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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
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 businessunder the provisions of article 1837,
second paragraph, No. 2, either alone or with others, andwithout
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
FERNANDEZ, J.:
This is an appeal to the Court of Appeals from the judgment of the Court of First
Instance of Negros Occidental in Civil Cage No. 5343, entitled "Manuel G.
Singson, et all vs. Isabela Sawmill, et al.,", the dispositive portion of which
reads:
10. That this Honorable Court has no jurisdiction in this case for
it is well settled in law and in jurisprudence that a court of first
instance has no power or jurisdiction to annul judgments or
decrees of a coordinate court because other function devolves
upon the proper appellate court; (Lacuna, et al. vs. Ofilada, et
al., G.R. No. L-13548, September 30, 1959; Cabigao vs. del
Rosario, 44 Phil. 182; PNB vs. Javellana, 49 O.G. No. 1, p.124),
as it appears from the complaint in this case to annul the
decision of this same court, but of another branch (Branch II,
Judge Querubin presiding). 4
After trial, judgment was rendered in favor of the plaintiffs and against the
defendants.
VI
said properties that she had bought at public aucton one week
before.
xxx xxx xxx 7
It is contended by the appellants that the Court of First Instance of Negros
Occidental had no jurisdiction over Civil Case No. 5343 because the plaintiffs
Oppen, Esteban, Inc., Agustin R. Tonsay, Jose L. Espinos and the Bacolod
Southern Lumber Yard sought to collect sums of moeny, the biggest amount of
which was less than P2,000.00 and, therefore, within the jurisdiction of the
municipal court.
This contention is devoid of merit because all the plaintiffs also asked for the
nullity of the assignment of right with chattel mortgage entered into by and
between Margarita G. Saldajeno and her former partners Leon Garibay and
Timoteo Tubungbanua. This cause of action is not capable of pecuniary
estimation and falls under the jurisdiction of the Court of First Instnace. Where
the basic issue is something more than the right to recover a sum of money and
where the money claim is purely incidental to or a consequence of the principal
relief sought, the action is as a case where the subject of the litigation is not
capable of pecuniary estimation and is cognizable exclusively by the Court of
First Instance.
The jurisdiction of all courts in the Philippines, in so far as the authority thereof
depends upon the nature of litigation, is defined in the amended Judiciary Act,
pursuant to which courts of first instance shall have exclusive original
jurisdiction over any case the subject matter of which is not capable of
pecuniary estimation. An action for the annulment of a judgment and an order of
a court of justice belongs to th category. 8
In determining whether an action is one the subject matter of which is not
capable of pecuniary estimation this Court has adopted the criterion of first
ascertaining the nature of the principal action or remedy sought. If it is primarily
for the recovery of a sum of money, the cliam is considered capable of pecuniary
estimation, and whether jurisdiciton is in the municipal courts or in the courts of
first instance would depend on the amount of the claim. However, where the
basic issue is something other than the right to recover a sum of money, where
the money claim is purely incidental to, or a consequence of, the principal relief
sought, this Court has considered such actions as cases where the subject ogf the
litigation may not be estimated in terms of money, and are cognizable
exclusively by courts of first instance.
In Andres Lapitan vs. SCANDIA, Inc., et al., 9 this Court held:
12
This Court has held that a person, who is not a party obliged principally or
subsidiarily under a contract, may exercised an action for nullity of the contract
if he is prejudiced in his rights with respect to one of the contracting parties,
and can show detriment which would positively result to him from the contract
in which he has no intervention. 21
BARREDO, J.:
The portion of the decision appealed from ordering the appellants to pay
attorney's fees to the plaintiffs-appellees cannot be sustained. There is no
showing that the appellants displayed a wanton disregard of the rights of the
plaintiffs. Indeed, the appellants believed in good faith, albeit erroneously, that
they are not liable to pay the claims.
The defendants-appellants have a right to be reimbursed whatever amounts they
shall pay the appellees by their co-defendants Leon Garibay and Timoteo
Tubungbanua. In the memorandum-agreement, Leon Garibay and Timoteo
Tubungbaun undertook to release Margarita G. Saldajeno from any obligation of
"Isabela Sawmill" to third persons. 22
WHEREFORE, the decision appealed from is hereby affirmed with the elimination
of the portion ordering appellants to pay attorney's fees and with the
modification that the defendsants, Leon Garibay and Timoteo Tubungbanua,
should reimburse the defendants-appellants, Margarita G. Saldajeno and her
husband Cecilio Saldajeno, whatever they shall pay to the plaintiffs-appellees,
without pronouncement as to costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Guerrero, De Castro and Melencio-Herrera,
JJ., concur.
accounting runs from the day the persons who should render
same cease in their functions, and Article 1149 of the Civil Code
provides that "all other actions whose periods are not fixed in
this Code or in other laws within five years from the time the
right of action accrues."
It is an incontrovertible fact that the plaintiff had filed this
action against the defendant on February 10, 1961, nearly ten
years after the expiration of the contract of partnership between
them on March, 1951. ... (Pp, 56-57, R. on A.)
In his complaint, plaintiff-appellant prayed for payment of his salaries not only
as President of the partnership but also as editor of the Leyte-Samar Tribune
which admittedly he had not been paid from the start, for accounting of the
partnership affairs, for payment of his alleged share in the rental value of the
printing equipment and accessories used by the partnership, of which he also
claimed part-ownership proportionally to his share in the partnership, and for
damages, attorney's fees and costs. The defendant-appellee admitted practically
all the material allegations of the complaint about the organization of the
partnership and the terms thereof as well as the non-payment of the salaries
claimed by appellant, but, in defense, he alleged that the whole business of the
partnership became his alone in 1947 after he had acquired by purchase the
share of Francisco Pagulayan and had taken over the share of appellant, since
the latter failed to pay the P1,100 he had requested appellee to pay to
Pagulayan, as security for the payment of which, he had pledge his said share to
appellee; that since 1947, the place of the business was transferred by him, he
had its name changed to Taega Press and he had always been operating openly
and publicly the said printing business from 1947 without any intervention or
participation of appellant and without said appellant making any claim of any
kind in connection therewith until the filing of the complaint on February 10,
1961, hence, all the claims and causes of action of the appellant had already
prescribed.
Upon the facts found by His Honor quoted above, We agree with His Honor in
upholding appellee's defense of prescription. From any angle that this case may
be viewed, it is obvious that appellant's causes of action barred by the statute of
limitations.
Appellee took exclusive control of the partnership affairs since 1947, publicly
and openly and after having notified appellant that he would do so should the
latter fail to comply with his letter of demand, Exhibit "5", dated April 19, 1947.
