due course to a petition lies in
the discretion of the court.
It is worthy to mention that SC Circular No. 1-91 has been replaced by
Revised Administrative Circular No. 1-95 (which took effect on 1 June 1995)
wherein the procedure for appeals from quasi-judicial agencies to the Court
of Appeals was clarified thus:
10. Due course. — If upon the filing of the comment or such other pleadings
or documents as may be required or allowed by the Court of Appeals or upon
the expiration of the period for the filing thereof, and on the bases of the
petition or the record the Court of Appeals finds prima facie that the court or
agency concerned has committed errors of fact or law that would warrant
reversal or modification of the award, judgment, final order or resolution
sought to be reviewed, it may give due course to the petition; otherwise, it
shall dismiss the same. The findings of fact of the court or agency
concerned, when supported by substantial evidence, shall be binding on the
Court of Appeals.
11. Transmittal of record. — Within fifteen (15) days from notice that the
petition has been given due course, the Court of Appeals may require the
court or agency concerned to transmit the original or a legible certified true
copy of the entire record of the proceeding under review. The record to be
transmitted may be abridged by agreement of all parties to the proceeding.
The Court of Appeals may require or permit subsequent correction of or
addition to the record. (Emphasis ours.)
The aforecited circular now formalizes the correct practice and clearly states
that in resolving appeals from quasi judicial agencies, it is within the
discretion of the Court of Appeals to have the original records of the
proceedings under review be transmitted to it. In this connection petitioners’
claim that the Court of Appeals could not have decided the case on the
merits without the records being brought before it is patently lame.
Indubitably, the Court of Appeals decided the case on the basis of the
uncontroverted facts and admissions contained in the pleadings, that is, the
petition, comment, reply, rejoinder, memoranda, etc. filed by the parties.
II
Petitioners contend that the decisions of the SEC and the Court of Appeals
are null and void for being rendered without the necessary substitution of
parties (for the deceased petitioner Manuel A. Torres, Jr.) as mandated by
Sec. 17, Rule 3 of the Revised Rules of Court, which provides as follows:
Sec. 17. Death of party. — After a party dies and the claim is not thereby
extinguished, the court shall order, upon proper notice, the legal
representative of the deceased to appear and to be substituted for the
deceased, within a period of thirty (30) days, or within such time as may be
granted. If the legal representative fails to appear within said time, the court
may order the opposing party to procure the appointment of a legal
representative of the deceased within a time to be specified by the court,
and the representative shall immediately appear for and on behalf of the
interest of the deceased. The court charges involved in procuring such
appointment, if defrayed by the opposing party, may be recovered as costs.
The heirs of the deceased may be allowed to be substituted for the
deceased, without requiring the appointment of an executor or administrator
and the court may appoint guardian ad litem for the minor heirs.
Petitioners insist that the SEC en banc should have granted the motions to
suspend they filed based as they were on the ground that the Regional Trial
Court of Makati, where the probate of the late Judge Torres’ will was
pending, had yet to appoint an administrator or legal representative of his
estate.
We are not unaware of the principle underlying the aforequoted provision:
It has been held that when a party dies in an action that survives, and no
order is issued by the Court for the appearance of the legal representative or
of the heirs of the deceased to be substituted for the deceased, and as a
matter of fact no such substitution has ever been effected, the trial held by
the court without such legal representative or heirs, and the judgment
rendered after such trial, are null and void because the court acquired no
jurisdiction over the persons of the legal representative or of the heirs upon
whom the trial and the judgment are not binding. 16
As early as 8 April 1988, Judge Torres instituted Special Proceedings No. M-
1768 before the Regional Trial Court of Makati for the ante-mortem probate
of his holographic will which he had executed on 31 October 1986. Testifying
in the said proceedings, Judge Torres confirmed his appointment of
petitioner Edgardo D. Pabalan as the sole executor of his will and
administrator of his estate. The proceedings, however, were opposed by the
same parties, herein private respondents Antonio P. Torres, Jr., Ma. Luisa T.
