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No. Case Title Pages Page
Arts. 1767-1809
1 Heirs of Lim v. Lim 7 2
2 Marsman Drysdale Land, Inc. v. Philippine Geoanalytics, Inc. 7 9
3 Jarantilla, Jr. v. Jarantilla 12 16
4 Aurbach v. Sanitary Wares Mftg. Corp. 16 28
5 Pioneer Insurance & Surety Corp. v. CA 12 44
THIRD DIVISION
DECISION
NACHURA , J : p
Before this Court is a Petition for Review on Certiorari 1 under Rule 45 of the
Rules of Civil Procedure, assailing the Court of Appeals (CA) Decision 2 dated June 29,
2005, which reversed and set aside the decision 3 of the Regional Trial Court (RTC) of
Lucena City, dated April 12, 2004.
The facts of the case are as follows:
Petitioners are the heirs of the late Jose Lim (Jose), namely: Jose's widow
Cresencia Palad (Cresencia); and their children Elenito, Evelia, Imelda, Edelyna and
Edison, all surnamed Lim (petitioners), represented by Elenito Lim (Elenito). They led a
Complaint 4 for Partition, Accounting and Damages against respondent Juliet Villa Lim
(respondent), widow of the late El edo Lim (El edo), who was the eldest son of Jose
and Cresencia.
Petitioners alleged that Jose was the liaison of cer of Interwood Sawmill in
Cagsiay, Mauban, Quezon. Sometime in 1980, Jose, together with his friends Jimmy Yu
(Jimmy) and Norberto Uy (Norberto), formed a partnership to engage in the trucking
business. Initially, with a contribution of P50,000.00 each, they purchased a truck to be
used in the hauling and transport of lumber of the sawmill. Jose managed the
operations of this trucking business until his death on August 15, 1981. Thereafter,
Jose's heirs, including El edo, and partners agreed to continue the business under the
management of El edo. The shares in the partnership pro ts and income that formed
part of the estate of Jose were held in trust by El edo, with petitioners' authority for
Elfledo to use, purchase or acquire properties using said funds.
Petitioners also alleged that, at that time, El edo was a fresh commerce
graduate serving as his father's driver in the trucking business. He was never a partner
or an investor in the business and merely supervised the purchase of additional trucks
using the income from the trucking business of the partners. By the time the
partnership ceased, it had nine trucks, which were all registered in El edo's name.
Petitioners asseverated that it was also through El edo's management of the
partnership that he was able to purchase numerous real properties by using the pro ts
derived therefrom, all of which were registered in his name and that of respondent. In
addition to the nine trucks, Elfledo also acquired five other motor vehicles.
HCTAEc
On May 18, 1995, El edo died, leaving respondent as his sole surviving heir.
Petitioners claimed that respondent took over the administration of the
aforementioned properties, which belonged to the estate of Jose, without their consent
and approval. Claiming that they are co-owners of the properties, petitioners required
respondent to submit an accounting of all income, pro ts and rentals received from the
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estate of El edo, and to surrender the administration thereof. Respondent refused;
thus, the filing of this case.
Respondent traversed petitioners' allegations and claimed that El edo was
himself a partner of Norberto and Jimmy. Respondent also claimed that per testimony
of Cresencia, sometime in 1980, Jose gave El edo P50,000.00 as the latter's capital in
an informal partnership with Jimmy and Norberto. When El edo and respondent got
married in 1981, the partnership only had one truck; but through the efforts of El edo,
the business ourished. Other than this trucking business, El edo, together with
respondent, engaged in other business ventures. Thus, they were able to buy real
properties and to put up their own car assembly and repair business. When Norberto
was ambushed and killed on July 16, 1993, the trucking business started to falter.
When El edo died on May 18, 1995 due to a heart attack, respondent talked to Jimmy
and to the heirs of Norberto, as she could no longer run the business. Jimmy suggested
that three out of the nine trucks be given to him as his share, while the other three
trucks be given to the heirs of Norberto. However, Norberto's wife, Paquita Uy, was not
interested in the vehicles. Thus, she sold the same to respondent, who paid for them in
installments.
Respondent also alleged that when Jose died in 1981, he left no known assets,
and the partnership with Jimmy and Norberto ceased upon his demise. Respondent
also stressed that Jose left no properties that El edo could have held in trust.
Respondent maintained that all the properties involved in this case were purchased and
acquired through her and her husband's joint efforts and hard work, and without any
participation or contribution from petitioners or from Jose. Respondent submitted that
these are conjugal partnership properties; and thus, she had the right to refuse to
render an accounting for the income or profits of their own business.
Trial on the merits ensued. On April 12, 2004, the RTC rendered its decision in
favor of petitioners, thus:
WHEREFORE, premises considered, judgment is hereby rendered:
In essence, petitioners argue that according to the testimony of Jimmy, the sole
surviving partner, El edo was not a partner; and that he and Norberto entered into a
partnership with Jose. Thus, the CA erred in not giving that testimony greater weight
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than that of Cresencia, who was merely the spouse of Jose and not a party to the
partnership. 8
Respondent counters that the issue raised by petitioners is not proper in a
petition for review on certiorari under Rule 45 of the Rules of Civil Procedure, as it would
entail the review, evaluation, calibration, and re-weighing of the factual ndings of the
CA. Moreover, respondent invokes the rationale of the CA decision that, in light of the
admissions of Cresencia and Edison and the testimony of respondent, the testimony of
Jimmy was effectively refuted; accordingly, the CA's reversal of the RTC's ndings was
fully justified. 9 cEaCTS
We resolve rst the procedural matter regarding the propriety of the instant
Petition.
Verily, the evaluation and calibration of the evidence necessarily involves
consideration of factual issues — an exercise that is not appropriate for a petition for
review on certiorari under Rule 45. This rule provides that the parties may raise only
questions of law, because the Supreme Court is not a trier of facts. Generally, we are
not duty-bound to analyze again and weigh the evidence introduced in and considered
by the tribunals below. 1 0 When supported by substantial evidence, the ndings of fact
of the CA are conclusive and binding on the parties and are not reviewable by this Court,
unless the case falls under any of the following recognized exceptions:
(1) When the conclusion is a nding grounded entirely on speculation,
surmises and conjectures;
(6) When the Court of Appeals, in making its ndings, went beyond the issues
of the case and the same is contrary to the admissions of both appellant and
appellee;
(7) When the findings are contrary to those of the trial court;
(8) When the ndings of fact are conclusions without citation of speci c
evidence on which they are based;
(9) When the facts set forth in the petition as well as in the petitioners' main
and reply briefs are not disputed by the respondents; and
(10) When the ndings of fact of the Court of Appeals are premised on the
supposed absence of evidence and contradicted by the evidence on record. 1 1
We note, however, that the ndings of fact of the RTC are contrary to those of the
CA. Thus, our review of such findings is warranted.
On the merits of the case, we find that the instant Petition is bereft of merit.
A partnership exists when two or more persons agree to place their money,
effects, labor, and skill in lawful commerce or business, with the understanding that
there shall be a proportionate sharing of the pro ts and losses among them. A contract
of partnership is de ned by the Civil Code as one where two or more persons bind
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themselves to contribute money, property, or industry to a common fund, with the
intention of dividing the profits among themselves. 1 2 aHIEcS
Undoubtedly, the best evidence would have been the contract of partnership or
the articles of partnership. Unfortunately, there is none in this case, because the alleged
partnership was never formally organized. Nonetheless, we are asked to determine who
between Jose and Elfledo was the "partner" in the trucking business.
A careful review of the records persuades us to af rm the CA decision. The
evidence presented by petitioners falls short of the quantum of proof required to
establish that: (1) Jose was the partner and not El edo; and (2) all the properties
acquired by El edo and respondent form part of the estate of Jose, having been
derived from the alleged partnership.
Petitioners heavily rely on Jimmy's testimony. But that testimony is just one
piece of evidence against respondent. It must be considered and weighed along with
petitioners' other evidence vis-à-vis respondent's contrary evidence. In civil cases, the
party having the burden of proof must establish his case by a preponderance of
evidence. "Preponderance of evidence" is the weight, credit, and value of the aggregate
evidence on either side and is usually considered synonymous with the term "greater
weight of the evidence" or "greater weight of the credible evidence." "Preponderance of
evidence" is a phrase that, in the last analysis, means probability of the truth. It is
evidence that is more convincing to the court as worthy of belief than that which is
offered in opposition thereto. 1 3 Rule 133, Section 1 of the Rules of Court provides the
guidelines in determining preponderance of evidence, thus:
SECTION I. Preponderance of evidence, how determined. — In civil cases, the
party having burden of proof must establish his case by a preponderance of
evidence. In determining where the preponderance or superior weight of evidence
on the issues involved lies, the court may consider all the facts and
circumstances of the case, the witnesses' manner of testifying, their intelligence,
their means and opportunity of knowing the facts to which they are testifying, the
nature of the facts to which they testify, the probability or improbability of their
testimony, their interest or want of interest, and also their personal credibility so
far as the same may legitimately appear upon the trial. The court may also
consider the number of witnesses, though the preponderance is not necessarily
with the greater number.
