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Republic of the Philippines

SUPREME COURTManila

EN BANC

G.R. No. L-35469 March 17, 1932

E. S. LYONS,plaintiff-appellant,vs.

C. W. ROSENSTOC, E!"c#$or o% $h" E&$a$" o% '"(r) W. E*&"r, +"c"a&"+, defendant-appellee.

Harvey & O'Brien for appellant.

DeWitt, Perkins & Brandy for appellee.

STREET, J.:

This action was institute in the Court of irst !nstance of the Cit" of Manila, b" E. #. $"ons a%ainst C.

&. Rosenstoc', as e(ecutor of the estate of ). &. Elser, deceased, conse*uent upon the ta'in% of

an appeal b" the e(ecutor fro+ the allowance of the clai+ sued upon b" the co++ittee on clai+s in

said estate. The purpose of the action is to recover four hundred fort"-si( and two thirds shares of

the stoc' of . . Pic'erin% Co., $td., to%ether with the su+ of about P/01,222, representin% the

dividends which accrued on said stoc' prior to 3ctober 0/, /405, with lawful interest. 6pon hearin%

the cause the trial court absolved the defendant e(ecutor fro+ the co+plaint, and the plaintiff

appealed.

Prior to his death on une /7, /408, )enr" &. Elser had been a resident of the Cit" of Manila where

he was en%a%ed durin% the "ears with which we are here concerned in bu"in%, sellin%, andad+inisterin% real estate. !n several ventures which he had +ade in bu"in% and sellin% propert" of

this 'ind the plaintiff, E. #. $"ons, had 9oined with hi+, the profits bein% shared b" the two in e*ual

parts. !n April, /4/4, $"ons, whose re%ular vocation was that of a +issionar", or +issionar" a%ent, of

the Methodist Episcopal Church, went on leave to the 6nited #tates and was %one for nearl" a "ear

and a half, returnin% on #epte+ber 0/, /402. 3n the eve of his departure Elser +ade a written

state+ents showin% that $"ons was, at that ti+e, half owner with Elser of three particular pieces of

real propert". Concurrentl" with this act $"ons e(ecute in favor of Elser a %eneral power of attorne"

e+powerin% hi+ to +ana%e and dispose of said properties at will and to represent $"ons full" and

a+pl", to the +utual advanta%e of both. :urin% the absence of $"ons two of the pieces of propert"

above referred to were sold b" Elser, leavin% in his hands a sin%le piece of propert" located at 5/5-

5/7 Carried #treet, in the Cit" of Manila, containin% about 070 s*uare +eters of land, with thei+prove+ents thereon.

!n the sprin% of /402 the attention of Elser was drawn to a piece of land, containin% about /,122,222

s*uare +eters, near the Cit" of Manila, and he discerned therein a fine opportunit" for the pro+otion

and develop+ent of a suburban i+prove+ent. This propert", which will be herein referred to as the

#an uan Estate, was offered b" its owners for P1;2,222. To afford a little ti+e for +aturin% his

plans, Elser purchased an option on this propert" for P1,222, and when this option was about to

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e(pire without his havin% been able to raise the necessar" funds, he paid P/1,222 +ore for an

e(tension of the option, with the understandin% in both cases that, in case the option should be

e(ercised, the a+ounts thus paid should be credited as part of the first pa"+ent. The a+ounts paid

for this option and its e(tension were supplied b" Elser entirel" fro+ his own funds. !n the end he

was able fro+ his own +eans, and with the assistance which he obtained fro+ others, to ac*uire

said estate. The a+ount re*uired for the first pa"+ent was P/12,222, and as Elser had availableonl" about P/02,222, includin% the P02,222 advanced upon the option, it was necessar" to raise the

re+ainder b" obtainin% a loan for P12,222. This a+ount was finall" obtained fro+ a Chinese

+erchant of the cit" na+ed 6" #iulion%. This loan was secured throu%h 6" Cho

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letter above-+entioned. 6pon receipt of this letter Elser was of course infor+ed that it would be out

of the *uestion to e(pect assistance fro+ $"ons in carr"in% out the #an uan pro9ect. No further

efforts to this end were therefore +ade b" Elser.

&hen Elser was concludin% the transaction for the purchase of the #an uan Estate, his boo'

showed that he was indebted to $"ons to the e(tent of, possibl", P//,554.;0, which had accrued to$"ons fro+ profits and earnin%s derived fro+ other properties= and when the . . Pic'erin%

Co+pan" was or%ani?ed and stoc' issued, Elser indorsed to $"ons 022 of the shares allocated to

hi+self, as he then believed that $"ons would be one of his associates in the deal. !t will be noted

that the par value of these 022 shares was +ore than P7,222 in e(cess of the a+ount which Elser in

fact owed to $"ons= and when the latter returned to the Philippine !slands, he accepted these shares

and sold the+ for his own benefit. !t see+s to be supposed in the appellants brief that the transfer of

these shares to $"ons b" Elser supplies so+e sort of basis for the present action, or at least

stren%thens the considerations involved in a feature of the case to be presentl" e(plained. This view

is +anifestl" untenable, since the ratification of the transaction b" $"ons and the appropriation b"

hi+ of the shares which were issued to hi+ leaves no %round whatever for treatin% the transaction

as a source of further e*uitable ri%hts in $"ons. &e should perhaps add that after $"ons return tothe Philippine !slands he acted for a ti+e as one of the +e+bers of the board of directors of the . .

Pic'erin% Co+pan", his *ualification for this office bein% derived precisel" fro+ the ownership of

these shares.

&e now turn to the incident which supplies the +ain basis of this action. !t will be re+e+bered that,

when Elser obtained the loan of P12,222 to co+plete the a+ount needed for the first pa"+ent on the

#an uan Estate, the lender, 6" #iulion%, insisted that he should procure the si%nature of the idelit"

#uret" Co. on the note to be %iven for said loan. But before si%nin% the note with Elser and his

associates, the idelit" #uret" Co. insisted upon havin% securit" for the liabilit" thus assu+ed b" it.

To +eet this re*uire+ents Elser +ort%a%ed to the idelit" #uret" Co. the e*uit" of rede+ption in

the propert" owned b" hi+self and $"ons on Carriedo #treet. This +ort%a%e was e(ecuted on une82, /402, at which ti+e Elser e(pected that $"ons would co+e in on the purchase of the #an uan

Estate. But when he learned fro+ the letter fro+ $"ons of ul" 0/, /402, that the latter had

deter+ined not to co+e into this deal, Elser be%an to cast around for +eans to relieve the Carriedo

propert" of the encu+brance which he had placed upon it. or this purpose, on #epte+ber 4, /402,

he addressed a letter to the idelit" #uret" Co., as'in% it to per+it hi+ to substitute a propert"

owned b" hi+self at 5>> M. ). del Pilar #treet, Manila, and /,222 shares of the . . Pic'erin%

Co+pan", in lieu of the Carriedo propert", as securit". The idelit" #uret" Co. a%reed to the

proposition= and on #epte+ber /1, /402, Elser e(ecuted in favor of the idelit" #uret" Co. a new

+ort%a%e on the M. ). del Pillar propert" and delivered the sa+e, with /,222 shares of . .

Pic'erin% Co+pan", to said co+pan". The latter thereupon in turn e(ecuted a cancellation of the

+ort%a%e on the Carriedo propert" and delivered it to Elser. But notwithstandin% the fact that thesedocu+ents were e(ecuted and delivered, the new +ort%a%e and the release of the old were never

re%istered= and on #epte+ber 01, /402, thereafter, Elser returned the cancellation of the +ort%a%e

on the Carriedo propert" and too' bac' fro+ the idelit" #uret" Co. the new +ort%a%e on the M.

). del Pilar propert", to%ether with the /,222 shares of the . . Pic'erin% Co+pan" which he had

delivered to it.

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The e(planation of this chan%e of purpose is undoubtedl" to be found in the fact that $"ons had

arrived in Manila on #epte+ber 0/, /402, and shortl" thereafter, in the course of a conversation with

Elser told hi+ to let the Carriedo +ort%a%e re+ain on the propert" @$et the Carriedo +ort%a%e

ride. Mrs. Elser testified to the conversation in which $"ons used the words above *uoted, and as

that conversation supplies the +ost reasonable e(planation of Elsers recession fro+ his purpose of

relievin% the Carriedo propert", the trial court was, in our opinion, well 9ustified in acceptin% as aproven fact the consent of $"ons for the +ort%a%e to re+ain on the Carriedo propert". This

concession was not onl" reasonable under the circu+stances, in view of the abundant solvenc" of

Elser, but in view of the further fact that Elser had %iven to $"ons 022 shares of the stoc' of the . .

Pic'erin% Co., havin% a value of nearl" P7,222 in e(cess of the indebtedness which Elser had

owed to $"ons upon state+ent of account. The trial court found in effect that the e(cess value of

these shares over Elsers actual indebtedness was conceded b" Elser to $"ons in consideration of

the assistance that had been derived fro+ the +ort%a%e placed upon $"ons interest in the Carriedo

propert". &hether the a%ree+ent was reached e(actl" upon this precise line of thou%ht is of little

+o+ent, but the relations of the parties had been such that it was to be e(pected that Elser would

be %enerous= and he could scarcel" have failed to ta'e account of the use he had +ade of the 9oint

propert" of the two.