Morales and Ma. Cristina T. Carlos, 17 who are nephew and nieces of Judge
Torres, being the children of his late brother Antonio A. Torres.
It can readily be observed therefore that the parties involved in the present
controversy are virtually the same parties fighting over the representation of
the late Judge Torres’ estate. It should be recalled that the purpose behind
the rule on substitution of parties is the protection of the right of every party
to due process. It is to ensure that the deceased party would continue to be
properly represented in the suit through the duly appointed legal
representative of his estate. In the present case, this purpose has been
substantially fulfilled (despite the lack of formal substitution) in view of the
peculiar fact that both proceedings involve practically the same parties. Both
parties have been fiercely fighting in the probate proceedings of Judge
Torres’ holographic will for appointment as legal representative of his estate.
Since both parties claim interests over the estate, the rights of the estate
were expected to be fully protected in the proceedings before the SEC en
banc and the Court of Appeals. In either case, whoever shall be appointed
legal representative of Judge Torres’ estate (petitioner Pabalan or private
respondents) would no longer be a stranger to the present case, the said
parties having voluntarily submitted to the jurisdiction of the SEC and the
Court of Appeals and having thoroughly participated in the proceedings.
The foregoing rationale finds support in the recent case of Vda. de Salazar
v. CA, 18 wherein the Court expounded thus:
The need for substitution of heirs is based on the right to due process
accruing to every party in any proceeding. The rationale underlying this
requirement in case a party dies during the pendency of proceedings of a
nature not extinguished by such death, is that . . . the exercise of judicial
power to hear and determine a cause implicitly presupposes in the trial
court, amongst other essentials, jurisdiction over the persons of the parties.
That jurisdiction was inevitably impaired upon the death of the protestee
pending the proceedings below such that unless and until a legal
representative is for him duly named and within the jurisdiction of the trial
court, no adjudication in the cause could have been accorded any validity or
binding effect upon any party, in representation of the deceased, without
trenching upon the fundamental right to a day in court which is the very
essence of the constitutionally enshrined guarantee of due process.
We are not unaware of several cases where we have ruled that a party
having died in an action that survives, the trial held by the court without
appearance of the deceased’s legal representative or substitution of heirs
and the judgment rendered after such trial, are null and void because the
court acquired no jurisdiction over the persons of the legal representatives
or of the heirs upon whom the trial and the judgment would be binding. This
general rule notwithstanding, in denying petitioner’s motion for
reconsideration, the Court of Appeals correctly ruled that formal substitution
of heirs is not necessary when the heirs themselves voluntarily appeared,
participated in the case and presented evidence in defense of deceased
defendant. Attending the case at bench, after all, are these particular
circumstances which negate petitioner’s belated and seemingly ostensible
claim of violation of her rights to due process. We should not lose sight of
the principle underlying the general rule that formal substitution of heirs
must be effectuated for them to be bound by a subsequent judgment. Such
had been the general rule established not because the rule on substitution of
heirs and that on appointment of a legal representative are jurisdictional
requirements per se but because non-compliance therewith results in the
undeniable violation of the right to due process of those who, though not
duly notified of the proceedings, are substantially affected by the decision
rendered therein . . . .
It is appropriate to mention here that when Judge Torres died on April 3,
1991, the SEC en banc had already fully heard the parties and what
remained was the evaluation of the evidence and rendition of the judgment.
Further, petitioners filed their motions to suspend proceedings only after
more than two (2) years from the death of Judge Torres. Petitioners’ counsel
was even remiss in his duty under Sec. 16, Rule 3 of the Revised Rules of
Court. 19 Instead, it was private respondents who informed the SEC of Judge
Torres’ death through a manifestation dated 24 April 1991.
For the SEC en banc to have suspended the proceedings to await the
appointment of the legal representative by the estate was impractical and
would have caused undue delay in the proceedings and a denial of justice.
There is no telling when the probate court will decide the issue, which may
still be appealed to the higher courts.
