Ortega vs CA
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 109248July 3, 1995
GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T.
BACORRO, petitioners,
vs.
HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and
JOAQUIN L. MISA, respondents.
VITUG, J.:
The instant petition seeks a review of the decision rendered by
the Court of Appeals, dated 26 February 1993, in CA-G.R. SP No.
24638 and No. 24648 affirming in toto that of the Securities and
Exchange Commission ("SEC") in SEC AC 254.
The antecedents of the controversy, summarized by respondent
Commission and quoted at length by the appellate court in its
decision, are hereunder restated.
The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly
registered in the Mercantile Registry on 4 January 1937 and
reconstituted with the Securities and Exchange Commission on 4
August 1948. The SEC records show that there were several
subsequent amendments to the articles of partnership on 18
September 1958, to change the firm [name] to ROSS, SELPH and
CARRASCOSO; on 6 July 1965 . . . to ROSS, SELPH, SALCEDO, DEL
ROSARIO, BITO & MISA; on 18 April 1972 to SALCEDO, DEL ROSARIO,
BITO, MISA & LOZADA; on 4 December 1972 to SALCEDO, DEL
ROSARIO, BITO, MISA & LOZADA; on 11 March 1977 to DEL ROSARIO,
BITO, MISA & LOZADA; on 7 June 1977 to BITO, MISA & LOZADA;
on 19 December 1980, [Joaquin L. Misa] appellees Jesus B. Bito and
Mariano M. Lozada associated themselves together, as senior
partners with respondents-appellees Gregorio F. Ortega, Tomas O.
del Castillo, Jr., and Benjamin Bacorro, as junior partners.
On February 17, 1988, petitioner-appellant wrote the
respondents-appellees a letter stating:
I am withdrawing and retiring from the firm of Bito, Misa and
Lozada, effective at the end of this month.
"I trust that the accountants will be instructed to make the
proper liquidation of my participation in the firm."
On the same day, petitioner-appellant wrote
respondents-appellees another letter stating:
"Further to my letter to you today, I would like to have a
meeting with all of you with regard to the mechanics of
liquidation, and more particularly, my interest in the two floors
of this building. I would like to have this resolved soon because
it has to do with my own plans."
On 19 February 1988, petitioner-appellant wrote
respondents-appellees another letter stating:
"The partnership has ceased to be mutually satisfactory because
of the working conditions of our employees including the assistant
attorneys. All my efforts to ameliorate the below subsistence level
of the pay scale of our employees have been thwarted by the other
partners. Not only have they refused to give meaningful increases
to the employees, even attorneys, are dressed down publicly in a
loud voice in a manner that deprived them of their self-respect.
The result of such policies is the formation of the union,
including the assistant attorneys."
On 30 June 1988, petitioner filed with this Commission's
Securities Investigation and Clearing Department (SICD) a petition
for dissolution and liquidation of partnership, docketed as SEC
Case No. 3384 praying that the Commission:
"1.Decree the formal dissolution and order the immediate
liquidation of (the partnership of) Bito, Misa & Lozada;
"2.Order the respondents to deliver or pay for petitioner's
share in the partnership assets plus the profits, rent or interest
attributable to the use of his right in the assets of the dissolved
partnership;
"3.Enjoin respondents from using the firm name of Bito, Misa
& Lozada in any of their correspondence, checks and pleadings
and to pay petitioners damages for the use thereof despite the
dissolution of the partnership in the amount of at least
P50,000.00;
"4.Order respondents jointly and severally to pay petitioner
attorney's fees and expense of litigation in such amounts as maybe
proven during the trial and which the Commission may deem just and
equitable under the premises but in no case less than ten (10%) per
cent of the value of the shares of petitioner or P100,000.00;
"5.Order the respondents to pay petitioner moral damages with
the amount of P500,000.00 and exemplary damages in the amount of
P200,000.00.
"Petitioner likewise prayed for such other and further reliefs
that the Commission may deem just and equitable under the
premises."
On 13 July 1988, respondents-appellees filed their opposition to
the petition.
On 13 July 1988, petitioner filed his Reply to the
Opposition.
On 31 March 1989, the hearing officer rendered a decision ruling
that:
"[P]etitioner's withdrawal from the law firm Bito, Misa &
Lozada did not dissolve the said law partnership. Accordingly, the
petitioner and respondents are hereby enjoined to abide by the
provisions of the Agreement relative to the matter governing the
liquidation of the shares of any retiring or withdrawing partner in
the partnership interest." 1
On appeal, the SEC en banc reversed the decision of the Hearing
Officer and held that the withdrawal of Attorney Joaquin L. Misa
had dissolved the partnership of "Bito, Misa & Lozada." The
Commission ruled that, being a partnership at will, the law firm
could be dissolved by any partner at anytime, such as by his
withdrawal therefrom, regardless of good faith or bad faith, since
no partner can be forced to continue in the partnership against his
will. In its decision, dated 17 January 1990, the SEC held:
WHEREFORE, premises considered the appealed order of 31 March
1989 is hereby REVERSED insofar as it concludes that the
partnership of Bito, Misa & Lozada has not been dissolved. The
case is hereby REMANDED to the Hearing Officer for determination of
the respective rights and obligations of the parties. 2
The parties sought a reconsideration of the above decision.
Attorney Misa, in addition, asked for an appointment of a receiver
to take over the assets of the dissolved partnership and to take
charge of the winding up of its affairs. On 4 April 1991,
respondent SEC issued an order denying reconsideration, as well as
rejecting the petition for receivership, and reiterating the remand
of the case to the Hearing Officer.
The parties filed with the appellate court separate appeals
(docketed CA-G.R. SP No. 24638 and CA-G.R. SP No. 24648).
During the pendency of the case with the Court of Appeals,
Attorney Jesus Bito and Attorney Mariano Lozada both died on,
respectively, 05 September 1991 and 21 December 1991. The death of
the two partners, as well as the admission of new partners, in the
law firm prompted Attorney Misa to renew his application for
receivership (in CA G.R. SP No. 24648). He expressed concern over
the need to preserve and care for the partnership assets. The other
partners opposed the prayer.
The Court of Appeals, finding no reversible error on the part of
respondent Commission, AFFIRMED in toto the SEC decision and order
appealed from. In fine, the appellate court held, per its decision
of 26 February 1993, (a) that Atty. Misa's withdrawal from the
partnership had changed the relation of the parties and inevitably
caused the dissolution of the partnership; (b) that such withdrawal
was not in bad faith; (c) that the liquidation should be to the
extent of Attorney Misa's interest or participation in the
partnership which could be computed and paid in the manner
stipulated in the partnership agreement; (d) that the case should
be remanded to the SEC Hearing Officer for the corresponding
determination of the value of Attorney Misa's share in the
partnership assets; and (e) that the appointment of a receiver was
unnecessary as no sufficient proof had been shown to indicate that
the partnership assets were in any such danger of being lost,
removed or materially impaired.
In this petition for review under Rule 45 of the Rules of Court,
petitioners confine themselves to the following issues:
1.Whether or not the Court of Appeals has erred in holding that
the partnership of Bito, Misa & Lozada (now Bito, Lozada,
Ortega & Castillo) is a partnership at will;
2.Whether or not the Court of Appeals has erred in holding that
the withdrawal of private respondent dissolved the partnership
regardless of his good or bad faith; and
3.Whether or not the Court of Appeals has erred in holding that
private respondent's demand for the dissolution of the partnership
so that he can get a physical partition of partnership was not made
in bad faith;
to which matters we shall, accordingly, likewise limit
ourselves.
A partnership that does not fix its term is a partnership at
will. That the law firm "Bito, Misa & Lozada," and now "Bito,
Lozada, Ortega and Castillo," is indeed such a partnership need not
be unduly belabored. We quote, with approval, like did the
appellate court, the findings and disquisition of respondent SEC on
this matter; viz:
The partnership agreement (amended articles of 19 August 1948)
does not provide for a specified period or undertaking. The
"DURATION" clause simply states:
"5.DURATION. The partnership shall continue so long as mutually
satisfactory and upon the death or legal incapacity of one of the
partners, shall be continued by the surviving partners."
The hearing officer however opined that the partnership is one
for a specific undertaking and hence not a partnership at will,
citing paragraph 2 of the Amended Articles of Partnership (19
August 1948):
"2.Purpose. The purpose for which the partnership is formed, is
to act as legal adviser and representative of any individual, firm
and corporation engaged in commercial, industrial or other lawful
businesses and occupations; to counsel and advise such persons and
entities with respect to their legal and other affairs; and to
appear for and represent their principals and client in all courts
of justice and government departments and offices in the
Philippines, and elsewhere when legally authorized to do so."
The "purpose" of the partnership is not the specific undertaking
referred to in the law. Otherwise, all partnerships, which
necessarily must have a purpose, would all be considered as
partnerships for a definite undertaking. There would therefore be
no need to provide for articles on partnership at will as none
would so exist. Apparently what the law contemplates, is a specific
undertaking or "project" which has a definite or definable period
of completion. 3
The birth and life of a partnership at will is predicated on the
mutual desire and consent of the partners. The right to choose with
whom a person wishes to associate himself is the very foundation
and essence of that partnership. Its continued existence is, in
turn, dependent on the constancy of that mutual resolve, along with
each partner's capability to give it, and the absence of a cause
for dissolution provided by the law itself. Verily, any one of the
partners may, at his sole pleasure, dictate a dissolution of the
partnership at will. He must, however, act in good faith, not that
the attendance of bad faith can prevent the dissolution of the
partnership 4 but that it can result in a liability for damages.
