Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 109248 July 3, 1995

GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO, petitioners,
vs.
HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L. MISA, respondents.

VITUG, J.:
The instant petition seeks a review of the decision rendered by the Court of Appeals, dated 26 February 1993, in CA-G.R. SP No. 24638 and
No. 24648 affirming in toto that of the Securities and Exchange Commission ("SEC") in SEC AC 254.
The antecedents of the controversy, summarized by respondent Commission and quoted at length by the appellate court in its decision, are
hereunder restated.
The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the Mercantile Registry on 4 January
1937 and reconstituted with the Securities and Exchange Commission on 4 August 1948. The SEC records show that there were
several subsequent amendments to the articles of partnership on 18 September 1958, to change the firm [name] to ROSS,
SELPH and CARRASCOSO; on 6 July 1965 . . . to ROSS, SELPH, SALCEDO, DEL ROSARIO, BITO & MISA; on 18 April 1972 to
SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA; on 4 December 1972 to SALCEDO, DEL ROSARIO, BITO, MISA &
LOZADA; on 11 March 1977 to DEL ROSARIO, BITO, MISA & LOZADA; on 7 June 1977 to BITO, MISA & LOZADA; on 19
December 1980, [Joaquin L. Misa] appellees Jesus B. Bito and Mariano M. Lozada associated themselves together, as senior
partners with respondents-appellees Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners.
On February 17, 1988, petitioner-appellant wrote the respondents-appellees a letter stating:
I am withdrawing and retiring from the firm of Bito, Misa and Lozada, effective at the end of this month.
"I trust that the accountants will be instructed to make the proper liquidation of my participation in the firm."
On the same day, petitioner-appellant wrote respondents-appellees another letter stating:
"Further to my letter to you today, I would like to have a meeting with all of you with regard to the mechanics
of liquidation, and more particularly, my interest in the two floors of this building. I would like to have this
resolved soon because it has to do with my own plans."
On 19 February 1988, petitioner-appellant wrote respondents-appellees another letter stating:
"The partnership has ceased to be mutually satisfactory because of the working conditions of our employees
including the assistant attorneys. All my efforts to ameliorate the below subsistence level of the pay scale of
our employees have been thwarted by the other partners. Not only have they refused to give meaningful
increases to the employees, even attorneys, are dressed down publicly in a loud voice in a manner that
deprived them of their self-respect. The result of such policies is the formation of the union, including the
assistant attorneys."
On 30 June 1988, petitioner filed with this Commission's Securities Investigation and Clearing Department (SICD) a petition for
dissolution and liquidation of partnership, docketed as SEC Case No. 3384 praying that the Commission:
"1. Decree the formal dissolution and order the immediate liquidation of (the partnership of) Bito, Misa &
Lozada;
"2. Order the respondents to deliver or pay for petitioner's share in the partnership assets plus the profits,
rent or interest attributable to the use of his right in the assets of the dissolved partnership;
"3. Enjoin respondents from using the firm name of Bito, Misa & Lozada in any of their correspondence,
checks and pleadings and to pay petitioners damages for the use thereof despite the dissolution of the
partnership in the amount of at least P50,000.00;
"4. Order respondents jointly and severally to pay petitioner attorney's fees and expense of litigation in such
amounts as maybe proven during the trial and which the Commission may deem just and equitable under
the premises but in no case less than ten (10%) per cent of the value of the shares of petitioner or
P100,000.00;
"5. Order the respondents to pay petitioner moral damages with the amount of P500,000.00 and exemplary
damages in the amount of P200,000.00.

"Petitioner likewise prayed for such other and further reliefs that the Commission may deem just and
equitable under the premises."
On 13 July 1988, respondents-appellees filed their opposition to the petition.
On 13 July 1988, petitioner filed his Reply to the Opposition.
On 31 March 1989, the hearing officer rendered a decision ruling that:
"[P]etitioner's withdrawal from the law firm Bito, Misa & Lozada did not dissolve the said law partnership.
Accordingly, the petitioner and respondents are hereby enjoined to abide by the provisions of the Agreement
relative to the matter governing the liquidation of the shares of any retiring or withdrawing partner in the
1
partnership interest."

On appeal, the SEC en banc reversed the decision of the Hearing Officer and held that the withdrawal of
Attorney Joaquin L. Misa had dissolved the partnership of "Bito, Misa & Lozada." The Commission ruled
that, being a partnership at will, the law firm could be dissolved by any partner at anytime, such as by his
withdrawal therefrom, regardless of good faith or bad faith, since no partner can be forced to continue in
the partnership against his will. In its decision, dated 17 January 1990, the SEC held:
WHEREFORE, premises considered the appealed order of 31 March 1989 is hereby REVERSED
insofar as it concludes that the partnership of Bito, Misa & Lozada has not been dissolved. The
case is hereby REMANDED to the Hearing Officer for determination of the respective rights and
obligations of the parties. 2
The parties sought a reconsideration of the above decision. Attorney Misa, in addition, asked for an
appointment of a receiver to take over the assets of the dissolved partnership and to take charge of the
winding up of its affairs. On 4 April 1991, respondent SEC issued an order denying reconsideration, as
well as rejecting the petition for receivership, and reiterating the remand of the case to the Hearing
Officer.
The parties filed with the appellate court separate appeals (docketed CA-G.R. SP No. 24638 and CAG.R. SP No. 24648).
During the pendency of the case with the Court of Appeals, Attorney Jesus Bito and Attorney Mariano
Lozada both died on, respectively, 05 September 1991 and 21 December 1991. The death of the two
partners, as well as the admission of new partners, in the law firm prompted Attorney Misa to renew his
application for receivership (in CA G.R. SP No. 24648). He expressed concern over the need to preserve
and care for the partnership assets. The other partners opposed the prayer.
The Court of Appeals, finding no reversible error on the part of respondent Commission, AFFIRMED in
toto the SEC decision and order appealed from. In fine, the appellate court held, per its decision of 26
February 1993, (a) that Atty. Misa's withdrawal from the partnership had changed the relation of the
parties and inevitably caused the dissolution of the partnership; (b) that such withdrawal was not in bad
faith; (c) that the liquidation should be to the extent of Attorney Misa's interest or participation in the
partnership which could be computed and paid in the manner stipulated in the partnership agreement; (d)
that the case should be remanded to the SEC Hearing Officer for the corresponding determination of the
value of Attorney Misa's share in the partnership assets; and (e) that the appointment of a receiver was
unnecessary as no sufficient proof had been shown to indicate that the partnership assets were in any
such danger of being lost, removed or materially impaired.
In this petition for review under Rule 45 of the Rules of Court, petitioners confine themselves to the
following issues:
1. Whether or not the Court of Appeals has erred in holding that the partnership of Bito, Misa &
Lozada (now Bito, Lozada, Ortega & Castillo) is a partnership at will;
2. Whether or not the Court of Appeals has erred in holding that the withdrawal of private
respondent dissolved the partnership regardless of his good or bad faith; and
3. Whether or not the Court of Appeals has erred in holding that private respondent's demand for
the dissolution of the partnership so that he can get a physical partition of partnership was not
made in bad faith;
to which matters we shall, accordingly, likewise limit ourselves.

A partnership that does not fix its term is a partnership at will. That the law firm "Bito, Misa & Lozada," and
now "Bito, Lozada, Ortega and Castillo," is indeed such a partnership need not be unduly belabored. We
quote, with approval, like did the appellate court, the findings and disquisition of respondent SEC on this
matter; viz:
The partnership agreement (amended articles of 19 August 1948) does not provide for a specified
period or undertaking. The "DURATION" clause simply states:
"5. DURATION. The partnership shall continue so long as mutually satisfactory
and upon the death or legal incapacity of one of the partners, shall be continued
by the surviving partners."
The hearing officer however opined that the partnership is one for a specific undertaking and
hence not a partnership at will, citing paragraph 2 of the Amended Articles of Partnership (19
August 1948):
"2. Purpose. The purpose for which the partnership is formed, is to act as legal
adviser and representative of any individual, firm and corporation engaged in
commercial, industrial or other lawful businesses and occupations; to counsel
and advise such persons and entities with respect to their legal and other affairs;
and to appear for and represent their principals and client in all courts of justice
and government departments and offices in the Philippines, and elsewhere when
legally authorized to do so."
The "purpose" of the partnership is not the specific undertaking referred to in the law. Otherwise,
all partnerships, which necessarily must have a purpose, would all be considered as partnerships
for a definite undertaking. There would therefore be no need to provide for articles on partnership
at will as none would so exist. Apparently what the law contemplates, is a specific undertaking or
"project" which has a definite or definable period of completion. 3
The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners.
The right to choose with whom a person wishes to associate himself is the very foundation and essence
of that partnership. Its continued existence is, in turn, dependent on the constancy of that mutual resolve,
along with each partner's capability to give it, and the absence of a cause for dissolution provided by the
law itself. Verily, any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership
at will. He must, however, act in good faith, not that the attendance of bad faith can prevent the
dissolution of the partnership 4 but that it can result in a liability for damages. 5
In passing, neither would the presence of a period for its specific duration or the statement of a particular
purpose for its creation prevent the dissolution of any partnership by an act or will of a partner. 6 Among
partners, 7 mutual agency arises and the doctrine of delectus personae allows them to have the power,
although not necessarily the right, to dissolve the partnership. An unjustified dissolution by the partner can
subject him to a possible action for damages.
The dissolution of a partnership is the change in the relation of the parties caused by any partner ceasing
to be associated in the carrying on, as might be distinguished from the winding up of, the business. 8 Upon
its dissolution, the partnership continues and its legal personality is retained until the complete winding up
of its business culminating in its termination. 9
The liquidation of the assets of the partnership following its dissolution is governed by various provisions
of the Civil Code; 10 however, an agreement of the partners, like any other contract, is binding among
them and normally takes precedence to the extent applicable over the Code's general provisions. We
here take note of paragraph 8 of the "Amendment to Articles of Partnership" reading thusly:
. . . In the event of the death or retirement of any partner, his interest in the partnership shall be
liquidated and paid in accordance with the existing agreements and his partnership participation
shall revert to the Senior Partners for allocation as the Senior Partners may determine; provided,
however, that with respect to the two (2) floors of office condominium which the partnership is
now acquiring, consisting of the 5th and the 6th floors of the Alpap Building, 140 Alfaro Street,
Salcedo Village, Makati, Metro Manila, their true value at the time of such death or retirement
shall be determined by two (2) independent appraisers, one to be appointed (by the partnership
and the other by the) retiring partner or the heirs of a deceased partner, as the case may be. In
the event of any disagreement between the said appraisers a third appraiser will be appointed by
them whose decision shall be final. The share of the retiring or deceased partner in the
aforementioned two (2) floor office condominium shall be determined upon the basis of the
valuation above mentioned which shall be paid monthly within the first ten (10) days of every

month in installments of not less than P20,000.00 for the Senior Partners, P10,000.00 in the case
of two (2) existing Junior Partners and P5,000.00 in the case of the new Junior Partner. 11
The term "retirement" must have been used in the articles, as we so hold, in a generic sense to mean the
dissociation by a partner, inclusive of resignation or withdrawal, from the partnership that thereby
dissolves it.
On the third and final issue, we accord due respect to the appellate court and respondent Commission on
their common factual finding, i.e., that Attorney Misa did not act in bad faith. Public respondents viewed
his withdrawal to have been spurred by "interpersonal conflict" among the partners. It would not be right,
we agree, to let any of the partners remain in the partnership under such an atmosphere of animosity;
certainly, not against their will. 12 Indeed, for as long as the reason for withdrawal of a partner is not
contrary to the dictates of justice and fairness, nor for the purpose of unduly visiting harm and damage
upon the partnership, bad faith cannot be said to characterize the act. Bad faith, in the context here used,
is no different from its normal concept of a conscious and intentional design to do a wrongful act for a
dishonest purpose or moral obliquity.
WHEREFORE, the decision appealed from is AFFIRMED. No pronouncement on costs.
SO ORDERED.
Feliciano, Romero, Melo and Francisco, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 144214