In any case, there has been no final disposition of the properties of the late
Judge Torres before the SEC. On the contrary, the decision of the SEC en
banc as affirmed by the Court of Appeals served to protect and preserve his
estate. Consequently, the rule that when a party dies, he should be
substituted by his legal representative to protect the interests of his estate
in observance of due process was not violated in this case in view of its
peculiar situation where the estate was fully protected by the presence of
the parties who claim interests therein either as directors, stockholders or
heirs.
Finally, we agree with petitioners’ contention that the principle of negotiorum
gestio 20 does not apply in the present case. Said principle explicitly covers
abandoned or neglected property or business.
III
Petitioners find legal basis for Judge Torres’ act of revoking the assignment
of his properties in Makati and Pasay City to Tormil corporation by relying on
Art. 1191 of the Civil Code which provides that:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent upon
him.
The injured party may choose between the fulfillment and the rescission of
the obligation, with the payment of damages in either case. He may also
seek rescission, even after he has chosen fulfillment, if the latter should
become impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who
have acquired the thing, in accordance with articles 1385 and 1388 and the
Mortgage Law.
Petitioners’ contentions cannot be sustained. We see no justifiable reason to
disturb the findings of SEC, as affirmed by the Court of Appeals:
We sustain the ruling of respondent SEC in the decision appealed from
(Rollo, pp. 45-46) that —
. . . the shortage of 972 shares would not be valid ground for respondent
Torres to unilaterally revoke the deeds of assignment he had executed on
July 13, 1984 and July 24, 1984 wherein he voluntarily assigned to TORMIL
real properties covered by TCT No. 374079 (Makati) and TCT No. 41527,
41528 and 41529 (Pasay) respectively.
A comparison of the number of shares that respondent Torres received from
TORMIL by virtue of the “deeds of assignment” and the stock certificates
issued by the latter to the former readily shows that TORMIL had
substantially performed what was expected of it. In fact, the first two
issuances were in satisfaction to the properties being revoked by respondent
Torres. Hence, the shortage of 972 shares would never be a valid ground for
the revocation of the deeds covering Pasay and Quezon City properties.
In Universal Food Corp. vs. CA, the Supreme Court held:
The general rule is that rescission of a contract will not be permitted for a
slight or carnal breach, but only for such substantial and fundamental breach
as would defeat the very object of the parties in making the agreement.
The shortage of 972 shares definitely is not substantial and fundamental
breach as would defeat the very object of the parties in entering into
contract. Art. 1355 of the Civil Code also provides: “Except in cases specified
by law, lesion or inadequacy of cause shall not invalidate a contract, unless
there has been fraud, mistake or undue influences.” There being no fraud,
mistake or undue influence exerted on respondent Torres by TORMIL and the
latter having already issued to the former of its 225,000 unissued shares,
the most logical course of action is to declare as null and void the deed of
revocation executed by respondent Torres. (Rollo, pp. 45-46.) 21
The aforequoted Civil Code provision does not apply in this particular
situation for the obvious reason that a specific number of shares of stock (as
evidenced by stock certificates) had already been issued to the late Judge
Torres in exchange for his Makati and Pasay City properties. The records
thus disclose:
DATE OF PROPERTY LOCATION NO. OF SHARES ORDER OF
ASSIGNMENT ASSIGNED TO BE ISSUED COMPLIANCE*
1. July 13, 1984 TCT 81834 Quezon City) 13,252 3rd
TCT 144240 Quezon City)
2. July 13, 1984 TCT 77008 Manila)
TCT 65689 Manila) 78,493 2nd
TCT 102200 Manila)
3. July 13, 1984 TCT 374079 Makati 8,307 1st
4. July 24, 1984 TCT 41527 Pasay
TCT 41528 Pasay) 9,855 4th
TCT 41529 Pasay)
5. August 6, 1984 El Hogar Filipino Stocks 2,000 7th
6. August 6, 1984 Manila Jockey Club Stocks 48,737 5th
7. August 7, 1984 San Miguel Corp. Stocks 50,238 8th
8. August 7, 1984 China Banking Corp. Stocks 6,300 6th
9. August 20, 1984 Ayala Corp. Stocks 7,468.2) 9th
10. August 29, 1984 Ayala Fund Stocks 1,322.1)
—————
TOTAL 225,972.3
DECISION
CARPIO, J.:
The Case
Antecedent Facts
xxx
RESPECTFULLY SUBMITTED.[10]
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.