As the develop+ent of the #an uan Estate was a success fro+ the start, Elser paid the note of

P12,222 to 6" #iulion% on anuar" /7, /40/, althou%h it was not due until +ore than five +onths

later. !t will thus be seen that the +ort%a%in% of the Carriedo propert" never resulted in da+a%e to

$"ons to the e(tent of a sin%le cent= and althou%h the court refused to allow the defendant to prove

the Elser was solvent at this ti+e in an a+ount +uch %reater than the entire encu+brance placed

upon the propert", it is evident that the ris' i+posed upon $"ons was ne%li%ible. !t is also plain that

no +one" actuall" derivin% fro+ this +ort%a%e was ever applied to the purchase of the #an uan

Estate. &hat reall" happened was the Elser +erel" sub9ected the propert" to a contin%ent liabilit",

and no actual liabilit" ever resulted therefro+. The financin% of the purchase of the #an uan Estate,

apart fro+ the +odest financial participation of his three associates in the #an uan deal, was thewor' of Elser acco+plished entirel" upon his own account.

The case for the plaintiff supposes that, when Elser placed a +ort%a%e for P12,222 upon the e*uit"

of rede+ption in the Carriedo propert", $"ons, as half owner of said propert", beca+e, as it were,

involuntaril" the owner of an undivided interest in the propert" ac*uired partl" b" that +one"= and it

is insisted for hi+ that, in consideration of this fact, he is entitled to the four hundred fort"-si( and

two-thirds shares of . . Pic'erin% Co+pan", with the earnin%s thereon, as clai+ed in his

co+plaint.

$"ons tells us that he did not 'now until after Elsers death that the +one" obtained fro+ 6" #iulion%

in the +anner alread" e(plained had been used to held finance the purchase of the #an uanEstate. )e see+s to have supposed that the Carried propert" had been +ort%a%ed to aid in puttin%

throu%h another deal, na+el", the purchase of a propert" referred to in the correspondence as the

Ron*uillo propert"= and in this connection a letter of Elser of the latter part of Ma", /402, can be

*uoted in which he uses this lan%ua%eD

As stated in cable%ra+ ! have arran%ed for P12,222 loan on Carriedo propert". &ill use part

of the +one" for Ron*uillo bu" @P52,222 if the owner co+es throu%h.

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3ther correspondence shows that Elser had apparentl" been tr"in% to bu" the Ron*uillo propert",

and $"ons leads us to infer that he thou%ht that the +one" obtained b" +ort%a%in% the Carriedo

propert" had been used in the purchase of this propert". !t doubtedless appeared so to hi+ in the

retrospect, but certain consideration show that he was inattentive to the contents of the *uotation

fro+ the letter above %iven. )e had alread" been infor+ed that, althou%h Elser was an%lin% for the

Ron*uillo propert", its price had %one up, thus introducin% a doubt as to whether he could %et it= andthe *uotation above %iven shows that the intended use of the +one" obtained b" +ort%a%in% the

Carriedo propert" was that onl" part of the P12,222 thus obtained would be used in this wa", if the

deal went throu%h. Naturall", upon the arrival of $"ons in #epte+ber, /402, one of his first in*uiries

would have been, if he did not 'now before, what was the status of the proposed trade for the

Ron*uillo propert".

Elsers widow and one of his cler's testified that about une /1, /402, Elser cabled $"ons so+ethin%

to this effect=D ! have +ort%a%ed the propert" on Carriedo #treet, secured b" +" personal note.

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The appellee insist that the trial court co++itted error in ad+ittin% the testi+on" of $"ons upon

+atters that passed between hi+ and Elser while the latter was still alive. &hile the ad+ission of this

testi+on" was of *uestionable propriet", an" error +ade b" the trial court on this point was error

without in9ur", and the deter+ination of the *uestion is not necessar" to this decision. &e therefore

pass the point without further discussion.

The 9ud%+ent appealed fro+ will be affir+ed, and it is so ordered, with costs a%ainst the appellant.

Avancea, C.J., Jonson, !alcol", #illa"or, #illa$%eal and "perial, JJ., concr.

Republic of the Philippines

SUPREME COURTManila

EN BANC

G.R. No. L-4935 Ma) 2, 1954

. M. TUSON / CO., 0NC., r"r"&"($"+ ) $ Ma(a( PRTNER, GREGOR0 RNET,0NC.,plaintiff-appellee,vs.

U0R0NO OLOS,defendant-appellant.

Araneta and Araneta for appellee.

Jose A. Bendia for appellant.

REYES, J.8

This is an action ori%inall" brou%ht in the Court of irst !nstance of Ri?al, ue?on Cit" Branch, to

recover possesion of re%istered land situated in barrio Tatalon, ue?on Cit".

Plaintiffs co+plaint was a+ended three ti+es with respect to the e(tent and description of the land

sou%ht to be recovered. The ori%inal co+plaint described the land as a portion of a lot re%istered in

plaintiffs na+e under Transfer Certificate of Title No. 8;575 of the land record of Ri?al Province and

as containin% an area of /8 hectares +ore or less. But the co+plaint was a+ended b" reducin% the

area of 5 hectares, +ore or less, after the defendant had indicated the plaintiffs surve"ors the

portion of land clai+ed and occupied b" hi+. The second a+end+ent beca+e necessar" and was

allowed followin% the testi+on" of plaintiffs surve"ors that a portion of the area was e+braced in

another certificate of title, which was plaintiffs Transfer Certificate of Title No. 8;5;;. And still later, inthe course of trial, after defendants surve"or and witness, uirino eria, had testified that the area

occupied and clai+ed b" defendant was about /8 hectares, as shown in his E(hibit /, plaintiff a%ain,

with the leave of court, a+ended its co+plaint to +a'e its alle%ations confor+ to the evidence.

:efendant, in his answer, sets up prescription and title in hi+self thru open, continuous, e(clusive

and public and notorious possession @of land in dispute under clai+ of ownership, adverse to the

entire world b" defendant and his predecessor in interest fro+ ti+e in-+e+orial. The answer

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further alle%es that re%istration of the land in dispute was obtained b" plaintiff or its predecessors in

interest thru fraud or error and without 'nowled%e @of or interest either personal or thru publication

to defendant andFor predecessors in interest. The answer therefore pra"s that the co+plaint be

dis+issed with costs and plaintiff re*uired to reconve" the land to defendant or pa" its value.

After trial, the lower court rendered 9ud%+ent for plaintiff, declarin% defendant to be without an" ri%htto the land in *uestion and orderin% hi+ to restore possession thereof to plaintiff and to pa" the latter

a +onthl" rent of P/80.50 fro+ anuar", /4>2, until he vacates the land, and also to pa" the costs.

Appealin% directl" to this court because of the value of the propert" involved, defendant +a'es the

followin% assi%n+ent or errorsD

!. The trial court erred in not dis+issin% the case on the %round that the case was not brou%ht

b" the real propert" in interest.

!!. The trial court erred in ad+ittin% the third a+ended co+plaint.

!!!. The trial court erred in den"in% defendants +otion to stri'e.

!G. The trial court erred in includin% in its decision land not involved in the liti%ation.

G. The trial court erred in holdin% that the land in dispute is covered b" transfer certificates of

Title Nos. 8;575 and 8;5;;.

Gl. The trial court erred in not findin% that the defendant is the true and lawful owner of the

land.

G!!. The trial court erred in findin% that the defendant is liable to pa" the plaintiff the a+ountof P/80.50 +onthl" fro+ anuar", /4>2, until he vacates the pre+ises.

G!!!. The trial court erred in not orderin% the plaintiff to reconve" the land in liti%ation to the

defendant.

As to the first assi%ned error, there is nothin% to the contention that the present action is not brou%ht

b" the real part" in interest, that is, b" . M. Tuason and Co., !nc. &hat the Rules of Court re*uire is

that an action be brou%ht in te na"e of,but not necessaril" (y, the real part" in interest. @#ection 0,

Rule 0. !n fact the practice is for an attorne"-at-law to brin% the action, that is to file the co+plaint, in

the na+e of the plaintiff. That practice appears to have been followed in this case, since the

co+plaint is si%ned b" the law fir+ of Araneta and Araneta, counsel for plaintiff and co++enceswith the state+ent co+es now plaintiff, throu%h its undersi%ned counsel. !t is true that the

co+plaint also states that the plaintiff is represented herein b" its Mana%in% Partner Hre%orio

Araneta, !nc., another corporation, but there is nothin% a%ainst one corporation bein% represented

b" another person, natural or 9uridical, in a suit in court. The contention that Hre%orio Araneta, !nc.

can not act as +ana%in% partner for plaintiff on the theor" that it is ille%al for two corporations to

enter into a partnership is without +erit, for the true rule is that thou%h a corporation has no power

to enter into a partnership, it +a" nevertheless enter into a 9oint venture with another where the

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nature of that venture is in line with the business authori?ed b" its charter. @&"o+in%-!ndiana 3il

Has Co. vs. &eston, 72 A. $. R., /2>8, citin% 0 letcher C"c. of Corp., /270. There is nothin% in the

record to indicate that the venture in which plaintiff is represented b" Hre%orio Araneta, !nc. as its

+ana%in% partner is not in line with the corporate business of either of the+.

Errors !!, !!!, and !G, referrin% to the ad+ission of the third a+ended co+plaint, +a" be answered b"+ere reference to section > of Rule /;, Rules of Court, which sanctions such a+end+ent. !t readsD

#ec. >.A"end"ent to confor" to evidence. I &hen issues not raised b" the pleadin%s are

tried b" e(press or i+plied consent of the parties, the" shall be treated in all respects, as if

the" had been raised in the pleadin%s. #uch a+end+ent of the pleadin%s as +a" be

necessar" to cause the+ to confor+ to the evidence and to raise these issues +a" be +ade

upon +otion of an" part" at +" ti+e, even of the trial of these issues. !f evidence is ob9ected

to at the trial on the %round that it is not within the issues +ade b" the pleadin%s, the court

+a" allow the pleadin%s to be a+ended and shall be so freel" when the presentation of the

+erits of the action will be subserved thereb" and the ob9ectin% part" fails to satisf" the court

that the ad+ission of such evidence would pre9udice hi+ in +aintainin% his action or defenseupon the +erits. The court +a" %rant a continuance to enable the ob9ectin% part" to +eet

such evidence.

