(Norberto), formed a partnership to engage in the trucking

HEIRS OF JOSE LIM, G.R. No. 172690 business. Initially, with a contribution of P50,000.00 each, they
represented by ELENITO LIM, purchased a truck to be used in the hauling and transport of
Petitioners, Present: lumber of the sawmill. Jose managed the operations of this
trucking business until his death on August 15, 1981. Thereafter,
CORONA, J., Jose's heirs, including Elfledo, and partners agreed to continue
Chairperson, the business under the management of Elfledo. The shares in the
VELASCO, JR., partnership profits and income that formed part of the estate of
- versus - NACHURA, Jose were held in trust by Elfledo, with petitioners' authority for
DEL CASTILLO,* and Elfledo to use, purchase or acquire properties using said funds.
MENDOZA, JJ.
Petitioners also alleged that, at that time, Elfledo was a fresh
Promulgated: commerce graduate serving as his fathers driver in the trucking
JULIET VILLA LIM, business. He was never a partner or an investor in the business
Respondent. March 3, 2010 and merely supervised the purchase of additional trucks using the
income from the trucking business of the partners. By the time
Before this Court is a Petition for Review on Certiorari[1] under the partnership ceased, it had nine trucks, which were all
Rule 45 of the Rules of Civil Procedure, assailing the Court of registered in Elfledo's name. Petitioners asseverated that it was
Appeals (CA) Decision[2] dated June 29, 2005, which reversed also through Elfledos management of the partnership that he was
and set aside the decision[3] of the Regional Trial Court (RTC) able to purchase numerous real properties by using the profits
of Lucena City, dated April 12, 2004. 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.
The facts of the case are as follows:
On May 18, 1995, Elfledo died, leaving respondent as his sole
Petitioners are the heirs of the late Jose Lim (Jose), surviving heir. Petitioners claimed that respondent took over the
namely: Jose's widow Cresencia Palad (Cresencia); and their administration of the aforementioned properties, which belonged
children Elenito, Evelia, Imelda, Edelyna and Edison, all to the estate of Jose, without their consent and approval.
surnamed Lim (petitioners), represented by Elenito Lim (Elenito). Claiming that they are co-owners of the properties, petitioners
They filed a Complaint[4] for Partition, Accounting and required respondent to submit an accounting of all income, profits
Damages against respondent Juliet Villa Lim (respondent), and rentals received from the estate of Elfledo, and to surrender
widow of the late Elfledo Lim (Elfledo), who was the eldest son of the administration thereof. Respondent refused; thus, the filing of
Jose and Cresencia. this case.

Petitioners alleged that Jose was the liaison officer of Interwood Respondent traversed petitioners' allegations and claimed that
Sawmill in Cagsiay, Mauban, Quezon. Sometime in 1980, Jose, Elfledo was himself a partner of Norberto and
together with his friends Jimmy Yu (Jimmy) and Norberto Uy Jimmy. Respondent also claimed that per testimony of
1
Cresencia, sometime in 1980, Jose gave Elfledo P50,000.00 as
the latter's capital in an informal partnership with Jimmy and
Norberto. When Elfledo and respondent got married in 1981, the
partnership only had one truck; but through the efforts of Elfledo,
the business flourished. Other than this trucking business,
Elfledo, 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 Elfledo 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 Elfledo could have held in trust. Respondent
maintained that all the properties involved in this case were
purchased and acquired through her and her husbands 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:
1) Ordering the partition of the above-mentioned properties
equally between the plaintiffs and heirs of Jose Lim and the
defendant Juliet Villa-Lim; and
2) Ordering the defendant to submit an accounting of all incomes,
profits and rentals received by her from said properties.
SO ORDERED.
Aggrieved, respondent appealed to the CA.
On June 29, 2005, the CA reversed and set aside the RTC's
decision, dismissing petitioners' complaint for lack of merit.
Undaunted, petitioners filed their Motion for
[5]
Reconsideration, which the CA, however, denied in its
Resolution[6] dated May 8, 2006.
Hence, this Petition, raising the sole question, viz.:
IN THE APPRECIATION BY THE COURT OF THE EVIDENCE
SUBMITTED BY THE PARTIES, CAN THE TESTIMONY OF
ONE OF THE PETITIONERS BE GIVEN GREATER WEIGHT
THAN THAT BY A FORMER PARTNER ON THE ISSUE OF THE
IDENTITY OF THE OTHER PARTNERS IN THE
PARTNERSHIP?[7]
In essence, petitioners argue that according to the testimony of
Jimmy, the sole surviving partner, Elfledo 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 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,
2
calibration, and re-weighing of the factual findings 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 findings was
fully justified.[9]
We resolve first 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 certiorariunder 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. [10] When
supported by substantial evidence, the findings 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 finding grounded entirely on
speculation, surmises and conjectures;
(2) When the inference made is manifestly mistaken, absurd or
impossible;
(3) Where there is a grave abuse of discretion;
(4) When the judgment is based on a misapprehension of facts;
(5) When the findings of fact are conflicting;
(6) When the Court of Appeals, in making its findings, 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 findings of fact are conclusions without citation of
specific 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 findings of fact of the Court of Appeals are
premised on the supposed absence of evidence and contradicted
by the evidence on record.[11]
We note, however, that the findings 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 profits and losses among them. A
contract of partnership is defined by the Civil Code as one where
two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of
dividing the profits among themselves.[12]
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.
3
A careful review of the records persuades us to affirm 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 Elfledo; and (2) all the properties acquired by
Elfledo 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--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.[13] 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 profits made by the use of the property;
(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 profits of a business
is a prima facie evidence that he is a partner in the business, but
no such inference shall be 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;
(c) As an annuity to a widow or representative of a deceased
partner;
(d) As interest on a loan, though the amount of payment vary with
the profits of the business;
(e) As the consideration for the sale of a goodwill of a business
or other property by installments or otherwise.
Applying the legal provision to the facts of this case, the following
circumstances tend to prove that Elfledo was himself the partner
4
of Jimmy and Norberto: 1) Cresencia testified that Jose gave
Elfledo P50,000.00, as share in the partnership, on a date that
coincided with the payment of the initial capital in the
partnership;[15] (2) Elfledo ran the affairs of the partnership,
wielding absolute control, power and authority, without any
intervention or opposition whatsoever from any of petitioners
herein;[16] (3) all of the properties, particularly the nine trucks of
the partnership, were registered in the name of Elfledo; (4) Jimmy
testified that Elfledo did not receive wages or salaries from the
partnership, indicating that what he actually received were shares
of the profits of the business;[17] and (5) none of the petitioners,
as heirs of Jose, the alleged partner, demanded periodic
accounting from Elfledo during his lifetime. As repeatedly
stressed in Heirs of Tan Eng Kee,[18] 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 Elfledo 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
Elfledo and respondent engaged in other
businesses. Edison even admitted that Elfledo also sold
Interwood lumber as a sideline.[19] 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.[20]
Finally, we agree with the judicious findings of the CA, to wit:
The above testimonies prove that Elfledo 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 Elfledo 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 Elfredos 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.
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 flourished. If it were true that it was Jose Lim
and not Elfledo who was the partner, then upon his
death the partnership should have
been dissolved and its assets liquidated. On 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. Elfledo did not limit himself to the business of their
partnership but engaged in other lines of businesses as well.
In sum, we find no cogent reason to disturb the findings 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.
5
G.R. No. 183374 June 29, 2010
MARSMAN DRYSDALE LAND, INC., Petitioner,
vs.
PHILIPPINE GEOANALYTICS, INC. AND GOTESCO
PROPERTIES, INC., Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 183376
GOTESCO PROPERTIES, INC., Petitioner,
vs.
MARSMAN DRYSDALE LAND, INC. AND PHILIPPINE
GEOANALYTICS, INC., Respondents.
DECISION
CARPIO MORALES, J.:
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 office 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:
4.2.1. The amount of PESOS: FIFTY MILLION (P50,000,000.00)
upon signing of this Agreement.
4.2.2. The balance of PESOS: THREE HUNDRED SEVENTY
MILLION (P370,000,000.00) shall be paid based on progress
billings, relative to the development and construction of the
Building, but shall in no case exceed ten (10) months from
delivery of the Property in a Buildable condition as defined in
section 4.1.
A joint account shall be opened and maintained by both Parties
for handling of said balance, among other Project concerns.
4.3. Funding and Financing
4.3.1 Construction funding for the Project shall be obtained from
the cash contribution of [Gotesco].
4.3.2 Subsequent funding shall be obtained from the pre-selling
of units in the Building or, when necessary, from loans from
various banks or financial institutions. [Gotesco] shall arrange the
required funding from such banks or financial institutions, under
such terms and conditions which will provide financing rates
favorable to the Parties.
4.3.3 [Marsman Drysdale] shall not be obligated to fund the
Project as its contribution is limited to the Property.
4.3.4 If the cost of the Project exceeds the cash contribution of
[Gotesco], the proceeds obtained from the pre-selling of units and
proceeds from loans, the Parties shall agree on other sources
and terms of funding such excess as soon as practicable.
4.3.5 x x x x.
4.3.6 x x x x.
4.3.7 x x x x.
4.3.8 All funds advanced by a Party (or by third parties in
substitution for advances from a Party) shall be repaid by the JV.
4.3.9 If any Party agrees to make an advance to the Project but
fails to do so (in whole or in part) the other party may advance the
shortfall and the Party in default shall indemnify the Party making
the substitute advance on demand for all of its losses, costs and
expenses incurred in so doing. (emphasis supplied; underscoring
in the original)
6
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.
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.