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)
Issues
The Angeles spouses allege that they had no partnership with Mercado.
The Angeles spouses rely on Articles 1771 to 1773 of the Civil Code, which
state that:
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.
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]
DECISION
PARAS, J.:
This is a direct appeal to this Court from a decision ** of the then Court of
First Instance of Davao, Seventh Judicial District, Branch III, in Civil Case
No. 3518, dismissing appellant's complaint.
As found by the trial court, the antecedent facts of the case are as follows:
On January 14, 1955, Maglana and Rojas executed their Articles of Co-
Partnership (Exhibit "A") called Eastcoast Development Enterprises (EDE)
with only the two of them as partners. The partnership EDE with an
indefinite term of existence was duly registered on January 21, 1955 with
the Securities and Exchange Commission.
One of the purposes of the duly-registered partnership was to "apply or
secure timber and/or minor forests products licenses and concessions over
public and/or private forest lands and to operate, develop and promote such
forests rights and concessions." (Rollo, p. 114).
A duly registered Articles of Co-Partnership was filed together with an
application for a timber concession covering the area located at Cateel and
Baganga, Davao with the Bureau of Forestry which was approved and
Timber License No. 35-56 was duly issued and became the basis of
subsequent renewals made for and in behalf of the duly registered
partnership EDE.
Under the said Articles of Co-Partnership, appellee Maglana shall manage the
business affairs of the partnership, including marketing and handling of cash
and is authorized to sign all papers and instruments relating to the
partnership, while appellant Rojas shall be the logging superintendent and
shall manage the logging operations of the partnership. It is also provided in
the said articles of co-partnership that all profits and losses of the
partnership shall be divided share and share alike between the partners.
During the period from January 14, 1955 to April 30, 1956, there was no
operation of said partnership (Record on Appeal [R.A.] p. 946).
Because of the difficulties encountered, Rojas and Maglana decided to avail
of the services of Pahamotang as industrial partner.
On March 4, 1956, Maglana, Rojas and Agustin Pahamotang executed their
Articles of Co-Partnership (Exhibit "B" and Exhibit "C") under the firm name
EASTCOAST DEVELOPMENT ENTERPRISES (EDE). Aside from the slight
difference in the purpose of the second partnership which is to hold and
secure renewal of timber license instead of to secure the license as in the
first partnership and the term of the second partnership is fixed to thirty
(30) years, everything else is the same.
The partnership formed by Maglana, Pahamotang and Rojas started
operation on May 1, 1956, and was able to ship logs and realize profits. An
income was derived from the proceeds of the logs in the sum of P643,633.07
(Decision, R.A. 919).
On October 25, 1956, Pahamotang, Maglana and Rojas executed a document
entitled "CONDITIONAL SALE OF INTEREST IN THE PARTNERSHIP,
EASTCOAST DEVELOPMENT ENTERPRISE" (Exhibits "C" and "D") agreeing
among themselves that Maglana and Rojas shall purchase the interest, share
and participation in the Partnership of Pahamotang assessed in the amount
of P31,501.12. It was also agreed in the said instrument that after payment
of the sum of P31,501.12 to Pahamotang including the amount of loan
secured by Pahamotang in favor of the partnership, the two (Maglana and
Rojas) shall become the owners of all equipment contributed by Pahamotang
and the EASTCOAST DEVELOPMENT ENTERPRISES, the name also given to
the second partnership, be dissolved. Pahamotang was paid in fun on August
31, 1957. No other rights and obligations accrued in the name of the second
partnership (R.A. 921).
After the withdrawal of Pahamotang, the partnership was continued by
Maglana and Rojas without the benefit of any written agreement or
reconstitution of their written Articles of Partnership (Decision, R.A. 948).
On January 28, 1957, Rojas entered into a management contract with
another logging enterprise, the CMS Estate, Inc. He left and abandoned the
partnership (Decision, R.A. 947).
