G.R. No.
148187 April 16, 2008 similar property which will be valueless, or of slight value, to the
PHILEX MINING CORPORATION, petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE,
respondent.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari of the June 30, 2000
Decision1 of the Court of Appeals in CA-G.R. SP No. 49385,
which affirmed the Decision2 of the Court of Tax Appeals in
C.T.A. Case No. 5200. Also assailed is the April 3, 2001
Resolution3 denying the motion for reconsideration.
The facts of the case are as follows:
On April 16, 1971, petitioner Philex Mining Corporation (Philex
Mining), entered into an agreement4 with Baguio Gold Mining
Company ("Baguio Gold") for the former to manage and operate
the latter’s mining claim, known as the Sto. Nino mine, located
in Atok and Tublay, Benguet Province. The parties’ agreement
was denominated as "Power of Attorney" and provided for the
following terms:
4. Within three (3) years from date thereof, the PRINCIPAL
(Baguio Gold) shall make available to the MANAGERS (Philex
Mining) up to ELEVEN MILLION PESOS (P11,000,000.00), in
such amounts as from time to time may be required by the
MANAGERS within the said 3-year period, for use in the
MANAGEMENT of the STO. NINO MINE. The said ELEVEN
MILLION PESOS (P11,000,000.00) shall be deemed, for
internal audit purposes, as the owner’s account in the Sto. Nino
PROJECT. Any part of any income of the PRINCIPAL from the
STO. NINO MINE, which is left with the Sto. Nino PROJECT,
shall be added to such owner’s account.
5. Whenever the MANAGERS shall deem it necessary and
convenient in connection with the MANAGEMENT of the STO.
NINO MINE, they may transfer their own funds or property to
the Sto. Nino PROJECT, in accordance with the following
arrangements:
(a) The properties shall be appraised and, together with the cash,
shall be carried by the Sto. Nino PROJECT as a special fund to
be known as the MANAGERS’ account.
(b) The total of the MANAGERS’ account shall not exceed
P11,000,000.00, except with prior approval of the PRINCIPAL;
provided, however, that if the compensation of the MANAGERS
as herein provided cannot be paid in cash from the Sto. Nino
PROJECT, the amount not so paid in cash shall be added to the
MANAGERS’ account.
(c) The cash and property shall not thereafter be withdrawn from
the Sto. Nino PROJECT until termination of this Agency.
(d) The MANAGERS’ account shall not accrue interest. Since it
is the desire of the PRINCIPAL to extend to the MANAGERS
the benefit of subsequent appreciation of property, upon a
projected termination of this Agency, the ratio which the
MANAGERS’ account has to the owner’s account will be
determined, and the corresponding proportion of the entire assets
of the STO. NINO MINE, excluding the claims, shall be
transferred to the MANAGERS, except that such transferred
assets shall not include mine development, roads, buildings, and
MANAGERS. The MANAGERS can, on the other hand, require
at their option that property originally transferred by them to the
Sto. Nino PROJECT be re-transferred to them. Until such assets
are transferred to the MANAGERS, this Agency shall remain
subsisting.
xxxx
12. The compensation of the MANAGER shall be fifty per cent
(50%) of the net profit of the Sto. Nino PROJECT before income
tax. It is understood that the MANAGERS shall pay income tax
on their compensation, while the PRINCIPAL shall pay income
tax on the net profit of the Sto. Nino PROJECT after deduction
therefrom of the MANAGERS’ compensation.
xxxx
16. The PRINCIPAL has current pecuniary obligation in favor
of the MANAGERS and, in the future, may incur other
obligations in favor of the MANAGERS. This Power of Attorney
has been executed as security for the payment and satisfaction of
all such obligations of the PRINCIPAL in favor of the
MANAGERS and as a means to fulfill the same. Therefore, this
Agency shall be irrevocable while any obligation of the
PRINCIPAL in favor of the MANAGERS is outstanding,
inclusive of the MANAGERS’ account. After all obligations of
the PRINCIPAL in favor of the MANAGERS have been paid
and satisfied in full, this Agency shall be revocable by the
PRINCIPAL upon 36-month notice to the MANAGERS.
17. Notwithstanding any agreement or understanding between
the PRINCIPAL and the MANAGERS to the contrary, the
MANAGERS may withdraw from this Agency by giving 6-
month notice to the PRINCIPAL. The MANAGERS shall not in
any manner be held liable to the PRINCIPAL by reason alone of
such withdrawal. Paragraph 5(d) hereof shall be operative in case
of the MANAGERS’ withdrawal.
x x x x5
In the course of managing and operating the project, Philex
Mining made advances of cash and property in accordance with
paragraph 5 of the agreement. However, the mine suffered
continuing losses over the years which resulted to petitioner’s
withdrawal as manager of the mine on January 28, 1982 and in
the eventual cessation of mine operations on February 20, 1982.6
Thereafter, on September 27, 1982, the parties executed a
"Compromise with Dation in Payment"7 wherein Baguio Gold
admitted an indebtedness to petitioner in the amount of
P179,394,000.00 and agreed to pay the same in three segments
by first assigning Baguio Gold’s tangible assets to petitioner,
transferring to the latter Baguio Gold’s equitable title in its
Philodrill assets and finally settling the remaining liability
through properties that Baguio Gold may acquire in the future.
On December 31, 1982, the parties executed an "Amendment to
Compromise with Dation in Payment"8 where the parties
determined that Baguio Gold’s indebtedness to petitioner
actually amounted to P259,137,245.00, which sum included
liabilities of Baguio Gold to other creditors that petitioner had
assumed as guarantor. These liabilities pertained to long-term
loans amounting to US$11,000,000.00 contracted by Baguio
Gold from the Bank of America NT & SA and Citibank N.A.
This time, Baguio Gold undertook to pay petitioner in two
segments by first assigning its tangible assets for
P127,838,051.00 and then transferring its equitable title in its
Philodrill assets for P16,302,426.00. The parties then ascertained
that Baguio Gold had a remaining outstanding indebtedness to
petitioner in the amount of P114,996,768.00.
Subsequently, petitioner wrote off in its 1982 books of account
the remaining outstanding indebtedness of Baguio Gold by
charging P112,136,000.00 to allowances and reserves that were
set up in 1981 and P2,860,768.00 to the 1982 operations.
In its 1982 annual income tax return, petitioner deducted from its
gross income the amount of P112,136,000.00 as "loss on
settlement of receivables from Baguio Gold against reserves and
allowances."9 However, the Bureau of Internal Revenue (BIR)
disallowed the amount as deduction for bad debt and assessed
petitioner a deficiency income tax of P62,811,161.39.