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 filed on November 11, 1999 a complaint for
collection of sum of money and damages at the Regional Trial
Court (RTC) of Quezon City against Marsman 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;
(2) the sum of P200,000.00 as exemplary damages;
(3) the sum of P200,000.00 as and for attorney’s fees; and
(4) costs of suit.
The cross-claim of defendant [Marsman Drysdale] against
defendant [Gotesco] is hereby GRANTED as follows:
a) Defendant [Gotesco] is ordered to reimburse co-defendant
[Marsman Drysdale] in the amount of P535,353.[50] in
accordance with the [JVA].
b) Defendant [Gotesco] is further ordered to pay co-defendant
[Marsman Drysdale] the sum of P100,000.00 as and for
attorney’s fees.
SO ORDERED. (underscoring in the original; emphasis supplied)
Marsman Drysdale moved for partial reconsideration, contending
that it should not have been held jointly liable with Gotesco on
PGI’s claim as well as on the awards of exemplary damages and
attorney’s fees. The motion was, by Resolution of October 28,
2005, denied.
Both Marsman Drysdale and Gotesco appealed to the Court of
Appeals which, by Decision of January 28, 2008,10 affirmed with
modification the decision of the trial court. Thus the appellate
court disposed:
WHEREFORE, premises considered, the instant appeal is
PARTLY GRANTED. The assailed Decision dated June 2, 2004
and the Resolution dated October 28, 2005 of the RTC of Quezon
City, Branch 226, in Civil Case No. Q99-39248 are hereby
AFFIRMED with MODIFICATION deleting the award of
exemplary damages in favor of [PGI] and the P100,000.00
attorney’s fees in favor of [Marsman Drysdale] and ordering
defendant-appellant [Gotesco] to REIMBURSE [Marsman
Drysdale] 50% of the aggregate sum due [PGI], instead of the
lump sum P535,353.00 awarded by the RTC. The rest of the
Decision stands.
7
SO ORDERED. (capitalization and emphasis in the original;
underscoring supplied)
In partly affirming 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."11
Their motions for partial reconsideration having been
denied,12 Marsman Drysdale and Gotesco filed separate
petitions for review with the Court which were docketed as G.R.
Nos. 183374 and 183376, respectively. By Resolution of
September 8, 2008, the Court consolidated the petitions.
In G.R. No. 183374, Marsman Drysdale imputes error on the
appellate court in
A. …ADJUDGING [MARSMAN DRYSDALE] WITH JOINT
LIABILITY AFTER CONCEDING THAT [GOTESCO] SHOULD
ULTIMATELY BE SOLELY LIABLE TO [PGI].
B. …AWARDING ATTORNEY’S FEES IN FAVOR OF [PGI]…
C. …IGNORING THE FACT THAT [PGI] DID NOT COMPLY
WITH THE REQUIREMENT OF "SATISFACTORY
PERFORMANCE" OF ITS PRESTATION WHICH, PURSUANT
TO THE TECHNICAL SERVICES CONTRACT, IS THE
CONDITION SINE QUA NON TO COMPENSATION.
D. …DISREGARDING CLEAR EVIDENCE SHOWING
[MARSMAN DRYSDALE’S] ENTITLEMENT TO AN AWARD OF
ATTORNEY’S FEES.13
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. 14
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 findings 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 findings 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 findings of
facts are contradicted by the evidence on record,15 these
extenuating grounds find no application in the present petitions.
At all events, the Court is convinced that PGI had more than
sufficiently established its claims against the joint venture. In fact,
Marsman Drysdale had long recognized PGI’s contractual claims
when it (PGI) received a Certificate of Payment16 from the joint
venture’s project manager17 which was endorsed to Gotesco for
processing and payment.18
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 financing
mechanism for the project, the same cannot be used to defeat
the lawful claim of PGI against the two joint venturers-partners.
8
The TSC clearly listed the joint venturers Marsman Drysdale and
Gotesco as the beneficial owner of the project,19 and all billing invoices
indicated the consortium therein as the client.
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.1avvphi1 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.20 Article 1797 of the Civil Code provides:
Art. 1797. The losses and profits shall be distributed in conformity with
the agreement. If only the share of each partner in the profits has been
agreed upon, the share of each in the losses shall be in the same
proportion.
In the absence of stipulation, the share of each in the profits and losses
shall be in proportion to what he may have contributed, but the industrial
partner shall not be liable for the losses. As for the profits, the industrial
partner shall receive such share as may be just and equitable under
the circumstances. If besides his services he has contributed capital,
he shall also receive a share in the profits in proportion to his capital.
(emphasis and underscoring supplied)
In the JVA, Marsman Drysdale and Gotesco agreed on a 50-50 ratio on
the proceeds of the project.21 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 modified, 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.
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 benefit 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 demand23as 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.24 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 final and executory until it is fully satisfied. The
appealed decision is, in all other respects, affirmed.
Costs against petitioners Marsman Drysdale and Gotesco.
SO ORDERED.
9
 The pertinent facts are as follows:

Republic of the Philippines The spouses Andres Jarantilla and Felisa Jaleco were survived
Supreme Court by eight children: Federico, Delfin, Benjamin, Conchita, Rosita,
Manila Pacita, Rafael and Antonieta.[4] Petitioner Federico Jarantilla, Jr.
FIRST DIVISION 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.
FEDERICO JARANTILLA, JR., G.R. No. 154486
Petitioner, Petitioner was one of the defendants in the complaint before the
Present: RTC while Antonieta Jarantilla, his aunt, was the plaintiff
therein. His co-respondents before he joined his aunt Antonieta
- versus - CORONA, C.J., in her complaint, were his late aunt Conchita Jarantillas husband
Chairperson, Buenaventura Remotigue, who died during the pendency of the
LEONARDO-DE CASTRO, case, his cousin Cynthia Remotigue, the adopted daughter of
ANTONIETA JARANTILLA, PERALTA,* Conchita Jarantilla and Buenaventura Remotigue, and his
BUENAVENTURA ABAD,** and brothers Doroteo and Tomas Jarantilla.[6]
REMOTIGUE,SUBSTITUTED BY PEREZ, JJ.
CYNTHIA REMOTIGUE, DOROTEO In 1948, the Jarantilla heirs extrajudicially partitioned amongst
JARANTILLA and TOMAS Promulgated: themselves the real properties of their deceased parents.[7] With
JARANTILLA, the exception of the real property adjudicated to Pacita Jarantilla,
Respondents. December 1, 2010 the heirs also agreed to allot the produce of the said real
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - properties for the years 1947-1949 for the studies of Rafael and
- - - - -x Antonieta Jarantilla.[8]

In the same year, the spouses Rosita Jarantilla and Vivencio

DECISION
LEONARDO-DE CASTRO, J.:
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.
Deocampo entered into an agreement with the spouses
Buenaventura Remotigue and Conchita Jarantilla to provide
mutual assistance to each other by way of financial 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,[10] voluntarily agreed to completely dissolve
their joint business relationship/arrangement.[11]

10
On April 29, 1957, the spouses Buenaventura and Conchita
Remotigue executed a document wherein they acknowledged
that while registered only in Buenaventura Remotigues 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 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 Jarantillas stated as eight thousand
pesos (P8,000.00) and Federico Jarantilla, Jr.s as five thousand
pesos (P5,000.00).[12]
The present case stems from the amended complaint[13] dated
April 22, 1987 filed 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 five 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[14] (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,[15] 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 Antonietas
8% share was limited to the businesses enumerated therein.With
regard to Antonietas claim in their other corporations and
businesses, the respondents said these should also be limited to
the number of her shares as specified in the respective articles of
incorporation. The respondents denied using the partnerships
income to purchase the subject real properties and said that the
certificates of title should be binding on her.[16]
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[17] with Antonieta Jarantilla
wherein he supported Antonietas 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 plaintiffs 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.[18]
The RTC, in an Order[19] dated March 25, 1992, approved the
Joint Motion to Approve Compromise Agreement[20] 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
11
defendants Cynthia Remotigue, Doroteo Jarantilla and Tomas was limited to the businesses enumerated in the
Jarantilla ordering the latter: Acknowledgement of Participating Capital. On July 30, 2002, the
Court of Appeals rendered the herein challenged decision setting
1. to deliver to the plaintiff her 8% share or its equivalent aside the RTCs decision, as follows:
amount on the real properties covered by TCT Nos. 35655,
338398, 338399 & 335395, all of the Registry of Deeds of Quezon WHEREFORE, the decision of the trial court, dated 18 December
City; TCT Nos. (18303)23341, 142882 & 490007(4615), all of the 1992 is SET ASIDE and a new one is hereby entered ordering
Registry of Deeds of Rizal; and TCT No. T-6309 of the Registry that:
of Deeds of Cotabato based on their present market value;
(1) after accounting, plaintiff Antonieta Jarantilla be given her
2. to deliver to the plaintiff her 8% share or its equivalent share of 8% in the assets and profits of Manila Athletic Supply,
amount on the Remotigue Agro-Industrial Corporation, Manila Remotigue Trading in Iloilo City and Remotigue Trading in
Athletic Supply, Inc., MAS Rubber Products, Inc. and Buendia Cotabato City;
Recapping Corporation based on the shares of stocks present
book value; (2) after accounting, defendant Federico Jarantilla, Jr. be given
his share of 6% of the assets and profits of the above-mentioned
3. to account for the assets and income of the co-ownership enterprises; and, holding that
and deliver to plaintiff her rightful share thereof equivalent to 8%;
(3) plaintiff Antonieta Jarantilla is a stockholder in the following
4. to pay plaintiff, jointly and severally, the sum of P50,000.00 corporations to the extent stated in their Articles of Incorporation:
as moral damages;
(a) Rural Bank of Barotac Nuevo, Inc.;
5. to pay, jointly and severally, the sum of P50,000.00 as
attorneys fees; and (b) MAS Rubber Products, Inc.;

6. to pay, jointly and severally, the costs of the suit.[21] (c) Manila Athletic Supply, Inc.; and

(d) B. Remotigue Agro-Industrial Development Corp.