5
In passing, neither would the presence of a period for its
specific duration or the statement of a particular purpose for its
creation prevent the dissolution of any partnership by an act or
will of a partner. 6 Among partners, 7 mutual agency arises and the
doctrine of delectus personae allows them to have the power,
although not necessarily the right, to dissolve the partnership. An
unjustified dissolution by the partner can subject him to a
possible action for damages.
The dissolution of a partnership is the change in the relation
of the parties caused by any partner ceasing to be associated in
the carrying on, as might be distinguished from the winding up of,
the business. 8 Upon its dissolution, the partnership continues and
its legal personality is retained until the complete winding up of
its business culminating in its termination. 9
The liquidation of the assets of the partnership following its
dissolution is governed by various provisions of the Civil Code; 10
however, an agreement of the partners, like any other contract, is
binding among them and normally takes precedence to the extent
applicable over the Code's general provisions. We here take note of
paragraph 8 of the "Amendment to Articles of Partnership" reading
thusly:
. . . In the event of the death or retirement of any partner,
his interest in the partnership shall be liquidated and paid in
accordance with the existing agreements and his partnership
participation shall revert to the Senior Partners for allocation as
the Senior Partners may determine; provided, however, that with
respect to the two (2) floors of office condominium which the
partnership is now acquiring, consisting of the 5th and the 6th
floors of the Alpap Building, 140 Alfaro Street, Salcedo Village,
Makati, Metro Manila, their true value at the time of such death or
retirement shall be determined by two (2) independent appraisers,
one to be appointed (by the partnership and the other by the)
retiring partner or the heirs of a deceased partner, as the case
may be. In the event of any disagreement between the said
appraisers a third appraiser will be appointed by them whose
decision shall be final. The share of the retiring or deceased
partner in the aforementioned two (2) floor office condominium
shall be determined upon the basis of the valuation above mentioned
which shall be paid monthly within the first ten (10) days of every
month in installments of not less than P20,000.00 for the Senior
Partners, P10,000.00 in the case of two (2) existing Junior
Partners and P5,000.00 in the case of the new Junior Partner.
11
The term "retirement" must have been used in the articles, as we
so hold, in a generic sense to mean the dissociation by a partner,
inclusive of resignation or withdrawal, from the partnership that
thereby dissolves it.
On the third and final issue, we accord due respect to the
appellate court and respondent Commission on their common factual
finding, i.e., that Attorney Misa did not act in bad faith. Public
respondents viewed his withdrawal to have been spurred by
"interpersonal conflict" among the partners. It would not be right,
we agree, to let any of the partners remain in the partnership
under such an atmosphere of animosity; certainly, not against their
will. 12 Indeed, for as long as the reason for withdrawal of a
partner is not contrary to the dictates of justice and fairness,
nor for the purpose of unduly visiting harm and damage upon the
partnership, bad faith cannot be said to characterize the act. Bad
faith, in the context here used, is no different from its normal
concept of a conscious and intentional design to do a wrongful act
for a dishonest purpose or moral obliquity.
WHEREFORE, the decision appealed from is AFFIRMED. No
pronouncement on costs.
SO ORDERED.
Feliciano, Romero, Melo and Francisco, JJ., concur.
Footnotes
1Rollo, pp. 53-56.
2Rollo, p. 122.
3Rollo, pp. 119-120.
4Art. 1830 (1) (b), Civil Code.
5See Art. 19, Civil Code.
6Art. 1830 (2), Civil Code; see also Rojas vs. Maglana, 192 SCRA
110.
7As general, as distinguished from limited partners.
8Art. 1828, Civil Code.
9Art. 1829, Civil Code.
10For instance, Art. 1837 of the Civil Code provides:
"Art. 1837. When dissolution is caused in any way, except in
contravention of the partnership agreement, each partner, as
against his co-partners and all persons claiming through them in
respect of their interests in the partnership, unless otherwise
agreed, may have the partnership property applied to discharge its
liabilities, and the surplus applied to pay in cash the net amount
owning to the respective partners. But if dissolution is caused by
expulsion of a partner, bona fide under the partnership agreement
and if the expelled partner is discharged from all partnership
liabilities, either by payment or agreement under the second
paragraph of article 1835, he shall receive in cash only the net
amount due him from the partnership."
11Rollo, pp. 69-70.
12Rojas v. Maglana, supra.
The Lawphil Project - Arellano Law Foundation
Navarro vs CA
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 101847May 27, 1993
LOURDES NAVARRO AND MENARDO NAVARRO, petitioners,
vs.
COURT OF APPEALS, JUDGE BETHEL KATALBAS-MOSCARDON, Presiding
Judge, Regional Trial Court of Bacolod City, Branch 52, Sixth
Judicial Region and Spouses OLIVIA V. YANSON AND RICARDO B. YANSON,
respondents.
George L. Howard Law Office for petitioners
Geocadin, Vinco, Guance, Laudenorio & Cario Law Office for
private respondents.
MELO, J.:
Assailed and sought to be set aside by the petition before us is
the Resolution of the Court of Appeals dated June 20, 1991 which
dismissed the petition for annulment of judgment filed by the
Spouses Lourdes and Menardo Navarro, thusly:
The instant petition for annulment of decision is DISMISSED.
1.Judgments may be annulled only on the ground of extrinsic or
collateral fraud, as distinguished from intrinsic fraud (Canlas vs.
Court of Appeals, 164 SCRA 160, 170). No such ground is alleged in
the petition.
2.Even if the judgment rendered by the respondent Court were
erroneous, it is not necessarily void (Chereau vs. Fuentebella, 43
Phil. 216). Hence, it cannot be annulled by the proceeding sought
to be commenced by the petitioners.
3.The petitioners' remedy against the judgment enforcement of
which is sought to be stopped should have been appeal.
SO ORDERED. (pp. 24-25, Rollo.)
The antecedent facts of the case are as follows:
On July 23, 1976, herein private respondent Olivia V. Yanson
filed a complaint against petitioner Lourdes Navarro for "Delivery
of Personal Properties With Damages". The complaint incorporated an
application for a writ of replevin. The complaint was later
docketed as Civil Case No. 716 (12562) of the then Court of First
Instance of Bacolod (Branch 55) and was subsequently amended to
include private respondent's husband, Ricardo B. Yanson, as
co-plaintiff, and petitioner's husband, as co-defendant.
On July 27, 1976, then Executive Judge Oscar R. Victoriano
(later to be promoted and to retire as Presiding Justice of the
Court of Appeals) approved private respondents' application for a
writ of replevin. The Sheriff's Return of Service dated March 3,
1978 affirmed receipt by private respondents of all pieces of
personal property sought to be recovered from petitioners.
On April 30, 1990, Presiding Judge Bethel Katalbas-Moscardon
rendered a decision, disposing as follows :
Accordingly, in the light of the aforegoing findings, all
chattels already recovered by plaintiff by virtue of the Writ of
Replevin and as listed in the complaint are hereby sustained to
belong to plaintiff being the owner of these properties; the motor
vehicle, particularly that Ford Fiera Jeep registered in and which
had remain in the possession of the defendant is likewise declared
to belong to her, however, said defendant is hereby ordered to
reimburse plaintiff the sum of P6,500.00 representing the amount
advanced to pay part of the price therefor; and said defendant is
likewise hereby ordered to return to plaintiff such other
equipment[s] as were brought by the latter to and during the
operation of their business as were listed in the complaint and not
recovered as yet by virtue of the previous Writ of Replevin. (p.
12, Rollo.)
Petitioner received a copy of the decision on January 10, 1991
(almost 9 months after its rendition) and filed on January 16, 1991
a "Motion for Extension of Time To File a Motion for
Reconsideration". This was granted on January 18, 1991. Private
respondents filed their opposition, citing the ruling in the case
of Habaluyas Enterprises, Inc. vs. Japson (142 SCRA 208 [1986])
proscribing the filing of any motion for extension of time to file
a motion for a new trial or reconsideration. The trial judge
vacated the order dated January 18, 1991 and declared the decision
of April 30, 1990 as final and executory. (Petitioners' motion for
reconsideration was subsequently filed on February 1, 1991 or 22
days after the receipt of the decision).
On February 4, 1991, the trial court issued a writ of execution
(Annex "5", p. 79, Rollo). The Sheriff's Return of Service (Annex
"6", p. 82, Rollo) declared that the writ was "duly served and
satisfied". A receipt for the amount of P6,500.00 issued by Mrs.
Lourdes Yanson, co-petitioner in this case, was likewise submitted
by the Sheriff (Annex "7", p. 83, Rollo).
On June 26, 1991, petitioners filed with respondent court a
petition for annulment of the trial court's decision, claiming that
the trial judge erred in declaring the non-existence of a
partnership, contrary to the evidence on record.
The appellate court, as aforesaid, outrightly dismissed the
petition due to absence of extrinsic or collateral fraud, observing
further that an appeal was the proper remedy.
In the petition before us, petitioners claim that the trial
judge ignored evidence that would show that the parties "clearly
intended to form, and (in fact) actually formed a verbal
partnership engaged in the business of Air Freight Service Agency
in Bacolod"; and that the decision sustaining the writ of replevin
is void since the properties belonging to the partnership do not
actually belong to any of the parties until the final disposition
and winding up of the partnership" (p. 15, Rollo). These issues,
however, were extensively discussed by the trial judge in her
16-page, single-spaced decision.
