SECOND DIVISIONROGER V. NAVARRO,Petitioner,-versus-HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37, Cagayan de Oro City, and KAREN T. GO, doing business under the name KARGO ENTERPRISES,Respondents.G.R. No.153788Promulgated:November 27, 2009

This is a petition for review oncertiorari[1]that seeks to set aside the Court of Appeals (CA) Decision[2]datedOctober 16, 2001and Resolution[3]datedMay 29, 2002in CA-G.R. SP. No. 64701. These CA rulings affirmed theJuly 26, 2000[4]andMarch 7, 2001[5]orders of the Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City, denying petitioner Roger V. Navarros (Navarro) motion to dismiss.BACKGROUND FACTSOnSeptember 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case Nos. 98-599 (first complaint)[6]and 98-598 (second complaint),[7]before the RTC for replevin and/or sum of money with damages against Navarro. In these complaints, Karen Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor vehicles in Navarros possession.The first complaint stated:1.That plaintiffKAREN T. GOis a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City anddoing business under the trade name KARGO ENTERPRISES, an entity duly registered and existing under and by virtue of the laws of the Republic of the Philippines, which has its business address at Bulua, Cagayan de Oro City; that defendant ROGER NAVARRO is a Filipino, of legal age, a resident of 62 Dolores Street, Nazareth, Cagayan de Oro City, where he may be served with summons and other processes of the Honorable Court; that defendant JOHN DOE whosereal name and address are at present unknown to plaintiff is hereby joined as party defendant as he may be the person in whose possession and custody the personal property subject matter of this suit may be found if the same is not in the possession of defendant ROGER NAVARRO;2.That KARGO ENTERPRISES is in the business of, among others, buying and selling motor vehicles, including hauling trucks and other heavy equipment;3.That for the cause of action against defendant ROGER NAVARRO, it is hereby stated that on August 8, 1997, the said defendant leased [from] plaintiff a certain motor vehicle which is more particularly described as followsMake/TypeFUSO WITH MOUNTED CRANESerial No.FK416K-51680Motor No.6D15-338735Plate No.GHK-378as evidenced by aLEASE AGREEMENT WITH OPTION TO PURCHASEentered into by and betweenKARGO ENTERPRISES, thenrepresented by its Manager, the aforementioned GLENN O. GO, and defendant ROGER NAVARRO xxx; that in accordance with the provisions of the above LEASE AGREEMENT WITH OPTION TO PURCHASE, defendant ROGER NAVARRO delivered unto plaintiff six (6) post-dated checks each in the amount of SIXTY-SIX THOUSAND THREE HUNDRED THIRTY-THREE & 33/100 PESOS (P66,333.33) which were supposedly in payment of the agreed rentals; that when thefifth and sixth checks,i.e.PHILIPPINE BANK OF COMMUNICATIONS CAGAYAN DE ORO BRANCH CHECKS NOS. 017112 and 017113, respectively dated January 8, 1998 and February 8, 1998, were presented for payment and/or credit, the same weredishonoredand/or returned by the drawee bank for the common reason that the current deposit account against which the said checks were issued did not have sufficient funds to cover the amounts thereof; that the total amount of the two (2) checks,i.e.the sum of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66) therefore represents the principal liability of defendant ROGER NAVARRO unto plaintiff on the basis of the provisions of the above LEASE AGREEMENT WITH RIGHT TO PURCHASE; thatdemands, written and oral,were made of defendantROGER NAVARRO to pay the amount of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66), or to return the subject motor vehicle as also provided for in the LEASE AGREEMENT WITH RIGHT TO PURCHASE, but said demands were, and still are, in vain to the great damage and injury of herein plaintiff; xxx4.That the aforedescribed motor vehicle has not been the subject of any tax assessment and/or fine pursuant to law, or seized under an execution or an attachment as against herein plaintiff;xxx8.That plaintiff hereby respectfully applies for an order of the Honorable Court for the immediate delivery of the above-described motor vehicle from defendants unto plaintiff pending the final determination of this case on the merits and, for that purpose, there is attached hereto an affidavit duly executed and bond double the value of the personal property subject matter hereof to answer for damages and costs which defendants may suffer in the event that the order for replevin prayed for may be found out to having not been properly issued.The second complaint contained essentially the same allegations as the first complaint, except that the Lease Agreement with Option to Purchase involved is datedOctober 1, 1997and the motor vehicle leased is described as follows:Make/TypeFUSO WITH MOUNTED CRANESerial No.FK416K-510528Motor No.6D14-423403

The second complaint also alleged that Navarro delivered three post-dated checks, each for the amount ofP100,000.00, to Karen Go in payment of the agreed rentals; however, the third checkwas dishonored when presented for payment.[8]OnOctober 12, 1998[9]andOctober 14, 1998,[10]the RTC issued writs of replevin for both cases; as a result, the Sheriff seized the two vehicles and delivered them to the possession of Karen Go.In his Answers,Navarro alleged as a special affirmative defense that the two complaints stated no cause of action,since Karen Go was not a party to the Lease Agreements with Option to Purchase (collectively, thelease agreements) the actionable documents on which the complaints were based.On Navarros motion, both cases were duly consolidated onDecember 13, 1999.In itsMay 8, 2000order, the RTC dismissed the case on the ground that the complaints did not state a cause of action.In response to the motion for reconsideration Karen Go filed datedMay 26, 2000,[11]the RTC issued another order datedJuly 26, 2000setting aside the order of dismissal. Acting on the presumption that Glenn Gos leasing business is a conjugal property, the RTC held that Karen Go had sufficient interest in his leasing business to file the action against Navarro. However, the RTC held that Karen Go should have included her husband, Glenn Go, in the complaint based on Section 4, Rule 3 of the Rules of Court (Rules).[12]Thus, the lower court ordered Karen Go to file a motion for the inclusion of Glenn Go as co-plaintiff.When the RTC denied Navarros motion for reconsideration onMarch 7, 2001, Navarro filed a petition forcertiorariwith the CA, essentially contending that the RTC committed grave abuse of discretion when it reconsidered the dismissal of the case and directed Karen Go to amend her complaints by including her husband Glenn Go as co-plaintiff. According to Navarro, a complaint which failed to state a cause of action could not be converted into one with a cause of action by mere amendment or supplemental pleading.OnOctober 16, 2001, the CA denied Navarros petition and affirmed the RTCs order.[13]The CA also denied Navarros motion for reconsideration in its resolution ofMay 29, 2002,[14]leading to the filing of the present petition.THE PETITIONNavarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since it did not have the requisite juridical personality to sue, the actual parties to the agreement are himself and Glenn Go. Since it was Karen Go who filed the complaints and not Glenn Go, she was not a real party-in-interest and the complaints failed to state a cause of action.Navarro posits that the RTC erred when it ordered the amendment of the complaint to include Glenn Go as a co-plaintiff, instead of dismissing the complaint outright because a complaint which does not state a cause of action cannot be converted into one with a cause of action by a mere amendment or a supplemental pleading. In effect, the lower court created a cause of action for Karen Go when there was none at the time she filed the complaints.Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff drastically changed the theory of the complaints, to his great prejudice. Navarro claims that the lower court gravely abused its discretion when it assumed that the leased vehicles are part of the conjugal property of Glenn and Karen Go. Since Karen Go is the registered owner of Kargo Enterprises, the vehicles subject of the complaint are her paraphernal properties and the RTC gravely erred when it ordered the inclusion of Glenn Go as a co-plaintiff.Navarro likewise faults the lower court for setting the trial of the case in the same order that required Karen Go to amend her complaints, claiming that by issuing this order, the trial court violated Rule 10 of the Rules.Even assuming the complaints stated a cause of action against him, Navarro maintains that the complaints were premature because no prior demand was made on him to comply with the provisions of the lease agreements before the complaints for replevin were filed.Lastly, Navarro posits that since the two writs of replevin were issued based on flawed complaints, the vehicles were illegally seized from his possession and should be returned to him immediately.Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no real interest in the subject of the complaint, even if the lease agreements were signed only by her husband, Glenn Go; she is the owner of Kargo Enterprises and Glenn Go signed the lease agreements merely as the manager of Kargo Enterprises. Moreover, Karen Go maintains that Navarros insistence that Kargo Enterprises is Karen Gos paraphernal property is without basis. Based on the law and jurisprudence on the matter, all property acquired during the marriage is presumed to be conjugal property. Finally, Karen Go insists that her complaints sufficiently established a cause of action against Navarro. Thus, when the RTC ordered her to include her husband as co-plaintiff, this was merely to comply with the rule that spouses should sue jointly, and was not meant to cure the complaints lack of cause of action.THE COURTS RULINGWe find the petition devoid of merit.Karen Go is the real party-in-interestThe 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in the name of thereal party-in-interest,i.e.,the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.[15]