6nder this provision a+end+ent is not even necessar" for the purpose of renderin% 9ud%+ent on

issues proved thou%h not alle%ed. Thus, co++entin% on the provision, Chief ustice Moran sa"s in

this Rules of CourtD

6nder this section, A+erican courts have, under the New ederal Rules of Civil Procedure,

ruled that where the facts shown entitled plaintiff to relief other than that as'ed for, no

a+end+ent to the co+plaint is necessar", especiall" where defendant has hi+self raised the

point on which recover" is based, and that the appellate court treat the pleadin%s asa+ended to confor+ to the evidence, althou%h the pleadin%s were not actuall" a+ended. @!

Moran, Rules of Court, /410 ed., 874-842.

3ur conclusion therefore is that specification of error !!, !!!, and !G are without +erit..

$et us now pass on the errors G and G!. Ad+ittin%, thou%h his attorne", at the earl" sta%e of the trial,

that the land in dispute is that described or represented in E(hibit A and in E(hibit B enclosed in red

pencil with the na+e uirino BolaJos, defendant later chan%ed his law"er and also his theor" and

tried to prove that the land in dispute was not covered b" plaintiffs certificate of title. The evidence,

however, is a%ainst defendant, for it clearl" establishes that plaintiff is the re%istered owner of lot No.

>-B-8-C, situate in barrio Tatalon, ue?on Cit", with an area of 1,04;,>04.8 s*uare +eters, +ore orless, covered b" transfer certificate of title No. 8;575 of the land records of Ri?al province, and of lot

No. >-B->, situated in the sa+e barrio, havin% an area of ;>,;74 s*uare +eters, +ore or less,

covered b" transfer certificate of title No. 8;5;; of the land records of the sa+e province, both lots

havin% been ori%inall" re%istered on ul" 7, /4/> under ori%inal certificate of title No. ;81. The

identit" of the lots was established b" the testi+on" of Antonio Manahan and Ma%no austino,

witnesses for plaintiff, and the identit" of the portion thereof clai+ed b" defendant was established

b" the testi+on" of his own witness, uirico eria. The co+bined testi+on" of these three witnesses

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clearl" shows that the portion clai+ed b" defendant is +ade up of a part of lot >-B-8-C and +a9or on

portion of lot >-B->, and is well within the area covered b" the two transfer certificates of title alread"

+entioned. This fact also appears ad+itted in defendants answer to the third a+ended co+plaint.

As the land in dispute is covered b" plaintiffs Torrens certificate of title and was re%istered in /4/>,

the decree of re%istration can no lon%er be i+pu%ned on the %round of fraud, error or lac' of noticeto defendant, as +ore than one "ear has alread" elapsed fro+ the issuance and entr" of the decree.

Neither court the decree be collaterall" attac'ed b" an" person clai+in% title to, or interest in, the

land prior to the re%istration proceedin%s. @#oroJ%onvs. Ma'alintal,/>1 3ff. Ha?., 87/4. Nor could

title to that land in dero%ation of that of plaintiff, the re%istered owner, be ac*uired b" prescription or

adverse possession. @#ection >5, Act No. >45. Adverse, notorious and continuous possession under

clai+ of ownership for the period fi(ed b" law is ineffective a%ainst a Torrens title. @Galiente vs. ud%e

of C! of Tarlac,0etc., >1 3ff. Ha?., #upp. 4, p. >8. And it is li'ewise settled that the ri%ht to secure

possession under a decree of re%istration does not prescribed. @rancisco vs. Cru?, >8 3ff. Ha?.,

1/21, 1/24-1//2. A recent decision of this Court on this point is that rendered in the case ofJose

Alcantara et al., vs. !ariano et al., 40 Phil., ;45. This disposes of the alle%ed errors G and G!.

As to error G!!, it is clai+ed that Kthere was no evidence to sustain the findin% that defendant should

be sentenced to pa" plaintiff P/80.50 +onthl" fro+ anuar", /4>2, until he vacates the pre+ises.

But it appears fro+ the record that that reasonable co+pensation for the use and occupation of the

pre+ises, as stipulated at the hearin% was P/2 a +onth for each hectare and that the area occupied

b" defendant was /8.05/4 hectares. The total rent to be paid for the area occupied should therefore

be P/80.50 a +onth. !t is appears fro+ the testi+on" of . A. Araneta and witness E+i%dio

Tan9uatco that as earl" as /484 an action of e9ect+ent had alread" been filed a%ainst defendant. And

it cannot be supposed that defendant has been pa"in% rents, for he has been assertin% all alon% that

the pre+ises in *uestion have alwa"s been since ti+e i++e+orial in open, continuous, e(clusive

and public and notorious possession and under clai+ of ownership adverse to the entire world b"

defendant and his predecessors in interest. This assi%n+ent of error is thus clearl" without +erit.

Error No. G!!! is but a conse*uence of the other errors alle%ed and needs for further consideration.

:urin% the pendenc" of this case in this Court appellant, thru other counsel, has filed a +otion to

dis+iss alle%in% that there is pendin% before the Court of irst !nstance of Ri?al another action

between the sa+e parties and for the sa+e cause and see'in% to sustain that alle%ation with a cop"

of the co+plaint filed in said action. But an e(a+ination of that co+plaint reveals that appellants

alle%ation is not correct, for the pretended identit" of parties and cause of action in the two suits

does not appear. That other case is one for recover" of ownership, while the present one is for

recover" of possession. And while appellant clai+s that he is also involved in that order action

because it is a class suit, the co+plaint does not show that such is reall" the case. 3n the contrar", itappears that the action see's relief for each individual plaintiff and not relief for and on behalf of

others. The +otion for dis+issal is clearl" without +erit.

&herefore, the 9ud%+ent appealed fro+ is affir+ed, with costs a%ainst the plaintiff.

Paras, C.J., Pa(lo, Ben)*on, !onte"ayor, J)o, Batista An)elo, +a(rador, and Concepcion,

JJ.,concur.

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THIRD DIVISION

[G.R. No. 136448. November 3, 1999]

LIM TONG LIM,petitioner, vs.PHILIPPINE FISHING GEARIN!STRIES, IN"., respondent.

E " I S I O N

PANGANI#AN,J.$

A partnership may be deemed to exist among parties who agree to borrow money to pursue a

business and to divide the profits or osses that may arise therefrom! even if it is shown that they

have not "ontributed any "apita of their own to a #"ommon fund$# Their "ontribution may be in

the form of "redit or industry! not ne"essariy "ash or fixed assets$ %eing partners! they are aiabe for debts in"urred by or on behaf of the partnership$ The iabiity for a "ontra"t entered

into on behaf of an unin"orporated asso"iation or ostensibe "orporation may ie in a person who

may not have dire"ty transa"ted on its behaf! but reaped benefits from that "ontra"t$

T%e "&'e

In the &etition for Review on Certioraribefore us! 'im Tong 'im assais the November ()! *++,

De"ision of the -ourt of Appeas in -A./R -V 0*011!2*3whi"h disposed as foows4

5H6R67OR6! 2there being3 no reversibe error in the appeaed de"ision! the same is herebyaffirmed$2(3

The de"reta portion of the 8ue9on -ity Regiona Tria -ourt :RT-; ruing! whi"h was

affirmed by the -A! reads as foows4

5H6R67OR6! the -ourt rues4

*$ That paintiff is entited to the writ of preiminary atta"hment issued by this -ourt

on September (

($ That defendants are >ointy iabe to paintiff for the foowing amounts! sub>e"t to

the modifi"ations as hereinafter made by reason of the spe"ia and uni?ue fa"ts and

"ir"umstan"es and the pro"eedings that transpired during the tria of this "ase=

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a$ &@(!"ounted from September (

e$ -ost of suit$

5ith respe"t to the >oint iabiity of defendants for the prin"ipa obigation or for the

unpaid pri"e of nets and foats in the amount of &@(!but! upon agreement of the parties! and! to avoid further deterioration of the nets

during the penden"y of this "ase! it was ordered sod at pubi" au"tion for not ess

than &+

of &+

paintiff may be abe to se"ure in this "ase with the ownership and possession of the

nets and foats awarded and deivered by the sheriff to paintiff as the highest bidder in

the pubi" au"tion sae$ It has aso been noted that ownership of the nets 2was3 retained

by the paintiff unti fu payment 2was3 made as stipuated in the invoi"es= hen"e! in

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effe"t! the paintiff atta"hed its own properties$ It 2was3 for this reason aso that this

-ourt earier ordered the atta"hment bond fied by paintiff to guaranty damages to

defendants to be "an"eed and for the &+

of &+however! that the tota >udgment obigation as "omputed above woud amount to

ony &,0ust to award the ex"ess to the

defendants who are not entited to damages and who did not put up a singe "entavo to

raise the amount of &+

-ontra"t dated 7ebruary 1! *++

respondent fied a "oe"tion suit against -hua! ao and &etitioner 'im Tong 'im with a prayer

for a writ of preiminary atta"hment$ The suit was brought against the three in their "apa"ities as

genera partners! on the aegation that O"ean 8uest 7ishing -orporation was a nonexistent

"orporation as shown by a -ertifi"ation from the Se"urities and 6x"hange -ommission$2@3

