Professional Documents
Culture Documents
Kilosbayan vs Guingona
Same; Same; Same; The challenged Contract of Lease violates or contravenes the
exception in Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42.We agree with
the petitioners that it does, notwithstanding its denomination or designation as a
Contract of Lease. We are neither convinced nor moved or fazed by the insistence
and forceful arguments of the PGMC that it does not because in reality it is only an
independent contractor for a piece of work, i.e., the building and maintenance of a
lottery system to be used by the PCSO in the operation of its lottery franchise.
Whether the contract in question is one of lease or whether the PGMC is merely an
independent contractor should not be decided on the basis of the title or
designation of the contract but by the intent of the parties, which may be gathered
from the provisions of the contract itself. Animus hominis est anima scripti. The
intention of the party is the soul of the instrument. In order to give life or effect to
an instrument, it is essential to look to the intention of the individual who executed
it. And, pursuant to Article 1371 of the Civil Code, to determine the intention of the
contracting parties, their contemporaneous and subsequent acts shall be principally
considered. To put it more bluntly, no one should be deceived by the title or
designation of a contract. Kilosbayan, Incorporated vs. Guingona, Jr., 232 SCRA 110,
G.R. No. 113375 May 5, 1994
Same; Same; Same; Same; The contract is not in reality a contract of lease but one
where the statutorily proscribed collaboration or association or joint venture exists
between the contracting parties.A careful analysis and evaluation of the
provisions of the contract and a consideration of the contemporaneous acts of the
PCSO and PGMC indubitably disclose that the contract is not in reality a contract of
lease under which the PGMC is merely an independent contractor for a piece of
work, but one where the statutorily proscribed collaboration or association, in the
least, or joint venture, at the most, exists between contracting parties. Collaboration
is defined as the acts of working together in a joint project. Association means the
act of a number of persons in uniting together for some special purpose or business.
Joint venture is defined as an association of persons or companies jointly
undertaking some commercial enterprise; generally all contribute assets and share
risks. It requires a community of interest in the performance of the subject matter, a
right to direct and govern the policy in connection therewith, and duty, which may
be altered by agreement to share both in profit and losses.
Same; Same; Same; Same; Court declares the contract of lease invalid for being
contrary to law.We thus declare that the challenged Contract of Lease violates the
exception provided for in paragraph B, Section 1 of R.A. No. 1169, as amended by
B.P. Blg. 42, and is, therefore, invalid for being contrary to law. This conclusion
renders unnecessary further discussion on the other issues raised by the
petitioners.
Constitutional Law; Franchise; The contract of lease is a joint venture between PCSO
and PGMC.On a slightly different plane and, perhaps simplified, I consider the
agreement or arrangement between the PCSO and PGMC a joint venture because
each party to the contract contributes its share in the enterprise or project. PGMC
contributes its facilities, equipment and know-how (expertise). PCSO contributes
(aside from its charter) the market, directly or through dealersand this to me is
most importantin the totality or mass of the Filipino gambling elements who will
invest in lotto tickets. PGMC will get its 4.9% of gross receipts (with assumption of
certain risks in the course of lotto operations); the residue of the whole exercise will
go to PCSO. To any person with a minimum of business know-how, this is a joint
venture between PCSO and PGMC, plain and simple. Kilosbayan, Incorporated vs.
Guingona, Jr., 232 SCRA 110, G.R. No. 113375 May 5, 1994
Kilosbayan v. Guingona
Facts:
This is a special civil action for prohibition and injunction, with a prayer for a
temporary restraining order and preliminary injunction which seeks to prohibit and
restrain the implementation of the Contract of Lease executed by the PCSO and the
Philippine Gaming Management Corporation in connection with the on-line lottery
system,
also
know
as
lotto.
Petitioners strongly opposed the setting up of the on-line lottery system on the basis
of serious moral and ethical considerations. It submitted that said contract of lease
violated Section 1 of R. A. No. 1169, as amended by B. P. Blg. 42.
Respondents contended, among others, that, the contract does not violate the
Foreign Investment Act of 1991; that the issues of wisdom, morality and propriety of
acts of the executive department are beyond the ambit of judicial reviews; and that
the
petitioners
have
no
standing
to
maintain
the
instant
suit.
ISSUES:
1. Whether or not petitioners have the legal standing to file the instant petition.
2.
Whether
or
not
the
contract
of
lease
is
legal
and
valid.
RULING: As to the preliminary issue, the Court resolved to set aside the procedural
technicality in view of the importance of the issues raised. The Court adopted the
liberal policy on locus standi to allow the ordinary taxpayers, members of Congress,
and even association of planters, and non-profit civic organizations to initiate and
prosecute actions to question the validity or constitutionality of laws, acts,
decisions, or rulings of various government agencies or instrumentalities.
As to the substantive issue, the Court agrees with the petitioners whether the
contract in question is one of lease or whether the PGMC is merely an independent
contractor should not be decided on the basis of the title or designation of the
contract but by the intent of the parties, which may be gathered from the provisions
of the contract itself. Animus homini est anima scripti. The intention of the party is
the
soul
of
the
instrument.
Therefore the instant petition is granted and the challenged Contract of Lease is
hereby declared contrary to law and invalid.
these two business forms, and has held that although a corporation cannot enter
into a partnership contract, it may however engage in a joint venture with others.
Facts: On June 7, 1995, Congress passed Republic Act 8046, which authorized
Comelec to conduct a nationwide demonstration of a computerized election system
and allowed the poll body to pilot-test the system in the March 1996 elections in the
Autonomous Region in Muslim Mindanao (ARMM).
On October 29, 2002, Comelec adopted in its Resolution 02-0170 a
modernization program for the 2004 elections. It resolved to conduct biddings for
the three (3) phases of its Automated Election System; namely, Phase I Voter
Registration and Validation System; Phase II Automated Counting and Canvassing
System; and Phase III Electronic Transmission.
On January 24, 2003, President Gloria Macapagal-Arroyo issued Executive Order
No. 172, which allocated the sum of P2.5 billion to fund the AES for the May 10,
2004 elections. Upon the request of Comelec, she authorized the release of an
additional P500 million.
On January 28, 2003, the Commission issued an "Invitation to Apply for Eligibility
and to Bid".
On May 29, 2003, five individuals and entities (including the herein Petitioners
Information Technology Foundation of the Philippines, represented by its president,
Alfredo M. Torres; and Ma. Corazon Akol) wrote a letter to Comelec Chairman
Benjamin Abalos Sr. They protested the award of the Contract to Respondent MPC
"due to glaring irregularities in the manner in which the bidding process had been
conducted." Citing therein the noncompliance with eligibility as well as technical
and procedural requirements (many of which have been discussed at length in the
Petition), they sought a re-bidding.
Held: WHEREFORE, the Petition is GRANTED. The Court hereby declares NULL and
VOID Comelec Resolution No. 6074 awarding the contract for Phase II of the CAES to
Mega Pacific Consortium (MPC). Also declared null and void is the subject Contract
executed between Comelec and Mega Pacific eSolutions (MPEI). 55 Comelec is
further ORDERED to refrain from implementing any other contract or agreement
entered into with regard to this project.
In short, Comelec claims that it evaluated the bids and made the decision to
award the Contract to the "winning" bidder partly on the basis of the operation of
the ACMs running a "base" software. That software was therefore nothing but a
sample or "demo" software, which would not be the actual one that would be used
on election day.
What then was the point of conducting the bidding, when the software that was
the subject of the Contract was still to be created and could conceivably undergo
innumerable changes before being considered as being in final form?
In view of awarding of contract
The public bidding system designed by Comelec under its RFP (Request for
Proposal for the Automation of the 2004 Election) mandated the use of a twoenvelope, two-stage system. A bidder's first envelope (Eligibility Envelope) was
meant to establish its eligibility to bid and its qualifications and capacity to perform
the contract if its bid was accepted, while the second envelope would be the Bid
Envelope itself.
The Eligibility Envelope was to contain legal documents such as articles of
incorporation, business registrations, licenses and permits, mayor's permit, VAT
certification, and so forth; technical documents containing documentary evidence to
establish the track record of the bidder and its technical and production capabilities
to perform the contract; and financial documents, including audited financial
statements for the last three years, to establish the bidder's financial capacity.
However, there is no sign whatsoever of any joint venture agreement,
consortium agreement, memorandum of agreement, or business plan executed
among the members of the purported consortium.So, it necessarily follows that,
during the bidding process, Comelec had no basis at all for determining that the
alleged consortium really existed and was eligible and qualified; and that the
arrangements among the members were satisfactory and sufficient to ensure
delivery on the Contract and to protect the government's interest.
In view of standing
On the other hand, petitioners suing in their capacities as taxpayers,
registered voters and concerned citizens respond that the issues central to this
case are "of transcendental importance and of national interest." Allegedly,
Comelec's flawed bidding and questionable award of the Contract to an unqualified
entity would impact directly on the success or the failure of the electoral process.
Thus, any taint on the sanctity of the ballot as the expression of the will of the
people would inevitably affect their faith in the democratic system of government.
Petitioners further argue that the award of any contract for automation involves
disbursement of public funds in gargantuan amounts; therefore, public interest
requires that the laws governing the transaction must be followed strictly.
Moreover, this Court has held that taxpayers are allowed to sue when there is a
claim of "illegal disbursement of public funds," 22 or if public money is being
"deflected to any improper purpose"; 23 or when petitioners seek to restrain
respondent from "wasting public funds through the enforcement of an invalid or
unconstitutional law."
In view of prematurity
The letter addressed to Chairman Benjamin Abalos Sr. dated May 29, 2003 28
serves to eliminate the prematurity issue as it was an actual written protest against
the decision of the poll body to award the Contract. The letter was signed by/for,
inter alia, two of herein petitioners: the Information Technology Foundation of the
Philippines, represented by its president, Alfredo M. Torres; and Ma. Corazon Akol.