Both the petitioner and the respondents appealed this decision to
the Court of Appeals. The petitioner claimed that the RTC erred (4) No costs.[23]
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.[22] The respondents, on August 20, 2002, filed a Motion for Partial
Reconsideration but the Court of Appeals denied this in a
While the Court of Appeals agreed to some of the RTCs factual Resolution[24] dated March 21, 2003.
findings, it also established that Antonieta Jarantilla was not part
of the partnership formed in 1946, and that her 8% share
12
Antonieta Jarantilla filed before this Court her own petition for
review on certiorari[25] dated September 16, 2002, assailing the
Court of Appeals decision on similar grounds and similar
assignments of errors as this present case[26] but it was dismissed
on November 20, 2002 for failure to file the appeal within the
reglementary period of fifteen (15) days in accordance with
Section 2, Rule 45 of the Rules of Court.[27]
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
Jarantillas 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 petitioners 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.[29]
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]
Since the Court of Appeals did not fully adopt the factual findings
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 affirmed 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
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.[31]
The Court of Appeals, on the other hand, agreed with the RTC as
to Antonietas 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
13
Appeals ruled that Antonietas claim of 8% is based on the
Acknowledgement of Participating Capital, a duly notarized
document which was specific 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 partnerships
businesses. The Court of Appeals also said that her claim in the
respondents real properties was more precarious as these were
all covered by certificates of title which served as the best
evidence as to all the matters contained therein.[32] Since
petitioners claim was essentially the same as Antonietas, 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 findings of the trial court, when confirmed by the Court of
Appeals, are final 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 finding 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 findings of fact
are conflicting; (6) when the Court of Appeals, in making its
findings, went beyond the issues of the case and the same is
contrary to the admissions of both appellant and appellee; (7)
when the findings of the Court of Appeals are contrary to those of
the trial court; (8) when the findings of fact are conclusions
without citation of specific 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 findings of fact of the Court of Appeals are premised on the
absence of evidence and are contradicted by the evidence on
record.[33]
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 affirmed in the 1957 Acknowledgement of Participating
Capital.
There is a co-ownership when an undivided thing or right belongs
to different persons.[34] 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
profits among themselves.[35] The Court, in Pascual v. The
Commissioner of Internal Revenue,[36] quoted the concurring
opinion of Mr. Justice Angelo Bautista in Evangelista v. The
Collector of Internal Revenue[37] 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 profits made by the use of the property;
(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;
From the above it appears that the fact that those who agree to
form a co- ownership share or do not share any profits 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 profit, the presence of other elements
constituting partnership is necessary, such as the clear intent to
14
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 profit 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.
A joint purchase of land, by two, does not constitute a co-
partnership in respect thereto; nor does an agreement to share
the profits and losses on the sale of land create a partnership; the
parties are only tenants in common.
Where plaintiff, his brother, and another agreed to become
owners of a single tract of realty, holding as tenants in common,
and to divide the profits of disposing of it, the brother and the
other not being entitled to share in plaintiffs commission, no
partnership existed as between the three parties, whatever their
relation may have been as to third parties.
In order to constitute a partnership inter sese there must be: (a)
An intent to form the same; (b) generally participating in both
profits and losses; (c) and such a community of interest, as far as
third persons are concerned as enables each party to make
contract, manage the business, and dispose of the whole
property. x x x.
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.[38] (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 profits among the contracting parties. The first
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.[39] 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 profits. They have
admitted this fact, agreed to its veracity, and even submitted one
common documentary evidence to prove such partnership - the
Acknowledgement of Participating Capital.
As this case revolves around the legal effects of the
Acknowledgement of Participating Capital, it would be instructive
to examine the pertinent portions of this document:
ACKNOWLEDGEMENT OF
PARTICIPATING CAPITAL
KNOW ALL MEN BY THESE PRESENTS:
That we, the spouses Buenaventura Remotigue and Conchita
Jarantilla de Remotigue, both of legal age, Filipinos and residents
of Loyola Heights, Quezon City, P.I. hereby state:
That the Manila Athletic Supply at 712 Raon, Manila, the
Remotigue Trading of Calle Real, Iloilo City and the Remotigue
15
Trading, Cotabato Branch, Cotabato, P.I., all dealing in athletic
goods and equipments, and general merchandise are recorded
in their respective books with Buenaventura Remotigue as the
registered owner and are being operated by them as such:
That they are not the only owners of the capital of the three
establishments and their participation in the capital of the three
establishments together with the other co-owners as of the year
1952 are stated as follows:
1. Buenaventura Remotigue (TWENTY-FIVE P25,000.00
THOUSAND)
2. Conchita Jarantilla de Remotigue (TWENTY-FIVE
THOUSAND) 25,000.00
3. Vicencio Deocampo (FIFTEEN THOUSAND) 15,000.00
4. Rosita J. Deocampo (FIFTEEN THOUSAND).... 15,000.00
5. Antonieta Jarantilla (EIGHT THOUSAND).. 8,000.00
6. Rafael Jarantilla (SIX THOUSAND).. ... 6,000.00
7. Federico Jarantilla, Jr. (FIVE THOUSAND).. 5,000.00
8. Quintin Vismanos (TWO THOUSAND)... 2,000.00
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[40]
The Acknowledgement of Participating Capital is a duly notarized
document voluntarily executed by Conchita Jarantilla-Remotigue
and Buenaventura Remotigue in 1957.Petitioner does not dispute
its contents and is actually relying on it to prove his participation
in the partnership. Article 1797 of the Civil Code provides:
Art. 1797. The losses and profits shall be distributed in
conformity with the agreement. If only the share of each
partner in the profits has been agreed upon, the share of each in
the losses shall be in the same proportion.
In the absence of stipulation, the share of each partner in the
profits and losses shall be in proportion to what he may have
contributed, but the industrial partner shall not be liable for the
losses. As for the profits, the industrial partner shall receive such
share as may be just and equitable under the circumstances. If
besides his services he has contributed capital, he shall also
receive a share in the profits in proportion to his
capital. (Emphases supplied.)
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
specifically 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 petitioners share to the assets of the businesses
enumerated in the Acknowledgement of Participating
Capital.
16

Ramirez,[41]
In Villareal v. 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 first 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.[42]
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.[43] In Pigao v. Rabanillo,[44] 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 benefit of another.[45]
On proving the existence of a trust, this Court held that:
Respondent has presented only bare assertions that a trust was
created. Noting the need to prove the existence of a trust, this
Court has held thus:
As a rule, the burden of proving the existence of a trust is on the
party asserting its existence, and such proof must be clear and
satisfactorily show the existence of the trust and its elements.
While implied trusts may be proved by oral evidence, the
evidence must be trustworthy and received by the courts with
extreme caution, and should not be made to rest on loose,
equivocal or indefinite declarations. Trustworthy evidence is
required because oral evidence can easily be fabricated. [46]
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 partnerships 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
profits. 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
17
testimonies, to prove that the respondents did not have the means to
fund their other businesses and real properties without the partnerships
income. On the other hand, the respondents have not only, by
testimonial evidence, proven their case against the petitioner, but have
also presented sufficient 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.[47] 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.[48] Moreover, it is a rule in this jurisdiction that testimonial
evidence cannot prevail over documentary evidence.[49] This Court had
on several occasions, expressed our disapproval on using mere self-
serving testimonies to support ones claim. In Ocampo v. Ocampo,[50] a
case on partition of a co-ownership, we held that:
Petitioners assert that their claim of co-ownership of the property was
sufficiently 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.[51]
It is true that a certificate 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.[52] 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.[53]:
Indeed, a Torrens title is generally conclusive evidence of ownership of
the land 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
certificate of title are not required to go beyond what appears on its
face.[54]
As we have settled that this action never really was for partition of a co-
ownership, to permit petitioners 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 certificates of title, more so since plaintiffs
[petitioners] claims amount to a collateral attack, which is prohibited
under Section 48 of Presidential Decree No. 1529, the Property
Registration Decree.[55]
SEC. 48. Certificate not subject to collateral attack. A certificate of title
shall not be subject to collateral attack. It cannot be altered, modified,
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.[56] In Aguilar v.
Alfaro,[57] 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. x x x.
Petitioners only piece of documentary evidence is the
Acknowledgement of Participating Capital, which as discussed above,
failed to prove that the real properties he is claiming co-ownership of
were acquired out of the proceeds of the businesses covered by such
document. Therefore, petitioners theory has no factual or legal leg to
stand on.
WHEREFORE, the Petition is hereby DENIED and the Decision of the
Court of Appeals in CA-G.R. CV No. 40887, dated July 30, 2002
is AFFIRMED.
SO ORDERED.
18
G.R. No. 75875 December 15, 1989
WOLRGANG AURBACH, JOHN GRIFFIN, DAVID P.
WHITTINGHAM and CHARLES CHAMSAY, petitioners,
vs.
SANITARY WARES MANUFACTURING CORPORATOIN,
ERNESTO V. LAGDAMEO, ERNESTO R. LAGDAMEO, JR.,
ENRIQUE R. LAGDAMEO, GEORGE F. LEE, RAUL A.
BONCAN, BALDWIN YOUNG and AVELINO V.