July 14, 2003

LUZVIMINDA J. VILLAREAL, DIOGENES VILLAREAL and CARMELITO JOSE,

petitioners,
vs.
DONALDO EFREN C. RAMIREZ and Spouses CESAR G. RAMIREZ JR. and
CARMELITA C. RAMIREZ, respondents.
PANGANIBAN, J.:
A share in a partnership can be returned only after the completion of the latter's dissolution,
liquidation and winding up of the business.
The Case
The Petition for Review on Certiorari before us challenges the March 23, 2000 Decision1 and the
July 26, 2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR CV No. 41026. The assailed
Decision disposed as follows:
"WHEREFORE, foregoing premises considered, the Decision dated July 21, 1992
rendered by the Regional Trial Court, Branch 148, Makati City is hereby SET ASIDE and
NULLIFIED and in lieu thereof a new decision is rendered ordering the [petitioners]
jointly and severally to pay and reimburse to [respondents] the amount of P253,114.00.
No pronouncement as to costs."4
Reconsideration was denied in the impugned Resolution.
The Facts
On July 25, 1984, Luzviminda J. Villareal, Carmelito Jose and Jesus Jose formed a partnership
with a capital of P750,000 for the operation of a restaurant and catering business under the name
"Aquarius Food House and Catering Services."5 Villareal was appointed general manager and
Carmelito Jose, operations manager.
Respondent Donaldo Efren C. Ramirez joined as a partner in the business on September 5, 1984.
His capital contribution of P250,000 was paid by his parents, Respondents Cesar and Carmelita
Ramirez.6
After Jesus Jose withdrew from the partnership in January 1987, his capital contribution of
P250,000 was refunded to him in cash by agreement of the partners.7
In the same month, without prior knowledge of respondents, petitioners closed down the
restaurant, allegedly because of increased rental. The restaurant furniture and equipment were
deposited in the respondents' house for storage.8
On March 1, 1987, respondent spouses wrote petitioners, saying that they were no longer
interested in continuing their partnership or in reopening the restaurant, and that they were
accepting the latter's offer to return their capital contribution.9
On October 13, 1987, Carmelita Ramirez wrote another letter informing petitioners of the
deterioration of the restaurant furniture and equipment stored in their house. She also reiterated

the request for the return of their one-third share in the equity of the partnership. The repeated
oral and written requests were, however, left unheeded.10
Before the Regional Trial Court (RTC) of Makati, Branch 59, respondents subsequently filed a
Complaint11 dated November 10, 1987, for the collection of a sum of money from petitioners.
In their Answer, petitioners contended that respondents had expressed a desire to withdraw from
the partnership and had called for its dissolution under Articles 1830 and 1831 of the Civil Code;
that respondents had been paid, upon the turnover to them of furniture and equipment worth over
P400,000; and that the latter had no right to demand a return of their equity because their share,
together with the rest of the capital of the partnership, had been spent as a result of irreversible
business losses.12
In their Reply, respondents alleged that they did not know of any loan encumbrance on the
restaurant. According to them, if such allegation were true, then the loans incurred by petitioners
should be regarded as purely personal and, as such, not chargeable to the partnership. The former
further averred that they had not received any regular report or accounting from the latter, who
had solely managed the business. Respondents also alleged that they expected the equipment and
the furniture stored in their house to be removed by petitioners as soon as the latter found a better
location for the restaurant.13
Respondents filed an Urgent Motion for Leave to Sell or Otherwise Dispose of Restaurant
Furniture and Equipment14 on July 8, 1988. The furniture and the equipment stored in their house
were inventoried and appraised at P29,000.15 The display freezer was sold for P5,000 and the
proceeds were paid to them.16
After trial, the RTC 17 ruled that the parties had voluntarily entered into a partnership, which
could be dissolved at any time. Petitioners clearly intended to dissolve it when they stopped
operating the restaurant. Hence, the trial court, in its July 21, 1992 Decision, held there liable as
follows:18
"WHEREFORE, judgment is hereby rendered in favor of [respondents] and against the
[petitioners] ordering the [petitioners] to pay jointly and severally the following:
(a) Actual damages in the amount of P250,000.00
(b) Attorney's fee in the amount of P30,000.00
(c) Costs of suit."
The CA Ruling
The CA held that, although respondents had no right to demand the return of their capital
contribution, the partnership was nonetheless dissolved when petitioners lost interest in
continuing the restaurant business with them. Because petitioners never gave a proper accounting
of the partnership accounts for liquidation purposes, and because no sufficient evidence was
presented to show financial losses, the CA. computed their liability as follows:
"Consequently, since what has been proven is only the outstanding obligation of the
partnership in the amount of P240,658.00, although contracted by the partnership before
[respondents'] have joined the partnership but in accordance with Article 1826 of the New
Civil Code, they are liable which must have to be deducted from the remaining
capitalization of the said partnership which is in the amount of P1,000,000.00 resulting in
the amount of P759,342.00, and in order to get the share of [respondents], this amount of
P759,342.00 must be divided into three (3) shares or in the amount of P253,114.00 for
each share and which is the only amount which [petitioner] will return to [respondents']
representing the contribution to the partnership minus the outstanding debt thereof."19

Hence, this Petition.20

Issues
In their Memorandum,21 petitioners submit the following issues for our consideration:
"9.1. Whether the Honorable Court of Appeals' decision ordering the distribution of the
capital contribution, instead of the net capital after the dissolution and liquidation of a
partnership, thereby treating the capital contribution like a loan, is in accordance with law
and jurisprudence;
"9.2. Whether the Honorable Court of Appeals' decision ordering the petitioners to jointly
and severally pay and reimburse the amount of [P]253,114.00 is supported by the
evidence on record; and
"9.3. Whether the Honorable Court of Appeals was correct in making [n]o
pronouncement as to costs."22
On closer scrutiny, the issues are as follows: (1) whether petitioners are liable to respondents for
the latter's share in the partnership; (2) whether the CA's computation of P253,114 as
respondents' share is correct; and (3) whether the CA was likewise correct in not assessing costs.
This Court's Ruling
The Petition has merit.
First Issue:
Share in Partnership
Both the trial and the appellate courts found that a partnership had indeed existed, and that it was
dissolved on March 1, 1987. They found that the dissolution took place when respondents
informed petitioners of the intention to discontinue it because of the former's dissatisfaction with,
and loss of trust in, the latter's management of the partnership affairs. These findings were amply
supported by the evidence on record. Respondents consequently demanded from petitioners the
return of their one-third equity in the partnership.
We hold that respondents have no right to demand from petitioners the return of their equity
share. Except as managers of the partnership, petitioners did not personally hold its equity or
assets. "The partnership has a juridical personality separate and distinct from that of each of the
partners."23 Since the capital was contributed to the partnership, not to petitioners, it is the
partnership that must refund the equity of the retiring partners.24
Second Issue:
What Must Be Returned?
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.25
After all the creditors have been paid, whatever is left of the partnership assets becomes available
for the payment of the partners' shares.
Evidently, in the present case, the exact amount of refund equivalent to respondents' one-third
share in the partnership cannot be determined until all the partnership assets will have been
liquidated in other words, sold and converted to cash and all partnership creditors, if any,
paid. The CA's computation of the amount to be refunded to respondents as their share was thus
erroneous.

First, it seems that the appellate court was under the misapprehension that the total capital
contribution was equivalent to the gross assets to be distributed to the partners at the time of the
dissolution of the partnership. We cannot sustain the underlying idea that the capital contribution
at the beginning of the partnership remains intact, unimpaired and available for distribution or
return to the partners. Such idea is speculative, conjectural and totally without factual or legal
support.
Generally, in the pursuit of a partnership business, its capital is either increased by profits earned
or decreased by losses sustained. It does not remain static and unaffected by the changing
fortunes of the business. In the present case, the financial statements presented before the trial
court showed that the business had made meager profits.26 However, notable therefrom is the
omission of any provision for the depreciation27 of the furniture and the equipment. The
amortization of the goodwill28 (initially valued at P500,000) is not reflected either. Properly
taking these non-cash items into account will show that the partnership was actually sustaining
substantial losses, which consequently decreased the capital of the partnership. Both the trial and
the appellate courts in fact recognized the decrease of the partnership assets to almost nil, but the
latter failed to recognize the consequent corresponding decrease of the capital.
Second, the CA's finding that the partnership had an outstanding obligation in the amount of
P240,658 was not supported by evidence. We sustain the contrary finding of the RTC, which had
rejected the contention that the obligation belonged to the partnership for the following reason:
"x x x [E]vidence on record failed to show the exact loan owed by the partnership to its
creditors. The balance sheet (Exh. '4') does not reveal the total loan. The Agreement (Exh.
'A') par. 6 shows an outstanding obligation of P240,055.00 which the partnership owes to
different creditors, while the Certification issued by Mercator Finance (Exh. '8') shows
that it was Sps. Diogenes P. Villareal and Luzviminda J. Villareal, the former being the
nominal party defendant in the instant case, who obtained a loan of P355,000.00 on Oct.
1983, when the original partnership was not yet formed."
Third, the CA failed to reduce the capitalization by P250,000, which was the amount paid by the
partnership to Jesus Jose when he withdrew from the partnership.
Because of the above-mentioned transactions, the partnership capital was actually reduced. When
petitioners and respondents ventured into business together, they should have prepared for the
fact that their investment would either grow or shrink. In the present case, the investment of
respondents substantially dwindled. The original amount of P250,000 which they had invested
could no longer be returned to them, because one third of the partnership properties at the time of
dissolution did not amount to that much.
It is a long established doctrine that the law does not relieve parties from the effects of unwise,
foolish or disastrous contracts they have entered into with all the required formalities and with
full awareness of what they were doing. Courts have no power to relieve them from obligations
they have voluntarily assumed, simply because their contracts turn out to be disastrous deals or
unwise investments.29
Petitioners further argue that respondents acted negligently by permitting the partnership assets
in their custody to deteriorate to the point of being almost worthless. Supposedly, the latter
should have liquidated these sole tangible assets of the partnership and considered the proceeds
as payment of their net capital. Hence, petitioners argue that the turnover of the remaining
partnership assets to respondents was precisely the manner of liquidating the partnership and
fully settling the latter's share in the partnership.
We disagree. The delivery of the store furniture and equipment to private respondents was for the
purpose of storage. They were unaware that the restaurant would no longer be reopened by
petitioners. Hence, the former cannot be faulted for not disposing of the stored items to recover
their capital investment.

Third Issue:
Costs
Section 1, Rule 142, provides:
"SECTION 1. Costs ordinarily follow results of suit. Unless otherwise provided in
these rules, costs shall be allowed to the prevailing party as a matter of course, but the
court shall have power, for special reasons, to adjudge that either party shall pay the costs
of an action, or that the same be divided, as may be equitable. No costs shall be allowed
against the Republic of the Philippines unless otherwise provided by law."
Although, as a rule, costs are adjudged against the losing party, courts have discretion, "for
special reasons," to decree otherwise. When a lower court is reversed, the higher court normally
does not award costs, because the losing party relied on the lower court's judgment which is
presumed to have been issued in good faith, even if found later on to be erroneous. Unless shown
to be patently capricious, the award shall not be disturbed by a reviewing tribunal.
WHEREFORE, the Petition is GRANTED, and the assailed Decision and Resolution SET ASIDE.
This disposition is without prejudice to proper proceedings for the accounting, the liquidation
and the distribution of the remaining partnership assets, if any. No pronouncement as to costs.
SO ORDERED.
Puno, Corona and Carpio-Morales, JJ ., concur.
Sandoval-Gutierrez, J ., on official leave.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 97212 June 30, 1993

BENJAMIN YU, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JADE MOUNTAIN PRODUCTS COMPANY LIMITED, WILLY CO, RHODORA D.
BENDAL, LEA BENDAL, CHIU SHIAN JENG and CHEN HO-FU, respondents.
Jose C. Guico for petitioner.
Wilfredo Cortez for private respondents.

FELICIANO, J.:
Petitioner Benjamin Yu was formerly the Assistant General Manager of the marble quarrying and export business operated by a registered
partnership with the firm name of "Jade Mountain Products Company Limited" ("Jade Mountain"). The partnership was originally organized
on 28 June 1984 with Lea Bendal and Rhodora Bendal as general partners and Chin Shian Jeng, Chen Ho-Fu and Yu Chang, all citizens of
the Republic of China (Taiwan), as limited partners. The partnership business consisted of exploiting a marble deposit found on land owned
by the Sps. Ricardo and Guillerma Cruz, situated in Bulacan Province, under a Memorandum Agreement dated 26 June 1984 with the Cruz
1
spouses. The partnership had its main office in Makati, Metropolitan Manila.