At this juncture, our ruling in Heirs of Tan Eng Kee v. Court of Appeals 14 is
enlightening. Therein, we cited Article 1769 of the Civil Code, which provides:
Art. 1769. In determining whether a partnership exists, these rules shall apply:
(1) Except as provided by Article 1825, persons who are not partners as to
each other are not partners as to third persons;
(2) Co-ownership or co-possession does not of itself establish a partnership,
whether such co-owners or co-possessors do or do not share any pro ts made by
the use of the property; CHDAEc
(3) The sharing of gross returns does not of itself establish a partnership,
whether or not the persons sharing them have a joint or common right or interest
in any property from which the returns are derived;
(4) The receipt by a person of a share of the pro ts of a business is a prima
facie evidence that he is a partner in the business, but no such inference shall be
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drawn if such profits were received in payment:
(a) As a debt by installments or otherwise;
(b) As wages of an employee or rent to a landlord;
Applying the legal provision to the facts of this case, the following circumstances
tend to prove that El edo was himself the partner of Jimmy and Norberto: 1) Cresencia
testi ed that Jose gave El edo P50,000.00, as share in the partnership, on a date that
coincided with the payment of the initial capital in the partnership; 1 5 (2) El edo ran the
affairs of the partnership, wielding absolute control, power and authority, without any
intervention or opposition whatsoever from any of petitioners herein; 1 6 (3) all of the
properties, particularly the nine trucks of the partnership, were registered in the name
of El edo; (4) Jimmy testi ed that El edo did not receive wages or salaries from the
partnership, indicating that what he actually received were shares of the pro ts of the
business; 1 7 and (5) none of the petitioners, as heirs of Jose, the alleged partner,
demanded periodic accounting from El edo during his lifetime. As repeatedly stressed
in Heirs of Tan Eng Kee , 1 8 a demand for periodic accounting is evidence of a
partnership.
Furthermore, petitioners failed to adduce any evidence to show that the real and
personal properties acquired and registered in the names of El edo and respondent
formed part of the estate of Jose, having been derived from Jose's alleged partnership
with Jimmy and Norberto. They failed to refute respondent's claim that El edo and
respondent engaged in other businesses. Edison even admitted that El edo also sold
Interwood lumber as a sideline. 1 9 Petitioners could not offer any credible evidence
other than their bare assertions. Thus, we apply the basic rule of evidence that between
documentary and oral evidence, the former carries more weight. 2 0
Finally, we agree with the judicious findings of the CA, to wit:
The above testimonies prove that El edo was not just a hired help but one of the
partners in the trucking business, active and visible in the running of its affairs
from day one until this ceased operations upon his demise. The extent of his
control, administration and management of the partnership and its business, the
fact that its properties were placed in his name, and that he was not paid salary or
other compensation by the partners, are indicative of the fact that El edo was a
partner and a controlling one at that. It is apparent that the other partners only
contributed in the initial capital but had no say thereafter on how the business
was ran. Evidently it was through Elfredo's efforts and hard work that the
partnership was able to acquire more trucks and otherwise prosper. Even the
appellant participated in the affairs of the partnership by acting as the
bookkeeper sans salary. TAIaHE
It is notable too that Jose Lim died when the partnership was barely a year old,
and the partnership and its business not only continued but also ourished. If it
were true that it was Jose Lim and not El edo who was the partner, then upon his
death the partnership should have been dissolved and its assets liquidated. On
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the contrary, these were not done but instead its operation continued under the
helm of Elfledo and without any participation from the heirs of Jose Lim.
Whatever properties appellant and her husband had acquired, this was through
their own concerted efforts and hard work. El edo did not limit himself to the
business of their partnership but engaged in other lines of businesses as well.
In sum, we nd no cogent reason to disturb the ndings and the ruling of the CA
as they are amply supported by the law and by the evidence on record.
WHEREFORE , the instant Petition is DENIED . The assailed Court of Appeals
Decision dated June 29, 2005 is AFFIRMED . Costs against petitioners.
SO ORDERED .
Corona, Velasco, Jr., Del Castillo * and Mendoza, JJ., concur.
Footnotes
* Additional member in lieu of Associate Justice Diosdado M. Peralta per Special Order No.
824 dated February 12, 2010.
8. Id.
9. Respondent's Memorandum; id. at 204-234.
10. Francisco Madrid and Edgardo Bernardo v. Spouses Bonifacio Mapoy and Felicidad
Martinez, G.R. No. 150887, August 14, 2009. (Citations omitted.)
11. Ontimare, Jr. v. Elep, G.R. No. 159224, January 20, 2006, 479 SCRA 257, 265.
12. Litonjua, Jr. v. Litonjua, Sr., G.R. Nos. 166299-300, December 13, 2005, 477 SCRA 576,
584.
13. Perfecta Cavile, Jose de la Cruz and Rural Bank of Bayawan, Inc. v. Justina Litania-
Hong, accompanied and joined by her husband, Leopoldo Hong and Genoveva Litania,
G.R. No. 179540, March 13, 2009, citing Go v. Court of Appeals, 403 Phil. 883, 890-891
(2001).
14. 396 Phil. 68 (2000).
DECISION
CARPIO MORALES , J : p
On February 12, 1997, Marsman Drysdale Land, Inc. (Marsman Drysdale) and
Gotesco Properties, Inc. (Gotesco) entered into a Joint Venture Agreement (JVA) for
the construction and development of an of ce building on a land owned by Marsman
Drysdale in Makati City. 1
The JVA contained the following pertinent provisions:
SECTION 4. CAPITAL OF THE JV
It is the desire of the Parties herein to implement this Agreement by investing in
the PROJECT on a FIFTY (50%) PERCENT-FIFTY (50%) PERCENT basis .
4.1. Contribution of [Marsman Drysdale]-[Marsman Drysdale] shall
contribute the Property .
The total appraised value of the Property is PESOS: FOUR HUNDRED TWENTY
MILLION (P420,000,000.00).
For this purpose, [Marsman Drysdale] shall deliver the Property in a buildable
condition within ninety (90) days from signing of this Agreement barring any
unforeseen circumstances over which [Marsman Drysdale] has no control.
Buildable condition shall mean that the old building/structure which stands on
the Property is demolished and taken to ground level.
4.2. Contribution of [Gotesco]-[Gotesco] shall contribute the amount of
PESOS: FOUR HUNDRED TWENTY MILLION (P420,000,000.00) in
cash which shall be payable as follows:
4.3.5. ...
4.3.6. ...
4.3.7. ...
Via Technical Services Contract (TSC) dated July 14, 1997, 2 the joint venture
engaged the services of Philippine Geoanalytics, Inc. (PGI) to provide subsurface soil
exploration, laboratory testing, seismic study and geotechnical engineering for the
project. PGI, was, however, able to drill only four of five boreholes needed to conduct its
subsurface soil exploration and laboratory testing, justifying its failure to drill the
remaining borehole to the failure on the part of the joint venture partners to clear the
area where the drilling was to be made. 3 PGI was able to complete its seismic study
though. aATEDS
PGI then billed the joint venture on November 24, 1997 for P284,553.50
representing the cost of partial subsurface soil exploration; and on January 15, 1998
for P250,800 representing the cost of the completed seismic study. 4
Despite repeated demands from PGI, 5 the joint venture failed to pay its
obligations.
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Meanwhile, due to unfavorable economic conditions at the time, the joint venture
was cut short and the planned building project was eventually shelved. 6
PGI subsequently led on November 11, 1999 a complaint for collection of sum
of money and damages at the Regional Trial Court (RTC) of Quezon City against
Marsman Drysdale and Gotesco.
In its Answer with Counterclaim and Cross-claim, Marsman Drysdale passed the
responsibility of paying PGI to Gotesco which, under the JVA, was solely liable for the
monetary expenses of the project. 7
Gotesco, on the other hand, countered that PGI has no cause of action against it
as PGI had yet to complete the services enumerated in the contract; and that Marsman
Drysdale failed to clear the property of debris which prevented PGI from completing its
work. 8
By Decision of June 2, 2004, 9 Branch 226 of the Quezon City RTC rendered
judgment in favor of PGI, disposing as follows:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of
plaintiff [PGI].
The defendants [Gotesco] and [Marsman Drysdale] are ordered to pay plaintiff,
jointly :
(1) the sum of P535,353.50 with legal interest from the date of this
decision until fully paid;
In partly af rming the trial court's decision, the appellate court ratiocinated that
notwithstanding the terms of the JVA, the joint venture cannot avoid payment of PGI's
claim since "[the JVA] could not affect third persons like [PGI] because of the basic civil
law principle of relativity of contracts which provides that contracts can only bind the
parties who entered into it, and it cannot favor or prejudice a third person, even if he is
aware of such contract and has acted with knowledge thereof." 1 1 ICASEH
C. . . . IGNORING THE FACT THAT [PGI] DID NOT COMPLY WITH THE
REQUIREMENT OF "SATISFACTORY PERFORMANCE" OF ITS PRESTATION
WHICH, PURSUANT TO THE TECHNICAL SERVICES CONTRACT, IS THE
CONDITION SINE QUA NON TO COMPENSATION.