Such letter-protest is sufficient compliance with the requirement to exhaust
administrative remedies particularly because it hews closely to the procedure
outlined in Section 55 of RA 9184.
Paat v. Court of Appeals enumerates the instances when the rule on exhaustion
of administrative remedies may be disregarded, as follows:
"(1) when there is a violation of due process,
(2) when the issue involved is purely a legal question,
(3) when the administrative action is patently illegal amounting to lack or
excess of jurisdiction,
(4) when there is estoppel on the part of the administrative agency concerned,
(5) when there is irreparable injury,
(6) when the respondent is a department secretary whose acts as an alter ego
of the President bears the implied and assumed approval of the latter,
(7) when to require exhaustion of administrative remedies would be
unreasonable,
(8) when it would amount to a nullification of a claim,
(9) when the subject matter is a private land in land case proceedings,
(10) when the rule does not provide a plain, speedy and adequate remedy, and
(11) when there are circumstances indicating the urgency of judicial
intervention."
F. LEE, RAUL A.
CRUZ,respondents.
BONCAN,
BALDWIN
YOUNG
and
AVELINO
V.
Mr. Baldwin Young went abroad to look for foreign partners, European or American
who could help in its expansion plans. On August 15, 1962, ASI, a foreign
corporation domiciled in Delaware, United States entered into an Agreement with
Saniwares and some Filipino investors whereby ASI and the Filipino investors agreed
to participate in the ownership of an enterprise which would engage primarily in the
business of manufacturing in the Philippines and selling here and abroad vitreous
china and sanitary wares. The parties agreed that the business operations in the
Philippines shall be carried on by an incorporated enterprise and that the name of
the corporation shall initially be "Sanitary Wares Manufacturing Corporation."
The Agreement has the following provisions relevant to the issues in these cases on
the nomination and election of the directors of the corporation:
3. Articles of Incorporation
(a) The Articles of Incorporation of the Corporation shall be
substantially in the form annexed hereto as Exhibit A and, insofar as
permitted under Philippine law, shall specifically provide for
(1) Cumulative voting for directors:
xxx xxx xxx
5. Management
(a) The management of the Corporation shall be vested in a Board of
Directors, which shall consist of nine individuals. As long as AmericanStandard shall own at least 30% of the outstanding stock of the
Corporation, three of the nine directors shall be designated by
American-Standard, and the other six shall be designated by the other
stockholders of the Corporation. (pp. 51 & 53, Rollo of 75875)
At the request of ASI, the agreement contained provisions designed to protect it as
a minority group, including the grant of veto powers over a number of corporate
acts and the right to designate certain officers, such as a member of the Executive
Committee whose vote was required for important corporate transactions.
Later, the 30% capital stock of ASI was increased to 40%. The corporation was also
registered with the Board of Investments for availment of incentives with the
condition that at least 60% of the capital stock of the corporation shall be owned by
Philippine nationals.
The joint enterprise thus entered into by the Filipino investors and the American
corporation prospered. Unfortunately, with the business successes, there came a
The SEC decision led to the filing of two separate appeals with the Intermediate
Appellate Court by Wolfgang Aurbach, John Griffin, David Whittingham and Charles
Chamsay (docketed as AC-G.R. SP No. 05604) and by Luciano E. Salazar (docketed
as AC-G.R. SP No. 05617). The petitions were consolidated and the appellate court
in its decision ordered the remand of the case to the Securities and Exchange
Commission with the directive that a new stockholders' meeting of Saniwares be
ordered convoked as soon as possible, under the supervision of the Commission.
Upon a motion for reconsideration filed by the appellees Lagdameo Group) the
appellate court (Court of Appeals) rendered the questioned amended decision.
Petitioners Wolfgang Aurbach, John Griffin, David P. Whittingham and Charles
Chamsay in G.R. No. 75875 assign the following errors:
I. THE COURT OF APPEALS, IN EFFECT, UPHELD THE ALLEGED
ELECTION OF PRIVATE RESPONDENTS AS MEMBERS OF THE BOARD OF
DIRECTORS OF SANIWARES WHEN IN FACT THERE WAS NO ELECTION
AT ALL.
II. THE COURT OF APPEALS PROHIBITS THE STOCKHOLDERS FROM
EXERCISING THEIR FULL VOTING RIGHTS REPRESENTED BY THE
NUMBER OF SHARES IN SANIWARES, THUS DEPRIVING PETITIONERS
AND THE CORPORATION THEY REPRESENT OF THEIR PROPERTY RIGHTS
WITHOUT DUE PROCESS OF LAW.
III. THE COURT OF APPEALS IMPOSES CONDITIONS AND READS
PROVISIONS INTO THE AGREEMENT OF THE PARTIES WHICH WERE NOT
THERE, WHICH ACTION IT CANNOT LEGALLY DO. (p. 17, Rollo-75875)
Petitioner Luciano E. Salazar in G.R. Nos. 75975-76 assails the amended decision on
the following grounds:
11.1. ThatAmendedDecisionwouldsanctiontheCA'sdisregard of binding
contractual agreements entered into by stockholders and the
replacement of the conditions of such agreements with terms never
contemplated by the stockholders but merely dictated by the CA .
11.2. The Amended decision would likewise sanction the deprivation of
the property rights of stockholders without due process of law in order
that a favored group of stockholders may be illegally benefitted and
guaranteed a continuing monopoly of the control of a corporation. (pp.
14-15, Rollo-75975-76)
On the other hand, the petitioners in G.R. No. 75951 contend that:
I
THE AMENDED DECISION OF THE RESPONDENT COURT, WHILE
RECOGNIZING THAT THE STOCKHOLDERS OF SANIWARES ARE DIVIDED
INTO TWO BLOCKS, FAILS TO FULLY ENFORCE THE BASIC INTENT OF
THE AGREEMENT AND THE LAW.
II
THE AMENDED DECISION DOES NOT CATEGORICALLY RULE THAT
PRIVATE PETITIONERS HEREIN WERE THE DULY ELECTED DIRECTORS
DURING THE 8 MARCH 1983 ANNUAL STOCKHOLDERS MEETING OF
SANTWARES. (P. 24, Rollo-75951)
The issues raised in the petitions are interrelated, hence, they are discussed jointly.
The main issue hinges on who were the duly elected directors of Saniwares for the
year 1983 during its annual stockholders' meeting held on March 8, 1983. To answer
this question the following factors should be determined: (1) the nature of the
business established by the parties whether it was a joint venture or a corporation
and (2) whether or not the ASI Group may vote their additional 10% equity during
elections of Saniwares' board of directors.
The rule is that whether the parties to a particular contract have thereby
established among themselves a joint venture or some other relation depends upon
their actual intention which is determined in accordance with the rules governing
the interpretation and construction of contracts. (Terminal Shares, Inc. v. Chicago, B.
and Q.R. Co. (DC MO) 65 F Supp 678; Universal Sales Corp. v. California Press Mfg.
Co. 20 Cal. 2nd 751, 128 P 2nd 668)
The ASI Group and petitioner Salazar (G.R. Nos. 75975-76) contend that the actual
intention of the parties should be viewed strictly on the "Agreement" dated August
15,1962 wherein it is clearly stated that the parties' intention was to form a
corporation and not a joint venture.
They specifically mention number 16 under Miscellaneous Provisions which states:
xxx xxx xxx
c) nothing herein contained shall be construed to constitute any of the
parties hereto partners or joint venturers in respect of any transaction
hereunder. (At P. 66, Rollo-GR No. 75875)
They object to the admission of other evidence which tends to show that the
parties' agreement was to establish a joint venture presented by the Lagdameo and
Young Group on the ground that it contravenes the parol evidence rule under
section 7, Rule 130 of the Revised Rules of Court. According to them, the Lagdameo
and Young Group never pleaded in their pleading that the "Agreement" failed to
express the true intent of the parties.
The parol evidence Rule under Rule 130 provides:
Evidence of written agreements-When the terms of an agreement have
been reduced to writing, it is to be considered as containing all such
terms, and therefore, there can be, between the parties and their
successors in interest, no evidence of the terms of the agreement
other than the contents of the writing, except in the following cases:
(a) Where a mistake or imperfection of the writing, or its failure to
express the true intent and agreement of the parties or the validity of
the agreement is put in issue by the pleadings.
(b) When there is an intrinsic ambiguity in the writing.
Contrary to ASI Group's stand, the Lagdameo and Young Group pleaded in their
Reply and Answer to Counterclaim in SEC Case No. 2417 that the Agreement failed
to express the true intent of the parties, to wit:
xxx xxx xxx
4. While certain provisions of the Agreement would make it appear that
the parties thereto disclaim being partners or joint venturers such
disclaimer is directed at third parties and is not inconsistent with, and
does not preclude, the existence of two distinct groups of stockholders
in Saniwares one of which (the Philippine Investors) shall constitute the
majority, and the other ASI shall constitute the minority stockholder. In
any event, the evident intention of the Philippine Investors and ASI in
entering into the Agreement is to enter into ajoint venture enterprise,
and if some words in the Agreement appear to be contrary to the
evident intention of the parties, the latter shall prevail over the former
(Art. 1370, New Civil Code). The various stipulations of a contract shall
be interpreted together attributing to the doubtful ones that sense
which may result from all of them taken jointly (Art. 1374, New Civil
Code). Moreover, in order to judge the intention of the contracting
parties, their contemporaneous and subsequent acts shall be
principally considered. (Art. 1371, New Civil Code). (Part I, Original
Records, SEC Case No. 2417)
and
legal
requirements
reserve
controlling
The Lagdameo Group stated in their appellees' brief in the Court of Appeal
In fact, the Philippine Corporation Code itself recognizes the right of
stockholders to enter into agreements regarding the exercise of their
voting rights.