We agree with respondents that the decision in this case has
become final. In fact a writ of execution had been issued and was
promptly satisfied by the payment of P6,500.00 to private
respondents.
Having lost their right to appeal, petitioners resorted to
annulment proceedings to justify a belated judicial review of their
case. This was, however, correctly thrown out by the Court of
Appeals because petitioners failed to cite extrinsic or collateral
fraud to warrant the setting aside of the trial court's decision.
We respect the appellate court's finding in this regard.
Petitioners have come to us in a petition for review. However,
the petition is focused solely on factual issues which can no
longer be entertained. Petitioners' arguments are all directed
against the decision of the regional trial court; not a word is
said in regard to the appellate's court disposition of their
petition for annulment of judgment. Verily, petitioners keeps on
pressing that the idea of a partnership exists on account of the
so-called admissions in judicio. But the factual premises of the
trial court were more than enough to suppress and negate
petitioners submissions along this line:
To be resolved by this Court factually involved in the issue of
whether there was a partnership that existed between the parties
based on their verbal contention; whether the properties that were
commonly used in the operation of Allied Air Freight belonged to
the alleged partnership business; and the status of the parties in
this transaction of alleged partnership. On the other hand, the
legal issues revolves on the dissolution and winding up in case a
partnership so existed as well as the issue of ownership over the
properties subject matter of recovery.
As a premise, Article 1767 of the New Civil Code defines the
contract of partnership to quote:
Art. 1767.By the contract of partnership two or more persons
bind themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the proceeds among
themselves.
xxxxxxxxx
Corollary to this definition is the provision in determining
whether a partnership exist as so provided under Article 1769, to
wit:
xxxxxxxxx
Furthermore, the Code provides under Article 1771 and 1772 that
while a partnership may be constituted in any form, a public
instrument is necessary where immovables or any rights is
constituted. Likewise, if the partnership involves a capitalization
of P3,000.00 or more in money or property, the same must appear in
a public instrument which must be recorded in the Office of the
Securities and Exchange Commission. Failure to comply with these
requirements shall only affect liability of the partners to third
persons.
In consideration of the above, it is undeniable that both the
plaintiff and the defendant-wife made admission to have entered
into an agreement of operating this Allied Air Freight Agency of
which the plaintiff personally constituted with the Manila Office
in a sense that the plaintiff did supply the necessary equipments
and money while her brother Atty. Rodolfo Villaflores was the
Manager and the defendant the Cashier. It was also admitted that
part of this agreement was an equal sharing of whatever proceeds
realized. Consequently, the plaintiff brought into this transaction
certain chattels in compliance with her obligation. The same has
been done by the herein brother and the herein defendant who
started to work in the business. A cursory examination of the
evidences presented no proof that a partnership, whether oral or
written had been constituted at the inception of this transaction.
True it is that even up to the filing of this complaint those
movables brought by the plaintiff for the use in the operation of
the business remain registered in her name.
While there may have been co-ownership or co-possession of some
items and/or any sharing of proceeds by way of advances received by
both plaintiff and the defendant, these are not indicative and
supportive of the existence of any partnership between them.
Article 1769 of the New Civil Code is explicit. Even the books and
records retrieved by the Commissioner appointed by the Court did
not show proof of the existence of a partnership as conceptualized
by law. Such that if assuming that there were profits realized in
1975 after the two-year deficits were compensated, this could only
be subject to an equal sharing consonant to the agreement to
equally divide any profit realized. However, this Court cannot
overlook the fact that the Audit Report of the appointed
Commissioner was not highly reliable in the sense that it was more
of his personal estimate of what is available on hand. Besides, the
alleged profits was a difference found after valuating the assets
and not arising from the real operation of the business. In
accounting procedures, strictly, this could not be profit but a net
worth.
In view of the above factual findings of the Court it follows
inevitably therefore that there being no partnership that existed,
any dissolution, liquidation or winding up is beside the point. The
plaintiff himself had summarily ceased from her contract of agency
and it is a personal prerogative to desist. On the other hand, the
assumption by the defendant in negotiating for herself the
continuance of the Agency with the principal in Manila is
comparable to plaintiff's. Any account of plaintiff with the
principal as alleged, bore no evidence as no collection was ever
demanded of from her. The alleged P20,000.00 assumption
specifically, as would have been testified to by the defendant's
husband remain a mere allegation.
As to the properties sought to be recovered, the Court sustains
the possession by plaintiff of all equipments and chattels
recovered by virtue of the Writ of Replevin. Considering the other
vehicle which appeared registered in the name of the defendant, and
to which even she admitted that part of the purchase price came
from the business claimed mutually operated, although the Court
have not as much considered all entries in the Audit Report as
totally reliable to be sustained insofar as the operation of the
business is concerned, nevertheless, with this admission of the
defendant and the fact that as borne out in said Report there has
been disbursed and paid for in this vehicle out of the business
funds in the total sum of P6,500.00, it is only fitting and proper
that validity of these disbursements must be sustained as true
(Exhs. M-1 to M-3, p. 180, Records). In this connection and taking
into account the earlier agreement that only profits were to be
shared equally, the plaintiff must be reimbursed of this cost if
only to allow the defendant continuous possession of the vehicle in
question. It is a fundamental moral, moral and civil injunction
that no one shall enrich himself at the expense of another. (pp.
71-75, Rollo.)
Withal, the appellate court acted properly in dismissing the
petition for annulment of judgment, the issue raised therein having
been directly litigated in, and passed upon by, the trial
court.
WHEREFORE, the petition is DISMISSED. The Resolution of the
Court of Appeals dated June 20, 1991 is AFFIRMED in all
respects.
No special pronouncement is made as to costs.
SO ORDERED.
Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.
The Lawphil Project - Arellano Law Foundation
Villareal vs Ramirez
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 144214 July 14, 2003
LUZVIMINDA J. VILLAREAL, DIOGENES VILLAREAL and CARMELITO JOSE,
petitioners,
vs.
DONALDO EFREN C. RAMIREZ and Spouses CESAR G. RAMIREZ JR. and
CARMELITA C. RAMIREZ, respondents.
PANGANIBAN, J.:
A share in a partnership can be returned only after the
completion of the latter's dissolution, liquidation and winding up
of the business.
The Case
The Petition for Review on Certiorari before us challenges the
March 23, 2000 Decision1 and the July 26, 2000 Resolution2 of the
Court of Appeals3 (CA) in CA-GR CV No. 41026. The assailed Decision
disposed as follows:
"WHEREFORE, foregoing premises considered, the Decision dated
July 21, 1992 rendered by the Regional Trial Court, Branch 148,
Makati City is hereby SET ASIDE and NULLIFIED and in lieu thereof a
new decision is rendered ordering the [petitioners] jointly and
severally to pay and reimburse to [respondents] the amount of
P253,114.00. No pronouncement as to costs."4
Reconsideration was denied in the impugned Resolution.
The Facts
On July 25, 1984, Luzviminda J. Villareal, Carmelito Jose and
Jesus Jose formed a partnership with a capital of P750,000 for the
operation of a restaurant and catering business under the name
"Aquarius Food House and Catering Services."5 Villareal was
appointed general manager and Carmelito Jose, operations
manager.
Respondent Donaldo Efren C. Ramirez joined as a partner in the
business on September 5, 1984. His capital contribution of P250,000
was paid by his parents, Respondents Cesar and Carmelita
Ramirez.6
After Jesus Jose withdrew from the partnership in January 1987,
his capital contribution of P250,000 was refunded to him in cash by
agreement of the partners.7
In the same month, without prior knowledge of respondents,
petitioners closed down the restaurant, allegedly because of
increased rental. The restaurant furniture and equipment were
deposited in the respondents' house for storage.8
On March 1, 1987, respondent spouses wrote petitioners, saying
that they were no longer interested in continuing their partnership
or in reopening the restaurant, and that they were accepting the
latter's offer to return their capital contribution.9
On October 13, 1987, Carmelita Ramirez wrote another letter
informing petitioners of the deterioration of the restaurant
furniture and equipment stored in their house. She also reiterated
the request for the return of their one-third share in the equity
of the partnership. The repeated oral and written requests were,
however, left unheeded.10
Before the Regional Trial Court (RTC) of Makati, Branch 59,
respondents subsequently filed a Complaint11 dated November 10,
1987, for the collection of a sum of money from petitioners.
In their Answer, petitioners contended that respondents had
expressed a desire to withdraw from the partnership and had called
for its dissolution under Articles 1830 and 1831 of the Civil Code;
that respondents had been paid, upon the turnover to them of
furniture and equipment worth over P400,000; and that the latter
had no right to demand a return of their equity because their
share, together with the rest of the capital of the partnership,
had been spent as a result of irreversible business losses.12
In their Reply, respondents alleged that they did not know of
any loan encumbrance on the restaurant. According to them, if such
allegation were true, then the loans incurred by petitioners should
be regarded as purely personal and, as such, not chargeable to the
partnership. The former further averred that they had not received
any regular report or accounting from the latter, who had solely
managed the business. Respondents also alleged that they expected
the equipment and the furniture stored in their house to be removed
by petitioners as soon as the latter found a better location for
the restaurant.13
Respondents filed an Urgent Motion for Leave to Sell or
Otherwise Dispose of Restaurant Furniture and Equipment14 on July
8, 1988. The furniture and the equipment stored in their house were
inventoried and appraised at P29,000.15 The display freezer was
sold for P5,000 and the proceeds were paid to them.16
After trial, the RTC 17 ruled that the parties had voluntarily
entered into a partnership, which could be dissolved at any time.