Benjamin Yu was hired by virtue of a Partnership Resolution dated 14 March 1985, as Assistant General
Manager with a monthly salary of P4,000.00. According to petitioner Yu, however, he actually received
only half of his stipulated monthly salary, since he had accepted the promise of the partners that the
balance would be paid when the firm shall have secured additional operating funds from abroad.
Benjamin Yu actually managed the operations and finances of the business; he had overall supervision of
the workers at the marble quarry in Bulacan and took charge of the preparation of papers relating to the
exportation of the firm's products.
Sometime in 1988, without the knowledge of Benjamin Yu, the general partners Lea Bendal and Rhodora
Bendal sold and transferred their interests in the partnership to private respondent Willy Co and to one
Emmanuel Zapanta. Mr. Yu Chang, a limited partner, also sold and transferred his interest in the
partnership to Willy Co. Between Mr. Emmanuel Zapanta and himself, private respondent Willy Co
acquired the great bulk of the partnership interest. The partnership now constituted solely by Willy Co and
Emmanuel Zapanta continued to use the old firm name of Jade Mountain, though they moved the firm's
main office from Makati to Mandaluyong, Metropolitan Manila. A Supplement to the Memorandum
Agreement relating to the operation of the marble quarry was entered into with the Cruz spouses in
February of 1988. 2 The actual operations of the business enterprise continued as before. All the
employees of the partnership continued working in the business, all, save petitioner Benjamin Yu as it
turned out.
On 16 November 1987, having learned of the transfer of the firm's main office from Makati to
Mandaluyong, petitioner Benjamin Yu reported to the Mandaluyong office for work and there met private
respondent Willy Co for the first time. Petitioner was informed by Willy Co that the latter had bought the
business from the original partners and that it was for him to decide whether or not he was responsible for
the obligations of the old partnership, including petitioner's unpaid salaries. Petitioner was in fact not
allowed to work anymore in the Jade Mountain business enterprise. His unpaid salaries remained unpaid.
3

On 21 December 1988. Benjamin Yu filed a complaint for illegal dismissal and recovery of unpaid salaries
accruing from November 1984 to October 1988, moral and exemplary damages and attorney's fees,
against Jade Mountain, Mr. Willy Co and the other private respondents. The partnership and Willy Co
denied petitioner's charges, contending in the main that Benjamin Yu was never hired as an employee by
the present or new partnership. 4
In due time, Labor Arbiter Nieves Vivar-De Castro rendered a decision holding that petitioner had been
illegally dismissed. The Labor Arbiter decreed his reinstatement and awarded him his claim for unpaid
salaries, backwages and attorney's fees. 5

On appeal, the National Labor Relations Commission ("NLRC") reversed the decision of the Labor Arbiter
and dismissed petitioner's complaint in a Resolution dated 29 November 1990. The NLRC held that a new
partnership consisting of Mr. Willy Co and Mr. Emmanuel Zapanta had bought the Jade Mountain
business, that the new partnership had not retained petitioner Yu in his original position as Assistant
General Manager, and that there was no law requiring the new partnership to absorb the employees of
the old partnership. Benjamin Yu, therefore, had not been illegally dismissed by the new partnership
which had simply declined to retain him in his former managerial position or any other position. Finally, the
NLRC held that Benjamin Yu's claim for unpaid wages should be asserted against the original members
of the preceding partnership, but these though impleaded had, apparently, not been served with
summons in the proceedings before the Labor Arbiter. 6
Petitioner Benjamin Yu is now before the Court on a Petition for Certiorari, asking us to set aside and
annul the Resolution of the NLRC as a product of grave abuse of discretion amounting to lack or excess
of jurisdiction.
The basic contention of petitioner is that the NLRC has overlooked the principle that a partnership has a
juridical personality separate and distinct from that of each of its members. Such independent legal
personality subsists, petitioner claims, notwithstanding changes in the identities of the partners.
Consequently, the employment contract between Benjamin Yu and the partnership Jade Mountain could
not have been affected by changes in the latter's membership. 7
Two (2) main issues are thus posed for our consideration in the case at bar: (1) whether the partnership
which had hired petitioner Yu as Assistant General Manager had been extinguished and replaced by a
new partnerships composed of Willy Co and Emmanuel Zapanta; and (2) if indeed a new partnership had
come into existence, whether petitioner Yu could nonetheless assert his rights under his employment
contract as against the new partnership.
In respect of the first issue, we agree with the result reached by the NLRC, that is, that the legal effect of
the changes in the membership of the partnership was the dissolution of the old partnership which had
hired petitioner in 1984 and the emergence of a new firm composed of Willy Co and Emmanuel Zapanta
in 1987.
The applicable law in this connection of which the NLRC seemed quite unaware is found in the Civil
Code provisions relating to partnerships. Article 1828 of the Civil Code provides as follows:
Art. 1828. The dissolution of a partnership is the change in the relation of the partners
caused by any partner ceasing to be associated in the carrying on as distinguished from
the winding up of the business. (Emphasis supplied)
Article 1830 of the same Code must also be noted:
Art. 1830. Dissolution is caused:
(1) without violation of the agreement between the partners;
xxx xxx xxx
(b) by the express will of any partner, who must act in
good faith, when no definite term or particular
undertaking is specified;
xxx xxx xxx
(2) in contravention of the agreement between the
partners, where the circumstances do not permit a
dissolution under any other provision of this article, by
the express will of any partner at any time;
xxx xxx xxx
(Emphasis supplied)
In the case at bar, just about all of the partners had sold their partnership interests (amounting to 82% of
the total partnership interest) to Mr. Willy Co and Emmanuel Zapanta. The record does not show what
happened to the remaining 18% of the original partnership interest. The acquisition of 82% of the

partnership interest by new partners, coupled with the retirement or withdrawal of the partners who had
originally owned such 82% interest, was enough to constitute a new partnership.
The occurrence of events which precipitate the legal consequence of dissolution of a partnership do not,
however, automatically result in the termination of the legal personality of the old partnership. Article 1829
of the Civil Code states that:
[o]n dissolution the partnership is not terminated, but continues until the winding up of
partnership affairs is completed.
In the ordinary course of events, the legal personality of the expiring partnership persists for the limited
purpose of winding up and closing of the affairs of the partnership. In the case at bar, it is important to
underscore the fact that the business of the old partnership was simply continued by the new partners,
without the old partnership undergoing the procedures relating to dissolution and winding up of its
business affairs. In other words, the new partnership simply took over the business enterprise owned by
the preceeding partnership, and continued using the old name of Jade Mountain Products Company
Limited, without winding up the business affairs of the old partnership, paying off its debts, liquidating and
distributing its net assets, and then re-assembling the said assets or most of them and opening a new
business enterprise. There were, no doubt, powerful tax considerations which underlay such an informal
approach to business on the part of the retiring and the incoming partners. It is not, however, necessary to
inquire into such matters.
What is important for present purposes is that, under the above described situation, not only the retiring
partners (Rhodora Bendal, et al.) but also the new partnership itself which continued the business of the
old, dissolved, one, are liable for the debts of the preceding partnership. In Singson, et al. v. Isabela Saw
Mill, et al, 8 the Court held that under facts very similar to those in the case at bar, a withdrawing partner
remains liable to a third party creditor of the old partnership. 9 The liability of the new partnership, upon the
other hand, in the set of circumstances obtaining in the case at bar, is established in Article 1840 of the
Civil Code which reads as follows:
Art. 1840. In the following cases creditors of the dissolved partnership are also creditors
of the person or partnership continuing the business:
(1) When any new partner is admitted into an existing partnership, or when any partner
retires and assigns (or the representative of the deceased partner assigns) his rights in
partnership property to two or more of the partners, or to one or more of the partners and
one or more third persons, if the business is continued without liquidation of the
partnership affairs;
(2) When all but one partner retire and assign (or the representative of a deceased
partner assigns) their rights in partnership property to the remaining partner, who
continues the business without liquidation of partnership affairs, either alone or with
others;
(3) When any Partner retires or dies and the business of the dissolved partnership is
continued as set forth in Nos. 1 and 2 of this Article, with the consent of the retired
partners or the representative of the deceased partner, but without any assignment of his
right in partnership property;
(4) When all the partners or their representatives assign their rights in partnership
property to one or more third persons who promise to pay the debts and who continue
the business of the dissolved partnership;
(5) When any partner wrongfully causes a dissolution and remaining partners continue
the business under the provisions of article 1837, second paragraph, No. 2, either alone
or with others, and without liquidation of the partnership affairs;
(6) When a partner is expelled and the remaining partners continue the business either
alone or with others without liquidation of the partnership affairs;
The liability of a third person becoming a partner in the partnership continuing the
business, under this article, to the creditors of the dissolved partnership shall be satisfied
out of the partnership property only, unless there is a stipulation to the contrary.
When the business of a partnership after dissolution is continued under any conditions
set forth in this article the creditors of the retiring or deceased partner or the

representative of the deceased partner, have a prior right to any claim of the retired
partner or the representative of the deceased partner against the person or partnership
continuing the business on account of the retired or deceased partner's interest in the
dissolved partnership or on account of any consideration promised for such interest or for
his right in partnership property.
Nothing in this article shall be held to modify any right of creditors to set assignment on
the ground of fraud.
xxx xxx xxx
(Emphasis supplied)
Under Article 1840 above, creditors of the old Jade Mountain are also creditors of the new Jade Mountain
which continued the business of the old one without liquidation of the partnership affairs. Indeed, a
creditor of the old Jade Mountain, like petitioner Benjamin Yu in respect of his claim for unpaid wages, is
entitled to priority vis-a-vis any claim of any retired or previous partner insofar as such retired partner's
interest in the dissolved partnership is concerned. It is not necessary for the Court to determine under
which one or mare of the above six (6) paragraphs, the case at bar would fall, if only because the facts on
record are not detailed with sufficient precision to permit such determination. It is, however, clear to the
Court that under Article 1840 above, Benjamin Yu is entitled to enforce his claim for unpaid salaries, as
well as other claims relating to his employment with the previous partnership, against the new Jade
Mountain.
It is at the same time also evident to the Court that the new partnership was entitled to appoint and hire a
new general or assistant general manager to run the affairs of the business enterprise take over. An
assistant general manager belongs to the most senior ranks of management and a new partnership is
entitled to appoint a top manager of its own choice and confidence. The non-retention of Benjamin Yu as
Assistant General Manager did not therefore constitute unlawful termination, or termination without just or
authorized cause. We think that the precise authorized cause for termination in the case at bar was
redundancy. 10 The new partnership had its own new General Manager, apparently Mr. Willy Co, the
principal new owner himself, who personally ran the business of Jade Mountain. Benjamin Yu's old
position as Assistant General Manager thus became superfluous or redundant. 11 It follows that petitioner
Benjamin Yu is entitled to separation pay at the rate of one month's pay for each year of service that he
had rendered to the old partnership, a fraction of at least six (6) months being considered as a whole
year.
While the new Jade Mountain was entitled to decline to retain petitioner Benjamin Yu in its employ, we
consider that Benjamin Yu was very shabbily treated by the new partnership. The old partnership certainly
benefitted from the services of Benjamin Yu who, as noted, previously ran the whole marble quarrying,
processing and exporting enterprise. His work constituted value-added to the business itself and
therefore, the new partnership similarly benefitted from the labors of Benjamin Yu. It is worthy of note that
the new partnership did not try to suggest that there was any cause consisting of some blameworthy act
or omission on the part of Mr. Yu which compelled the new partnership to terminate his services.
Nonetheless, the new Jade Mountain did not notify him of the change in ownership of the business, the
relocation of the main office of Jade Mountain from Makati to Mandaluyong and the assumption by Mr.
Willy Co of control of operations. The treatment (including the refusal to honor his claim for unpaid wages)
accorded to Assistant General Manager Benjamin Yu was so summary and cavalier as to amount to
arbitrary, bad faith treatment, for which the new Jade Mountain may legitimately be required to respond by
paying moral damages. This Court, exercising its discretion and in view of all the circumstances of this
case, believes that an indemnity for moral damages in the amount of P20,000.00 is proper and
reasonable.
In addition, we consider that petitioner Benjamin Yu is entitled to interest at the legal rate of six percent
(6%) per annum on the amount of unpaid wages, and of his separation pay, computed from the date of
promulgation of the award of the Labor Arbiter. Finally, because the new Jade Mountain compelled
Benjamin Yu to resort to litigation to protect his rights in the premises, he is entitled to attorney's fees in
the amount of ten percent (10%) of the total amount due from private respondent Jade Mountain.
WHEREFORE, for all the foregoing, the Petition for Certiorari is GRANTED DUE COURSE, the Comment
filed by private respondents is treated as their Answer to the Petition for Certiorari, and the Decision of the
NLRC dated 29 November 1990 is hereby NULLIFIED and SET ASIDE. A new Decision is hereby
ENTERED requiring private respondent Jade Mountain Products Company Limited to pay to petitioner
Benjamin Yu the following amounts:

(a) for unpaid wages which, as found by the Labor Arbiter, shall be
computed at the rate of P2,000.00 per month multiplied by thirty-six (36)
months (November 1984 to December 1987) in the total amount of
P72,000.00;
(b) separation pay computed at the rate of P4,000.00 monthly pay
multiplied by three (3) years of service or a total of P12,000.00;
(c) indemnity for moral damages in the amount of P20,000.00;
(d) six percent (6%) per annum legal interest computed on items (a) and
(b) above, commencing on 26 December 1989 and until fully paid; and
(e) ten percent (10%) attorney's fees on the total amount due from
private respondent Jade Mountain.
Costs against private respondents.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 101847 May 27, 1993

LOURDES NAVARRO AND MENARDO NAVARRO, petitioners,
vs.
COURT OF APPEALS, JUDGE BETHEL KATALBAS-MOSCARDON, Presiding Judge, Regional Trial Court of Bacolod City, Branch
52, Sixth Judicial Region and Spouses OLIVIA V. YANSON AND RICARDO B. YANSON, respondents.
George L. Howard Law Office for petitioners
Geocadin, Vinco, Guance, Laudenorio & Cario Law Office for private respondents.

