Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

L-27343 February 28, 1979 MANUEL G. SINGSONG, JOSE BELZUNCE, AGUSTIN E. TONSAY, JOSE L. ESPINOS, BACOLOD SOUTHERN LUMBER YARD, and OPPEN, ESTEBAN, INC., plaintiffs-appellees, vs. ISABELA SAWMILL, MARGARITA G. SALDAJENO and her husband CECILIO SALDAJENO LEON GARIBAY, TIMOTEO TUBUNGBANUA, and THE PROVINCIAL SHERIFF OF NEGROS OCCIDENTAL, defendants, MARGARITA G. SALDAJENO and her husband CECILIO SALDAJENO, defendantsappellants.

FERNANDEZ, J.: This is an appeal to the Court of Appeals from the judgment of the Court of First Instance of Negros Occidental in Civil Cage No. 5343, entitled "Manuel G. Singson, et all vs. Isabela Sawmill, et al.,", the dispositive portion of which reads: IN VIEW OF THE FOREGOING CONSIDERATIONS, it is hereby held. (1) that the contract, Appendix "F", of the Partial Stipulation of Facts, Exh. "A", has not created a chattel mortgage lien on the machineries and other chattels mentioned therein, all of which are property of the defendant partnership "Isabela Sawmill", (2) that the plaintiffs, as creditors of the defendant partnership, have a preferred right over the assets of the said partnership and over the proceeds of their sale at public auction, superior to the right of the defendant Margarita G. Saldajeno, as creditor of the partners Leon Garibay and Timoteo Tubungbanua; (3) that the defendant Isabela Sawmill' is indebted to the plaintiff Oppen, Esteban, Inc. in the amount of P1,288.89, with legal interest thereon from the filing of the complaint on June 5, 1959; (4) that the same defendant is indebted to the plaintiff Manuel G. Singsong in the total amount of P5,723.50, with interest thereon at the rate of 1 % per month from May 6, 1959, (the date of the statements of account, Exhs. "L" and "M"), and 25% of the total indebtedness at the time of payment, for attorneys' fees, both interest and attorneys fees being stipulated in Exhs. "I" to "17", inclusive; (5) that the same defendant is indebted to the plaintiff Agustin E. Tonsay in the amount of P933.73, with legal interest thereon from the filing of the complaint on June 5, 1959; (6) that the same defendant is indebted to the plaintiff Jose L. Espinos in the amount of P1,579.44, with legal interest thereon from the filing of the complaint on June 5, 1959; (7) that the same defendant is indebted to the plaintiff Bacolod Southern Lumber Yard in the amount of Pl,048.78, with legal interest thereon from the filing of the complaint on June 5, 1959; (8) that the same defendant is indebted to the plaintiff Jose Belzunce in the amount of P2,052.10, with legal interest thereon from the filing of the complaint on June 5. 1959; (9) that the defendant Margarita G. Saldajeno, having purchased at public auction the assets of the defendant partnership over which the plaintiffs have a preferred right, and having sold said assets for P 45,000.00, is bound to pay to each of the plaintiffs the respective amounts for which the defendant partnership is held indebted to, them, as above indicated and she is hereby ordered to pay the said amounts, plus attorneys fees equivalent to 25% of the judgment in favor of the plaintiff Manuel G. Singson, as stipulated in Exhs. "I" "to I-17", inclusive, and 20% of the respective judgments in favor of the other plaintiffs, pursuant to. Art. 2208, pars. (5) and (11), of the Civil Code of the Philippines; (10) The defendants Leon Garibay and Timoteo Tibungbanua are hereby ordered to pay to the plaintiffs the respective amounts adjudged in their favor in the event that said plaintiffs cannot recover them from the defendant Margarita G. Saldajeno and the surety on the bond that she has filed for the lifting of the injunction ordered by this court upon the commencement of this case. The cross-claim cf the defendant Margarita G. Saldajeno against the defendants Leon Garibay arid Timoteo Tubungbanua is hereby discussed Margarita G. Saldajeno shall pay the costs. SO ORDERED.
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In a resolution promulgated on February 3, 1967, the Court of Appeals certified the records of this case to the Supreme Court "considering that the 2 resolution of this appeal involves purely questions or question of law over which this Court has no jurisdiction ... On June 5. 1959, Manuel G. Singsong, Jose Belzunce, Agustin E. Tonsay, Jose L. Espinos, Bacolod Southern Lumber Yard, and Oppen, Esteban, Inc. filed in the Court of first Instance of Negros Occidental, Branch I, against "Isabela Sawmill", Margarita G. Saldajeno and her husband Cecilio Saldajeno, Leon Garibay, Timoteo Tubungbanua and the Provincial Sheriff of Negros Occidental a complaint the prayer of which reads:

WHEREFORE, the plaintiffs respectfully pray: (1) That a writ of preliminary injunction be issued restraining the defendant Provincial Sheriff of Negros Occidental from proceeding with the sales at public auction that he advertised in two notices issued by him on May 18, 1959 in connection with Civil Case No. 5223 of this Honorable Court, until further orders of this Court; and to make said injunction permanent after hearing on the merits: (2) That after hearing, the defendant partnership be ordered; to pay to the plaintiff Manuel G. Singson the sum of P3,723.50 plus 1% monthly interest thereon and 25% attorney's fees, and costs; to pay to the plaintiff JoseBelzunce the sum of P2,052.10, plus 6% annual interest thereon and 25% for attorney's fees, and costs;to pay to the plaintiff Agustin E. Tonsay the sum of P993.73 plus 6% annual interest thereon and 25% attorney's fees, and costs; to pay to the plaintiff Bacolod Southern Lumber Yard the sum of P1,048.78, plus 6% annual interest thereon and 25% attorney's fees, and costs; and to pay to the plaintiff Oppen, Esteban, Inc. the sum of P1,350.89, plus 6% annual interest thereon and 25% attorney's fees and costs: (3) That the so-called Chattel Mortgage executed by the defendant Leon Garibay and Timoteo Tubungbanua in favor of the defendant Margarita G. Saldajeno on May 26, 1958 be declared null and void being in fraud of creditors of the defendant partnership and without valuable consideration insofar as the said defendant is concerned: (4) That the Honorable Court order the sale of public auction of the assets of the defendnat partnership in case the latter fails to pay the judgment that the plaintiffs may recover in the action, with instructions that the proceeds of the sale b e applied in payment of said judgment before any part of saod proceeds is paid to the defendant Margarita G. Saldajeno; (5) That the defendant Leon Garibay, Timoteo Tubungbanua, and Margarita G. Saldajeno be declared jointly liable to the plaintifs for whatever deficiency may remain unpaid after the proceeds of the sale of the assets of the defendnt partnership are supplied in payment of the judgment that said plaintiffs may recover in this action; (6) The plaintiffs further pray for all other remedies to which the Honorable Court will find them entitled to, with costs to the defendants. Bacolod City, June 4, 1959.
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The action was docketed as Civil Case No. 5343 of said court. In their amended answer, the defendants Margarita G. Saldajeno and her husband, Cecilio Saldajeno, alleged the following special and affirmative defenses: xxx xxx xxx 2. That the defendant Isabela Sawmill has been dissolved by virtue of an action entitled "In the matter of: Dissolution of Isabela Sawmill as partnership, etc. Margarita G. Saldajeno et al. vs. Isabela Sawmill, et al., Civil Case No. 4787, Court of First Instance of Negros Occidental; 3. That as a result of the said dissolution and the decision of the Court of First Instance of Negros Occidental in the aforesaid case, the other defendants herein Messrs. Leon Garibay and Timoteo Tubungbanua became the successors-in-interest to the said defunct partnership and have bound themselves to answere for any and all obligations of the defunct partnership to its creditors and third persons; 4. That to secure the performance of the obligations of the other defendants Leon Garibay and Timoteo Tubungbanua to the answering defendant herein, the former have constituted a chattel mortgage over the properties mentioned in the annexes to that instrument entitled "Assignment of Rights with Chattel Mortgage" entered into on May 26, 1968 and duly registered in the Register of Deeds of Negros Occidental on the same date: 5. That all the plaintiffs herein, with the exceptionof the plaintiff Oppen, Esteban, Inc. are creditors of Messrs. Leon Garibay and Timoteo Tubungbanua and not of the defunct Isabela Sawmill and as such they have no cause of action against answering defendant herein and the defendant Isabela Sawmill; 6. That all the plaintiffs herein, except for the plaintiff Oppen, Esteban, Inc. granted cash advances, gasoline, crude oil, motor oil, grease, rice and nipa to the defendants Leon Garibay and Timoteo Tubungbanua with the knowledge and notice that the