D. . . . DISREGARDING CLEAR EVIDENCE SHOWING [MARSMAN
DRYSDALE'S] ENTITLEMENT TO AN AWARD OF ATTORNEY'S FEES. 1 3
On the other hand, in G.R. No. 183376, Gotesco peddles that the appellate court
committed error when it
. . . ORDERED [GOTESCO] TO PAY P535,353.50 AS COST OF THE WORK
PERFORMED BY [PGI] AND P100,000.00 [AS] ATTORNEY'S FEES . . . [AND] TO
REIMBURSE [MARSMAN DRYSDALE] 50% OF P535,353.50 AND PAY [MARSMAN
DRYSDALE] P100,000.00 AS ATTORNEY'S FEES. 1 4
On the issue of whether PGI was indeed entitled to the payment of services it
rendered, the Court sees no imperative to re-examine the congruent ndings of the trial
and appellate courts thereon. Undoubtedly, the exercise involves an examination of
facts which is normally beyond the ambit of the Court's functions under a petition for
review, for it is well-settled that this Court is not a trier of facts. While this judicial tenet
admits of exceptions, such as when the ndings of facts of the appellate court are
contrary to those of the trial court's, or when the judgment is based on a
misapprehension of facts, or when the ndings of facts are contradicted by the
evidence on record, 1 5 these extenuating grounds nd no application in the present
petitions.
AT ALL EVENTS, the Court is convinced that PGI had more than suf ciently
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established its claims against the joint venture. In fact, Marsman Drysdale had long
recognized PGI's contractual claims when it (PGI) received a Certi cate of Payment 1 6
from the joint venture's project manager 1 7 which was endorsed to Gotesco for
processing and payment. 1 8 STcADa
The core issue to be resolved then is which between joint venturers Marsman
Drysdale and Gotesco bears the liability to pay PGI its unpaid claims.
To Marsman Drysdale, it is Gotesco since, under the JVA, construction funding
for the project was to be obtained from Gotesco's cash contribution, as its (Marsman
Drysdale's) participation in the venture was limited to the land.
Gotesco maintains, however, that it has no liability to pay PGI since it was due to
the fault of Marsman Drysdale that PGI was unable to complete its undertaking.
The Court finds Marsman Drysdale and Gotesco jointly liable to PGI.
PGI executed a technical service contract with the joint venture and was never a
party to the JVA. While the JVA clearly spelled out, inter alia, the capital contributions of
Marsman Drysdale (land) and Gotesco (cash) as well as the funding and nancing
mechanism for the project, the same cannot be used to defeat the lawful claim of PGI
against the two joint venturers-partners.
The TSC clearly listed the joint venturers Marsman Drysdale and Gotesco as the
bene cial owner of the project, 1 9 and all billing invoices indicated the consortium
therein as the client. HCIaDT
As the appellate court held, Articles 1207 and 1208 of the Civil Code, which
respectively read:
Art. 1207. The concurrence of two or more creditors or of two or more
debtors in one and the same obligation does not imply that each one of
the former has a right to demand, or that each one of the latter is bound
to render, entire compliance with the prestations . There is a solidary
liability only when the obligation expressly so states, or when the law or nature of
the obligation requires solidarity.
Art. 1208. If from the law, or the nature or the wording of the obligations to
which the preceding article refers the contrary does not appear, the credit or
debt shall be presumed to be divided into as many equal shares as
there are creditors or debtors , the credits or debts being considered distinct
from one another, subject to the Rules of Court governing the multiplicity of suits.
(emphasis and underscoring supplied)
presume that the obligation owing to PGI is joint between Marsman Drysdale and
Gotesco.
The only time that the JVA may be made to apply in the present petitions is when
the liability of the joint venturers to each other would set in.
A joint venture being a form of partnership, it is to be governed by the laws on
partnership. 2 0 Article 1797 of the Civil Code provides:
Art. 1797. The losses and pro ts shall be distributed in conformity with the
agreement. If only the share of each partner in the profits has been
agreed upon, the share of each in the losses shall be in the same
proportion .
In the absence of stipulation, the share of each in the pro ts and losses shall be
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in proportion to what he may have contributed, but the industrial partner shall not
be liable for the losses. As for the pro ts, the industrial partner shall receive such
share as may be just and equitable under the circumstances. If besides his
services he has contributed capital, he shall also receive a share in the pro ts in
proportion to his capital. (emphasis and underscoring supplied)
In the JVA, Marsman Drysdale and Gotesco agreed on a 50-50 ratio on the
proceeds of the project. 2 1 They did not provide for the splitting of losses, however.
Applying the above-quoted provision of Article 1797 then, the same ratio applies in
splitting the P535,353.50 obligation-loss of the joint venture.
The appellate court's decision must be modi ed, however. Marsman Drysdale
and Gotesco being jointly liable, there is no need for Gotesco to reimburse Marsman
Drysdale for "50% of the aggregate sum due" to PGI.
Allowing Marsman Drysdale to recover from Gotesco what it paid to PGI would
not only be contrary to the law on partnership on division of losses but would partake
of a clear case of unjust enrichment at Gotesco's expense. The grant by the lower
courts of Marsman Drysdale cross-claim against Gotesco was thus erroneous. THCSEA
Marsman Drysdale's supplication for the award of attorney's fees in its favor
must be denied. It cannot claim that it was compelled to litigate or that the civil action
or proceeding against it was clearly unfounded, for the JVA provided that, in the event a
party advances funds for the project, the joint venture shall repay the advancing party.
22
Marsman Drysdale was thus not precluded from advancing funds to pay for
PGI's contracted services to abate any legal action against the joint venture itself. It
was in fact hardline insistence on Gotesco having sole responsibility to pay for the
obligation, despite the fact that PGI's services redounded to the bene t of the joint
venture, that spawned the legal action against it and Gotesco.
Finally, an interest of 12% per annum on the outstanding obligation must be
imposed from the time of demand 2 3 as the delay in payment makes the obligation one
of forbearance of money, conformably with this Court's ruling in Eastern Shipping Lines,
Inc. v. Court of Appeals . 2 4 Marsman Drysdale and Gotesco should bear legal interest
on their respective obligations.
WHEREFORE , the assailed Decision and Resolution of the Court of Appeals are
AFFIRMED with MODIFICATION in that the order for Gotesco to reimburse Marsman
Drysdale is DELETED , and interest of 12% per annum on the respective obligations of
Marsman Drysdale and Gotesco is imposed, computed from the last demand or on
January 5, 1999 up to the finality of the Decision.
If the adjudged amount and the interest remain unpaid thereafter, the interest
rate shall be 12% per annum computed from the time the judgment becomes nal and
executory until it is fully satis ed. The appealed decision is, in all other respects,
affirmed.
Costs against petitioners Marsman Drysdale and Gotesco.
SO ORDERED.
Carpio, * Brion, Abad ** and Villarama, Jr., JJ., concur.
Footnotes
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*Additional member per Raffle dated June 16, 2010.
**Additional member per Special Order No. 843 dated May 17, 2010.
1.I Records, pp. 101-120.
2.Id. at pp. 6-31.
3.Id. at p. 2.
4.Id. at pp. 33 and 36. Covered by Billing Invoice Nos. 437 and 526, respectively.
5.Id. at pp. 222, 224, and 225; Exhibits "E"; "F" and "G".
6.II Records, pp. 397-398. See also Transcript of Stenographic Notes, August 21, 2001, p. 8.
7.I Records, pp. 92-94.
8.Id. at p. 70.
12.Id. at p. 322.
13.Rollo (G.R. No. 183374), pp. 19-20.
14.Rollo (G.R. No. 183376), p. 19.
15.La Rosa v. Ambassador Hotel, G.R. No. 177059, March 13, 2009, 581 SCRA 340, 345-346.
DECISION
LEONARDO-DE CASTRO , J : p
This petition for review on certiorari 1 seeks to modify the Decision 2 of the Court
of Appeals dated July 30, 2002 in CA-G.R. CV No. 40887, which set aside the Decision 3
dated December 18, 1992 of the Regional Trial Court (RTC) of Quezon City, Branch 98 in
Civil Case No. Q-50464.
The pertinent facts are as follows:
The spouses Andres Jarantilla and Felisa Jaleco were survived by eight children:
Federico, Del n, Benjamin, Conchita, Rosita, Pacita, Rafael and Antonieta. 4 Petitioner
Federico Jarantilla, Jr. is the grandchild of the late Jarantilla spouses by their son
Federico Jarantilla, Sr. and his wife Leda Jamili. 5 Petitioner also has two other
brothers: Doroteo and Tomas Jarantilla.