Petitioner protested before the BIR arguing that the deduction
must be allowed since all requisites for a bad debt deduction were
satisfied, to wit: (a) there was a valid and existing debt; (b) the
debt was ascertained to be worthless; and (c) it was charged off
within the taxable year when it was determined to be worthless.
Petitioner emphasized that the debt arose out of a valid
management contract it entered into with Baguio Gold. The bad
debt deduction represented advances made by petitioner which,
pursuant to the management contract, formed part of Baguio
Gold’s "pecuniary obligations" to petitioner. It also included
payments made by petitioner as guarantor of Baguio Gold’s
long-term loans which legally entitled petitioner to be subrogated
to the rights of the original creditor.
Petitioner also asserted that due to Baguio Gold’s irreversible
losses, it became evident that it would not be able to recover the
advances and payments it had made in behalf of Baguio Gold.
For a debt to be considered worthless, petitioner claimed that it
was neither required to institute a judicial action for collection
against the debtor nor to sell or dispose of collateral assets in
satisfaction of the debt. It is enough that a taxpayer exerted
diligent efforts to enforce collection and exhausted all reasonable
means to collect.
On October 28, 1994, the BIR denied petitioner’s protest for lack
of legal and factual basis. It held that the alleged debt was not
ascertained to be worthless since Baguio Gold remained existing
and had not filed a petition for bankruptcy; and that the deduction
did not consist of a valid and subsisting debt considering that,
under the management contract, petitioner was to be paid fifty
percent (50%) of the project’s net profit.10
Petitioner appealed before the Court of Tax Appeals (CTA)
which rendered judgment, as follows:
WHEREFORE, in view of the foregoing, the instant Petition for
Review is hereby DENIED for lack of merit. The assessment in
question, viz: FAS-1-82-88-003067 for deficiency income tax in
the amount of P62,811,161.39 is hereby AFFIRMED.
ACCORDINGLY, petitioner Philex Mining Corporation is
hereby ORDERED to PAY respondent Commissioner of
Internal Revenue the amount of P62,811,161.39, plus, 20%
delinquency interest due computed from February 10, 1995,
which is the date after the 20-day grace period given by the
respondent within which petitioner has to pay the deficiency
amount x x x up to actual date of payment.
SO ORDERED.11
The CTA rejected petitioner’s assertion that the advances it made
for the Sto. Nino mine were in the nature of a loan. It instead
characterized the advances as petitioner’s investment in a
partnership with Baguio Gold for the development and
exploitation of the Sto. Nino mine. The CTA held that the
"Power of Attorney" executed by petitioner and Baguio Gold
was actually a partnership agreement. Since the advanced
amount partook of the nature of an investment, it could not be
deducted as a bad debt from petitioner’s gross income.
The CTA likewise held that the amount paid by petitioner for the
long-term loan obligations of Baguio Gold could not be allowed
as a bad debt deduction. At the time the payments were made,
Baguio Gold was not in default since its loans were not yet due
and demandable. What petitioner did was to pre-pay the loans as
evidenced by the notice sent by Bank of America showing that it
was merely demanding payment of the installment and interests
due. Moreover, Citibank imposed and collected a "pre-
termination penalty" for the pre-payment.
The Court of Appeals affirmed the decision of the CTA.12
Hence, upon denial of its motion for reconsideration,13
petitioner took this recourse under Rule 45 of the Rules of Court,
alleging that:
I.
The Court of Appeals erred in construing that the advances made
by Philex in the management of the Sto. Nino Mine pursuant to
the Power of Attorney partook of the nature of an investment
rather than a loan.
II.
The Court of Appeals erred in ruling that the 50%-50% sharing
in the net profits of the Sto. Nino Mine indicates that Philex is a
partner of Baguio Gold in the development of the Sto. Nino Mine
notwithstanding the clear absence of any intent on the part of
Philex and Baguio Gold to form a partnership.
III.
The Court of Appeals erred in relying only on the Power of
Attorney and in completely disregarding the Compromise
Agreement and the Amended Compromise Agreement when it
construed the nature of the advances made by Philex.
IV.
The Court of Appeals erred in refusing to delve upon the issue of
the propriety of the bad debts write-off.14
Petitioner insists that in determining the nature of its business
relationship with Baguio Gold, we should not only rely on the
"Power of Attorney", but also on the subsequent "Compromise
with Dation in Payment" and "Amended Compromise with
Dation in Payment" that the parties executed in 1982. These
documents, allegedly evinced the parties’ intent to treat the
advances and payments as a loan and establish a creditor-debtor
relationship between them.
The petition lacks merit.
The lower courts correctly held that the "Power of Attorney" is
the instrument that is material in determining the true nature of
the business relationship between petitioner and Baguio Gold.
Before resort may be had to the two compromise agreements, the
parties’ contractual intent must first be discovered from the
expressed language of the primary contract under which the
parties’ business relations were founded. It should be noted that
the compromise agreements were mere collateral documents
executed by the parties pursuant to the termination of their
business relationship created under the "Power of Attorney". On
the other hand, it is the latter which established the juridical
relation of the parties and defined the parameters of their
dealings with one another.
The execution of the two compromise agreements can hardly be
considered as a subsequent or contemporaneous act that is
reflective of the parties’ true intent. The compromise agreements
were executed eleven years after the "Power of Attorney" and
merely laid out a plan or procedure by which petitioner could
recover the advances and payments it made under the "Power of
Attorney". The parties entered into the compromise agreements
as a consequence of the dissolution of their business relationship.
It did not define that relationship or indicate its real character.
An examination of the "Power of Attorney" reveals that a
partnership or joint venture was indeed intended by the parties.
Under a contract of partnership, 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.15 While a corporation, like petitioner, cannot
generally enter into a contract of partnership unless authorized
by law or its charter, it has been held that it may enter into a joint
venture which is akin to a particular partnership:
The legal concept of a joint venture is of common law origin. It
has no precise legal definition, but it has been generally
understood to mean an organization formed for some temporary
purpose. x x x It is in fact hardly distinguishable from the
partnership, since their elements are similar – community of
interest in the business, sharing of profits and losses, and a
mutual right of control. x x x 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. x x x 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. x x x It would seem therefore that under
Philippine law, a joint venture is a form of partnership and should
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. x x x (Citations omitted) 16
Perusal of the agreement denominated as the "Power of
Attorney" indicates that the parties had intended to create a
partnership and establish a common fund for the purpose. They
also had a joint interest in the profits of the business as shown by
a 50-50 sharing in the income of the mine.