Isabela Sawmill as a former partnership of defendants Margarita G. Isabela Sawmill as a former partnership of defendants Margarita G. Saldajeno, Leon Garibay and Timoteo Tubungbanua, has already been dissolved; 7. That this Honorable Court has no jurisdictionover the claims of the plaintiffs Oppen, Esteban, Inc., Agustin R. Tonsay, Jose L. Espinos, and the Bacolod Southern Lumber Yard, it appearing that the amounts sought to be recovered by them in this action is less than P2,000.00 each, exclusive of interests; 8. That in so far as the claims of these alleged creditors plaintiffs are concerned, there is a misjoinder of parties because this is not a class suit, and therefore this Honorable Court cannot take jurisdictionof the claims for payment; 9. That the claims of plaintiffs-creditors, except Oppen, Esteban, Inc. go beyond the limit mentioned inthe statute of frauds, Art. 1403 of the Civil Code, and are therefor unenforceable, even assuming that there were such credits and claims; 10. That this Honorable Court has no jurisdiction in this case for it is well settled in law and in jurisprudence that a court of first instance has no power or jurisdiction to annul judgments or decrees of a coordinate court because other function devolves upon the proper appellate court; (Lacuna, et al. vs. Ofilada, et al., G.R. No. L-13548, September 30, 1959; Cabigao vs. del Rosario, 44 Phil. 182; PNB vs. Javellana, 49 O.G. No. 1, p.124), as it appears from the complaint in this case to annul the decision 4 of this same court, but of another branch (Branch II, Judge Querubin presiding). Said defendants interposed a cross-claim against the defendsants Leon Garibay and Timoteo Tubungbanua praying "that in the event that judgment be rendered ordering defendant cross claimant to pay to the plaintiffs the amount claimed in the latter's complaint, that the cross 5 claimant whatever amount is paid by the latter to the plaintiff in accordance to the said judgment. ... After trial, judgment was rendered in favor of the plaintiffs and against the defendants. The defendants, Margarita G. Saldajeno and her husband Cecilio Saldajeno, appealed to the Court of Appeals assigning the following errors: I THE COURT A QUO ERRED IN ASSUMING JURISDICTION OVER THE CASE. II THE COURT A QUO ERRED IN HOLDING THAT THE ISSUE WITH REFERENCE TO THE WITHDRAWAL OF DEFENDANT-APPELLANT MARGARITA G. SALDAJENO FROM THE PARTNERSHIP "SABELA SAWMILL" WAS WHETHER OR NOT SUCH WITHDRAWAL CAUSED THE "COMPLETE DISAPPEARANCE" OR "EXTINCTION" OF SAID PARTNERSHIP. III THE COURT A QUO ERRED IN OT HOLDING THAT THE WITHDRAWAL OF DEFENDANT-APPELLANT MARGARITA G. SALDAJENO AS A PARTNER THEREIN DISSOLVED THE PARTNERSHIP "ISABELA SAWMILL" (FORMED ON JAN. 30, 1951 AMONG LEON GARIBAY, TIMOTEO TUBUNGBANUA AND SAID MARGARITA G. SALDAJENO). IV THE COURT A QUO ERRED IN ISSUING THE WRIT OF PRELIMINARY INJUNCTION. V THE COURT A QUO ERRED IN HOLDING THAT THE CHATTEL MORTGAGE DATED MAY 26, 1958, WHICH CONSTITUTED THE JUDGMENT IN CIVIL CASE NO. 4797 AND WHICH WAS FORECLOSED IN CIVIL CASE NO. 5223 (BOTH OF THE COURT OF FIRST INSTANCE OF NEGROS OCCIDENTAL) WAS NULL AND VOID. VI THE COURT A QUO ERRED IN HOLDING THAT THE CHATTLES ACQUIRED BY DEFENDANT-APPELLANT MARGARITA G. SALDAJENO IN THE FORECLOSURE SALE IN CIVIL CASE NO. 5223 CONSTITUTED 'ALL THE ASSETS OF THE DEFENDNAT PARTNERSHIP.

VII THE COURT A QUO ERRED IN HOLDING THAT DEFENDANT-APPELLANT MARGARITA G. SALDAJENO BECAME PRIMARILY LIABLE TO THE PLAINTFFS-APPELLEES FOR HAVING ACQUIRED THE MORTGAGED CHATTLES IN THE FORECLOSURE SALE CONDUCTED IN CONNECTION WITH CIVIL CASE NO. 5223. VIII THE COURT A QUO ERRED IN HOLDING DEFENDANT-APPELLANT MARGARITA G. SALDAJENO LIABLE FOR THE OBLIGATIONS OF MESSRS. LEON GARIBAY AND TIMOTEO TUBUNGBANUA, INCURRED BY THE LATTER AS PARTNERS IN THE NEW 'ISABELA SAWMILL', AFTER THE DISSOLUTION OF THE OLD PARTNERSHIP IN WHICH SAID MARGARITA G. SALDAJENO WAS A PARTNER. IX THE COURT A QUO ERRED IN HOLDING DEFENDANT-APPELLANT MARGARITA G. SALDAJENO LIABLE TO THE PLAINTIFFSAPPELLEES FOR ATTORNEY'S FEES. X THE COURT A QUO ERRED IN NOT DISMISSING THE COMPLAINT OF THE PLAINTIFFS-APPELLEES. XI THE COURT A QUO ERRED IN DISMISSING THE CROSS-CLAIM OF DEFENDANT-APPELLANT MARGARITA G. SALDAJENO AGAINST 6 CROSS-DEFENDANTS LEON GARIBAY AND TIMOTEO TUBUNGBANUA. The facts, as found by the trial court, are: At the commencement of the hearing of the case on the merits the plaintiffs and the defendant Cecilio and Margarita g. Saldajeno submittee a Partial Stipulation of Facts that was marked as Exh. "A". Said stipulation reads as folows: 1. That on January 30, 1951 the defendants Leon Garibay, Margarita G. Saldejeno, and Timoteo Tubungbanua entered into a Contract of Partnership under the firm name "Isabela Sawmill", a copy of which is hereto attached Appendix "A". 2. That on February 3, 1956 the plaintiff Oppen, Esteban, Inc. sold a Motor Truck and two Tractors to the partnership Isabela Sawmill for the sum of P20,500.00. In order to pay the said purcahse price, the said partnership agreed to make arrangements with the International Harvester Company at Bacolod City so that the latter would sell farm machinery to Oppen, Esteban, Inc. with the understanding that the price was to be paid by the partnership. A copy of the corresponding contract of sle is attached hereto as Appendix "B". 3. That through the method of payment stipulated in the contract marked as Appendix "B" herein, the International Harvester Company has been paid a total of P19,211.11, leaving an unpaid balance of P1,288.89 as shown in the statements hereto attached as Appendices "C", "C-1", and "C-2". 4. That on April 25, 1958 Civil Case No. 4797 was filed by the spouses Cecilio Saldajeno and Margarita G. Saldajeno against the Isabela Sawmill, Leon Garibay, and Timoteo Tubungbanua, a copy of which Complaint is attached as Appendix 'D'. 5. That on April 27, 1958 the defendants LeonGaribay, Timoteo Tubungbanua and Margarita G. Saldajeno entered into a "Memorandum Agreement", a copy of which is hereto attached as Appendix 'E' in Civil Case 4797 of the Court of First Instance of Negros Occidental. 6. That on May 26, 1958 the defendants Leon Garibay, Timoteo Tubungbanua and Margarita G. Saldajeno executed a document entitled "Assignment of Rights with Chattel Mortgage", a copy of which documents and its Annexes "A" to "A-5" forming a part of the record of the above mentioned Civil Case No. 4797, which deed was referred to in the Decision of the Court ofFirst Instance of Negros Occidental in Civil Case No. 4797 dated May 29, 1958, a copy of which is hereto attached as Appendix "F" and "F-1" respectively.