Petitioner was one of the defendants in the complaint before the RTC while
Antonieta Jarantilla, his aunt, was the plaintiff therein. His co-respondents before he
joined his aunt Antonieta in her complaint, were his late aunt Conchita Jarantilla's
husband Buenaventura Remotigue, who died during the pendency of the case, his
cousin Cynthia Remotigue, the adopted daughter of Conchita Jarantilla and
Buenaventura Remotigue, and his brothers Doroteo and Tomas Jarantilla. 6
In 1948, the Jarantilla heirs extrajudicially partitioned amongst themselves the
real properties of their deceased parents. 7 With the exception of the real property
adjudicated to Pacita Jarantilla, the heirs also agreed to allot the produce of the said
real properties for the years 1947-1949 for the studies of Rafael and Antonieta
Jarantilla. 8
In the same year, the spouses Rosita Jarantilla and Vivencio Deocampo entered
into an agreement with the spouses Buenaventura Remotigue and Conchita Jarantilla to
provide mutual assistance to each other by way of nancial support to any commercial
and agricultural activity on a joint business arrangement. This business relationship
proved to be successful as they were able to establish a manufacturing and trading
business, acquire real properties, and construct buildings, among other things. 9 This
partnership ended in 1973 when the parties, in an "Agreement," 1 0 voluntarily agreed to
completely dissolve their "joint business relationship/arrangement." 1 1 DHATcE
On April 29, 1957, the spouses Buenaventura and Conchita Remotigue executed
a document wherein they acknowledged that while registered only in Buenaventura
Remotigue's name, they were not the only owners of the capital of the businesses
Manila Athletic Supply (712 Raon Street, Manila), Remotigue Trading (Calle Real, Iloilo
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City) and Remotigue Trading (Cotabato City). In this same "Acknowledgement of
Participating Capital," they stated the participating capital of their co-owners as of the
year 1952, with Antonieta Jarantilla's stated as eight thousand pesos (P8,000.00) and
Federico Jarantilla, Jr.'s as five thousand pesos (P5,000.00). 1 2
The present case stems from the amended complaint 1 3 dated April 22, 1987
led by Antonieta Jarantilla against Buenaventura Remotigue, Cynthia Remotigue,
Federico Jarantilla, Jr., Doroteo Jarantilla and Tomas Jarantilla, for the accounting of
the assets and income of the co-ownership, for its partition and the delivery of her
share corresponding to eight percent (8%), and for damages. Antonieta claimed that in
1946, she had entered into an agreement with Conchita and Buenaventura Remotigue,
Rafael Jarantilla, and Rosita and Vivencio Deocampo to engage in business. Antonieta
alleged that the initial contribution of property and money came from the heirs'
inheritance, and her subsequent annual investment of seven thousand ve hundred
pesos (P7,500.00) as additional capital came from the proceeds of her farm. Antonieta
also alleged that from 1946-1969, she had helped in the management of the business
they co-owned without receiving any salary. Her salary was supposedly rolled back into
the business as additional investments in her behalf. Antonieta further claimed co-
ownership of certain properties 1 4 (the subject real properties) in the name of the
defendants since the only way the defendants could have purchased these properties
were through the partnership as they had no other source of income.
The respondents, including petitioner herein, in their Answer, 1 5 denied having
formed a partnership with Antonieta in 1946. They claimed that she was in no position
to do so as she was still in school at that time. In fact, the proceeds of the lands they
partitioned were devoted to her studies. They also averred that while she may have
helped in the businesses that her older sister Conchita had formed with Buenaventura
Remotigue, she was paid her due salary. They did not deny the existence and validity of
the "Acknowledgement of Participating Capital" and in fact used this as evidence to
support their claim that Antonieta's 8% share was limited to the businesses
enumerated therein. With regard to Antonieta's claim in their other corporations and
businesses, the respondents said these should also be limited to the number of her
shares as speci ed in the respective articles of incorporation. The respondents denied
using the partnership's income to purchase the subject real properties and said that the
certificates of title should be binding on her. 1 6
During the course of the trial at the RTC, petitioner Federico Jarantilla, Jr., who
was one of the original defendants, entered into a compromise agreement 1 7 with
Antonieta Jarantilla wherein he supported Antonieta's claims and asserted that he too
was entitled to six percent (6%) of the supposed partnership in the same manner as
Antonieta was. He prayed for a favorable judgment in this wise:
Defendant Federico Jarantilla, Jr., hereby joins in plaintiff's prayer for an
accounting from the other defendants, and the partition of the properties of the
co-ownership and the delivery to the plaintiff and to defendant Federico Jarantilla,
Jr. of their rightful share of the assets and properties in the co-ownership. 1 8
acCETD
The RTC, in an Order 1 9 dated March 25, 1992, approved the Joint Motion to
Approve Compromise Agreement 2 0 and on December 18, 1992, decided in favor of
Antonieta, to wit:
WHEREFORE, premises above-considered, the Court renders judgment in favor of
the plaintiff Antonieta Jarantilla and against defendants Cynthia Remotigue,
Doroteo Jarantilla and Tomas Jarantilla ordering the latter:
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1. to deliver to the plaintiff her 8% share or its equivalent amount on
the real properties covered by TCT Nos. 35655, 338398, 338399 &
335395, all of the Registry of Deeds of Quezon City; TCT Nos.
(18303)23341, 142882 & 490007(4615), all of the Registry of Deeds
of Rizal; and TCT No. T-6309 of the Registry of Deeds of Cotabato
based on their present market value;
Both the petitioner and the respondents appealed this decision to the Court of
Appeals. The petitioner claimed that the RTC "erred in not rendering a complete
judgment and ordering the partition of the co-ownership and giving to [him] six per
centum (6%) of the properties." 2 2
While the Court of Appeals agreed to some of the RTC's factual ndings, it also
established that Antonieta Jarantilla was not part of the partnership formed in 1946,
and that her 8% share was limited to the businesses enumerated in the
Acknowledgement of Participating Capital. On July 30, 2002, the Court of Appeals
rendered the herein challenged decision setting aside the RTC's decision, as follows:
WHEREFORE , the decision of the trial court, dated 18 December 1992 is SET
ASIDE and a new one is hereby entered ordering that:
Petitioner filed before us this petition for review on the sole ground that:
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN NOT
RULING THAT PETITIONER FEDERICO JARANTILLA, JR. IS ENTITLED
TO A SIX PER CENTUM (6%) SHARE OF THE OWNERSHIP OF THE REAL
PROPERTIES ACQUIRED BY THE OTHER DEFENDANTS USING COMMON
FUNDS FROM THE BUSINESSES WHERE HE HAD OWNED SUCH SHARE .
28
Petitioner asserts that he was in a partnership with the Remotigue spouses, the
Deocampo spouses, Rosita Jarantilla, Rafael Jarantilla, Antonieta Jarantilla and Quintin
Vismanos, as evidenced by the Acknowledgement of Participating Capital the
Remotigue spouses executed in 1957. He contends that from this partnership, several
other corporations and businesses were established and several real properties were
acquired. In this petition, he is essentially asking for his 6% share in the subject real
properties. He is relying on the Acknowledgement of Participating Capital, on his own
testimony, and Antonieta Jarantilla's testimony to support this contention.
The core issue is whether or not the partnership subject of the
Acknowledgement of Participating Capital funded the subject real properties. In other
words, what is the petitioner's right over these real properties?
It is a settled rule that in a petition for review on certiorari under Rule 45 of the
Rules of Civil Procedure, only questions of law may be raised by the parties and passed
upon by this Court. 2 9
A question of law arises when there is doubt as to what the law is on a certain
state of facts, while there is a question of fact when the doubt arises as to the
truth or falsity of the alleged facts. For a question to be one of law, the same
must not involve an examination of the probative value of the evidence presented
by the litigants or any of them. The resolution of the issue must rest solely on
what the law provides on the given set of circumstances. Once it is clear that the
issue invites a review of the evidence presented, the question posed is one of fact.
Thus, the test of whether a question is one of law or of fact is not the appellation
given to such question by the party raising the same; rather, it is whether the
appellate court can determine the issue raised without reviewing or evaluating the
evidence, in which case, it is a question of law; otherwise it is a question of fact.
30 TCDHaE
Since the Court of Appeals did not fully adopt the factual ndings of the RTC, this
Court, in resolving the questions of law that are now in issue, shall look into the facts
only in so far as the two courts a quo differed in their appreciation thereof.
The RTC found that an unregistered partnership existed since 1946 which was
af rmed in the 1957 document, the "Acknowledgement of Participating Capital." The
RTC used this as its basis for giving Antonieta Jarantilla an 8% share in the three
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businesses listed therein and in the other businesses and real properties of the
respondents as they had supposedly acquired these through funds from the
partnership. 3 1
The Court of Appeals, on the other hand, agreed with the RTC as to Antonieta's
8% share in the business enumerated in the Acknowledgement of Participating Capital,
but not as to her share in the other corporations and real properties. The Court of
Appeals ruled that Antonieta's claim of 8% is based on the "Acknowledgement of
Participating Capital," a duly notarized document which was speci c as to the subject
of its coverage. Hence, there was no reason to pattern her share in the other
corporations from her share in the partnership's businesses. The Court of Appeals also
said that her claim in the respondents' real properties was more "precarious" as these
were all covered by certi cates of title which served as the best evidence as to all the
matters contained therein. 3 2 Since petitioner's claim was essentially the same as
Antonieta's, the Court of Appeals also ruled that petitioner be given his 6% share in the
same businesses listed in the Acknowledgement of Participating Capital.