Petitioners clearly intended to dissolve it when they stopped
operating the restaurant. Hence, the trial court, in its July 21,
1992 Decision, held there liable as follows:18
"WHEREFORE, judgment is hereby rendered in favor of
[respondents] and against the [petitioners] ordering the
[petitioners] to pay jointly and severally the following:
(a)Actual damages in the amount of P250,000.00
(b)Attorney's fee in the amount of P30,000.00
(c)Costs of suit."
The CA Ruling
The CA held that, although respondents had no right to demand
the return of their capital contribution, the partnership was
nonetheless dissolved when petitioners lost interest in continuing
the restaurant business with them. Because petitioners never gave a
proper accounting of the partnership accounts for liquidation
purposes, and because no sufficient evidence was presented to show
financial losses, the CA. computed their liability as follows:
"Consequently, since what has been proven is only the
outstanding obligation of the partnership in the amount of
P240,658.00, although contracted by the partnership before
[respondents'] have joined the partnership but in accordance with
Article 1826 of the New Civil Code, they are liable which must have
to be deducted from the remaining capitalization of the said
partnership which is in the amount of P1,000,000.00 resulting in
the amount of P759,342.00, and in order to get the share of
[respondents], this amount of P759,342.00 must be divided into
three (3) shares or in the amount of P253,114.00 for each share and
which is the only amount which [petitioner] will return to
[respondents'] representing the contribution to the partnership
minus the outstanding debt thereof."19
Hence, this Petition.20
Issues
In their Memorandum,21 petitioners submit the following issues
for our consideration:
"9.1.Whether the Honorable Court of Appeals' decision ordering
the distribution of the capital contribution, instead of the net
capital after the dissolution and liquidation of a partnership,
thereby treating the capital contribution like a loan, is in
accordance with law and jurisprudence;
"9.2.Whether the Honorable Court of Appeals' decision ordering
the petitioners to jointly and severally pay and reimburse the
amount of [P]253,114.00 is supported by the evidence on record;
and
"9.3.Whether the Honorable Court of Appeals was correct in
making [n]o pronouncement as to costs."22
On closer scrutiny, the issues are as follows: (1) whether
petitioners are liable to respondents for the latter's share in the
partnership; (2) whether the CA's computation of P253,114 as
respondents' share is correct; and (3) whether the CA was likewise
correct in not assessing costs.
This Court's Ruling
The Petition has merit.
First Issue:
Share in Partnership
Both the trial and the appellate courts found that a partnership
had indeed existed, and that it was dissolved on March 1, 1987.
They found that the dissolution took place when respondents
informed petitioners of the intention to discontinue it because of
the former's dissatisfaction with, and loss of trust in, the
latter's management of the partnership affairs. These findings were
amply supported by the evidence on record. Respondents consequently
demanded from petitioners the return of their one-third equity in
the partnership.
We hold that respondents have no right to demand from
petitioners the return of their equity share. Except as managers of
the partnership, petitioners did not personally hold its equity or
assets. "The partnership has a juridical personality separate and
distinct from that of each of the partners."23 Since the capital
was contributed to the partnership, not to petitioners, it is the
partnership that must refund the equity of the retiring
partners.24
Second Issue:
What Must Be Returned?
Since it is the partnership, as a separate and distinct entity,
that must refund the shares of the partners, the amount to be
refunded is necessarily limited to its total resources. In other
words, it can only pay out what it has in its coffers, which
consists of all its assets. However, before the partners can be
paid their shares, the creditors of the partnership must first be
compensated.25 After all the creditors have been paid, whatever is
left of the partnership assets becomes available for the payment of
the partners' shares.
Evidently, in the present case, the exact amount of refund
equivalent to respondents' one-third share in the partnership
cannot be determined until all the partnership assets will have
been liquidated in other words, sold and converted to cash and all
partnership creditors, if any, paid. The CA's computation of the
amount to be refunded to respondents as their share was thus
erroneous.
First, it seems that the appellate court was under the
misapprehension that the total capital contribution was equivalent
to the gross assets to be distributed to the partners at the time
of the dissolution of the partnership. We cannot sustain the
underlying idea that the capital contribution at the beginning of
the partnership remains intact, unimpaired and available for
distribution or return to the partners. Such idea is speculative,
conjectural and totally without factual or legal support.
Generally, in the pursuit of a partnership business, its capital
is either increased by profits earned or decreased by losses
sustained. It does not remain static and unaffected by the changing
fortunes of the business. In the present case, the financial
statements presented before the trial court showed that the
business had made meager profits.26 However, notable therefrom is
the omission of any provision for the depreciation27 of the
furniture and the equipment. The amortization of the goodwill28
(initially valued at P500,000) is not reflected either. Properly
taking these non-cash items into account will show that the
partnership was actually sustaining substantial losses, which
consequently decreased the capital of the partnership. Both the
trial and the appellate courts in fact recognized the decrease of
the partnership assets to almost nil, but the latter failed to
recognize the consequent corresponding decrease of the capital.
Second, the CA's finding that the partnership had an outstanding
obligation in the amount of P240,658 was not supported by evidence.
We sustain the contrary finding of the RTC, which had rejected the
contention that the obligation belonged to the partnership for the
following reason:
"x x x [E]vidence on record failed to show the exact loan owed
by the partnership to its creditors. The balance sheet (Exh. '4')
does not reveal the total loan. The Agreement (Exh. 'A') par. 6
shows an outstanding obligation of P240,055.00 which the
partnership owes to different creditors, while the Certification
issued by Mercator Finance (Exh. '8') shows that it was Sps.
Diogenes P. Villareal and Luzviminda J. Villareal, the former being
the nominal party defendant in the instant case, who obtained a
loan of P355,000.00 on Oct. 1983, when the original partnership was
not yet formed."
Third, the CA failed to reduce the capitalization by P250,000,
which was the amount paid by the partnership to Jesus Jose when he
withdrew from the partnership.
Because of the above-mentioned transactions, the partnership
capital was actually reduced. When petitioners and respondents
ventured into business together, they should have prepared for the
fact that their investment would either grow or shrink. In the
present case, the investment of respondents substantially dwindled.
The original amount of P250,000 which they had invested could no
longer be returned to them, because one third of the partnership
properties at the time of dissolution did not amount to that
much.
It is a long established doctrine that the law does not relieve
parties from the effects of unwise, foolish or disastrous contracts
they have entered into with all the required formalities and with
full awareness of what they were doing. Courts have no power to
relieve them from obligations they have voluntarily assumed, simply
because their contracts turn out to be disastrous deals or unwise
investments.29
Petitioners further argue that respondents acted negligently by
permitting the partnership assets in their custody to deteriorate
to the point of being almost worthless. Supposedly, the latter
should have liquidated these sole tangible assets of the
partnership and considered the proceeds as payment of their net
capital. Hence, petitioners argue that the turnover of the
remaining partnership assets to respondents was precisely the
manner of liquidating the partnership and fully settling the
latter's share in the partnership.
We disagree. The delivery of the store furniture and equipment
to private respondents was for the purpose of storage. They were
unaware that the restaurant would no longer be reopened by
petitioners. Hence, the former cannot be faulted for not disposing
of the stored items to recover their capital investment.
Third Issue:
Costs
Section 1, Rule 142, provides:
"SECTION 1.Costs ordinarily follow results of suit. Unless
otherwise provided in these rules, costs shall be allowed to the
prevailing party as a matter of course, but the court shall have
power, for special reasons, to adjudge that either party shall pay
the costs of an action, or that the same be divided, as may be
equitable. No costs shall be allowed against the Republic of the
Philippines unless otherwise provided by law."
Although, as a rule, costs are adjudged against the losing
party, courts have discretion, "for special reasons," to decree
otherwise. When a lower court is reversed, the higher court
normally does not award costs, because the losing party relied on
the lower court's judgment which is presumed to have been issued in
good faith, even if found later on to be erroneous. Unless shown to
be patently capricious, the award shall not be disturbed by a
reviewing tribunal.
WHEREFORE, the Petition is GRANTED, and the assailed Decision
and Resolution SET ASIDE. This disposition is without prejudice to
proper proceedings for the accounting, the liquidation and the
distribution of the remaining partnership assets, if any. No
pronouncement as to costs.
SO ORDERED.
Puno, Corona and Carpio-Morales, JJ ., concur.
Sandoval-Gutierrez, J ., on official leave.
Footnotes
1 Rollo, pp. 3349.
2 Id., pp. 5253.
3 Eighth Division. Composed of Justices Buenaventura J.
Guerrero, chairman; Hilarion L. Aquino, member; and Mercedes
Gozo-Dadole, member and ponente.
4 Rollo, p. 49.
5 Rollo, pp. 5457.
6 "Agreement"; rollo, pp. 5960.
7 Rollo, p. 213.
8 Id., p. 13.
9 Id., p. 78.
10 Id., p. 217.
11 Docketed as Civil Case No. 18289; rollo, pp. 7377.
12 Records, pp. 6667.
13 Id., pp. 95101.
14 Id., pp. 112113.
15 Id., p. 194.
16 Id. at p. 340.
17 Regional Trial Court of Makati, Br. 148, presided by Judge
Oscar B. Pimentel.
18 Rollo, p. 158.
19 Rollo, p. 48.
20 The case was deemed submitted for decision upon this Court's
receipt of petitioners' Memorandum on July 18, 2001.
21 Petitioners' Memorandum was signed by Atty. Teodoro L. Regala
Jr., while the Memorandum for respondents was signed by Atty. Jose
M. Ricafrente.
22 Rollo, p. 171.
23 Art. 1768 of the Civil Code.
24 Magdusa v. Albaran, 115 Phil. 511, June 30, 1962.
25 Article 1839 of the Civil Code provides thus:
"Article 1839. In settling accounts between the partners after
dissolution, the following rules shall be observed, subject to any
agreement to the contrary:
(1) The assets of the partnership are:
(a) The partnership property,
(b) The contributions of the partners necessary for the payment
of all the liabilities specified in No. 2.
(2) The liabilities of the partnership shall rank in order of
payment as follows:
(a) Those owing to creditors other than partners,
(b) Those owing to partners other than for capital and
profits,
(c) Those owing to partners in respect of capital,
(d) Those owing the partners in respect of profits.
(3) The assets shall applied in the order of their declaration
in No. 1 of this article to the satisfaction of the
liabilities.
(4) The partners shall contribute, as provided by article 1797,
the amount necessary to satisfy the liabilities.
(5) An assignee for the benefit of creditors or any person
appointed by the court shall have the right to enforce the
contributions specified in the preceding number.
(6) Any partner or his legal representative shall have the right
to enforce the contributions specified in No. 4, to the extent of
the amount which he has paid in excess of his share of the
liability.
(7) The individual property of a deceased partner shall be
liable for the contributions specified in No. 4.
(8) When partnership property and the individual properties of
the partners are in possession of a court for distribution,
partnership creditors shall have priority on partnership property,
saving the rights of lien or secured creditors.
(9) Where a partner has become insolvent or his estate is
insolvent, the claims against his separate property shall rank in
the following order:
(a) Those owing to separate creditors;
(b) Those owing to partnership creditors;
(c) Those owing to partnership by way of contribution."
26 Annexes "D"-"D-8"; rollo, pp. 205212.
27 As an accepted business practice, furniture and equipment are
depreciated over five years to recognize the decrease in their
value due to wear and tear.
28 As an accepted business practice, 1/5 of the original value
of goodwill is charged as a business expense every year, such that
at the end of five years goodwill no longer appears as an asset of
the business.
29 Esguerra v. Court of Appeals, 335 Phil. 58, 69, February 3,
1997; Sanchez v. Court of Appeals, 345 Phil. 155, 190191, September
29, 1997.
The Lawphil Project - Arellano Law Foundation
Yu vs NLRC
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 97212June 30, 1993
BENJAMIN YU, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JADE MOUNTAIN PRODUCTS
COMPANY LIMITED, WILLY CO, RHODORA D. BENDAL, LEA BENDAL, CHIU
SHIAN JENG and CHEN HO-FU, respondents.
Jose C. Guico for petitioner.
Wilfredo Cortez for private respondents.
FELICIANO, J.:
Petitioner Benjamin Yu was formerly the Assistant General
Manager of the marble quarrying and export business operated by a
registered partnership with the firm name of "Jade Mountain
Products Company Limited" ("Jade Mountain"). The partnership was
originally organized on 28 June 1984 with Lea Bendal and Rhodora
Bendal as general partners and Chin Shian Jeng, Chen Ho-Fu and Yu
Chang, all citizens of the Republic of China (Taiwan), as limited
partners. The partnership business consisted of exploiting a marble
deposit found on land owned by the Sps. Ricardo and Guillerma Cruz,
situated in Bulacan Province, under a Memorandum Agreement dated 26
June 1984 with the Cruz spouses. 1 The partnership had its main
office in Makati, Metropolitan Manila.
Benjamin Yu was hired by virtue of a Partnership Resolution
dated 14 March 1985, as Assistant General Manager with a monthly
salary of P4,000.00. According to petitioner Yu, however, he
actually received only half of his stipulated monthly salary, since
he had accepted the promise of the partners that the balance would
be paid when the firm shall have secured additional operating funds
from abroad. Benjamin Yu actually managed the operations and
finances of the business; he had overall supervision of the workers
at the marble quarry in Bulacan and took charge of the preparation
of papers relating to the exportation of the firm's products.
Sometime in 1988, without the knowledge of Benjamin Yu, the
general partners Lea Bendal and Rhodora Bendal sold and transferred
their interests in the partnership to private respondent Willy Co
and to one Emmanuel Zapanta. Mr. Yu Chang, a limited partner, also
sold and transferred his interest in the partnership to Willy Co.
Between Mr. Emmanuel Zapanta and himself, private respondent Willy
Co acquired the great bulk of the partnership interest. The
partnership now constituted solely by Willy Co and Emmanuel Zapanta
continued to use the old firm name of Jade Mountain, though they
moved the firm's main office from Makati to Mandaluyong,
Metropolitan Manila. A Supplement to the Memorandum Agreement
relating to the operation of the marble quarry was entered into
with the Cruz spouses in February of 1988. 2 The actual operations
of the business enterprise continued as before. All the employees
of the partnership continued working in the business, all, save
petitioner Benjamin Yu as it turned out.
On 16 November 1987, having learned of the transfer of the
firm's main office from Makati to Mandaluyong, petitioner Benjamin
Yu reported to the Mandaluyong office for work and there met
private respondent Willy Co for the first time. Petitioner was
informed by Willy Co that the latter had bought the business from
the original partners and that it was for him to decide whether or
not he was responsible for the obligations of the old partnership,
including petitioner's unpaid salaries. Petitioner was in fact not
allowed to work anymore in the Jade Mountain business enterprise.
His unpaid salaries remained unpaid. 3
On 21 December 1988. Benjamin Yu filed a complaint for illegal
dismissal and recovery of unpaid salaries accruing from November
1984 to October 1988, moral and exemplary damages and attorney's
fees, against Jade Mountain, Mr. Willy Co and the other private
respondents. The partnership and Willy Co denied petitioner's
charges, contending in the main that Benjamin Yu was never hired as
an employee by the present or new partnership. 4
In due time, Labor Arbiter Nieves Vivar-De Castro rendered a
decision holding that petitioner had been illegally dismissed. The
Labor Arbiter decreed his reinstatement and awarded him his claim
for unpaid salaries, backwages and attorney's fees. 5
On appeal, the National Labor Relations Commission ("NLRC")
reversed the decision of the Labor Arbiter and dismissed
petitioner's complaint in a Resolution dated 29 November 1990. The
NLRC held that a new partnership consisting of Mr. Willy Co and Mr.
Emmanuel Zapanta had bought the Jade Mountain business, that the
new partnership had not retained petitioner Yu in his original
position as Assistant General Manager, and that there was no law
requiring the new partnership to absorb the employees of the old
partnership. Benjamin Yu, therefore, had not been illegally
dismissed by the new partnership which had simply declined to
retain him in his former managerial position or any other position.
Finally, the NLRC held that Benjamin Yu's claim for unpaid wages
should be asserted against the original members of the preceding
partnership, but these though impleaded had, apparently, not been
served with summons in the proceedings before the Labor Arbiter.
6
Petitioner Benjamin Yu is now before the Court on a Petition for
Certiorari, asking us to set aside and annul the Resolution of the
NLRC as a product of grave abuse of discretion amounting to lack or
excess of jurisdiction.
The basic contention of petitioner is that the NLRC has
overlooked the principle that a partnership has a juridical
personality separate and distinct from that of each of its members.
Such independent legal personality subsists, petitioner claims,
notwithstanding changes in the identities of the partners.
Consequently, the employment contract between Benjamin Yu and the
partnership Jade Mountain could not have been affected by changes
in the latter's membership. 7
Two (2) main issues are thus posed for our consideration in the
case at bar: (1) whether the partnership which had hired petitioner
Yu as Assistant General Manager had been extinguished and replaced
by a new partnerships composed of Willy Co and Emmanuel Zapanta;
and (2) if indeed a new partnership had come into existence,
whether petitioner Yu could nonetheless assert his rights under his
employment contract as against the new partnership.
In respect of the first issue, we agree with the result reached
by the NLRC, that is, that the legal effect of the changes in the
membership of the partnership was the dissolution of the old
partnership which had hired petitioner in 1984 and the emergence of
a new firm composed of Willy Co and Emmanuel Zapanta in 1987.
The applicable law in this connection of which the NLRC seemed
quite unaware is found in the Civil Code provisions relating to
partnerships. Article 1828 of the Civil Code provides as
follows:
Art. 1828.The dissolution of a partnership is the change in the
relation of the partners caused by any partner ceasing to be
associated in the carrying on as distinguished from the winding up
of the business. (Emphasis supplied)
Article 1830 of the same Code must also be noted:
Art. 1830.Dissolution is caused:
(1)without violation of the agreement between the partners;
xxxxxxxxx
(b)by the express will of any partner, who must act in good
faith, when no definite term or particular undertaking is
specified;
xxxxxxxxx
(2)in contravention of the agreement between the partners, where
the circumstances do not permit a dissolution under any other
provision of this article, by the express will of any partner at
any time;
xxxxxxxxx
(Emphasis supplied)
In the case at bar, just about all of the partners had sold
their partnership interests (amounting to 82% of the total
partnership interest) to Mr. Willy Co and Emmanuel Zapanta. The
record does not show what happened to the remaining 18% of the
original partnership interest. The acquisition of 82% of the
partnership interest by new partners, coupled with the retirement
or withdrawal of the partners who had originally owned such 82%
interest, was enough to constitute a new partnership.
The occurrence of events which precipitate the legal consequence
of dissolution of a partnership do not, however, automatically
result in the termination of the legal personality of the old
partnership. Article 1829 of the Civil Code states that:
[o]n dissolution the partnership is not terminated, but
continues until the winding up of partnership affairs is
completed.
In the ordinary course of events, the legal personality of the
expiring partnership persists for the limited purpose of winding up
and closing of the affairs of the partnership. In the case at bar,
it is important to underscore the fact that the business of the old
partnership was simply continued by the new partners, without the
old partnership undergoing the procedures relating to dissolution
and winding up of its business affairs. In other words, the new
partnership simply took over the business enterprise owned by the
preceeding partnership, and continued using the old name of Jade
Mountain Products Company Limited, without winding up the business
affairs of the old partnership, paying off its debts, liquidating
and distributing its net assets, and then re-assembling the said
assets or most of them and opening a new business enterprise. There
were, no doubt, powerful tax considerations which underlay such an
informal approach to business on the part of the retiring and the
incoming partners. It is not, however, necessary to inquire into
such matters.
What is important for present purposes is that, under the above
described situation, not only the retiring partners (Rhodora
Bendal, et al.) but also the new partnership itself which continued
the business of the old, dissolved, one, are liable for the debts
of the preceding partnership. In Singson, et al. v. Isabela Saw
Mill, et al, 8 the Court held that under facts very similar to
those in the case at bar, a withdrawing partner remains liable to a
third party creditor of the old partnership. 9 The liability of the
new partnership, upon the other hand, in the set of circumstances
obtaining in the case at bar, is established in Article 1840 of the
Civil Code which reads as follows:
Art. 1840.In the following cases creditors of the dissolved
partnership are also creditors of the person or partnership
continuing the business:
(1)When any new partner is admitted into an existing
partnership, or when any partner retires and assigns (or the
representative of the deceased partner assigns) his rights in
partnership property to two or more of the partners, or to one or
more of the partners and one or more third persons, if the business
is continued without liquidation of the partnership affairs;
(2)When all but one partner retire and assign (or the
representative of a deceased partner assigns) their rights in
partnership property to the remaining partner, who continues the
business without liquidation of partnership affairs, either alone
or with others;
(3)When any Partner retires or dies and the business of the
dissolved partnership is continued as set forth in Nos. 1 and 2 of
this Article, with the consent of the retired partners or the
representative of the deceased partner, but without any assignment
of his right in partnership property;
(4)When all the partners or their representatives assign their
rights in partnership property to one or more third persons who
promise to pay the debts and who continue the business of the
dissolved partnership;
(5)When any partner wrongfully causes a dissolution and
remaining partners continue the business under the provisions of
article 1837, second paragraph, No. 2, either alone or with others,
and without liquidation of the partnership affairs;
(6)When a partner is expelled and the remaining partners
continue the business either alone or with others without
liquidation of the partnership affairs;
The liability of a third person becoming a partner in the
partnership continuing the business, under this article, to the
creditors of the dissolved partnership shall be satisfied out of
the partnership property only, unless there is a stipulation to the
contrary.
When the business of a partnership after dissolution is
continued under any conditions set forth in this article the
creditors of the retiring or deceased partner or the representative
of the deceased partner, have a prior right to any claim of the
retired partner or the representative of the deceased partner
against the person or partnership continuing the business on
account of the retired or deceased partner's interest in the
dissolved partnership or on account of any consideration promised
for such interest or for his right in partnership property.
Nothing in this article shall be held to modify any right of
creditors to set assignment on the ground of fraud.
xxxxxxxxx
(Emphasis supplied)
Under Article 1840 above, creditors of the old Jade Mountain are
also creditors of the new Jade Mountain which continued the
business of the old one without liquidation of the partnership
affairs. Indeed, a creditor of the old Jade Mountain, like
petitioner Benjamin Yu in respect of his claim for unpaid wages, is
entitled to priority vis-a-vis any claim of any retired or previous
partner insofar as such retired partner's interest in the dissolved
partnership is concerned. It is not necessary for the Court to
determine under which one or mare of the above six (6) paragraphs,
the case at bar would fall, if only because the facts on record are
not detailed with sufficient precision to permit such
determination. It is, however, clear to the Court that under
Article 1840 above, Benjamin Yu is entitled to enforce his claim
for unpaid salaries, as well as other claims relating to his
employment with the previous partnership, against the new Jade
Mountain.
It is at the same time also evident to the Court that the new
partnership was entitled to appoint and hire a new general or
assistant general manager to run the affairs of the business
enterprise take over. An assistant general manager belongs to the
most senior ranks of management and a new partnership is entitled
to appoint a top manager of its own choice and confidence. The
non-retention of Benjamin Yu as Assistant General Manager did not
therefore constitute unlawful termination, or termination without
just or authorized cause. We think that the precise authorized
cause for termination in the case at bar was redundancy. 10 The new
partnership had its own new General Manager, apparently Mr. Willy
Co, the principal new owner himself, who personally ran the
business of Jade Mountain. Benjamin Yu's old position as Assistant
General Manager thus became superfluous or redundant. 11 It follows
that petitioner Benjamin Yu is entitled to separation pay at the
rate of one month's pay for each year of service that he had
rendered to the old partnership, a fraction of at least six (6)
months being considered as a whole year.
While the new Jade Mountain was entitled to decline to retain
petitioner Benjamin Yu in its employ, we consider that Benjamin Yu
was very shabbily treated by the new partnership. The old
partnership certainly benefitted from the services of Benjamin Yu
who, as noted, previously ran the whole marble quarrying,
processing and exporting enterprise. His work constituted
value-added to the business itself and therefore, the new
partnership similarly benefitted from the labors of Benjamin Yu. It
is worthy of note that the new partnership did not try to suggest
that there was any cause consisting of some blameworthy act or
omission on the part of Mr. Yu which compelled the new partnership
to terminate his services. Nonetheless, the new Jade Mountain did
not notify him of the change in ownership of the business, the
relocation of the main office of Jade Mountain from Makati to
Mandaluyong and the assumption by Mr. Willy Co of control of
operations. The treatment (including the refusal to honor his claim
for unpaid wages) accorded to Assistant General Manager Benjamin Yu
was so summary and cavalier as to amount to arbitrary, bad faith
treatment, for which the new Jade Mountain may legitimately be
required to respond by paying moral damages. This Court, exercising
its discretion and in view of all the circumstances of this case,
believes that an indemnity for moral damages in the amount of
P20,000.00 is proper and reasonable.
In addition, we consider that petitioner Benjamin Yu is entitled
to interest at the legal rate of six percent (6%) per annum on the
amount of unpaid wages, and of his separation pay, computed from
the date of promulgation of the award of the Labor Arbiter.
Finally, because the new Jade Mountain compelled Benjamin Yu to
resort to litigation to protect his rights in the premises, he is
entitled to attorney's fees in the amount of ten percent (10%) of
the total amount due from private respondent Jade Mountain.
WHEREFORE, for all the foregoing, the Petition for Certiorari is
GRANTED DUE COURSE, the Comment filed by private respondents is
treated as their Answer to the Petition for Certiorari, and the
Decision of the NLRC dated 29 November 1990 is hereby NULLIFIED and
SET ASIDE. A new Decision is hereby ENTERED requiring private
respondent Jade Mountain Products Company Limited to pay to
petitioner Benjamin Yu the following amounts:
(a)for unpaid wages which, as found by the Labor Arbiter, shall
be computed at the rate of P2,000.00 per month multiplied by
thirty-six (36) months (November 1984 to December 1987) in the
total amount of P72,000.00;
(b)separation pay computed at the rate of P4,000.00 monthly pay
multiplied by three (3) years of service or a total of
P12,000.00;
(c)indemnity for moral damages in the amount of P20,000.00;
(d)six percent (6%) per annum legal interest computed on items
(a) and (b) above, commencing on 26 December 1989 and until fully
paid; and
(e)ten percent (10%) attorney's fees on the total amount due
from private respondent Jade Mountain.
Costs against private respondents.
SO ORDERED.
Bidin, Davide, Jr., Romero and Melo, JJ., concur.
# Footnotes
1Rollo, pp. 11, 28, 31, 35 and 43.
2Id., pp. 31, 43 and 68.
3Id., pp. 36 and 44.
4Id., pp. 40-41.
5Id., pp. 36-38.
6Id., pp. 45-46.
7Id., pp. 9-10.
888 SCRA 623 (1979).
988 SCRA 642-643.
10Art. 283.Closure of establishment and reduction of personnel.
The employer may also terminate the employment of any employee due
to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is
for the purpose of circumventing the provisions of this title, by
serving written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof.
In case of termination due to the installation of labor-saving
devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent
losses or in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one
(1) month pay or at least one-half () month pay for every year of
service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year. (This provision is
identical with that existing in 1987, except that the provision was
numerically designated in 1987 as "Article 284"), Labor Code.