7. That thereafter the defendants Leon Garibay and Timoteo Tubungbanua did not divide the assets and properties of the "Isabela Sawmill" between them, but they continued the business of said partnership under the same firm name "Isabela Sawmill". 8. That on May 18, 1959 the Provincial Sheriff of Negros Occidental published two (2) notices that he would sell at public auction on June 5, 1959 at Isabela, Negros Occidental certain trucks, tractors, machinery, officeequipment and other things that were involved in Civil Case No. 5223 of the Court of First Instance of Negros Occidental, entitled "Margarita G. Saldajeno vs. Leon Garibay, et al." See Appendices "G" and "G-1". 9. That on October 15, 1969 the Provincial Sheriff of Negros Occidental executed a Certificate ofSale in favor of the defendant Margarita G. Saldajeno, as a result of the sale conducted by him on October 14 and 15, 1959 for the enforcement of the judgment rendered in Civil Case No. 5223 of the Court of First Instance of Negros Occidental, a certified copy of which certificte of sale is hereto attached as Appendix "H". 10. That on October 20, 1959 the defendant Margarita G. Saldajeno executed a deed of sale in favor of the Pan Oriental Lumber Company transfering to the latter for the sum of P45,000.00 the trucks, tractors, machinery, and other things that she had purchashed at a public auction referred to in the foregoing paragraph, a certified true copy of which Deed of Sale is hereto attached as Appendix "I". 11. The plaintiffs and the defendants Cecilio Saldajeno and Margarita G. Saldajeno reserve the right to present additional evidence at the hearing of this case. Forming parts of the above copied stipulation are documents that were marked as Appendices "A", "B", "C", "C-1", "C-2", "D", "E", "F", "F-1", "G", "G-1", "H", and "I". The plaintiffs and the defendants Cecilio and Margarita G. Saldajeno presented additional evidence, mostly documentary, while the cross-defendants did not present any evidence. The case hardly involves quetions of fact at all, but only questions of law. The fact that the defendnat 'Isabela Sawmill' is indebted to theplaintiff Oppen, Esteban, Inc. in the amount of P1,288.89 as the unpaid balance of an obligation of P20,500.00 contracted on February 3, 10956 is expressly admitted in paragraph 2 and 3 of the Stipulation, Exh. "A" and its Appendices "B", "C", "C-1", and "C-2". The plaintiff Agustin E. Tonssay proved by his own testimony and his Exhs. "B" to"G" that from October 6, 1958 to November 8, 1958 he advanced a total of P4,200.00 to the defendant 'Isabela Sawmill'. Agaist the said advances said defendant delivered to Tonsay P3,266.27 worth of lumber, leavng an unpaid balance of P933.73, which balance was confirmed on May 15, 1959 by the defendant Leon Garibay, as Manager of the defendant partnership. The plaintiff Manuel G. Singsong proved by his own testimony and by his Exhs. "J" to "L" that from May 25, 1988 to January 13, 1959 he sold on credit to the defendnat "Isabela Sawmill" rice and bran, on account of which business transaction there remains an unpaid balance of P3,580.50. The same plaintiff also proved that the partnership ownes him the sum of P143.00 for nipa shingles bought from him on credit and unpaid for. The plaintiff Jose L. Espinos proved through the testimony of his witness Cayetano Palmares and his Exhs. "N" to "O-3" that he owns the "Guia Lumber Yard", that on October 11, 1958 said lumber yard advanced the sum of P2,500.00 to the defendant "Isabela Sawmill", that against the said cash advance, the defendant partnership delivered to Guia Lumber Yard P920.56 worth of lumber, leaving an outstanding balance of P1,579.44. The plaintiff Bacolod Southern Lumber Yard proved through the testimony of the witness Cayetano Palmares an its Exhs. "P" to "Q-1" that on October 11, 1958 said plaintiff advanced the sum of P1,500.00 to the defendsant 'Isabela Sawmill', that against the said cash advance, the defendant partnership delivered to the said plaintiff on November 19, 1958 P377.72 worth of lumber, and P73.54 worth of lumber on January 27, 1959, leaving an outstanding balance of P1,048.78. The plaintiff Jose Balzunce proved through the testimony of Leon Garibay whom he called as his witness, and through the Exhs. "R" to "E" that from September 14, 1958 to November 27, 1958 he sold to the defedant "Isabela Sawmill" gasoline, motor fuel, and lubricating oils, and that on account of said transactions, the defendant partnersip ownes him an unpaid balance of P2,052.10. Appendix "H" of the stipulation Exh. "A" shows that on October 13 and 14, 1959 the Provincial Sheriff sold to the defendant Margrita G. Saldajeno for P38,040.00 the assets of the defendsant "Isabela Sawmill" which the defendants Leon G. Garibay and

Timoteo Tubungbanua had mortgaged to her, and said purchase price was applied to the judgment that she has obtained against he said mortgagors in Civil Case No. 5223 of this Court. Appendix "I" of the same stipulation Exh. "A" shows that on October 20, 1959 the defendant Margarita G. Saldajeno sold to the PAN ORIENTAL LUMBER COMPANY for P45,000.00 part of the said properties that she had bought at public aucton one week before. xxx xxx xxx
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It is contended by the appellants that the Court of First Instance of Negros Occidental had no jurisdiction over Civil Case No. 5343 because the plaintiffs Oppen, Esteban, Inc., Agustin R. Tonsay, Jose L. Espinos and the Bacolod Southern Lumber Yard sought to collect sums of moeny, the biggest amount of which was less than P2,000.00 and, therefore, within the jurisdiction of the municipal court. This contention is devoid of merit because all the plaintiffs also asked for the nullity of the assignment of right with chattel mortgage entered into by and between Margarita G. Saldajeno and her former partners Leon Garibay and Timoteo Tubungbanua. This cause of action is not capable of pecuniary estimation and falls under the jurisdiction of the Court of First Instnace. Where the basic issue is something more than the right to recover a sum of money and where the money claim is purely incidental to or a consequence of the principal relief sought, the action is as a case where the subject of the litigation is not capable of pecuniary estimation and is cognizable exclusively by the Court of First Instance. The jurisdiction of all courts in the Philippines, in so far as the authority thereof depends upon the nature of litigation, is defined in the amended Judiciary Act, pursuant to which courts of first instance shall have exclusive original jurisdiction over any case the subject matter of which is not 8 capable of pecuniary estimation. An action for the annulment of a judgment and an order of a court of justice belongs to th category. In determining whether an action is one the subject matter of which is not capable of pecuniary estimation this Court has adopted the criterion of first ascertaining the nature of the principal action or remedy sought. If it is primarily for the recovery of a sum of money, the cliam is considered capable of pecuniary estimation, and whether jurisdiciton is in the municipal courts or in the courts of first instance would depend on the amount of the claim. However, where the basic issue is something other than the right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the principal relief sought, this Court has considered such actions as cases where the subject ogf the litigation may not be estimated in terms of money, and are cognizable exclusively by courts of first instance. In Andres Lapitan vs. SCANDIA, Inc., et al., this Court held: Actions for specific performance of contracts have been expressly prounounced to be exclusively cognizable by courts of first instance: De Jesus vs. Judge Garcia, L-26816, February 28, 1967;Manufacturers' Distributors, Inc. vs. Yu Siu Liong, L-21285, April 29, 1966. And no cogent reason appears, and none is here advanced by the parties, why an actin for rescission (or resolution) should be differently treated, a "rescission" being a counterpart, so to speak, of "specific performance'. In both cases, the court would certainly have to undertake an investigation into facts that would justify one act of the other. No award for damages may be had in an action for resicssion without first conducting an inquiry into matters which would justify the setting aside of a contract, in the same manner that courts of first instance would have to make findings of fact and law in actions not capable of pecuniary estimnation espressly held to be so by this Court, arising from issues like those arised in Arroz v. Alojado, et al., L22153, March 31, 1967 (the legality or illegality of the conveyance sought for and the determination of the validity of the money deposit made); De Ursua v. Pelayo, L-13285, April 18, 1950 (validity of a judgment); Bunayog v. Tunas, L-12707, December 23, 1959 (validity of a mortgage); Baito v. Sarmiento, L-13105, August 25, 1960 (the relations of the parties, the right to support created by the relation, etc., in actions for support); De Rivera, et al. v. Halili, L-15159, September 30, 1963 (the validity or nullity of documents upon which claims are predicated). Issues of the same nature may be raised by a party against whom an action for rescission has been brought, or by the plaintiff himself. It is, therefore, difficult to see why a prayer for damages in an action for rescission should be taken as the basis for concluding such action for resiccison should be taken as the basis for concluding such action as one cpable of pecuniary estimation - a prayer which must be included in the main action if plaintiff is to be compensated for what he may have suffered as a result of the breach committed by defendant, and not later on precluded from recovering damages by the rule against splitting a cause of action and discouraging multiplicitly of suits. The foregoing doctrine was reiterated in The Good Development Corporation vs. Tutaan,
10 9