Sec. 100. Agreements by stockholders.xxx xxx xxx
2. An agreement between two or more stockholders, if in writing and
signed by the parties thereto, may provide that in exercising any
voting rights, the shares held by them shall be voted as therein
provided, or as they may agree, or as determined in accordance with a
procedure agreed upon by them.
Appellants contend that the above provision is included in the
Corporation Code's chapter on close corporations and Saniwares
cannot be a close corporation because it has 95 stockholders. Firstly,
although Saniwares had 95 stockholders at the time of the disputed
stockholders meeting, these 95 stockholders are not separate from
each other but are divisible into groups representing a single
Identifiable interest. For example, ASI, its nominees and lawyers count
for 13 of the 95 stockholders. The YoungYutivo family count for another
13 stockholders, the Chamsay family for 8 stockholders, the Santos
family for 9 stockholders, the Dy family for 7 stockholders, etc. If the
members of one family and/or business or interest group are
considered as one (which, it is respectfully submitted, they should be
for purposes of determining how closely held Saniwares is there were
as of 8 March 1983, practically only 17 stockholders of Saniwares.
(Please refer to discussion in pp. 5 to 6 of appellees' Rejoinder
Memorandum dated 11 December 1984 and Annex "A" thereof).
Secondly, even assuming that Saniwares is technically not a close
corporation because it has more than 20 stockholders, the undeniable
fact is that it is a close-held corporation. Surely, appellants cannot
honestly claim that Saniwares is a public issue or a widely held
corporation.
In the United States, many courts have taken a realistic approach to
joint venture corporations and have not rigidly applied principles of
The ASI Group and petitioner Salazar, now reiterate their theory that the ASI Group
has the right to vote their additional equity pursuant to Section 24 of the
Corporation Code which gives the stockholders of a corporation the right to
cumulate their votes in electing directors. Petitioner Salazar adds that this right if
granted to the ASI Group would not necessarily mean a violation of the Anti-Dummy
Act (Commonwealth Act 108, as amended). He cites section 2-a thereof which
provides:
And provided finally that the election of aliens as members of the
board of directors or governing body of corporations or associations
engaging in partially nationalized activities shall be allowed in
proportion to their allowable participation or share in the capital of
such entities. (amendments introduced by Presidential Decree 715,
section 1, promulgated May 28, 1975)
The ASI Group's argument is correct within the context of Section 24 of the
Corporation Code. The point of query, however, is whether or not that provision is
applicable to a joint venture with clearly defined agreements:
The legal concept of ajoint venture is of common law origin. It has no
precise legal definition but it has been generally understood to mean
an organization formed for some temporary purpose. (Gates v.
Megargel, 266 Fed. 811 [1920]) It is in fact hardly distinguishable from
the partnership, since their elements are similar community of interest
in the business, sharing of profits and losses, and a mutual right of
control. Blackner v. Mc Dermott, 176 F. 2d. 498, [1949]; Carboneau v.
Peterson, 95 P. 2d., 1043 [1939]; Buckley v. Chadwick, 45 Cal. 2d. 183,
288 P. 2d. 12 289 P. 2d. 242 [1955]). The main distinction cited by most
opinions in common law jurisdictions is that the partnership
contemplates a general business with some degree of continuity, while
the joint venture is formed for the execution of a single transaction,
and is thus of a temporary nature. (Tufts v. Mann 116 Cal. App. 170, 2
P. 2d. 500 [1931]; Harmon v. Martin, 395 111. 595, 71 NE 2d. 74
[1947]; Gates v. Megargel 266 Fed. 811 [1920]). This observation is not
entirely accurate in this jurisdiction, since under the Civil Code, a
partnership may be particular or universal, and a particular partnership
may have for its object a specific undertaking. (Art. 1783, Civil Code).
It would seem therefore that under Philippine law, a joint venture is a
form of partnership and should thus be governed by the law of
partnerships. The Supreme Court has however recognized a distinction
between these two business forms, and has held that although a
corporation cannot enter into a partnership contract, it may however
engage in a joint venture with others. (At p. 12, Tuazon v. Bolanos, 95
its original agreement. Cumulative voting may not be used as a device to enable
ASI to achieve stealthily or indirectly what they cannot accomplish openly. There are
substantial safeguards in the Agreement which are intended to preserve the
majority status of the Filipino investors as well as to maintain the minority status of
the foreign investors group as earlier discussed. They should be maintained.
WHEREFORE, the petitions in G.R. Nos. 75975-76 and G.R. No. 75875 are DISMISSED
and the petition in G.R. No. 75951 is partly GRANTED. The amended decision of the
Court of Appeals is MODIFIED in that Messrs. Wolfgang Aurbach John Griffin, David
Whittingham Emesto V. Lagdameo, Baldwin Young, Raul A. Boncan, Ernesto R.
Lagdameo, Jr., Enrique Lagdameo, and George F. Lee are declared as the duly
elected directors of Saniwares at the March 8,1983 annual stockholders' meeting. In
all other respects, the questioned decision is AFFIRMED. Costs against the
petitioners in G.R. Nos. 75975-76 and G.R. No. 75875.
SO ORDERED.
sell its shares of stock to a third party, Kawasaki could only exercise its right of first
refusal to the extent that its total shares of stock would not exceed 40% of the
entire shares of stock. The NIDC, on the other hand, may purchase even beyond
60% of the total shares. As a government corporation and necessarily a 100%
Filipino-owned corporation, there is nothing to prevent its purchase of stocks even
beyond 60% of the capitalization as the Constitution clearly limits only foreign
capitalization.
Kawasaki was bound by its contractual obligation under the JVA that limits its right
of first refusal to 40% of the total capitalization of PHILSECO. Thus, Kawasaki cannot
purchase beyond 40% of the capitalization of the joint venture on account of both
constitutional and contractual proscriptions.
5. Primelink Properties and Development Corporation vs. LazatinMagat, 493 SCRA 444, G.R. No. 167379 June 27, 2006
Partnerships; Joint Venture Agreements (JVAs); A JVA is a form of partnership, and as
such is to be governed by the laws on partnership.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.
Same; Same; Dissolution of Partnerships; On dissolution, the partnership is not
terminated but continues until the winding up of partnership affairs is completed.
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. With 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. On
dissolution, the partnership is not terminated but continues until the winding up of
partnership affairs is completed. 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.
Same; Same; Same; Unless otherwise agreed, the parties who have not wrongfully
dissolved the partnership have the right to wind up the partnership affairs.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.
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.
Same; Same; Same; Until the partnership accounts are determined, it cannot be
ascertained how much any of the parties is entitled to, if at all.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. 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. Primelink Properties
and Development Corporation vs. Lazatin-Magat, 493 SCRA 444, G.R. No. 167379
June 27, 2006
Business Organization Partnership, Agency, Trust Dissolution and Winding Up
Joint Venture Agreement Rights of Innocent Party
In 1994, Primelink Properties and the Lazatin siblings entered into a joint venture
agreement whereby the Lazatins shall contribute a huge parcel of land and
Primelink shall develop the same into a subdivision. For 4 years however, Primelink
failed to develop the said land. So in 1998, the Lazatins filed a complaint to rescind
the joint venture agreement with prayer for preliminary injunction. In said case,
Primelink was declared in default or failing to file an answer and for asking multiple
motions for extension. The trial court eventually ruled in favor of the Lazatins and it
ordered Primelink to return the possession of said land to the Lazatins as well as
some improvements which Primelink had so far over the property without the
Lazatins paying for said improvements. This decision was affirmed by the Court of
Appeals. Primelink is now assailing the order; that turning over improvements to the
Lazatins without reimbursement is unjust; that the Lazatins did not ask the
properties to be placed under their possession but they merely asked for rescission.
ISSUE: Whether or not the improvements made by Primelink should also be turned
over under the possession of the Lazatins.
HELD: Yes. In the first place, even though the Lazatins did specifically pray for
possession the same (placing of improvements under their possession) is incidental
in the relief they prayed for. They are therefore entitled possession over the parcel
of land plus the improvements made thereon made by Primelink.
In this jurisdiction, joint ventures are governed by the laws of partnership. Under the
laws of partnership, when a partnership is dissolved, as in this case when the trial
court rescinded the joint venture agreement, the innocent party has the right to
wind up the partnership affairs.
With 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. On dissolution, the partnership is not terminated but continues
until the winding up of partnership affairs is completed. 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.
It must be stressed, too, that although the Lazatins 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 and subject to the outcome of the settlement of
the accounts between the parties, absent any agreement of the parties in their JVA
to the contrary (here no agreement in the JVA as to winding up). Until the
partnership accounts are determined, it cannot be ascertained how much any of the
parties is entitled to, if at all.
6. PHILEX MINING CORPORATION, petitioner, vs. COMMISSIONER
OF INTERNAL REVENUE, respondent.
and should be governed by the law of partnerships. The Supreme Court has
however recognized a distinction between these two business forms, and has held
that although a corporation cannot enter into a partnership contract, it may
however engage in a joint venture with others. x x x (Citations omitted)
Same; Agency; Words and Phrases; In an agency coupled with interest, it is the
agency that cannot be revoked or withdrawn by the principal due to an interest of a
third party that depends upon it, or the mutual interest of both principal and agent.
There is no merit to petitioners claim that the prohibition in paragraph 5(c)
against withdrawal of advances should not be taken as an indication that it had
entered into a partnership with Baguio Gold; that the stipulation only showed that
what the parties entered into was actually a contract of agency coupled with an
interest which is not revocable at will and not a partnership. In an agency coupled
with interest, it is the agency that cannot be revoked or withdrawn by the principal
due to an interest of a third party that depends upon it, or the mutual interest of
both principal and agent. In this case, the non-revocation or non-withdrawal under
paragraph 5(c) applies to the advances made by petitioner who is supposedly the
agent and not the principal under the contract. Thus, it cannot be inferred from the
stipulation that the parties relation under the agreement is one of agency coupled
with an interest and not a partnership.