Nowhere in the facts found by the trial judge does it appear that appellant did
anything about said demand or that he ever contested the action of the appellee
of transferring the place of business and changing its name to Taega Press.
There is nothing to show that he had taken any move for the payment to him of
his unpaid salaries both as President of the business and as editor of the LeyteSamar Tribune.
Under these circumstances, it would be giving premium to inaction and
indifference to still hold that appellant could sue appellee, almost fourteen
years after the latter, with prior notice to the former, had openly and publicly
taken over exclusive control of the partnership business as if it were his own and
only a little short of ten years after the expiration of the stipulated term of
partnership. His claims for salaries accrued after each month they were unpaid.
Whether we assume that these claims lost basis in 1947 when appellee took over
the businesses of the printing press and the newspaper or in 1951, upon the
expiration of the term of the agreements, by all standards, these claims had
already prescribed when the present suit was filed. On the other hand, under
Article 1153 of the Civil Code, a demand for "accounting runs from the day the
persons who should render the same ceases in their functions," which in this case
as in 1947, when the appellee began to operate the businesses as exclusively his
own. Again, inasmuch as the longest period in the chapter on prescription of the
Civil Code is ten years, it is evident that appellant's action for accounting is
already barred. The same is true with the claim for rentals and recovery of
proportional ownership of the printing equipment and accessories, as to which,
appellant's period to bring his actions accrued also in 1947, fourteen years
before this suit was filed.
As a matter of fact, appellant impliedly admits the correctness of this position,
since in this appeal his only contention is that both as his partner and as pledgee
of his share, the appellee became his trustee, in legal contemplation, or that, in
the eyes of the law, a relationship of trusteeship arose between him and
appellee, hence his actions against him are imprescriptible. Appellant's pose is
without merit. In bad faith or in good faith, after eight years of actual adverse
possession, appellee acquired clear ownership of appellant's share by acquisitive
prescription. According to Art. 1132 of the Civil Code, "the ownership of personal
property also prescribes through uninterrupted possession for eight years,
without need of any other condition." So, appellee became undisputed owner of
appellant's share since 1955 or six years before this action was filed and since
said year the allegation of trusteeship had already lost any basis whatsoever.
Under Article 1140 of same Code, "Actions to recover movables shall prescribe
eight years from the time the possession thereof is lost, unless the possessor has
acquired the ownership by prescription for a less period" or for an equal period,
in which latter case, the right to sue prescribes together with the title.
Equally untenable is appellant's reliance on the theory that as a member of the
partnership, appellee continued as a trustee even after 1947, when said appellee
took the business for himself and even after 1951, the expiry date of the
agreements. The provisions of Article 1785 to the effect that: .
When a partnership for a fixed term or particular undertaking is
continued after the termination of such term or particular
undertaking without any express agreement, the rights and
duties of the partners remain the same as they were at such
termination, so far as is consistent with a partnership at will.
A continuation of the business by the partners or such of them as
habitually acted therein during the term, without any settlement
or liquidation of the partnership affairs, is prima facie evidence
of a continuation of the partnership.
and Article 1829 thus:
On dissolution the partnership is not terminated, but continues
until the winding up of partnership affairs is completed.
are clearly inapplicable here, for the simple reason that those
articles are premised on a continuation of the partnership as
such, which is not our case, because here appellee repudiated
the partnership as early as 1947 with either actual or presumed
knowledge of the appellant. By analogy, at least, with the rule
as to a co-ownership, which a partnership essentially is,
prescription does not run in favor of any of the co-owners only as
long as the co-owner claiming against the others "expressly or
impliedly recognizes the co-ownership," a circumstance
irreconcilably inconsistent with appellee's conduct of
transferring the place of business, changing its name and not
paying appellant any of the salaries agreed upon in the articles
of partnership.
What is more, this case may well be decided on the basis of laches as was done
by the trial judge. In other words, even if prescription were not properly
applicable, We could still hold that under the facts proven in the record and
found by the lower court, appellant has been guilty of laches and his stale
demands may not gain the ears of the court. We note, however, that in his
answer, the appellee limit his defense specifically to prescription which is a
separate defense from laches. Not that such particularity of appellee's defense is
fatal, because, after all, it does not appear that the evidence proving laches
were objected to by appellant, (Section 5, Rule 10, Rules of Court) but We do
not feel that in this case We need to go beyond the specific defense expressly
invoked by the appellant. This is mentioned only, lest appellant may still
entertain any hope regarding this case.
WHEREFORE, the judgment of the lower court is affirmed, with costs against
appellant.
In G. R. No. 94285, the petitioners assail the Resolution[1] dated June 27,
1990 of the Court of Appeals granting the Motion for Reconsideration interposed
by the petitioners (now the private respondents) of its Decision [2], promulgated
on January 15, 1990, which affirmed the Order [3] issued on January 16, 1989 by
the Securities and Exchange Commission (SEC) en banc and the Order[4] of SEC
Hearing Officer Felipe Tongco, dated October 5, 1988,
The facts that matter are as follows:
Sy Yong Hu & Sons is a partnership of Sy Yong Hu and his sons, Jose Sy,
Jayme Sy, Marciano Sy, Willie Sy, Vicente Sy, and Jesus Sy, registered with the
SEC on March 29, 1962, with Jose Sy as managing partner. The partners and their
respective shares are reflected in the Amended Articles of Partnership [5] as
follows:
NAMES AMOUNT CONTRIBUTED
JESUS SY, JAIME SY, ESTATE OF JOSE SY, ESTATE OF VICENTE SY, HEIR OF
MARCIANO SY represented by JUSTINA VDA. DE SY and WILLIE
SY,petitioners, vs. THE COURT OF APPEALS, INTESTATE ESTATE OF SY
YONG HU, SEC. HEARING OFFICER FELIPE TONGCO, SECURITIES AND
EXCHANGE COMMISSION, respondents.
SY YONG HU & SONS, JOHN TAN, BACOLOD CANVAS AND UPHOLSTERY SUPPLY
CO., AND NEGROS ISUZU SALES, petitioners, vs. HONORABLE COURT
OF APPEALS (11th Division), INTESTATE ESTATE OF THE LATE SY
YONG HU, JOSE FALSIS, JR., AND HON. BETHEL KATALBASMOSCARDON, RTC OF NEGROS OCCIDENTAL, Branch 51, respondents.
DECISION
PURISIMA, J.:
At bar are two consolidated petitions for review on certiorari under Rule 45
of the Revised Rules of Court, docketed as G. R. Nos. 94285 and G.R. No.
100313, respectively, seeking to reinstate the Resolution of the Court of Appeals
in CA - G. R. SP No. 17070 and its Decision in CA-G. R. SP No. 24189.