OnSeptember (

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nets whi"h were in his possession$ &eter ao fied an Answer! after whi"h he was deemed to have

waived his right to "ross.examine witnesses and to present eviden"e on his behaf! be"ause of his

faiure to appear in subse?uent hearings$ 'im Tong 'im! on the other hand! fied an Answer with

-ounter"aim and -ross"aim and moved for the ifting of the 5rit of Atta"hment$ 2)3The tria

"ourt maintained the 5rit! and upon motion of private respondent! ordered the sae of the fishing

nets at a pubi" au"tion$ &hiippine 7ishing /ear Industries won the bidding and deposited with

the said "ourt the saes pro"eeds of &+On November *,! *++(! the tria "ourt rendered its De"ision! ruing that &hiippine 7ishing

/ear Industries was entited to the 5rit of Atta"hment and that -hua! ao and 'im! as genera

partners! were >ointy iabe to pay respondent$2,3

The tria "ourt rued that a partnership among 'im! -hua and ao existed based :*; on the

testimonies of the witnesses presented and :(; on a -ompromise Agreement exe"uted by the

three2+3in -ivi -ase No$ *0+(.EN whi"h -hua and ao had brought against 'im in the RT- of

Eaabon! %ran"h 1(! for :a; a de"aration of nuity of "ommer"ia do"uments= :b; a reformation

of "ontra"ts= :"; a de"aration of ownership of fishing boats= :d; an in>un"tion and :e; damages$2*

obigations! but that >oint iabiity "oud be presumed from the e?ua distribution of the profit andoss$2*(3

'im appeaed to the -ourt of Appeas :-A; whi"h! as aready stated! affirmed the RT-$

Ruing of the -ourt of Appeas

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In affirming the tria "ourt! the -A hed that petitioner was a partner of -hua and ao in a

fishing business and may thus be hed iabe as a su"h for the fishing nets and foats pur"hased by

and for the use of the partnership$ The appeate "ourt rued4

The eviden"e estabishes that a the defendants in"uding herein appeant 'im Tong 'im

undertooC a partnership for a spe"ifi" undertaCing! that is for "ommer"ia fishing x x

x$ Obviousy! the utimate undertaCing of the defendants was to divide the profits among

themseves whi"h is what a partnership essentiay is x x x$ %y a "ontra"t of partnership! two or

more persons bind themseves to "ontribute money! property or industry to a "ommon fund with

the intention of dividing the profits among themseves :Arti"e *1)1! New -ivi -ode;$2*3

Hen"e! petitioner brought this re"ourse before this -ourt$2*03

T%e I''*e'

In his &etition and Eemorandum! 'im asCs this -ourt to reverse the assaied De"ision on the

foowing grounds4

I TH6 -ORT O7 A&&6A'S 6RR6D IN HO'DIN/! %AS6D ON A

-OE&ROEIS6 A/R66E6NT THAT -HA! AO AND &6TITION6R 'IE

6NT6R6D INTO IN A S6&ARAT6 -AS6! THAT A &ARTN6RSHI& A/R66E6NT

6JIST6D AEON/ TH6E$

II SIN-6 IT 5AS ON' -HA 5HO R6&R6S6NT6D THAT H6 5AS A-TIN/

7OR O-6AN 86ST 7ISHIN/ -OR&ORATION 5H6N H6 %O/HT TH6N6TS 7ROE &HI'I&&IN6 7ISHIN/! TH6 -ORT O7 A&&6A'S 5AS

NGSTI7I6D IN IE&TIN/ 'IA%I'IT TO &6TITION6R 'IE AS 56''$

III TH6 TRIA' -ORT IE&RO&6R' ORD6R6D TH6 S6IKR6 AND

ATTA-HE6NT O7 &6TITION6R 'IES /OODS$

In determining whether petitioner may be hed iabe for the fishing nets and foats

pur"hased from respondent! the -ourt must resove this Cey issue4 whether by their a"ts! 'im!

-hua and ao "oud be deemed to have entered into a partnership$

T%+' "o*r)' R*+-

The &etition is devoid of merit$

F+r') &-/ Se(o-/ I''*e'$Existence of a Partnership and Petitioner's Liability

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In arguing that he shoud not be hed iabe for the e?uipment pur"hased from respondent!

petitioner "ontroverts the -A finding that a partnership existed between him! &eter ao and

Antonio -hua$ He asserts that the -A based its finding on the -ompromise Agreement

aone$ 7urthermore! he dis"aims any dire"t parti"ipation in the pur"hase of the nets! aeging that

the negotiations were "ondu"ted by -hua and ao ony! and that he has not even met the

representatives of the respondent "ompany$ &etitioner further argues that he was a essor! not a

partner! of -hua and ao! for the #-ontra"t of 'ease# dated 7ebruary *! *++

merey eased to the two the main asset of the purported partnership .. the fishing boatF/B

Lourdes.The ease was for six months! with a monthy renta of &1!@

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:); That be"ause of the unavaiabiity of funds! Gesus 'im again extended a oan to the

partnership in the amount of &* miion se"ured by a "he"C! be"ause of whi"h! ao

and -hua entrusted the ownership papers of two other boats! -huasFB Lady Anne

Mel and aosFB Tracy to 'im Tong 'im$

:1; That in pursuan"e of the business agreement! &eter ao and Antonio -hua bought

nets from Respondent &hiippine 7ishing /ear! in behaf of #O"ean 8uest 7ishing

-orporation!# their purported business name$

:,; That subse?uenty! -ivi -ase No$ *0+(.EN was fied in the Eaabon RT-!

%ran"h 1( by Antonio -hua and &eter ao against 'im Tong 'im for :a; de"aration

of nuity of "ommer"ia do"uments= :b; reformation of "ontra"ts= :"; de"aration of

ownership of fishing boats= :0; in>un"tion= and :e; damages$

:+; That the "ase was ami"aby setted through a -ompromise Agreement exe"uted

between the parties.itigants the terms of whi"h are aready enumerated above$

7rom the fa"tua findings of both ower "ourts! it is "ear that -hua! ao and 'im had

de"ided to engage in a fishing business! whi"h they started by buying boats worth &$@ miion!

finan"ed by a oan se"ured from Gesus 'im who was petitioners brother$ In their -ompromise

Agreement! they subse?uenty reveaed their intention to pay the oan with the pro"eeds of the

sae of the boats! and to divide e?uay among them the ex"ess or oss$These boats! the pur"hase

and the repair of whi"h were finan"ed with borrowed money! fe under the term "ommon fund

under Arti"e *1)1$ The "ontribution to su"h fund need not be "ash or fixed assets= it "oud be an

intangibe iCe "redit or industry$ That the parties agreed that any oss or profit from the sae and

operation of the boats woud be divided e?uay among them aso shows that they had indeed

formed a partnership$

Eoreover! it is "ear that the partnership extended not ony to the pur"hase of the boat! but

aso to that of the nets and the foats$ The fishing nets and the foats! both essentia to fishing!

were obviousy a"?uired in furtheran"e of their business$ It woud have been in"on"eivabe for

'im to invove himsef so mu"h in buying the boat but not in the a"?uisition of the aforesaid

e?uipment! without whi"h the business "oud not have pro"eeded$

/iven the pre"eding fa"ts! it is "ear that there was! among petitioner! -hua and ao! a

partnership engaged in the fishing business$ They pur"hased the boats! whi"h "onstituted the

main assets of the partnership! and they agreed that the pro"eeds from the saes and operations

thereof woud be divided among them$

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5e stress that under Rue 0@! a petition for review iCe the present "ase shoud invove ony

?uestions of aw$ Thus! the foregoing fa"tua findings of the RT- and the -A are binding on this

-ourt! absent any "ogent proof that the present a"tion is embra"ed by one of the ex"eptions to the

rue$2*)3In assaiing the fa"tua findings of the two ower "ourts! petitioner effe"tivey goes

beyond the bounds of a petition for review under Rue 0@$

Compromise Agreement Not the ole !asis of Partnership

&etitioner argues that the appeate "ourts soe basis for assuming the existen"e of a

partnership was the -ompromise Agreement$ He aso "aims that the settement was entered into

ony to end the dispute among them! but not to ad>udi"ate their preexisting rights and

obigations$ His arguments are baseess$ The Agreement was but an embodiment of the

relationship etant among the parties prior to its eecution.

A proper ad>udi"ation of "aimants rights mandates that "ourts must review and thoroughy

appraise a reevant fa"ts$ %oth ower "ourts have done so and have found! "orre"ty! a

preexisting partnership among the parties$ In impying that the ower "ourts have de"ided on the

basis of one pie"e of do"ument aone! petitioner fais to appre"iate that the -A and the RT-

deved into the history of the do"ument and expored a the possibe "onse?uentia "ombinations

in harmony with aw! ogi" and fairness$ Veriy! the two ower "ourts fa"tua findings mentioned

above nuified petitioners argument that the existen"e of a partnership was based ony on the

-ompromise Agreement$

Petitioner "as a Partner, Not a Lessor

5e are not "onvin"ed by petitioners argument that he was merey the essor of the boats to

-hua and ao! not a partner in the fishing venture$ His argument aegedy finds support in the

-ontra"t of 'ease and the registration papers showing that he was the owner of the boats!

in"udingF/B Lourdeswhere the nets were found$

His aegation defies ogi"$ In effe"t! he woud iCe this -ourt to beieve that he "onsented to

the sae of his ownboats to pay a debt of Chua and !ao! with the ex"ess of the pro"eeds to be

divided among the three of them$ No essor woud do what petitioner did$ Indeed! his "onsent to

the sae proved that there was a preexisting partnership among a three$

Veriy! as found by the ower "ourts! petitioner entered into a business agreement with -hua

and ao! in whi"h debts were undertaCen in order to finan"e the a"?uisition and the upgrading of

the vesses whi"h woud be used in their fishing business$ The sae of the boats! as we as the

division among the three of the baan"e remaining after the payment of their oans! proves

beyond "avi thatF/B Lourdes! though registered in his name! was not his own property but an

asset of the partnership$ It is not un"ommon to register the properties a"?uired from a oan in the