MELO, J.:
Assailed and sought to be set aside by the petition before us is the Resolution of the Court of Appeals dated June 20, 1991 which dismissed
the petition for annulment of judgment filed by the Spouses Lourdes and Menardo Navarro, thusly:
The instant petition for annulment of decision is DISMISSED.
1. Judgments may be annulled only on the ground of extrinsic or collateral fraud, as distinguished from intrinsic fraud
(Canlas vs. Court of Appeals, 164 SCRA 160, 170). No such ground is alleged in the petition.
2. Even if the judgment rendered by the respondent Court were erroneous, it is not necessarily void (Chereau vs.
Fuentebella, 43 Phil. 216). Hence, it cannot be annulled by the proceeding sought to be commenced by the petitioners.
3. The petitioners' remedy against the judgment enforcement of which is sought to be stopped should have been
appeal.
SO ORDERED. (pp. 24-25, Rollo.)
The antecedent facts of the case are as follows:
On July 23, 1976, herein private respondent Olivia V. Yanson filed a complaint against petitioner Lourdes Navarro for "Delivery of Personal
Properties With Damages". The complaint incorporated an application for a writ of replevin. The complaint was later docketed as Civil Case
No. 716 (12562) of the then Court of First Instance of Bacolod (Branch 55) and was subsequently amended to include private respondent's
husband, Ricardo B. Yanson, as co-plaintiff, and petitioner's husband, as co-defendant.
On July 27, 1976, then Executive Judge Oscar R. Victoriano (later to be promoted and to retire as Presiding Justice of the Court of Appeals)
approved private respondents' application for a writ of replevin. The Sheriff's Return of Service dated March 3, 1978 affirmed receipt by
private respondents of all pieces of personal property sought to be recovered from petitioners.
On April 30, 1990, Presiding Judge Bethel Katalbas-Moscardon rendered a decision, disposing as follows :
Accordingly, in the light of the aforegoing findings, all chattels already recovered by plaintiff by virtue of the Writ of
Replevin and as listed in the complaint are hereby sustained to belong to plaintiff being the owner of these properties;
the motor vehicle, particularly that Ford Fiera Jeep registered in and which had remain in the possession of the
defendant is likewise declared to belong to her, however, said defendant is hereby ordered to reimburse plaintiff the
sum of P6,500.00 representing the amount advanced to pay part of the price therefor; and said defendant is likewise
hereby ordered to return to plaintiff such other equipment[s] as were brought by the latter to and during the operation of
their business as were listed in the complaint and not recovered as yet by virtue of the previous Writ of Replevin. (p. 12,
Rollo.)
Petitioner received a copy of the decision on January 10, 1991 (almost 9 months after its rendition) and filed on January 16, 1991 a "Motion
for Extension of Time To File a Motion for Reconsideration". This was granted on January 18, 1991. Private respondents filed their
opposition, citing the ruling in the case of Habaluyas Enterprises, Inc. vs. Japson (142 SCRA 208 [1986]) proscribing the filing of any motion
for extension of time to file a motion for a new trial or reconsideration. The trial judge vacated the order dated January 18, 1991 and declared
the decision of April 30, 1990 as final and executory. (Petitioners' motion for reconsideration was subsequently filed on February 1, 1991 or
22 days after the receipt of the decision).
On February 4, 1991, the trial court issued a writ of execution (Annex "5", p. 79, Rollo). The Sheriff's Return of Service (Annex "6", p. 82,
Rollo) declared that the writ was "duly served and satisfied". A receipt for the amount of P6,500.00 issued by Mrs. Lourdes Yanson, copetitioner in this case, was likewise submitted by the Sheriff (Annex "7", p. 83, Rollo).
On June 26, 1991, petitioners filed with respondent court a petition for annulment of the trial court's decision, claiming that the trial judge
erred in declaring the non-existence of a partnership, contrary to the evidence on record.

The appellate court, as aforesaid, outrightly dismissed the petition due to absence of extrinsic or collateral fraud, observing further that an
appeal was the proper remedy.
In the petition before us, petitioners claim that the trial judge ignored evidence that would show that the parties "clearly intended to form, and
(in fact) actually formed a verbal partnership engaged in the business of Air Freight Service Agency in Bacolod"; and that the decision
sustaining the writ of replevin is void since the properties belonging to the partnership do not actually belong to any of the parties until the
final disposition and winding up of the partnership" (p. 15, Rollo). These issues, however, were extensively discussed by the trial judge in her
16-page, single-spaced decision.
We agree with respondents that the decision in this case has become final. In fact a writ of execution had been issued and was promptly
satisfied by the payment of P6,500.00 to private respondents.
Having lost their right to appeal, petitioners resorted to annulment proceedings to justify a belated judicial review of their case. This was,
however, correctly thrown out by the Court of Appeals because petitioners failed to cite extrinsic or collateral fraud to warrant the setting
aside of the trial court's decision. We respect the appellate court's finding in this regard.
Petitioners have come to us in a petition for review. However, the petition is focused solely on factual issues which can no longer be
entertained. Petitioners' arguments are all directed against the decision of the regional trial court; not a word is said in regard to the
appellate's court disposition of their petition for annulment of judgment. Verily, petitioners keeps on pressing that the idea of a partnership
exists on account of the so-called admissions in judicio. But the factual premises of the trial court were more than enough to suppress and
negate petitioners submissions along this line:
To be resolved by this Court factually involved in the issue of whether there was a partnership that existed between the
parties based on their verbal contention; whether the properties that were commonly used in the operation of Allied Air
Freight belonged to the alleged partnership business; and the status of the parties in this transaction of alleged
partnership. On the other hand, the legal issues revolves on the dissolution and winding up in case a partnership so
existed as well as the issue of ownership over the properties subject matter of recovery.
As a premise, Article 1767 of the New Civil Code defines the contract of partnership to quote:
Art. 1767. By the 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 proceeds among themselves.
xxx xxx xxx
Corollary to this definition is the provision in determining whether a partnership exist as so provided under Article 1769,
to wit:
xxx xxx xxx
Furthermore, the Code provides under Article 1771 and 1772 that while a partnership may be constituted in any form, a
public instrument is necessary where immovables or any rights is constituted. Likewise, if the partnership involves a
capitalization of P3,000.00 or more in money or property, the same must appear in a public instrument which must be
recorded in the Office of the Securities and Exchange Commission. Failure to comply with these requirements shall
only affect liability of the partners to third persons.
In consideration of the above, it is undeniable that both the plaintiff and the defendant-wife made admission to have
entered into an agreement of operating this Allied Air Freight Agency of which the plaintiff personally constituted with
the Manila Office in a sense that the plaintiff did supply the necessary equipments and money while her brother Atty.
Rodolfo Villaflores was the Manager and the defendant the Cashier. It was also admitted that part of this agreement
was an equal sharing of whatever proceeds realized. Consequently, the plaintiff brought into this transaction certain
chattels in compliance with her obligation. The same has been done by the herein brother and the herein defendant
who started to work in the business. A cursory examination of the evidences presented no proof that a partnership,
whether oral or written had been constituted at the inception of this transaction. True it is that even up to the filing of
this complaint those movables brought by the plaintiff for the use in the operation of the business remain registered in
her name.
While there may have been co-ownership or co-possession of some items and/or any sharing of proceeds by way of
advances received by both plaintiff and the defendant, these are not indicative and supportive of the existence of any
partnership between them. Article 1769 of the New Civil Code is explicit. Even the books and records retrieved by the
Commissioner appointed by the Court did not show proof of the existence of a partnership as conceptualized by law.
Such that if assuming that there were profits realized in 1975 after the two-year deficits were compensated, this could
only be subject to an equal sharing consonant to the agreement to equally divide any profit realized. However, this
Court cannot overlook the fact that the Audit Report of the appointed Commissioner was not highly reliable in the sense
that it was more of his personal estimate of what is available on hand. Besides, the alleged profits was a difference
found after valuating the assets and not arising from the real operation of the business. In accounting procedures,
strictly, this could not be profit but a net worth.
In view of the above factual findings of the Court it follows inevitably therefore that there being no partnership that
existed, any dissolution, liquidation or winding up is beside the point. The plaintiff himself had summarily ceased from
her contract of agency and it is a personal prerogative to desist. On the other hand, the assumption by the defendant in
negotiating for herself the continuance of the Agency with the principal in Manila is comparable to plaintiff's. Any
account of plaintiff with the principal as alleged, bore no evidence as no collection was ever demanded of from her. The
alleged P20,000.00 assumption specifically, as would have been testified to by the defendant's husband remain a mere
allegation.
As to the properties sought to be recovered, the Court sustains the possession by plaintiff of all equipments and
chattels recovered by virtue of the Writ of Replevin. Considering the other vehicle which appeared registered in the
name of the defendant, and to which even she admitted that part of the purchase price came from the business
claimed mutually operated, although the Court have not as much considered all entries in the Audit Report as totally
reliable to be sustained insofar as the operation of the business is concerned, nevertheless, with this admission of the
defendant and the fact that as borne out in said Report there has been disbursed and paid for in this vehicle out of the

business funds in the total sum of P6,500.00, it is only fitting and proper that validity of these disbursements must be
sustained as true (Exhs. M-1 to M-3, p. 180, Records). In this connection and taking into account the earlier agreement
that only profits were to be shared equally, the plaintiff must be reimbursed of this cost if only to allow the defendant
continuous possession of the vehicle in question. It is a fundamental moral, moral and civil injunction that no one shall
enrich himself at the expense of another. (pp. 71-75, Rollo.)
Withal, the appellate court acted properly in dismissing the petition for annulment of judgment, the issue raised therein having been directly
litigated in, and passed upon by, the trial court.
WHEREFORE, the petition is DISMISSED. The Resolution of the Court of Appeals dated June 20, 1991 is AFFIRMED in all respects.
No special pronouncement is made as to costs.
SO ORDERED.
Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 143340

August 15, 2001

LILIBETH SUNGA-CHAN and CECILIA SUNGA, petitioners,

vs.
LAMBERTO T. CHUA, respondent.
GONZAGA-REYES, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court of the
Decision1 of the Court of Appeals dated January 31, 2000 in the case entitled "Lamberto T. Chua
vs. Lilibeth Sunga Chan and Cecilia Sunga" and of the Resolution dated May 23, 2000 denying
the motion for reconsideration of herein petitioners Lilibeth Sunga and Cecilia Sunga (hereafter
collectively referred to as petitioners).
The pertinent facts of this case are as follows:
On June 22, 1992, Lamberto T. Chua (hereafter respondent) filed a complaint against Lilibeth
Sunga Chan (hereafter petitioner Lilibeth) and Cecilia Sunga (hereafter petitioner Cecilia),
daughter and wife, respectively of the deceased Jacinto L. Sunga (hereafter Jacinto), for
"Winding Up of Partnership Affairs, Accounting, Appraisal and Recovery of Shares and
Damages with Writ of Preliminary Attachment" with the Regional Trial Court, Branch 11,
Sindangan, Zamboanga del Norte.
Respondent alleged that in 1977, he verbally entered into a partnership with Jacinto in the
distribution of Shellane Liquefied Petroleum Gas (LPG) in Manila. For business convenience,
respondent and Jacinto allegedly agreed to register the business name of their partnership,
SHELLITE GAS APPLIANCE CENTER (hereafter Shellite), under the name of Jacinto as a sole
proprietorship. Respondent allegedly delivered his initial capital contribution of P100,000.00 to
Jacinto while the latter in turn produced P100,000.00 as his counterpart contribution, with the
intention that the profits would be equally divided between them. The partnership allegedly had
Jacinto as manager, assisted by Josephine Sy (hereafter Josephine), a sister of the wife
respondent, Erlinda Sy. As compensation, Jacinto would receive a manager's fee or remuneration
of 10% of the gross profit and Josephine would receive 10% of the net profits, in addition to her
wages and other remuneration from the business.
Allegedly, from the time that Shellite opened for business on July 8, 1977, its business operation
went quite and was profitable. Respondent claimed that he could attest to success of their
business because of the volume of orders and deliveries of filled Shellane cylinder tanks supplied
by Pilipinas Shell Petroleum Corporation. While Jacinto furnished respondent with the
merchandise inventories, balance sheets and net worth of Shellite from 1977 to 1989, respondent
however suspected that the amount indicated in these documents were understated and
undervalued by Jacinto and Josephine for their own selfish reasons and for tax avoidance.
Upon Jacinto's death in the later part of 1989, his surviving wife, petitioner Cecilia and
particularly his daughter, petitioner Lilibeth, took over the operations, control, custody,
disposition and management of Shellite without respondent's consent. Despite respondent's
repeated demands upon petitioners for accounting, inventory, appraisal, winding up and
restitution of his net shares in the partnership, petitioners failed to comply. Petitioner Lilibeth
allegedly continued the operations of Shellite, converting to her own use and advantage its
properties.