Espejo in an Order, dated January 11, 1984, which Order became final since no
appeal was taken therefrom.[14]
After the dismissal of SEC Case No. 2338, the children of Keng Sian sought to
intervene in SEC Case No. 1648 but their motion to so intervene was denied in an
Order dated May 9, 1985. There was no appeal from said order.[15]
In the meantime, Branch 43 of the Regional Trial Court of Negros Occidental
appointed one Felix Ferrer as a Special Administrator for the Intestate Estate of
Sy Yong Hu in Civil Case No. 13388. Then, on August 30, 1985, Alex Ferrer moved
to intervene in the proceedings in SEC Case No. 1648, for the partition and
distribution of the partnership assets, on behalf of the respondent Intestate
Estate.[16]
It appears that sometime in December, 1985, Special Administrator Ferrer
filed an Amended Complaint on behalf of respondent Intestate Estate in Civil
Case No. 13388, wherein he joined Keng Sian as plaintiff and thereby withdrew
as defendant in the case. Special Administrator Ferrer adopted the theory of
Keng Sian that the assets of the partnership belong to Keng Sian and Sy Yong Hu
(now represented by the Estate of Sy Yong Hu) in co-ownership, which assets
were wrongfully diverted in favor of the defendants.[17]
The motion to intervene in SEC Case No. 1648, filed by Special
Administrator Alex Ferrer on behalf of the respondent Estate, was denied in the
order issued on May 9, 1986 by Hearing Officer Sison.With the denial of the
motion for reconsideration, private respondent Intestate Estate of Sy Yong Hu
appealed to the Commission en banc.
In its decision (Sulit decision) on the aforesaid appeal from the Order dated
May 9, 1986, and the Order dated December 2, 1986, the SEC en banc[18] ruled:
On the basis of the above decision of the SEC en banc, Hearing Officer Sison
approved a partial partition of certain partnership assets in an order [13] dated
December 2, 1986. Therefrom, respondents seasonably appealed.
In 1982, the children of Keng Sian with Sy Yong Hu, namely, John Keng
Seng, Carlos Keng Seng, Tita Sy, Yolanda Sy and Lolita Sy, filed a petition,
docketed as SEC Case No 2338, to revoke the certificate of registration of Sy
Yong Hu & Sons, and to have its assets reverted to the estate of the late Sy Yong
Hu. After hearings, the petition was dismissed by Hearing Officer Bernardo T.
The said decision of the SEC en banc reiterated that the Abello decision of June
8, 1982, which upheld the order of dissolution of the partnership, had long
become final and executory. No further appeal was taken from the Sulit
Decision.
During the continuation of the proceedings in SEC Case No. 1648, now
presided over by Hearing Officer Felipe S. Tongco who had substituted Hearing
Officer Sison, the propriety of placing the Partnership under receivership was
taken up. The parties brought to the attention of the Hearing Officer the fact of
existence of Civil Case No. 903 (formerly Civil Case No. 13388) pending before
the Regional Trial Court of Negros Occidental. They also agreed that during the
pendency of the aforesaid court case, there will be no disposition of the
partnership assets.[21] On October 5, 1988, Hearing Officer Tongco came out with
an Order[22] (Tongco Order) incorporating the above submissions of the parties
and placing[23] the partnership under a receivership committee, explaining that it
is the most equitable fair and just manner to preserve the assets of the
partnership during the pendency of the civil case in the Regional Trial Court of
Bacolod City.
On October 22, 1988, a joint Notice of Appeal to the SEC en banc was filed
by herein petitioners Jayme Sy, Jesus Sy, Estate of Jose Sy, Estate of Vicente Sy,
Heirs of Marciano Sy (represented by Justina Vda. de Sy), and Willie Sy, against
the Intervenor (now private respondent). In an order (Lopez Order) dated
January 16, 1989, the SEC en banc[24]affirmed the Tongco Order.
With the denial of their Motion for Reconsideration,
special civil action for certiorari with the Court of Appeals.
[25]
petitioners filed a
On January 15, 1990, the Court of Appeals granted the petition and set
aside the Tongco and Lopez Orders, and remanded the case for further execution
of the 1982 Abello and 1988 Sulit Decisions, ordering the partition and
distribution of the partnership properties.[26]
Private respondent seasonably interposed a motion for reconsideration of
such decision of the Court of Appeals.
Acting thereupon on June 27, 1990, the Court of Appeals issued its assailed
Resolution, reversing its Decision of January 15, 1990, and remanding the case to
the SEC for the formation of a receivership committee, as envisioned in the
Tongco Order.
G. R. No. 100313 came about in view of the dismissal by the Court of
Appeals[27] of the Petition for Certiorari with a Prayer for Preliminary Injunction,
docketed as CA-G. R. SP No. 24189, seeking to annul and set aside the orders,
dated January 24, 1991 and April 19, 1989, respectively, in Civil Case No. 5326
before the Regional Trial Court of Bacolod City.
The antecedent facts are as follows:
Sometime in June of 1988, petitioner Sy Yong Hu & Sons through its
Managing Partner, Jesus Sy, applied for a building permit to reconstruct its
building called Sy Yong Hu & Sons Building, located in the central business
district of Bacolod City, which had been destroyed by fire in the late 70s. On
July 5, 1988, respondent City Engineer issued Building Permit No. 4936 for the
reconstruction of the first two floors of the building. Soon thereafter,
reconstruction work began. In January, 1989, upon completion of its
reconstruction, the building was occupied by the herein petitioners, Bacolod and
Upholstery Supply Company and Negros Isuzu Sales, which businesses are owned
by successors-in-interest of the deceased partners Jose Sy and Vicente
Sy. Petitioner John Tan, who is also an occupant of the reconstructed building, is
the brother-in-law of deceased partner Marciano Sy.[28]
From the records on hand, it can be gleaned that the Tongco Order[29],
dated October 5, 1988, in SEC Case No. 1648, had, among others, denied a
similar petition of the intervenors therein (now private respondents) for a
restraining order and/or injunction to enjoin the reconstruction of the same
building. However, on October 10, 1988, respondent Intestate Estate sent a
letter to the City Engineer claiming that Jesus Sy is not authorized to act for
petitioners Sy Yong Hu & Sons with respect to the reconstruction or renovation of
the property of the partnership. This was followed by a letter dated November
11, 1988, requesting the revocation of Building Permit No. 4936.