Factual ndings of the trial court, when con rmed by the Court of Appeals, are
nal and conclusive except in the following cases: (1) when the inference made is
manifestly mistaken, absurd or impossible; (2) when there is a grave abuse of
discretion; (3) when the nding is grounded entirely on speculations, surmises or
conjectures; (4) when the judgment of the Court of Appeals is based on
misapprehension of facts; (5) when the ndings of fact are con icting; (6) when the
Court of Appeals, in making its ndings, went beyond the issues of the case and the
same is contrary to the admissions of both appellant and appellee; (7) when the
ndings of the Court of Appeals are contrary to those of the trial court; (8) when the
ndings of fact are conclusions without citation of speci c evidence on which they are
based; (9) when the Court of Appeals manifestly overlooked certain relevant facts not
disputed by the parties and which, if properly considered, would justify a different
conclusion; and (10) when the ndings of fact of the Court of Appeals are premised on
the absence of evidence and are contradicted by the evidence on record. 3 3
In this case, we find no error in the ruling of the Court of Appeals.
Both the petitioner and Antonieta Jarantilla characterize their relationship with
the respondents as a co-ownership, but in the same breath, assert that a verbal
partnership was formed in 1946 and was af rmed in the 1957 Acknowledgement of
Participating Capital.
There is a co-ownership when an undivided thing or right belongs to different
persons. 3 4 It is a partnership when two or more persons bind themselves to contribute
money, property, or industry to a common fund, with the intention of dividing the pro ts
among themselves. 3 5 The Court, in Pascual v. The Commissioner of Internal Revenue ,
3 6 quoted the concurring opinion of Mr. Justice Angelo Bautista in Evangelista v. The
Collector of Internal Revenue 3 7 to further elucidate on the distinctions between a co-
ownership and a partnership, to wit:
I wish however to make the following observation: Article 1769 of the new Civil
Code lays down the rule for determining when a transaction should be deemed a
partnership or a co-ownership. Said article paragraphs 2 and 3, provides;
(2) Co-ownership or co-possession does not itself establish a partnership,
whether such co-owners or co-possessors do or do not share any pro ts made by
the use of the property;
From the above it appears that the fact that those who agree to form a co-
ownership share or do not share any pro ts made by the use of the property held
in common does not convert their venture into a partnership. Or the sharing of the
gross returns does not of itself establish a partnership whether or not the persons
sharing therein have a joint or common right or interest in the property. This only
means that, aside from the circumstance of pro t, the presence of other elements
constituting partnership is necessary, such as the clear intent to form a
partnership, the existence of a juridical personality different from that of the
individual partners, and the freedom to transfer or assign any interest in the
property by one with the consent of the others.
It is evident that an isolated transaction whereby two or more persons contribute
funds to buy certain real estate for pro t in the absence of other circumstances
showing a contrary intention cannot be considered a partnership.
Persons who contribute property or funds for a common enterprise and agree to
share the gross returns of that enterprise in proportion to their contribution, but
who severally retain the title to their respective contribution, are not thereby
rendered partners. They have no common stock or capital, and no community of
interest as principal proprietors in the business itself which the proceeds derived.
The common ownership of property does not itself create a partnership between
the owners, though they may use it for the purpose of making gains; and they
may, without becoming partners, agree among themselves as to the
management, and use of such property and the application of the proceeds
therefrom. 3 8 (Citations omitted.)
Under Article 1767 of the Civil Code, there are two essential elements in a
contract of partnership: (a) an agreement to contribute money, property or industry to a
common fund; and (b) intent to divide the pro ts among the contracting parties . The
rst element is undoubtedly present in the case at bar, for, admittedly, all the parties in
this case have agreed to, and did, contribute money and property to a common fund.
Hence, the issue narrows down to their intent in acting as they did. 3 9 It is not denied
that all the parties in this case have agreed to contribute capital to a common fund to
be able to later on share its pro ts. They have admitted this fact, agreed to its veracity,
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and even submitted one common documentary evidence to prove such partnership —
the Acknowledgement of Participating Capital. SDTIaE
That aside from the persons mentioned in the next preceding paragraph, no other
person has any interest in the above-mentioned three establishments.
IN WITNESS WHEREOF, they sign this instrument in the City of Manila, P.I., this
29th day of April, 1957.
[Sgd.]
BUENAVENTURA REMOTIGUE
[Sgd.]
CONCHITA JARANTILLA DE REMOTIGUE 4 0
It is clear from the foregoing that a partner is entitled only to his share as agreed
upon, or in the absence of any such stipulations, then to his share in proportion to his
contribution to the partnership. The petitioner himself claims his share to be 6%, as
stated in the Acknowledgement of Participating Capital. However, petitioner fails to
realize that this document speci cally enumerated the businesses covered by the
partnership: Manila Athletic Supply, Remotigue Trading in Iloilo City and Remotigue
Trading in Cotabato City. Since there was a clear agreement that the capital the
partners contributed went to the three businesses, then there is no reason to deviate
from such agreement and go beyond the stipulations in the document. Therefore, the
Court of Appeals did not err in limiting petitioner's share to the assets of the
businesses enumerated in the Acknowledgement of Participating Capital.
I n Villareal v. Ramirez , 4 1 the Court held that since a partnership is a separate
juridical entity, the shares to be paid out to the partners is necessarily limited only to its
total resources, to wit:
Since it is the partnership, as a separate and distinct entity, that must refund the
shares of the partners, the amount to be refunded is necessarily limited to its total
resources. In other words, it can only pay out what it has in its coffers, which
consists of all its assets. However, before the partners can be paid their shares,
the creditors of the partnership must rst be compensated. After all the creditors
have been paid, whatever is left of the partnership assets becomes available for
the payment of the partners' shares. 4 2
There is no evidence that the subject real properties were assets of the
partnership referred to in the Acknowledgement of Participating Capital.
The petitioner further asserts that he is entitled to respondents' properties based
on the concept of trust. He claims that since the subject real properties were
purchased using funds of the partnership, wherein he has a 6% share, then "law and
equity mandates that he should be considered as a co-owner of those properties in
such proportion." 4 3 In Pigao v. Rabanillo , 4 4 this Court explained the concept of trusts,
to wit:
Express trusts are created by the intention of the trustor or of the parties, while
implied trusts come into being by operation of law, either through implication of
an intention to create a trust as a matter of law or through the imposition of the
trust irrespective of, and even contrary to, any such intention. In turn, implied
trusts are either resulting or constructive trusts. Resulting trusts are based on the
equitable doctrine that valuable consideration and not legal title determines the
equitable title or interest and are presumed always to have been contemplated by
the parties. They arise from the nature or circumstances of the consideration
involved in a transaction whereby one person thereby becomes invested with
legal title but is obligated in equity to hold his legal title for the bene t of another.
45 HTAIcD
The petitioner has failed to prove that there exists a trust over the subject real
properties. Aside from his bare allegations, he has failed to show that the respondents
used the partnership's money to purchase the said properties. Even assuming
arguendo that some partnership income was used to acquire these properties, the
petitioner should have successfully shown that these funds came from his share in the
partnership pro ts. After all, by his own admission, and as stated in the
Acknowledgement of Participating Capital, he owned a mere 6% equity in the
partnership.
In essence, the petitioner is claiming his 6% share in the subject real properties,
by relying on his own self-serving testimony and the equally biased testimony of
Antonieta Jarantilla. Petitioner has not presented evidence, other than these
unsubstantiated testimonies, to prove that the respondents did not have the means to
fund their other businesses and real properties without the partnership's income. On
the other hand, the respondents have not only, by testimonial evidence, proven their
case against the petitioner, but have also presented suf cient documentary evidence to
substantiate their claims, allegations and defenses. They presented preponderant
proof on how they acquired and funded such properties in addition to tax receipts and
tax declarations. 4 7 It has been held that "while tax declarations and realty tax receipts
do not conclusively prove ownership, they may constitute strong evidence of ownership
when accompanied by possession for a period sufficient for prescription." 4 8 Moreover,
it is a rule in this jurisdiction that testimonial evidence cannot prevail over documentary
evidence. 4 9 This Court had on several occasions, expressed our disapproval on using
mere self-serving testimonies to support one's claim. In Ocampo v. Ocampo , 5 0 a case
on partition of a co-ownership, we held that:
Petitioners assert that their claim of co-ownership of the property was suf ciently
proved by their witnesses — Luisa Ocampo-Llorin and Melita Ocampo. We
disagree. Their testimonies cannot prevail over the array of documents presented
by Belen. A claim of ownership cannot be based simply on the testimonies of
witnesses; much less on those of interested parties, self-serving as they are. 5 1
It is true that a certi cate of title is merely an evidence of ownership or title over
the particular property described therein. Registration in the Torrens system does not
create or vest title as registration is not a mode of acquiring ownership; hence, this
cannot deprive an aggrieved party of a remedy in law. 5 2 However, petitioner asserts
ownership over portions of the subject real properties on the strength of his own
admissions and on the testimony of Antonieta Jarantilla. As held by this Court in
Republic of the Philippines v. Orfinada, Sr.: 5 3
Indeed, a Torrens title is generally conclusive evidence of ownership of the land
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referred to therein, and a strong presumption exists that a Torrens title was
regularly issued and valid. A Torrens title is incontrovertible against any
informacion possessoria, of other title existing prior to the issuance thereof not
annotated on the Torrens title. Moreover, persons dealing with property covered
by a Torrens certi cate of title are not required to go beyond what appears on its
face. 5 4
As we have settled that this action never really was for partition of a co-
ownership, to permit petitioner's claim on these properties is to allow a collateral,
indirect attack on respondents' admitted titles. In the words of the Court of Appeals,
"such evidence cannot overpower the conclusiveness of these certi cates of title, more
so since plaintiff's [petitioner's] claims amount to a collateral attack, which is
prohibited under Section 48 of Presidential Decree No. 1529, the Property Registration
Decree." 5 5 aAcDSC
SEC. 48. Certi cate not subject to collateral attack . — A certi cate of title
shall not be subject to collateral attack. It cannot be altered, modi ed, or
cancelled except in a direct proceeding in accordance with law.