On March 31, 1991, respondent claimed that after petitioner Lilibeth ran out the alibis and
reasons to evade respondent's demands, she disbursed out of the partnership funds the amount of
P200,000.00 and partially paid the same to respondent. Petitioner Lilibeth allegedly informed
respondent that the P200,000.00 represented partial payment of the latter's share in the
partnership, with a promise that the former would make the complete inventory and winding up
of the properties of the business establishment. Despite such commitment, petitioners allegedly
failed to comply with their duty to account, and continued to benefit from the assets and income
of Shellite to the damage and prejudice of respondent.
On December 19, 1992, petitioners filed a Motion to Dismiss on the ground that the Securities
and Exchange Commission (SEC) in Manila, not the Regional Trial Court in Zamboanga del
Norte had jurisdiction over the action. Respondent opposed the motion to dismiss.
On January 12, 1993, the trial court finding the complaint sufficient in from and substance
denied the motion to dismiss.
On January 30, 1993, petitioners filed their Answer with Compulsory Counter-claims,
contending that they are not liable for partnership shares, unreceived income/profits, interests,
damages and attorney's fees, that respondent does not have a cause of action against them, and
that the trial court has no jurisdiction over the nature of the action, the SEC being the agency that
has original and exclusive jurisdiction over the case. As counterclaim, petitioner sought
attorney's fees and expenses of litigation.
On August 2, 1993, petitioner filed a second Motion to Dismiss this time on the ground that the
claim for winding up of partnership affairs, accounting and recovery of shares in partnership
affairs, accounting and recovery of shares in partnership assets/properties should be dismissed
and prosecuted against the estate of deceased Jacinto in a probate or intestate proceeding.
On August 16, 1993, the trial denied the second motion to dismiss for lack of merit.
On November 26, 1993, petitioners filed their Petition for Certiorari, Prohibition and Mandamus
with the Court of Appeals docketed as CA-G.R. SP No. 32499 questioning the denial of the
motion to dismiss.
On November 29, 1993, petitioners filed with the trial court a Motion to Suspend Pre-trial
Conference.
On December 13, 1993, the trial court granted the motion to suspend pre-trial conference.
On November 15, 1994, the Court of Appeals denied the petition for lack of merit.
On January 16, 1995, this Court denied the petition for review on certiorari filed by petitioner,
"as petitioners failed to show that a reversible error was committed by the appellate court."2
On February 20, 1995, entry of judgment was made by the Clerk of Court and the case was
remanded to the trial court on April 26, 1995.
On September 25, 1995, the trial court terminated the pre-trial conference and set the hearing of
the case of January 17, 1996. Respondent presented his evidence while petitioners were
considered to have waived their right to present evidence for their failure to attend the scheduled
date for reception of evidence despite notice.
On October 7, 1997, the trial court rendered its Decision ruling for respondent. The dispositive of
the Decision reads:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendants, as follows:

(1) DIRECTING them to render an accounting in acceptable form under

accounting procedures and standards of the properties, assets, income and profits
of the Shellite Gas Appliance Center Since the time of death of Jacinto L. Sunga,
from whom they continued the business operations including all businesses
derived from Shellite Gas Appliance Center, submit an inventory, and appraisal of
all these properties, assets, income, profits etc. to the Court and to plaintiff for
approval or disapproval;
(2) ORDERING them to return and restitute to the partnership any and all
properties, assets, income and profits they misapplied and converted to their own
use and advantage the legally pertain to the plaintiff and account for the properties
mentioned in pars. A and B on pages 4-5 of this petition as basis;
(3) DIRECTING them to restitute and pay to the plaintiff shares and interest of
the plaintiff in the partnership of the listed properties, assets and good will (sic) in
schedules A, B and C, on pages 4-5 of the petition;
(4) ORDERING them to pay the plaintiff earned but unreceived income and
profits from the partnership from 1988 to May 30, 1992, when the plaintiff
learned of the closure of the store the sum of P35,000.00 per month, with legal
rate of interest until fully paid;
(5) ORDERING them to wind up the affairs of the partnership and terminate its
business activities pursuant to law, after delivering to the plaintiff all the
interest, shares, participation and equity in the partnership, or the value thereof in
money or money's worth, if the properties are not physically divisible;
(6) FINDING them especially Lilibeth Sunga-Chan guilty of breach of trust and
in bad faith and hold them liable to the plaintiff the sum of P50,000.00 as moral
and exemplary damages; and,
(7) DIRECTING them to reimburse and pay the sum of P25,000.00 as attorney's
(sic) and P25,000.00 as litigation expenses.
NO special pronouncements as to COSTS.
SO ORDERED."3
On October 28, 1997, petitioners filed a Notice of Appeal with the trial court, appealing the case
to the Court of Appeals.
On January 31, 2000, the Court of Appeals dismissed the appeal. The dispositive portion of the
Decision reads:
"WHEREFORE, the instant appeal is dismissed. The appealed decision is AFFIRMED in
all respects."4
On May 23, 2000, the Court of Appeals denied the motion for reconsideration filed by petitioner.
Hence, this petition wherein petitioner relies upon following grounds:
"1. The Court of Appeals erred in making a legal conclusion that there existed a
partnership between respondent Lamberto T. Chua and the late Jacinto L. Sunga upon the
latter'' invitation and offer and that upon his death the partnership assets and business
were taken over by petitioners.

2. The Court of Appeals erred in making the legal conclusion that laches and/or
prescription did not apply in the instant case.
3. The Court of Appeals erred in making the legal conclusion that there was competent
and credible evidence to warrant the finding of a partnership, and assuming arguendo
that indeed there was a partnership, the finding of highly exaggerated amounts or values
in the partnership assets and profits."5
Petitioners question the correctness of the finding of the trial court and the Court of Appeals that
a partnership existed between respondent and Jacinto from 1977 until Jacinto's death. In the
absence of any written document to show such partnership between respondent and Jacinto,
petitioners argues that these courts were proscribes from hearing the testimonies of respondent
and his witness, Josephine, to prove the alleged partnership three years after Jacinto's death. To
support this argument, petitioners invoke the "Dead Man's Statute' or "Survivorship Rule" under
Section 23, Rule 130 of the Rules of Court that provides:
"SEC. 23. Disqualification by reason of death or insanity of adverse party. Parties or
assignors of parties to a case, or persons in whose behalf a case is prosecuted, against an
executor or administrator or other representative of a deceased person, or against a person
of unsound mind, upon a claim or demand against the estate of such deceased person, or
against such person of unsound mind, cannot testify as to any matter of fact occurring
before the death of such deceased person or before such person became of unsound
mind."
Petitioners thus implore this Court to rule that the testimonies of respondent and his alter ego,
Josephine, should not have been admitted to prove certain claims against a deceased person
(Jacinto), now represented by petitioners.
We are not persuaded.
A partnership may be constituted in any form, except where immovable property of real rights
are contributed thereto, in which case a public instrument shall necessary.6 Hence, based on the
intention of the parties, as gathered from the facts and ascertained from their language and
conduct, a verbal contract of partnership may arise.7 The essential profits that must be proven to
that a partnership was agreed upon are (1) mutual contribution to a common stock, and (2) a joint
interest in the profits.8 Understandably so, in view of the absence of the written contract of
partnership between respondent and Jacinto, respondent resorted to the introduction of
documentary and testimonial evidence to prove said partnership. The crucial issue to settle then
is to whether or not the "Dead Man's Statute" applies to this case so as to render inadmissible
respondent's testimony and that of his witness, Josephine.
The "Dead Man's Statute" provides that if one party to the alleged transaction is precluded from
testifying by death, insanity, or other mental disabilities, the surviving party is not entitled to the
undue advantage of giving his own uncontradicted and unexplained account of the transaction.9
But before this rule can be successfully invoked to bar the introduction of testimonial evidence, it
is necessary that:
"1. The witness is a party or assignor of a party to case or persons in whose behalf a case
in prosecuted.
2. The action is against an executor or administrator or other representative of a deceased
person or a person of unsound mind;
3. The subject-matter of the action is a claim or demand against the estate of such
deceased person or against person of unsound mind;

4. His testimony refers to any matter of fact of which occurred before the death of such
deceased person or before such person became of unsound mind."10
Two reasons forestall the application of the "Dead Man's Statute" to this case.
First, petitioners filed a compulsory counterclaim11 against respondents in their answer before the
trial court, and with the filing of their counterclaim, petitioners themselves effectively removed
this case from the ambit of the "Dead Man's Statute".12 Well entrenched is the rule that when it is
the executor or administrator or representatives of the estates that sets up the counterclaim, the
plaintiff, herein respondent, may testify to occurrences before the death of the deceased to defeat
the counterclaim.13 Moreover, as defendant in the counterclaim, respondent is not disqualified
from testifying as to matters of facts occurring before the death of the deceased, said action not
having been brought against but by the estate or representatives of the deceased.14
Second, the testimony of Josephine is not covered by the "Dead Man's Statute" for the simple
reason that she is not "a party or assignor of a party to a case or persons in whose behalf a case is
prosecuted." Records show that respondent offered the testimony of Josephine to establish the
existence of the partnership between respondent and Jacinto. Petitioners' insistence that
Josephine is the alter ego of respondent does not make her an assignor because the term
"assignor" of a party means "assignor of a cause of action which has arisen, and not the assignor
of a right assigned before any cause of action has arisen."15 Plainly then, Josephine is merely a
witness of respondent, the latter being the party plaintiff.
We are not convinced by petitioners' allegation that Josephine's testimony lacks probative value
because she was allegedly coerced coerced by respondent, her brother-in-law, to testify in his
favor, Josephine merely declared in court that she was requested by respondent to testify and that
if she were not requested to do so she would not have testified. We fail to see how we can
conclude from this candid admission that Josephine's testimony is involuntary when she did not
in any way categorically say that she was forced to be a witness of respondent.
Also, the fact that Josephine is the sister of the wife of respondent does not diminish the value of
her testimony since relationship per se, without more, does not affect the credibility of
witnesses.16
Petitioners' reliance alone on the "Dead Man's Statute" to defeat respondent's claim cannot
prevail over the factual findings of the trial court and the Court of Appeals that a partnership was
established between respondent and Jacinto. Based not only on the testimonial evidence, but the
documentary evidence as well, the trial court and the Court of Appeals considered the evidence
for respondent as sufficient to prove the formation of partnership, albeit an informal one.
Notably, petitioners did not present any evidence in their favor during trial. By the weight of
judicial precedents, a factual matter like the finding of the existence of a partnership between
respondent and Jacinto cannot be inquired into by this Court on review.17 This Court can no
longer be tasked to go over the proofs presented by the parties and analyze, assess and weigh
them to ascertain if the trial court and the appellate court were correct in according superior
credit to this or that piece of evidence of one party or the other.18 It must be also pointed out that
petitioners failed to attend the presentation of evidence of respondent. Petitioners cannot now
turn to this Court to question the admissibility and authenticity of the documentary evidence of
respondent when petitioners failed to object to the admissibility of the evidence at the time that
such evidence was offered.19
With regard to petitioners' insistence that laches and/or prescription should have extinguished
respondent's claim, we agree with the trial court and the Court of Appeals that the action for
accounting filed by respondents three (3) years after Jacinto's death was well within the
prescribed period. The Civil Code provides that an action to enforce an oral contract prescribes
in six (6) years20 while the right to demand an accounting for a partner's interest as against the
person continuing the business accrues at the date of dissolution, in the absence of any contrary