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name of the person the ender trusts! who in this "ase is the petitioner himsef$ After a! he is the

brother of the "reditor! Gesus 'im$

5e stress that it is unreasonabe indeed! it is absurd .. for petitioner to se his property to

pay a debt he did not in"ur! if the reationship among the three of them was merey that of essor.

essee! instead of partners$

Corporation by Estoppel

&etitioner argues that under the do"trine of "orporation by estoppe! iabiity "an be imputed

ony to -hua and ao! and not to him$ Again! we disagree$

Se"tion (* of the -orporation -ode of the &hiippines provides4

Se"$ (*$ Corporation by estoppel$ . A persons who assume to a"t as a "orporation

Cnowing it to be without authority to do so sha be iabe as genera partners for a

debts! iabiities and damages in"urred or arising as a resut thereof4"ro#ided

howe#er$ That when any su"h ostensibe "orporation is sued on any transa"tion

entered by it as a "orporation or on any tort "ommitted by it as su"h! it sha not be

aowed to use as a defense its a"C of "orporate personaity$

One who assumes an obigation to an ostensibe "orporation as su"h! "annot resist

performan"e thereof on the ground that there was in fa"t no "orporation$

Thus! even if the ostensibe "orporate entity is proven to be egay nonexistent! a party may

be estopped from denying its "orporate existen"e$ The reason behind this do"trine is obvious . an

unin"orporated asso"iation has no personaity and woud be in"ompetent to a"t and appropriate

for itsef the power and attributes of a "orporation as provided by aw= it "annot "reate agents or

"onfer authority on another to a"t in its behaf= thus! those who a"t or purport to a"t as its

representatives or agents do so without authority and at their own risC$ And as it is an eementary

prin"ipe of aw that a person who a"ts as an agent without authority or without a prin"ipa is

himsef regarded as the prin"ipa! possessed of a the right and sub>e"t to a the iabiities of a

prin"ipa! a person a"ting or purporting to a"t on behaf of a "orporation whi"h has no vaid

existen"e assumes su"h privieges and obigations and be"omes personay iabe for "ontra"tsentered into or for other a"ts performed as su"h agent$2*13

The do"trine of "orporation by estoppe may appy to the aeged "orporation and to a third

party$ In the first instan"e! an unin"orporated asso"iation! whi"h represented itsef to be a

"orporation! wi be estopped from denying its "orporate "apa"ity in a suit against it by a third

person who reied in good faith on su"h representation$ It "annot aege a"C of personaity to be

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sued to evade its responsibiity for a "ontra"t it entered into and by virtue of whi"h it re"eived

advantages and benefits$

On the other hand! a third party who$ %nowing an association to be unincorporated$

nonetheless treated it as a corporation and recei#ed benefits from it$ may be barred from denying

its corporate eistence in a suit brought against the alleged corporation.In su"h "ase! a those

who benefited from the transa"tion made by the ostensibe "orporation! despite Cnowedge of its

ega defe"ts! may be hed iabe for "ontra"ts they impiedy assented to or tooC advantage of$

There is no dispute that the respondent! &hiippine 7ishing /ear Industries! is entited to be

paid for the nets it sod$ The ony ?uestion here is whether petitioner shoud be hed

>ointy2*,3iabe with -hua and ao$ &etitioner "ontests su"h iabiity! insisting that ony those who

deat in the name of the ostensibe "orporation shoud be hed iabe$ Sin"e his name does not

appear on any of the "ontra"ts and sin"e he never dire"ty transa"ted with the respondent

"orporation! ergo! he "annot be hed iabe$

n?uestionaby! petitioner benefited from the use of the nets found insideF/B Lourdes$ the

boat whi"h has earier been proven to be an asset of the partnership$ He in fa"t ?uestions the

atta"hment of the nets! be"ause the 5rit has effe"tivey stopped his use of the fishing vesse$

It is diffi"ut to disagree with the RT- and the -A that 'im! -hua and ao de"ided to form a

"orporation$ Athough it was never egay formed for unCnown reasons! this fa"t aone does not

pre"ude the iabiities of the three as "ontra"ting parties in representation of it$ -eary! under the

aw on estoppe! those a"ting on behaf of a "orporation and those benefited by it! Cnowing it to

be without vaid existen"e! are hed iabe as genera partners$

Te"hni"ay! it is true that petitioner did not directlyacton behaf of the

"orporation$&owe#er$ ha#ing reaped the benefits of the contract entered into by persons with

whom he pre#iously had an eisting relationship$ he is deemed to be part of said association and

is co#ered by the scope of the doctrine of corporation by estoppel. 5e reiterate the ruing of the

-ourt inAlonso #. 'illamor42*+3

A itigation is not a game of te"hni"aities in whi"h one! more deepy s"hooed and

sCied in the subte art of movement and position ! entraps and destroys the other$ It

is! rather! a "ontest in whi"h ea"h "ontending party fuy and fairy ays before the"ourt the fa"ts in issue and then! brushing aside as whoy trivia and inde"isive a

imperfe"tions of form and te"hni"aities of pro"edure! asCs that >usti"e be done upon

the merits$ 'awsuits! uniCe dues! are not to be won by a rapiers thrust$ Te"hni"aity!

when it deserts its proper offi"e as an aid to >usti"e and be"omes its great hindran"e

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LITONJUA SHIPPINAEN"Y, IN"., EDDIE K.LITONJUA SHIPPIN "O.,IN"., LITONJUA

SE"URITIES, IN".$%or&er'( E. K. Liton)u*Se+, LUNETA THEATER,IN"., E L REALTY,$%or&er'( E L INTLSHIPPIN "ORP., NP"O., IN"., HO!EENTERPRISES, IN".,BEAU!ONT DEV. REALTY"O., IN"., LOED LAND

"ORP., E/UITY TRADIN"O., IN"., 0D "ORP., LDEV. "ORP, L"!THEATRI"ALENTERPRISES, IN".,LITONJUA SHIPPIN "O.IN"., !A"OIL IN"., ODEONREALTY "ORP., SARATOAREALTY, IN"., A"T

THEATER IN". $%or&er'(ener*' T1e*tri+*' i'&E2+1*n3e, IN"., AVENUEREALTY, IN"., AVENUETHEATER, IN". *n4 LVPHILIPPINES, IN".,$or&er'( VPHILIPPINES,

Res5on4ents.

/AR-IA! GG$

&romugated4

De"ember *! (

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In this petition for review under Rule 45 of the Rules of Court,

petitioner Aurelio K. Litonjua, Jr. seeks to nullify and set aside the

e!ision of the Court of Appeals "CA# dated $ar!h %&, '((4)&*in

!onsolidated !ases C.A. G.R. Sp. No. 76987and C.A. G.R. SP. No78774and its Resolution dated e!e+er (-, '((4,)'*denyin

petitioners +otion for re!onsideration.

/he re!ourse is !ast aainst the followin fa!tual a!kdrop0

1etitioner Aurelio K. Litonjua, Jr. "Aurelio# and herein respondent

2duardo K. Litonjua, 3r. "2duardo# are rothers. /he leal dispute

etween the+ started when, on e!e+er 4, '((', in the

Reional /rial Court "R/C# at 1asi City, Aurelio led a suit aainst

his rother 2duardo and herein respondent Roert /. an "an#

and several !orporations for spe!i! perfor+an!e and a!!ountin.

In his !o+plaint,)%*do!keted as Civil Case 6o. 78'%5 and

eventually ra9ed to :ran!h 7; of the !ourt, )4*Aurelio alleed that,

sin!e June &8-%, he and 2duardo are into a joint

venturepanded thru invest+ent in Cineple>, In!., LC$

/heatri!al 2nterprises, =deon Realty Corporation "operator of=deon I and II theatres#, Avenue Realty, In!., owner of lands and

uildins, a+on other !orporations. an is des!ried in the

!o+plaint as petitioners and 2duardos partner in their =deon

/heater invest+ent.)5*/he sa+e !o+plaint also !ontained the

followin +aterial aver+ents0$oint venturepartnership for the "ontinuation of their famiy business

and "ommon famiy funds $

$oint venture2partnership3 agreement was "ontained in a

memorandum addressed by 6duardo to his sibings! parents and other

reatives.-opy of this memorandum is atta"hed hereto and made an

integra part as A--e5 A and the portion referring to 2Aureio3

submarCed as A--e5 A21$

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$oint venturepartnership 2but these

demands for "ompete a""ounting and i?uidation were not heeded3$

xxx xxx xxx

@$

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?or ease of referen!e, Anne>A-1of the !o+plaint, whi!h

petitioner asserts to have een +eant for hi+ y his rother

2duardo, pertinently reads0

*ua34ou have now your own ife to ive after having been married$ $

I am trying my best to mod you the way I worC so you "an foow the

pattern $ ou wi be the ony one eft with the "ompany! among us

brothers and I wi asC you to stay as I want you to run this offi"e every

time I am away$ I want you to run it the way I am trying to run it be"ause

I wi be a aone and I wi depend entirey to you :si";$ Ey sons wi

not be ready to hep me yet unti about maybe *@(< years from now$

5hatever is eft in the "orporation! I wi maCe sure that you get ON6

EI''ION &6SOS :&*!