This Court has deemed an action or proceeding to be "an attack on a title when
its objective is to nullify the title, thereby challenging the judgment pursuant to which
the title was decreed." 5 6 In Aguilar v. Alfaro, 5 7 this Court further distinguished between
a direct and an indirect or collateral attack, as follows:
A collateral attack transpires when, in another action to obtain a different relief
and as an incident to the present action, an attack is made against the judgment
granting the title. This manner of attack is to be distinguished from a direct attack
against a judgment granting the title, through an action whose main objective is
to annul, set aside, or enjoin the enforcement of such judgment if not yet
implemented, or to seek recovery if the property titled under the judgment had
been disposed of. . . . .
Footnotes
2. Rollo, pp. 34-45; penned by Associate Justice Buenaventura J. Guerrero with Associate
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Justices Rodrigo V. Cosico and Perlita J. Tria Tirona concurring.
3. Id. at 105-110.
4. Id. at 34.
5. Records, Vol. I, p. 1.
6. Rollo, p. 49.
7. Id. at 34-35.
8. Records, Vol. I, p. 1.
9. Id. at 7.
10. Id. at 7-9.
11. Id. at 7.
12. Id. at 6.
13. Rollo, pp. 48-57.
14. Rollo, p. 18; the subject real properties are covered by TCT Nos. 35655, 338398, 338399
& 335395, all of the Registry of Deeds of Quezon City; TCT Nos. (18303)23341, 142882
& 490007(4615), all of the Registry of Deeds of Rizal; and TCT No. T-6309 of the
Registry of Deeds of Cotabato.
15. Id. at 72-76.
16. Id. at 111-197.
17. Id. at 83-87.
18. Id. at 85-86.
19. Id. at 102-104.
20. Id. at 83-87.
21. Id. at 109-110.
22. Id. at 205.
23. Id. at 44.
24. CA rollo, p. 564.
25. Docketed as G.R. No. 154722.
48. Heirs of Clemente Ermac v. Heirs of Vicente Ermac, 451 Phil. 368, 378 (2003).
49. Romago Electric Co., Inc. v. Court of Appeals, 388 Phil. 964, 976 (2000).
50. 471 Phil. 519 (2004).
51. Id. at 539.
52. Heirs of Clemente Ermac v. Heirs of Vicente Ermac, supra note 48 at 377.
53. G.R. No. 141145, November 12, 2004, 442 SCRA 342.
54. Id. at 359.
55. Rollo, pp. 42-43.
56. Oño v. Lim, G.R. No. 154270, March 9, 2010.
57. G.R. No. 164402, July 5, 2010.
SYLLABUS
DECISION
GUTIERREZ, JR., J : p
These consolidated petitions seek the review of the amended decision of the
Court of Appeals in CA-G.R. SP Nos. 05604 and 05617 which set aside the earlier
decision dated June 5, 1986, of the then Intermediate Appellate Court and
directed that in all subsequent elections for directors of Sanitary Wares
Manufacturing Corporation (Saniwares), American Standard Inc. (ASI) cannot
nominate more than three (3) directors; that the Filipino stockholders shall not
interfere in ASI's choice of its three (3) nominees; that, on the other hand, the
Filipino stockholders can nominate only six (6) candidates and in the event they
cannot agree on the six (6) nominees, they shall vote only among themselves to
determine who the six (6) nominees will be, with cumulative voting to be
allowed but without interference from ASI.
The antecedent facts can be summarized as follows:
In 1961, Saniwares, a domestic corporation was incorporated for the primary
purpose of manufacturing and marketing sanitary wares. One of the
incorporators, Mr. Baldwin Young went abroad to look for foreign partners,
European or American who could help in its expansion plans. On August 15,
1962, ASI, a foreign corporation domiciled in Delaware, United States entered
into an Agreement with Saniwares and some Filipino investors whereby ASI and
the Filipino investors agreed to participate in the ownership of an enterprise
which would engage primarily in the business of manufacturing in the
Philippines and selling here and abroad vitreous china and sanitary wares. The
parties agreed that the business operations in the Philippines shall be carried on
by an incorporated enterprise and that the name of the corporation shall initially
be "Sanitary Wares Manufacturing Corporation." LibLex
The Agreement has the following provisions relevant to the issues in these cases
on the nomination and election of the directors of the corporation:
"3. Articles of Incorporation
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"3. Articles of Incorporation
"5. Management
(a) The management of the Corporation shall be vested in
a Board of Directors, which shall consist of nine individuals. As long
as American-Standard shall own at least 30% of the outstanding
stock of the Corporation, three of the nine directors shall be
designated by American-Standard, and the others six: shall be
designated by the other stockholders of the Corporation. (pp. 51 &
53, Rollo of 75875).
. . . . There were protests against the action of the Chairman and heated
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arguments ensued. An appeal was made by the ASI representative to the
body of stockholders present that a vote be taken on the ruling of the
Chairman. The Chairman, Baldwin Young, declared the appeal out of order
and no vote on the ruling was taken. The Chairman then instructed the
Corporate Secretary to cast all the votes present and represented by
proxy equally for the 6 nominees of the Philippine Investors and the 3
nominees of ASI, thus effectively excluding the 2 additional persons
nominated, namely, Luciano E. Salazar and Charles Chamsay. The ASI
representative, Mr. Jaqua, protested the decision of the Chairman and
announced that all votes accruing to ASI shares, a total of 1,329,695 (p.
27, Rollo, AC-G.R. SP No. 05617) were being cumulatively voted for the
three ASI nominees and Charles Chamsay, and instructed the Secretary
to so vote. Luciano E. Salazar and other proxy holders announced that all
the votes owned by and or represented by them 467,197 shares (p. 27,
Rollo, AC-G.R. SP No. 05617) were being voted cumulatively in favor of
Luciano E. Salazar. The Chairman, Baldwin Young, nevertheless instructed
the Secretary to cast all votes equally in favor of the three ASI nominees,
namely, Wolfgang Aurbach, John Griffin and David Whittingham, and the
six originally nominated by Rogelio Vinluan, namely, Ernesto Lagdameo,
Sr., Raul Boncan, Ernesto Lagdameo, Jr., Enrique Lagdameo, George F.
Lee, and Baldwin Young. The Secretary then certified for the election of
the following — Wolfgang Aurbach, John Griffin, David Whittingham,
Ernesto Lagdameo, Sr., Ernesto Lagdameo, Jr., Enrique Lagdameo,
George F. Lee, Raul A. Boncan, Baldwin Young. The representative of ASI
then moved to recess the meeting which was duly seconded. There was
also a motion to adjourn (p. 28, Rollo, Ac-G.R. SP No. 05617). This motion
to adjourn was accepted by the Chairman, Baldwin Young, who
announced that the motion was carried and declared the meeting
adjourned. Protests against the adjournment were registered and having
been ignored, Mr. Jaqua, the ASI representative, stated that the meeting
was not adjourned but only recessed and that the meeting would be
reconvened in the next room. The Chairman then threatened to have the
stockholders who did not agree to the decision of the Chairman on the
casting of votes bodily thrown out. The ASI Group, Luciano E. Salazar and
other stockholders, allegedly representing 53 or 54% of the shares of
Saniwares, decided to continue the meeting at the elevator lobby of the
American Standard Building. The continued meeting was presided by
Luciano E. Salazar, while Andres Gatmaitan acted as Secretary. On the
basis of the cumulative votes cast earlier in the meeting, the ASI Group
nominated its four nominees; Wolfgang Aurbach, John Griffin, David
Whittingham and Charles Chamsay. Luciano E. Salazar voted for himself,
thus the said five directors were certified as elected directors by the
Acting Secretary, Andres Gatmaitan, with the explanation that there was
a tie among the other six (6) nominees for the four (4) remaining
positions of directors and that the body decided not to break the tie."