CRUZ, respondents.
G.R. No. 75951 December 15, 1989
SANITARY WARES MANUFACTURING CORPORATION,
ERNESTO R. LAGDAMEO, ENRIQUE B. LAGDAMEO,
GEORGE FL .EE RAUL A. BONCAN, BALDWIN YOUNG and
AVELINO V. CRUX, petitioners,
vs.
THE COURT OF APPEALS, WOLFGANG AURBACH, JOHN
GRIFFIN, DAVID P. WHITTINGHAM, CHARLES CHAMSAY
and LUCIANO SALAZAR, respondents.
G.R. Nos. 75975-76 December 15, 1989
LUCIANO E. SALAZAR, petitioner,
vs.
SANITARY WARES MANUFACTURING CORPORATION,
ERNESTO V. LAGDAMEO, ERNESTO R. LAGDAMEO, JR.,
ENRIQUE R. LAGDAMEO, GEORGE F. LEE, RAUL A.
BONCAN, BALDWIN YOUNG, AVELINO V. CRUZ and the
COURT OF APPEALS, respondents.
Belo, Abiera & Associates for petitioners in 75875.
Sycip, Salazar, Hernandez & Gatmaitan for Luciano E. Salazar.
GUTIERREZ, JR., J.:
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."
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
(a) The Articles of Incorporation of the Corporation shall be
substantially in the form annexed hereto as Exhibit A and, insofar
as permitted under Philippine law, shall specifically provide for
(1) Cumulative voting for directors:
xxx xxx xxx
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 other six shall be
19
designated by the other stockholders of the Corporation. (pp. 51
& 53, Rollo of 75875)
At the request of ASI, the agreement contained provisions
designed to protect it as a minority group, including the grant of
veto powers over a number of corporate acts and the right to
designate certain officers, such as a member of the Executive
Committee whose vote was required for important corporate
transactions.
Later, the 30% capital stock of ASI was increased to 40%. The
corporation was also registered with the Board of Investments for
availment of incentives with the condition that at least 60% of the
capital stock of the corporation shall be owned by Philippine
nationals.
The joint enterprise thus entered into by the Filipino investors and
the American corporation prospered. Unfortunately, with the
business successes, there came a deterioration of the initially
harmonious relations between the two groups. According to the
Filipino group, a basic disagreement was due to their desire to
expand the export operations of the company to which ASI
objected as it apparently had other subsidiaries of joint joint
venture groups in the countries where Philippine exports were
contemplated. On March 8, 1983, the annual stockholders'
meeting was held. The meeting was presided by Baldwin Young.
The minutes were taken by the Secretary, Avelino Cruz. After
disposing of the preliminary items in the agenda, the stockholders
then proceeded to the election of the members of the board of
directors. The ASI group nominated three persons namely;
Wolfgang Aurbach, John Griffin and David P. Whittingham. The
Philippine investors nominated six, namely; Ernesto Lagdameo,
Sr., Raul A. Boncan, Ernesto R. Lagdameo, Jr., George F. Lee,
and Baldwin Young. Mr. Eduardo R, Ceniza then nominated Mr.
Luciano E. Salazar, who in turn nominated Mr. Charles Chamsay.
The chairman, Baldwin Young ruled the last two nominations out
of order on the basis of section 5 (a) of the Agreement, the
consistent practice of the parties during the past annual
stockholders' meetings to nominate only nine persons as
nominees for the nine-member board of directors, and the legal
advice of Saniwares' legal counsel. The following events then,
transpired:
... There were protests against the action of the Chairman and
heated 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
20
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,
Emesto V. Lagdameo, Baldwin Young, Raul A. Bonean 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 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.
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.
III. THE COURT OF APPEALS IMPOSES CONDITIONS AND
READS PROVISIONS INTO THE AGREEMENT OF THE
PARTIES WHICH WERE NOT THERE, WHICH ACTION IT
CANNOT LEGALLY DO. (p. 17, Rollo-75875)
Petitioner Luciano E. Salazar in G.R. Nos. 75975-76 assails the
amended decision on the following grounds:
11.1. ThatAmendedDecisionwouldsanctiontheCA'sdisregard 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 .
21
11.2. The Amended decision would likewise sanction the
deprivation of the property rights of stockholders without due
process of law in order that a favored group of stockholders may
be illegally benefitted and guaranteed a continuing monopoly of
the control of a corporation. (pp. 14-15, Rollo-75975-76)
On the other hand, the petitioners in G.R. No. 75951 contend that:
I Provisions which states:
THE AMENDED DECISION OF THE RESPONDENT COURT,
WHILE RECOGNIZING THAT THE STOCKHOLDERS OF
SANIWARES ARE DIVIDED INTO TWO BLOCKS, FAILS TO
FULLY ENFORCE THE BASIC INTENT OF THE AGREEMENT
AND THE LAW.
II
THE AMENDED DECISION DOES NOT CATEGORICALLY
RULE THAT PRIVATE PETITIONERS HEREIN WERE THE
DULY ELECTED DIRECTORS DURING THE 8 MARCH 1983
ANNUAL STOCKHOLDERS MEETING OF SANTWARES. (P.
24, Rollo-75951)
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.
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
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-GR 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
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
22
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 ajoint 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)
It has been ruled:
In an action at law, where there is evidence tending to prove that
the parties joined their efforts in furtherance of an enterprise for
their joint profit, the question whether they intended by their
agreement to create a joint adventure, or to assume some other
relation is a question of fact for the jury. (Binder v. Kessler v 200
App. Div. 40,192 N Y S 653; Pyroa v. Brownfield (Tex. Civ. A.)
238 SW 725; Hoge v. George, 27 Wyo, 423, 200 P 96 33 C.J. p.
871)
In the instant cases, our examination of important provisions of
the Agreement as well as the testimonial evidence presented by
the Lagdameo and Young Group shows that the parties agreed
to establish a joint venture and not a corporation. The history of
the organization of Saniwares and the unusual arrangements
which govern its policy making body are all consistent with a joint
venture and not with an ordinary corporation. As stated by the
SEC:
According to the unrebutted testimony of Mr. Baldwin Young, he
negotiated the Agreement with ASI in behalf of the Philippine
nationals. He testified that ASI agreed to accept the role of
minority vis-a-vis the Philippine National group of investors, on
the condition that the Agreement should contain provisions to
protect ASI as the minority.
An examination of the Agreement shows that certain provisions
were included to protect the interests of ASI as the minority. For
example, the vote of 7 out of 9 directors is required in certain
enumerated corporate acts [Sec. 3 (b) (ii) (a) of the Agreement].
ASI is contractually entitled to designate a member of the
Executive Committee and the vote of this member is required for
certain transactions [Sec. 3 (b) (i)].
The Agreement also requires a 75% super-majority vote for the
amendment of the articles and by-laws of Saniwares [Sec. 3 (a)
(iv) and (b) (iii)]. ASI is also given the right to designate the
president and plant manager [Sec. 5 (6)]. The Agreement further
provides that the sales policy of Saniwares shall be that which is
normally followed by ASI [Sec. 13 (a)] and that Saniwares should
not export "Standard" products otherwise than through ASI's
Export Marketing Services [Sec. 13 (6)]. Under the Agreement,
ASI agreed to provide technology and know-how to Saniwares
and the latter paid royalties for the same. (At p. 2).
xxx xxx xxx
It is pertinent to note that the provisions of the Agreement
requiring a 7 out of 9 votes of the board of directors for certain
actions, in effect gave ASI (which designates 3 directors under
the Agreement) an effective veto power. Furthermore, the grant
to ASI of the right to designate certain officers of the corporation;
the super-majority voting requirements for amendments of the
articles and by-laws; and most significantly to the issues of tms
case, the provision that ASI shall designate 3 out of the 9
directors and the other stockholders shall designate the other 6,
clearly indicate that there are two distinct groups in Saniwares,
namely ASI, which owns 40% of the capital stock and the
Philippine National stockholders who own the balance of 60%,
and that 2) ASI is given certain protections as the minority
stockholder.
Premises considered, we believe that under the Agreement there
are two groups of stockholders who established a corporation
23
with provisions for a special contractual relationship between the
parties, i.e., ASI and the other stockholders. (pp. 4-5)
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 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.
The Lagdameo Group stated in their appellees' brief in the Court
of Appeal
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
2. An agreement between two or more stockholders, if in writing
and signed by the parties thereto, may provide that in exercising
any voting rights, the shares held by them shall be voted as
therein provided, or as they may agree, or as determined in
accordance with a procedure agreed upon by them.
Appellants contend that the above provision is included in the
Corporation Code's chapter on close corporations and Saniwares
cannot be a close corporation because it has 95 stockholders.
Firstly, although Saniwares had 95 stockholders at the time of the
disputed stockholders meeting, these 95 stockholders are not
separate from each other but are divisible into groups
representing a single Identifiable interest. For example, ASI, its
nominees and lawyers count for 13 of the 95 stockholders. The
YoungYutivo family count for another 13 stockholders, the
Chamsay family for 8 stockholders, the Santos family for 9
stockholders, the Dy family for 7 stockholders, etc. If the
members of one family and/or business or interest group are
considered as one (which, it is respectfully submitted, they should
be for purposes of determining how closely held Saniwares is
there were as of 8 March 1983, practically only 17 stockholders
of Saniwares. (Please refer to discussion in pp. 5 to 6 of
appellees' Rejoinder Memorandum dated 11 December 1984
and Annex "A" thereof).
Secondly, even assuming that Saniwares is technically not a
close corporation because it has more than 20 stockholders, the
undeniable fact is that it is a close-held corporation. Surely,
appellants cannot honestly claim that Saniwares is a public issue
or a widely held corporation.