where this Court held:

On the issue of which court has jurisdiction, the case of SENO vs. Pastolante, et al., is in point. It was ruled therein that although the purposes of an action is to recover an amount plus interest which comes within the original jurisidction of the Justice of the Peace Court, yet when said action involves the foreclosure of a chattel mortgage covering personal properties valued at more than P2,000, (now P10,000.00) the action should be instituted before the Court of First Instance.

In the instanct, case, the action is to recover the amount of P1,520.00 plus interest and costs, and involves the foreclosure of a chattel mortgage of personal properties valued at P15,340.00, so that it is clearly within the competence of the respondent court to try and resolve. In the light of the foregoing recent rulings, the Court of First Instance of Negros Occidental did no err in exercising jurisidction over Civil Case No. 5343. The appellants also contend that the chattel mortgage may no longer be annulled because it had been judicially approved in Civil Case No. 4797 of the Court of First Instance of Negros Occidental and said chattel mortgage had been ordered foreclosed in Civil Case No. 5223 of the same court. On the question of whether a court may nullify a final judgment of another court of co-equal, concurrent and coordinate jusridiction, this Court originally ruled that: A court has no power to interfere with the judgments or decrees of a court of concurrent or coordinate jurisdiction having equal power to grant the relief sought by the injunction. The various branches of the Court of First Instance of Manila are in a sense coordinate courts and cannot be allowed to 11 interfere with each others' judgments or decrees. The foregoing doctrine was reiterated in a 1953 case
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where this Court said:

The rule which prohibits a Judge from intertering with the actuations of the Judge of another branch of the same court is not infringed when the Judge who modifies or annuls the order isued by the other Judge acts in the same case and belongs to the same court (Eleazar vs. Zandueta, 48 Phil. 193. But the rule is infringed when the Judge of a branch of the court issues a writ of preliminary injunction in a case to enjoint the sheriff from carrying out an order by execution issued in another case by the Judge of another branch of the same court. (Cabigao and Izquierdo vs. Del Rosario et al., 44 Phil. 182). This ruling was maintained in 1967. In Mas vs. Dumaraog, the judgment sought to be annulled was rendered by the Court of First Instance of Iloilo and the action for annullment was filed with the Court of First Instance of Antique, both courts belonging to the same Judicial District. This Court held that: The power to open, modify or vacant a judgment is not only possessed by but restricted to the court in which the judgment was rendered. The reason of this Court was: Pursuant to the policy of judicial stability, the judgment of a court of competent jurisdiction may not be interfered with by any court concurrrent jurisdiction. Again, in 1967 this Court ruled that the jurisdiction to annul a judgement of a branch of the court of First Instance belongs solely to the very same 14 branch which rendered the judgement. Two years later, the same doctrine was laid down in the Sterling Investment case.
15 13

In December 1971, however, this court re-examined and reversed its earlier doctrine on the matter. In Dupla v. Court of Appeals, speaking through Mr. Justice Villamor declared:

16

this Tribunal,

... the underlying philosophy expressed in the Dumara-og case, the policy of judicial stability, to the end that the judgment of a court of competent jurisdiction may not be interfered with by any court of concurrent jurisdiction may not be interfered with by any court of concurrent jurisdiciton, this Court feels that this is as good an occasion as any to re-examine the doctrine laid down ... In an action to annul the judgment of a court, the plaintiff's cause of action springs from the alleged nullity of the judgment based on one ground or another, particularly fraud, which fact affords the plaintiff a right to judicial interference in his behalf. In such a suit the cause of action is entirely different from that in the actgion which grave rise to the judgment sought to be annulled, for a direct attack against a final and executory judgment is not a incidental to, but is the main object of the proceeding. The cause of action in the two cases being distinct and separate from each other, there is no plausible reason why the venue of the action to annul the judgment should necessarily follow the venue of the previous action ...

The present doctrine which postulate that one court or one branch of a court may not annul the judgment of another court or branch, not only opens the door to a violation of Section 2 of Rule 4, (of the Rules of Court) but also limit the opportunity for the application of said rule. Our conclusion must therefore be that a court of first instance or a branch thereof has the authority and jurisdiction to take cognizance of, and to act in, suit to annul final and executory judgment or order rendered by another court of first instance or by another branch of the same court... In February 1974 this Court reiterated the ruling in the Dulap case.
17

In the light of the latest ruling of the Supreme Court, there is no doubt that one branch of the Court of First Instance of Negros Occidental can take cognizance of an action to nullify a final judgment of the other two branches of the same court. It is true that the dissolution of a partnership is caused by any partner ceasing to be associated in the carrying on of the business. 19 dissolution, the partnershop is not terminated but continuous until the winding up to the business.
18