Under the "Power of Attorney", petitioner and Baguio Gold
undertook to contribute money, property and industry to the
common fund known as the Sto. Niño mine.17 In this regard, we
note that there is a substantive equivalence in the respective
contributions of the parties to the development and operation of
the mine. Pursuant to paragraphs 4 and 5 of the agreement,
petitioner and Baguio Gold were to contribute equally to the joint
venture assets under their respective accounts. Baguio Gold
would contribute P11M under its owner’s account plus any of its
income that is left in the project, in addition to its actual mining
claim. Meanwhile, petitioner’s contribution would consist of its
expertise in the management and operation of mines, as well as
the manager’s account which is comprised of P11M in funds and
property and petitioner’s "compensation" as manager that cannot
be paid in cash.
However, petitioner asserts that it could not have entered into a
partnership agreement with Baguio Gold because it did not
"bind" itself to contribute money or property to the project; that
under paragraph 5 of the agreement, it was only optional for
petitioner to transfer funds or property to the Sto. Niño project
"(w)henever the MANAGERS shall deem it necessary and
convenient in connection with the MANAGEMENT of the STO.
NIÑO MINE."18
The wording of the parties’ agreement as to petitioner’s
contribution to the common fund does not detract from the fact
that petitioner transferred its funds and property to the project as
specified in paragraph 5, thus rendering effective the other
stipulations of the contract, particularly paragraph 5(c) which
prohibits petitioner from withdrawing the advances until
termination of the parties’ business relations. As can be seen,
petitioner became bound by its contributions once the transfers
were made. The contributions acquired an obligatory nature as
soon as petitioner had chosen to exercise its option under
paragraph 5.
There is no merit to petitioner’s claim that the prohibition in
paragraph 5(c) against withdrawal of advances should not be
taken as an indication that it had entered into a partnership with
Baguio Gold; that the stipulation only showed that what the
parties entered into was actually a contract of agency coupled
with an interest which is not revocable at will and not a
partnership.
In an agency coupled with interest, it is the agency that cannot
be revoked or withdrawn by the principal due to an interest of a
third party that depends upon it, or the mutual interest of both
principal and agent.19 In this case, the non-revocation or non-
withdrawal under paragraph 5(c) applies to the advances made
by petitioner who is supposedly the agent and not the principal
under the contract. Thus, it cannot be inferred from the
stipulation that the parties’ relation under the agreement is one
of agency coupled with an interest and not a partnership.
Neither can paragraph 16 of the agreement be taken as an
indication that the relationship of the parties was one of agency
and not a partnership. Although the said provision states that
"this Agency shall be irrevocable while any obligation of the
PRINCIPAL in favor of the MANAGERS is outstanding,
inclusive of the MANAGERS’ account," it does not necessarily
follow that the parties entered into an agency contract coupled
with an interest that cannot be withdrawn by Baguio Gold.
It should be stressed that the main object of the "Power of
Attorney" was not to confer a power in favor of petitioner to
contract with third persons on behalf of Baguio Gold but to create
a business relationship between petitioner and Baguio Gold, in
which the former was to manage and operate the latter’s mine
through the parties’ mutual contribution of material resources
and industry. The essence of an agency, even one that is coupled
with interest, is the agent’s ability to represent his principal and
bring about business relations between the latter and third
persons.20 Where representation for and in behalf of the
principal is merely incidental or necessary for the proper
discharge of one’s paramount undertaking under a contract, the
latter may not necessarily be a contract of agency, but some other
agreement depending on the ultimate undertaking of the
parties.21

In this case, the totality of the circumstances and the stipulations
in the parties’ agreement indubitably lead to the conclusion that
a partnership was formed between petitioner and Baguio Gold.
First, it does not appear that Baguio Gold was unconditionally
obligated to return the advances made by petitioner under the
agreement. Paragraph 5 (d) thereof provides that upon
termination of the parties’ business relations, "the ratio which the
MANAGER’S account has to the owner’s account will be
determined, and the corresponding proportion of the entire assets
of the STO. NINO MINE, excluding the claims" shall be
transferred to petitioner.22 As pointed out by the Court of Tax
Appeals, petitioner was merely entitled to a proportionate return
of the mine’s assets upon dissolution of the parties’ business
relations. There was nothing in the agreement that would require
Baguio Gold to make payments of the advances to petitioner as
would be recognized as an item of obligation or "accounts
payable" for Baguio Gold.
Thus, the tax court correctly concluded that the agreement
provided for a distribution of assets of the Sto. Niño mine upon
termination, a provision that is more consistent with a
partnership than a creditor-debtor relationship. It should be
pointed out that in a contract of loan, a person who receives a
loan or money or any fungible thing acquires ownership thereof
and is bound to pay the creditor an equal amount of the same
kind and quality.23 In this case, however, there was no
stipulation for Baguio Gold to actually repay petitioner the cash
and property that it had advanced, but only the return of an
amount pegged at a ratio which the manager’s account had to the
owner’s account.
In this connection, we find no contractual basis for the execution
of the two compromise agreements in which Baguio Gold
recognized a debt in favor of petitioner, which supposedly arose
from the termination of their business relations over the Sto.
Nino mine. The "Power of Attorney" clearly provides that
petitioner would only be entitled to the return of a proportionate
share of the mine assets to be computed at a ratio that the
manager’s account had to the owner’s account. Except to provide
a basis for claiming the advances as a bad debt deduction, there
is no reason for Baguio Gold to hold itself liable to petitioner
under the compromise agreements, for any amount over and
above the proportion agreed upon in the "Power of Attorney".
Next, the tax court correctly observed that it was unlikely for a
business corporation to lend hundreds of millions of pesos to
another corporation with neither security, or collateral, nor a
specific deed evidencing the terms and conditions of such loans.
The parties also did not provide a specific maturity date for the
advances to become due and demandable, and the manner of
payment was unclear. All these point to the inevitable conclusion
that the advances were not loans but capital contributions to a
partnership.
The strongest indication that petitioner was a partner in the Sto
Niño mine is the fact that it would receive 50% of the net profits
as "compensation" under paragraph 12 of the agreement. The
entirety of the parties’ contractual stipulations simply leads to no
other conclusion than that petitioner’s "compensation" is
actually its share in the income of the joint venture.