(pp. 37-39, Rollo of 75975-76)
These incidents triggered off the filing of separate petitions by the parties with
the Securities and Exchange Commission (SEC). The first petition filed was for
preliminary injunction by Saniwares, Ernesto V. Lagdameo, Baldwin Young, Raul
A. Boncan, Ernesto R. Lagdameo, Jr., Enrique Lagdameo and George F. Lee against
Luciano Salazar and Charles Chamsay. The case was denominated as SEC Case
No. 2417. The second petition was for quo warranto and application for
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receivership by Wolfgang Aurbach, John Griffin, David Whittingham, Luciano E.
Salazar and Charles Chamsay against the group of Young and Lagdameo
(petitioners in SEC Case No. 2417) and Avelino F. Cruz. The case was docketed as
SEC Case No. 2718. Both sets of parties except for Avelino Cruz claimed to be the
legitimate directors of the corporation. LLphil
The two petitions were consolidated and tried jointly by a hearing officer who
rendered a decision upholding the election of the Lagdameo Group and dismissing
the quo warranto petition of Salazar and Chamsay. The ASI Group and Salazar
appealed the decision to the SEC en banc which affirmed the hearing officer's
decision.
The SEC decision led to the filing of two separate appeals with the Intermediate
Appellate Court by Wolfgang Aurbach, John Griffin, David Whittingham and
Charles Chamsay (docketed as AC-G.R. SP No. 05604) and by Luciano E. Salazar
(docketed as AC-G.R. SP No. 05617). The petitions were consolidated and the
appellate court in its decision ordered the remand of the case to the Securities
and Exchange Commission with the directive that a new stockholders' meeting
of Saniwares be ordered convoked as soon as possible, under the supervision of
the Commission.
Upon a motion for reconsideration filed by the appellees (Lagdameo Group) the
appellate court (Court of Appeals) rendered the questioned amended decision.
Petitioners Wolfgang Aurbach, John Griffin, David P. Whittingham and Charles
Chamsay in G.R. No. 75875 assign the following errors:
I. THE COURT OF APPEALS, IN EFFECT, UPHELD THE ALLEGED
ELECTION OF PRIVATE RESPONDENTS AS MEMBERS OF THE BOARD OF
DIRECTORS OF SANIWARES WHEN IN FACT THERE WAS NO ELECTION
AT ALL.
II. THE COURT OF APPEALS PROHIBITS THE STOCKHOLDERS FROM
EXERCISING THEIR FULL VOTING RIGHTS REPRESENTED BY THE
NUMBER OF SHARES IN SANIWARES, THUS DEPRIVING PETITIONERS
AND THE CORPORATION THEY REPRESENT OF THEIR PROPERTY RIGHTS
WITHOUT DUE PROCESS OF LAW.
Petitioner Luciano E. Salazar in G.R. Nos. 75975-76 assails the amended decision
on the following grounds:
"11.1 That Amended Decision would sanction the CA's disregard of
binding contractual agreements entered into by stockholders and the
replacement of the conditions of such agreements with terms never
contemplated by the stockholders but merely dictated by the CA.
The issues raised in the petitions are interrelated, hence, they are discussed
jointly.
The main issue hinges on who were the duly elected directors of Saniwares for
the year 1983 during its annual stockholders' meeting held on March 8, 1983. To
answer this question the following factors should be determined: (1) the nature
of the business established by the parties — whether it was a joint venture or a
corporation and (2) whether or not the ASI Group may vote their additional 10%
equity during elections of Saniwares' board of directors. LLjur
The rule is that whether the parties to a particular contract have thereby
established among themselves a joint venture or some other relation depends
upon their actual intention which is determined in accordance with the rules
governing the interpretation and construction of contracts. (Terminal Shares, Inc.
v. Chicago, B. and Q.R. Co. (DC MO) 65 F Supp 678; Universal Sales Corp. v.
California Press Mfg. Co. 20 Cal. 2nd 751, 128 P 2nd 668)
The ASI Group and petitioner Salazar (G.R. Nos. 75975-76) contend that the
actual intention of the parties should be viewed strictly on the "Agreement"
dated August 15, 1962 wherein it is clearly stated that the parties' intention was
to form a corporation and not a joint venture.
They specifically mention number 16 under Miscellaneous Provisions which
states:
xxx xxx xxx
"(c) nothing herein contained shall be construed to constitute any of
the parties hereto partners or joint venturers in respect of any
transaction hereunder." (At p. 66, Rollo — G.R. No. 75875)
They object to the admission of other evidence which tends to show that the
parties' agreement was to establish a joint venture presented by the Lagdameo
and Young Group on the ground that it contravenes the parol evidence rule under
section 7, Rule 130 of the Revised Rules of Court. According to them, the
Lagdameo and Young Group never pleaded in their pleading that the
"Agreement" failed to express the true intent of the parties.
The parol evidence Rule under Rule 130 provides:
"Evidence of written agreements — When the terms of an agreement
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have been reduced to writing, it is to be considered as containing all such
terms, and therefore, there can be, between the parties and their
successors in interest, no evidence of the terms of the agreement other
than the contents of the writing, except in the following cases:
(a) Where a mistake or imperfection of the writing, or its failure to
express the true intent and agreement of the parties or the validity of the
agreement is put in issue by the pleadings.
(b) When there is an intrinsic ambiguity in the writing.
Contrary to ASI Group's stand, the Lagdameo and Young Group pleaded in their
Reply and Answer to Counterclaim in SEC Case No. 2417 that the Agreement
failed to express the true intent of the parties, to wit:
xxx xxx xxx
"4. While certain provisions of the Agreement would make it appear
that the parties thereto disclaim being partners or joint venturers such
disclaimer is directed at third parties and is not inconsistent with, and
does not preclude, the existence of two distinct groups of stockholders
in Saniwares one of which (the Philippine Investors) shall constitute the
majority, and the other (ASI) shall constitute the minority stockholder. In
any event, the evident intention of the Philippine Investors and ASI in
entering into the Agreement is to enter into a joint venture enterprise, and
if some words in the Agreement appear to be contrary to the evident
intention of the parties, the latter shall prevail over the former (Art. 1370,
New Civil Code). The various stipulations of a contract shall be interpreted
together attributing to the doubtful ones that sense which may result
from all of them taken jointly (Art. 1374, New Civil Code). Moreover, in
order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered.
(Art. 1371, New Civil Code). (Part I, Original Records, SEC Case No. 2417).
Section 5 (a) of the agreement uses the word "designated" and not "nominated"
or "elected" in the selection of the nine directors on a six to three ratio. Each
group is assured of a fixed number of directors in the board.
Moreover, ASI in its communications referred to the enterprise as joint venture.
Baldwin Young also testified that Section 16(c) of the Agreement that "Nothing
herein contained shall be construed to constitute any of the parties hereto
partners or joint venturers in respect of any transaction hereunder" was merely
to obviate the possibility of the enterprise being treated as partnership for tax
purposes and liabilities to third parties.
Quite often, Filipino entrepreneurs in their desire to develop the industrial and
manufacturing capacities of a local firm are constrained to seek the technology
and marketing assistance of huge multinational corporations of the developed
world. Arrangements are formalized where a foreign group becomes a minority
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owner of a firm in exchange for its manufacturing expertise, use of its brand
names, and other such assistance. However, there is always a danger from such
arrangements. The foreign group may, from the start, intend to establish its own
sole or monopolistic operations and merely uses the joint venture arrangement
to gain a foothold or test the Philippine waters, so to speak. Or the covetousness
may come later. As the Philippine firm enlarges its operations and becomes
profitable, the foreign group undermines the local majority ownership and
actively tries to completely or predominantly take over the entire company. This
undermining of joint ventures is not consistent with fair dealing to say the least.
To the extent that such subversive actions can be lawfully prevented, the courts
should extend protection especially in industries where constitutional and legal
requirements reserve controlling ownership to Filipino citizens. cdll
The Lagdameo Group stated in their appellees' brief in the Court of Appeals:
"In fact, the Philippine Corporation Code itself recognizes the right of
stockholders to enter into agreements regarding the exercise of their
voting rights.
"'Sec. 100. Agreements by stockholders. —
xxx xxx xxx
"In short, even assuming that sec. 5(a) of the Agreement relating to the
designation or nomination of directors restricts the right of the
Agreement's signatories to vote for directors, such contractual provision,
as correctly held by the SEC, is valid and binding upon the signatories
thereto, which include appellants." (Rollo G.R. No. 75951, pp. 90-94).
In regard to the question as to whether or not the ASI group may vote their
additional equity during elections of Saniwares' board of directors, the Court of
Appeals correctly stated:
"As in other joint venture companies, the extent of ASI's participation in
the management of the corporation is spelled out in the Agreement.
Section 5(a) hereof says that three of the nine directors shall be
designated by ASI and the remaining six by the other stockholders, i.e.,
the Filipino stockholders. This allocation of board seats is obviously in
consonance with the minority position of ASI.