However, on

The remaining partners did not terminate the business of the partnership "Isabela Sawmill". Instead of winding up the business of the partnership, they continued the business still in the name of said partnership. It is expressly stipulated in the memorandum-agreement that the remaining 20 partners had constituted themselves as the partnership entity, the "Isabela Sawmill". There was no liquidation of the assets of the partnership. The remaining partners, Leon Garibay and Timoteo Tubungbanua, continued doing the business of the partnership in the name of "Isabela Sawmill". They used the properties of said partnership. The properties mortgaged to Margarita G. Saldajeno by the remaining partners, Leon Garibay and Timoteo Tubungbanua, belonged to the partnership "Isabela Sawmill." The appellant, Margarita G. Saldajeno, was correctly held liable by the trial court because she purchased at public auction the properties of the partnership which were mortgaged to her. It does not appear that the withdrawal of Margarita G. Saldajeno from the partnership was published in the newspapers. The appellees and the public in general had a right to expect that whatever, credit they extended to Leon Garibay and Timoteo Tubungbanua doing the business in the name of the partnership "Isabela Sawmill" could be enforced against the proeprties of said partnership. The judicial foreclosure of the chattel mortgage executed in favor of Margarita G. Saldajeno did not relieve her from liability to the creditors of the partnership. The appellant, margrita G. Saldajeno, cannot complain. She is partly to blame for not insisting on the liquidaiton of the assets of the partnership. She even agreed to let Leon Garibay and Timoteo Tubungbanua continue doing the business of the partnership "Isabela Sawmill" by entering into the memorandum-agreement with them. Although it may be presumed that Margarita G. Saldajeno had action in good faith, the appellees aslo acted in good faith in extending credit to the partnership. Where one of two innocent persons must suffer, that person who gave occasion for the damages to be caused must bear the consequences. Had Margarita G. Saldajeno not entered into the memorandum-agreement allowing Leon Garibay and Timoteo Tubungbanua to continue doing the business of the aprtnership, the applees would not have been misled into thinking that they were still dealing with the partnership "Isabela Sawmill". Under the facts, it is of no moment that technically speaking the partnership "Isabela Sawmill" was dissolved by the withdrawal therefrom of Margarita G. Saldajeno. The partnership was not terminated and it continued doping business through the two remaining partners. The contention of the appellant that the appleees cannot bring an action to annul the chattel mortgage of the propertiesof the partnership executed by Leon Garibay and Timoteo Tubungbanua in favor of Margarita G. Saldajeno has no merit. As a rule, a contract cannot be assailed by one who is not a party thereto. However, when a contract prejudices the rights of a third person, he may file an action to annul the contract. This Court has held that a person, who is not a party obliged principally or subsidiarily under a contract, may exercised an action for nullity of the contract if he is prejudiced in his rights with respect to one of the contracting parties, and can show detriment which would positively result to him 21 from the contract in which he has no intervention. The plaintiffs-appellees were prejudiced in their rights by the execution of the chattel mortgage over the properties of the partnership "Isabela Sawmill" in favopr of Margarita G. Saldajeno by the remaining partners, Leon Garibay and Timoteo Tubungbanua. Hence, said appelees have a right to file the action to nullify the chattel mortgage in question.

The portion of the decision appealed from ordering the appellants to pay attorney's fees to the plaintiffs-appellees cannot be sustained. There is no showing that the appellants displayed a wanton disregard of the rights of the plaintiffs. Indeed, the appellants believed in good faith, albeit erroneously, that they are not liable to pay the claims. The defendants-appellants have a right to be reimbursed whatever amounts they shall pay the appellees by their co-defendants Leon Garibay and Timoteo Tubungbanua. In the memorandum-agreement, Leon Garibay and Timoteo Tubungbaun undertook to release Margarita G. Saldajeno from 22 any obligation of "Isabela Sawmill" to third persons. WHEREFORE, the decision appealed from is hereby affirmed with the elimination of the portion ordering appellants to pay attorney's fees and with the modification that the defendsants, Leon Garibay and Timoteo Tubungbanua, should reimburse the defendants-appellants, Margarita G. Saldajeno and her husband Cecilio Saldajeno, whatever they shall pay to the plaintiffs-appellees, without pronouncement as to costs. SO ORDERED. Teehankee (Chairman), Makasiar, Guerrero, De Castro and Melencio-Herrera, JJ., concur.

FIRST DIVISION

[G.R. No. 127405. September 20, 2001]

MARJORIE TOCAO and WILLIAM T. BELO, petitioners, vs. COURT OF APPEALS and NENITA A. ANAY, respondents. RESOLUTION YNARES-SANTIAGO, J.: The inherent powers of a Court to amend and control its processes and orders so as to make them conformable to law and justice includes the right to reverse itself, especially when in its honest opinion it has committed an error or mistake in judgment, and that to adhere to its decision [1] will cause injustice to a party litigant. On November 14, 2001, petitioners Marjorie Tocao and William T. Belo filed a Motion for Reconsideration of our Decision dated October 4, 2000. They maintain that there was no partnership bettween petitioner Belo, on the one hand, and respondent Nenita A. Anay, on the other hand; and that the latter being merely an employee of petitioner Tocao. After a careful review of the evidence presented, we are convinced that, indeed, petitioner Belo acted merely as guarantor of Geminesse Enterprise. This was categorically affirmed by respondents own witness, Elizabeth Bantilan, during her cross-examination. Furthermore, Bantilan testified that it was Peter Lo who was the companys financier. Thus: Q A Q A Q A Q A Q A Q You mentioned a while ago the name William Belo. Now, what is the role of William Belo with Geminesse Enterprise? William Belo is the friend of Marjorie Tocao and he was the guarantor of the company. What do you mean by guarantor? He guarantees the stocks that she owes somebody who is Peter Lo and he acts as guarantor for us. We can borrow money from him. You mentioned a certain Peter Lo. Who is this Peter Lo? Peter Lo is based in Singapore. What is the role of Peter Lo in the Geminesse Enterprise? He is the one fixing our orders that open the L/C. You mean Peter Lo is the financier? Yes, he is the financier. And the defendant William Belo is merely the guarantor of Geminesse Enterprise, am I correct?

Yes, sir.

[2]

The foregoing was neither refuted nor contradicted by respondents evidence. It should be recalled that the business relationship created between petitioner Tocao and respondent Anay was an informal partnership, which was not even recorded with the Securities and Exchange Commission. As such, it was understandable that Belo, who was after all petitioner Tocaos good friend and confidante, would occasionally [3] participate in the affairs of the business, although never in a formal or official capacity. Again, respondents witness, Elizabeth Bantilan, confirmed [4] that petitioner Belos presence in Geminesse Enterprises meetings was merely as guarantor of the company and to help petitioner Tocao. Furthermore, no evidence was presented to show that petitioner Belo participated in the profits of the business enterprise. Respondent [5] herself professed lack of knowledge that petitioner Belo received any share in the net income of the partnership. On the other hand, petitioner [6] Tocao declared that petitioner Belo was not entitled to any share in the profits of Geminesse Enterprise. With no participation in the profits, [7] petitioner Belo cannot be deemed a partner since the essence of a partnership is that the partners share in the profits and losses. Consequently, inasmuch as petitioner Belo was not a partner in Geminesse Enterprise, respondent had no cause of action against him and her complaint against him should accordingly be dismissed. As regards the award of damages, petitioners argue that respondent should be deemed in bad faith for failing to account for stocks of Geminesse Enterprise amounting to P208,250.00 and that, accordingly, her claim for damages should be barred to that extent. We do not agree. Given the circumstances surrounding private respondents sudden ouster from the partnership by petitioner Tocao, her act of withholding whatever stocks were in her possession and control was justified, if only to serve as security for her claims against the partnership. However, while we do not agree that the same renders private respondent in bad faith and should bar her claim for damages, we find that the said sum of P208,250.00 should be deducted from whatever amount is finally adjudged in her favor on the basis of the formal account of the partnership affairs to be submitted to the Regional Trial Court. WHEREFORE, based on the foregoing, the Motion for Reconsideration of petitioners is PARTIALLY GRANTED. The Regional Trial Court of Makati is hereby ordered to DISMISS the complaint, docketed as Civil Case No. 88-509, as against petitioner William T. Belo only. The sum of P208,250.00 shall be deducted from whatever amount petitioner Marjorie Tocao shall be held liable to pay respondent after the formal accounting of the partnership affairs. SO ORDERED. Davide, Jr., C.J., (Chairman), Kapunan, and Pardo, JJ., concur. Puno, J., on official leave. FIRST DIVISION

[G.R. No. 127405. October 4, 2000]