agreement.21 Considering that the death of a partner results in the dissolution of the partnership22,
in this case, it was Jacinto's death that respondent as the surviving partner had the right to an
account of his interest as against petitioners. It bears stressing that while Jacinto's death dissolved
the partnership, the dissolution did not immediately terminate the partnership. The Civil Code23
expressly provides that upon dissolution, the partnership continues and its legal personality is
retained until the complete winding up of its business, culminating in its termination.24
In a desperate bid to cast doubt on the validity of the oral partnership between respondent and
Jacinto, petitioners maintain that said partnership that had initial capital of P200,000.00 should
have been registered with the Securities and Exchange Commission (SEC) since registration is
mandated by the Civil Code, True, Article 1772 of the Civil Code requires that partnerships with
a capital of P3,000.00 or more must register with the SEC, however, this registration requirement
is not mandatory. Article 1768 of the Civil Code25 explicitly provides that the partnership retains
its juridical personality even if it fails to register. The failure to register the contract of
partnership does not invalidate the same as among the partners, so long as the contract has the
essential requisites, because the main purpose of registration is to give notice to third parties, and
it can be assumed that the members themselves knew of the contents of their contract.26 In the
case at bar, non-compliance with this directory provision of the law will not invalidate the
partnership considering that the totality of the evidence proves that respondent and Jacinto
indeed forged the partnership in question.
WHEREFORE, in view of the foregoing, the petition is DENIED and the appealed decision is
AFFIRMED.
SO ORDERED.1wphi1.nt
Melo, Vitug, Panganiban, and Sandoval-Gutierrez, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 126334

November 23, 2001

EMILIO EMNACE, petitioner,

vs.
COURT OF APPEALS, ESTATE OF VICENTE TABANAO, SHERWIN TABANAO,
VICENTE WILLIAM TABANAO, JANETTE TABANAO DEPOSOY, VICENTA MAY
TABANAO VARELA, ROSELA TABANAO and VINCENT TABANAO, respondents.
YNARES-SANTIAGO, J.:
Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a business
concern known as Ma. Nelma Fishing Industry. Sometime in January of 1986, they decided to
dissolve their partnership and executed an agreement of partition and distribution of the
partnership properties among them, consequent to Jacinto Divinagracia's withdrawal from the
partnership.1 Among the assets to be distributed were five (5) fishing boats, six (6) vehicles, two
(2) parcels of land located at Sto. Nio and Talisay, Negros Occidental, and cash deposits in the
local branches of the Bank of the Philippine Islands and Prudential Bank.
Throughout the existence of the partnership, and even after Vicente Tabanao's untimely demise in
1994, petitioner failed to submit to Tabanao's heirs any statement of assets and liabilities of the
partnership, and to render an accounting of the partnership's finances. Petitioner also reneged on
his promise to turn over to Tabanao's heirs the deceased's 1/3 share in the total assets of the
partnership, amounting to P30,000,000.00, or the sum of P10,000,000.00, despite formal demand
for payment thereof.2
Consequently, Tabanao' s heirs, respondents herein, filed against petitioner an action for
accounting, payment of shares, division of assets and damages.3 In their complaint, respondents
prayed as follows:
1. Defendant be ordered to render the proper accounting of all the assets and liabilities of
the partnership at bar; and
2. After due notice and hearing defendant be ordered to pay/remit/deliver/surrender/yield
to the plaintiffs the following:
A. No less than One Third (1/3) of the assets, properties, dividends, cash, land(s),
fishing vessels, trucks, motor vehicles, and other forms and substance of treasures
which belong and/or should belong, had accrued and/or must accrue to the
partnership;
B. No less than Two Hundred Thousand Pesos (P200,000.00) as moral damages;
C. Attorney's fees equivalent to Thirty Percent (30%) of the entire
share/amount/award which the Honorable Court may resolve the plaintiffs as
entitled to plus P1,000.00 for every appearance in court.4
Petitioner filed a motion to dismiss the complaint on the grounds of improper venue, lack of
jurisdiction over the nature of the action or suit, and lack of capacity of the estate of Tabanao to
sue.5 On August 30, 1994, the trial court denied the motion to dismiss. It held that venue was
properly laid because, while realties were involved, the action was directed against a particular
person on the basis of his personal liability; hence, the action is not only a personal action but

also an action in personam. As regards petitioner's argument of lack of jurisdiction over the
action because the prescribed docket fee was not paid considering the huge amount involved in
the claim, the trial court noted that a request for accounting was made in order that the exact
value of the partnership may be ascertained and, thus, the correct docket fee may be paid.
Finally, the trial court held that the heirs of Tabanao had aright to sue in their own names, in view
of the provision of Article 777 of the Civil Code, which states that the rights to the succession are
transmitted from the moment of the death of the decedent.6
The following day, respondents filed an amended complaint,7 incorporating the additional prayer
that petitioner be ordered to "sell all (the partnership's) assets and thereafter
pay/remit/deliver/surrender/yield to the plaintiffs" their corresponding share in the proceeds
thereof. In due time, petitioner filed a manifestation and motion to dismiss,8 arguing that the trial
court did not acquire jurisdiction over the case due to the plaintiffs' failure to pay the proper
docket fees. Further, in a supplement to his motion to dismiss,9 petitioner also raised prescription
as an additional ground warranting the outright dismissal of the complaint.
On June 15, 1995, the trial court issued an Order,10 denying the motion to dismiss inasmuch as
the grounds raised therein were basically the same as the earlier motion to dismiss which has
been denied. Anent the issue of prescription, the trial court ruled that prescription begins to run
only upon the dissolution of the partnership when the final accounting is done. Hence,
prescription has not set in the absence of a final accounting. Moreover, an action based on a
written contract prescribes in ten years from the time the right of action accrues.
Petitioner filed a petition for certiorari before the Court of Appeals,11 raising the following issues:
I.
Whether or not respondent Judge acted without jurisdiction or with grave abuse of
discretion in taking cognizance of a case despite the failure to pay the required docket
fee;
II. Whether or not respondent Judge acted without jurisdiction or with grave abuse of
discretion in insisting to try the case which involve (sic) a parcel of land situated outside
of its territorial jurisdiction;
III. Whether or not respondent Judge acted without jurisdiction or with grave abuse of
discretion in allowing the estate of the deceased to appear as party plaintiff, when there is
no intestate case and filed by one who was never appointed by the court as administratrix
of the estates; and
IV. Whether or not respondent Judge acted without jurisdiction or with grave abuse of
discretion in not dismissing the case on the ground of prescription.
On August 8, 1996, the Court of Appeals rendered the assailed decision,12 dismissing the petition
for certiorari, upon a finding that no grave abuse of discretion amounting to lack or excess of
jurisdiction was committed by the trial court in issuing the questioned orders denying petitioner's
motions to dismiss.
Not satisfied, petitioner filed the instant petition for review, raising the same issues resolved by
the Court of Appeals, namely:
I.

Failure to pay the proper docket fee;

II.
Parcel of land subject of the case pending before the trial court is outside the said
court's territorial jurisdiction;
III.

Lack of capacity to sue on the part of plaintiff heirs of Vicente Tabanao; and

IV.

Prescription of the plaintiff heirs' cause of action.

It can be readily seen that respondents' primary and ultimate objective in instituting the action
below was to recover the decedent's 1/3 share in the partnership' s assets. While they ask for an
accounting of the partnership' s assets and finances, what they are actually asking is for the trial
court to compel petitioner to pay and turn over their share, or the equivalent value thereof, from
the proceeds of the sale of the partnership assets. They also assert that until and unless a proper
accounting is done, the exact value of the partnership' s assets, as well as their corresponding
share therein, cannot be ascertained. Consequently, they feel justified in not having paid the
commensurate docket fee as required by the Rules of Court.1wphi1.nt
We do not agree. The trial court does not have to employ guesswork in ascertaining the estimated
value of the partnership's assets, for respondents themselves voluntarily pegged the worth thereof
at Thirty Million Pesos (P30,000,000.00). Hence, this case is one which is really not beyond
pecuniary estimation, but rather partakes of the nature of a simple collection case where the
value of the subject assets or amount demanded is pecuniarily determinable.13 While it is true that
the exact value of the partnership's total assets cannot be shown with certainty at the time of
filing, respondents can and must ascertain, through informed and practical estimation, the
amount they expect to collect from the partnership, particularly from petitioner, in order to
determine the proper amount of docket and other fees.14 It is thus imperative for respondents to
pay the corresponding docket fees in order that the trial court may acquire jurisdiction over the
action.15
Nevertheless, unlike in the case of Manchester Development Corp. v. Court of Appeals,16 where
there was clearly an effort to defraud the government in avoiding to pay the correct docket fees,
we see no attempt to cheat the courts on the part of respondents. In fact, the lower courts have
noted their expressed desire to remit to the court "any payable balance or lien on whatever award
which the Honorable Court may grant them in this case should there be any deficiency in the
payment of the docket fees to be computed by the Clerk of Court."17 There is evident willingness
to pay, and the fact that the docket fee paid so far is inadequate is not an indication that they are
trying to avoid paying the required amount, but may simply be due to an inability to pay at the
time of filing. This consideration may have moved the trial court and the Court of Appeals to
declare that the unpaid docket fees shall be considered a lien on the judgment award.
Petitioner, however, argues that the trial court and the Court of Appeals erred in condoning the
non-payment of the proper legal fees and in allowing the same to become a lien on the monetary
or property judgment that may be rendered in favor of respondents. There is merit in petitioner's
assertion. The third paragraph of Section 16, Rule 141 of the Rules of Court states that:
The legal fees shall be a lien on the monetary or property judgment in favor of the
pauper-litigant.
Respondents cannot invoke the above provision in their favor because it specifically applies to
pauper-litigants. Nowhere in the records does it appear that respondents are litigating as paupers,
and as such are exempted from the payment of court fees.18
The rule applicable to the case at bar is Section 5(a) of Rule 141 of the Rules of Court, which
defines the two kinds of claims as: (1) those which are immediately ascertainable; and (2) those
which cannot be immediately ascertained as to the exact amount. This second class of claims,
where the exact amount still has to be finally determined by the courts based on evidence
presented, falls squarely under the third paragraph of said Section 5(a), which provides:
In case the value of the property or estate or the sum claimed is less or more in
accordance with the appraisal of the court, the difference of fee shall be refunded or paid
as the case may be. (Underscoring ours)
In Pilipinas Shell Petroleum Corporation v. Court of Appeals,19 this Court pronounced that the
above-quoted provision "clearly contemplates an Initial payment of the filing fees corresponding
to the estimated amount of the claim subject to adjustment as to what later may be proved."20