Same; Same; The essence of an agency, even one that is coupled with interest, is
the agents ability to represent his principal and bring about business relations
between the latter and third persons.It should be stressed that the main object of
the Power of Attorney was not to confer a power in favor of petitioner to contract
with third persons on behalf of Baguio Gold but to create a business relationship
between petitioner and Baguio Gold, in which the former was to manage and
operate the latters mine through the parties mutual contribution of material
resources and industry. The essence of an agency, even one that is coupled with
interest, is the agents ability to represent his principal and bring about business
relations between the latter and third persons. Where representation for and in
behalf of the principal is merely incidental or necessary for the proper discharge of
ones paramount undertaking under a contract, the latter may not necessarily be a
contract of agency, but some other agreement depending on the ultimate
undertaking of the parties. In this case, the totality of the circumstances and the
stipulations in the parties agreement indubitably lead to the conclusion that a
partnership was formed between petitioner and Baguio Gold. Philex Mining
Corporation vs. Commissioner of Internal Revenue, 551 SCRA 428, April 16, 2008
Same; Article 1769 (4) of the Civil Code explicitly provides that the receipt by a
person of a share in the profits of a business is prima facie evidence that he is a
partner in the business.Article 1769 (4) of the Civil Code explicitly provides that
the receipt by a person of a share in the profits of a business is prima facie
evidence that he is a partner in the business. Petitioner asserts, however, that no
such inference can be drawn against it since its share in the profits of the Sto Nio
PHILEX
MINING
CORPORATION, petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari of the June 30, 2000 Decision 1 of the Court
of Appeals in CA-G.R. SP No. 49385, which affirmed the Decision 2 of the Court of Tax
Appeals in C.T.A. Case No. 5200. Also assailed is the April 3, 2001
Resolution3 denying the motion for reconsideration.
The facts of the case are as follows:
On April 16, 1971, petitioner Philex Mining Corporation (Philex Mining), entered into
an agreement4 with Baguio Gold Mining Company ("Baguio Gold") for the former to
manage and operate the latters mining claim, known as the Sto. Nino mine, located
in Atok and Tublay, Benguet Province. The parties agreement was denominated as
"Power of Attorney" and provided for the following terms:
4. Within three (3) years from date thereof, the PRINCIPAL (Baguio Gold) shall
make available to the MANAGERS (Philex Mining) up to ELEVEN MILLION
PESOS (P11,000,000.00), in such amounts as from time to time may be
required by the MANAGERS within the said 3-year period, for use in the
MANAGEMENT of the STO. NINO MINE. The said ELEVEN MILLION PESOS
Power of Attorney has been executed as security for the payment and
satisfaction of all such obligations of the PRINCIPAL in favor of the MANAGERS
and as a means to fulfill the same. Therefore, this Agency shall be irrevocable
while any obligation of the PRINCIPAL in favor of the MANAGERS is
outstanding, inclusive of the MANAGERS account. After all obligations of the
PRINCIPAL in favor of the MANAGERS have been paid and satisfied in full, this
Agency shall be revocable by the PRINCIPAL upon 36-month notice to the
MANAGERS.
17. Notwithstanding any agreement or understanding between the PRINCIPAL
and the MANAGERS to the contrary, the MANAGERS may withdraw from this
Agency by giving 6-month notice to the PRINCIPAL. The MANAGERS shall not
in any manner be held liable to the PRINCIPAL by reason alone of such
withdrawal. Paragraph 5(d) hereof shall be operative in case of the
MANAGERS withdrawal.
x x x x5
In the course of managing and operating the project, Philex Mining made advances
of cash and property in accordance with paragraph 5 of the agreement. However,
the mine suffered continuing losses over the years which resulted to petitioners
withdrawal as manager of the mine on January 28, 1982 and in the eventual
cessation of mine operations on February 20, 1982. 6
Thereafter, on September 27, 1982, the parties executed a "Compromise with
Dation in Payment"7 wherein Baguio Gold admitted an indebtedness to petitioner in
the amount of P179,394,000.00 and agreed to pay the same in three segments by
first assigning Baguio Golds tangible assets to petitioner, transferring to the latter
Baguio Golds equitable title in its Philodrill assets and finally settling the remaining
liability through properties that Baguio Gold may acquire in the future.
On December 31, 1982, the parties executed an "Amendment to Compromise with
Dation in Payment"8 where the parties determined that Baguio Golds indebtedness
to petitioner actually amounted to P259,137,245.00, which sum included liabilities
of Baguio Gold to other creditors that petitioner had assumed as guarantor. These
liabilities pertained to long-term loans amounting to US$11,000,000.00 contracted
by Baguio Gold from the Bank of America NT & SA and Citibank N.A. This time,
Baguio Gold undertook to pay petitioner in two segments by first assigning its
tangible assets for P127,838,051.00 and then transferring its equitable title in its
Philodrill assets for P16,302,426.00. The parties then ascertained that Baguio Gold
had a remaining outstanding indebtedness to petitioner in the amount of
P114,996,768.00.
Subsequently, petitioner wrote off in its 1982 books of account the remaining
outstanding indebtedness of Baguio Gold by charging P112,136,000.00 to
allowances and reserves that were set up in 1981 and P2,860,768.00 to the 1982
operations.
In its 1982 annual income tax return, petitioner deducted from its gross income the
amount of P112,136,000.00 as "loss on settlement of receivables from Baguio Gold
against reserves and allowances." 9 However, the Bureau of Internal Revenue (BIR)
disallowed the amount as deduction for bad debt and assessed petitioner a
deficiency income tax of P62,811,161.39.
Petitioner protested before the BIR arguing that the deduction must be allowed
since all requisites for a bad debt deduction were satisfied, to wit: (a) there was a
valid and existing debt; (b) the debt was ascertained to be worthless; and (c) it was
charged off within the taxable year when it was determined to be worthless.
Petitioner emphasized that the debt arose out of a valid management contract it
entered into with Baguio Gold. The bad debt deduction represented advances made
by petitioner which, pursuant to the management contract, formed part of Baguio
Golds "pecuniary obligations" to petitioner. It also included payments made by
petitioner as guarantor of Baguio Golds long-term loans which legally entitled
petitioner to be subrogated to the rights of the original creditor.
Petitioner also asserted that due to Baguio Golds irreversible losses, it became
evident that it would not be able to recover the advances and payments it had
made in behalf of Baguio Gold. For a debt to be considered worthless, petitioner
claimed that it was neither required to institute a judicial action for collection
against the debtor nor to sell or dispose of collateral assets in satisfaction of the
debt. It is enough that a taxpayer exerted diligent efforts to enforce collection and
exhausted all reasonable means to collect.
On October 28, 1994, the BIR denied petitioners protest for lack of legal and factual
basis. It held that the alleged debt was not ascertained to be worthless since Baguio
Gold remained existing and had not filed a petition for bankruptcy; and that the
deduction did not consist of a valid and subsisting debt considering that, under the
management contract, petitioner was to be paid fifty percent (50%) of the projects
net profit.10
Petitioner appealed before the Court of Tax Appeals (CTA) which rendered judgment,
as follows:
WHEREFORE, in view of the foregoing, the instant Petition for Review is
hereby DENIED for lack of merit. The assessment in question, viz: FAS-1-8288-003067 for deficiency income tax in the amount of P62,811,161.39 is
hereby AFFIRMED.
ACCORDINGLY, petitioner Philex Mining Corporation is hereby ORDERED to
PAY respondent Commissioner of Internal Revenue the amount of
P62,811,161.39, plus, 20% delinquency interest due computed from February
10, 1995, which is the date after the 20-day grace period given by the
respondent within which petitioner has to pay the deficiency amount x x x up
to actual date of payment.
SO ORDERED.11
The CTA rejected petitioners assertion that the advances it made for the Sto. Nino
mine were in the nature of a loan. It instead characterized the advances as
petitioners investment in a partnership with Baguio Gold for the development and
exploitation of the Sto. Nino mine. The CTA held that the "Power of Attorney"
executed by petitioner and Baguio Gold was actually a partnership agreement.
Since the advanced amount partook of the nature of an investment, it could not be
deducted as a bad debt from petitioners gross income.
The CTA likewise held that the amount paid by petitioner for the long-term loan
obligations of Baguio Gold could not be allowed as a bad debt deduction. At the
time the payments were made, Baguio Gold was not in default since its loans were
not yet due and demandable. What petitioner did was to pre-pay the loans as
evidenced by the notice sent by Bank of America showing that it was merely
demanding payment of the installment and interests due. Moreover, Citibank
imposed and collected a "pre-termination penalty" for the pre-payment.
The Court of Appeals affirmed the decision of the CTA. 12 Hence, upon denial of its
motion for reconsideration,13petitioner took this recourse under Rule 45 of the Rules
of Court, alleging that:
I.
The Court of Appeals erred in construing that the advances made by Philex in
the management of the Sto. Nino Mine pursuant to the Power of Attorney
partook of the nature of an investment rather than a loan.
II.
The Court of Appeals erred in ruling that the 50%-50% sharing in the net
profits of the Sto. Nino Mine indicates that Philex is a partner of Baguio Gold
in the development of the Sto. Nino Mine notwithstanding the clear absence
of any intent on the part of Philex and Baguio Gold to form a partnership.
III.
The Court of Appeals erred in relying only on the Power of Attorney and in
completely disregarding the Compromise Agreement and the Amended
Compromise Agreement when it construed the nature of the advances made
by Philex.
IV.