MARJORIE TOCAO and WILLIAM T. BELO, petitioners, vs. COURT OF APPEALS and NENITA A. ANAY, respondents. DECISION YNARES-SANTIAGO, J.: This is a petition for review of the Decision of the Court of Appeals in CA-G.R. CV No. 41616, affirming the Decision of the Regional Trial [2] Court of Makati, Branch 140, in Civil Case No. 88-509. Fresh from her stint as marketing adviser of Technolux in Bangkok, Thailand, private respondent Nenita A. Anay met petitioner William T. Belo, then the vice-president for operations of Ultra Clean Water Purifier, through her former employer in Bangkok. Belo introduced Anay to petitioner Marjorie Tocao, who conveyed her desire to enter into a joint venture with her for the importation and local distribution of kitchen cookwares. Belo volunteered to finance the joint venture and assigned to Anay the job of marketing the product considering her experience and established relationship with West Bend Company, a manufacturer of kitchen wares in Wisconsin, U.S.A. Under the joint venture, Belo acted as capitalist, Tocao as president and general manager, and Anay as head of the marketing department and later, vice-president for sales. Anay organized the administrative staff and sales force while Tocao hired and fired employees, determined commissions and/or salaries of the employees, and assigned them to different branches. The parties agreed that Belos name should not appear in any documents re lating to their transactions with West Bend Company. Instead, they agreed to use Anays name in securing distributorship of cookware from that company. The parties agreed further that Anay would be entitled to: (1) ten percent (10%) of the annual net profits of the business; (2) overriding commission of six percent (6%) of the overall weekly production; (3) thirty percent (30%) of the sales she would make; and (4) two percent (2%) for her demonstration services. The agreement was not reduced to writing on the strength o f Belos assurances that he was sincere, dependable and honest when it came to financial commitments.
[1]

10

Anay having secured the distributorship of cookware products from the West Bend Company and organized the administrative staff and the sales force, the cookware business took off successfully. They operated under the name of Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocaos name, with office at 712 Rufino Building, Ayala Avenue, Makati City.Belo made good his monetary commitmen ts to Anay. Thereafter, Roger Muencheberg of West Bend Company invited Anay to the distributor/dealer meeting in West Bend, Wisconsin, U.S.A., from July 19 to 21, 1987 and to the southwestern regional convention in Pismo Beach, California, U.S.A., from July 25-26, 1987. Anay accepted the invitation with the consent of Marjorie Tocao who, as president and general manager of Geminesse Enterprise, even wrote a letter to the Visa Section of the U.S. Embassy in Manila on July 13, 1987. A portion of the letter reads: Ms. Nenita D. Anay (sic), who has been patronizing and supporting West Bend Co. for twenty (20) years now, acquired the dist ributorship of Royal Queen cookware for Geminesse Enterprise, is the Vice President Sales Marketing and a business partner of our company, will attend in response to [3] the invitation. (Italics supplied.) Anay arrived from the U.S.A. in mid-August 1987, and immediately undertook the task of saving the business on account of the unsatisfactory sales record in the Makati and Cubao offices. On August 31, 1987, she received a plaque of appreciation from the administrative and sales people [4] [5] through Marjorie Tocao for her excellent job performance. On October 7, 1987, in the presence of Anay, Belo signed a memo entitling her to a thirty-seven percent (37%) commission for her personal sales "up Dec 31/87. Belo explained to her that said commission was apart fr om her ten [6] percent (10%) share in the profits. On October 9, 1987, Anay learned that Marjorie Tocao had signed a letter addressed to the Cubao sales office to the effect that she was no longer the vice-president of Geminesse Enterprise. The following day, October 10, she received a note from Lina T. Cruz, marketing manager, that Marjorie Tocao had barred her from holding office and conducting demonstrations in both Makati and Cubao [7] offices. Anay attempted to contact Belo. She wrote him twice to demand her overriding commission for the period of January 8, 1988 to February 5, 1988 and the audit of the company to determine her share in the net profits. When her letters were not answered, Anay consulted her lawyer, who, in turn, wrote Belo a letter. Still, that letter was not answered. Anay still received her five percent (5%) overriding commission up to December 1987. The following year, 1988, she did not receive the same commission although the company netted a gross sales of P13,300,360.00. On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of money with damages against Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati, Branch 140. In her complaint, Anay prayed that defendants be ordered to pay her, jointly and severally, the following: (1) P32,00.00 as unpaid overriding commission from January 8, 1988 to February 5, 1988; (2) P100,000.00 as moral damages, and (3) P100,000.00 as exemplary damages. The plaintiff also prayed for an audit of the finances of Geminesse Enterprise from t he inception of its business operation until she was illegally dismissed to determine her ten percent (10%) share in the net profits. She further prayed that she be paid the five percent (5%) overriding commission on the remaining 150 West Bend cookware sets before her dismissal. In their answer, Marjorie Tocao and Belo asserted that the alleged agreement with Anay that was neither reduced in writin g, nor ratified, was either unenforceable or void or inexistent. As far as Belo was concerned, his only role was to introduce Ana y to Marjorie Tocao. There could not have been a partnership because, as Anay herself admitted, Geminesse Enterprise was the sole proprietorship of Marjorie Tocao. Because Anay merely acted as marketing demonstrator of Geminesse Enterprise for an agreed remuneration, and her complaint referred to either her compensation or dismissal, such complaint should have been lodged with the Department of Labor and not with the regular court. Petitioners (defendants therein) further alleged that Anay filed the complaint on account of ill -will and resentment because Marjorie Tocao did not allow her to lord it over in the Geminesse Enterprise. Anay had acted like she owned the enterprise because of her experience and expertise. Hence, petitioners were the ones who suffered actual damages including unreturned and unaccounted stocks of Gemin esse Enterprise, and serious anxiety, besmirched reputation in the business world, and various damages not less than P500,000.00. They also alleged that, to vindicate their names, they had to hire counsel for a fee of P23,000.00. At the pre-trial conference, the issues were limited to: (a) whether or not the plaintiff was an employee or partner of Marjorie Tocao and [10] Belo, and (b) whether or not the parties are entitled to damages. In their defense, Belo denied that Anay was supposed to receive a share in the profit of the business. He, however, admitted that the two had agreed that Anay would receive a three to four percent (3-4%) share in the gross sales of the cookware. He denied contributing capital to the business or receiving a share in its profits as he merely served as a guarantor of Marjorie Tocao, who was new in the business. He attended and/or presided over business meetings of the venture in his capacity as a guarantor but he never participated in decision-making. He claimed that he wrote the memo granting the plaintiff thirty-seven percent (37%) commission upon her dismissal from the business venture at the request of Tocao, because Anay had no other income. For her part, Marjorie Tocao denied having entered into an oral partnership agreement with Anay. However, she admitted that Anay was an expert in the cookware business and hence, they agreed to grant her the following commissions: thirty-seven percent (37%) on personal sales; five percent (5%) on gross sales; two percent (2%) on product demonstrations, and two percent (2%) for recruitment of personnel. Marjorie denied that they agreed on a ten percent (10%) commission on the net profits. Marjorie claimed that she got the capital for the business out of the sale of the sewing machines used in her garments business and from Peter Lo, a Singaporean friend-financier who loaned her the funds with interest. Because she treated Anay as her co-equal, Marjorie received the same amounts of commissions as her. However, Anay failed to account for stocks valued at P200,000.00.
[9] [8]