Moreover, we reiterated therein the principle that the payment of filing fees cannot be made
contingent or dependent on the result of the case. Thus, an initial payment of the docket fees
based on an estimated amount must be paid simultaneous with the filing of the complaint.
Otherwise, the court would stand to lose the filing fees should the judgment later turn out to be
adverse to any claim of the respondent heirs.
The matter of payment of docket fees is not a mere triviality. These fees are necessary to defray
court expenses in the handling of cases. Consequently, in order to avoid tremendous losses to the
judiciary, and to the government as well, the payment of docket fees cannot be made dependent
on the outcome of the case, except when the claimant is a pauper-litigant.
Applied to the instant case, respondents have a specific claim - 1/3 of the value of all the
partnership assets - but they did not allege a specific amount. They did, however, estimate the
partnership's total assets to be worth Thirty Million Pesos (P30,000,000.00), in a letter21
addressed to petitioner. Respondents cannot now say that they are unable to make an estimate,
for the said letter and the admissions therein form part of the records of this case. They cannot
avoid paying the initial docket fees by conveniently omitting the said amount in their amended
complaint. This estimate can be made the basis for the initial docket fees that respondents should
pay. Even if it were later established that the amount proved was less or more than the amount
alleged or estimated, Rule 141, Section 5(a) of the Rules of Court specifically provides that the
court may refund the 'excess or exact additional fees should the initial payment be insufficient. It
is clear that it is only the difference between the amount finally awarded and the fees paid upon
filing of this complaint that is subject to adjustment and which may be subjected to alien.
In the oft-quoted case of Sun Insurance Office, Ltd. v. Hon. Maximiano Asuncion,22 this Court
held that when the specific claim "has been left for the determination by the court, the additional
filing fee therefor shall constitute a lien on the judgment and it shall be the responsibility of the
Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the
additional fee." Clearly, the rules and jurisprudence contemplate the initial payment of filing and
docket fees based on the estimated claims of the plaintiff, and it is only when there is a
deficiency that a lien may be constituted on the judgment award until such additional fee is
collected.
Based on the foregoing, the trial court erred in not dismissing the complaint outright despite their
failure to pay the proper docket fees. Nevertheless, as in other procedural rules, it may be
liberally construed in certain cases if only to secure a just and speedy disposition of an action.
While the rule is that the payment of the docket fee in the proper amount should be adhered to,
there are certain exceptions which must be strictly construed.23
In recent rulings, this Court has relaxed the strict adherence to the Manchester doctrine, allowing
the plaintiff to pay the proper docket fees within a reasonable time before the expiration of the
applicable prescriptive or reglementary period.24
In the recent case of National Steel Corp. v. Court of Appeals,25 this Court held that:
The court acquires jurisdiction over the action if the filing of the initiatory pleading is
accompanied by the payment of the requisite fees, or, if the fees are not paid at the time
of the filing of the pleading, as of the time of full payment of the fees within such
reasonable time as the court may grant, unless, of course, prescription has set in the
meantime.
It does not follow, however, that the trial court should have dismissed the complaint for
failure of private respondent to pay the correct amount of docket fees. Although the
payment of the proper docket fees is a jurisdictional requirement, the trial court may
allow the plaintiff in an action to pay the same within a reasonable time before the
expiration of the applicable prescriptive or reglementary period. If the plaintiff fails to
comply within this requirement, the defendant should timely raise the issue of jurisdiction

or else he would be considered in estoppel. In the latter case, the balance between the
appropriate docket fees and the amount actually paid by the plaintiff will be considered a
lien or any award he may obtain in his favor. (Underscoring ours)
Accordingly, the trial court in the case at bar should determine the proper docket fee based on the
estimated amount that respondents seek to collect from petitioner, and direct them to pay the
same within a reasonable time, provided the applicable prescriptive or reglementary period has
not yet expired, Failure to comply therewith, and upon motion by petitioner, the immediate
dismissal of the complaint shall issue on jurisdictional grounds.
On the matter of improper venue, we find no error on the part of the trial court and the Court of
Appeals in holding that the case below is a personal action which, under the Rules, may be
commenced and tried where the defendant resides or may be found, or where the plaintiffs
reside, at the election of the latter.26
Petitioner, however, insists that venue was improperly laid since the action is a real action
involving a parcel of land that is located outside the territorial jurisdiction of the court a quo.
This contention is not well-taken. The records indubitably show that respondents are asking that
the assets of the partnership be accounted for, sold and distributed according to the agreement of
the partners. The fact that two of the assets of the partnership are parcels of land does not
materially change the nature of the action. It is an action in personam because it is an action
against a person, namely, petitioner, on the basis of his personal liability. It is not an action in
rem where the action is against the thing itself instead of against the person.27 Furthermore, there
is no showing that the parcels of land involved in this case are being disputed. In fact, it is only
incidental that part of the assets of the partnership under liquidation happen to be parcels of land.
The time-tested case of Claridades v. Mercader, et al.,28 settled this issue thus:
The fact that plaintiff prays for the sale of the assets of the partnership, including the
fishpond in question, did not change the nature or character of the action, such sale being
merely a necessary incident of the liquidation of the partnership, which should precede
and/or is part of its process of dissolution.
The action filed by respondents not only seeks redress against petitioner. It also seeks the
enforcement of, and petitioner's compliance with, the contract that the partners executed to
formalize the partnership's dissolution, as well as to implement the liquidation and partition of
the partnership's assets. Clearly, it is a personal action that, in effect, claims a debt from
petitioner and seeks the performance of a personal duty on his part.29 In fine, respondents'
complaint seeking the liquidation and partition of the assets of the partnership with damages is a
personal action which may be filed in the proper court where any of the parties reside.30 Besides,
venue has nothing to do with jurisdiction for venue touches more upon the substance or merits of
the case.31 As it is, venue in this case was properly laid and the trial court correctly ruled so.
On the third issue, petitioner asserts that the surviving spouse of Vicente Tabanao has no legal
capacity to sue since she was never appointed as administratrix or executrix of his estate.
Petitioner's objection in this regard is misplaced. The surviving spouse does not need to be
appointed as executrix or administratrix of the estate before she can file the action. She and her
children are complainants in their own right as successors of Vicente Tabanao. From the very
moment of Vicente Tabanao' s death, his rights insofar as the partnership was concerned were
transmitted to his heirs, for rights to the succession are transmitted from the moment of death of
the decedent.32
Whatever claims and rights Vicente Tabanao had against the partnership and petitioner were
transmitted to respondents by operation of law, more particularly by succession, which is a mode
of acquisition by virtue of which the property, rights and obligations to the extent of the value of
the inheritance of a person are transmitted.33 Moreover, respondents became owners of their
respective hereditary shares from the moment Vicente Tabanao died.34

A prior settlement of the estate, or even the appointment of Salvacion Tabanao as executrix or
administratrix, is not necessary for any of the heirs to acquire legal capacity to sue. As successors
who stepped into the shoes of their decedent upon his death, they can commence any action
originally pertaining to the decedent.35 From the moment of his death, his rights as a partner and
to demand fulfillment of petitioner's obligations as outlined in their dissolution agreement were
transmitted to respondents. They, therefore, had the capacity to sue and seek the court's
intervention to compel petitioner to fulfill his obligations.
Finally, petitioner contends that the trial court should have dismissed the complaint on the
ground of prescription, arguing that respondents' action prescribed four (4) years after it accrued
in 1986. The trial court and the Court of Appeals gave scant consideration to petitioner's hollow
arguments, and rightly so.
The three (3) final stages of a partnership are: (1) dissolution; (2) winding-up; and (3)
termination.36 The partnership, although dissolved, continues to exist and its legal personality is
retained, at which time it completes the winding up of its affairs, including the partitioning and
distribution of the net partnership assets to the partners.37 For as long as the partnership exists,
any of the partners may demand an accounting of the partnership's business. Prescription of the
said right starts to run only upon the dissolution of the partnership when the final accounting is
done.38
Contrary to petitioner's protestations that respondents' right to inquire into the business affairs of
the partnership accrued in 1986, prescribing four (4) years thereafter, prescription had not even
begun to run in the absence of a final accounting. Article 1842 of the Civil Code provides:
The right to an account of his interest shall accrue to any partner, or his legal
representative as against the winding up partners or the surviving partners or the person
or partnership continuing the business, at the date of dissolution, in the absence of any
agreement to the contrary.
Applied in relation to Articles 1807 and 1809, which also deal with the duty to account, the
above-cited provision states that the right to demand an accounting accrues at the date of
dissolution in the absence of any agreement to the contrary. When a final accounting is made, it
is only then that prescription begins to run. In the case at bar, no final accounting has been made,
and that is precisely what respondents are seeking in their action before the trial court, since
petitioner has failed or refused to render an accounting of the partnership's business and assets.
Hence, the said action is not barred by prescription.
In fine, the trial court neither erred nor abused its discretion when it denied petitioner's motions
to dismiss. Likewise, the Court of Appeals did not commit reversible error in upholding the trial
court's orders. Precious time has been lost just to settle this preliminary issue, with petitioner
resurrecting the very same arguments from the trial court all the way up to the Supreme Court.
The litigation of the merits and substantial issues of this controversy is now long overdue and
must proceed without further delay.
WHEREFORE, in view of all the foregoing, the instant petition is DENIED for lack of merit,
and the case is REMANDED to the Regional Trial Court of Cadiz City, Branch 60, which is
ORDERED to determine the proper docket fee based on the estimated amount that plaintiffs
therein seek to collect, and direct said plaintiffs to pay the same within a reasonable time,
provided the applicable prescriptive or reglementary period has not yet expired. Thereafter, the
trial court is ORDERED to conduct the appropriate proceedings in Civil Case No. 416-C.
Costs against petitioner.1wphi1.nt
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION
G.R. No. 178782

September 21, 2011

JOSEFINA P. REALUBIT, Petitioner,

vs.
PROSENCIO D. JASO and EDEN G. JASO, Respondents.
DECISION
PEREZ, J.:
The validity as well as the consequences of an assignment of rights in a joint venture are at issue
in this petition for review filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure,1
assailing the 30 April 2007 Decision2 rendered by the Court of Appeals (CA) then Twelfth
Division in CA-G.R. CV No. 73861,3 the dispositive portion of which states:
WHEREFORE, the Decision appealed from is SET ASIDE and we order the dissolution of the
joint venture between defendant-appellant Josefina Realubit and Francis Eric Amaury Biondo
and the subsequent conduct of accounting, liquidation of assets and division of shares of the joint
venture business.
Let a copy hereof and the records of the case be remanded to the trial court for appropriate
proceedings.4
The Facts
On 17 March 1994, petitioner Josefina Realubit (Josefina) entered into a Joint Venture
Agreement with Francis Eric Amaury Biondo (Biondo), a French national, for the operation of an
ice manufacturing business. With Josefina as the industrial partner and Biondo as the capitalist
partner, the parties agreed that they would each receive 40% of the net profit, with the remaining
20% to be used for the payment of the ice making machine which was purchased for the
business.5 For and in consideration of the sum of P500,000.00, however, Biondo subsequently
executed a Deed of Assignment dated 27 June 1997, transferring all his rights and interests in the
business in favor of respondent Eden Jaso (Eden), the wife of respondent Prosencio Jaso.6 With
Biondos eventual departure from the country, the Spouses Jaso caused their lawyer to send
Josefina a letter dated 19 February 1998, apprising her of their acquisition of said Frenchmans
share in the business and formally demanding an accounting and inventory thereof as well as the
remittance of their portion of its profits.7
Faulting Josefina with unjustified failure to heed their demand, the Spouses Jaso commenced the
instant suit with the filing of their 3 August 1998 Complaint against Josefina, her husband, Ike
Realubit (Ike), and their alleged dummies, for specific performance, accounting, examination,
audit and inventory of assets and properties, dissolution of the joint venture, appointment of a
receiver and damages. Docketed as Civil Case No. 98-0331 before respondent Branch 257 of the
Regional Trial Court (RTC) of Paraaque City, said complaint alleged, among other matters, that
the Spouses Realubit had no gainful occupation or business prior to their joint venture with
Biondo; that with the income of the business which earned not less than P3,000.00 per day, they
were, however, able to acquire the two-storey building as well as the land on which the joint
ventures ice plant stands, another building which they used as their office and/or residence and
six (6) delivery vans; and, that aside from appropriating for themselves the income of the
business, the Spouses Realubit have fraudulently concealed the funds and assets thereof thru
their relatives, associates or dummies.8
Served with summons, the Spouses Realubit filed their Answer dated 21 October 1998,
specifically denying the material allegations of the foregoing complaint. Claiming that they have
been engaged in the tube ice trading business under a single proprietorship even before their