In the United States, many courts have taken a realistic approach
to joint venture corporations and have not rigidly applied
principles of corporation law designed primarily for public issue
corporations. These courts have indicated that express
24
arrangements between corporate joint ventures should be
construed with less emphasis on the ordinary rules of law usually
applied to corporate entities and with more consideration given to
the nature of the agreement between the joint venturers (Please
see Wabash Ry v. American Refrigerator Transit Co., 7 F 2d 335;
Chicago, M & St. P. Ry v. Des Moines Union Ry; 254 Ass'n. 247
US. 490'; Seaboard Airline Ry v. Atlantic Coast Line Ry; 240 N.C.
495,.82 S.E. 2d 771; Deboy v. Harris, 207 Md., 212,113 A 2d 903;
Hathway v. Porter Royalty Pool, Inc., 296 Mich. 90, 90, 295 N.W.
571; Beardsley v. Beardsley, 138 U.S. 262; "The Legal Status of
Joint Venture Corporations", 11 Vand Law Rev. p. 680,1958).
These American cases dealt with legal questions as to the extent
to which the requirements arising from the corporate form of joint
venture corporations should control, and the courts ruled that
substantial justice lay with those litigants who relied on the joint
venture agreement rather than the litigants who relied on the
orthodox principles of corporation law.
As correctly held by the SEC Hearing Officer:
It is said that participants in a joint venture, in organizing the joint
venture deviate from the traditional pattern of corporation
management. A noted authority has pointed out that just as in
close corporations, shareholders' agreements in joint venture
corporations often contain provisions which do one or more of the
following: (1) require greater than majority vote for shareholder
and director action; (2) give certain shareholders or groups of
shareholders power to select a specified number of directors; (3)
give to the shareholders control over the selection and retention
of employees; and (4) set up a procedure for the settlement of
disputes by arbitration (See I O' Neal, Close Corporations, 1971
ed., Section 1.06a, pp. 15-16) (Decision of SEC Hearing Officer,
P. 16)
Thirdly paragraph 2 of Sec. 100 of the Corporation Code does not
necessarily imply that agreements regarding the exercise of
voting rights are allowed only in close corporations. As Campos
and Lopez-Campos explain:
Paragraph 2 refers to pooling and voting agreements in
particular. Does this provision necessarily imply that these
agreements can be valid only in close corporations as defined by
the Code? Suppose that a corporation has twenty five
stockholders, and therefore cannot qualify as a close corporation
under section 96, can some of them enter into an agreement to
vote as a unit in the election of directors? It is submitted that there
is no reason for denying stockholders of corporations other than
close ones the right to enter into not voting or pooling agreements
to protect their interests, as long as they do not intend to commit
any wrong, or fraud on the other stockholders not parties to the
agreement. Of course, voting or pooling agreements are perhaps
more useful and more often resorted to in close corporations. But
they may also be found necessary even in widely held
corporations. Moreover, since the Code limits the legal meaning
of close corporations to those which comply with the requisites
laid down by section 96, it is entirely possible that a corporation
which is in fact a close corporation will not come within the
definition. In such case, its stockholders should not be precluded
from entering into contracts like voting agreements if these are
otherwise valid. (Campos & Lopez-Campos, op cit, p. 405)
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 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.
Having entered into a well-defined contractual relationship, it is
imperative that the parties should honor and adhere to their
25
respective rights and obligations thereunder. Appellants seem to
contend that any allocation of board seats, even in joint venture
corporations, are null and void to the extent that such may
interfere with the stockholder's rights to cumulative voting as
provided in Section 24 of the Corporation Code. This Court
should not be prepared to hold that any agreement which curtails
in any way cumulative voting should be struck down, even if such
agreement has been freely entered into by experienced
businessmen and do not prejudice those who are not parties
thereto. It may well be that it would be more cogent to hold, as
the Securities and Exchange Commission has held in the
decision appealed from, that cumulative voting rights may be
voluntarily waived by stockholders who enter into special
relationships with each other to pursue and implement specific
purposes, as in joint venture relationships between foreign and
local stockholders, so long as such agreements do not adversely
affect third parties.
In any event, it is believed that we are not here called upon to
make a general rule on this question. Rather, all that needs to be
done is to give life and effect to the particular contractual rights
and obligations which the parties have assumed for themselves.
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.
In our decision sought to be reconsidered, we opted to uphold the
second over the first. Upon further reflection, we feel that the
proper and just solution to give due consideration to both factors
suggests itself quite clearly. This Court should recognize and
uphold the division of the stockholders into two groups, and at the
same time uphold the right of the stockholders within each group
to cumulative voting in the process of determining who the
group's nominees would be. In practical terms, as suggested by
appellant Luciano E. Salazar himself, this means that if the
Filipino stockholders cannot agree who their six nominees will be,
a vote would have to be taken among the Filipino stockholders
only. During this voting, each Filipino stockholder can cumulate
his votes. 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. (Rollo-
75875, pp. 38-39)
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 ajoint 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
26
similar community of interest in the business, sharing of profits
and losses, and a mutual right of control. Blackner v. Mc Dermott,
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, 395 111. 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 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. Bolanos, 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)
Equally important as the consideration of the contractual intent of
the parties is the consideration as regards the possible
domination by the foreign investors of the enterprise in violation
of the nationalization requirements enshrined in the Constitution
and circumvention of the Anti-Dummy Act. In this regard,
petitioner Salazar's position is that the Anti-Dummy Act allows the
ASI group to elect board directors in proportion to their share in
the capital of the entity. It is to be noted, however, that the same
law also limits the election of aliens as members of the board of
directors in proportion to their allowance participation of said
entity. In the instant case, the foreign Group ASI was limited to
designate three directors. This is the allowable participation of the
ASI Group. Hence, in future dealings, this limitation of six to three
board seats should always be maintained as long as the joint
venture agreement exists considering that in limiting 3 board
27
seats in the 9-man board of directors there are provisions already The joint venture character of the enterprise must always be
agreed upon and embodied in the parties' Agreement to protect taken into account, so long as the company exists under its
the interests arising from the minority status of the foreign original agreement. Cumulative voting may not be used as a
investors. device to enable ASI to achieve stealthily or indirectly what they
With these findings, we the decisions of the SEC Hearing Officer cannot accomplish openly. There are substantial safeguards in
and SEC which were impliedly affirmed by the appellate court the Agreement which are intended to preserve the majority status
declaring Messrs. Wolfgang Aurbach, John Griffin, David P of the Filipino investors as well as to maintain the minority status
Whittingham, Emesto V. Lagdameo, Baldwin young, Raul A. of the foreign investors group as earlier discussed. They should
Boncan, Emesto V. Lagdameo, Jr., Enrique Lagdameo, and be maintained.
George F. Lee as the duly elected directors of Saniwares at the WHEREFORE, the petitions in G.R. Nos. 75975-76 and G.R. No.
March 8,1983 annual stockholders' meeting. 75875 are DISMISSED and the petition in G.R. No. 75951 is
On the other hand, the Lagdameo and Young Group (petitioners partly GRANTED. The amended decision of the Court of Appeals
in G.R. No. 75951) object to a cumulative voting during the is MODIFIED in that Messrs. Wolfgang Aurbach John Griffin,
election of the board of directors of the enterprise as ruled by the David Whittingham Emesto V. Lagdameo, Baldwin Young, Raul
appellate court and submits that the six (6) directors allotted the A. Boncan, Ernesto R. Lagdameo, Jr., Enrique Lagdameo, and
Filipino stockholders should be selected by consensus pursuant George F. Lee are declared as the duly elected directors of
to section 5 (a) of the Agreement which uses the word "designate" Saniwares at the March 8,1983 annual stockholders' meeting. In
meaning "nominate, delegate or appoint." all other respects, the questioned decision is AFFIRMED. Costs
They also stress the possibility that the ASI Group might take against the petitioners in G.R. Nos. 75975-76 and G.R. No.
control of the enterprise if the Filipino stockholders are allowed to 75875.
select their nominees separately and not as a common slot SO ORDERED.
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.
28
G.R. No. 84197 July 28, 1989
PIONEER INSURANCE & SURETY
CORPORATION, petitioner,
vs.
THE HON. COURT OF APPEALS, BORDER MACHINERY &
HEAVY EQUIPMENT, INC., (BORMAHECO), CONSTANCIO M.
MAGLANA and JACOB S. LIM, respondents.
G.R. No. 84157 July 28, 1989
JACOB S. LIM, petitioner,
vs.
COURT OF APPEALS, PIONEER INSURANCE AND SURETY
CORPORATION, BORDER MACHINERY and HEAVY
EQUIPMENT CO., INC,, FRANCISCO and MODESTO
CERVANTES and CONSTANCIO MAGLANA, respondents.
Eriberto D. Ignacio for Pioneer Insurance & Surety Corporation.
Sycip, Salazar, Hernandez & Gatmaitan for Jacob S. Lim.
Renato J. Robles for BORMAHECO, Inc. and Cervanteses.
Leonardo B. Lucena for Constancio Maglana.
GUTIERREZ, JR., J.:
The subject matter of these consolidated petitions is the decision
of the Court of Appeals in CA-G.R. CV No. 66195 which modified
the decision of the then Court of First Instance of Manila in Civil
Case No. 66135. The plaintiffs 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.
The dispositive portion of the trial court's decision reads as
follows:
WHEREFORE, judgment is rendered against defendant Jacob S.