11

On April 22, 1993, the trial court rendered a decision the dispositive part of which is as follows: WHEREFORE, in view of the foregoing, judgment is hereby rendered: 1. Ordering defendants to submit to the Court a formal account as to the partnership affairs for the years 1987 and 1988 pursuant to Art. 1809 of the Civil Code in order to determine the ten percent (10%) share of plaintiff in the net profits of the cookware business; 2. Ordering defendants to pay five percent (5%) overriding commission for the one hundred and fifty (150) cookware sets available for disposition when plaintiff was wrongfully excluded from the partnership by defendants; 3. Ordering defendants to pay plaintiff overriding commission on the total production which for the period covering January 8, 1988 to February 5, 1988 amounted to P32,000.00; 4. Ordering defendants to pay P100,000.00 as moral damages and P100,000.00 as exemplary damages, and 5. Ordering defendants to pay P50,000.00 as attorneys fees and P20,000.00 as costs of suit. SO ORDERED. The trial court held that there was indeed an oral partnership agreement between the plaintiff and the defendants, based on the following: (a) there was an intention to create a partnership; (b) a common fund was established through contributions consisting of money and industry, and (c) there was a joint interest in the profits. The testimony of Elizabeth Bantilan, Anays cousin and the admini strative officer of Geminesse Enterprise from August 21, 1986 until it was absorbed by Royal International, Inc., buttressed the fact that a partnership existed between the parties. The letter of Roger Muencheberg of West Bend Company stating that he awarded the distributorship to Anay and Marjorie Tocao because he was convinced that with Marjories financial contribution and Anays experience, the combination of the two would be inval uable to the partnership, also supported that conclusion. Belos claim that he was merely a guarantor has no basis since there was no written evidence thereof as required by Article 2055 of the Civil Code. Moreover, his acts of attending and/or presiding over meetings of Geminesse Enterprise plus his issuance of a memo giving Anay 37% commission on personal sales belied this. On the contrary, it demonstrated his involvement as a partner in the business. The trial court further held that the payment of commissions did not preclude the existence of the partnership inasmuch as such practice is often resorted to in business circles as an impetus to bigger sales volume. It did not matter that the agreement was not in writing because Article 1771 of the Civil Code provides that a partnership may be constituted in any form. The fact that Geminesse Enterprise was registered in Marjorie Tocaos name is not determinative of whether or not the business was managed and operated by a sole proprietor or a partnersh ip. What was registered with the Bureau of Domestic Trade was merely the business name or style of Geminesse Enterprise. The trial court finally held that a partner who is excluded wrongfully from a partnership is an innocent partner. Hence, the guilty partner must give him his due upon the dissolution of the partnership as well as damages or share in the profits realized from the appropriation of the partnership business and goodwill. An innocent partner thus possesses pecuniary interest in every existing contract that wa s incomplete and in the trade name of the co-partnership and assets at the time he was wrongfully expelled. Petitioners appeal to the Court of Appeals was dismissed, but the amount of damages awarded by the trial court were reduced to P50,000.00 for moral damages and P50,000.00 as exemplary damages. Their Motion for Reconsideration was denied by the Court of Appeals for [12] lack of merit. Petitioners Belo and Marjorie Tocao are now before this Court on a petition for review on certiorari, asserting that there was no business partnership between them and herein private respondent Nenita A. Anay who is, therefore, not entitled to the damages awarded to her by the Court of Appeals. Petitioners Tocao and Belo contend that the Court of Appeals erroneously held that a partnership existed between them and private respondent Anay because Geminesse Enterprise came into being exactly a year before the alleged partnership was formed, and that it was very unlikely that petitioner Belo would invest the sum of P2,500,000.00 with petitioner Tocao contributing nothing, without any memorandum [13] whatsoever regarding the alleged partnership. The issue of whether or not a partnership exists is a factual matter which are within the exclusive domain of both the trial and appellate courts. This Court cannot set aside factual findings of such courts absent any showing that there is no evidence to support the conclusion drawn by [14] the court a quo. In this case, both the trial court and the Court of Appeals are one in ruling that petitioners and private respondent established a business partnership. This Court finds no reason to rule otherwise. To be considered a juridical personality, a partnership must fulfill these requisites: (1) two or more persons bind themselves to contribute [15] money, property or industry to a common fund; and (2) intention on the part of the partners to divide the profits among themselves. It may be [16] constituted in any form; a public instrument is necessary only where immovable property or real rights are contributed thereto. This implies that since a contract of partnership is consensual, an oral contract of partnership is as good as a written one. Where no immovable property or real rights are involved, what matters is that the parties have complied with the requisites of a partnership. The fact that there appears to be no record in the Securities and Exchange Commission of a public instrument embodying the partnership agreement pursuant to Article 1772 of the Civil [17] Code did not cause the nullification of the partnership. The pertinent provision of the Civil Code on the matter states:
[11]

12

Art. 1768. The partnership has a juridical personality separate and distinct from that of each of the partners, even in case of failure to comply with the requirements of article 1772, first paragraph. Petitioners admit that private respondent had the expertise to engage in the business of distributorship of cookware. Private respondent contributed such expertise to the partnership and hence, under the law, she was the industrial or managing partner. It was through her reputation with the West Bend Company that the partnership was able to open the business of distributorship of that companys cookware products; it was through the same efforts that the business was propelled to financial success. Petitioner Tocao herself admitted private resp ondents indispensable role in putting up the business when, upon being asked if private respondent held the positions of marketing manager and vice-president for sales, she testified thus: A: No, sir at the start she was the marketing manager because there were no one to sell yet, its only me there then her and then two (2) people, so about four (4). Now, after that when she recruited already Oscar Abella and Lina Torda-Cruz these two (2) people [18] were given the designation of marketing managers of which definitely Nita as superior to them would be the Vice President. By the set-up of the business, third persons were made to believe that a partnership had indeed been forged between petitioners and private respondents. Thus, the communication dated June 4, 1986 of Missy Jagler of West Bend Company to Roger Muencheberg of the same company states: Marge Tocao is president of Geminesse Enterprises. Geminesse will finance the operations. Marge does not have cookware exper ience. Nita Anay has started to gather former managers, Lina Torda and Dory Vista. She has also gathered former demonstrators, Betty Bantilan, Eloisa Lamela, Menchu Javier. They will continue to gather other key people and build up the organization. All they need is the finance and the products to [19] sell. On the other hand, petitioner Belos denial that he financed the partnership rings hollow in the face of the established fact that he presided over meetings regarding matters affecting the operation of the business. Moreover, his having authorized in writing on October 7, 1987, on a stationery of his own business firm, Wilcon Builders Supply, that private respondent should receive thirty-seven (37%) of the proceeds of her personal sales, could not be interpreted otherwise than that he had a proprietary interest in the business. His claim that he was merely a guarantor is belied by that personal act of proprietorship in the business. Moreover, if he was indeed a guarantor of future debts of petitioner Tocao under [20] Article 2053 of the Civil Code, he should have presented documentary evidence therefor. While Article 2055 of the Civil Code simply provides that guaranty must be express, Article 1403, the Statute of Frauds, requires that a special promise to answer for the debt, default or miscarriage [21] of another be in writing. Petitioner Tocao, a former ramp model, was also a capitalist in the partnership. She claimed that she herself financed the business. Her and petitioner Belos roles as both capitalists to the partnership with private respondent are buttressed by petitioner Tocaos admissions that petitioner Belo was her boyfriend and that the partnership was not their only business venture together. They also established a firm that they [23] called Wiji, the combination of petitioner Belos first name, William, and her nickname, Jiji. The special relationship between them dovetails with petitioner Belos claim that he was acting in behalf of petitioner Tocao. Significantly, in the early stage of the business operation, petitioners requested West Bend Company to allow them to utilize their banking and trading facilities in Singapore in the matter of imp ortation and [24] payment of the cookware products. The inevitable conclusion, therefore, was that petitioners merged their respective capital and infused the amount into the partnership of distributing cookware with private respondent as the managing partner. The business venture operated under Geminesse Enterprise did not result in an employer-employee relationship between petitioners and private respondent. While it is true that the receipt of a percentage of net profits constitutes only prima facie evidence that the recipient is a [25] partner in the business, the evidence in the case at bar controverts an employer-employee relationship between the parties. In the first place, [26] private respondent had a voice in the management of the affairs of the cookware distributorship, including selection of people who would constitute the administrative staff and the sales force. Secondly, petitioner Tocaos admissions militate against an employer -employee relationship. [27] She admitted that, like her who owned Geminesse Enterprise, private respondent received only commissions and transportation and [28] [29] representation allowances and not a fixed salary. Petitioner Tocao testified: Q: Of course. Now, I am showing to you certain documents already marked as Exhs. X and Y. Please go over this. Exh. Y is deno minated `Cubao overrides 8-21-87 with ending August 21, 1987, will you please go over this and tell the Honorable Court whether you ever came across this document and know of your own knowledge the amount --A: Yes, sir this is what I am talking about earlier. Thats the one I am telling you earlier a certain percentage for promotions , advertising, incentive. Q: I see. Now, this promotion, advertising, incentive, there is a figure here and words which I quote: Overrides Marjorie Ann Tocao P21,410.50 this means that you have received this amount? A: Oh yes, sir. Q: I see. And, by way of amplification this is what you are saying as one representing commission, representation, advertising and promotion? A: Yes, sir. Q: I see. Below your name is the words and figure and I quote Nita D. Anay P21,410.50, what is this?
[22]