"On the one hand, the clearly established minority position of ASI and the
contractual allocation of board seats cannot be disregarded. On the other
hand, the rights of the stockholders to cumulative voting should also be
protected.
The ASI Group and petitioner Salazar, now reiterate their theory that the ASI
Group has the right to vote their additional equity pursuant to Section 24 of the
Corporation Code which gives the stockholders of a corporation the right to
cumulate their votes in electing directors. Petitioner Salazar adds that this right if
granted to the ASI Group would not necessarily mean a violation of the Anti-
Dummy Act (Commonwealth Act 108, as amended). He cites section 2-a thereof
which provides:
"And provided finally that the election of aliens as members of the board
of directors or governing body of corporations or associations engaging
in partially nationalized activities shall be allowed in proportion to their
allowable participation or share in the capital of such entities.
(amendments introduced by Presidential Decree 715, section 1,
promulgated May 28, 1975)"
The ASI Group's argument is correct within the context of Section 24 of the
Corporation Code. The point of query, however, is whether or not that provision
is applicable to a joint venture with clearly defined agreements:
"The legal concept of a joint venture is of common law origin. It has no
precise legal definition, but it has been generally understood to mean an
organization formed for some temporary purpose. (Gates v. Megargel,
266 Fed. 811 [1920]) It is in fact hardly distinguishable from the
partnership, since their elements are similar — community of interest in
the business, sharing of profits and losses, and a mutual right of control.
(Blackner v. McDermott, 176 F. 2d. 498, [1949]; Carboneau v. Peterson,
95 P. 2d., 1043 [1939]; Buckley v. Chadwick, 45 Cal. 2d. 183, 288 P. 2d.
12 289 P. 2d. 242 [1955]). The main distinction cited by most opinions in
common law jurisdictions is that the partnership contemplates a general
business with some degree of continuity, while the joint venture is formed
for the execution of a single transaction, and is thus of a temporary
nature. (Tufts v. Mann. 116 Cal. App. 170, 2 P. 2d. 500 [1931]; Harmon v.
Martin, 395 Ill. 595, 71 NE 2d. 74 [1947]; Gates v. Megargel 266 Fed. 811
[1920]). This observation is not entirely accurate in this jurisdiction, since
under the Civil Code, a partnership may be particular or universal, and a
particular partnership may have for its object a specific undertaking. (Art.
1783, Civil Code). It would seem therefore that under Philippine law, a joint
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venture is a form of partnership and should thus be governed by the law
of partnerships. The Supreme Court has however recognized a distinction
between these two business forms, and has held that although a
corporation cannot enter into a partnership contract, it may however
engage in a joint venture with others. (At p. 12, Tuazon v. Bolaños, 95
Phil. 906 [1954]) (Campos and Lopez — Campos Comments, Notes and
Selected Cases, Corporation Code 1981).
Moreover, the usual rules as regards the construction and operations of contracts
generally apply to a contract of joint venture. (O'Hara v. Harman 14 App. Dev.
(167) 43 NYS 556).
Bearing these principles in mind, the correct view would be that the resolution of
the question of whether or not the ASI Group may vote their additional equity
lies in the agreement of the parties.
Necessarily, the appellate court was correct in upholding the agreement of the
parties as regards the allocation of director seats under Section 5 (a) of the
"Agreement," and the right of each group of stockholders to cumulative voting in
the process of determining who the group's nominees would be under Section
3(a) (1) of the "Agreement." As pointed out by SEC, Section 5(a) of the
Agreement relates to the manner of nominating the members of the board of
directors while Section 3 (a) (1) relates to the manner of voting for these
nominees.
This is the proper interpretation of the Agreement of the parties as regards the
election of members of the board of directors.
To allow the ASI Group to vote their additional equity to help elect even a Filipino
director who would be beholden to them would obliterate their minority status
as agreed upon by the parties. As aptly stated by the appellate court:
". . . . ASI, however, should not be allowed to interfere in the voting within
the Filipino group. Otherwise, ASI would be able to designate more than
the three directors it is allowed to designate under the Agreement, and
may even be able to get a majority of the board seats, a result which is
clearly contrary to the contractual intent of the parties.
"Such a ruling will give effect to both the allocation of the board seats and
the stockholder's right to cumulative voting. Moreover, this ruling will also
give due consideration to the issue raised by the appellees on possible
violation or circumvention of the Anti-Dummy Law (Com. Act No. 108, as
amended) and the nationalization requirements of the Constitution and
the laws if ASI is allowed to nominate more than three directors." (At p.
39, Rollo, 75875).
With these findings, we affirm the decisions of the SEC Hearing Officer and SEC
which were impliedly affirmed by the appellate court declaring Messrs. Wolfgang
Aurbach, John Griffin, David P. Whittingham, Ernesto V. Lagdameo, Baldwin
Young, Raul A. Boncan, Ernesto R. Lagdameo, Jr., Enrique Lagdameo, and George
F. Lee as the duly elected directors of Saniwares at the March 8, 1983 annual
stockholders' meeting.
On the other hand, the Lagdameo and Young Group (petitioners in G.R. No.
75951 ) object to a cumulative voting during the election of the board of
directors of the enterprise as ruled by the appellate court and submits that the
six (6) directors allotted the Filipino stockholders should be selected by consensus
pursuant to section 5 (a) of the Agreement which uses the word "designate"
meaning "nominate, delegate or appoint."
They also stress the possibility that the ASI Group might take control of the
enterprise if the Filipino stockholders are allowed to select their nominees
separately and not as a common slot determined by the majority of their group.
Section 5(a) of the Agreement which uses the word designates in the allocation
of board directors should not be interpreted in isolation. This should be construed
in relation to section 3 (a) (1 ) of the Agreement. As we stated earlier, section
3(a) (1 ) relates to the manner of voting for these nominees which is cumulative
voting while section 5(a) relates to the manner of nominating the members of
the board of directors. The petitioners in G.R. No. 75951 agreed to this procedure,
hence, they cannot now impugn its legality.
The insinuation that the ASI Group may be able to control the enterprise under
the cumulative voting procedure cannot, however, be ignored. The validity of the
cumulative voting procedure is dependent on the directors thus elected being
genuine members of the Filipino group, not voters whose interest is to increase
the ASI share in the management of Saniwares. The joint venture character of
the enterprise must always be taken into account, so long as the company exists
under its original agreement. Cumulative voting may not be used as a device to
enable ASI to achieve stealthily or indirectly what they cannot accomplish
openly. There are substantial safeguards in the Agreement which are intended to
preserve the majority status of the Filipino investors as well as to maintain the
minority status of the foreign investors group as earlier discussed. They should
be maintained. cdll
WHEREFORE, the petitions in G.R. Nos. 75975-76 and G.R. No. 75875 are
DISMISSED and the petition in G.R. No. 75951 is partly GRANTED. The amended
decision of the Court of Appeals is MODIFIED in that Messrs. Wolfgang Aurbach,
John Griffin, David Whittingham, Ernesto V. Lagdameo, Baldwin Young, Raul A.
Boncan, Ernesto R. Lagdameo, Jr., Enrique Lagdameo, and George F. Lee are
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declared as the duly elected directors of Saniwares at the March 8, 1983 annual
stockholders' meeting. In all other respects, the questioned decision is AFFIRMED.
Costs against the petitioners in G.R. Nos. 75975-76 and G.R. No. 75875.
SO ORDERED.
Fernan C.J., Bidin and Cortés, JJ., concur.
Feliciano, J., took no part.
SYLLABUS
DECISION
GUTIERREZ, JR. , J : p
The subject matter of these consolidated petitions is the decision of the Court of
Appeals in CA-G.R. CV No. 66195 which modi ed the decision of the then Court of First
Instance of Manila in Civil Case No. 66135. The plaintiff's complaint (petitioner in G.R.
No. 84197) against all defendants (respondents in G.R. No. 84197) was dismissed but
in all other respects the trial court's decision was affirmed. LLpr
It is therefore clear that the petitioner never had the intention to form a
corporation with the respondents despite his representations to them. This gives
credence to the cross-claims of the respondents to the effect that they were induced
and lured by the petitioner to make contributions to a proposed corporation which was
never formed because the petitioner reneged on their agreement. Maglana alleged in
his cross-claim:
". . . that sometime in early 1965, Jacob Lim proposed to Francisco
Cervantes and Maglana to expand his airline business. Lim was to procure two
DC-3's from Japan and secure the necessary certi cates of public convenience
and necessity as well as the required permits for the operation thereof. Maglana
sometime in May 1965, gave Cervantes his share of P75,000.00 for delivery to
Lim which Cervantes did and Lim acknowledged receipt thereof Cervantes,
likewise, delivered his share of the undertaking. Lim in an undertaking sometime
on or about August 9, 1965, promised to incorporate his airline in accordance
with their agreement and proceeded to acquire the planes on his own account.
Since then up to the ling of this answer, Lim has refused, failed and still
refuses to set up the corporation or return the money of Maglana."
(Record on Appeal, pp. 337-338).