Lim requiring Lim to pay plaintiff the amount of P311,056.02, with
interest at the rate of 12% per annum compounded monthly; plus
15% of the amount awarded to plaintiff as attorney's fees from
July 2,1966, until full payment is made; plus P70,000.00 moral
and exemplary damages.
It is found in the records that the cross party plaintiffs incurred
additional miscellaneous expenses aside from
Pl51,000.00,,making a total of P184,878.74. Defendant Jacob S.
Lim is further required to pay cross party plaintiff, Bormaheco, the
Cervanteses one-half and Maglana the other half, the amount of
Pl84,878.74 with interest from the filing of the cross-complaints
until the amount is fully paid; plus moral and exemplary damages
in the amount of P184,878.84 with interest from the filing of the
cross-complaints until the amount is fully paid; plus moral and
exemplary damages in the amount of P50,000.00 for each of the
two Cervanteses.
Furthermore, he is required to pay P20,000.00 to Bormaheco and
the Cervanteses, and another P20,000.00 to Constancio B.
Maglana as attorney's fees.
xxx xxx xxx
WHEREFORE, in view of all above, the complaint of plaintiff
Pioneer against defendants Bormaheco, the Cervanteses and
Constancio B. Maglana, is dismissed. Instead, plaintiff is required
to indemnify the defendants Bormaheco and the Cervanteses the
amount of P20,000.00 as attorney's fees and the amount of
P4,379.21, per year from 1966 with legal rate of interest up to the
time it is paid.
Furthermore, the plaintiff is required to pay Constancio B.
Maglana the amount of P20,000.00 as attorney's fees and costs.
No moral or exemplary damages is awarded against plaintiff for
this action was filed in good faith. The fact that the properties of
the Bormaheco and the Cervanteses were attached and that they
were required to file a counterbond in order to dissolve the
attachment, is not an act of bad faith. When a man tries to protect
his rights, he should not be saddled with moral or exemplary
damages. Furthermore, the rights exercised were provided for in
the Rules of Court, and it was the court that ordered it, in the
exercise of its discretion.
No damage is decided against Malayan Insurance Company,
Inc., the third-party defendant, for it only secured the attachment
prayed for by the plaintiff Pioneer. If an insurance company would
be liable for damages in performing an act which is clearly within
its power and which is the reason for its being, then nobody would
engage in the insurance business. No further claim or counter-
29
claim for or against anybody is declared by this Court. (Rollo -
G.R. No. 24197, pp. 15-16)
In 1965, Jacob S. Lim (petitioner in G.R. No. 84157) was engaged
in the airline business as owner-operator of Southern Air Lines
(SAL) a single proprietorship.
On May 17, 1965, at Tokyo, Japan, Japan Domestic Airlines
(JDA) and Lim entered into and executed a sales contract (Exhibit
A) for the sale and purchase of two (2) DC-3A Type aircrafts and
one (1) set of necessary spare parts for the total agreed price of
US $109,000.00 to be paid in installments. One DC-3 Aircraft with
Registry No. PIC-718, arrived in Manila on June 7,1965 while the
other aircraft, arrived in Manila on July 18,1965.
On May 22, 1965, Pioneer Insurance and Surety Corporation
(Pioneer, petitioner in G.R. No. 84197) as surety executed and
issued its Surety Bond No. 6639 (Exhibit C) in favor of JDA, in
behalf of its principal, Lim, for the balance price of the aircrafts
and spare parts.
It appears that Border Machinery and Heavy Equipment
Company, Inc. (Bormaheco), Francisco and Modesto Cervantes
(Cervanteses) and Constancio Maglana (respondents in both
petitions) contributed some funds used in the purchase of the
above aircrafts and spare parts. The funds were supposed to be
their contributions to a new corporation proposed by Lim to
expand his airline business. They executed two (2) separate
indemnity agreements (Exhibits D-1 and D-2) in favor of Pioneer,
one signed by Maglana and the other jointly signed by Lim for
SAL, Bormaheco and the Cervanteses. The indemnity
agreements stipulated that the indemnitors principally agree and
bind themselves jointly and severally to indemnify and hold and
save harmless Pioneer from and against any/all damages,
losses, costs, damages, taxes, penalties, charges and expenses
of whatever kind and nature which Pioneer may incur in
consequence of having become surety upon the bond/note and
to pay, reimburse and make good to Pioneer, its successors and
assigns, all sums and amounts of money which it or its
representatives should or may pay or cause to be paid or become
liable to pay on them of whatever kind and nature.
On June 10, 1965, Lim doing business under the name and style
of SAL executed in favor of Pioneer as deed of chattel mortgage
as security for the latter's suretyship in favor of the former. It was
stipulated therein that Lim transfer and convey to the surety the
two aircrafts. The deed (Exhibit D) was duly registered with the
Office of the Register of Deeds of the City of Manila and with the
Civil Aeronautics Administration pursuant to the Chattel Mortgage
Law and the Civil Aeronautics Law (Republic Act No. 776),
respectively.
Lim defaulted on his subsequent installment payments prompting
JDA to request payments from the surety. Pioneer paid a total
sum of P298,626.12.
Pioneer then filed a petition for the extrajudicial foreclosure of the
said chattel mortgage before the Sheriff of Davao City. The
Cervanteses and Maglana, however, filed a third party claim
alleging that they are co-owners of the aircrafts,
On July 19, 1966, Pioneer filed an action for judicial foreclosure
with an application for a writ of preliminary attachment against
Lim and respondents, the Cervanteses, Bormaheco and
Maglana.
In their Answers, Maglana, Bormaheco and the Cervanteses filed
cross-claims against Lim alleging that they were not privies to the
contracts signed by Lim and, by way of counterclaim, sought for
damages for being exposed to litigation and for recovery of the
sums of money they advanced to Lim for the purchase of the
aircrafts in question.
After trial on the merits, a decision was rendered holding Lim
liable to pay Pioneer but dismissed Pioneer's complaint against
all other defendants.
As stated earlier, the appellate court modified the trial court's
decision in that the plaintiffs complaint against all the defendants
was dismissed. In all other respects the trial court's decision was
affirmed.
We first resolve G.R. No. 84197.
Petitioner Pioneer Insurance and Surety Corporation avers that:
RESPONDENT COURT OF APPEALS GRIEVOUSLY ERRED
WHEN IT DISMISSED THE APPEAL OF PETITIONER ON THE
30
SOLE GROUND THAT PETITIONER HAD ALREADY
COLLECTED THE PROCEEDS OF THE REINSURANCE ON
ITS BOND IN FAVOR OF THE JDA AND THAT IT CANNOT
REPRESENT A REINSURER TO RECOVER THE AMOUNT
FROM HEREIN PRIVATE RESPONDENTS AS DEFENDANTS
IN THE TRIAL COURT. (Rollo - G. R. No. 84197, p. 10)
The petitioner questions the following findings of the appellate
court:
We find no merit in plaintiffs appeal. It is undisputed that plaintiff
Pioneer had reinsured its risk of liability under the surety bond in
favor of JDA and subsequently collected the proceeds of such
reinsurance in the sum of P295,000.00. Defendants' alleged
obligation to Pioneer amounts to P295,000.00, hence, plaintiffs
instant action for the recovery of the amount of P298,666.28 from
defendants will no longer prosper. Plaintiff Pioneer is not the real
party in interest to institute the instant action as it does not stand
to be benefited or injured by the judgment.
Plaintiff Pioneer's contention that it is representing the reinsurer
to recover the amount from defendants, hence, it instituted the
action is utterly devoid of merit. Plaintiff did not even present any
evidence that it is the attorney-in-fact of the reinsurance
company, authorized to institute an action for and in behalf of the
latter. To qualify a person to be a real party in interest in whose
name an action must be prosecuted, he must appear to be the
present real owner of the right sought to be enforced (Moran, Vol.
I, Comments on the Rules of Court, 1979 ed., p. 155). It has been
held that the real party in interest is the party who would be
benefited or injured by the judgment or the party entitled to the
avails of the suit (Salonga v. Warner Barnes & Co., Ltd., 88 Phil.
125, 131). By real party in interest is meant a present substantial
interest as distinguished from a mere expectancy or a future,
contingent, subordinate or consequential interest (Garcia v.
David, 67 Phil. 27; Oglleaby v. Springfield Marine Bank, 52 N.E.
2d 1600, 385 III, 414; Flowers v. Germans, 1 NW 2d 424; Weber
v. City of Cheye, 97 P. 2d 667, 669, quoting 47 C.V. 35).
Based on the foregoing premises, plaintiff Pioneer cannot be
considered as the real party in interest as it has already been paid
by the reinsurer the sum of P295,000.00 — the bulk of
defendants' alleged obligation to Pioneer.
In addition to the said proceeds of the reinsurance received by
plaintiff Pioneer from its reinsurer, the former was able to
foreclose extra-judicially one of the subject airplanes and its
spare engine, realizing the total amount of P37,050.00 from the
sale of the mortgaged chattels. Adding the sum of P37,050.00, to
the proceeds of the reinsurance amounting to P295,000.00, it is
patent that plaintiff has been overpaid in the amount of
P33,383.72 considering that the total amount it had paid to JDA
totals to only P298,666.28. To allow plaintiff Pioneer to recover
from defendants the amount in excess of P298,666.28 would be
tantamount to unjust enrichment as it has already been paid by
the reinsurance company of the amount plaintiff has paid to JDA
as surety of defendant Lim vis-a-vis defendant Lim's liability to
JDA. Well settled is the rule that no person should unjustly enrich
himself at the expense of another (Article 22, New Civil Code).
(Rollo-84197, pp. 24-25).