dealings with Biondo, the Spouses Realubit, in turn, averred that their said business partner had
left the country in May 1997 and could not have executed the Deed of Assignment which bears a
signature markedly different from that which he affixed on their Joint Venture Agreement; that
they refused the Spouses Jasos demand in view of the dubious circumstances surrounding their
acquisition of Biondos share in the business which was established at Don Antonio Heights,
Commonwealth Avenue, Quezon City; that said business had already stopped operations on 13
January 1996 when its plant shut down after its power supply was disconnected by MERALCO
for non-payment of utility bills; and, that it was their own tube ice trading business which had
been moved to 66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City that the
Spouses Jaso mistook for the ice manufacturing business established in partnership with Biondo.9
The issues thus joined and the mandatory pre-trial conference subsequently terminated, the RTC
went on to try the case on its merits and, thereafter, to render its Decision dated 17 September
2001, discounting the existence of sufficient evidence from which the income, assets and the
supposed dissolution of the joint venture can be adequately reckoned. Upon the finding,
however, that the Spouses Jaso had been nevertheless subrogated to Biondos rights in the
business in view of their valid acquisition of the latters share as capitalist partner,10 the RTC
disposed of the case in the following wise:
WHEREFORE, defendants are ordered to submit to plaintiffs a complete accounting and
inventory of the assets and liabilities of the joint venture from its inception to the present, to
allow plaintiffs access to the books and accounting records of the joint venture, to deliver to
plaintiffs their share in the profits, if any, and to pay the plaintiffs the amount of P20,000. for
moral damages. The claims for exemplary damages and attorneys fees are denied for lack of
basis.11
On appeal before the CA, the foregoing decision was set aside in the herein assailed Decision
dated 30 April 2007, upon the following findings and conclusions: (a) the Spouses Jaso validly
acquired Biondos share in the business which had been transferred to and continued its
operations at 66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City and not
dissolved as claimed by the Spouses Realubit; (b) absent showing of Josefinas knowledge and
consent to the transfer of Biondos share, Eden cannot be considered as a partner in the business,
pursuant to Article 1813 of the Civil Code of the Philippines; (c) while entitled to Biondos share
in the profits of the business, Eden cannot, however, interfere with the management of the
partnership, require information or account of its transactions and inspect its books; (d) the
partnership should first be dissolved before Eden can seek an accounting of its transactions and
demand Biondos share in the business; and, (e) the evidence adduced before the RTC do not
support the award of moral damages in favor of the Spouses Jaso.12
The Spouses Realubits motion for reconsideration of the foregoing decision was denied for lack
of merit in the CAs 28 June 2007 Resolution,13 hence, this petition.
The Issues
The Spouses Realubit urge the reversal of the assailed decision upon the negative of the
following issues, to wit:
A. WHETHER OR NOT THERE WAS A VALID ASSIGNMENT OF RIGHTS TO THE
JOINT VENTURE.
B. WHETHER THE COURT MAY ORDER PETITIONER [JOSEFINA REALUBIT]
AS PARTNER IN THE JOINT VENTURE TO RENDER [A]N ACCOUNTING TO
ONE WHO IS NOT A PARTNER IN SAID JOINT VENTURE.
C. WHETHER PRIVATE RESPONDENTS [SPOUSES JASO] HAVE ANY RIGHT IN
THE JOINT VENTURE AND IN THE SEPARATE ICE BUSINESS OF
PETITIONER[S].14

The Courts Ruling

We find the petition bereft of merit.
The Spouses Realubit argue that, in upholding its validity, both the RTC and the CA inordinately
gave premium to the notarization of the 27 June 1997 Deed of Assignment executed by Biondo
in favor of the Spouses Jaso. Calling attention to the latters failure to present before the RTC
said assignor or, at the very least, the witnesses to said document, the Spouses Realubit maintain
that the testimony of Rolando Diaz, the Notary Public before whom the same was acknowledged,
did not suffice to establish its authenticity and/or validity. They insist that notarization did not
automatically and conclusively confer validity on said deed, since it is still entirely possible that
Biondo did not execute said deed or, for that matter, appear before said notary public.15 The
dearth of merit in the Spouses Realubits position is, however, immediately evident from the
settled rule that documents acknowledged before notaries public are public documents which are
admissible in evidence without necessity of preliminary proof as to their authenticity and due
execution.16
It cannot be gainsaid that, as a public document, the Deed of Assignment Biondo executed in
favor of Eden not only enjoys a presumption of regularity17 but is also considered prima facie
evidence of the facts therein stated.18 A party assailing the authenticity and due execution of a
notarized document is, consequently, required to present evidence that is clear, convincing and
more than merely preponderant.19 In view of the Spouses Realubits failure to discharge this
onus, we find that both the RTC and the CA correctly upheld the authenticity and validity of said
Deed of Assignment upon the combined strength of the above-discussed disputable presumptions
and the testimonies elicited from Eden20 and Notary Public Rolando Diaz.21 As for the Spouses
Realubits bare assertion that Biondos signature on the same document appears to be forged,
suffice it to say that, like fraud,22 forgery is never presumed and must likewise be proved by clear
and convincing evidence by the party alleging the same.23 Aside from not being borne out by a
comparison of Biondos signatures on the Joint Venture Agreement24 and the Deed of
Assignment,25 said forgery is, moreover debunked by Biondos duly authenticated certification
dated 17 November 1998, confirming the transfer of his interest in the business in favor of
Eden.26
Generally understood to mean an organization formed for some temporary purpose, a joint
venture is likened to a particular partnership or one which "has for its object determinate things,
their use or fruits, or a specific undertaking, or the exercise of a profession or vocation."27 The
rule is settled that joint ventures are governed by the law on partnerships28 which are, in turn,
based on mutual agency or delectus personae.29 Insofar as a partners conveyance of the entirety
of his interest in the partnership is concerned, Article 1813 of the Civil Code provides as follows:
Art. 1813. A conveyance by a partner of his whole interest in the partnership does not itself
dissolve the partnership, or, as against the other partners in the absence of agreement, entitle the
assignee, during the continuance of the partnership, to interfere in the management or
administration of the partnership business or affairs, or to require any information or account of
partnership transactions, or to inspect the partnership books; but it merely entitles the assignee to
receive in accordance with his contracts the profits to which the assigning partners would
otherwise be entitled. However, in case of fraud in the management of the partnership, the
assignee may avail himself of the usual remedies.
In the case of a dissolution of the partnership, the assignee is entitled to receive his assignors
interest and may require an account from the date only of the last account agreed to by all the
partners.
From the foregoing provision, it is evident that "(t)he transfer by a partner of his partnership
interest does not make the assignee of such interest a partner of the firm, nor entitle the assignee
to interfere in the management of the partnership business or to receive anything except the
assignees profits. The assignment does not purport to transfer an interest in the partnership, but

only a future contingent right to a portion of the ultimate residue as the assignor may become
entitled to receive by virtue of his proportionate interest in the capital."30 Since a partners
interest in the partnership includes his share in the profits,31 we find that the CA committed no
reversible error in ruling that the Spouses Jaso are entitled to Biondos share in the profits,
despite Juanitas lack of consent to the assignment of said Frenchmans interest in the joint
venture. Although Eden did not, moreover, become a partner as a consequence of the assignment
and/or acquire the right to require an accounting of the partnership business, the CA correctly
granted her prayer for dissolution of the joint venture conformably with the right granted to the
purchaser of a partners interest under Article 1831 of the Civil Code.32 1wphi1
Considering that they involve questions of fact, neither are we inclined to hospitably entertain
the Spouses Realubits insistence on the supposed fact that Josefinas joint venture with Biondo
had already been dissolved and that the ice manufacturing business at 66-C Cenacle Drive,
Sanville Subdivision, Project 6, Quezon City was merely a continuation of the same business
they previously operated under a single proprietorship. It is well-entrenched doctrine that
questions of fact are not proper subjects of appeal by certiorari under Rule 45 of the Rules of
Court as this mode of appeal is confined to questions of law.33 Upon the principle that this Court
is not a trier of facts, we are not duty bound to examine the evidence introduced by the parties
below to determine if the trial and the appellate courts correctly assessed and evaluated the
evidence on record.34 Absent showing that the factual findings complained of are devoid of
support by the evidence on record or the assailed judgment is based on misapprehension of facts,
the Court will limit itself to reviewing only errors of law.35
Based on the evidence on record, moreover, both the RTC36 and the CA37 ruled out the
dissolution of the joint venture and concluded that the ice manufacturing business at the
aforesaid address was the same one established by Juanita and Biondo. As a rule, findings of fact
of the CA are binding and conclusive upon this Court,38 and will not be reviewed or disturbed on
appeal39 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 CA, 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 CA are premised on the supposed absence of evidence
and contradicted by the evidence on record.40 Unfortunately for the Spouses Realubits cause, not
one of the foregoing exceptions applies to the case.
WHEREFORE, the petition is DENIED for lack of merit and the assailed CA Decision dated 30
April 2007 is, accordingly, AFFIRMED in toto.
SO ORDERED.
JOSE PORTUGAL PEREZ
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 172690

March 3, 2010

HEIRS OF JOSE LIM, represented by ELENITO LIM, Petitioners,

vs.
JULIET VILLA LIM, Respondent.
DECISION
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Civil
Procedure, assailing the Court of Appeals (CA) Decision2 dated June 29, 2005, which reversed
and set aside the decision3 of the Regional Trial Court (RTC) of Lucena City, dated April 12,
2004.
The facts of the case are as follows:
Petitioners are the heirs of the late Jose Lim (Jose), namely: Jose's widow Cresencia Palad
(Cresencia); and their children Elenito, Evelia, Imelda, Edelyna and Edison, all surnamed Lim
(petitioners), represented by Elenito Lim (Elenito). They filed a Complaint4 for Partition,
Accounting and Damages against respondent Juliet Villa Lim (respondent), widow of the late
Elfledo Lim (Elfledo), who was the eldest son of Jose and Cresencia.
Petitioners alleged that Jose was the liaison officer of Interwood Sawmill in Cagsiay, Mauban,
Quezon. Sometime in 1980, Jose, together with his friends Jimmy Yu (Jimmy) and Norberto Uy
(Norberto), formed a partnership to engage in the trucking business. Initially, with a contribution
of P50,000.00 each, they purchased a truck to be used in the hauling and transport of lumber of
the sawmill. Jose managed the operations of this trucking business until his death on August 15,
1981. Thereafter, Jose's heirs, including Elfledo, and partners agreed to continue the business
under the management of Elfledo. The shares in the partnership profits and income that formed
part of the estate of Jose were held in trust by Elfledo, with petitioners' authority for Elfledo to
use, purchase or acquire properties using said funds.
Petitioners also alleged that, at that time, Elfledo was a fresh commerce graduate serving as his
fathers driver in the trucking business. He was never a partner or an investor in the business and
merely supervised the purchase of additional trucks using the income from the trucking business
of the partners. By the time the partnership ceased, it had nine trucks, which were all registered
in Elfledo's name. Petitioners asseverated that it was also through Elfledos management of the
partnership that he was able to purchase numerous real properties by using the profits 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.
On May 18, 1995, Elfledo died, leaving respondent as his sole surviving heir. Petitioners claimed
that respondent took over the administration of the aforementioned properties, which belonged to
the estate of Jose, without their consent and approval. Claiming that they are co-owners of the
properties, petitioners required respondent to submit an accounting of all income, profits and
rentals received from the estate of Elfledo, and to surrender the administration thereof.
Respondent refused; thus, the filing of this case.
Respondent traversed petitioners' allegations and claimed that Elfledo was himself a partner of
Norberto and Jimmy. Respondent also claimed that per testimony of 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 Reconsideration,5
which the CA, however, denied in its Resolution6 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,
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 certiorari under
Rule 45. This rule provides that the parties may raise only questions of law, because the Supreme
Court is not a trier of facts. Generally, we are not duty-bound to analyze again and weigh the
evidence introduced in and considered by the tribunals below.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.
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 Appeals14 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 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.1avvphi1
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.
ANTONIO EDUARDO B. NACHURA
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION
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)
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 attorneys 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 attorneys 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 PGIs claim as well as on the awards of exemplary damages
and attorneys 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 attorneys 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.
SO ORDERED. (capitalization and emphasis in the original; underscoring supplied)
In partly affirming the trial courts decision, the appellate court ratiocinated that notwithstanding
the terms of the JVA, the joint venture cannot avoid payment of PGIs 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 ATTORNEYS 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 DRYSDALES]
ENTITLEMENT TO AN AWARD OF ATTORNEYS 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] ATTORNEYS FEES [AND] TO REIMBURSE
[MARSMAN DRYSDALE] 50% OF P535,353.50 AND PAY [MARSMAN DRYSDALE]
P100,000.00 AS ATTORNEYS 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 Courts 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 courts, 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 PGIs contractual
claims when it (PGI) received a Certificate of Payment16 from the joint ventures 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 Gotescos cash contribution, as its (Marsman Drysdales) 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.
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 courts 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 Gotescos expense. The grant by the lower courts of Marsman Drysdale
cross-claim against Gotesco was thus erroneous.
Marsman Drysdales supplication for the award of attorneys 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 PGIs 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 PGIs
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 demand23 as the delay in payment makes the obligation one of forbearance of money,
conformably with this Courts 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.
CONCHITA CARPIO MORALES
Associate Justice
Chairperson
WE CONCUR: