G.R. No. 143340. August 15, 2001.]
LILIBETH SUNGA-CHAN and CECILIA SUNGA,
petitioners, vs. LAMBERTO T. CHUA, respondent.
Manuel T. Chan for petitioners.
Pacatang Law Office for respondent.
SYLLABUS
1. CIVIL LAW; PARTNERSHIP; MAY BE
CONSTITUTED IN ANY FORM; EXCEPTION; REQUISITES TO PROVE EXISTENCE OF
PARTNERSHIP. — A partnership may be constituted in any form, except where
immovable property or real rights are contributed thereto, in which case a
public instrument shall be necessary. 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. The essential points that
must be proven to show that a partnership was agreed upon are (1) mutual
contribution to a common stock, and (2) a joint interest in the profits.
Understandably so, in view of the absence of a written contract of partnership
between respondent and Jacinto, respondent resorted to the introduction of
documentary and testimonial evidence to prove said partnership.
2. ID.; ID.; ACTION FOR ACCOUNTING;
PRESCRIPTION. — 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
respondent 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) years 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. Considering that
the death of a partner results in the dissolution of the partnership, in this
case, it was after 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 Code 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.
3. ID.; ID.; REGISTRATION REQUIREMENT IS
NOT MANDATORY; NON-REGISTRATION OF THE CONTRACT OF PARTNERSHIP DOES NOT
INVALIDATE THE PARTNERSHIP; CASE AT BAR. — 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 an 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 Code 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. 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.
4. REMEDIAL LAW; EVIDENCE; DEAD MAN'S
STATUTE; APPLICABILITY. — 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. 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 a case or persons in whose behalf
a case is 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 which occurred before the death of such deceased person or
before such person became of unsound mind."
5. ID.; ID.; ID.; NOT APPLICABLE IN CASE AT
BAR. — Two reasons forestall the application of the "Dead Man's
Statute" to this case. First, petitioners filed a compulsory counterclaim
against respondent 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." Well entrenched is the
rule that when it is the executor or administrator or representatives of the
estate that sets up the counterclaim, the plaintiff, herein respondent, may
testify to occurrences before the death of the deceased to defeat the
counterclaim. Moreover, as defendant in the counterclaim, respondent is not
disqualified from testifying as to matters of fact occurring before the death
of the deceased, said action not having been brought against but by the estate
or representatives of the deceased. 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."
Plainly then, Josephine is merely a witness of respondent, the latter being the
party plaintiff.
6. ID.; ID.; CREDIBILITY OF WITNESSES; NOT
AFFECTED BY RELATIONSHIP PER SE. — We are not convinced by petitioners'
allegation that Josephine's testimony lacks probative value because she was
allegedly 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. DcCITS
7. ID.; ID.; FACTUAL FINDINGS OF TRIAL
COURT AND COURT OF APPEALS OF THE EXISTENCE OF PARTNERSHIP, CANNOT BE INQUIRED
INTO BY THE SUPREME COURT ON REVIEW. — 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 a 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. 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. 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.
D E C I S I O N
GONZAGA-REYES, J p:
Before us is a petition for review on
certiorari under Rule 45 of the Rules of Court of the Decision 1 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 Chan 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 of 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 well and
was profitable. Respondent claimed that he could attest to the 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. aEAcHI
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 of 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 form and substance denied the motion to
dismiss.
On January 30, 1993, petitioners filed
their Answer with Compulsory Counterclaims, 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 court denied
the second motion to dismiss for lack of merit. HIcTDE
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. DSTCIa
On September 25, 1995, the trial court
terminated the pre-trial conference and set the hearing of the case on 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 portion 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 the 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 that 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 1/2 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 1/2 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; HEScID
(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 P25,00.00 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. TSIDEa
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 the 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's 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 argue that these courts were proscribed 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:
"SECTION 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 or real rights are contributed thereto,
in which case a public instrument shall be 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 points that must be proven to show 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 a 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 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 a case or persons in whose behalf a case is prosecuted. EDCIcH
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 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
counterclaim 11 against respondent 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 estate 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 fact 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 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 a 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 respondent 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) years 20 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 partnership 22 , in this case, it was after 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 Code 23 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 an 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 Code 25 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.
Melo, Vitug, Panganiban and
Sandoval-Gutierrez, JJ., concur.
EN BANC
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