Interestingly, although Navarro admits that Karen Go is the registered owner of the business name Kargo Enterprises, he still insists that Karen Go is not a real party-in-interest in the case. According to Navarro, while the lease contracts were in Kargo Enterprises name, this was merely a trade name without a juridical personality, so the actual parties to the lease agreements were Navarro and Glenn Go, to the exclusion of Karen Go.As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it ordered the inclusion of Glenn Go as co-plaintiff, since this in effect created a cause of action for the complaints when in truth, there was none.We do not find Navarros arguments persuasive.The central factor in appreciating the issues presented in this case is the business name Kargo Enterprises.The name appears in the title of the Complaint where the plaintiff was identified as KAREN T. GO doing business under the name KARGO ENTERPRISES, and this identification was repeated in the first paragraph of the Complaint.Paragraph 2 defined the business KARGO ENTERPRISES undertakes.Paragraph 3 continued with the allegation that the defendant leased from plaintiff a certain motor vehicle that was thereafter described.Significantly, the Complaint specifies and attaches as its integral part the Lease Agreement that underlies the transaction between the plaintiff and the defendant.Again, the name KARGO ENTERPRISES entered the picture as this Lease Agreement provides:This agreement, made and entered into by and between:GLENN O. GO, of legal age, married, with post office address at xxx, herein referred to as the LESSOR-SELLER;representing KARGO ENTERPRISES as its Manager,xxx

thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented.In other words, by the express terms of this Lease Agreement, Glenn Go did sign the agreement only as the manager of Kargo Enterprises and the latter is clearly the real party to the lease agreements.As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a natural person, nor a juridical person, as defined by Article 44 of the Civil Code:Art. 44. The following are juridical persons:(1)The State and its political subdivisions;(2)Other corporations, institutions and entities for public interest or purpose, created by law; their personality begins as soon as they have been constituted according to law;(3)Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical personality, separate and distinct from that of each shareholder, partner or member.Thus, pursuant to Section 1, Rule 3 of the Rules,[16]Kargo Enterprises cannot be a party to a civil action. This legal reality leads to the question: who then is the proper party to file an action based on a contract in the name of Kargo Enterprises?We faced a similar question inJuasing Hardware v. Mendoza,[17]where we said:Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court. The law merely recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual, and requires the proprietor or owner thereof to secure licenses and permits, register the business name, and pay taxes to the national government. It does not vest juridical or legal personality upon the sole proprietorship nor empower it to file or defend an action in court.Thus, the complaint in the court below should have beenfiled in the name of the owner of Juasing Hardware. The allegation in the body of the complaint would show that thesuit is brought by such person as proprietor or owner of the business conducted under the name and style Juasing Hardware.The descriptive words doing business as Juasing Hardware may be added to the title of the case, as is customarily done.[18][Emphasis supplied.]This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states:SEC. 2.Parties in interest.A real party in interest is the party who stands to bebenefitedorinjuredby the judgment in the suit, or theparty entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest.As the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from or be injured by a judgment in this case. Thus, contrary to Navarros contention, Karen Go is the real party-in-interest, and it is legally incorrect to say that her Complaint does not state a cause of action because her name did not appear in the Lease Agreement that her husband signed in behalf of Kargo Enterprises.Whether Glenn Go can legally sign the Lease Agreementin his capacity as a managerof Kargo Enterprises, a sole proprietorship, is a question we do not decide, as this is a matter for the trial court to consider in a trial on the merits.Glenn Gos Role in the CaseWe find it significant that the business name Kargo Enterprises is in the name of Karen T. Go,[19]who described herself in the Complaints to bea Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City, and doing business under the trade name KARGO ENTERPRISES.[20]That Glenn Go and Karen Go are married to each other is a fact never brought in issue in the case. Thus, the business name KARGO ENTERPRISES is registeredin the name of a married woman, a fact material to the side issue of whether Kargo Enterprises and its properties are paraphernal or conjugal properties.To restate the parties positions,Navarro alleges that Kargo Enterprises is Karen Gos paraphernal property, emphasizing the fact that the business is registered solely in Karen Gos name.On the other hand, Karen Go contends that while the business is registered in her name, it is in fact part of their conjugal property.The registration of the trade name in the name of one person a woman does not necessarily lead to the conclusion that the trade nameas a propertyis hers alone, particularly when the woman is married. By law, all property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugalunless the contrary is proved.[21]Our examination of the records of the case does not show any proof that Kargo Enterprises and the properties or contracts in its name are conjugal. If at all, only the bare allegation of Navarro to this effect exists in the records of the case.As we emphasized inCastro v. Miat:[22]Petitioners also overlook Article 160 of the New Civil Code.It provides that all property of the marriage is presumed to be conjugal partnership, unless it be prove[n] that it pertains exclusively to the husband or to the wife.This articledoes not require proof that the property was acquired with funds of the partnership.The presumption applies even when the manner in which the property was acquired does not appear.[23][Emphasis supplied.]Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises as a sole proprietorship is conjugal or paraphernal property, we hold that it is conjugal property.Article 124 of the Family Code, on the administration of the conjugal property, provides:Art. 124.The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly.In case ofdisagreement, the husbands decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision.xxxThis provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in managing their conjugal property,i.e.,Kargo Enterprises.No need exists, therefore, for one to obtain the consent of the other before performing an act of administration or any act that does not dispose of or encumber their conjugal property.Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements.In other words, the property relations of the husband and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of Gains of the Family Code and, suppletorily, by the spouses marriage settlement and by the rules on partnership under the Civil Code.In the absence of any evidence of a marriage settlement between the spouses Go, we look at the Civil Code provision on partnership for guidance.A rule on partnership applicable to the spouses circumstances is Article 1811 of the Civil Code, which states:Art. 1811. A partner is a co-owner with the other partners of specific partnership property.The incidents of this co-ownership are such that:(1)A partner, subject to the provisions of this Title and to any agreement between the partners,has an equal right with his partners to possess specific partnership propertyfor partnership purposes; xxxUnder this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the properties registered under this name; hence, both have an equal right to seek possession of these properties. Applying Article 484 of the Civil Code, which states thatin default of contracts, or special provisions, co-ownership shall be governed by the provisions of this Title,we find further support in Article 487 of the Civil Code that allows any of the co-owners to bring an action in ejectment with respect to the co-owned property.While ejectment is normally associated with actions involving real property, we find that this rule can be applied to the circumstances of the present case, following our ruling inCarandang v. Heirs of De Guzman.[24]In this case, one spouse filed an action for the recovery of credit, a personal property considered conjugal property, without including the other spouse in the action. In resolving the issue of whether the other spouse was required to be included as a co-plaintiff in the action for the recovery of the credit, we said:Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the spouses Carandang, seems to be either an indispensable or a necessary party.If she is an indispensable party, dismissal would be proper.If she is merely a necessary party, dismissal is not warranted, whether or not there was an order for her inclusion in the complaint pursuant to Section 9, Rule 3.Article 108 of the Family Code provides:Art. 108.The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements.This provision is practically the same as the Civil Code provision it superseded:Art. 147.The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter.In this connection, Article 1811 of the Civil Code provides that [a] partner is a co-owner with the other partners of specific partnership property.Taken with the presumption of the conjugal nature of the funds used to finance the four checks used to pay for petitioners stock subscriptions, and with the presumption that the credits themselves are part of conjugal funds, Article 1811 makes Quirino and Milagros de Guzman co-owners of the alleged credit.Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring an action for the recovery thereof. In the fairly recent cases ofBaloloy v. HularandAdlawan v. Adlawan,we held that,in a co-ownership, co-owners may bring actions for the recovery of co-owned property without the necessity of joining all the other co-owners as co-plaintiffs because the suit is presumed to have been filed for the benefit of his co-owners.In the latter case and in that ofDe Guia v. Court of Appeals,we also held thatArticle 487of the Civil Code, which provides that any of the co-owners may bring an action for ejectment,covers all kinds of action for the recovery of possession.In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring an action, any kind of action, for the recovery of co-owned properties. Therefore,only one of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned property, is an indispensable party thereto. The other co-owners are not indispensable parties. They are not even necessary parties, for a complete relief can be accorded in the suit even without their participation, since the suit is presumed to have been filed for the benefit of all co-owners.[25][Emphasis supplied.]Under this ruling, either of the spouses Go may bring an action against Navarro to recover possession of the Kargo Enterprises-leased vehicles which they co-own.This conclusion is consistent with Article 124 of the Family Code, supporting as it does the position that either spouse may act on behalf of the conjugal partnership, so long as they do not dispose of or encumber the property in question without the other spouses consent.On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to recover possession of the leased vehicles, he only needs to be impleaded as apro-formaparty to the suit, based on Section 4, Rule 4 of the Rules, which states:Section 4.Spouses as parties. Husband and wife shall sue or be sued jointly, except as provided by law.Non-joinder of indispensable parties not ground to dismiss actionEven assuming that Glenn Go is an indispensable party to the action,we have held in a number of cases[26]that the misjoinder or non-joinder of indispensable parties in a complaint is not a ground for dismissal of action. As we stated inMacababbad v. Masirag:[27]Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of parties is a ground for the dismissal of an action, thus:Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any claim against a misjoined party may be severed and proceeded with separately.InDomingo v. Scheer, this Court held that the proper remedy when a party is left out is to implead the indispensable party at any stage of the action.The court, eithermotu proprioor upon the motion of a party, may order the inclusion of the indispensable party or give the plaintiff opportunity to amend his complaint in order to includeindispensable parties.If the plaintiff to whom the order to include the indispensable party is directed refuses to comply with the order of the court, the complaint may be dismissed upon motion of the defendant or upon the court's own motion.Only upon unjustified failure or refusal to obey the order to include or to amend is the action dismissed.In these lights, the RTC Order ofJuly 26, 2000requiring plaintiff Karen Go to join her husband as a party plaintiff is fully in order.Demand not required priorto filing of replevin actionIn arguing that prior demand is required before an action for a writ of replevin is filed, Navarro apparently likens a replevin action to an unlawful detainer.For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond, pursuant to Section 2, Rule 60 of the Rules, which states:Sec. 2. Affidavit and bond.The applicant must show by his own affidavit or that of some other person who personally knows the facts:(a)That theapplicant is the owner of the propertyclaimed, particularly describing it,or is entitled to the possessionthereof;(b)That the property iswrongfully detained by the adverse party, alleging the cause of detention thereof according to the best of his knowledge, information, and belief;(c)That the property has not been distrained or taken for a tax assessment or a fine pursuant to law, or seized under a writ of execution or preliminary attachment, or otherwise placed undercustodialegis, or if so seized, that it is exempt from such seizure or custody; and(d) The actual market value of the property.The applicant must also give a bond, executed to the adverse party in double the value of the property as stated in the affidavit aforementioned, for the return of the property to the adverse party if such return be adjudged, and for the payment to the adverse party of such sum as he may recover from the applicant in the action.We see nothing in these provisions which requires the applicant to make a prior demand on the possessor of the property before he can file an action for a writ of replevin. Thus, prior demand is not a condition precedent to an action for a writ of replevin.More importantly, Navarro is no longer in the position to claim that a prior demand is necessary, as he has already admitted in his Answers that he had received the letters that Karen Go sent him, demanding that he either pay his unpaid obligations or return the leased motor vehicles.Navarros position that a demand is necessary and has not been made is therefore totally unmeritorious.WHEREFORE, premises considered, weDENYthepetition for review for lack of merit.Costs against petitioner Roger V. Navarro.

EN BANC

[G.R. No. 45662. April 26, 1939.]

ENRIQUE CLEMENTE,Plaintiff-Appellee, v. DIONISIO GALVAN,Defendant-Appellee. JOSE ECHEVARRIA,Intervenor-Appellant.

1. POSSESSION; CONSTRICTIVE POSSESSION. From the facts stated in the decision of the court. it is clear that plaintiff could not obtain possession of the machines in question. The constructive possession deducible from the fact that he had control of the keys to the place where the machines were found (Ylaya Street Nos. 705-707), as they had been delivered to him by the receiver, does not help him any because the lower court suspended the effects of the order whereby the keys were delivered to him a few days after its issuance; and thereafter revolved it entirely in the appealed decision.

2. ID.; ACTUAL POSSESSION. Furthermore, when he attempted to take material possession of the machines, the defendant did not allow him to do so. Consequently, if he did not have material possession of the said machines, he could not in any manner mortgage them. While it is true that the deed of mortgage Exhibit B was annotated in the registry of property, it is no less true that the machines to which it refers are not the same as those in question because the latter are on Ylaya Street Nos. 705-707 and the former are on Singalong Street N o. 1163.

3. ID.; PRIVATE DOCUMENT DOES NOT CHANGE TERMS OF A PUBLIC DOCUMENT. It can not be said that Exhibit B-1 allegedly a supplementary contract between the plaintiff and the intervenor, shows that the machines referred to in the deed of mortgage are the same as those which are in dispute and which are found on Ylaya Street, for the reason that said exhibit being merely a private document, the same cannot vary or alter the terms of a public document which is Exhibit B or the deed of mortgage.

The intervenor Jose Echevarria having lost in the Court of First Instance of Manila which rendered judgment against him, the pertinent portion of which reads: "and with respect to the complaint of the intervenor, the mortgage executed in his favor by plaintiff is declared null and void, and said complaint in intervention. as well as the counterclaim filed by the defendant against the intervenor, is dismissed, without pronouncement as to costs," he appealed to this court on the ground that, according to him, the lower court committed the errors assigned in his brief as follows:jgc:chanrobles.com.ph

"I. The court a quo erred in finding in the appealed decision that plaintiff was unable to take possession of the machines subject of the deed of mortgage Exhibit B either before or after the execution thereof.