The Court of Appeals erred in refusing to delve upon the issue of the propriety
of the bad debts write-off.14
Petitioner insists that in determining the nature of its business relationship with
Baguio Gold, we should not only rely on the "Power of Attorney", but also on the
subsequent "Compromise with Dation in Payment" and "Amended Compromise with
Dation in Payment" that the parties executed in 1982. These documents, allegedly
evinced the parties intent to treat the advances and payments as a loan and
establish a creditor-debtor relationship between them.
The petition lacks merit.
The lower courts correctly held that the "Power of Attorney" is the instrument that is
material in determining the true nature of the business relationship between
petitioner and Baguio Gold. Before resort may be had to the two compromise
agreements, the parties contractual intent must first be discovered from the
expressed language of the primary contract under which the parties business
relations were founded. It should be noted that the compromise agreements were
mere collateral documents executed by the parties pursuant to the termination of
their business relationship created under the "Power of Attorney". On the other
hand, it is the latter which established the juridical relation of the parties and
defined the parameters of their dealings with one another.
The execution of the two compromise agreements can hardly be considered as a
subsequent or contemporaneous act that is reflective of the parties true intent. The
compromise agreements were executed eleven years after the "Power of Attorney"
and merely laid out a plan or procedure by which petitioner could recover the
advances and payments it made under the "Power of Attorney". The parties entered
into the compromise agreements as a consequence of the dissolution of their
business relationship. It did not define that relationship or indicate its real character.
An examination of the "Power of Attorney" reveals that a partnership or joint
venture was indeed intended by the parties. Under a contract of partnership, two or
more persons bind themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among themselves. 15 While a
corporation, like petitioner, cannot generally enter into a contract of partnership
unless authorized by law or its charter, it has been held that it may enter into a joint
venture which is akin to a particular partnership:
The legal concept of a joint venture is of common law origin. It has no precise
legal definition, but it has been generally understood to mean an organization
formed for some temporary purpose. x x x It is in fact hardly distinguishable
from the partnership, since their elements are similar community of interest
in the business, sharing of profits and losses, and a mutual right of control. x
x x The main distinction cited by most opinions in common law jurisdictions is
that the partnership contemplates a general business with some degree of
continuity, while the joint venture is formed for the execution of a single
transaction, and is thus of a temporary nature. x x x This observation is not
entirely accurate in this jurisdiction, since under the Civil Code, a partnership
may be particular or universal, and a particular partnership may have for its
object a specific undertaking. x x x It would seem therefore that under
Philippine law, a joint venture is a form of partnership and should be
governed by the law of partnerships. The Supreme Court has however
recognized a distinction between these two business forms, and has held that
although a corporation cannot enter into a partnership contract, it may
however engage in a joint venture with others. x x x (Citations omitted) 16
Perusal of the agreement denominated as the "Power of Attorney" indicates that the
parties had intended to create a partnership and establish a common fund for the
purpose. They also had a joint interest in the profits of the business as shown by a
50-50 sharing in the income of the mine.
Under the "Power of Attorney", petitioner and Baguio Gold undertook to contribute
money, property and industry to the common fund known as the Sto. Nio mine. 17 In
this regard, we note that there is a substantive equivalence in the respective
contributions of the parties to the development and operation of the mine. Pursuant
to paragraphs 4 and 5 of the agreement, petitioner and Baguio Gold were to
contribute equally to the joint venture assets under their respective accounts.
Baguio Gold would contribute P11M under its owners account plus any of its
income that is left in the project, in addition to its actual mining claim. Meanwhile,
petitioners contribution would consist of its expertise in the management and
operation of mines, as well as the managers account which is comprised ofP11M in
funds and property and petitioners "compensation" as manager that cannot be
paid in cash.
However, petitioner asserts that it could not have entered into a partnership
agreement with Baguio Gold because it did not "bind" itself to contribute money or
property to the project; that under paragraph 5 of the agreement, it was only
optional for petitioner to transfer funds or property to the Sto. Nio project
"(w)henever the MANAGERS shall deem it necessary and convenient in connection
with the MANAGEMENT of the STO. NIO MINE." 18
The wording of the parties agreement as to petitioners contribution to the common
fund does not detract from the fact that petitioner transferred its funds and property
to the project as specified in paragraph 5, thus rendering effective the other
stipulations of the contract, particularly paragraph 5(c) which prohibits petitioner
from withdrawing the advances until termination of the parties business relations.
As can be seen, petitioner became bound by its contributions once the transfers
were made. The contributions acquired an obligatory nature as soon as petitioner
had chosen to exercise its option under paragraph 5.
There is no merit to petitioners claim that the prohibition in paragraph 5(c) against
withdrawal of advances should not be taken as an indication that it had entered into
a partnership with Baguio Gold; that the stipulation only showed that what the
parties entered into was actually a contract of agency coupled with an interest
which is not revocable at will and not a partnership.
In an agency coupled with interest, it is the agency that cannot be revoked or
withdrawn by the principal due to an interest of a third party that depends upon
it, or the mutual interest of both principal and agent. 19 In this case, the nonrevocation or non-withdrawal under paragraph 5(c) applies to the advances made
by petitioner who is supposedly the agent and not the principal under the contract.
Thus, it cannot be inferred from the stipulation that the parties relation under the
agreement is one of agency coupled with an interest and not a partnership.
Neither can paragraph 16 of the agreement be taken as an indication that the
relationship of the parties was one of agency and not a partnership. Although the
said provision states that "this Agency shall be irrevocable while any obligation of
the PRINCIPAL in favor of the MANAGERS is outstanding, inclusive of the MANAGERS
account," it does not necessarily follow that the parties entered into an agency
contract coupled with an interest that cannot be withdrawn by Baguio Gold.
It should be stressed that the main object of the "Power of Attorney" was not to
confer a power in favor of petitioner to contract with third persons on behalf of
Baguio Gold but to create a business relationship between petitioner and Baguio
Gold, in which the former was to manage and operate the latters mine through the
parties mutual contribution of material resources and industry. The essence of an
agency, even one that is coupled with interest, is the agents ability to represent his
principal and bring about business relations between the latter and third
persons.20 Where representation for and in behalf of the principal is merely
incidental or necessary for the proper discharge of ones paramount undertaking
under a contract, the latter may not necessarily be a contract of agency, but some
other agreement depending on the ultimate undertaking of the parties. 21
In this case, the totality of the circumstances and the stipulations in the parties
agreement indubitably lead to the conclusion that a partnership was formed
between petitioner and Baguio Gold.
First, it does not appear that Baguio Gold was unconditionally obligated to return
the advances made by petitioner under the agreement. Paragraph 5 (d) thereof
provides that upon termination of the parties business relations, "the ratio which
the MANAGERS account has to the owners account will be determined, and the
corresponding proportion of the entire assets of the STO. NINO MINE, excluding the
claims" shall be transferred to petitioner. 22 As pointed out by the Court of Tax
Appeals, petitioner was merely entitled to a proportionate return of the mines
assets upon dissolution of the parties business relations. There was nothing in the
agreement that would require Baguio Gold to make payments of the advances to
petitioner as would be recognized as an item of obligation or "accounts payable" for
Baguio Gold.
Thus, the tax court correctly concluded that the agreement provided for a
distribution of assets of the Sto. Nio mine upon termination, a provision that is
more consistent with a partnership than a creditor-debtor relationship. It should be
pointed out that in a contract of loan, a person who receives a loan or money or any
fungible thing acquires ownership thereof and is bound to pay the creditor an equal
amount of the same kind and quality. 23 In this case, however, there was no
stipulation for Baguio Gold to actually repay petitioner the cash and property that it
had advanced, but only the return of an amount pegged at a ratio which the
managers account had to the owners account.
In this connection, we find no contractual basis for the execution of the two
compromise agreements in which Baguio Gold recognized a debt in favor of
petitioner, which supposedly arose from the termination of their business relations
over the Sto. Nino mine. The "Power of Attorney" clearly provides that petitioner
would only be entitled to the return of a proportionate share of the mine assets to
be computed at a ratio that the managers account had to the owners account.
Except to provide a basis for claiming the advances as a bad debt deduction, there
is no reason for Baguio Gold to hold itself liable to petitioner under the compromise
agreements, for any amount over and above the proportion agreed upon in the
"Power of Attorney".
Next, the tax court correctly observed that it was unlikely for a business corporation
to lend hundreds of millions of pesos to another corporation with neither security, or
collateral, nor a specific deed evidencing the terms and conditions of such loans.
The parties also did not provide a specific maturity date for the advances to become
due and demandable, and the manner of payment was unclear. All these point to
the inevitable conclusion that the advances were not loans but capital contributions
to a partnership.
The strongest indication that petitioner was a partner in the Sto Nio mine is the
fact that it would receive 50% of the net profits as "compensation" under paragraph
12 of the agreement. The entirety of the parties contractual stipulations simply
leads to no other conclusion than that petitioners "compensation" is actually its
share in the income of the joint venture.
Article 1769 (4) of the Civil Code explicitly provides that the "receipt by a person of
a share in the profits of a business is prima facie evidence that he is a partner in the
business." Petitioner asserts, however, that no such inference can be drawn against
it since its share in the profits of the Sto Nio project was in the nature of
compensation or "wages of an employee", under the exception provided in Article
1769 (4) (b).24
On this score, the tax court correctly noted that petitioner was not an employee of
Baguio Gold who will be paid "wages" pursuant to an employer-employee
relationship. To begin with, petitioner was the manager of the project and had put
substantial sums into the venture in order to ensure its viability and profitability. By
pegging its compensation to profits, petitioner also stood not to be remunerated in
case the mine had no income. It is hard to believe that petitioner would take the risk
of not being paid at all for its services, if it were truly just an ordinary employee.
Consequently, we find that petitioners "compensation" under paragraph 12 of the
agreement actually constitutes its share in the net profits of the partnership.
Indeed, petitioner would not be entitled to an equal share in the income of the mine
if it were just an employee of Baguio Gold. 25 It is not surprising that petitioner was
to receive a 50% share in the net profits, considering that the "Power of Attorney"
also provided for an almost equal contribution of the parties to the St. Nino mine.
The "compensation" agreed upon only serves to reinforce the notion that the
parties relations were indeed of partners and not employer-employee.
All told, the lower courts did not err in treating petitioners advances as investments
in a partnership known as the Sto. Nino mine. The advances were not "debts" of
Baguio Gold to petitioner inasmuch as the latter was under no unconditional
obligation to return the same to the former under the "Power of Attorney". As for the
amounts that petitioner paid as guarantor to Baguio Golds creditors, we find no
reason to depart from the tax courts factual finding that Baguio Golds debts were
not yet due and demandable at the time that petitioner paid the same. Verily,
petitioner pre-paid Baguio Golds outstanding loans to its bank creditors and this
conclusion is supported by the evidence on record. 26
In sum, petitioner cannot claim the advances as a bad debt deduction from its gross
income. Deductions for income tax purposes partake of the nature of tax
exemptions and are strictly construed against the taxpayer, who must prove by
convincing evidence that he is entitled to the deduction claimed. 27 In this case,
petitioner failed to substantiate its assertion that the advances were subsisting
debts of Baguio Gold that could be deducted from its gross income. Consequently, it
could not claim the advances as a valid bad debt deduction.
WHEREFORE, the petition is DENIED. The decision of the Court of Appeals in CAG.R. SP No. 49385 dated June 30, 2000, which affirmed the decision of the Court of
Tax Appeals in C.T.A. Case No. 5200 is AFFIRMED. Petitioner Philex Mining
Corporation is ORDERED to PAY the deficiency tax on its 1982 income in the
amount of P62,811,161.31, with 20% delinquency interest computed from February
10, 1995, which is the due date given for the payment of the deficiency income tax,
up to the actual date of payment.
SO ORDERED.
4.2.2.
4.3.4
4.3.9
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.
(2)
(3)
(4)
costs of suit.
b)
Defendant [Gotesco] is further ordered to pay codefendant [Marsman Drysdale] the sum of P100,000.00 as
and for attorneys fees.
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
original; underscoring supplied)
and
emphasis
in
the
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
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
Payment[16] from the joint ventures project manager [17] which was endorsed to
Gotesco for processing and payment.[18]
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 demand[23] 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.
8. J. TIOSEJO INVESTMENT CORP., petitioner,
BENJAMIN AND ELEANOR ANG, respondents.
vs.
SPOUSES
property pending completion of the condominium project but had also bound itself
to answer liabilities proceeding from contracts entered into by PPGI with third
parties.Even prescinding from the foregoing procedural considerations, we also
find that the HLURB Arbiter and Board correctly held petitioner liable alongside PPGI
for respondents claims and the P10,000.00 administrative fine imposed pursuant to
Section 20 in relation to Section 38 of P.D. 957. By the express terms of the JVA, it
appears that petitioner not only retained ownership of the property pending
completion of the condominium project but had also bound itself to answer liabilities
proceeding from contracts entered into by PPGI with third parties.
Civil Law; Partnership; Under Article 1824 of the Civil Code of the Philippines,
all partners are solidarily liable with the partnership for everything chargeable to
the partnership, including loss or injury caused to a third person or penalties
incurred due to any wrongful act or omission of any partner acting in the ordinary
course of the business of the partnership or with the authority of his co-partners.
Viewed in the light of the foregoing provision of the JVA, petitioner cannot avoid
liability by claiming that it was not in any way privy to the Contracts to Sell
executed by PPGI and respondents. As correctly argued by the latter, moreover, a
joint venture is considered in this jurisdiction as a form of partnership and is,
accordingly, governed by the law of partnerships. Under Article 1824 of the Civil
Code of the Philippines, all partners are solidarily liable with the partnership for
everything chargeable to the partnership, including loss or injury caused to a third
person or penalties incurred due to any wrongful act or omission of any partner
acting in the ordinary course of the business of the partnership or with the authority
of his co-partners. Whether innocent or guilty, all the partners are solidarily liable
with the partnership itself.
Filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure, the petition for
review at bench seeks the reversal of the Resolutions dated 23 May 2006 and 9
August 2006 issued by the Third Division of the Court of Appeals (CA) in CA-G.R. SP
No. 93841 which, respectively, dismissed the petition for review of petitioner J.
Tiosejo Investment Corp. (JTIC) for having been filed out of time [1] and denied the
motion for reconsideration of said dismissal.[2]
The Facts
On 28 December 1995 petitioner entered into a Joint Venture Agreement (JVA) with
Primetown Property Group, Inc. (PPGI) for the development of a residential
condominium project to be known as The Meditel on the formers 9,502 square
meter property along Samat St., Highway Hills, Mandaluyong City.[3] With petitioner
contributing the same property to the joint venture and PPGI undertaking to develop
the condominium, the JVA provided, among other terms and conditions, that the
developed units shall be shared by the former and the latter at a ratio of 17%-83%,
respectively.[4] While
both
parties
were
allowed,
at
their
own
individual
responsibility, to pre-sell the units pertaining to them, [5] PPGI further undertook to
use all proceeds from the pre-selling of its saleable units for the completion of the
Condominium Project.
[6]
On 17 June 1996, the Housing and Land Use Regulatory Board (HLURB) issued
License to Sell No. 96-06-2854 in favor of petitioner and PPGI as project owners.
[7]
By virtue of said license, PPGI executed Contract to Sell No. 0212 with Spouses
Benjamin and Eleanor Ang on 5 February 1997, over the 35.45-square meter
condominium unit denominated as Unit A-1006, for the agreed contract price
of P52,597.88 per square meter or a total P2,077,334.25.[8] On the same date PPGI
and respondents also executed Contract to Sell No. 0214 over the 12.50 square
meter parking space identified as Parking Slot No. 0405, for the stipulated
consideration of P26,400.00 square meters or a total of P313,500.00.[9]
On 21 July 1999, respondents filed against petitioner and PPGI the complaint for the
rescission of the aforesaid Contracts to Sell docketed before the HLURB as HLURB
Case No. REM 072199-10567. Contending that they were assured by petitioner and
PPGI that the subject condominium unit and parking space would be available for
turn-over and occupancy in December 1998, respondents averred, among other
matters, that in view of the non-completion of the project according to said
representation, respondents instructed petitioner and PPGI to stop depositing the
post-dated checks they issued and to cancel said Contracts to Sell; and, that despite
several demands, petitioner and PPGI have failed and refused to refund
the P611,519.52 they already paid under the circumstances.Together with the
refund of said amount and interests thereon at the rate of 12% per annum,
respondents prayed for the grant of their claims for moral and exemplary damages
as well as attorneys fees and the costs.[10]
Specifically denying the material allegations of the foregoing complaint, PPGI filed
its 7 September 1999 answer alleging that the delay in the completion of the
project was attributable to the economic crisis which affected the country at the
time; that the unexpected and unforeseen inflation as well as increase in interest
rates and cost of building materials constitute force majeure and were beyond its
control; that aware of its responsibilities, it offered several alternatives to its buyers
like respondents for a transfer of their investment to its other feasible projects and
for the amounts they already paid to be considered as partial payment for the
replacement unit/s; and, that the complaint was prematurely filed in view of the ongoing negotiations it is undertaking with its buyers and prospective joint venture
partners. Aside from the dismissal of the complaint, PPGI sought the readjustment
of the contract price and the grant of its counterclaims for attorneys fees and
litigation expenses.[11]
answer dated
February
2002[12] which
it
amended
on
20
May
2002.Calling attention to the fact that its prestation under the JVA consisted in
contributing the property on which The Meditel was to be constructed, petitioner
asseverated that, by the terms of the JVA, each party was individually responsible
for the marketing and sale of the units pertaining to its share; that not being privy
to the Contracts to Sell executed by PPGI and respondents, it did not receive any
portion of the payments made by the latter; and, that without any contributory fault
and negligence on its part, PPGI breached its undertakings under the JVA by failing
to complete the condominium project. In addition to the dismissal of the complaint
and the grant of its counterclaims for exemplary damages, attorneys fees, litigation
expenses and the costs, petitioner interposed a cross-claim against PPGI for full
reimbursement of any sum it may be adjudged liable to pay respondents. [13]
Acting on the position papers and draft decisions subsequently submitted by the
parties,[14] Housing and Land Use (HLU) Arbiter Dunstan T. San Vicente went on to
render the 30 July 2003 decision declaring the subject Contracts to Sell cancelled
and rescinded on account of the non-completion of the condominium project. On the
ground that the JVA created a partnership liability on their part, petitioner and PPGI,
as co-owners of the condominium project, were ordered to pay: (a) respondents
claim for refund of the P611,519.52 they paid, with interest at the rate of 12% per
annum from 5 February 1997; (b) damages in the sum ofP75,000.00; (c) attorneys
fees in the sum of P30,000.00; (d) the costs; and, (e) an administrative fine in the
sum of P10,000.00 for violation of Sec. 20 in relation to Sec. 38 of Presidential
Decree No. 957.
[15]
for review filed by petitioner,[16] the foregoing decision was modified to grant the
latters cross-claim in the 14 September 2004 decision rendered by said
administrative bodys Second Division in HLURB Case No. REM-A-031007-0240, [17] to
wit:
With the denial of its motion for reconsideration of the foregoing decision,
[19]
petitioner filed a Notice of Appeal dated 28 February 2005 which was docketed
before the Office of the President (OP) as O.P. Case No. 05-B-072. [20] On 3 March
2005, the OP issued an order directing petitioner to submit its appeal memorandum
within 15 days from receipt thereof. [21] Acting on the motion therefor filed, the OP
also issued another order on the same date, granting petitioner a period of 15 days
from 28 February 2005 or until 15 March 2005 within which to file its appeal
memorandum.[22] In view of petitioners filing of a second motion for extension dated
15 March 2005,[23] the OP issued the 18 March 2005 order granting the former an
additional 10 days from 15 March 2005 or until 25 March 2005 within which to file
its appeal memorandum, provided no further extension shall be allowed. [24] Claiming
to have received the aforesaid 3 March 2005 order only on 16 March 2005, however,
petitioner filed its 31 March 2005 motion seeking yet another extension of 10 days
or until 10 April 2005 within which to file its appeal memorandum. [25]
On 7 April 2005, respondents filed their opposition to the 31 March 2005 motion for
extension of petitioner[26] which eventually filed its appeal memorandum by
registered mail on 11 April 2005 in view of the fact that 10 April 2005 fell on a
Sunday.[27] On 25 October 2005, the OP rendered a decision dismissing petitioners
appeal on the ground that the latters appeal memorandum was filed out of time and
that the HLURB Board committed no grave abuse of discretion in rendering the
appealed decision.[28] Aggrieved by the denial of its motion for reconsideration of the
foregoing decision in the 3 March 2006 order issued by the OP, [29] petitioner filed
before the CA its 29 March 2006 motion for an extension of 15 days from 31 March
2006 or until 15 April 2006 within which to file its petition for review. [30] Accordingly,
a non-extendible period of 15 days to file its petition for review was granted
petitioner in the 31 March 2006 resolution issued by the CA Third Division in CA-G.R,
SP No. 93841.[31]
Maintaining that 15 April 2006 fell on a Saturday and that pressures of work
prevented its counsel from finalizing its petition for review, petitioner filed a motion
on 17 April 2006, seeking for an additional time of 10 days or until 27 April 2006
within which to file said pleading. [32] Although petitioner filed by registered mail a
motion to admit its attached petition for review on 19 April 2006, [33] the CA issued
the herein assailed 23 May 2006 resolution, [34] disposing of the formers pending
motion for extension as well as the petition itself in the following wise:
We resolve to DENY the second extension motion and rule
to DISMISS the petition for being filed late.
Settled is that heavy workload is by no means excusable (Land
Bank of the Philippines vs. Natividad, 458 SCRA 441 [2005]). If the
failure of the petitioners counsel to cope up with heavy workload
should be considered a valid justification to sidestep the reglementary
period, there would be no end to litigations so long as counsel had not
been sufficiently diligent or experienced (LTS Philippine Corporation vs.
Maliwat, 448 SCRA 254, 259-260 [2005], citing Sublay vs. National
Labor Relations Commission, 324 SCRA 188 [2000]).
Moreover, lawyers should not assume that their motion for
extension or postponement will be granted the length of time they
pray for (Ramos vs. Dajoyag, 378 SCRA 229 [2002]).
SO ORDERED.[35]
The Issues
The perfection of an appeal in the manner and within the period prescribed by
law is, in fact, not only mandatory but jurisdictional. [42] Considering that they are
requirements which cannot be trifled with as mere technicality to suit the interest of
a party,[43] failure to perfect an appeal in the prescribed manner has the effect of
rendering the judgment final and executory. [44]
Fealty to the foregoing principles impels us to discount the error petitioner imputes
against the CA for denying its second motion for extension of time for lack of merit
and dismissing its petition for review for having been filed out of time. Acting on
the 29 March 2006 motion filed for the purpose, after all, the CA had already
granted petitioner an inextendible period of 15 days from 31 March 2006 or until 15
April 2006 within which to file its petition for review. Sec. 4, Rule 43 of the 1997
Rules of Civil Procedure provides as follows:
Sec. 4. Period of appeal. The appeal shall be taken within fifteen (15)
days from notice of the award, judgment, final order or resolution, or
from the date of its last publication, if publication is required by law for
its effectivity, or of the denial of petitioners motion for new trial or
reconsideration duly filed in accordance with the governing law of the
court or agency a quo. Only one (1) motion for reconsideration shall be
allowed. Upon proper motion and payment of the full amount of the
docket fee before the expiration of the reglementary period, the Court
of Appeals may grant an additional period of fifteen (15) days only
within which to file the petition for review. No further extension shall be
granted except for the most compelling reason and in no case to
exceed fifteen (15) days. (Underscoring supplied)
The record shows that, having been granted the 15-day extension sought in its first
motion, petitioner filed a second motion for extension praying for an additional 10
days from 17 April 2006 within which to file its petition for review, on the ground
that pressures of work and the demands posed by equally important cases
prevented its counsel from finalizing the same. As correctly ruled by the CA,
however, heavy workload cannot be considered as a valid justification to sidestep
the reglementary period[45] since to do so would only serve to encourage needless
delays and interminable litigations. Indeed, rules prescribing the time for doing
specific
acts
or
for
taking
certain
proceedings
are
considered
absolutely
moreover,
lawyers
cannot
expect
that
their
motions
for
extension
or
Although technical rules of procedure are not ends in themselves, they are
necessary for an effective and expeditious administration of justice and cannot, for
said reason, be discarded with the mere expediency of claiming substantial merit.
[49]
This holds particularly true in the case at bench where, prior to the filing of its
petition for review before the CA, petitioners appeal before the OP was likewise
dismissed in view of its failure to file its appeal memorandum within the extensions
of time it had been granted by said office. After being granted an initial extension of
15 days to do the same, the records disclose that petitioner was granted by the OP
a second extension of 10 days from 15 March 2005 or until 25 March 2005 within
which to file its appeal memorandum, on the condition that no further extensions
shall be allowed. Aside from not heeding said proviso, petitioner had, consequently,
no more time to extend when it filed its 31 March 2005 motion seeking yet another
extension of 10 days or until 10 April 2005 within which to file its appeal
memorandum.
With the foregoing procedural antecedents, the initial 15-day extension granted by
the CA and the injunction under Sec. 4, Rule 43 of the 1997 Rules of Civil
Procedure against further extensions except for the most compelling reason, it was
clearly inexcusable for petitioner to expediently plead its counsels heavy workload
as ground for seeking an additional extension of 10 days within which to file its
petition for review. To our mind, petitioner would do well to remember that, rather
than the low gate to which parties are unreasonably required to stoop, procedural
rules are designed for the orderly conduct of proceedings and expeditious
settlement of cases in the courts of law. Like all rules, they are required to be
followed[50] and utter disregard of the same cannot be expediently rationalized by
harping on the policy of liberal construction [51] which was never intended as an
unfettered license to disregard the letter of the law or, for that matter, a convenient
excuse to substitute substantial compliance for regular adherence thereto. When it
comes to compliance with time rules, the Court cannot afford inexcusable delay. [52]
Even prescinding from the foregoing procedural considerations, we also find that the
HLURB Arbiter and Board correctly held petitioner liable alongside PPGI for
respondents claims and the P10,000.00 administrative fine imposed pursuant
to Section 20 in relation to Section 38 of P.D. 957. By the express terms of the JVA, it
appears that petitioner not only retained ownership of the property pending
completion of the condominium project [53] but had also bound itself to answer
liabilities proceeding from contracts entered into by PPGI with third parties. Article
VIII, Section 1 of the JVA distinctly provides as follows:
Sec. 1. Rescission and damages. Non-performance by either party of
its obligations under this Agreement shall be excused when the same
is due to Force Majeure. In such cases, the defaulting party must
exercise due diligence to minimize the breach and to remedy the same
at the soonest possible time. In the event that either party defaults or
breaches any of the provisions of this Agreement other than by reason
of Force Majeure, the other party shall have the right to terminate this
Agreement by giving notice to the defaulting party, without prejudice
to the filing of a civil case for damages arising from the breach of the
defaulting party.
In the event that the Developer shall be rendered unable to complete
the Condominium Project, and such failure is directly and solely
attributable to the Developer, the Owner shall send written notice to
the Developer to cause the completion of the Condominium Project. If
the developer fails to comply within One Hundred Eighty (180) days
from such notice or, within such time, indicates its incapacity to
complete the Project, the Owner shall have the right to take over the
construction and cause the completion thereof. If the Owner exercises
its right to complete the Condominium Project under these
circumstances, this Agreement shall be automatically rescinded upon
written notice to the Developer and the latter shall hold the former free
and harmless from any and all liabilities to third persons arising from
such rescission. In any case, the Owner shall respect and strictly
comply with any covenant entered into by the Developer and third
parties with respect to any of its units in the Condominium Project. To
enable the owner to comply with this contingent liability, the
Developer shall furnish the Owner with a copy of its contracts with the
said buyers on a month-to-month basis.Finally, in case the Owner
would be constrained to assume the obligations of the Developer to its
own buyers, the Developer shall lose its right to ask for indemnity for
whatever it may have spent in the Development of the Project.
Nevertheless, with respect to the buyers of the Developer for the First
Phase, the area intended for the Second Phase shall not be bound
and/or subjected to the said covenants and/or any other liability
incurred by the Developer in connection with the development of the
first phase. (Underscoring supplied)
Viewed in the light of the foregoing provision of the JVA, petitioner cannot avoid
liability by claiming that it was not in any way privy to the Contracts to Sell
executed by PPGI and respondents. As correctly argued by the latter, moreover, a
joint venture is considered in this jurisdiction as a form of partnership and is,
accordingly, governed by the law of partnerships. [54] Under Article 1824 of the Civil
Code of the Philippines, all partners are solidarily liable with the partnership for
everything chargeable to the partnership, including loss or injury caused to a third
person or penalties incurred due to any wrongful act or omission of any partner
acting in the ordinary course of the business of the partnership or with the authority
of his co-partners.[55] Whether innocent or guilty, all the partners are solidarily liable
with the partnership itself.[56]
WHEREFORE, premises considered, the petition for review is DENIED for lack of
merit.