On February 4, 1957, Rojas withdrew his equipment from the partnership for
use in the newly acquired area (Decision, R.A. 948).
The equipment withdrawn were his supposed contributions to the first
partnership and was transferred to CMS Estate, Inc. by way of chattel
mortgage (Decision, R.A. p. 948).
On March 17, 1957, Maglana wrote Rojas reminding the latter of his
obligation to contribute, either in cash or in equipment, to the capital
investments of the partnership as well as his obligation to perform his duties
as logging superintendent.
Two weeks after March 17, 1957, Rojas told Maglana that he will not be able
to comply with the promised contributions and he will not work as logging
superintendent. Maglana then told Rojas that the latter's share will just be
20% of the net profits. Such was the sharing from 1957 to 1959 without
complaint or dispute (Decision, R.A. 949).: nad
Meanwhile, Rojas took funds from the partnership more than his
contribution. Thus, in a letter dated February 21, 1961 (Exhibit "10")
Maglana notified Rojas that he dissolved the partnership (R.A. 949).
On April 7, 1961, Rojas filed an action before the Court of First Instance of
Davao against Maglana for the recovery of properties, accounting,
receivership and damages, docketed as Civil Case No. 3518 (Record on
Appeal, pp. 1-26).
Rojas' petition for appointment of a receiver was denied (R.A. 894).
Upon motion of Rojas on May 23, 1961, Judge Romero appointed
commissioners to examine the long and voluminous accounts of the
Eastcoast Development Enterprises (Ibid., pp. 894-895).
The motion to dismiss the complaint filed by Maglana on June 21, 1961
(Ibid., pp. 102-114) was denied by Judge Romero for want of merit (Ibid., p.
125). Judge Romero also required the inclusion of the entire year 1961 in
the report to be submitted by the commissioners (Ibid., pp. 138-143).
Accordingly, the commissioners started examining the records and
supporting papers of the partnership as well as the information furnished
them by the parties, which were compiled in three (3) volumes.
On May 11, 1964, Maglana filed his motion for leave of court to amend his
answer with counterclaim, attaching thereto the amended answer (Ibid., pp.
26-336), which was granted on May 22, 1964 (Ibid., p. 336).
On May 27, 1964, Judge M.G. Reyes approved the submitted
Commissioners' Report (Ibid., p. 337).
On June 29, 1965, Rojas filed his motion for reconsideration of the order
dated May 27, 1964 approving the report of the commissioners which was
opposed by the appellee.
On September 19, 1964, appellant's motion for reconsideration was denied
(Ibid., pp. 446-451).
A mandatory pre-trial was conducted on September 8 and 9, 1964 and the
following issues were agreed upon to be submitted to the trial court:
(a) The nature of partnership and the legal relations of Maglana and
Rojas after the dissolution of the second partnership;
(b) Their sharing basis: whether in proportion to their contribution or
share and share alike;
(c) The ownership of properties bought by Maglana in his wife's name;
(d) The damages suffered and who should be liable for them; and
(e) The legal effect of the letter dated February 23, 1961 of Maglana
dissolving the partnership (Decision, R.A. pp. 895-896).- nad
After trial, the lower court rendered its decision on March 11, 1968, the
dispositive portion of which reads as follows:
"WHEREFORE, the above facts and issues duly considered, judgment is
hereby rendered by the Court declaring that:
"1. The nature of the partnership and the legal relations of Maglana
and Rojas after Pahamotang retired from the second partnership, that
is, after August 31, 1957, when Pahamotang was finally paid his share
— the partnership of the defendant and the plaintiff is one of a de
facto and at will;
"2. Whether the sharing of partnership profits should be on the basis
of computation, that is the ratio and proportion of their respective
contributions, or on the basis of share and share alike — this covered
by actual contributions of the plaintiff and the defendant and by their
verbal agreement; that the sharing of profits and losses is on the basis
of actual contributions; that from 1957 to 1959, the sharing is on the
basis of 80% for the defendant and 20% for the plaintiff of the profits,
but from 1960 to the date of dissolution, February 23, 1961, the
plaintiff's share will be on the basis of his actual contribution and,
considering his indebtedness to the partnership, the plaintiff is not
entitled to any share in the profits of the said partnership;
"3. As to whether the properties which were bought by the defendant