13

A: Thats her overriding commission. Q: Overriding commission, I see. Of course, you are telling this Honorable Court that there being the same P21,410.50 is merely by coincidence? A: No, sir, I made it a point that we were equal because the way I look at her kasi, you know in a sense because of her expertise in the business she is vital to my business. So, as part of the incentive I offer her the same thing. Q: So, in short you are saying that this you have shared together, I mean having gotten from the company P21,140.50 is your way of indicating that you were treating her as an equal? A: As an equal. Q: As an equal, I see. You were treating her as an equal? A: Yes, sir. Q: I am calling again your attention to Exh. Y Overrides Makati the other one is --A: That is the same thing, sir. Q: With ending August 21, words and figure Overrides Marjorie Ann Tocao P15,314.25 the amount there you will acknowledge you h ave received that? A: Yes, sir. Q: Again in concept of commission, representation, promotion, etc.? A: Yes, sir. Q: Okey. Below your name is the name of Nita Anay P15,314.25 that is also an indication that she received the same amount? A: Yes, sir. Q: And, as in your previous statement it is not by coincidence that these two (2) are the same? A: No, sir. Q: It is again in concept of you treating Miss Anay as your equal? A: Yes, sir. (Italics supplied.)
[30]

If indeed petitioner Tocao was private respondents employer, it is difficult t o believe that they shall receive the same income in the business. In a partnership, each partner must share in the profits and losses of the venture, except that the industrial partner shall not be liable for [31] the losses. As an industrial partner, private respondent had the right to demand for a formal accounting of the business and to receive her share [32] in the net profit. The fact that the cookware distributorship was operated under the name of Geminesse Enterprise, a sole proprietorship, is of no [33] moment. What was registered with the Bureau of Domestic Trade on August 19, 1987 was merely the name of that enterprise. While it is true that in her undated application for renewal of registration of that firm name, petitioner Tocao indicated that it would be engaged in retail of [34] kitchenwares, cookwares, utensils, skillet, she also admitted that the enterprise was only 60% to 70% for the cookware business, while 20% [35] to 30% of its business activity was devoted to the sale of water sterilizer or purifier. Indubitably then, the business name Geminesse Enterprise was used only for practical reasons - it was utilized as the common name for petitioner Tocaos various business activities, which included the distributorship of cookware. Petitioners underscore the fact that the Court of Appeals did not return the unaccounted and unremitted stocks of Geminesse Enterprise [36] amounting to P208,250.00. Obviously a ploy to offset the damages awarded to private respondent, that claim, more than anything else, proves the existence of a partnership between them. In Idos v. Court of Appeals, this Court said: The best evidence of the existence of the partnership, which was not yet terminated (though in the winding up stage), were the unsold goods and uncollected receivables, which were presented to the trial court. Since the partnership has not been terminated, the petitioner and private [37] complainant remained as co-partners. x x x. It is not surprising then that, even after private respondent had been unceremoniously booted out of the partnership in October 1987, she still received her overriding commission until December 1987. Undoubtedly, petitioner Tocao unilaterally excluded private respondent from the partnership to reap for herself and/or for petitioner Belo financial gains resulting from private respondents efforts to make the business venture a success. Thus, as petitioner Tocao became adept in the [38] business operation, she started to assert herself to the extent that she would even shout at private respondent in front of other people. Her instruction to Lina Torda Cruz, marketing manager, not to allow private respondent to hold office in both the Makati and Cubao sales offices

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concretely spoke of her perception that private respondent was no longer necessary in the business operation, and resulted in a falling out between the two. However, a mere falling out or misunderstanding between partners does not convert the partnership into a sham [40] organization. The partnership exists until dissolved under the law. Since the partnership created by petitioners and private respondent has no fixed term and is therefore a partnership at will predicated on their mutual desire and consent, it may be dissolved by the will of a partner. Thus: x x x. The right to choose with whom a person wishes to associate himself is the very foundation and essence of that partnership. Its continued existence is, in turn, dependent on the constancy of that mutual resolve, along with each partners capability to give it, an d the absence of cause for dissolution provided by the law itself. Verily, any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will. He must, however, act in good faith, not that the attendance of bad faith can prevent the dissolution of the partnership but that it can result in a [41] liability for damages. An unjustified dissolution by a partner can subject him to action for damages because by the mutual agency that arises in a partnership, the [42] doctrine of delectus personae allows the partners to have the power, although not necessarily the right to dissolve the partnership. In this case, petitioner Tocaos unilateral exclusion of private respondent from the partnership is shown by her memo to the Cubao office [43] plainly stating that private respondent was, as of October 9, 1987, no longer the vice-president for sales of Geminesse Enterprise. By that memo, petitioner Tocao effected her own withdrawal from the partnership and considered herself as having ceased to be associated with the partnership [44] in the carrying on of the business. Nevertheless, the partnership was not terminated thereby; it continues until the winding up of the business. The winding up of partnership affairs has not yet been undertaken by the partnership. This is manifest in petitioners claim for stocks that had been entrusted to private respondent in the pursuit of the partnership business. The determination of the amount of damages commensurate with the factual findings upon which it is based is primarily the task of the trial [45] [46] court. The Court of Appeals may modify that amount only when its factual findings are diametrically opposed to that of the lower court, or [47] the award is palpably or scandalously and unreasonably excessive. However, exemplary damages that are awarded by way of example or [48] correction for the public good, should be reduced to P50,000.00, the amount correctly awarded by the Court of Appeals. Concomitantly, the award of moral damages of P100,000.00 was excessive and should be likewise reduced to P50,000.00. Similarly, attorneys fees that should be granted on account of the award of exemplary damages and petitioners evident bad faith in refusing to satisfy private respondents plainly valid, [49] just and demandable claims, appear to have been excessively granted by the trial court and should therefore be reduced to P25,000.00. WHEREFORE, the instant petition for review on certiorari is DENIED. The partnership among petitioners and private respondent is ordered dissolved, and the parties are ordered to effect the winding up and liquidation of the partnership pursuant to the pertinent provisions of the Civil Code. This case is remanded to the Regional Trial Court for proper proceedings relative to said dissolution. The appealed decisions of the Regional Trial Court and the Court of Appeals are AFFIRMED with MODIFICATIONS, as follows --1. Petitioners are ordered to submit to the Regional Trial Court a formal account of the partnership affairs for the years 1987 and 1988, pursuant to Article 1809 of the Civil Code, in order to determine private respondents ten percent (10%) share in the net profits of the partnership; 2. Petitioners are ordered, jointly and severally, to pay private respondent five percent (5%) overriding commission for the one hundred and fifty (150) cookware sets available for disposition since the time private respondent was wrongfully excluded from the partnership by petitioners; 3. Petitioners are ordered, jointly and severally, to pay private respondent overriding commission on the total production which, for the period covering January 8, 1988 to February 5, 1988, amounted to P32,000.00; 4. Petitioners are ordered, jointly and severally, to pay private respondent moral damages in the amount of P50,000.00, exemplary damages in the amount of P50,000.00 and attorneys fees in the amount of P25,000.00. SO ORDERED. Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur.

[39]

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