I pass away! I want you to taCe "are of a of this$ ou Ceep my share for

my two sons are ready taCe over but give them the "han"e to run the

"ompany whi"h I have buit$

xxx xxx xxx

%e"ause you wi need a pa"e to stay! I wi arrange to give you first

ON6 HNDR6D THOSANDS &6SOS4 :&*

you in form of sto"Cs whi"h you "an Ceep$ This sto"C I assure you is

good and saeabe$ I wi aso gady give you the share of 5a"C.5a"C

and Vaey /of be"ause you have been good$ The rest wi be in sto"Cs

from a the "orporations whi"h I repeat! ten per"ent :*

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the a!tionale do!u+ent, i.., Anne>A-1,ein void under the

ter+s of Arti!le &-7- in relation to Arti!le &--% of the Civil

Code, in"ra.It is further alleed that whatever undertakin

2duardo areed to do, if any, under Anne>A-1,are unenfor!eale

under the provisions of the 3tatute of ?rauds.)-*

?or his part, an who was served with su++ons lon after the

other defendants su+itted their answer +oved to dis+iss on the

round, intr alia, that, as to hi+, petitioner has no !ause of

a!tion and the !o+plaint does not state any. );*1etitioner opposed

this +otion to dis+iss.

=n January &(, '((%, 2duardo, t al., led a #otion to Rsol$

A%rmati$ &"nss.[9]/o this +otion, petitioner interposed

an 'pposition (ith )*Part #otion to St th Cas "or Pr*trial.[10]

A!tin on the separate +otions i++ediately adverted to

aove, the trial !ourt, in an =+nius =rder dated $ar!h 5, '((%,

denied the a@r+ative defenses and, e>!ept for an, set the !ase

for pretrial on April &(, '((%.)&&*

In another =+nius =rder of April ', '((%, the sa+e !ourtdenied the +otion of 2duardo, t al., for re!onsideration)&'*and

ans +otion to dis+iss. /he followin then transpired insofar as

an is !on!erned0

*$ On Apri *0! (

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en!e, petitioners present re!ourse, on the !ontention that the

CA erred0

A$ 5hen it rued that there was no partnership "reated by the a"tionabedo"ument be"ause this was not a pubi" instrument and immovabe

properties were "ontributed to the partnership$

%$ 5hen it rued that the a"tionabe do"ument did not "reate a

demandabe right in favor of petitioner$

-$ 5hen it rued that the "ompaint stated no "ause of a"tion against

2respondent3 Robert ang= and

D$ 5hen it rued that petitioner has "hanged his theory on appea whena that &etitioner had done was to support his peaded "ause of a"tion by

another ega perspe"tiveargument$

/he petition la!ks +erit.

1etitioners de+and, as dened in the petitory portion of his

!o+plaint in the trial !ourt, is for delivery or pay+ent to hi+, as

2duardos and ans partner, of his partnership

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of prots and losses. :ein a for+ of partnership, a joint venture

is enerally overned y the law on partnership. )''*

/he underlyin issue that ne!essarily !o+es to +ind in this

pro!eedins is whether or not petitioner and respondent 2duardoare partners in the theatre, shippin and realty usiness, as one

!lai+s ut whi!h the other denies. And the issue earin on the

rst assined error relates to the Buestion of what leal provision

is appli!ale under the pre+ises, petitioner seekin, as it were, to

enfor!e the a!tionale do!u+ent Anne>A-1 whi!h he depi!ts

in his !o+plaint to e the !ontra!t of partnershipisten!e, or denin the for+al

reBuisites, of a partnership is indi!ated. ?ore+ost of these are the

followin provisions of the Civil Code0

Art$ *11*$ A partnership may be "onstituted in any form! ex"ept where

immovabe property or rea rights are "ontributed thereto! in whi"h "ase

a pubi" instrument sha be ne"essary$

Art$ *11($ 6very "ontra"t of partnership having a "apita of three

thousand pesos or more! in money or property! sha appear in a pubi"

instrument! whi"h must be re"orded in the Offi"e of the Se"urities and6x"hange -ommission$

7aiure to "ompy with the re?uirement of the pre"eding paragraph sha

not affe"t the iabiity of the partnership and the members thereof to third

persons$

Art$ *11$ A "ontra"t of partnership is void! whenever immovabe

property is "ontributed thereto! if an inventory of said property is not

made! signed by the parties! and atta"hed to the pubi" instrument$

Anne>A-1, on its fa!e, !ontains typewritten entries,

personal in tone, ut is unsined and undated. As an unsined

do!u+ent, there !an e no Builin that Anne>A-1does not

+eet the puli! instru+entation reBuire+ents e>a!ted under

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Arti!le &--& of the Civil Code. $oreover, ein unsined and

doutless referrin to a partnership involvin +ore than

1%,(((.(( in +oney or property, Anne>A-1!annot e presented

for notariEation, let alone reistered with the 3e!urities and

2>!hane Co++ission "32C#, as !alled for under the Arti!le &--'of the Code. And inas+u!h as the inventory reBuire+ent under

the su!!eedin Arti!le &--% oes into the +atter of validity when

i++ovale property is !ontriuted to the partnership, the ne>t

loi!al point of inBuiry turns on the nature of petitioners

!ontriution, if any, to the supposed partnership.

/he CA, addressin the foreoin Buery, !orre!tly stated that

petitioners !ontriution !onsisted of i++ovales and real rihts.

Frote that !ourt0

A further examination of the aegations in the "ompaint woud

show that 2petitioners3 "ontribution to the so."aed partnership>oint

venture was his supposed share in the famiy business that is "onsisting

of movie theaters! shipping and and deveopment under paragraph $oint venture "onsisted of immovabe properties and

rea rights$ $2(3

3ini!antly enouh, petitioner +atteroffa!tly !on!urred

with the appellate !ourts oservation that, pres!indin fro+ what

he hi+self alleed in his asi! !o+plaint, his !ontriution to the

partnership !onsisted of his share in the Litonjua fa+ily

usinesses whi!h owned variale i++ovale properties.

1etitioners assertion in his +otion for re!onsideration)'4*of the

CAs de!ision, that (hat (as to - !ontri-ut+ to th -usinss o"

th partnrship/ (as ptitionrs/ in+ustry an+ his shar in th

"amily thatr an+ lan+ +$lopmnt/ -usinssleaves no roo+

for spe!ulation as to what petitioner !ontriuted to the per!eived

partnership.

Lest it e overlooked, the !ontra!tvalidatin inventory

reBuire+ent under Arti!le &--% of the Civil Code applies as lon

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real property or real rihts are initially rouht into the

partnership. In short, it is really of no +o+ent whi!h of the

partners, or, in this !ase, who etween petitioner and his rother

2duardo, !ontriuted i++ovales. In !onte>t, the +ore i+portant

!onsideration is that real property was !ontriuted, in whi!h !asean inventory of the !ontriuted property duly sined y the

parties should e atta!hed to the puli! instru+ent, else there is

leally no partnership to speak of.

1etitioner, in an ovious id to evade the appli!ation of

Arti!le &--%, arues that the i++ovales in Buestion were not

!ontriuted, ut were a!Buired after the for+ation of the

supposed partnership. 6eedless to stress, the Court !annot

a!!ord !oen!y to this spe!ious aru+ent. ?or, as earlier stated,

petitioner hi+self ad+itted !ontriutin his share in the supposed

shippin, +ovie theatres and realty develop+ent fa+ily

usinesses whi!h already owned i++ovales even efore

Anne>A-1was alleedly e>e!uted.

Considerin thus the value and nature of petitioners alleed

!ontriution to the purported partnership, the Court, even if so

disposed, !annot plausily e>tend Anne>A-1the leal eDe!tsthat petitioner so desires and pleads to e iven. Anne>A-1, in

ne, !annot support the e>isten!e of the partnership sued upon

and souht to e enfor!ed. /he leal and fa!tual +ilieu of the

!ase !alls for this disposition. A partnership +ay e !onstituted in

any for+, save when i++ovale property or real rihts are

!ontriuted thereto or when the partnership has a !apital of at

least 1%,(((.((, in whi!h !ase a puli! instru+ent shall e

ne!essary.

)'5*

And if only to stress what has repeatedly eenarti!ulated, an inventory to e sined y the parties and atta!hed

to the puli! instru+ent is alsoindispensale to the validity of the

partnership whenever i++ovale property is !ontriuted to it.