Respondent City Engineer inquired[30] later from Jesus Sy for an authority to
sign for and on behalf of Sy Yong Hu & Sons to justify the latters signature in the
application for the building permit, informing him that absent any proof of his
authority, he would not be issued an occupancy permit.[31] On December 27,
1988, respondent Intestate Estate reiterated its objection to the authority of
Jesus Sy to apply for a building permit and pointing out that in view of the
creation of a receivership committee, Jesus Sy no longer had any authority to act
for the partnership.[32]
In reply, Jesus Sy informed the City Engineer that the Tongco Order had
been elevated to the SEC en banc, making him still the authorized manager of
the partnership. He then requested that an occupancy permit be issued as Sy
Yong Hu & Sons had complied with the requirements of the City Engineers Office
and the National Building Code.[33]
Unable to convince the respondent City Engineer to revoke subject building
permit, respondent Intestate Estate brought a Petition for Mandamus with
prayer for a Writ of Preliminary Injunction,docketed as Civil Case No 5326
before the Regional Trial Court of Bacolod City and entitled Intestate Estate of
the Late Sy Yong Hu vs. Engineer Jose P. Falsis, Jr. [34] The Complaint concluded
with the following prayer:
WHEREFORE PREMISES CONSIDERED, it is respectfully prayed of the Honorable
Court that:
1. A writ of Preliminary Injunction be issued to the respondent, after preliminary
hearing is had. compelling his office to padlock the premises occupied, without
After the respondents had sent in their answer, petitioners filed a Reply
with a prayer for the issuance of a writ of mandamus directing the respondent
City Engineer to reissue the building permit previously issued in favor of
petitioner Sy Yong Hu & Sons, and to issue a certificate of occupancy on the
basis of the admission by respondent City Engineer that petitioner had complied
with the provisions of the National Building Code.[41]
On May 31, 1991, the Court of Appeals rendered its questioned decision
denying the petition.[42]
From the Resolution of the Court of Appeals granting the motion for
reconsideration in CA-G. R. SP No. 17070 and the Decision in CA-G. R. SP No.
24189, petitioners have come to this Court for relief.
In G. R. No. 94285, petitioners contend by way of assignment of
errors,[43] that:
I
RESPONDENT COURT OF APPEALS ERRED IN REVERSING ITS MAIN
DECISION IN CA-G. R. No. 17070, WHICH DECISION HAD REMANDED TO
THE SEC THE CASE FOR THE PROPER IMPLEMENTATION OF THE 1982
ABELLO AND 1988 SULIT DECISIONS WHICH IN TURN ORDERED THE
DISTRIBUTION AND PARTITION OF THE PARTNERSHIP PROPERTIES.
II
RESPONDENT COURT OF APPEALS ERRED IN REINSTATING THE TONGCO
ORDER, WHICH HAD SUSPENDED THE DISSOLUTION OF THE
PARTNERSHIP AND THE DISTRIBUTION OF ITS ASSETS, AND IN PLACING
THE PARTNERSHIP PROPERTIES UNDER RECEIVERSHIP PENDING THE
RESOLUTION OF CIVIL CASE NO. 903 (13388), ON A GROUND NOT MADE
THE BASIS OF THE SEC RESOLUTION UNDER REVIEW, I. E., THE
DISPOSITION BY A PARTNER OF SMALL PROPERTIES ALREADY
ADJUDICATED TO HIM BY A FINAL SEC ORDER DATED DECEMBER 2,
1986 AND MADE LONG BEFORE THE AGREEMENT OF JUNE 28, 1988 OF
THE PETITIONERS NOT TO DISPOSE OF THE PARTNERSHIP ASSETS.
In G. R. No. 100313, Petitioners assign as errors, that:
[44]
I
THE HONORABLE COURT OF APPEALS (ELEVENTH DIVISION) ERRED IN
HOLDING THAT RESPONDENT JUDGE DID NOT ACT WITHOUT
The dissolution of the partnership did not mean that the juridical entity was
immediately terminated and that the distribution of the assets to its partners
should perfunctorily follow. On the contrary, the dissolution simply effected a
change in the relationship among the partners. The partnership, although
dissolved, continues to exist until its termination, at which time the winding up
of its affairs should have been completed and the net partnership assets are
partitioned and distributed to the partners.[47]
The error, therefore, ascribed to the Court of Appeals is devoid of any
sustainable basis. The Abello Decision though, indeed, final and executory, did
not pose any obstacle to the Hearing Officer to issue orders not inconsistent
therewith. From the time a dissolution is ordered until the actual termination of
the partnership, the SEC retained jurisdiction to adjudicate all incidents relative
thereto. Thus, the disputed order placing the partnership under a receivership
committee cannot be said to have varied the final order of dissolution. Neither
did it suspend the dissolution of the partnership. If at all, it only suspended the
partition and distribution of the partnership assets pending disposition of Civil
Case No. 903 on the basis of the agreement by the parties and under the
circumstances of the case. It bears stressing that, like the appointment of a
manager in charge of the winding up of the affairs of the partnership, said
appointment of a receiver during the pendency of the dissolution is interlocutory
in nature, well within the jurisdiction of the SEC.
Furthermore, having agreed with the respondents not to dispose of the
partnership assets, petitioners effectively consented to the suspension of the
winding up or, more specifically, the partition and distribution of subject
assets. Petitioners are now estopped from questioning the order of the Hearing
Officer issued in accordance with the said agreement. [48]
Petitioners also assail the propriety of the receivership theorizing that there
was no necessity therefor, and that such remedy should be granted only in
extreme cases, with respondent being duty-bound to adduce evidence of the
grave and irremediable loss or damage which it would suffer if the same was not
granted. It is further theorized that, at any rate, the rights of respondent
Intestate Estate are adequately protected since notices of lis pendens of the
aforesaid civil case have been annotated on the real properties of the
partnership.[49]
To bolster petitioners' contention, they maintain that they are the majority
partners of the partnership Sy Yong Hu & Sons controlling Ninety Six per cent
(96%) of its equity. As such, they have the greatest interest in preserving the
partnership properties for themselves,[50] and therefore, keeping the said
properties in their possession will not bring about any feared damage or
dissipation of such properties, petitioners stressed.
Sec. (6) of Presidential Decree No. 902-A, as amended, reads:
As alleged by the respondents and as shown by the records there is now pending
civil case entitled Keng Sian and Intestate of Sy Yong Hu vs. Jayme Sy, Jesus Sy,
Marciano Sy, Willy Sy, Intestate of Jose Sy, Intestate of Vicente Sy, Sy Yong Hu &
co and Sy Yong Hu & Sons denominated as Civil Case No. 903 before Branch 50 of
the Regional Trial Court of Bacolod City.
Moreover, a review of the records reveal that certain properties in question have
already been sold as of 1987, as evidenced by deeds of absolute sale executed by
Jesus in favor of Reynaldo Navarro (p. 331, Rollo), among others.
To ensure that no further disposition shall be made of the questioned assets and
in view of the pending civil case in the lower court, there is a compelling
necessity to place all these properties and assets under the management of a
receivership committee. The receivership committee, which will provide active
participation, through a designated representative, on the part of all interested
parties, can best protect the properties involved and assure fairness and equity
for all.