The petitioner contends that-(1) it is at a loss where respondent
court based its finding that petitioner was paid by its reinsurer in
the aforesaid amount, as this matter has never been raised by
any of the parties herein both in their answers in the court below
and in their respective briefs with respondent court; (Rollo, p. 11)
(2) even assuming hypothetically that it was paid by its reinsurer,
still none of the respondents had any interest in the matter since
the reinsurance is strictly between the petitioner and the re-
insurer pursuant to section 91 of the Insurance Code; (3)
pursuant to the indemnity agreements, the petitioner is entitled to
recover from respondents Bormaheco and Maglana; and (4) the
principle of unjust enrichment is not applicable considering that
whatever amount he would recover from the co-indemnitor will be
paid to the reinsurer.
The records belie the petitioner's contention that the issue on the
reinsurance money was never raised by the parties.
A cursory reading of the trial court's lengthy decision shows that
two of the issues threshed out were:
xxx xxx xxx
31
1. Has Pioneer a cause of action against defendants with respect
to so much of its obligations to JDA as has been paid with
reinsurance money?
2. If the answer to the preceding question is in the negative, has
Pioneer still any claim against defendants, considering the
amount it has realized from the sale of the mortgaged properties?
(Record on Appeal, p. 359, Annex B of G.R. No. 84157).
In resolving these issues, the trial court made the following
findings:
It appearing that Pioneer reinsured its risk of liability under the
surety bond it had executed in favor of JDA, collected the
proceeds of such reinsurance in the sum of P295,000, and paid
with the said amount the bulk of its alleged liability to JDA under
the said surety bond, it is plain that on this score it no longer has
any right to collect to the extent of the said amount.
On the question of why it is Pioneer, instead of the reinsurance
(sic), that is suing defendants for the amount paid to it by the
reinsurers, notwithstanding that the cause of action pertains to
the latter, Pioneer says: The reinsurers opted instead that the
Pioneer Insurance & Surety Corporation shall pursue alone the
case.. . . . Pioneer Insurance & Surety Corporation is representing
the reinsurers to recover the amount.' In other words, insofar as
the amount paid to it by the reinsurers Pioneer is suing
defendants as their attorney-in-fact.
But in the first place, there is not the slightest indication in the
complaint that Pioneer is suing as attorney-in- fact of the
reinsurers for any amount. Lastly, and most important of all,
Pioneer has no right to institute and maintain in its own name an
action for the benefit of the reinsurers. It is well-settled that an
action brought by an attorney-in-fact in his own name instead of
that of the principal will not prosper, and this is so even where the
name of the principal is disclosed in the complaint.
Section 2 of Rule 3 of the Old Rules of Court provides that 'Every
action must be prosecuted in the name of the real party in
interest.' This provision is mandatory. The real party in interest is
the party who would be benefitted or injured by the judgment or
is the party entitled to the avails of the suit.
This Court has held in various cases that an attorney-in-fact is not
a real party in interest, that there is no law permitting an action to
be brought by an attorney-in-fact. Arroyo v. Granada and
Gentero, 18 Phil. Rep. 484; Luchauco v. Limjuco and Gonzalo,
19 Phil. Rep. 12; Filipinos Industrial Corporation v. San Diego
G.R. No. L- 22347,1968, 23 SCRA 706, 710-714.
The total amount paid by Pioneer to JDA is P299,666.29. Since
Pioneer has collected P295,000.00 from the reinsurers, the
uninsured portion of what it paid to JDA is the difference between
the two amounts, or P3,666.28. This is the amount for which
Pioneer may sue defendants, assuming that the indemnity
agreement is still valid and effective. But since the amount
realized from the sale of the mortgaged chattels are P35,000.00
for one of the airplanes and P2,050.00 for a spare engine, or a
total of P37,050.00, Pioneer is still overpaid by P33,383.72.
Therefore, Pioneer has no more claim against defendants.
(Record on Appeal, pp. 360-363).
The payment to the petitioner made by the reinsurers was not
disputed in the appellate court. Considering this admitted
payment, the only issue that cropped up was the effect of
payment made by the reinsurers to the petitioner. Therefore, the
petitioner's argument that the respondents had no interest in the
reinsurance contract as this is strictly between the petitioner as
insured and the reinsuring company pursuant to Section 91
(should be Section 98) of the Insurance Code has no basis.
In general a reinsurer, on payment of a loss acquires the same
rights by subrogation as are acquired in similar cases where the
original insurer pays a loss (Universal Ins. Co. v. Old Time
Molasses Co. C.C.A. La., 46 F 2nd 925).
The rules of practice in actions on original insurance policies are
in general applicable to actions or contracts of reinsurance.
(Delaware, Ins. Co. v. Pennsylvania Fire Ins. Co., 55 S.E.
330,126 GA. 380, 7 Ann. Con. 1134).
Hence the applicable law is Article 2207 of the new Civil Code, to
wit:
Art. 2207. If the plaintiffs property has been insured, and he has
received indemnity from the insurance company for the injury or
32
loss arising out of the wrong or breach of contract complained of,
the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the
contract. If the amount paid by the insurance company does not
fully cover the injury or loss, the aggrieved party shall be entitled
to recover the deficiency from the person causing the loss or
injury.
Interpreting the aforesaid provision, we ruled in the case of Phil.
Air Lines, Inc. v. Heald Lumber Co. (101 Phil. 1031 [1957]) which
we subsequently applied in Manila Mahogany Manufacturing
Corporation v. Court of Appeals (154 SCRA 650 [1987]):
Note that if a property is insured and the owner receives the
indemnity from the insurer, it is provided in said article that the
insurer is deemed subrogated to the rights of the insured against
the wrongdoer and if the amount paid by the insurer does not fully
cover the loss, then the aggrieved party is the one entitled to
recover the deficiency. Evidently, under this legal provision, the
real party in interest with regard to the portion of the indemnity
paid is the insurer and not the insured. (Emphasis supplied).
It is clear from the records that Pioneer sued in its own name and
not as an attorney-in-fact of the reinsurer.
Accordingly, the appellate court did not commit a reversible error
in dismissing the petitioner's complaint as against the
respondents for the reason that the petitioner was not the real
party in interest in the complaint and, therefore, has no cause of
action against the respondents.
Nevertheless, the petitioner argues that the appeal as regards the
counter indemnitors should not have been dismissed on the
premise that the evidence on record shows that it is entitled to
recover from the counter indemnitors. It does not, however, cite
any grounds except its allegation that respondent "Maglanas
defense and evidence are certainly incredible" (p. 12, Rollo) to
back up its contention.
On the other hand, we find the trial court's findings on the matter
replete with evidence to substantiate its finding that the counter-
indemnitors are not liable to the petitioner. The trial court stated:
Apart from the foregoing proposition, the indemnity agreement
ceased to be valid and effective after the execution of the chattel
mortgage.
Testimonies of defendants Francisco Cervantes and Modesto
Cervantes.
Pioneer Insurance, knowing the value of the aircrafts and the
spare parts involved, agreed to issue the bond provided that the
same would be mortgaged to it, but this was not possible because
the planes were still in Japan and could not be mortgaged here
in the Philippines. As soon as the aircrafts were brought to the
Philippines, they would be mortgaged to Pioneer Insurance to
cover the bond, and this indemnity agreement would be
cancelled.
The following is averred under oath by Pioneer in the original
complaint:
The various conflicting claims over the mortgaged properties
have impaired and rendered insufficient the security under the
chattel mortgage and there is thus no other sufficient security for
the claim sought to be enforced by this action.
This is judicial admission and aside from the chattel mortgage
there is no other security for the claim sought to be enforced by
this action, which necessarily means that the indemnity
agreement had ceased to have any force and effect at the time
this action was instituted. Sec 2, Rule 129, Revised Rules of
Court.
Prescinding from the foregoing, Pioneer, having foreclosed the
chattel mortgage on the planes and spare parts, no longer has
any further action against the defendants as indemnitors to
recover any unpaid balance of the price. The indemnity
agreement was ipso jure extinguished upon the foreclosure of the
chattel mortgage. These defendants, as indemnitors, would be
entitled to be subrogated to the right of Pioneer should they make
payments to the latter. Articles 2067 and 2080 of the New Civil
Code of the Philippines.
Independently of the preceding proposition Pioneer's election of
the remedy of foreclosure precludes any further action to recover
any unpaid balance of the price.
33
SAL or Lim, having failed to pay the second to the eight and last
installments to JDA and Pioneer as surety having made of the
payments to JDA, the alternative remedies open to Pioneer were
as provided in Article 1484 of the New Civil Code, known as the
Recto Law.
Pioneer exercised the remedy of foreclosure of the chattel
mortgage both by extrajudicial foreclosure and the instant suit.
Such being the case, as provided by the aforementioned
provisions, Pioneer shall have no further action against the
purchaser to recover any unpaid balance and any agreement to
the contrary is void.' Cruz, et al. v. Filipinas Investment & Finance
Corp. No. L- 24772, May 27,1968, 23 SCRA 791, 795-6.
The operation of the foregoing provision cannot be escaped from
through the contention that Pioneer is not the vendor but JDA.
The reason is that Pioneer is actually exercising the rights of JDA
as vendor, having subrogated it in such rights. Nor may the
application of the provision be validly opposed on the ground that
these defendants and defendant Maglana are not the vendee but
indemnitors. Pascual, et al. v. Universal Motors Corporation, G.R.
No. L- 27862, Nov. 20,1974, 61 SCRA 124.
The restructuring of the obligations of SAL or Lim, thru the change
of their maturity dates discharged these defendants from any
liability as alleged indemnitors. The change of the maturity dates
of the obligations of Lim, or SAL extinguish the original obligations
thru novations thus discharging the indemnitors.