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Given the foreoin perspe!tive, what the appellate !ourt

wrote in its assailed e!ision)'7*aout the proative value and

leal eDe!t of Anne>A-1!o++ends itself for !on!urren!e0

-onsidering that the aegations in the "ompaint showed that 2petitioner3"ontributed immovabe properties to the aeged partnership! the Eemorandum

:Annex A of the "ompaint; whi"h purports to estabish the said

partnership>oint venture is NOT a pubi" instrument and there was NO

inventory of the immovabe property duy signed by the parties$ As su"h! the

said Eemorandum is nu and void for purposes of estabishing the existen"e of

a vaid "ontra"t of partnership$ Indeed! be"ause of the faiure to "ompy with

the essentia formaities of a vaid "ontra"t! the purported partnership>oint

venture is egay inexistent and it produ"es no effe"t whatsoever$ Ne"essariy! a

void or egay inexistent "ontra"t "annot be the sour"e of any "ontra"tua or

ega right$ A""ordingy! the aegations in the "ompaint! in"uding thea"tionabe do"ument atta"hed thereto! "eary demonstrates that 2petitioner3 has

NO vaid "ontra"tua or ega right whi"h "oud be vioated by the 2individua

respondents3 herein$ As a "onse?uen"e! 2petitioners3 "ompaint does NOT state

a vaid "ause of a"tion be"ause NOT a the essentia eements of a "ause of

a"tion are present$ :nders"oring and words in bra"Cet added$;

Likewise welltaken are the followin !o+ple+entary e>!erpts

fro+ the CAs eBually assailed Resolution of e!e+er -,

'((4)'-*denyin petitioners +otion for re!onsideration07urther! 5e "on"ude that despite garing defe"ts in the aegations in the

"ompaint as we as the a"tionabe do"ument atta"hed thereto :Roo! p$

*+*;! the 2tria3 "ourt did not appre"iate and appy the ega provisions

whi"h were brought to its attention by herein 2respondents3 in the their

peadings$ In our evauation of 2petitioners3 "ompaint! the atter

aeged inter aliato have "ontributed immovabe properties to the

aeged partnership but the a"tionabe do"ument is not a pubi" do"ument

and there was no inventory of immovabe properties signed by theparties$ %oth the aegations in the "ompaint and the a"tionabe

do"uments "onsidered! it is "rysta "ear that 2petitioner3 has no vaid or

ega right whi"h "oud be vioated by 2respondents3$ :5ords in bra"Cet

added$;

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Hnder the se!ond assined error, it is petitioners posture that

Anne>A-1, assu+in its ine@!a!y or nullity as a partnership

do!u+ent, nevertheless !reated de+andale rihts in his

favor. As petitioner su!!in!tly puts it in this petition0

0$ -ontrariwise! this a"tionabe do"ument! espe"iay its above.?uoted

provisions! estabished an a"tionabe "ontra"t even though it may not be

a partnership$ This a"tionabe "ontra"t is what is Cnown as an innominate

"ontra"t :-ivi -ode! Arti"e *perien!ed a

reversal of fortune thereat as an afterthouht. /he appellate

!ourt, however, !annot really e faulted for not yieldin to

petitioners duious stratae+ of alterin his theory of joint

venture

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an impied admission that the very theory he himsef has adopted! fied

and prose"uted before the respondent "ourt is erroneous$

%e that as it may $ $ 5e hod that this new theory "ontravenes 2petitioners3

theory of the a"tionabe do"ument being a partnership do"ument$ If

anything! it is so obvious we do have to test the suffi"ien"y of the "auseof a"tion on the basis of partnership aw xxx$2(+3:6mphasis in the

origina= 5ords in bra"Cet added;$

:ut even assu+in in ratia arumnti that Anne>A-1partakes

of a perfe!ted inno+inate !ontra!t, petitioners !o+plaint would

still e dis+issile as aainst 2duardo and, +ore so, aainst an.

It !annot e overe+phasiEed that petitioner points to 2duardo as

the author of Anne>A-1. Fithal, even on this !onsideration alone,

petitioners !lai+ aainst an is doo+ed fro+ the very start.

As it were, the only portion of Anne>A-1whi!h !ould perhaps e

re+otely rearded as vestin petitioner with a riht to de+and

fro+ respondent 2duardo the oservan!e of a deter+inate

!ondu!t, reads0

xxx ou wi be the ony one eft with the "ompany! among us brothers and I

wi asC you to stay as I want you to run this offi"e everytime I am away$I want you to run it the way I am trying to run it be"ause I wi be aone

and I wi depend entirey to you! Ey sons wi not be ready to hep me

yet unti about maybe *@(< years from now$ 5hatever is eft in the

"orporation! I wi maCe sure that you get ON6 EI''ION &6SOS

:&*!

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frauds, an aree+ent that y its ter+s is not to e

perfor+ed within a year fro+ the +akin thereof shall e

unenfor!eale y a!tion, unless the sa+e, or so+e note or

+e+orandu+ thereof, e in writin and sus!ried y the

party !hared. Corollarily, no a!tion !an e proved unlessthe reBuire+ent e>a!ted y the statute of frauds is !o+plied

with.)%&*

Lest it e overlooked, petitioner is the intended ene!iary of the

1& $illion or &( eBuity of the fa+ily usinesses supposedly

pro+ised y 2duardo to ive in the near future. Any

suestion that the stated a+ount or the eBuity !o+ponent

of the pro+ise was intended to o to a !o++on fund would

e to read so+ethin not written inAnne2

A-1. /hus, even

this anle alone arues aainst the very idea of a

partnership, the!reation of whi!h reBuires two or +ore

!ontra!tin +inds +utually areein to !ontriute +oney,

property or industryto a !o++on fund with the intention of

dividin the prots etween or a+on the+selves.)%'*

In su+ then, the Court rules, as did the CA, that petitioners

!o+plaint for spe!i! perfor+an!e an!hored on an a!tionale

do!u+ent of partnership whi!h is leally ine>istent or void or, at

est, unenfor!eale does not state a !ause of a!tion as aainstrespondent 2duardo and the !orporate defendants. And if no of

a!tion !an su!!essfully e +aintained aainst respondent

2duardo e!ause no valid partnership e>isted etween hi+ and

petitioner, the Court !annot see its way !lear on how the sa+e

a!tion !ould plausily prosper aainst an. 3urely, an !ould

not have e!o+e a partner in, or !ould not have had any for+ of

usiness relationship with, an ine>istent partnership.

As +ay e noted, petitioner has not, in his !o+plaint, provide the

loi!al ne>us that would tie an to hi+ as his partner. In fa!t,

attendant !ir!u+stan!es would indi!ate the !ontrary. Consider0

*$ &etitioner asserted in his "ompaint that his so."aed >oint

venturepartnership with 6duardo was for the "ontinuation of their famiy

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business and "ommon famiy funds whi"h were theretofore being mainy

managed by 6duardo$ 23%ut ang denies Cinship with the 'iton>ua famiy and

petitioner has not disputed the dis"aimer$

($ In some detai! petitioner mentioned what he had "ontributed to the >oint

venturepartnership with 6duardo and what his share in the businesses wi be$

No aegation is made whatsoever about what ang "ontributed! if any! et aone

his proportiona share in the profits$ %ut su"h aegation "annot! however! be

made be"ause! as apty observed by the -A! the a"tionabe do"ument did not

"ontain su"h provision! et aone mention the name of ang$ How! indeed!

"oud a person be "onsidered a partner when the do"ument purporting to

estabish the partnership "ontra"t did not even mention his name$

$ &etitioner states in par$ ($

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-eary! 2petitioners3 "aim against ang arose from his aeged

partnership with petitioner and the respondent$ However! there was NO

aegation in the "ompaint whi"h dire"ty aeged how the supposed

"ontra"tua reation was "reated between 2petitioner3 and ang$ Eore

importanty! however! the foregoing ruing of this -ourt that the

purported partnership between 26duardo3 is void and egay inexistentdire"ty affe"ts said "aim against ang$ Sin"e 2petitioner3 is trying to

estabish his "aim against ang by inCing him to the egay inexistent

partnership $ $ $ su"h attempt had be"ome futie be"ause there was

NOTHIN/ that woud "ontra"tuay "onne"t 2petitioner3 and ang$ To

estabish a vaid "ause of a"tion! the "ompaint shoud have a statement

of fa"t upon whi"h to "onne"t 2respondent3 ang to the aeged

partnership between 2petitioner3 and respondent 26duardo3! in"uding

their aeged investment in the Odeon Theater$ A statement of fa"ts on

those matters is pivota to the "ompaint as they woud "onstitute the

utimate fa"ts ne"essary to estabish the eements of a "ause of a"tion

against ang$ 2@3

1ressin its point, the CA later stated in its resolution

denyin petitioners +otion for re!onsideration the followin0

xxx 5hatever the "ompaint "as it! it is the a"tionabe do"ument

atta"hed to the "ompaint that is "ontroing$ Suffi"e it to state! 5e have

not ignored the a"tionabe do"ument As a matter of fa"t! 5e emphasi9edin our de"ision that insofar as 2ang3 is "on"erned! he is not even

mentioned in the said a"tionabe do"ument$ 5e are therefore pu99ed

how a person not mentioned in a do"ument purporting to estabish a

partnership "oud be "onsidered a partner$2)3:5ords in bra"Cet ours;$

/he last issue raised y petitioner, referrin to whether or

not he !haned his theory of the !ase, as pere+ptorily

deter+ined y the CA, has een dis!ussed at lenth earlier and

need not detain us lon. 3u@!e it to say that after the CA has

ruled that the alleed partnership is ine>istent, petitioner took a

diDerent ta!k. /hus, fro+ a joint venture

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whether or not to pursue theoriinal !ause of a!tion or altoether

aandonin the sa+e, thus0

*($ In"identay! assuming that the a"tionabe do"ument "reated a partnership

between 2respondent3 6duardo! Sr$ and 2petitioner3! no immovabes were"ontributed to this partnership$ xxx

*0$ A tod! the De"ision taCes off from a fase premise that the

a"tionabe do"ument atta"hed to the "ompaint does not estabish a

"ontra"tua reationship between 2petitioner3 and 6duardo! Sr$ and

Roberto T ang simpy be"ause his do"ument does not "reate a

partnership or a >oint venture$ This is a myopi" reading of the a"tionabe

do"ument$

1er the Courts own !ount, petitioner used in his !o+plaint the

+i>ed words0oint $ntur1partnrshipnineteen "&8# ti+es and

the ter+partnrfour "4# ti+es. e +ade referen!e to the la( o"

0oint $ntur1partnrship -in appli!a-l/ to th -usinss

rlationship -t(n him/, E+uar+o an+ 2o--y 3an/ and to

hisrihts in all sp!i! proprtis o" thir 0oint

$ntur1partnrship. Given this !onsideration, petitioners riht of

a!tion aainst respondents 2duardo and an doutless pivots on

the e>isten!e of the partnership etween the three of the+, aspurportedly eviden!ed y the undated and unsined Anne>A-1.