"II. The court a quo likewise erred in deciding the present case against the intervenor-appellant, on the ground, among others, that plaintiff has not adduced any evidence nor has he testified to show that the machines mortgaged by him to the intervenor have ever belonged to him, notwithstanding that said intervenor is his close relative.

"III. The lower court also erred in declaring null and void the mortgage executed by plaintiff in favor of the intervenor and, thereby, dismissing the complaint in intervention.

"IV. The lower court lastly erred in ordering the receiver J. D. Mencarini to deliver to the defendant the aforesaid machines upon petition of the plaintiff."cralaw virtua1aw library

In order to have a clear idea of the question, it is proper to state the facts bearing on the case as they appear in the decision and judgment of the lower court and in the documents which constitute all the evidence adduced by the parties during the trial.

On June 6, 1931, plaintiff and defendant organized a civil partnership which they named "Galvan y Compaia" to engage in the manufacture and sale of paper and other stationery. They agreed to invest therein a capital of P100,000, but as a matter of fact they did not cover more than one-fifth thereof, each contributing P10,000. Hardly a y ear after such organization, the plaintiff commenced the present case in the above-mentioned court to ask for the dissolution of the partnership and to compel defendant to whom the management thereof was entrusted to submit an accounting of his administration and to deliver to him his share as such partner. In his answer defendant expressed his conformity to the dissolution of the partnership and the liquidation of its affairs; but by way of counterclaim he asked that, having covered a deficit incurred by the partnership amounting to P4,000 with his own money, plaintiff reimburse him of one-half of said sum. On petition of the plaintiff a receiver and liquidator to take charge of the properties and business of the partnership while the same was not yet definitely dissolved, was appointed, the person chosen being Juan D. Mencarini. The latter was already discharging the duties of his office when the court, by virtue of a petition ex parte of the plaintiff, issued the order of May 24, 1933, requiring said receiver to deliver to him (plaintiff) certain machines which were then at Nos. 705-707 Ylaya Street, Manila, but authorizing him to charge their value of P4,500 against the portion which may eventually be due to said plaintiff. To comply with said order. the receiver delivered to plaintiff the keys to the place where the machines were found, which was the same place where defendant had his home; but before he could take actual possession of said machines, upon the strong opposition of defendant, the court, on motion of the latter, suspended the effects of its order of May 24, 1933. In the meantime the judgments rendered in cases Nos. 42794 and 43070 entitled "Philippine Education Co., Inc. v. Enrique Clemente" for the recovery of a sum of money, and "Jose Echevarria v. Enrique Clemente", also for the recovery of a sum of money, respectively, were made executory; and in order to avoid the attachment and subsequent sale of the machines by the sheriff for the satisfaction from the proceeds thereof of the judgments rendered in the two cases aforecited, plaintiff agreed with the intervenor, who is his nephew, to execute, as he in fact executed in favor of the latter, a deed of mortgage Exhibit B encumbering the machines described in said deed in which it is stated that "they are situated on Singalong Street No. 1163", which is a place entirely different from the house Nos. 705 and 707 on Ylaya Street hereinbefore mentioned. The one year agreed upon in the deed of mortgage for the fulfillment by the plaintiff of the obligation he had contracted with the intervenor, having expired, the latter commenced case No. 49629 to collect his mortgage credit. The intervenor, as plaintiff in the said case, obtained judgment in his favor because the defendant did not interpose any defense or objection, and, moreover, admitted being really indebted to the intervenor in the amount set forth in the deed of mortgage Exhibit B. The machines which the intervenor said were mortgaged to him were then in fact in custodia legis, as they were under the control of the receiver and liquidator Juan D. Mencarini. It was, therefore, useless for the intervenor to attach the same in view of the receivers opposition; and the question having been brought to court, it decided that nothing could be done because the receiver was not a party to the case which the intervenor instituted to collect his aforesaid credit. (Civil case. No. 49629.) The question ended thus because the intervenor did not take any other step until he thought of joining in this case as intervenor.

1. From the foregoing facts, it is clear that plaintiff could not obtain possession of the machines in question. The constructive possession deducible from the fact that he had the keys to the place where the machines were found (Ylaya Street Nos. 705-707), as they had been delivered to him by the receiver, does not help him any because the lower court suspended the effects of the order whereby the keys were delivered to him a few days after its issuance; and thereafter revoked it entirely in the appealed decision. Furthermore, when he attempted to take actual possession of the machines, the defendant did not allow him to do so. Consequently, if he did not have actual possession of the machines, he could not in any manner mortgage them, for while it is true that the oft-mentioned deed of mortgage Exhibit B was annotated in the registry of property, it is no less true that the machines to which it refers are not the same as those in question because the latter are on Ylaya Street Nos. 705-707 and the former are on Singalong Street No. 1163. It can not be said that Exhibit B-1, allegedly a supplementary contract between the plaintiff and the intervenor, shows that the machines referred to in the deed of mortgage are the same as those in dispute and which are found on Ylaya Street because said exhibit being merely a private document, the same cannot vary or alter the terms of a public document which is Exhibit B or the deed of mortgage.

2. The second error attributed to the lower court is baseless. The evidence of record shows that the machines in contention originally belonged to the defendant and from him were transferred to the partnership Galvan y Compaia. This being the case, said machines belong to the partnership and not to him, and shall belong to it until partition is effected according to the result thereof after the liquidation.

3. The last two errors attributed by the appellant to the lower court have already been disposed of by the considerations above set forth. They are as baseless as the previous ones.

In view of all the foregoing, the judgment appealed from is affirmed, with costs against the appellant. So ordered.

Article 1813: Assignment of Partners whole interest in the partnership

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.D E C I S I O NA share in a partnership can be returned only after the completion of the latters dissolution, liquidation and winding up of the business.The CaseThe Petition for Review on Certiorari before us challenges the March 23, 2000 Decision[1]and the July 26, 2000 Resolution[2]of the Court of Appeals[3](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 ofP253,114.00.No pronouncement as to costs.[4]

Reconsideration was denied in the impugned Resolution.

The FactsOn July 25, 1984, Luzviminda J. Villareal, Carmelito Jose and Jesus Jose formed a partnership with a capital ofP750,000 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 ofP250,000 was paid by his parents, Respondents Cesar and Carmelita Ramirez.[6]

After Jesus Jose withdrew from the partnership in January 1987, his capital contribution ofP250,000 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 latters 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 Complaint[11]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 overP400,000; 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 Equipment[14]on July 8, 1988.The furniture and the equipment stored in their house were inventoried and appraised atP29,000.[15]The display freezer was sold forP5,000 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 them 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 ofP250,000.00(b)Attorneys fee in the amount ofP30,000.00(c)Costs of suit.The CA RulingThe 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 ofP240,658.00, 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 ofP1,000,000.00 resulting in the amount ofP759,342.00, and in order to get the share of [respondents], this amount ofP759,342.00 must be divided into three (3) shares or in the amount ofP253,114.00 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]

IssuesIn 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; and9.3.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 latters share in the partnership; (2) whether the CAs computation ofP253,114 as respondents share is correct; and (3) whether the CA was likewise correct in not assessing costs.This Courts RulingThe Petition has merit.First Issue:Share in PartnershipBoth 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 formers dissatisfaction with, and loss of trust in, the latters 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 CAs 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 depreciation[27]of the furniture and the equipment.The amortization of the goodwill[28](initially valued atP500,000) 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 CAs finding that the partnership had an outstanding obligation in the amount ofP240,658 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 ofP240,055.00 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 ofP355,000.00 on Oct. 1983, when the original partnership was not yet formed.

Third, the CA failed to reduce the capitalization byP250,000, 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 ofP250,000 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 latters 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:CostsSection 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 courts 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 isGRANTED, and the assailed Decision and ResolutionSET 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.

SECOND DIVISIONJOSEFINA P. REALUBIT,Petitioner,- versus -PROSENCIO D. JASO andEDENG. JASO,Respondents.G.R. No.178782Promulgated:September 21, 2011

The validity as well as the consequences of an assignment of rights in a joint venture are at issue in this petition for review filed pursuant to Rule 45 of the1997 Rules of Civil Procedure,[1]assailing the 30 April 2007 Decision[2]rendered by the Court of Appeals (CA) then Twelfth Division in CA-G.R. CV No. 73861,[3]the dispositive portion of which states:WHEREFORE, the Decision appealed from is SET ASIDE and we order the dissolution of the joint venture between defendant-appellant Josefina Realubit and Francis Eric Amaury Biondo and the subsequent conduct of accounting, liquidation of assets and division of shares of the joint venture business.Let a copy hereof and the records of the case be remanded to the trial court for appropriate proceedings.[4]The FactsOn 17 March 1994, petitioner Josefina Realubit (Josefina) entered into aJoint Venture Agreementwith Francis Eric Amaury Biondo (Biondo), a French national, for the operation of an ice manufacturing business.With Josefina as the industrial partner and Biondo as the capitalist partner, the parties agreed that they would each receive 40% of the net profit, with the remaining 20% to be used for the payment of the ice making machine which was purchased for the business.[5]For and in consideration of the sum ofP500,000.00, however, Biondo subsequently executed aDeed of Assignmentdated 27 June 1997, transferring all his rights and interests in the business in favor of respondent Eden Jaso (Eden), the wife of respondent Prosencio Jaso.[6]With Biondos eventual departure from the country, the Spouses Jaso caused their lawyer to send Josefina a letter dated 19 February 1998, apprising her of their acquisition of said Frenchmans share in the business and formally demanding an accounting and inventory thereof as well as the remittance of their portion of its profits.[7]Faulting Josefina with unjustified failure to heed their demand, the Spouses Jaso commenced the instant suit with the filing of their 3 August 1998 Complaint against Josefina, her husband, Ike Realubit (Ike), and their alleged dummies, for specific performance, accounting, examination, audit and inventory of assets and properties, dissolution of the joint venture, appointment of a receiver and damages.Docketed as Civil Case No. 98-0331 before respondent Branch 257 of the Regional Trial Court (RTC) of Paraaque City, said complaint alleged, among other matters, that the Spouses Realubit had no gainful occupation or business prior to their joint venture with Biondo; that with the income of the business which earned not less thanP3,000.00 per day, they were, however, able to acquire the two-storey building as well as the land on which the joint ventures ice plant stands, another building which they used as their office and/or residence and six (6) delivery vans; and, that aside from appropriating for themselves the income of the business, the Spouses Realubit have fraudulently concealed the funds and assets thereof thru their relatives, associates or dummies.[8]

Served with summons, the Spouses Realubit filed their Answer dated 21 October 1998, specifically denying the material allegations of the foregoing complaint.Claiming that they have been engaged in the tube ice trading business under a single proprietorship even before their dealings with Biondo, the Spouses Realubit, in turn, averred that their said business partner had left the country in May 1997 and could not have executed theDeed of Assignmentwhich bears a signature markedly different from that which he affixed on theirJoint Venture Agreement; that they refused the Spouses Jasos demand in view of the dubious circumstances surrounding their acquisition of Biondos share in the business which was established at Don Antonio Heights, Commonwealth Avenue, Quezon City; that said business had already stopped operations on 13 January 1996 when its plant shut down after its power supply was disconnected by MERALCO for non-payment of utility bills; and, that it was their own tube ice trading business which had been moved to 66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City that the Spouses Jaso mistook for the ice manufacturing business established in partnership with Biondo.[9]

The issues thus joined and the mandatory pre-trial conference subsequently terminated, the RTC went on to try the case on its merits and, thereafter, to render its Decision dated 17 September 2001, discounting the existence of sufficient evidence from which the income, assets and the supposed dissolution of the joint venture can be adequately reckoned.Upon the finding, however, that the Spouses Jaso had been nevertheless subrogated to Biondos rights in the business in view of their valid acquisition of the latters share as capitalist partner,[10]the RTC disposed of the case in the following wise:WHEREFORE, defendants are ordered to submit to plaintiffs a complete accounting and inventory of the assets and liabilities of the joint venture from its inception to the present, to allow plaintiffs access to the books and accounting records of the joint venture, to deliver to plaintiffs their share in the profits, if any, and to pay the plaintiffs the amount ofP20,000. for moral damages.The claims for exemplary damages and attorneys fees are denied for lack of basis.[11]On appeal before the CA, the foregoing decision was set aside in the herein assailed Decision dated 30 April 2007, upon the following findings and conclusions: (a) the Spouses Jaso validly acquired Biondos share in the business which had been transferred to and continued its operations at 66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City and not dissolved as claimed by the Spouses Realubit; (b) absent showing of Josefinas knowledge and consent to the transfer of Biondos share, Eden cannot be considered as a partner in the business, pursuant to Article 1813 of theCivil Code of the Philippines; (c) while entitled to Biondosshare in the profitsof the business, Eden cannot, however, interfere with the management of the partnership, require information or account of its transactions and inspect its books; (d) the partnership should first be dissolved before Eden can seek an accounting of its transactions and demand Biondosshare in the business; and, (e) the evidence adduced before the RTC do not support the award of moral damages in favor of the Spouses Jaso.[12]The Spouses Realubits motion for reconsideration of the foregoing decision was denied for lack of merit in the CAs 28 June 2007 Resolution,[13]hence, this petition.The IssuesThe Spouses Realubit urge the reversal of the assailed decision upon the negative of the following issues, to wit:A.WHETHER OR NOT THERE WAS A VALIDASSIGNMENT OF RIGHTS TO THE JOINT VENTURE.B.WHETHER THE COURT MAY ORDER PETITIONER [JOSEFINA REALUBIT] AS PARTNER IN THE JOINT VENTURE TO RENDER [A]N ACCOUNTING TO ONE WHO IS NOT A PARTNER IN SAID JOINT VENTURE.C.WHETHER PRIVATE RESPONDENTS [SPOUSES JASO] HAVE ANY RIGHT IN THE JOINT VENTURE AND IN THE SEPARATE ICE BUSINESS OF PETITIONER[S].[14]The Courts RulingWe find the petition bereft of merit.The Spouses Realubit argue that, in upholding its validity, both the RTC and the CA inordinately gave premium to the notarization of the27 June 1997Deed of Assignmentexecuted by Biondo in favor of the Spouses Jaso.Calling attention to the latters failure to present before the RTC said assignor or, at the very least, the witnesses to said document, the Spouses Realubit maintain that the testimony of Rolando Diaz, the Notary Public before whom the same was acknowledged, did not suffice to establish its authenticity and/or validity.They insist that notarization did not automatically and conclusively confer validity on said deed, since it is still entirely possible that Biondo did not execute said deed or, for that matter, appear before said notary public.[15]The dearth of merit in the Spouses Realubits position is, however, immediately evident from the settled rule thatdocuments acknowledged before notaries public are public documents which are admissible in evidence without necessity of preliminary proof as to their authenticity and due execution.[16]It cannot be gainsaid that, as a public document, theDeed of AssignmentBiondo executed in favor ofEdennot only enjoys a presumption of regularity[17]but is also consideredprima facieevidence of the facts therein stated.[18]A party assailing the authenticity and due execution of a notarized document is, consequently, required to present evidence that is clear, convincing and more than merely preponderant.[19]In view of the Spouses Realubits failure to discharge this onus, we find that both the RTC and the CA correctly upheld the authenticity and validity of saidDeed of Assignmentupon the combined strength of the above-discussed disputable presumptions and the testimonies elicited from Eden[20]and Notary Public Rolando Diaz.[21]As for the Spouses Realubits bare assertion that Biondos signature on the same document appears to be forged, suffice it to say that, like fraud,[22]forgery is never presumed and must likewise be proved by clear and convincing evidence by the party alleging the same.[23]Aside from not being borne out by a comparison of Biondos signatures on theJoint Venture Agreement[24]and theDeed of Assignment,[25]said forgery is, moreover debunked by Biondos duly authenticated certification dated 17 November1998, confirming the transfer of his interest in the business in favor of Eden.[26]Generally understood to mean an organization formed for some temporary purpose, a joint venture is likened to a particular partnership or one which has for its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession or vocation.[27]The rule is settled that joint ventures are governed by the law on partnerships[28]which are, in turn, based on mutual agency ordelectus personae.[29]Insofar as a partners conveyance of the entirety of his interest in the partnership is concerned, Article 1813 of the Civil Code provides as follows:Art. 1813.A conveyance by a partner of his whole interest in the partnership does not itself dissolve the partnership, or, as against the other partners in the absence of agreement, entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any information or account of partnership transactions, or to inspect the partnership books; but it merely entitles the assignee to receive in accordance with his contracts the profits to which the assigning partners would otherwise be entitled.However, in case of fraud in the management of the partnership, the assignee may avail himself of the usual remedies.In the case of a dissolution of the partnership, the assignee is entitled to receive his assignors interest and may require an account from the date only of the last account agreed to by all the partners.From the foregoing provision, it is evident that (t)he transfer by a partner of his partnership interest does not make the assignee of such interest a partner of the firm, nor entitle the assignee to interfere in the management of the partnership business or to receive anything except the assignees profits.The assignment does not purport to transfer an interest in the partnership, but only a future contingent right to a portion of the ultimate residue as the assignor may become entitled to receive by virtue of his proportionate interest in the capital.[30]Since a partners interest in the partnership includes his share in the profits,[31]we find that the CA committed no reversible error in ruling that the Spouses Jaso are entitled to Biondosshare in the profits, despite Juanitas lack of consent to the assignment of said Frenchmans interest in the joint venture.AlthoughEdendid not, moreover, become a partner as a consequence of the assignment and/or acquire the right to require an accounting of the partnership business, the CA correctly granted her prayer for dissolution of the joint venture conformably with the right granted to the purchaser of a partners interest under Article 1831 of theCivil Code.[32]Considering that they involve questions of fact, neither are we inclined to hospitably entertain the Spouses Realubits insistence on the supposed fact that Josefinas joint venture with Biondo had already been dissolved and that the ice manufacturing business at 66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City was merely a continuation of the same business they previously operated under a single proprietorship.Itis well-entrenched doctrine that questions of fact are not proper subjects of appeal bycertiorariunder Rule 45 of the Rules of Court as this mode of appeal is confined to questions of law.[33]Upon the principle that this Court is not a trier of facts, we are not duty bound to examine the evidence introduced by the parties below to determine if the trial and the appellate courts correctly assessed and evaluated the evidence on record.[34]Absent showing that the factual findings complained of are devoid of support by the evidence on record or the assailed judgment is based on misapprehension of facts, the Court will limit itself to reviewing only errors of law.[35]Based on the evidence on record, moreover, both the RTC[36]and the CA[37]ruled out the dissolution of the joint venture and concluded that the ice manufacturing business at the aforesaid address was the same one established by Juanita and Biondo.As a rule, findings of fact of the CA are binding and conclusive upon this Court,[38]and will not be reviewed or disturbed on appeal[39]unless the case falls under any of the following recognized exceptions: (1) when the conclusion is a finding grounded entirely on speculation, surmises and conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) where there is a grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the CA, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioners' main and reply briefs are not disputed by the respondents; and, (10) when the findings of fact of the CA are premised on the supposed absence of evidence and contradicted by the evidence on record.[40]Unfortunately for the Spouses Realubits cause, not one of the foregoing exceptions applies to the case.WHEREFORE,the petition isDENIEDfor lack of merit and the assailed CA Decision dated 30 April 2007 is, accordingly,AFFIRMEDin toto.

Article 1815: Partnership Name

EN BANC

[G.R. No. X92-1. July 30, 1979.]

PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME "SYCIP, SALAZAR, FELICIANO, HERNANDEZ & CASTILLO." LUCIANO E. SALAZAR, FLORENTINO P, FELICIANO, BENILDO G. HERNANDEZ. GREGORIO R. CASTILLO. ALBERTO P. SAN JUAN, JUAN C. REYES, JR., ANDRES G. GATMAITAN, JUSTINO H. CACANINDIN, NOEL A. LAMAN, ETHELWOLDO E. FERNANDEZ, ANGELITO C. IMPERIO, EDUARDO R. CENIZA, TRISTAN A. CATINDIG, ANCHETA K. TAN, and ALICE V. PESIGAN, petitioners.

IN THE MATTER OF THE PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME "OZAETA, ROMULO, DE LEON, MABANTA & REYES." RICARDO J. ROMULO, BENJAMIN M. DE LEON, ROMAN MABANTA, JR., JOSE MA. REYES, JESUS S. J. SAYOC, EDUARDO DE LOS ANGELES, and JOSE F. BUENAVENTURA, petitioners.

Two separate Petitions were filed before this Court 1) by the surviving partners of Atty. Alexander Sycip, who died on May 5, 1975, and 2) by the surviving partners of Atty. Herminio Ozaeta, who died on February 14, 1976, praying that they be allowed to continue using, in the names of their firms, the names of partners who had passed away. In the Courts Resolution of September 2, 1976, both Petitions were ordered consolidated.chanrobles.com.ph : virtual law library

Petitioners base their petitions on the following arguments:chanrob1es virtual 1aw library

1. Under the law, a partnership is not prohibited from continuing its business under a firm name which includes the name of a deceased partner; in fact, Article 1840 of the Civil Code explicitly sanctions the practice when it provides in the last paragraph that:jgc:chanrobles.com.ph

"The use by the person or partnership continuing the business of the partnership name, or the name of a deceased partner as part thereof, shall not of itself make the individual property of the deceased partner liable for any debts contracted by such person or partnership." 1

2. In regulating other professions, such as accountancy and engineering, the legislature has authorized the adoption of firm names without any restriction as to the use, in such firm name, of the name of a deceased partner; 2 the legislative authorization given to those engaged in the practice of accountancy a profession requiring the same degree of trust and confidence in respect of clients as that implicit in the relationship of attorney and client to acquire and use a trade name, strongly indicates that there is no fundamental policy that is offended by the continued use by a firm of professionals of a firm name which includes the name of a deceased partner, at least where such firm name has acquired the characteristics of a "trade name." 3

3. The Canons of Professional Ethics are not transgressed by the continued use of the name of a deceased partner in the firm name of a law partnership because Canon 33 of the Canons of Professional Ethics adopted by the American Bar Association declares that:jgc:chanrobles.com.ph

". . . The continued use of the name of a deceased or former partner when permissible by local custom, is not unethical, but care should be taken that no imposition or deception is practiced through this use. . . ." 4

4. There is no possibility of imposition or deception because the deaths of their respective deceased partners were well-publicized in all newspapers of general circulation for several days; the stationeries now being used by them carry new letterheads indicating the years when their respective deceased partners were connected with the firm; petitioners will notify all leading national and international law directories of the fact of their respective deceased partners deaths. 5

5. No local custom prohibits the continued use of a deceased partners name in a professional firms name; 6 there is no custom or usage in the Philippines, or at least in the Greater Manila Area, which recognizes that the name of a law firm necessarily identifies the individual members of the firm. 7

6. The continued use of a deceased partners name in the firm name of law partnerships has been consistently allowed by U.S. Courts and is an accepted practice in the legal profession of most countries in the world. 8

The question involved in these Petitions first came under consideration by this Court in 1953 when a law firm in Cebu (the Dean case) continued its practice of including in its firm name that of a deceased partner, C.D. Johnston. The matter was resolved with this Court advising the firm to desist from including in their firm designation the name of C. D. Johnston, "who has long been dead."cralaw virtua1aw library

The same issue was raised before this Court in 1958 as an incident in G. R. No. L-11964, entitled Register of Deeds of Manila v. China Banking Corporation. The law firm of Perkins & Ponce Enrile moved to intervene as amicus curiae. Before acting thereon, the Court, in a Resolution of April 15, 1957, stated that it "would like to be informed why the name of Perkins is still being used although Atty. E. A. Perkins is already dead." In a Manifestation dated May 21, 1957, the law firm of Perkins and Ponce Enrile, raising substantially the same arguments as those now being raised by petitioners, prayed that the continued use of the firm name "Perkins & Ponce Enrile" be held proper.

On June 16, 1958, this Court resolved:jgc:chanrobles.com.ph

"After carefully considering the reasons given by Attorneys Alfonso Ponce Enrile and Associates for their continued use of the name of the deceased E. G. Perkins, the Court found no reason to depart from the policy it adopted in June 1953 when it required Attorneys Alfred P. Deen and Eddy A. Deen of Cebu City to desist from including in their firm designation, the name of C. D. Johnston, deceased. The Court believes that, in view of the personal and confidential nature of the relations between attorney and client and the high standards demanded in the canons of professional ethics, no practice should be allowed which even in a remote degree could give rise to the possibility of deception. Said attorneys are accordingly advised to drop the name "PERKINS" from their firm name."cralaw virtua1aw library

Petitioners herein now seek a re-examination of the policy thus far enunciated by the Court.

The Court finds no sufficient reason to depart from the rulings thus laid down.

A. Inasmuch as "Sycip, Salazar, Feliciano, Hernandez and Castillo" and "Ozaeta, Romulo, De Leon, Mabanta and Reyes" are partnerships, the use in their partnership names of the names of deceased partners will run counter to Article 1815 of the Civil Code which provides:jgc:chanrobles.com.ph

"Art. 1815. Every partnership shall operate under a firm name, which may or may not include the name of one or more of the partners.

"Those who, not being members of the partnership include their names in the firm name, shall be subject to the liability of a partner."cralaw virtua1aw library

It is clearly tacit in the above provision that names in a firm name of a partnership must either be those of living partners and, in the case of non-partners, should be living persons who can be subjected to liability. In fact, Article 1825 of the Civil Code prohibits a third person from including his name in the firm name under pain of assuming the liability of a partner. The heirs of a deceased partner in a law firm cannot be held liable as the old members to the creditors of a firm particularly where they are non-lawyers. Thus, Canon 34 of the Canons of Professional Ethics "prohibits all agreement for the payment to the widow and heirs of a deceased lawyer of a percentage, either gross or net, of the fees received from the future business of the deceased lawyers clients, both because the recipients of such division are not lawyers and because such payments will not represent service or responsibility on the part of the recipient." Accordingly, neither the widow nor the heirs can be held liable for transactions entered into after the death of their lawyer-predecessor. There being no benefits accruing, there can be no corresponding liability.chanrobles law library : red

Prescinding the law, there could be practical objections to allowing the use by law firms of the names of deceased partners. The public relations value of the use of an old firm name can tend to create undue advantages and disadvantages in the practice of the profession. An able lawyer without connections will have to make a name for himself starting from scratch. Another able lawyer, who can join an old firm, can initially ride on that old firms reputation established by deceased partners.

B. In regards to the last paragraph of Article 1840 of the Civil Code cited by petitioners, supra, the first factor to consider is that it is within Chapter 3 of Title IX of the Code entitled "Dissolution and Winding Up." The Article primarily deals with the exemption from liability in cases of a dissolved partnership, of the individual property of the deceased partner for debts contracted by the person or partnership which continues the business using the partnership name or the name of the deceased partner as part thereof. What the law contemplates therein is a hold-over situation preparatory to formal reorganization.

Secondly, Article 1840 treats more of a commercial partnership with a good will to protect rather than of a professional partnership, with no saleable good will but whose reputation depends on the personal qualifications of its individual members. Thus, it has been held that a saleable goodwill can exist only in a commercial partnership and cannot arise in a professional partnership consisting of lawyers. 9

"As a general rule, upon the dissolution of a commercial partnership the succeeding partners or parties have the right to carry on the business under the old name, in the absence of a stipulation forbidding it, (s)ince the name of a commercial partnership is a partnership asset inseparable from the good will of the firm . . .." (60 Am Jur 2d, s 204, p. 115) (Emphasis supplied)

On the other hand,

". . . a professional partnership the reputation of which depends on the individual skill of the members, such as partnerships of attorneys or physicians, has no good will to be distributed us a firm asset on its dissolution, however intrinsically valuable such skill and reputation may be, especially where there is no provision in the partnership agreement relating to good will as an asset. . . ." (ibid, s 203, p. 115) (Emphasis supplied).

C. A partnership for the practice of law cannot be likened to partnerships formed by other professionals or for business. For one thing, the law on accountancy specifically allows the use of a trade name in connection with the practice of accountancy. 10

"A partnership for the practice of law is not a legal entity. It is a mere relationship or association for a particular purpose. . . . It is not a partnership formed for the purpose of carrying on trade or business or of holding property." 11 Thus, it has been stated that "the use of a nom de plume, assumed or trade name in law practice is improper." 12

"The usual reason given for different standards of conduct being applicable to the practice of law from those pertaining to business is that the law is a profession. . . .

"Dean Pound, in his recently published contribution to the Survey of the Legal Profession, (The Lawyer from Antiquity to Modern Times, p. 5) defines a profession as a group of men pursuing a learned art as a common calling in the spirit of public service, no less a public service because it may incidentally be a means of livelihood.xxx"Primary characteristics which distinguish the legal profession from business are:

1. A duty of public service, of which the emolument is a by-product, and in which one may attain the highest eminence without making much money.

2. A relation as an officer of court to the administration of justice involving thorough sincerity, integrity, and reliability.