Receivership, which is admittedly a harsh remedy, should be granted with
extreme caution.[52] Sound bases therefor must appear on record, and there
should be a clear showing of its necessity.[53] The need for a receivership in the
case under consideration can be gleaned from the aforecited disquisition by the
Court of Appeals finding that the properties of the partnership were in danger of
being damaged or lost on account of certain acts of the appointed manager in
liquidation.
The dispositions of certain properties by the said manager, on the basis of
an order of partial partition, dated December 2, 1986, by Hearing Officer Sison,
which was not yet final and executory, indicated that the feared irreparable
injury to the properties of the partnership might happen again. So also, the
failure of the manager in liquidation to submit to the SEC an accounting of all
the partnership assets as required in its order of April 29, 1988, justified the SEC
in placing the subject assets under receivership.
Moreover, it has been held by this Court that an order placing the
partnership under receivership so as to wind up its affairs in an orderly manner
and to protect the interest of the plaintiff (herein private respondent) was not
tainted with grave abuse of discretion.[54] The allegation that respondents rights
are adequately protected by the notices of lis pendens in Civil Case 903 is
inaccurate. As pointed out in their Comment to the Petition, the private
respondents claim that the partnership assets include the income and fruits
thereof. Therefore, protection of such rights and preservation of the properties
involved are best left to a receivership committee in which the opposing parties
are represented.
[55]
The power to appoint a receiver pendente lite is discretionary with the judge of
the court of first instance; and once the discretion is exercised, the appellate
court will not interfere, except in a clear case of abuse thereof, or an extra
limitation of jurisdiction.
Here, no clear abuse of discretion in the appointment of a receiver in the case
under consideration can be discerned.
With respect to G. R. No. 100313.[56]
Petitioners argue in this case that the failure of the private respondents to
implead them in Civil Case No. 5326 constituted a violation of due process. It is
their submission that the ex parte grant of said petition by the trial court worked
to their prejudice as they were deprived of an opportunity to be heard on the
allegations of the petition concerning subject property and assets. The recall of
the order granting their Motion to Intervene was done without the observance of
due process and consequently without jurisdiction on the part of the lower
court.
Commenting on the Petition, private respondents maintain that the only
issue in the present case is whether or not there was a violation of the Building
Code. They contend that after due and proper hearing before the lower court, it
was fully established that the provisions of the said Code had been violated,
warranting issuance of the Writ of Preliminary Injunction dated April 19,
1989. They further asseverate that the petitioners, who are the owner and
lessees in the building under controversy, have nothing to do with the case
for mandamus since it is directed against the respondent building official to
perform a specific duty mandated by the provisions of the Building Code.
In his Comment, the respondent City Engineer, relying on the validity of the
order of the trial court to padlock the building, denied any impropriety in his
compliance with the said order.
After a careful examination of the records on hand, the Court finds merit in
the petition.
In opposing the petition, respondent intestate estate anchors its stance on
the existence of violations of pertinent provisions of the aforesaid Code. As
regards due process, however, a distinction must be made between matters of
substance.[57] In essence, procedural due process refers to the method or manner
by which the law is enforced, while substantive due process requires that the
law itself, not merely the procedure by which the law would be enforced, is fair,
reasonable, and just.[58] Although private respondent upholds the substantive
aspect of due process, it, in the same breath, brushes aside its procedural
In similar fashion, the respondent court acted with grave abuse of discretion
when it disallowed the intervention of petitioners in Civil Case No. 5326. As it
was, the issuance of the Writ of Preliminary Injunction directing the padlocking
of the building was improper for non-conformity with the rudiments of due
process.
Parenthetically, the trial court, in issuing the questioned order, ignored
established principles relative to the issuance of a Writ of Preliminary
Injunction. For the issuance of the writ of preliminary injunction to be proper, it
must be shown that the invasion of the right sought to be protected is material
and substantial, that the right of complainant is clear and unmistakable and that
there is an urgent and paramount necessity for the writ to prevent serious
damage.[63]
In light of the allegations supporting the prayer for the issuance of a writ of
preliminary injunction, the Court is at a loss as to the basis of the respondent
judge in issuing the same. What is clear is that complainant (now private
respondent) therein, which happens to be a juridical person (Estate of Sy Yong
Hu), made general allegations of hazard and serious damage to the public due to
violations of various provisions of the Building Code, but without any showing of
any grave damage or injury it was bound to suffer should the writ not issue.
Finally, the Court notes, with disapproval, what the respondent court did in
ordering the ejectment of the lawful owner and the occupants of the building,
and disposed of the case before him even before it was heard on the merits by
the simple expedient of issuing the said writ of preliminary injunction. In Ortigas
& Company Limited Partnership vs. Court of Appeals et al. this Court held that
courts should avoid issuing a writ of preliminary injunction which in effect
disposes of the main case without trial.[64]
Resolution of the third issue has become moot and academic in view of the
Courts finding of grave abuse of discretion tainting the issuance of the Writ of
Preliminary Injunction in question.
WHEREFORE, the Resolution of the Court of Appeals in CA-G. R. No. 17070
is AFFIRMED and its Decision in CA-G. R. No. 24189 REVERSED. No pronouncement
as to costs.
SO ORDERED.
G.R. No. L-20341
their rights. Soon thereafter, or on February 12, 1962, the Zuluetas filed a
motion to dismiss upon the ground that the complaint states no cause of action;
that venue has been improperly laid; and that plaintiff complaint is moot and
academic. Acting upon the motion, on March 2, 1962, the lower court granted
the same upon the ground of improper venue. A reconsideration of this order
having been denied, plaintiff and intervenor Reyes have interposed the present
appeal.
The only question for determination before us is whether or not this action
should have been instituted, not in the Court of First Instance of Bulacan, but in
that of Marinduque, where the aforementioned fishpond is located. The lower
court answered this question in the affirmative, upon the ground that the
subject matter of this case is the possessor of said fishpond, because plaintiff
prays in the complaint that the assets of the partnership, including said fishpond
be sold, that the proceeds of the sale be applied to the payment of the debts of
the partnership, and that the residue be distributed equally among the partners;
that, as intervenor, Asuncion claims to have an interest in said fishpond; that the
same has been placed under a receivership; and that the Zuluetas claim to be
the exclusive owners of the fishpond aforementioned.
The conclusion drawn from these premises is erroneous. Plaintiff's complaint
merely seeks the liquidation of his partnership with defendants Fernandez and
Mercader. This is obviously a personal action, which may be brought in the place
of residence of either the plaintiff or the defendants. Since plaintiff is a resident
of Bulacan, he had the right to bring the action in the court of first instance of
that province.1 What is more, although defendants Fernandez and Mercader
reside in Marinduque, they did not object to the venue. In other words, they
waived whatever rights they had, if any, to question it.2
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
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.