Article 1769 (4) of the Civil Code explicitly provides that the
"receipt by a person of a share in the profits of a business is prima
facie evidence that he is a partner in the business." Petitioner
asserts, however, that no such inference can be drawn against it
since its share in the profits of the Sto Niño project was in the
nature of compensation or "wages of an employee", under the
exception provided in Article 1769 (4) (b).24
On this score, the tax court correctly noted that petitioner was
not an employee of Baguio Gold who will be paid "wages"
pursuant to an employer-employee relationship. To begin with,
petitioner was the manager of the project and had put substantial
sums into the venture in order to ensure its viability and
profitability. By pegging its compensation to profits, petitioner
also stood not to be remunerated in case the mine had no income.
It is hard to believe that petitioner would take the risk of not
being paid at all for its services, if it were truly just an ordinary
employee.
Consequently, we find that petitioner’s "compensation" under
paragraph 12 of the agreement actually constitutes its share in
the net profits of the partnership. Indeed, petitioner would not be
entitled to an equal share in the income of the mine if it were just
an employee of Baguio Gold.25 It is not surprising that petitioner
was to receive a 50% share in the net profits, considering that the
"Power of Attorney" also provided for an almost equal
contribution of the parties to the St. Nino mine. The
"compensation" agreed upon only serves to reinforce the notion
that the parties’ relations were indeed of partners and not
employer-employee.
All told, the lower courts did not err in treating petitioner’s
advances as investments in a partnership known as the Sto. Nino
mine. The advances were not "debts" of Baguio Gold to
petitioner inasmuch as the latter was under no unconditional
obligation to return the same to the former under the "Power of
Attorney". As for the amounts that petitioner paid as guarantor
to Baguio Gold’s creditors, we find no reason to depart from the
tax court’s factual finding that Baguio Gold’s debts were not yet
due and demandable at the time that petitioner paid the same.
Verily, petitioner pre-paid Baguio Gold’s outstanding loans to its
bank creditors and this conclusion is supported by the evidence
on record.26
In sum, petitioner cannot claim the advances as a bad debt
deduction from its gross income. Deductions for income tax
purposes partake of the nature of tax exemptions and are strictly
construed against the taxpayer, who must prove by convincing
evidence that he is entitled to the deduction claimed.27 In this
case, petitioner failed to substantiate its assertion that the
advances were subsisting debts of Baguio Gold that could be
deducted from its gross income. Consequently, it could not claim
the advances as a valid bad debt deduction.
WHEREFORE, the petition is DENIED. The decision of the
Court of Appeals in CA-G.R. SP No. 49385 dated June 30, 2000,
which affirmed the decision of the Court of Tax Appeals in
C.T.A. Case No. 5200 is AFFIRMED. Petitioner Philex Mining
Corporation is ORDERED to PAY the deficiency tax on its 1982
income in the amount of P62,811,161.31, with 20% delinquency
interest computed from February 10, 1995, which is the due date
given for the payment of the deficiency income tax, up to the
actual date of payment.
SO ORDERED.
G.R. NOS. 166299-300 December 13, 2005
AURELIO K. LITONJUA, JR., Petitioner,
vs.
EDUARDO K. LITONJUA, SR., ROBERT T. YANG,
ANGLO PHILS. MARITIME, INC., CINEPLEX, INC.,
DDM GARMENTS, INC., EDDIE K. LITONJUA
SHIPPING AGENCY, INC., EDDIE K. LITONJUA
SHIPPING CO., INC., LITONJUA SECURITIES, INC.
(formerly E. K. Litonjua Sec), LUNETA THEATER, INC.,
E & L REALTY, (formerly E & L INT’L SHIPPING
CORP.), FNP CO., INC., HOME ENTERPRISES, INC.,
BEAUMONT DEV. REALTY CO., INC., GLOED LAND
CORP., EQUITY TRADING CO., INC., 3D CORP., "L"
DEV. CORP, LCM THEATRICAL ENTERPRISES, INC.,
LITONJUA SHIPPING CO. INC., MACOIL INC., ODEON
REALTY CORP., SARATOGA REALTY, INC., ACT
THEATER INC. (formerly General Theatrical & Film
Exchange, INC.), AVENUE REALTY, INC., AVENUE
THEATER, INC. and LVF PHILIPPINES, INC., (Formerly
VF PHILIPPINES), Respondents.
DECISION
GARCIA, J.:
In this petition for review under Rule 45 of the Rules of Court,
petitioner Aurelio K. Litonjua, Jr. seeks to nullify and set aside
the Decision of the Court of Appeals (CA) dated March 31,
20041 in consolidated cases C.A. G.R. Sp. No. 76987 and C.A.
G.R. SP. No 78774 and its Resolution dated December 07,
2004,2 denying petitioner’s motion for reconsideration.
The recourse is cast against the following factual backdrop:
Petitioner Aurelio K. Litonjua, Jr. (Aurelio) and herein
respondent Eduardo K. Litonjua, Sr. (Eduardo) are brothers. The
legal dispute between them started when, on December 4, 2002,
in the Regional Trial Court (RTC) at Pasig City, Aurelio filed a
suit against his brother Eduardo and herein respondent Robert T.
Yang (Yang) and several corporations for specific performance
and accounting. In his complaint,3 docketed as Civil Case No.
69235 and eventually raffled to Branch 68 of the court,4 Aurelio
alleged that, since June 1973, he and Eduardo are into a joint
venture/partnership arrangement in the Odeon Theater business
which had expanded thru investment in Cineplex, Inc., LCM
Theatrical Enterprises, Odeon Realty Corporation (operator of
Odeon I and II theatres), Avenue Realty, Inc., owner of lands and
buildings, among other corporations. Yang is described in the
complaint as petitioner’s and Eduardo’s partner in their Odeon
Theater investment.5 The same complaint also contained the
following material averments:
3.01 On or about 22 June 1973, [Aurelio] and Eduardo entered
into a joint venture/partnership for the continuation of their
family business and common family funds ….
3.01.1 This joint venture/[partnership] agreement was contained
in a memorandum addressed by Eduardo to his siblings, parents
and other relatives. Copy of this memorandum is attached hereto
and made an integral part as Annex "A" and the portion referring
to [Aurelio] submarked as Annex "A-1".
3.02 It was then agreed upon between [Aurelio] and Eduardo that
in consideration of [Aurelio’s] retaining his share in the
remaining family businesses (mostly, movie theaters, shipping
and land development) and contributing his industry to the
continued operation of these businesses, [Aurelio] will be given
P1 Million or 10% equity in all these businesses and those to be
subsequently acquired by them whichever is greater. . . .
4.01 … from 22 June 1973 to about August 2001, or [in] a span
of 28 years, [Aurelio] and Eduardo had accumulated in their joint
venture/partnership various assets including but not limited to
the corporate defendants and [their] respective assets.