and placed in his or in his wife's name were acquired with partnership
funds or with funds of the defendant and — the Court declares that
there is no evidence that these properties were acquired by the
partnership funds, and therefore the same should not belong to the
partnership;
"4. As to whether damages were suffered and, if so, how much, and
who caused them and who should be liable for them — the Court
declares that neither parties is entitled to damages, for as already
stated above it is not a wise policy to place a price on the right of a
person to litigate and/or to come to Court for the assertion of the
rights they believe they are entitled to;
"5. As to what is the legal effect of the letter of defendant to the
plaintiff dated February 23, 1961; did it dissolve the partnership or not
— the Court declares that the letter of the defendant to the plaintiff
dated February 23, 1961, in effect dissolved the partnership;
"6. Further, the Court relative to the canteen, which sells foodstuffs,
supplies, and other merchandise to the laborers and employees of the
Eastcoast Development Enterprises, — the COURT DECLARES THE
SAME AS NOT BELONGING TO THE PARTNERSHIP;
"7. That the alleged sale of forest concession Exhibit 9-B, executed by
Pablo Angeles David — is VALID AND BINDING UPON THE PARTIES
AND SHOULD BE CONSIDERED AS PART OF MAGLANA'S
CONTRIBUTION TO THE PARTNERSHIP;
"8. Further, the Court orders and directs plaintiff Rojas to pay or turn
over to the partnership the amount of P69,000.00 the profits he
received from the CMS Estate, Inc. operated by him;
"9. The claim that plaintiff Rojas should be ordered to pay the further
sum of P85,000.00 which according to him he is still entitled to receive
from the CMS Estate, Inc. is hereby denied considering that it has not
yet been actually received, and further the receipt is merely based
upon an expectancy and/or still speculative;
"10. The Court also directs and orders plaintiff Rojas to pay the sum of
P62,988.19 his personal account to the partnership;
"11. The Court also credits the defendant the amount of P85,000.00
the amount he should have received as logging superintendent, and
which was not paid to him, and this should be considered as part of
Maglana's contribution likewise to the partnership; and
"12. The complaint is hereby dismissed with costs against the
plaintiff.: rd
"SO ORDERED." Decision, Record on Appeal, pp. 985-989).
Rojas interposed the instant appeal.
The main issue in this case is the nature of the partnership and legal
relationship of the Maglana-Rojas after Pahamotang retired from the second
partnership.
The lower court is of the view that the second partnership superseded the
first, so that when the second partnership was dissolved there was no
written contract of co-partnership; there was no reconstitution as provided
for in the Maglana, Rojas and Pahamotang partnership contract. Hence, the
partnership which was carried on by Rojas and Maglana after the dissolution
of the second partnership was a de facto partnership and at will. It was
considered as a partnership at will because there was no term, express or
implied; no period was fixed, expressly or impliedly (Decision, R.A. pp. 962-
963).
On the other hand, Rojas insists that the registered partnership under the
firm name of Eastcoast Development Enterprises (EDE) evidenced by the
Articles of Co-Partnership dated January 14, 1955 (Exhibit "A") has not been
novated, superseded and/or dissolved by the unregistered articles of co-
partnership among appellant Rojas, appellee Maglana and Agustin
Pahamotang, dated March 4, 1956 (Exhibit "C") and accordingly, the terms
and stipulations of said registered Articles of Co-Partnership (Exhibit "A")
should govern the relations between him and Maglana. Upon withdrawal of
Agustin Pahamotang from the unregistered partnership (Exhibit "C"), the
legally constituted partnership EDE (Exhibit "A") continues to govern the
relations between them and it was legal error to consider a de facto
partnership between said two partners or a partnership at will. Hence, the
letter of appellee Maglana dated February 23, 1961, did not legally dissolve
the registered partnership between them, being in contravention of the
partnership agreement agreed upon and stipulated in their Articles of Co-
Partnership (Exhibit "A"). Rather, appellant is entitled to the rights
enumerated in Article 1837 of the Civil Code and to the sharing profits
between them of "share and share alike" as stipulated in the registered
Articles of Co-Partnership (Exhibit "A").