The principal hereof shall be paid in eight equal successive three
months interval installments, the first of which shall be due and
payable 25 August 1965, the remainder of which ... shall be due
and payable on the 26th day x x x of each succeeding three
months and the last of which shall be due and payable 26th May
1967.
However, at the trial of this case, Pioneer produced a
memorandum executed by SAL or Lim and JDA, modifying the
maturity dates of the obligations, as follows:
The principal hereof shall be paid in eight equal successive three
month interval installments the first of which shall be due and
payable 4 September 1965, the remainder of which ... shall be
due and payable on the 4th day ... of each succeeding months
and the last of which shall be due and payable 4th June 1967.
Not only that, Pioneer also produced eight purported promissory
notes bearing maturity dates different from that fixed in the
aforesaid memorandum; the due date of the first installment
appears as October 15, 1965, and those of the rest of the
installments, the 15th of each succeeding three months, that of
the last installment being July 15, 1967.
These restructuring of the obligations with regard to their maturity
dates, effected twice, were done without the knowledge, much
less, would have it believed that these defendants Maglana (sic).
Pioneer's official Numeriano Carbonel would have it believed that
these defendants and defendant Maglana knew of and consented
to the modification of the obligations. But if that were so, there
would have been the corresponding documents in the form of a
written notice to as well as written conformity of these defendants,
and there are no such document. The consequence of this was
the extinguishment of the obligations and of the surety bond
secured by the indemnity agreement which was thereby also
extinguished. Applicable by analogy are the rulings of the
Supreme Court in the case of Kabankalan Sugar Co. v. Pacheco,
55 Phil. 553, 563, and the case of Asiatic Petroleum Co. v. Hizon
David, 45 Phil. 532, 538.
Art. 2079. An extension granted to the debtor by the creditor
without the consent of the guarantor extinguishes the guaranty
The mere failure on the part of the creditor to demand payment
after the debt has become due does not of itself constitute any
extension time referred to herein, (New Civil Code).'
Manresa, 4th ed., Vol. 12, pp. 316-317, Vol. VI, pp. 562-563, M.F.
Stevenson & Co., Ltd., v. Climacom et al. (C.A.) 36 O.G. 1571.
Pioneer's liability as surety to JDA had already prescribed when
Pioneer paid the same. Consequently, Pioneer has no more
cause of action to recover from these defendants, as supposed
indemnitors, what it has paid to JDA. By virtue of an express
stipulation in the surety bond, the failure of JDA to present its
claim to Pioneer within ten days from default of Lim or SAL on
every installment, released Pioneer from liability from the claim.
34
Therefore, Pioneer is not entitled to exact reimbursement from
these defendants thru the indemnity.
Art. 1318. Payment by a solidary debtor shall not entitle him to
reimbursement from his co-debtors if such payment is made after
the obligation has prescribed or became illegal.
These defendants are entitled to recover damages and attorney's
fees from Pioneer and its surety by reason of the filing of the
instant case against them and the attachment and garnishment
of their properties. The instant action is clearly unfounded insofar
as plaintiff drags these defendants and defendant Maglana.'
(Record on Appeal, pp. 363-369, Rollo of G.R. No. 84157).
We find no cogent reason to reverse or modify these findings.
Hence, it is our conclusion that the petition in G.R. No. 84197 is
not meritorious.
We now discuss the merits of G.R. No. 84157.
Petitioner Jacob S. Lim poses the following issues:
l. What legal rules govern the relationship among co-investors
whose agreement was to do business through the corporate
vehicle but who failed to incorporate the entity in which they had
chosen to invest? How are the losses to be treated in situations
where their contributions to the intended 'corporation' were
invested not through the corporate form? This Petition presents
these fundamental questions which we believe were resolved
erroneously by the Court of Appeals ('CA'). (Rollo, p. 6).
These questions are premised on the petitioner's theory that as a
result of the failure of respondents Bormaheco, Spouses
Cervantes, Constancio Maglana and petitioner Lim to
incorporate, a de facto partnership among them was created, and
that as a consequence of such relationship all must share in the
losses and/or gains of the venture in proportion to their
contribution. The petitioner, therefore, questions the appellate
court's findings ordering him to reimburse certain amounts given
by the respondents to the petitioner as their contributions to the
intended corporation, to wit:
However, defendant Lim should be held liable to pay his co-
defendants' cross-claims in the total amount of P184,878.74 as
correctly found by the trial court, with interest from the filing of the
cross-complaints until the amount is fully paid. Defendant Lim
should pay one-half of the said amount to Bormaheco and the
Cervanteses and the other one-half to defendant Maglana. It is
established in the records that defendant Lim had duly received
the amount of Pl51,000.00 from defendants Bormaheco and
Maglana representing the latter's participation in the ownership of
the subject airplanes and spare parts (Exhibit 58). In addition, the
cross-party plaintiffs incurred additional expenses, hence, the
total sum of P 184,878.74.
We first state the principles.
While it has been held that as between themselves the rights of
the stockholders in a defectively incorporated association should
be governed by the supposed charter and the laws of the state
relating thereto and not by the rules governing partners (Cannon
v. Brush Electric Co., 54 A. 121, 96 Md. 446, 94 Am. S.R. 584), it
is ordinarily held that persons who attempt, but fail, to form a
corporation and who carry on business under the corporate name
occupy the position of partners inter se (Lynch v. Perryman, 119
P. 229, 29 Okl. 615, Ann. Cas. 1913A 1065). Thus, where
persons associate themselves together under articles to
purchase property to carry on a business, and their organization
is so defective as to come short of creating a corporation within
the statute, they become in legal effect partners inter se, and their
rights as members of the company to the property acquired by
the company will be recognized (Smith v. Schoodoc Pond
Packing Co., 84 A. 268,109 Me. 555; Whipple v. Parker, 29 Mich.
369). So, where certain persons associated themselves as a
corporation for the development of land for irrigation purposes,
and each conveyed land to the corporation, and two of them
contracted to pay a third the difference in the proportionate value
of the land conveyed by him, and no stock was ever issued in the
corporation, it was treated as a trustee for the associates in an
action between them for an accounting, and its capital stock was
treated as partnership assets, sold, and the proceeds distributed
among them in proportion to the value of the property contributed
by each (Shorb v. Beaudry, 56 Cal. 446). However, such a
relation does not necessarily exist, for ordinarily persons cannot
35
be made to assume the relation of partners, as between
themselves, when their purpose is that no partnership shall
exist (London Assur. Corp. v. Drennen, Minn., 6 S.Ct. 442, 116
U.S. 461, 472, 29 L.Ed. 688), and it should be implied only when
necessary to do justice between the parties; thus, one who takes
no part except to subscribe for stock in a proposed corporation
which is never legally formed does not become a partner with
other subscribers who engage in business under the name of the
pretended corporation, so as to be liable as such in an action for
settlement of the alleged partnership and contribution (Ward v.
Brigham, 127 Mass. 24). A partnership relation between certain
stockholders and other stockholders, who were also directors, will
not be implied in the absence of an agreement, so as to make the
former liable to contribute for payment of debts illegally
contracted by the latter (Heald v. Owen, 44 N.W. 210, 79 Iowa
23). (Corpus Juris Secundum, Vol. 68, p. 464). (Italics supplied).
In the instant case, it is to be noted that the petitioner was
declared non-suited for his failure to appear during the pretrial
despite notification. In his answer, the petitioner denied having
received any amount from respondents Bormaheco, the
Cervanteses and Maglana. The trial court and the appellate court,
however, found through Exhibit 58, that the petitioner received
the amount of P151,000.00 representing the participation of
Bormaheco and Atty. Constancio B. Maglana in the ownership of
the subject airplanes and spare parts. The record shows that
defendant Maglana gave P75,000.00 to petitioner Jacob Lim thru
the Cervanteses.
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
certificates 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 filing 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).
while respondents Bormaheco and the Cervanteses alleged in
their answer, counterclaim, cross-claim and third party complaint:
Sometime in April 1965, defendant Lim lured and induced the
answering defendants to purchase two airplanes and spare parts
from Japan which the latter considered as their lawful contribution
and participation in the proposed corporation to be known as
SAL. Arrangements and negotiations were undertaken by
defendant Lim. Down payments were advanced by defendants
Bormaheco and the Cervanteses and Constancio Maglana (Exh.
E- 1). Contrary to the agreement among the defendants,
defendant Lim in connivance with the plaintiff, signed and
executed the alleged chattel mortgage and surety bond
agreement in his personal capacity as the alleged proprietor of
the SAL. The answering defendants learned for the first time of
this trickery and misrepresentation of the other, Jacob Lim, when
the herein plaintiff chattel mortgage (sic) allegedly executed by
defendant Lim, thereby forcing them to file an adverse claim in
the form of third party claim. Notwithstanding repeated oral
demands made by defendants Bormaheco and Cervanteses, to
defendant Lim, to surrender the possession of the two planes and
their accessories and or return the amount advanced by the
former amounting to an aggregate sum of P 178,997.14 as
evidenced by a statement of accounts, the latter ignored, omitted
and refused to comply with them. (Record on Appeal, pp. 341-
342).
36
Applying therefore the principles of law earlier cited to the facts
of the case, necessarily, no de facto partnership was created
among the parties which would entitle the petitioner to a
reimbursement of the supposed losses of the proposed
corporation. The record shows that the petitioner was acting on
his own and not in behalf of his other would-be incorporators in
transacting the sale of the airplanes and spare parts.
WHEREFORE, the instant petitions are DISMISSED. The
questioned decision of the Court of Appeals is AFFIRMED.
SO ORDERED.

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