4.02 In addition . . . the joint venture/partnership … had also
acquired [various other assets], but Eduardo caused to be
registered in the names of other parties….
xxx xxx xxx
4.04 The substantial assets of most of the corporate defendants
consist of real properties …. A list of some of these real
properties is attached hereto and made an integral part as Annex
"B".
xxx xxx xxx
5.02 Sometime in 1992, the relations between [Aurelio] and
Eduardo became sour so that [Aurelio] requested for an
accounting and liquidation of his share in the joint
venture/partnership [but these demands for complete accounting
and liquidation were not heeded].
xxx xxx xxx
5.05 What is worse, [Aurelio] has reasonable cause to believe
that Eduardo and/or the corporate defendants as well as Bobby
[Yang], are transferring . . . various real properties of the
corporations belonging to the joint venture/partnership to other
parties in fraud of [Aurelio]. In consequence, [Aurelio] is
therefore causing at this time the annotation on the titles of these
real properties… a notice of lis pendens …. (Emphasis in the
original; underscoring and words in bracket added.)
For ease of reference, Annex "A-1" of the complaint, which
petitioner asserts to have been meant for him by his brother
Eduardo, pertinently reads:
10) JR. (AKL) [Referring to petitioner Aurelio K. Litonjua]:
You have now your own life to live after having been married.
….
I am trying my best to mold you the way I work so you can follow
the pattern …. You will be the only one left with the company,
among us brothers and I will ask you to stay as I want you to run
this office every time I am away. I want you to run it the way I
am trying to run it because I will be all alone and I will depend
entirely to you (sic). My sons will not be ready to help me yet
until about maybe 15/20 years from now. Whatever is left in the
corporation, I will make sure that you get ONE MILLION
PESOS (P1,000,000.00) or ten percent (10%) equity, whichever
is greater. We two will gamble the whole thing of what I have
and what you are entitled to. …. It will be you and me alone on
this. If ever I pass away, I want you to take care of all of this.
You keep my share for my two sons are ready take over but give
them the chance to run the company which I have built.
xxx xxx xxx
Because you will need a place to stay, I will arrange to give you
first ONE HUNDRED THOUSANDS PESOS: (P100, 000.00)
in cash or asset, like Lt. Artiaga so you can live better there. The
rest I will give you in form of stocks which you can keep. This
stock I assure you is good and saleable. I will also gladly give
you the share of Wack-Wack …and Valley Golf … because you
have been good. The rest will be in stocks from all the
corporations which I repeat, ten percent (10%) equity. 6
On December 20, 2002, Eduardo and the corporate respondents,
as defendants a quo, filed a joint ANSWER With Compulsory
Counterclaim denying under oath the material allegations of the
complaint, more particularly that portion thereof depicting
petitioner and Eduardo as having entered into a contract of
partnership. As affirmative defenses, Eduardo, et al., apart from
raising a jurisdictional matter, alleged that the complaint states
no cause of action, since no cause of action may be derived from
the actionable document, i.e., Annex "A-1", being void under the
terms of Article 1767 in relation to Article 1773 of the Civil
Code, infra. It is further alleged that whatever undertaking
Eduardo agreed to do, if any, under Annex "A-1", are
unenforceable under the provisions of the Statute of Frauds.7
For his part, Yang - who was served with summons long after
the other defendants submitted their answer – moved to dismiss
on the ground, inter alia, that, as to him, petitioner has no cause
of action and the complaint does not state any.8 Petitioner
opposed this motion to dismiss.
On January 10, 2003, Eduardo, et al., filed a Motion to Resolve
Affirmative Defenses.9 To this motion, petitioner interposed an
Opposition with ex-Parte Motion to Set the Case for Pre-trial.10
Acting on the separate motions immediately adverted to above,
the trial court, in an Omnibus Order dated March 5, 2003, denied
the affirmative defenses and, except for Yang, set the case for
pre-trial on April 10, 2003.11
In another Omnibus Order of April 2, 2003, the same court
denied the motion of Eduardo, et al., for reconsideration12 and
Yang’s motion to dismiss. The following then transpired insofar
as Yang is concerned:
1. On April 14, 2003, Yang filed his ANSWER, but expressly
reserved the right to seek reconsideration of the April 2, 2003
Omnibus Order and to pursue his failed motion to dismiss13 to
its full resolution.
2. On April 24, 2003, he moved for reconsideration of the
Omnibus Order of April 2, 2003, but his motion was denied in
an Order of July 4, 2003.14
3. On August 26, 2003, Yang went to the Court of Appeals (CA)
in a petition for certiorari under Rule 65 of the Rules of Court,
docketed as CA-G.R. SP No. 78774,15 to nullify the separate
orders of the trial court, the first denying his motion to dismiss
the basic complaint and, the second, denying his motion for
reconsideration.
Earlier, Eduardo and the corporate defendants, on the contention
that grave abuse of discretion and injudicious haste attended the
issuance of the trial court’s aforementioned Omnibus Orders
dated March 5, and April 2, 2003, sought relief from the CA via
similar recourse. Their petition for certiorari was docketed as CA
G.R. SP No. 76987.
Per its resolution dated October 2, 2003,16 the CA’s 14th
Division ordered the consolidation of CA G.R. SP No. 78774
with CA G.R. SP No. 76987.
Following the submission by the parties of their respective
Memoranda of Authorities, the appellate court came out with the
herein assailed Decision dated March 31, 2004, finding for
Eduardo and Yang, as lead petitioners therein, disposing as
follows:
WHEREFORE, judgment is hereby rendered granting the
issuance of the writ of certiorari in these consolidated cases
annulling, reversing and setting aside the assailed orders of the
court a quo dated March 5, 2003, April 2, 2003 and July 4, 2003
and the complaint filed by private respondent [now petitioner
Aurelio] against all the petitioners [now herein respondents
Eduardo, et al.] with the court a quo is hereby dismissed.
SO ORDERED.17 (Emphasis in the original; words in bracket
added.)
Explaining its case disposition, the appellate court stated, inter
alia, that the alleged partnership, as evidenced by the actionable
documents, Annex "A" and "A-1" attached to the complaint, and
upon which petitioner solely predicates his right/s allegedly
violated by Eduardo, Yang and the corporate defendants a quo is
"void or legally inexistent".
In time, petitioner moved for reconsideration but his motion was
denied by the CA in its equally assailed Resolution of December
7, 2004.18 .