After a careful study of the records as against the conflicting claims of Rojas
and Maglana, it appears evident that it was not the intention of the partners
to dissolve the first partnership, upon the constitution of the second one,
which they unmistakably called an "Additional Agreement" (Exhibit "9-B")
(Brief for Defendant-Appellee, pp. 24-25). Except for the fact that they took
in one industrial partner; gave him an equal share in the profits and fixed
the term of the second partnership to thirty (30) years, everything else was
the same. Thus, they adopted the same name, EASTCOAST DEVELOPMENT
ENTERPRISES, they pursued the same purposes and the capital
contributions of Rojas and Maglana as stipulated in both partnerships call for
the same amounts. Just as important is the fact that all subsequent renewals
of Timber License No. 35-36 were secured in favor of the First Partnership,
the original licensee. To all intents and purposes therefore, the First Articles
of Partnership were only amended, in the form of Supplementary Articles of
Co-Partnership (Exhibit "C") which was never registered (Brief for Plaintiff-
Appellant, p. 5). Otherwise stated, even during the existence of the second
partnership, all business transactions were carried out under the duly
registered articles. As found by the trial court, it is an admitted fact that
even up to now, there are still subsisting obligations and contracts of the
latter (Decision, R.A. pp. 950-957). No rights and obligations accrued in the
name of the second partnership except in favor of Pahamotang which was
fully paid by the duly registered partnership (Decision, R.A., pp. 919-921).
On the other hand, there is no dispute that the second partnership was
dissolved by common consent. Said dissolution did not affect the first
partnership which continued to exist. Significantly, Maglana and Rojas
agreed to purchase the interest, share and participation in the second
partnership of Pahamotang and that thereafter, the two (Maglana and Rojas)
became the owners of equipment contributed by Pahamotang. Even more
convincing, is the fact that Maglana on March 17, 1957, wrote Rojas,
reminding the latter of his obligation to contribute either in cash or in
equipment, to the capital investment of the partnership as well as his
obligation to perform his duties as logging superintendent. This reminder
cannot refer to any other but to the provisions of the duly registered Articles
of Co-Partnership. As earlier stated, Rojas replied that he will not be able to
comply with the promised contributions and he will not work as logging
superintendent. By such statements, it is obvious that Roxas understood
what Maglana was referring to and left no room for doubt that both
considered themselves governed by the articles of the duly registered
partnership.
Under the circumstances, the relationship of Rojas and Maglana after the
withdrawal of Pahamotang can neither be considered as a De Facto
Partnership, nor a Partnership at Will, for as stressed, there is an existing
partnership, duly registered.
As to the question of whether or not Maglana can unilaterally dissolve the
partnership in the case at bar, the answer is in the affirmative.
Hence, as there are only two parties when Maglana notified Rojas that he
dissolved the partnership, it is in effect a notice of withdrawal.
Under Article 1830, par. 2 of the Civil Code, even if there is a specified term,
one partner can cause its dissolution by expressly withdrawing even before
the expiration of the period, with or without justifiable cause. Of course, if
the cause is not justified or no cause was given, the withdrawing partner is
liable for damages but in no case can he be compelled to remain in the firm.
With his withdrawal, the number of members is decreased, hence, the
dissolution. And in whatever way he may view the situation, the conclusion
is inevitable that Rojas and Maglana shall be guided in the liquidation of the
partnership by the provisions of its duly registered Articles of Co-
Partnership; that is, all profits and losses of the partnership shall be divided
"share and share alike" between the partners.
But an accounting must first be made and which in fact was ordered by the
trial court and accomplished by the commissioners appointed for the
purpose.