Neither plaintiff's complaint nor the answer filed by defendants Fernandez and
Mercader questioned the title to said property or the possession thereof.
Again, the situation was not changed materially by the Intervention either of
Asuncion or of the Zuluetas, for, as alleged successors to the interest Mercader
in the fishpond, they, at best, stepped into his shoes. Again, the nature of an
action is determined by the allegations of the complaint.3 At any rate, since the
venue was properly laid when the complaint was filed, said venue cannot,
subsequently, become improper in consequence of issues later raised by any of
the intervenors. The court having legally acquired authority to hear and decide
the case, it can not be divested of that authority by said intervenors. "An
intervention cannot alter the nature of the action and the issues joined by the
original parties thereto."4
Wherefore, the order appealed from should be as it is hereby set aside and the
case remanded to the lower court for further proceedings, with costs against
intervenors appellees, Armando H. Asuncion and Mr. and Mrs. Alfredo J. Zulueta.
It is so ordered.
On March 10, 1994, the Lazatins and Primelink, represented by Lopez, in his
capacity as President, entered into a Joint Venture Agreement 5 (JVA) for the
development of the aforementioned property into a residential subdivision to be
known as "Tagaytay Garden Villas." Under the JVA, the Lazatin siblings obliged
themselves to contribute the two parcels of land as their share in the joint
venture. For its part, Primelink undertook to contribute money, labor,
personnel, machineries, equipment, contractors pool, marketing activities,
managerial expertise and other needed resources to develop the property and
construct therein the units for sale to the public. Specifically, Primelink bound
itself to accomplish the following, upon the execution of the deed:
a.) Survey the land, and prepare the projects master plans, engineering
designs, structural and architectural plans, site development plans, and
such other need plans in accordance with existing laws and the rules and
regulations of appropriate government institutions, firms or agencies;
b.) Secure and pay for all the licenses, permits and clearances needed
for the projects;
c.) Furnish all materials, equipment, labor and services for the
development of the land in preparation for the construction and sale of
the different types of units (single-detached, duplex/twin, cluster and
row house);
d.) Guarantee completion of the land development work if not prevented
by force majeure or fortuitous event or by competent authority, or other
unavoidable circumstances beyond the DEVELOPERS control, not to
exceed three years from the date of the signing of this Joint Venture
Agreement, except the installation of the electrical facilities which is
solely MERALCOS responsibility;
basis of sixty percent (60%) for the DEVELOPER and forty percent (40%)
for the LANDOWNERS.
The drawing allowances/advances are limited to twenty percent (20%) of
the net revenue for the first two years, in order to have sufficient
reserves or funds to protect and/or guarantee the construction and
completion of the different types of units mentioned above.
C1 3,500,000 -
C2 1,400,000
2,100,000 x
=
16
33,600,000.00
900,000 x 24 =
21,600,000.00
ROW-TYPE TOWNHOMES:
D1 1,600,000 -
D2 700,000
P138,720,000.00
2. After two years, the DEVELOPER and the LANDOWNERS shall be
entitled to drawing allowances and/or advances equivalent to sixty
percent (60%) and forty percent (40%), respectively, of the total net
revenue or income of the sale of the units.7
(GROSS)
P231,200,000.00
92,480,000.00
They also agreed to share in the profits from the joint venture, thus:
1. The DEVELOPER shall be entitled to sixty percent (60%) of the net
revenue or income of the Joint Venture project, after deducting all
expenses incurred in connection with the land development (such as
administrative management and construction expenses), and marketing
(such as sales, advertising and promotions), and
2. The LANDOWNERS shall be entitled to forty percent (40%) of the net
revenue or income of the Joint Venture project, after deducting all the
above-mentioned expenses.8
TCP x 30%
D/P
P 69,360,000
Balance =
70%
161,840,000
x .03069 x 48 =
P238,409,740
SALES-INCOME-COST PROJECTION
lawphil.net
COST PRICE
DIFFERENCE
A2 1,260,000
1,940,000 x
=
24
P 46,560,000.00
TWIN:
B1 2,500,000 SINGLE:
P307,769,740.00
P 92,480,000.00
18,496,000.00
4,624,000.00
4,624,000.00
INCOME
CLUSTER:
A1 3,200,000 -
238,409,740.00
EXPENSES:
less: A Building expenses
SELLING PRICE
P 69,360,000.00
12,000,000.00
P132,224,000.00
1,540,000 x
=
24
36,960,000.00
P307,769,740.00
132,224,000.00
Total Expenses
P175,545,740.009
auditing procedures, checks and balances system installed for the mutual
protection of both parties, and the scheduled regular meetings were seldom held
to the detriment and disadvantage of plaintiffs. They averred that they sent a
letter through counsel, demanding compliance of what was agreed upon under
the agreement but defendants refused to heed said demand. After a succession
of letters with still no action from defendants, plaintiffs sent a letter on October
22, 1997, a letter formally rescinding the JVA.
Plaintiffs also claimed that in a sales-income-costs projection prepared and
submitted by defendants, they (plaintiffs) stood to receive the amount
of P70,218,296.00 as their net share in the joint venture project; to date,
however, after almost four (4) years and despite the undertaking in the JVA that
plaintiffs shall initially get 20% of the agreed net revenue during the first two (2)
years (on the basis of the 60%-40% sharing) and their full 40% share thereafter,
defendants had yet to deliver these shares to plaintiffs which by conservative
estimates would amount to no less than P40,000,000.00.15
Plaintiffs prayed that, after due proceedings, judgment be rendered in their
favor, thus:
WHEREFORE, it is respectfully prayed of this Honorable Court that a temporary
restraining order be forthwith issued enjoining the defendants to immediately
stop their land development, construction and marketing of the housing units in
the aforesaid project; after due proceedings, to issue a writ of preliminary
injunction enjoining and prohibiting said land development, construction and
marketing of housing units, pending the disposition of the instant case.
After trial, a decision be rendered:
1. Rescinding the Joint Venture Agreement executed between the
plaintiffs and the defendants;
2. Immediately restoring to the plaintiffs possession of the subject
parcels of land;
3. Ordering the defendants to render an accounting of all income
generated as well as expenses incurred and disbursement made in
connection with the project;
4. Making the Writ of Preliminary Injunction permanent;
day extension18 within which to file their answer. The additional time prayed for
was granted by the RTC.19 However, instead of filing their answer, defendants
prayed for a series of 15-day extensions in eight (8) successive motions for
extensions on the same justification.20 The RTC again granted the additional
time prayed for, but in granting the last extension, it warned against further
extension.21Despite the admonition, defendants again moved for another 15-day
extension,22 which, this time, the RTC denied. No answer having been filed,
plaintiffs moved to declare the defendants in default, 23 which the RTC granted in
its Order24 dated June 24, 1998.