11See, in this connection, Wiltshire File Co., Inc. v. National
Labor Relations Commission, et al., 193 SCRA 665 (1991).
The Lawphil Project - Arellano Law Foundation
Sunga-Chan vs Chua
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 143340 August 15, 2001
LILIBETH SUNGA-CHAN and CECILIA SUNGA, petitioners,
vs.
LAMBERTO T. CHUA, respondent.
GONZAGA-REYES, J.:
Before us is a petition for review on certiorari under Rule 45
of the Rules of Court of the Decision1 of the Court of Appeals
dated January 31, 2000 in the case entitled "Lamberto T. Chua vs.
Lilibeth Sunga Chan and Cecilia Sunga" and of the Resolution dated
May 23, 2000 denying the motion for reconsideration of herein
petitioners Lilibeth Sunga and Cecilia Sunga (hereafter
collectively referred to as petitioners).
The pertinent facts of this case are as follows:
On June 22, 1992, Lamberto T. Chua (hereafter respondent) filed
a complaint against Lilibeth Sunga Chan (hereafter petitioner
Lilibeth) and Cecilia Sunga (hereafter petitioner Cecilia),
daughter and wife, respectively of the deceased Jacinto L. Sunga
(hereafter Jacinto), for "Winding Up of Partnership Affairs,
Accounting, Appraisal and Recovery of Shares and Damages with Writ
of Preliminary Attachment" with the Regional Trial Court, Branch
11, Sindangan, Zamboanga del Norte.
Respondent alleged that in 1977, he verbally entered into a
partnership with Jacinto in the distribution of Shellane Liquefied
Petroleum Gas (LPG) in Manila. For business convenience, respondent
and Jacinto allegedly agreed to register the business name of their
partnership, SHELLITE GAS APPLIANCE CENTER (hereafter Shellite),
under the name of Jacinto as a sole proprietorship. Respondent
allegedly delivered his initial capital contribution of P100,000.00
to Jacinto while the latter in turn produced P100,000.00 as his
counterpart contribution, with the intention that the profits would
be equally divided between them. The partnership allegedly had
Jacinto as manager, assisted by Josephine Sy (hereafter Josephine),
a sister of the wife respondent, Erlinda Sy. As compensation,
Jacinto would receive a manager's fee or remuneration of 10% of the
gross profit and Josephine would receive 10% of the net profits, in
addition to her wages and other remuneration from the business.
Allegedly, from the time that Shellite opened for business on
July 8, 1977, its business operation went quite and was profitable.
Respondent claimed that he could attest to success of their
business because of the volume of orders and deliveries of filled
Shellane cylinder tanks supplied by Pilipinas Shell Petroleum
Corporation. While Jacinto furnished respondent with the
merchandise inventories, balance sheets and net worth of Shellite
from 1977 to 1989, respondent however suspected that the amount
indicated in these documents were understated and undervalued by
Jacinto and Josephine for their own selfish reasons and for tax
avoidance.
Upon Jacinto's death in the later part of 1989, his surviving
wife, petitioner Cecilia and particularly his daughter, petitioner
Lilibeth, took over the operations, control, custody, disposition
and management of Shellite without respondent's consent. Despite
respondent's repeated demands upon petitioners for accounting,
inventory, appraisal, winding up and restitution of his net shares
in the partnership, petitioners failed to comply. Petitioner
Lilibeth allegedly continued the operations of Shellite, converting
to her own use and advantage its properties.
On March 31, 1991, respondent claimed that after petitioner
Lilibeth ran out the alibis and reasons to evade respondent's
demands, she disbursed out of the partnership funds the amount of
P200,000.00 and partially paid the same to respondent. Petitioner
Lilibeth allegedly informed respondent that the P200,000.00
represented partial payment of the latter's share in the
partnership, with a promise that the former would make the complete
inventory and winding up of the properties of the business
establishment. Despite such commitment, petitioners allegedly
failed to comply with their duty to account, and continued to
benefit from the assets and income of Shellite to the damage and
prejudice of respondent.
On December 19, 1992, petitioners filed a Motion to Dismiss on
the ground that the Securities and Exchange Commission (SEC) in
Manila, not the Regional Trial Court in Zamboanga del Norte had
jurisdiction over the action. Respondent opposed the motion to
dismiss.
On January 12, 1993, the trial court finding the complaint
sufficient in from and substance denied the motion to dismiss.
On January 30, 1993, petitioners filed their Answer with
Compulsory Counter-claims, contending that they are not liable for
partnership shares, unreceived income/profits, interests, damages
and attorney's fees, that respondent does not have a cause of
action against them, and that the trial court has no jurisdiction
over the nature of the action, the SEC being the agency that has
original and exclusive jurisdiction over the case. As counterclaim,
petitioner sought attorney's fees and expenses of litigation.
On August 2, 1993, petitioner filed a second Motion to Dismiss
this time on the ground that the claim for winding up of
partnership affairs, accounting and recovery of shares in
partnership affairs, accounting and recovery of shares in
partnership assets/properties should be dismissed and prosecuted
against the estate of deceased Jacinto in a probate or intestate
proceeding.
On August 16, 1993, the trial denied the second motion to
dismiss for lack of merit.
On November 26, 1993, petitioners filed their Petition for
Certiorari, Prohibition and Mandamus with the Court of Appeals
docketed as CA-G.R. SP No. 32499 questioning the denial of the
motion to dismiss.
On November 29, 1993, petitioners filed with the trial court a
Motion to Suspend Pre-trial Conference.
On December 13, 1993, the trial court granted the motion to
suspend pre-trial conference.
On November 15, 1994, the Court of Appeals denied the petition
for lack of merit.
On January 16, 1995, this Court denied the petition for review
on certiorari filed by petitioner, "as petitioners failed to show
that a reversible error was committed by the appellate court."2
On February 20, 1995, entry of judgment was made by the Clerk of
Court and the case was remanded to the trial court on April 26,
1995.
On September 25, 1995, the trial court terminated the pre-trial
conference and set the hearing of the case of January 17, 1996.
Respondent presented his evidence while petitioners were considered
to have waived their right to present evidence for their failure to
attend the scheduled date for reception of evidence despite
notice.
On October 7, 1997, the trial court rendered its Decision ruling
for respondent. The dispositive of the Decision reads:
"WHEREFORE, judgment is hereby rendered in favor of the
plaintiff and against the defendants, as follows:
(1) DIRECTING them to render an accounting in acceptable form
under accounting procedures and standards of the properties,
assets, income and profits of the Shellite Gas Appliance Center
Since the time of death of Jacinto L. Sunga, from whom they
continued the business operations including all businesses derived
from Shellite Gas Appliance Center, submit an inventory, and
appraisal of all these properties, assets, income, profits etc. to
the Court and to plaintiff for approval or disapproval;
(2) ORDERING them to return and restitute to the partnership any
and all properties, assets, income and profits they misapplied and
converted to their own use and advantage the legally pertain to the
plaintiff and account for the properties mentioned in pars. A and B
on pages 4-5 of this petition as basis;
(3) DIRECTING them to restitute and pay to the plaintiff shares
and interest of the plaintiff in the partnership of the listed
properties, assets and good will (sic) in schedules A, B and C, on
pages 4-5 of the petition;
(4) ORDERING them to pay the plaintiff earned but unreceived
income and profits from the partnership from 1988 to May 30, 1992,
when the plaintiff learned of the closure of the store the sum of
P35,000.00 per month, with legal rate of interest until fully
paid;
(5) ORDERING them to wind up the affairs of the partnership and
terminate its business activities pursuant to law, after delivering
to the plaintiff all the interest, shares, participation and equity
in the partnership, or the value thereof in money or money's worth,
if the properties are not physically divisible;
(6) FINDING them especially Lilibeth Sunga-Chan guilty of breach
of trust and in bad faith and hold them liable to the plaintiff the
sum of P50,000.00 as moral and exemplary damages; and,
(7) DIRECTING them to reimburse and pay the sum of P25,000.00 as
attorney's (sic) and P25,000.00 as litigation expenses.
NO special pronouncements as to COSTS.
SO ORDERED."3
On October 28, 1997, petitioners filed a Notice of Appeal with
the trial court, appealing the case to the Court of Appeals.
On January 31, 2000, the Court of Appeals dismissed the appeal.
The dispositive portion of the Decision reads:
"WHEREFORE, the instant appeal is dismissed. The appealed
decision is AFFIRMED in all respects."4
On May 23, 2000, the Court of Appeals denied the motion for
reconsideration filed by petitioner.
Hence, this petition wherein petitioner relies upon following
grounds:
"1. The Court of Appeals erred in making a legal conclusion that
there existed a partnership between respondent Lamberto T. Chua and
the late Jacinto L. Sunga upon the latter'' invitation and offer
and that upon his death the partnership assets and business were
taken over by petitioners.
2. The Court of Appeals erred in making the legal conclusion
that laches and/or prescription did not apply in the instant
case.