Hence, petitioner’s present recourse, on the contention that the
CA erred:
A. When it ruled that there was no partnership created by the
actionable document because this was not a public instrument
and immovable properties were contributed to the partnership.
B. When it ruled that the actionable document did not create a
demandable right in favor of petitioner.
C. When it ruled that the complaint stated no cause of action
against [respondent] Robert Yang; and
D. When it ruled that petitioner has changed his theory on appeal
when all that Petitioner had done was to support his pleaded
cause of action by another legal perspective/argument.
The petition lacks merit.
Petitioner’s demand, as defined in the petitory portion of his
complaint in the trial court, is for delivery or payment to him, as
Eduardo’s and Yang’s partner, of his partnership/joint venture
share, after an accounting has been duly conducted of what he
deems to be partnership/joint venture property.19
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 between them.20
A contract of partnership is defined by the Civil Code as one
where two or more persons bound themselves to contribute
money, property, or industry to a common fund with the
intention of dividing the profits among themselves.21 A joint
venture, on the other hand, is hardly distinguishable from, and
may be likened to, a partnership since their elements are similar,
i.e., community of interests in the business and sharing of profits
and losses. Being a form of partnership, a joint venture is
generally governed by the law on partnership.22
The underlying issue that necessarily comes to mind in this
proceedings is whether or not petitioner and respondent Eduardo
are partners in the theatre, shipping and realty business, as one
claims but which the other denies. And the issue bearing on the
first assigned error relates to the question of what legal provision
is applicable under the premises, petitioner seeking, as it were,
to enforce the actionable document - Annex "A-1" - which he
depicts in his complaint to be the contract of partnership/joint
venture between himself and Eduardo. Clearly, then, a look at
the legal provisions determinative of the existence, or defining
the formal requisites, of a partnership is indicated. Foremost of
these are the following provisions of the Civil Code:
Art. 1771. A partnership may be constituted in any form, except
where immovable property or real rights are contributed thereto,
in which case a public instrument shall be necessary.
Art. 1772. Every contract of partnership having a capital of three
thousand pesos or more, in money or property, shall appear in a
public instrument, which must be recorded in the Office of the
Securities and Exchange Commission.
Failure to comply with the requirement of the preceding
paragraph shall not affect the liability of the partnership and the
members thereof to third persons.
Art. 1773. A contract of partnership is void, whenever
immovable property is contributed thereto, if an inventory of said
property is not made, signed by the parties, and attached to the
public instrument.
Annex "A-1", on its face, contains typewritten entries, personal
in tone, but is unsigned and undated. As an unsigned document,
there can be no quibbling that Annex "A-1" does not meet the
public instrumentation requirements exacted under Article 1771
of the Civil Code. Moreover, being unsigned and doubtless
referring to a partnership involving more than P3,000.00 in
money or property, Annex "A-1" cannot be presented for
notarization, let alone registered with the Securities and
Exchange Commission (SEC), as called for under the Article
1772 of the Code. And inasmuch as the inventory requirement
under the succeeding Article 1773 goes into the matter of validity
when immovable property is contributed to the partnership, the
next logical point of inquiry turns on the nature of petitioner’s
contribution, if any, to the supposed partnership.
The CA, addressing the foregoing query, correctly stated that
petitioner’s contribution consisted of immovables and real
rights. Wrote that court:
A further examination of the allegations in the complaint would
show that [petitioner’s] contribution to the so-called
"partnership/joint venture" was his supposed share in the family
business that is consisting of movie theaters, shipping and land
development under paragraph 3.02 of the complaint. In other
words, his contribution as a partner in the alleged
partnership/joint venture consisted of immovable properties and
real rights. ….23
Significantly enough, petitioner matter-of-factly concurred with
the appellate court’s observation that, prescinding from what he
himself alleged in his basic complaint, his contribution to the
partnership consisted of his share in the Litonjua family
businesses which owned variable immovable properties.
Petitioner’s assertion in his motion for reconsideration24 of the
CA’s decision, that "what was to be contributed to the business
[of the partnership] was [petitioner’s] industry and his share in
the family [theatre and land development] business" leaves no
room for speculation as to what petitioner contributed to the
perceived partnership.
Lest it be overlooked, the contract-validating inventory
requirement under Article 1773 of the Civil Code applies as long
real property or real rights are initially brought into the
partnership. In short, it is really of no moment which of the
partners, or, in this case, who between petitioner and his brother
Eduardo, contributed immovables. In context, the more
important consideration is that real property was contributed, in
which case an inventory of the contributed property duly signed
by the parties should be attached to the public instrument, else
there is legally no partnership to speak of.
Petitioner, in an obvious bid to evade the application of Article
1773, argues that the immovables in question were not
contributed, but were acquired after the formation of the
supposed partnership. Needless to stress, the Court cannot accord
cogency to this specious argument. For, as earlier stated,
petitioner himself admitted contributing his share in the
supposed shipping, movie theatres and realty development
family businesses which already owned immovables even before
Annex "A-1" was allegedly executed.
Considering thus the value and nature of petitioner’s alleged
contribution to the purported partnership, the Court, even if so
disposed, cannot plausibly extend Annex "A-1" the legal effects
that petitioner so desires and pleads to be given. Annex "A-1", in
fine, cannot support the existence of the partnership sued upon
and sought to be enforced. The legal and factual milieu of the
case calls for this disposition. A partnership may be constituted
in any form, save when immovable property or real rights are
contributed thereto or when the partnership has a capital of at
least ₱3,000.00, in which case a public instrument shall be
necessary.25 And if only to stress what has repeatedly been
articulated, an inventory to be signed by the parties and attached
to the public instrument is also indispensable to the validity of
the partnership whenever immovable property is contributed to
it.
Given the foregoing perspective, what the appellate court wrote
in its assailed Decision26 about the probative value and legal
effect of Annex "A-1" commends itself for concurrence:
Considering that the allegations in the complaint showed that
[petitioner] contributed immovable properties to the alleged
partnership, the "Memorandum" (Annex "A" of the complaint)
which purports to establish the said "partnership/joint venture" is
NOT a public instrument and there was NO inventory of the
immovable property duly signed by the parties. As such, the said
"Memorandum" … is null and void for purposes of establishing
the existence of a valid contract of partnership. Indeed, because
of the failure to comply with the essential formalities of a valid
contract, the purported "partnership/joint venture" is legally
inexistent and it produces no effect whatsoever. Necessarily, a
void or legally inexistent contract cannot be the source of any
contractual or legal right. Accordingly, the allegations in the
complaint, including the actionable document attached thereto,
clearly demonstrates that [petitioner] has NO valid contractual or
legal right which could be violated by the [individual
respondents] herein. As a consequence, [petitioner’s] complaint
does NOT state a valid cause of action because NOT all the
essential elements of a cause of action are present. (Underscoring
and words in bracket added.)