On June 25, 1998, defendants filed, via registered mail, their "Answer with
Counterclaim and Opposition to the Prayer for the Issuance of a Writ of
Preliminary Injunction."25 On July 8, 1998, defendants filed a Motion to Set Aside
the Order of Default.26 This was opposed by plaintiffs.27 In an Order28 dated July
14, 1998, the RTC denied defendants motion to set aside the order of default
and ordered the reception of plaintiffs evidence ex parte. Defendants filed a
motion for reconsideration29 of the July 14, 1998 Order, which the RTC denied in
its Order30 dated October 21, 1998.
Defendants thereafter interposed an appeal to the CA assailing the Order
declaring them in default, as well as the Order denying their motion to set aside
the order of default, alleging that these were contrary to facts of the case, the
law and jurisprudence.31 On September 16, 1999, the appellate court issued a
Resolution32 dismissing the appeal on the ground that the Orders appealed from
were interlocutory in character and, therefore, not appealable. No motion for
reconsideration of the Order of the dismissal was filed by defendants.
In the meantime, plaintiffs adduced ex parte their testimonial and documentary
evidence. On April 17, 2000, the RTC rendered a Decision, the dispositive part of
which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against
the defendants as follows:
1. Ordering the rescission of the Joint Venture Agreement as of the date
of filing of this complaint;
2. Ordering the defendants to return possession, including all
improvements therein, of the real estate property belonging to the
plaintiffs which is described in, and covered by Transfer Certificate of
Title No. T-10848 of the Register of Deeds of Tagaytay City, and located
in Barangay Anulin, City of Tagaytay;
33
Of the reported net income of P2,603,810.64 (Exhibit "P-2") the plaintiffs should
have received the sum ofP1,041,524.26 representing their 40% share under
paragraph II and V of the JVA. But this was not to be so. Even before the
plaintiffs could get hold of their share as indicated above, the defendants closed
the chance altogether by declaring a net loss. The court perceives this to be one
calculated coup-de-grace that would put to thin air plaintiffs hope of getting
their share in the profit under the JVA.
That this matter had reached the court is no longer a cause for speculation. The
way the defendants treated the JVA and the manner by which they handled the
project itself vis--vis their partners, the plaintiffs herein, there is bound to be
certain conflict as the latter repeatedly would received the losing end of the
bargain.
Under the intolerable circumstances, the plaintiffs could not have opted for
some other recourse but to file the present action to enforce their rights. x x x 34
On May 15, 2000, plaintiffs filed a Motion for Execution Pending Appeal 35 alleging
defendants dilatory tactics for its allowance. This was opposed by defendants.36
On May 22, 2000, the RTC resolved the motion for execution pending appeal in
favor of plaintiffs.37 Upon posting a bond of P1,000,000.00 by plaintiffs, a writ of
execution pending appeal was issued on June 20, 2000.38
Defendants appealed the decision to the CA on the following assignment of
errors:
I
THE TRIAL COURT ERRED IN DECIDING THE CASE WITHOUT FIRST REFERRING THE
COMPLAINT FOR VOLUNTARY ARBITRATION (RA NO. 876), CONTRARY TO THE
MANDATED VOLUNTARY ARBITRATION CLAUSE UNDER THE JOINT VENTURE
AGREEMENT, AND THE DOCTRINE IN "MINDANAO PORTLAND CEMENT
CORPORATION V. MCDONOUGH CONSTRUCTION COMPANY OF FLORIDA" (19 SCRA
814-815).
II
THE TRIAL COURT ERRED IN ISSUING A WRIT OF EXECUTION PENDING APPEAL
EVEN IN THE ABSENCE OF GOOD AND COMPELLING REASONS TO JUSTIFY SAID
ISSUANCE, AND DESPITE PRIMELINKS STRONG OPPOSITION THERETO.
III
IV
Petitioners thus filed the instant Petition for Review on Certiorari, alleging that:
THE TRIAL COURT ERRED IN RESCINDING THE JOINT VENTURE AGREEMENT
ALTHOUGH PRIMELINK HAS SUBSTANTIALLY DEVELOPED THE PROJECT AND HAS
SPENT MORE OR LESS FORTY MILLION PESOS, AND DESPITE APPELLEES FAILURE
TO PRESENT SUFFICIENT EVIDENCE JUSTIFYING THE SAID RESCISSION.
V
THE TRIAL COURT ERRED IN DECIDING THAT THE APPELLEES HAVE THE RIGHT TO
TAKE OVER THE SUBDIVISION AND TO APPROPRIATE FOR THEMSELVES ALL THE
EXISTING IMPROVEMENTS INTRODUCED THEREIN BY PRIMELINK, ALTHOUGH SAID
RIGHT WAS NEITHER ALLEGED NOR PRAYED FOR IN THE COMPLAINT, MUCH LESS
PROVEN DURING THE EX PARTE HEARING, AND EVEN WITHOUT ORDERING
APPELLEES TO FIRST REIMBURSE PRIMELINK OF THE SUBSTANTIAL DIFFERENCE
BETWEEN THE MARKET VALUE OF APPELLEES RAW, UNDEVELOPED AND
UNPRODUCTIVE LAND (CONTRIBUTED TO THE PROJECT) AND THE SUM OF MORE
OR LESS FORTY MILLION PESOS WHICH PRIMELINK HAD SPENT FOR THE
HORIZONTAL AND VERTICAL DEVELOPMENT OF THE PROJECT, THEREBY
ALLOWING APPELLEES TO UNJUSTLY ENRICH THEMSELVES AT THE EXPENSE OF
PRIMELINK.39
The appeal was docketed in the CA as CA-G.R. CV No. 69200.
On August 9, 2004, the appellate court rendered a decision affirming, with
modification, the appealed decision. The fallo of the decision reads:
WHEREFORE, in view of the foregoing, the assailed decision of the Regional Trial
Court of Tagaytay City, Branch 18, promulgated on April 17, 2000 in Civil Case
No. TG-1776, is hereby AFFIRMED. Accordingly, Transfer Certificate of Title No.
T-10848 held for safekeeping by Chinabank pursuant to the Escrow Agreement is
ordered released for return to the plaintiffs-appellees and conformably with the
affirmed decision, the cancellation by the Register of Deeds of Tagaytay City of
whatever annotation in TCT No. 10848 by virtue of the Joint Venture Agreement,
is now proper.
SO ORDERED.40
The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who
have acquired the thing, in accordance with articles 1385 and 1388 and the
Mortgage Law.