SO ORDERED.
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. Since a partners interest in the partnership includes his share in the
profits, 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. Realubit vs. Jaso, 658 SCRA 146, G.R. No. 178782 September 21, 2011
FACTS
Petitioner Josefina Realubit entered into a Joint Venture Agreement with
Francis Eric Amaury 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. For and in consideration of the sum
of P500,000.00,
however,
Biondo
subsequently
executed
a Deed
of
Assignment transferring all his rights and interests in the business in favor of
respondent Eden Jaso, the wife of respondent Prosencio Jaso.With Biondos eventual
departure from the country, the Spouses Jaso caused their lawyer to send Josefina a
letter 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.
Faulting Josefina with unjustified failure to heed their demand, the Spouses
Jaso commenced the instant suit for specific performance, accounting, examination,
audit and inventory of assets and properties, dissolution of the joint venture,
appointment of a receiver and damages. The said complaint alleged that the
Spouses Realubit had no gainful occupation or business prior to their joint venture
with Biondo and that aside from appropriating for themselves the income of the
business, they have fraudulently concealed the funds and assets thereof thru their
relatives, associates or dummies. The Spouses Realubit claimed that they have
been engaged in the tube ice trading business under a single proprietorship even
before their dealings with Biondo.
The RTC rendered its Decision 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. On appeal before the CA, the
foregoing decision was set aside
upon the following findings that the Spouses Jaso validly acquired Biondos share in
the business which had been transferred to and continued its operations and not
dissolved as claimed by the Spouses Realubit.
ISSUES
1.
2.
3.
Whether Jaso acquired the title of being a partner based on the Deed of
Assignment
RULING
1.
Yes. As a public document, the Deed of Assignment Biondo executed in favor
of Eden not only enjoys a presumption of regularity but is also considered prima
facie evidence of the facts therein stated. 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. 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 Edenand Notary Public Rolando
Diaz.
2.
Yes. 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. The rule is settled that joint
ventures are governed by the law on partnerships which are, in turn, based on
mutual agency or delectus personae.
3.
No. It is evident that the 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. Since a partners interest in the partnership
includes his share in the profits, 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
10.
J. M. TUASON & CO., INC., represented by it Managing
PARTNER,
GREGORIA
ARANETA,
INC., plaintiff-appellee,
vs.
QUIRINO BOLAOS, defendant-appellant.
Araneta and Araneta for appellee.
Jose A. Buendia for appellant.
REYES, J.:
This is an action originally brought in the Court of First Instance of Rizal, Quezon
City Branch, to recover possesion of registered land situated in barrio Tatalon,
Quezon City.
Plaintiff's complaint was amended three times with respect to the extent and
description of the land sought to be recovered. The original complaint described the
land as a portion of a lot registered in plaintiff's name under Transfer Certificate of
Title No. 37686 of the land record of Rizal Province and as containing an area of 13
hectares more or less. But the complaint was amended by reducing the area of 6
hectares, more or less, after the defendant had indicated the plaintiff's surveyors
the portion of land claimed and occupied by him. The second amendment became
necessary and was allowed following the testimony of plaintiff's surveyors that a
portion of the area was embraced in another certificate of title, which was plaintiff's
Transfer Certificate of Title No. 37677. And still later, in the course of trial, after
defendant's surveyor and witness, Quirino Feria, had testified that the area
occupied and claimed by defendant was about 13 hectares, as shown in his Exhibit
1, plaintiff again, with the leave of court, amended its complaint to make its
allegations conform to the evidence.
Defendant, in his answer, sets up prescription and title in himself thru "open,
continuous, exclusive and public and notorious possession (of land in dispute) under
claim of ownership, adverse to the entire world by defendant and his predecessor in
interest" from "time in-memorial". The answer further alleges that registration of the
land in dispute was obtained by plaintiff or its predecessors in interest thru "fraud or
error and without knowledge (of) or interest either personal or thru publication to
defendant and/or predecessors in interest." The answer therefore prays that the
complaint be dismissed with costs and plaintiff required to reconvey the land to
defendant or pay its value.
After trial, the lower court rendered judgment for plaintiff, declaring defendant to be
without any right to the land in question and ordering him to restore possession
thereof to plaintiff and to pay the latter a monthly rent of P132.62 from January,
1940, until he vacates the land, and also to pay the costs.
Appealing directly to this court because of the value of the property involved,
defendant makes the following assignment or errors:
I. The trial court erred in not dismissing the case on the ground that the case
was not brought by the real property in interest.
II. The trial court erred in admitting the third amended complaint.
III. The trial court erred in denying defendant's motion to strike.
IV. The trial court erred in including in its decision land not involved in the
litigation.
V. The trial court erred in holding that the land in dispute is covered by
transfer certificates of Title Nos. 37686 and 37677.
Vl. The trial court erred in not finding that the defendant is the true and
lawful owner of the land.
VII. The trial court erred in finding that the defendant is liable to pay the
plaintiff the amount of P132.62 monthly from January, 1940, until he vacates
the premises.
VIII. The trial court erred in not ordering the plaintiff to reconvey the land in
litigation to the defendant.
As to the first assigned error, there is nothing to the contention that the present
action is not brought by the real party in interest, that is, by J. M. Tuason and Co.,
Inc. What the Rules of Court require is that an action be broughtin the name of, but
not necessarily by, the real party in interest. (Section 2, Rule 2.) In fact the practice
is for an attorney-at-law to bring the action, that is to file the complaint, in the name
of the plaintiff. That practice appears to have been followed in this case, since the
complaint is signed by the law firm of Araneta and Araneta, "counsel for plaintiff"
and commences with the statement "comes now plaintiff, through its undersigned
counsel." It is true that the complaint also states that the plaintiff is "represented
herein by its Managing Partner Gregorio Araneta, Inc.", another corporation, but
lot No. 4-B-3-C, situate in barrio Tatalon, Quezon City, with an area of 5,297,429.3
square meters, more or less, covered by transfer certificate of title No. 37686 of the
land records of Rizal province, and of lot No. 4-B-4, situated in the same barrio,
having an area of 74,789 square meters, more or less, covered by transfer
certificate of title No. 37677 of the land records of the same province, both lots
having been originally registered on July 8, 1914 under original certificate of title
No. 735. The identity of the lots was established by the testimony of Antonio
Manahan and Magno Faustino, witnesses for plaintiff, and the identity of the portion
thereof claimed by defendant was established by the testimony of his own witness,
Quirico Feria. The combined testimony of these three witnesses clearly shows that
the portion claimed by defendant is made up of a part of lot 4-B-3-C and major on
portion of lot 4-B-4, and is well within the area covered by the two transfer
certificates of title already mentioned. This fact also appears admitted in
defendant's answer to the third amended complaint.
As the land in dispute is covered by plaintiff's Torrens certificate of title and was
registered in 1914, the decree of registration can no longer be impugned on the
ground of fraud, error or lack of notice to defendant, as more than one year has
already elapsed from the issuance and entry of the decree. Neither court the decree
be collaterally attacked by any person claiming title to, or interest in, the land prior
to the registration proceedings. (Sorogon vs. Makalintal,1 45 Off. Gaz., 3819.) Nor
could title to that land in derogation of that of plaintiff, the registered owner, be
acquired by prescription or adverse possession. (Section 46, Act No. 496.) Adverse,
notorious and continuous possession under claim of ownership for the period fixed
by law is ineffective against a Torrens title. (Valiente vs. Judge of CFI of Tarlac, 2 etc.,
45 Off. Gaz., Supp. 9, p. 43.) And it is likewise settled that the right to secure
possession under a decree of registration does not prescribed. (Francisco vs. Cruz,
43 Off. Gaz., 5105, 5109-5110.) A recent decision of this Court on this point is that
rendered in the case of Jose Alcantara et al., vs. Mariano et al., 92 Phil., 796. This
disposes of the alleged errors V and VI.
As to error VII, it is claimed that `there was no evidence to sustain the finding that
defendant should be sentenced to pay plaintiff P132.62 monthly from January,
1940, until he vacates the premises.' But it appears from the record that that
reasonable compensation for the use and occupation of the premises, as stipulated
at the hearing was P10 a month for each hectare and that the area occupied by
defendant was 13.2619 hectares. The total rent to be paid for the area occupied
should therefore be P132.62 a month. It is appears from the testimony of J. A.
Araneta and witness Emigdio Tanjuatco that as early as 1939 an action of ejectment
had already been filed against defendant. And it cannot be supposed that defendant
has been paying rents, for he has been asserting all along that the premises in
question 'have always been since time immemorial in open, continuous, exclusive
and public and notorious possession and under claim of ownership adverse to the
entire world by defendant and his predecessors in interest.' This assignment of error
is thus clearly without merit.
Error No. VIII is but a consequence of the other errors alleged and needs for further
consideration.
During the pendency of this case in this Court appellant, thru other counsel, has
filed a motion to dismiss alleging that there is pending before the Court of First
Instance of Rizal another action between the same parties and for the same cause
and seeking to sustain that allegation with a copy of the complaint filed in said
action. But an examination of that complaint reveals that appellant's allegation is
not correct, for the pretended identity of parties and cause of action in the two suits
does not appear. That other case is one for recovery of ownership, while the present
one is for recovery of possession. And while appellant claims that he is also involved
in that order action because it is a class suit, the complaint does not show that such
is really the case. On the contrary, it appears that the action seeks relief for each
individual plaintiff and not relief for and on behalf of others. The motion for
dismissal is clearly without merit.
Wherefore, the judgment appealed from is affirmed, with costs against the plaintiff.