On the basis of the Commissioners' Report, the corresponding contribution of
the partners from 1956-1961 are as follows: Eufracio Rojas who should have
contributed P158,158.00, contributed only P18,750.00 while Maglana who
should have contributed P160,984.00, contributed P267,541.44 (Decision,
R.A. p. 976). It is a settled rule that when a partner who has undertaken to
contribute a sum of money fails to do so, he becomes a debtor of the
partnership for whatever he may have promised to contribute (Article 1786,
Civil Code) and for interests and damages from the time he should have
complied with his obligation (Article 1788, Civil Code) (Moran, Jr. v. Court of
Appeals, 133 SCRA 94 [1984]). Being a contract of partnership, each partner
must share in the profits and losses of the venture. That is the essence of a
partnership (Ibid., p. 95).
Thus, as reported in the Commissioners' Report, Rojas is not entitled to any
profits. In their voluminous reports which was approved by the trial court,
they showed that on 50-50% basis, Rojas will be liable in the amount of
P131,166.00; on 80-20%, he will be liable for P40,092.96 and finally on the
basis of actual capital contribution, he will be liable for P52,040.31.
Consequently, except as to the legal relationship of the partners after the
withdrawal of Pahamotang which is unquestionably a continuation of the
duly registered partnership and the sharing of profits and losses which
should be on the basis of share and share alike as provided for in the duly
registered Articles of Co-Partnership, no plausible reason could be found to
disturb the findings and conclusions of the trial court.: nad
As to whether Maglana is liable for damages because of such withdrawal, it
will be recalled that after the withdrawal of Pahamotang, Rojas entered into
a management contract with another logging enterprise, the CMS Estate,
Inc., a company engaged in the same business as the partnership. He
withdrew his equipment, refused to contribute either in cash or in equipment
to the capital investment and to perform his duties as logging
superintendent, as stipulated in their partnership agreement. The records
also show that Rojas not only abandoned the partnership but also took funds
in an amount more than his contribution (Decision, R.A., p. 949).
In the given situation Maglana cannot be said to be in bad faith nor can he
be liable for damages.
PREMISES CONSIDERED, the assailed decision of the Court of First Instance
of Davao, Branch III, is hereby MODIFIED in the sense that the duly
registered partnership of Eastcoast Development Enterprises continued to
exist until liquidated and that the sharing basis of the partners should be on
share and share alike as provided for in its Articles of Partnership, in
accordance with the computation of the commissioners. We also hereby
AFFIRM the decision of the trial court in all other respects.: nad
SO ORDERED.
Melencio-Herrera, Sarmiento and Regalado, JJ., concur.
Padilla, J., took no part.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
CONCEPCION, C.J.:
In his answer, Mabato admitted the formal allegations of the complaint and
denied the existence of said partnership, upon the ground that the contract
therefor had not been perfected, despite the execution of Annex "A",
because Agad had allegedly failed to give his P1,000 contribution to the
partnership capital. Mabato prayed, therefore, that the complaint be
dismissed; that Annex "A" be declared void ab initio; and that Agad be
sentenced to pay actual, moral and exemplary damages, as well as
attorney's fees.
Subsequently, Mabato filed a motion to dismiss, upon the ground that the
complaint states no cause of action and that the lower court had no
jurisdiction over the subject matter of the case, because it involves
principally the determination of rights over public lands. After due hearing,
the court issued the order appealed from, granting the motion to dismiss the
complaint for failure to state a cause of action. This conclusion was
predicated upon the theory that the contract of partnership, Annex "A", is
null and void, pursuant to Art. 1773 of our Civil Code, because an inventory
of the fishpond referred in said instrument had not been attached thereto. A
reconsideration of this order having been denied, Agad brought the matter
to us for review by record on appeal.
The operation of the fishpond mentioned in Annex "A" was the purpose of
the partnership. Neither said fishpond nor a real right thereto was
contributed to the partnership or became part of the capital thereof, even if
a fishpond or a real right thereto could become part of its assets.
WHEREFORE, we find that said Article 1773 of the Civil Code is not in point
and that, the order appealed from should be, as it is hereby set aside and
the case remanded to the lower court for further proceedings, with the costs
of this instance against defendant-appellee, Severino Mabato. It is so
ordered.