They insist that petitioners are not entitled to rescission for the improvements
because, as found by the RTC and the CA, it was petitioner Primelink that
enriched itself at the expense of respondents. Respondents reiterate the ruling
of the CA, and argue as follows:
PRIMELINK argued that the LAZATINs in their complaint did not allege, did not
prove and did not pray that they are and should be entitled to take over the
development of the project, and that the improvements and existing structures
which were introduced by PRIMELINK after spending more or less Forty Million
Pesos be awarded to them. They merely asked in the complaint that the joint
venture agreement be rescinded, and that the parcels of land they contributed
to the project be returned to them.
On the other hand, the CA ruled that although respondents therein (plaintiffs
below) did not specifically pray for their takeover of the property and for the
possession of the improvements on the parcels of land, nevertheless,
respondents were entitled to said relief as a necessary consequence of the ruling
of the trial court ordering the rescission of the JVA. The appellate court cited
the ruling of this Court in the Aurbach case and Article 1838 of the New Civil
Code, to wit:
PRIMELINKs argument lacks merit. The order of the court for PRIMELINK to
return possession of the real estate property belonging to the LAZATINs including
all improvements thereon was not a judgment that was different in kind than
what was prayed for by the LAZATINs. The order to return the property with all
the improvements thereon is just a necessary consequence to the order of
rescission.
Respondents, for their part, assert that Articles 1380 to 1389 of the New Civil
Code deal with rescissible contracts. What applies is Article 1191 of the New
Civil Code, which reads:
ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him.
The legal concept of a joint venture is of common law origin. It has no precise
legal definition, but it has been generally understood to mean an organization
formed for some temporary purpose. (Gates v. Megargel, 266 Fed. 811 [1920]) It
is, in fact, hardly distinguishable from the partnership, since elements are
similar community of interest in the business, sharing of profits and losses, and
On the second issue, we agree with the CA ruling that petitioner Primelink and
respondents entered into a joint venture as evidenced by their JVA which, under
the Courts ruling in Aurbach, is a form of partnership, and as such is to be
governed by the laws on partnership.
Thus, under Article 1837 of the New Civil Code, the rights of the parties when
dissolution is caused in contravention of the partnership agreement are as
follows:
(1) Each partner who has not caused dissolution wrongfully shall have:
When the RTC rescinded the JVA on complaint of respondents based on the
evidence on record that petitioners willfully and persistently committed a
breach of the JVA, the court thereby dissolved/cancelled the partnership. 54With
the rescission of the JVA on account of petitioners fraudulent acts, all authority
of any partner to act for the partnership is terminated except so far as may be
necessary to wind up the partnership affairs or to complete transactions begun
but not yet finished.55 On dissolution, the partnership is not terminated but
continues until the winding up of partnership affairs is completed. 56 Winding up
means the administration of the assets of the partnership for the purpose of
terminating the business and discharging the obligations of the partnership.
The transfer of the possession of the parcels of land and the improvements
thereon to respondents was only for a specific purpose: the winding up of
partnership affairs, and the partition and distribution of the net partnership
assets as provided by law.57 After all, Article 1836 of the New Civil Code provides
that unless otherwise agreed by the parties in their JVA, respondents have the
right to wind up the partnership affairs:
Art. 1836. Unless otherwise agreed, the partners who have not wrongfully
dissolved the partnership or the legal representative of the last surviving
partner, not insolvent, has the right to wind up the partnership affairs, provided,
however, that any partner, his legal representative or his assignee, upon cause
shown, may obtain winding up by the court.
It must be stressed, too, that although respondents acquired possession of the
lands and the improvements thereon, the said lands and improvements remained
partnership property, subject to the rights and obligations of the parties, inter
se, of the creditors and of third parties under Articles 1837 and 1838 of the New
Civil Code, and subject to the outcome of the settlement of the accounts
between the parties as provided in Article 1839 of the New Civil Code, absent
any agreement of the parties in their JVA to the contrary.58 Until the partnership
accounts are determined, it cannot be ascertained how much any of the parties
is entitled to, if at all.
It was thus premature for petitioner Primelink to be demanding that it be
indemnified for the value of the improvements on the parcels of land owned by
the joint venture/partnership. Notably, the JVA of the parties does not contain
any provision designating any party to wind up the affairs of the partnership.
(a) All the rights specified in the first paragraph of this article,
and
(b) The right, as against each partner who has caused the
dissolution wrongfully, to damages for breach of the agreement.
(2) The partners who have not caused the dissolution wrongfully, if they
all desire to continue the business in the same name either by
themselves or jointly with others, may do so, during the agreed term for
the partnership and for that purpose may possess the partnership
property, provided they secure the payment by bond approved by the
court, or pay to any partner who has caused the dissolution wrongfully,
the value of his interest in the partnership at the dissolution, less any
damages recoverable under the second paragraph, No. 1(b) of this
article, and in like manner indemnify him against all present or future
partnership liabilities.
(3) A partner who has caused the dissolution wrongfully shall have:
(a) If the business is not continued under the provisions of the
second paragraph, No. 2, all the rights of a partner under the
first paragraph, subject to liability for damages in the second
paragraph, No. 1(b), of this article.
(b) If the business is continued under the second paragraph, No.
2, of this article, the right as against his co-partners and all
claiming through them in respect of their interests in the
partnership, to have the value of his interest in the partnership,
less any damage caused to his co-partners by the dissolution,
ascertained and paid to him in cash, or the payment secured by
a bond approved by the court, and to be released from all
existing liabilities of the partnership; but in ascertaining the
value of the partners interest the value of the good-will of the
business shall not be considered.
And under Article 1838 of the New Civil Code, the party entitled to rescind is,
without prejudice to any other right, entitled:
(1) To a lien on, or right of retention of, the surplus of the partnership
property after satisfying the partnership liabilities to third persons for
any sum of money paid by him for the purchase of an interest in the
partnership and for any capital or advances contributed by him;
(2) To stand, after all liabilities to third persons have been satisfied, in
the place of the creditors of the partnership for any payments made by
him in respect of the partnership liabilities; and
(3) To be indemnified by the person guilty of the fraud or making the
representation against all debts and liabilities of the partnership.
The accounts between the parties after dissolution have to be settled as
provided in Article 1839 of the New Civil Code:
Art. 1839. In settling accounts between the partners after dissolution, the
following rules shall be observed, subject to any agreement to the contrary:
(1) The assets of the partnership are:
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The assailed Decision
and Resolution of the Court of Appeals in CA-G.R. CV No. 69200 are AFFIRMED
insofar as they conform to this Decision of the Court.
(b) Those owing to partners other than for capital and profits,
SO ORDERED.