A void Anne> A&, as an a!tionale do!u+ent of partnership,

would strip petitioner of a !ause of a!tion under the pre+ises. A

!o+plaint for delivery and a!!ountin of partnership property

ased on su!h void or leally none>istent a!tionale do!u+ent is

dis+issile for failure to state of a!tion. 3o, in ist, said the Court

of Appeals. /he Court arees.

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THIRD DIVISION

[G.R. No. 1167. &-*&r 7, 1999]

AFIS"O INS!RAN"E "ORPORATION """ INS!RAN"E

"ORPORATION "HARTER INS!RAN"E "O., IN". "I#ELES

INS!RAN"E "ORPORATION "OMMON0EALTH INS!RAN"E

"OMPAN: "ONSOLIATE INS!RAN"E "O., IN".

E;ELOPMENT INS!RAN"E < S!RET: "ORPORATION

OMESTI" INS!RAN"E "OMPAN: OF THE PHILIPPINES

EASTERN ASS!RAN"E "OMPAN: < S!RET: "ORP. EMPIRE

INS!RAN"E "OMPAN: E=!ITA#LE INS!RAN"E

"ORPORATION FEERAL INS!RAN"E "ORPORATION IN".

FG! INS!RAN"E "ORPORATION FIELIT: < S!RET:

"OMPAN: OF THE PHILS., IN". FILIPINO MER"HANTS

INS!RAN"E "O., IN". GO;ERNMENT SER;I"E INS!RAN"E

S:STEM MALA:AN INS!RAN"E "O., IN". MALA:AN >!RI"H

INS!RAN"E "O., IN". MER"ANTILE INS!RAN"E "O., IN".

METROPOLITAN INS!RAN"E "OMPAN: METRO2TAISHO

INS!RAN"E "ORPORATION NE0 >EALAN INS!RAN"E "O.,

LT. PAN2MALA:AN INS!RAN"E "ORPORATIONPARAMO!NT INS!RAN"E "ORPORATION PEOPLES TRANS2

EAST ASIA INS!RAN"E "ORPORATION PERLA"OMPANIA E

SEG!ROS, IN". PHILIPPINE #RITISH ASS!RAN"E "O., IN".

PHILIPPINE FIRST INS!RAN"E "O., IN". PIONEER

INS!RAN"E < S!RET: "ORP. PIONEER INTER"ONTINENTAL

INS!RAN"E "ORPORATION PRO;IENT INS!RAN"E

"OMPAN: OF THE PHILIPPINES P:RAMI INS!RAN"E "O.,

IN". RELIAN"E S!RET: < INS!RAN"E "OMPAN: RI>ALS!RET: < INS!RAN"E "OMPAN: SANPIRO INS!RAN"E

"ORPORATION SEA#OAR2EASTERN INS!RAN"E "O.,

IN". SOLI G!ARANT:, IN". SO!TH SEA S!RET: e"t! uness there has been an abuse or improvident exer"ise of

its authority$2(

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S6-$ (1$+ates of *ncome Ta on (omestic Corporations. 00

:A;*n eneral$ .. 6x"ept as otherwise provided in this -ode! an in"ome tax of thirty.

five per"ent :@B; is hereby imposed upon the taxabe in"ome derived during ea"h

taxabe year from a sour"es within and without the &hiippines by every "orporation!as defined in Se"tion (( :%; of this -ode! and taxabe under this Tite as a "orporation

xxx$

S6-$ (($ ..(efinition$ .. 5hen used in this Tite4

xxx xxx xxx

:%; The term (or@or&)+o-sha in"ude partnerships! no matter how "reated

or organi9ed! >oint.sto"C "ompanies! >oint a""ounts :cuentas en

participacion;! asso"iations! or insuran"e "ompanies! but does not in"ude

genera professiona partnerships 2or3 a >oint venture or "onsortium formed

for the purpose of undertaCing "onstru"tion pro>e"ts or engaging in

petroeum! "oa! geotherma and other energy operations pursuant to an

operating or "onsortium agreement under a servi"e "ontra"t without the

/overnment$ Ge-er& @roe''+o-& @&r)-er'%+@'are partnerships formed by

persons for the soe purpose of exer"ising their "ommon profession! no part of

the in"ome of whi"h is derived from engaging in any trade or business$

xxx xxx xxx$#

Thus! the -ourt in)#angelista #. Collector of *nternal +e#enue2((3hed that Se"tion (0

"overed these unregistered partnerships and even asso"iations or >oint a""ounts! whi"h had no

ega personaities apart from their individua members$2(3The -ourt of Appeas astutey

appied)#angelista42(03

xxx A""ordingy! a poo of individua rea property owners deaing in rea estate

business was "onsidered a "orporation for purposes of the tax in se"$ (0 of the Tax

-ode in)#angelista #. Collector of *nternal +e#enue$ supra$ The Supreme -ourt said4

The term partnership in"udes a syndi"ate! group! poo! >oint venture or other

unin"orporated organi9ation! through or by means of whi"h any business!

finan"ia operation! or venture is "arried on$ :, Eertens 'aw of 7edera

In"ome Taxation! p$ @)( Note );

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Arti"e *1)1 of the -ivi -ode re"ogni9es the "reation of a "ontra"t of partnership when two

or more persons bind themseves to "ontribute money! property! or industry to a "ommon fund!

with the intention of dividing the profits among themseves$2(@3Its re?uisites are4 :*; mutua

"ontribution to a "ommon sto"C! and :(; a >oint interest in the profits$2()3In other words! a

partnership is formed when persons "ontra"t to devote to a "ommon purpose either money!

property! or abor with the intention of dividing the profits between themseves$ 2(13Eeanwhie! an

asso"iation impies asso"iates who enter into a >oint enterprise x x x for the transa"tion of

business$2(,3

In the "ase before us! the "eding "ompanies entered into a &oo Agreement2(+3or an

asso"iation2e"t as! indeed! profit was earned$ Though the profit wasapportioned among the members! this is ony a matter of "onse?uen"e! as it impies that

profit a"tuay resuted$213

The petitioners reian"e on"ascual #. Commissioner2,3is mispa"ed! be"ause the fa"ts

obtaining therein are not on a fours with the present "ase$In"ascual$ there was no unregistered

partnership! but merey a "o.ownership whi"h tooC up ony two isoated transa"tions$2+3The

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-ourt of Appeas did not err in appying)#angelista$ whi"h invoved a partnership that engaged

in a series of transa"tions spanning more than ten years! as in the "ase before us$

Se(o-/ I''*e$

Pools &emittances Are *axable

&etitioners further "ontend that the remittan"es of the poo to the "eding "ompanies and

Euni"h are not dividends sub>e"t to tax$ They insist that taxing su"h remittan"es "ontravene

Se"tions (0 :b; :I; and () of the *+11 NIR- and woud be tantamount to an iega doube

taxation! as it woud resut in taxing the same premium in"ome twi"e in the hands of the same

taxpayer$20e"t

information return for the year ending *+1@ was fied$

Referring to the *+1@ version of the "ounterpart se"tions of the NIR-! the -ourt sti "annot

>ustify the exemptions "aimed$ Se"tion (@@ provides that no tax sha xxx be paid upon

reinsuran"e by any "ompany that has aready paid the tax xxx$ This "annot be appied to thepresent "ase be"ause! as previousy dis"ussed! the poo is a taxabe entity distin"t from the "eding

"ompanies= therefore! the atter "annot individuay "aim the in"ome tax paid by the former as

their own$

On the other hand! Se"tion (0 :b; :*;20,3pertains to tax on foreign "orporations= hen"e! it

"annot be "aimed by the "eding "ompanies whi"h are domesti" "orporations$ Nor "an Euni"h! a

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foreign "orporation! be granted exemption based soey on this provision of the Tax -ode!

be"ause the same subse"tion spe"ifi"ay taxes di#idends$ the type of remittan"es forwarded to it

by the poo$ Athough not a signatory to the &oo Agreement! Euni"h is patenty an asso"iate of

the "eding "ompanies in the entity formed! pursuant to their reinsuran"e treaties whi"h re?uired

the "reation of said poo$

nder its poo arrangement with the "eding "ompanies! Euni"h shared in their in"ome and

oss$ This is manifest from a reading of Arti"es 20+3and *udi"ia noti"e that it tooC effe"t

ony ater! on De"ember *0! *+,0$2@@3

T%+r/ I''*e$Prescription

&etitioners aso argue that the governments right to assess and "oe"t the sub>e"t tax had

pres"ribed$ They "aim that the sub>e"t information return was fied by the poo on Apri *0!

*+1)$ On the basis of this return! the %IR teephoned petitioners on November **! *+,*! to givethem noti"e of its etter of assessment dated Ear"h (1! *+,*$ Thus! the petitioners "ontend that

the five.year statute of imitations then provided in the NIR- had aready apsed! and that the

interna revenue "ommissioner was aready barred by pres"ription from maCing an assessment$ 2@)3

5e "annot sustain the petitioners$ The -A and the -TA "ategori"ay found that the

pres"riptive period was toed under then Se"tion of the NIR-!2@13be"ause the taxpayer

"annot be o"ated at the address given in the information return fied and for whi"h reason there

was deay in sending the assessment$2@,3Indeed! whether the governments right to "oe"t and

assess the tax has pres"ribed invoves fa"ts whi"h have been rued upon by the ower "ourts$ It is

axiomati" that in the absen"e of a "ear showing of papabe error or grave abuse of dis"retion! asin this "ase! this -ourt must not overturn the fa"tua findings of the -A and the -TA$

7urthermore! petitioners admitted in their Eotion for Re"onsideration before the -ourt