Likewise well-taken are the following complementary excerpts
from the CA’s equally assailed Resolution of December 7,
200427 denying petitioner’s motion for reconsideration:
Further, We conclude that despite glaring defects in the
allegations in the complaint as well as the actionable document
attached thereto (Rollo, p. 191), the [trial] court did not
appreciate and apply the legal provisions which were brought to
its attention by herein [respondents] in the their pleadings. In our
evaluation of [petitioner’s] complaint, the latter alleged inter alia
to have contributed immovable properties to the alleged
partnership but the actionable document is not a public document
and there was no inventory of immovable properties signed by
the parties. Both the allegations in the complaint and the
actionable documents considered, it is crystal clear that
[petitioner] has no valid or legal right which could be violated by
[respondents]. (Words in bracket added.)
Under the second assigned error, it is petitioner’s posture that
Annex "A-1", assuming its inefficacy or nullity as a partnership
document, nevertheless created demandable rights in his favor.
As petitioner succinctly puts it in this petition:
43. Contrariwise, this actionable document, especially its above-
quoted provisions, established an actionable contract even
though it may not be a partnership. This actionable contract is
what is known as an innominate contract (Civil Code, Article
1307).
44. It may not be a contract of loan, or a mortgage or whatever,
but surely the contract does create rights and obligations of the
parties and which rights and obligations may be enforceable and
demandable. Just because the relationship created by the
agreement cannot be specifically labeled or pigeonholed into a
category of nominate contract does not mean it is void or
unenforceable.
Petitioner has thus thrusted the notion of an innominate contract
on this Court - and earlier on the CA after he experienced a
reversal of fortune thereat - as an afterthought. The appellate
court, however, cannot really be faulted for not yielding to
petitioner’s dubious stratagem of altering his theory of joint
venture/partnership to an innominate contract. For, at bottom, the
appellate court’s certiorari jurisdiction was circumscribed by
what was alleged to have been the order/s issued by the trial court
in grave abuse of discretion. As respondent Yang pointedly
observed,28 since the parties’ basic position had been well-
defined, that of petitioner being that the actionable document
established a partnership/joint venture, it is on those positions
that the appellate court exercised its certiorari jurisdiction.
Petitioner’s act of changing his original theory is an
impermissible practice and constitutes, as the CA aptly declared,
an admission of the untenability of such theory in the first place.
[Petitioner] is now humming a different tune . . . . In a sudden
twist of stance, he has now contended that the actionable
instrument may be considered an innominate contract. xxx
Verily, this now changes [petitioner’s] theory of the case which
is not only prohibited by the Rules but also is an implied
admission that the very theory he himself … has adopted, filed
and prosecuted before the respondent court is erroneous.
Be that as it may . …. We hold that this new theory contravenes
[petitioner’s] theory of the actionable document being a
partnership document. If anything, it is so obvious we do have to
test the sufficiency of the cause of action on the basis of
partnership law xxx.29 (Emphasis in the original; Words in
bracket added).
But even assuming in gratia argumenti that Annex "A-1"
partakes of a perfected innominate contract, petitioner’s
complaint would still be dismissible as against Eduardo and,
more so, against Yang. It cannot be over-emphasized that
petitioner points to Eduardo as the author of Annex "A-1".
Withal, even on this consideration alone, petitioner’s claim
against Yang is doomed from the very start.
As it were, the only portion of Annex "A-1" which could perhaps
be remotely regarded as vesting petitioner with a right to demand
from respondent Eduardo the observance of a determinate
conduct, reads:
xxx You will be the only one left with the company, among us
brothers and I will ask you to stay as I want you to run this office
everytime I am away. I want you to run it the way I am trying to
run it because I will be alone and I will depend entirely to you,
My sons will not be ready to help me yet until about maybe 15/20
years from now. Whatever is left in the corporation, I will make
sure that you get ONE MILLION PESOS (P1,000,000.00) or ten
percent (10%) equity, whichever is greater. (Underscoring
added)
It is at once apparent that what respondent Eduardo imposed
upon himself under the above passage, if he indeed wrote Annex
"A-1", is a promise which is not to be performed within one year
from "contract" execution on June 22, 1973. Accordingly, the
agreement embodied in Annex "A-1" is covered by the Statute
of Frauds and ergo unenforceable for non-compliance
therewith.30 By force of the statute of frauds, an agreement that
by its terms is not to be performed within a year from the making
thereof shall be unenforceable by action, unless the same, or
some note or memorandum thereof, be in writing and subscribed
by the party charged. Corollarily, no action can be proved unless
the requirement exacted by the statute of frauds is complied
with.31
Lest it be overlooked, petitioner is the intended beneficiary of the
P1 Million or 10% equity of the family businesses supposedly
promised by Eduardo to give in the near future. Any suggestion
that the stated amount or the equity component of the promise
was intended to go to a common fund would be to read
something not written in Annex "A-1". Thus, even this angle
alone argues against the very idea of a partnership, the creation
of which requires two or more contracting minds mutually
agreeing to contribute money, property or industry to a common
fund with the intention of dividing the profits between or among
themselves.32
In sum then, the Court rules, as did the CA, that petitioner’s
complaint for specific performance anchored on an actionable
document of partnership which is legally inexistent or void or, at
best, unenforceable does not state a cause of action as against
respondent Eduardo and the corporate defendants. And if no of
action can successfully be maintained against respondent
Eduardo because no valid partnership existed between him and
petitioner, the Court cannot see its way clear on how the same
action could plausibly prosper against Yang. Surely, Yang could
not have become a partner in, or could not have had any form of
business relationship with, an inexistent partnership.
As may be noted, petitioner has not, in his complaint, provide the
logical nexus that would tie Yang to him as his partner. In fact,
attendant circumstances would indicate the contrary. Consider:
1. Petitioner asserted in his complaint that his so-called joint
venture/partnership with Eduardo was "for the continuation of
their family business and common family funds which were
theretofore being mainly managed by Eduardo." 33 But Yang
denies kinship with the Litonjua family and petitioner has not
disputed the disclaimer.
2. In some detail, petitioner mentioned what he had contributed
to the joint venture/partnership with Eduardo and what his share
in the businesses will be. No allegation is made whatsoever about
what Yang contributed, if any, let alone his proportional share in
the profits. But such allegation cannot, however, be made
because, as aptly observed by the CA, the actionable document
did not contain such provision, let alone mention the name of
Yang. How, indeed, could a person be considered a partner when
the document purporting to establish the partnership contract did
not even mention his name.