3. The Court of Appeals erred in making the legal conclusion
that there was competent and credible evidence to warrant the
finding of a partnership, and assuming arguendo that indeed there
was a partnership, the finding of highly exaggerated amounts or
values in the partnership assets and profits."5
Petitioners question the correctness of the finding of the trial
court and the Court of Appeals that a partnership existed between
respondent and Jacinto from 1977 until Jacinto's death. In the
absence of any written document to show such partnership between
respondent and Jacinto, petitioners argues that these courts were
proscribes from hearing the testimonies of respondent and his
witness, Josephine, to prove the alleged partnership three years
after Jacinto's death. To support this argument, petitioners invoke
the "Dead Man's Statute' or "Survivorship Rule" under Section 23,
Rule 130 of the Rules of Court that provides:
"SEC. 23. Disqualification by reason of death or insanity of
adverse party. Parties or assignors of parties to a case, or
persons in whose behalf a case is prosecuted, against an executor
or administrator or other representative of a deceased person, or
against a person of unsound mind, upon a claim or demand against
the estate of such deceased person, or against such person of
unsound mind, cannot testify as to any matter of fact occurring
before the death of such deceased person or before such person
became of unsound mind."
Petitioners thus implore this Court to rule that the testimonies
of respondent and his alter ego, Josephine, should not have been
admitted to prove certain claims against a deceased person
(Jacinto), now represented by petitioners.
We are not persuaded.
A partnership may be constituted in any form, except where
immovable property of real rights are contributed thereto, in which
case a public instrument shall necessary.6 Hence, based on the
intention of the parties, as gathered from the facts and
ascertained from their language and conduct, a verbal contract of
partnership may arise.7 The essential profits that must be proven
to that a partnership was agreed upon are (1) mutual contribution
to a common stock, and (2) a joint interest in the profits.8
Understandably so, in view of the absence of the written contract
of partnership between respondent and Jacinto, respondent resorted
to the introduction of documentary and testimonial evidence to
prove said partnership. The crucial issue to settle then is to
whether or not the "Dead Man's Statute" applies to this case so as
to render inadmissible respondent's testimony and that of his
witness, Josephine.
The "Dead Man's Statute" provides that if one party to the
alleged transaction is precluded from testifying by death,
insanity, or other mental disabilities, the surviving party is not
entitled to the undue advantage of giving his own uncontradicted
and unexplained account of the transaction.9 But before this rule
can be successfully invoked to bar the introduction of testimonial
evidence, it is necessary that:
"1. The witness is a party or assignor of a party to case or
persons in whose behalf a case in prosecuted.
2. The action is against an executor or administrator or other
representative of a deceased person or a person of unsound
mind;
3. The subject-matter of the action is a claim or demand against
the estate of such deceased person or against person of unsound
mind;
4. His testimony refers to any matter of fact of which occurred
before the death of such deceased person or before such person
became of unsound mind."10
Two reasons forestall the application of the "Dead Man's
Statute" to this case.
First, petitioners filed a compulsory counterclaim11 against
respondents in their answer before the trial court, and with the
filing of their counterclaim, petitioners themselves effectively
removed this case from the ambit of the "Dead Man's Statute".12
Well entrenched is the rule that when it is the executor or
administrator or representatives of the estates that sets up the
counterclaim, the plaintiff, herein respondent, may testify to
occurrences before the death of the deceased to defeat the
counterclaim.13 Moreover, as defendant in the counterclaim,
respondent is not disqualified from testifying as to matters of
facts occurring before the death of the deceased, said action not
having been brought against but by the estate or representatives of
the deceased.14
Second, the testimony of Josephine is not covered by the "Dead
Man's Statute" for the simple reason that she is not "a party or
assignor of a party to a case or persons in whose behalf a case is
prosecuted." Records show that respondent offered the testimony of
Josephine to establish the existence of the partnership between
respondent and Jacinto. Petitioners' insistence that Josephine is
the alter ego of respondent does not make her an assignor because
the term "assignor" of a party means "assignor of a cause of action
which has arisen, and not the assignor of a right assigned before
any cause of action has arisen."15 Plainly then, Josephine is
merely a witness of respondent, the latter being the party
plaintiff.
We are not convinced by petitioners' allegation that Josephine's
testimony lacks probative value because she was allegedly coerced
coerced by respondent, her brother-in-law, to testify in his favor,
Josephine merely declared in court that she was requested by
respondent to testify and that if she were not requested to do so
she would not have testified. We fail to see how we can conclude
from this candid admission that Josephine's testimony is
involuntary when she did not in any way categorically say that she
was forced to be a witness of respondent.
Also, the fact that Josephine is the sister of the wife of
respondent does not diminish the value of her testimony since
relationship per se, without more, does not affect the credibility
of witnesses.16
Petitioners' reliance alone on the "Dead Man's Statute" to
defeat respondent's claim cannot prevail over the factual findings
of the trial court and the Court of Appeals that a partnership was
established between respondent and Jacinto. Based not only on the
testimonial evidence, but the documentary evidence as well, the
trial court and the Court of Appeals considered the evidence for
respondent as sufficient to prove the formation of partnership,
albeit an informal one.
Notably, petitioners did not present any evidence in their favor
during trial. By the weight of judicial precedents, a factual
matter like the finding of the existence of a partnership between
respondent and Jacinto cannot be inquired into by this Court on
review.17 This Court can no longer be tasked to go over the proofs
presented by the parties and analyze, assess and weigh them to
ascertain if the trial court and the appellate court were correct
in according superior credit to this or that piece of evidence of
one party or the other.18 It must be also pointed out that
petitioners failed to attend the presentation of evidence of
respondent. Petitioners cannot now turn to this Court to question
the admissibility and authenticity of the documentary evidence of
respondent when petitioners failed to object to the admissibility
of the evidence at the time that such evidence was offered.19
With regard to petitioners' insistence that laches and/or
prescription should have extinguished respondent's claim, we agree
with the trial court and the Court of Appeals that the action for
accounting filed by respondents three (3) years after Jacinto's
death was well within the prescribed period. The Civil Code
provides that an action to enforce an oral contract prescribes in
six (6) years20 while the right to demand an accounting for a
partner's interest as against the person continuing the business
accrues at the date of dissolution, in the absence of any contrary
agreement.21 Considering that the death of a partner results in the
dissolution of the partnership22, in this case, it was Jacinto's
death that respondent as the surviving partner had the right to an
account of his interest as against petitioners. It bears stressing
that while Jacinto's death dissolved the partnership, the
dissolution did not immediately terminate the partnership. The
Civil Code23 expressly provides that upon dissolution, the
partnership continues and its legal personality is retained until
the complete winding up of its business, culminating in its
termination.24
In a desperate bid to cast doubt on the validity of the oral
partnership between respondent and Jacinto, petitioners maintain
that said partnership that had initial capital of P200,000.00
should have been registered with the Securities and Exchange
Commission (SEC) since registration is mandated by the Civil Code,
True, Article 1772 of the Civil Code requires that partnerships
with a capital of P3,000.00 or more must register with the SEC,
however, this registration requirement is not mandatory. Article
1768 of the Civil Code25 explicitly provides that the partnership
retains its juridical personality even if it fails to register. The
failure to register the contract of partnership does not invalidate
the same as among the partners, so long as the contract has the
essential requisites, because the main purpose of registration is
to give notice to third parties, and it can be assumed that the
members themselves knew of the contents of their contract.26 In the
case at bar, non-compliance with this directory provision of the
law will not invalidate the partnership considering that the
totality of the evidence proves that respondent and Jacinto indeed
forged the partnership in question.
WHEREFORE, in view of the foregoing, the petition is DENIED and
the appealed decision is AFFIRMED.
SO ORDERED.1wphi1.nt
Melo, Vitug, Panganiban, and Sandoval-Gutierrez, JJ.,
concur.
Footnotes:
1 Per Associate Justice Delilah Vidallon-Magtolis and concurred
in by Associate Justices Bernardo P. Abesamis and Mercedes
Gozo-Dadole, Court of Appeals, Fourteenth Division.
2 Rollo, p. 185.
3 Records, pp. 75-76; Decision, pp. 25-26.
4 Rollo, p. 46; Decision, p. 11.
5 Rollo, pp. 13-14; Petition, pp. 6-7.
6 JOSE C. VITUG, COMPENDIUM OF CIVIL LAW AND JURISPRUDENCE, REV.
ED. (1993), p. 712.
7 RAMON C. AQUINO AND CAROLINA C. GRIO-AQUINO, THE CIVIL CODE OF
THE PHILIPPINES, VOL. 3 (1990), p. 295.
8 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE
CIVIL CODE OF THE PHILIPPINES, VOLUME 5 (1997), p. 320.
9 Tan vs. Court of Appeals, 295 SCRA 247 (1998), p. 258.
10 OSCAR M. HERRERA, REMEDIAL LAW, REVISED RULES ON EVIDENCE,
VOL. V (1999), pp. 308-309.
11 Records, pp. 47-51.
12 See Goni vs. Court of Appeals, 144 SCRA 222 (1986).
13 HERRERA, supra, p. 310.
14 Goni vs. Court of Appeals, supra, p. 233.
15 RICARDO J. FRANCISCO, EVIDENCE, THIRD EDITION (1996), p.
135.
16 People vs. Nang, 289 SCRA 16 (1998), p. 32.
17 Alicbusan vs. Court of Appeals, 269 SCRA 336, p. 341.
18 Ibid.
19 See Chua vs. Court of Appeals, 301 SCRA 356 (1999).
20 "The following actions must be commenced within six
years:
(1) Upon an oral contract; and
(2) Upon a quasi-contract."
21 Art. 1842, Civil