3. A relation to clients in the highest degree fiduciary.

4. A relation to colleagues at the bar characterized by candor, fairness, and unwillingness to resort to current business methods of advertising and encroachment on their practice, or dealing directly with their clients." 13

"The right to practice law is not a natural or constitutional right but is in the nature of a privilege or franchise. 14 It is limited to persons of good moral character with special qualifications duly ascertained and certified. 15 The right does not only presuppose in its possessor integrity, legal standing and attainment, but also the exercise of a special privilege, highly personal and partaking of the nature of a public trust." 16

D. Petitioners cited Canon 33 of the Canons of Professional Ethics of the American Bar Association 17 in support of their petitions.

It is true that Canon 33 does not consider as unethical the continued use of the name of a deceased or former partner in the firm name of a law partnership when such a practice is permissible by local custom but the Canon warns that care should be taken that no imposition or deception is practiced through this use.

It must be conceded that in the Philippines, no local custom permits or allows the continued use of a deceased or former partners name in the firm names of law partnerships. Firm names, under our custom, identify the more active and/or more senior members or partners of the law firm. A glimpse at the history of the firms of petitioners and of other law firms in this country would show how their firm names have evolved and changed from time to time as the composition of the partnership changed.

"The continued use of a firm name after the death of one or more of the partners designated by it is proper only where sustained by local custom and not where by custom this purports to identify the active members. . . .

"There would seem to be a question, under the working of the Canon, as to the propriety of adding the name of a new partner and at the same time retaining that of a deceased partner who was never a partner with the new one." (H.S. Drinker, op. cit., supra, at pp. 207-208) (Emphasis supplied)

The possibility of deception upon the public, real or consequential, where the name of a deceased partner continues to be used cannot be ruled out. A person in search of legal counsel might be guided by the familiar ring of a distinguished name appearing in a firm title.

E. Petitioners argue that U.S. Courts have consistently avowed the continued use of a deceased partners name in the firm name of law partnerships. But that is so because it is sanctioned by custom.

In the case of Mendelsohn v. Equitable Life Assurance Society (33 N.Y.S. 2d 733) which petitioners Salazar, Et. Al. quoted in their memorandum, the New York Supreme Court sustained the use of the firm name Alexander & Green even if none of the present ten partners of the firm bears either name because the practice was sanctioned by custom and did not offend any statutory provision or legislative policy and was adopted by agreement of the parties The Court stated therein:jgc:chanrobles.com.ph

"The practice sought to be proscribed has the sanction of custom and offends no statutory provision or legislative policy. Canon 33 of the Canons of Professional Ethics of both the American Bar Association and the New York State Bar Association provides in part as follows: The continued use of the name of a deceased or former partner, when permissible by local custom is not unethical, but care should be taken that no imposition or deception is practiced through this use. There is no question as to local custom. Many firms in the city use the names of deceased members with the approval of other attorneys, bar associations and the courts. The Appellate Division of the First Department has considered the matter and reached the conclusion that such practice should not be prohibited. (Emphasis supplied)xxx

"Neither the Partnership Law nor the Penal Law prohibits the practice in question. The use of the firm name herein is also sustainable by reason of agreement between the partners." 18

Not so in this jurisdiction where there is no local custom that sanctions the practice. Custom has been defined as a rule of conduct formed by repetition of acts, uniformly observed (practiced) as a social rule, legally binding and obligatory. 19 Courts take no judicial notice of custom. A custom must be proved as a fact, according to the rules of evidence. 20 A local custom as a source of right cannot be considered by a court of justice unless such custom is properly established by competent evidence like any other fact. 21 We find such proof of the existence of a local custom. and of the elements requisite to constitute the same, wanting herein. Merely because something is done as a matter of practice does not mean that Courts can rely on the same for purposes of adjudication as a juridical custom. Juridical custom must be differentiated from social custom. The former can supplement statutory law or be applied in the absence of such statute. Not so with the latter.

Moreover, judicial decisions applying or interpreting the laws form part of the legal system. 22 When the Supreme Court in the Deen and Perkins cases issued its Resolutions directing lawyers to desist from including the names of deceased partners in their firm designation, it laid down a legal rule against which no custom or practice to the contrary, even if proven, can prevail. This is not to speak of our civil law which clearly ordains that a partnership is dissolved by the death of any partner. 23 Customs which are contrary to law, public order or public policy shall not be countenanced. 24

The practice of law is intimately and peculiarly related to the administration of justice and should not be considered like an ordinary "money-making trade."cralaw virtua1aw library

". . . It is of the essence of a profession that it is practiced in a spirit of public service.A trade . . .aims primarily at personal gain; a profession at the exercise of powers beneficial to mankind. If, as in the era of wide free opportunity, we think of free competitive self assertion as the highest good, lawyer and grocer and farmer may seem to be freely competing with their fellows in their calling in order each to acquire as much of the worlds good as he may within the limits allowed him by law. But the member of a profession does not regard himself as in competition with his professional brethren. He is not bartering his services as is the artisan nor exchanging the products of his skill and learning as the farmer sells wheat or corn. There should be no such thing as a lawyers or physicians strike. The best service of the professional man is often rendered for no equivalent or for a trifling equivalent and it is his pride to do what he does in a way worthy of his profession even if done with no expectation of reward. This spirit of public service in which the profession of law is and ought to be exercised is a prerequisite of sound administration of justice according to law. The other two elements of a profession, namely, organization and pursuit of a learned art have their justification in that they secure and maintain that spirit."25cralaw:red

In fine, petitioners desire to preserve the identity of their firms in the eyes of the public must bow to legal and ethical impediments.

ACCORDINGLY, the petitions filed herein are denied and petitioners advised to drop the names "SYCIP" and "OZAETA" from their respective firm names. Those names may, however, be included in the listing of individuals who have been partners in their firms indicating the years during which they served as such.chanrobles.com.ph : virtual law library

SO ORDERED.

C E R T I F I C A T I O NThe petitions are denied, as there are only four votes for granting them, seven of the .Justices being of the contrary view, as explained in the plurality opinion of Justice Ameurfina Melencio-Herrera. It is out of delicadeza that the undersigned did not participate in the disposition of these petitions, as the law office of Sycip, Salazar, Feliciano, Hernandez and Castillo started with the partnership of Quisumbing, Sycip, and Quisumbing, the senior partner, the late Ramon Quisumbing, being the father-in-law of the undersigned, and the most junior partner then, Norberto J. Quisumbing, being his brother-in-law. For the record, the undersigned wishes to invite the attention of all concerned, and not only of petitioners, to the last sentence of the opinion of Justice Ameurfina Melencio-Herrera: Those names [Sycip and Ozaeta] may, however, be included in the listing of individuals who have been partners in their firms indicating the years during which they served as such." It represents a happy compromise.Separate Opinions

I dissent. The fourteen members of the law firm, Sycip, Salazar, Feliciano, Hernandez & Castillo, in their petition of June 10, 1975, prayed for authority to continue the use of that firm name, notwithstanding the death of Attorney Alexander Sycip on May 5, 1975 (May he rest in peace). He was the founder of the firm which was originally known as the Sycip Law Office.

On the other hand, the seven surviving partners of the law firm, Ozaeta, Romulo, De Leon, Mabanta & Reyes, in their petition of August 13, 1976, prayed that they be allowed to continue using the said firm name notwithstanding the death of two partners, former Justice Roman Ozaeta and his son, Herminio, on May 1, 1972 and February 14, 1976, respectively.

They alleged that the said law firm was a continuation of the Ozaeta Law Office which was established in 1957 by Justice Ozaeta and his son and that, as to the said law firm, the name Ozaeta has acquired an institutio