3. Petitioner states in par. 2.01 of the complaint that "[he] and
Eduardo are business partners in the [respondent] corporations,"
while "Bobby is his and Eduardo’s partner in their Odeon
Theater investment’ (par. 2.03). This means that the partnership
between petitioner and Eduardo came first; Yang became their
partner in their Odeon Theater investment thereafter. Several
paragraphs later, however, petitioner would contradict himself
by alleging that his "investment and that of Eduardo and Yang in
the Odeon theater business has expanded through a reinvestment
of profit income and direct investments in several corporation
including but not limited to [six] corporate respondents" This
simply means that the "Odeon Theatre business" came before the
corporate respondents. Significantly enough, petitioner refers to
the corporate respondents as "progeny" of the Odeon Theatre
business.34
Needless to stress, petitioner has not sufficiently established in
his complaint the legal vinculum whence he sourced his right to
drag Yang into the fray. The Court of Appeals, in its assailed
decision, captured and formulated the legal situation in the
following wise:
[Respondent] Yang, … is impleaded because, as alleged in the
complaint, he is a "partner" of [Eduardo] and the [petitioner] in
the Odeon Theater Investment which expanded through
reinvestments of profits and direct investments in several
corporations, thus:
xxx xxx xxx
Clearly, [petitioner’s] claim against … Yang arose from his
alleged partnership with petitioner and the …respondent.
However, there was NO allegation in the complaint which
directly alleged how the supposed contractual relation was
created between [petitioner] and …Yang. More importantly,
however, the foregoing ruling of this Court that the purported
partnership between [Eduardo] is void and legally inexistent
directly affects said claim against …Yang. Since [petitioner] is
trying to establish his claim against … Yang by linking him to
the legally inexistent partnership . . . such attempt had become
futile because there was NOTHING that would contractually
connect [petitioner] and … Yang. To establish a valid cause of
action, the complaint should have a statement of fact upon which
to connect [respondent] Yang to the alleged partnership between
[petitioner] and respondent [Eduardo], including their alleged
investment in the Odeon Theater. A statement of facts on those
matters is pivotal to the complaint as they would constitute the
ultimate facts necessary to establish the elements of a cause of
action against … Yang. 35
Pressing its point, the CA later stated in its resolution denying
petitioner’s motion for reconsideration the following:
xxx Whatever the complaint calls it, it is the actionable document
attached to the complaint that is controlling. Suffice it to state,
We have not ignored the actionable document … As a matter of
fact, We emphasized in our decision … that insofar as [Yang] is
concerned, he is not even mentioned in the said actionable
document. We are therefore puzzled how a person not mentioned
in a document purporting to establish a partnership could be
considered a partner.36 (Words in bracket ours).
The last issue raised by petitioner, referring to whether or not he
changed his theory of the case, as peremptorily determined by
the CA, has been discussed at length earlier and need not detain
us long. Suffice it to say that after the CA has ruled that the
alleged partnership is inexistent, petitioner took a different tack.
Thus, from a joint venture/partnership theory which he adopted
and consistently pursued in his complaint, petitioner embraced
the innominate contract theory. Illustrative of this shift is
petitioner’s statement in par. #8 of his motion for reconsideration
of the CA’s decision combined with what he said in par. # 43 of
this petition, as follows:
8. Whether or not the actionable document creates a partnership,
joint venture, or whatever, is a legal matter. What is
determinative for purposes of sufficiency of the complainant’s
allegations, is whether the actionable document bears out an
actionable contract – be it a partnership, a joint venture or
whatever or some innominate contract … It may be noted that
one kind of innominate contract is what is known as du ut facias
(I give that you may do).37
43. Contrariwise, this actionable document, especially its above-
quoted provisions, established an actionable contract even
though it may not be a partnership. This actionable contract is
what is known as an innominate contract (Civil Code, Article
1307).38
Springing surprises on the opposing party is offensive to the
sporting idea of fair play, justice and due process; hence, the
proscription against a party shifting from one theory at the trial
court to a new and different theory in the appellate court.39 On
the same rationale, an issue which was neither averred in the
complaint cannot be raised for the first time on appeal.40 It is not
difficult, therefore, to agree with the CA when it made short
shrift of petitioner’s innominate contract theory on the basis of
the foregoing basic reasons.
Petitioner’s protestation that his act of introducing the concept of
innominate contract was not a case of changing theories but of
supporting his pleaded cause of action – that of the existence of
a partnership - by another legal perspective/argument, strikes the
Court as a strained attempt to rationalize an untenable position.
Paragraph 12 of his motion for reconsideration of the CA’s
decision virtually relegates partnership as a fall-back theory.
Two paragraphs later, in the same notion, petitioner faults the
appellate court for reading, with myopic eyes, the actionable
document solely as establishing a partnership/joint venture.
Verily, the cited paragraphs are a study of a party hedging on
whether or not to pursue the original cause of action or altogether
abandoning the same, thus:
12. Incidentally, assuming that the actionable document created
a partnership between [respondent] Eduardo, Sr. and [petitioner],
no immovables were contributed to this partnership. xxx
14. All told, the Decision takes off from a false premise that the
actionable document attached to the complaint does not establish
a contractual relationship between [petitioner] and … Eduardo,
Sr. and Roberto T Yang simply because his document does not
create a partnership or a joint venture. This is … a myopic
reading of the actionable document.
Per the Court’s own count, petitioner used in his complaint the
mixed words "joint venture/partnership" nineteen (19) times and
the term "partner" four (4) times. He made reference to the "law
of joint venture/partnership [being applicable] to the business
relationship … between [him], Eduardo and Bobby [Yang]" and
to his "rights in all specific properties of their joint
venture/partnership". Given this consideration, petitioner’s right
of action against respondents Eduardo and Yang doubtless pivots
on the existence of the partnership between the three of them, as
purportedly evidenced by the undated and unsigned Annex "A-
1". A void Annex "A-1", as an actionable document of
partnership, would strip petitioner of a cause of action under the
premises. A complaint for delivery and accounting of partnership
property based on such void or legally non-existent actionable
document is dismissible for failure to state of action. So, in gist,
said the Court of Appeals. The Court agrees.

WHEREFORE, the instant petition is DENIED and the

impugned Decision and Resolution of the Court of Appeals
AFFIRMED.

Cost against the petitioner.

SO ORDERED.