FIRST DIVISION
PRIMELINK PROPERTIES G.R. No. 167379
AND DEVELOPMENT
CORPORATION and
RAFAELITO W. LOPEZ, Present:
Petitioners,
PANGANIBAN, C.J., Chairperson,
YNARES-SANTIAGO,
-
versus - AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
MA.
CLARITA T. LAZATIN-
MAGAT,
JOSE SERAFIN T.
LAZATIN, JAIME TEODORO
T. LAZATIN and JOSE Promulgated:
MARCOS T. LAZATIN,
Respondents.
x - -
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D E C I S I O N
CALLEJO, SR., J.:
Before us is a Petition for Review on
Certiorari under Rule 45 of the 1997
Rules of Civil Procedure of the Decision[1] of
the Court of Appeals (CA) in CA-G.R. CV No. 69200 and its Resolution[2]
denying petitioners’ motion for reconsideration thereof.
The factual and procedural
antecedents are as follows:
Primelink Properties and Development
Corporation (Primelink for brevity) is a domestic corporation engaged in real
estate development. Rafaelito W. Lopez
is its President and Chief Executive Officer.[3]
Ma.
Clara T. Lazatin-Magat and her brothers, Jose Serafin T. Lazatin, Jaime T.
Lazatin and Jose Marcos T. Lazatin (the Lazatins for brevity), are co-owners of
two (2) adjoining parcels of land, with a combined area of 30,000 square meters,
located in Tagaytay City and covered by Transfer Certificate of Title (
On
a.) Survey the land, and prepare the projects master plans, engineering designs, structural and architectural plans, site development plans, and such other need plans in accordance with existing laws and the rules and regulations of appropriate government institutions, firms or agencies;
b.) Secure and pay for all the licenses, permits and clearances needed for the projects;
c.) Furnish all materials, equipment, labor and services for the development of the land in preparation for the construction and sale of the different types of units (single-detached, duplex/twin, cluster and row house);
d.) Guarantee completion of the land development work if not prevented by force majeure or fortuitous event or by competent authority, or other unavoidable circumstances beyond the DEVELOPER’S control, not to exceed three years from the date of the signing of this Joint Venture Agreement, except the installation of the electrical facilities which is solely MERALCO’S responsibility;
e.) Provide necessary manpower resources, like
executive and managerial officers, support personnel and marketing staff, to
handle all services related to land and housing development (administrative and
construction) and marketing (sales, advertising and promotions).[6]
The
Lazatins and Primelink covenanted that they shall be entitled to draw
allowances/advances as follows:
1. During the first two years of the Project, the DEVELOPER and the LANDOWNER can draw allowances or make advances not exceeding a total of twenty percent (20%) of the net revenue for that period, on the basis of sixty percent (60%) for the DEVELOPER and forty percent (40%) for the LANDOWNERS.
The drawing allowances/advances are limited to twenty percent (20%) of the net revenue for the first two years, in order to have sufficient reserves or funds to protect and/or guarantee the construction and completion of the different types of units mentioned above.
They
also agreed to share in the profits from the joint venture, thus:
1. The DEVELOPER shall be entitled to sixty percent (60%) of the net revenue or income of the Joint Venture project, after deducting all expenses incurred in connection with the land development (such as administrative management and construction expenses), and marketing (such as sales, advertising and promotions), and
2. The LANDOWNERS shall be entitled to forty
percent (40%) of the net revenue or income of the Joint Venture project, after
deducting all the above-mentioned expenses.[8]
Primelink
submitted to the Lazatins its Projection of the Sales-Income-Cost of the
project:
SALES-INCOME-COST PROJECTION
SELLING PRICE COST
PRICE DIFFERENCE
INCOME
CLUSTER:
A1
3,200,000 - A2
1,260,000 = 1,940,000
x 24 = P
46,560,000.00
TWIN:
B1 2,500,000 - B2 960,000 = 1,540,000 x 24 = 36,960,000.00
SINGLE:
C1 3,500,000 - C2 1,400,000 = 2,100,000 x 16 = 33,600,000.00
ROW-TYPE TOWNHOMES:
D1 1,600,000 - D2 700,000 = 900,000 x 24 = 21,600,000.00
P138,720,000.00
(GROSS) Total Cash Price (A1+B1+C1+D1) = P231,200,000.00
COMPUTATION OF ADD’L. INCOME ON INTEREST
TCP x
30% D/P = P
69,360,000
P 69,360,000.00
Balance = 70% = 161,840,000
x .03069
x 48 = P238,409,740 238,409,740.00
Total Amount (TCP
+ int. earn.) P307,769,740.00
EXPENSES:
less: A
Building expenses P 92,480,000.00
B Commission (8% of TCP) 18,496,000.00
C Admin. & Mgmt. expenses (2% of TCP) 4,624,000.00
D Advertising & Promo exp. (2% of TCP) 4,624,000.00
E Building expenses for the open spaces
and Amenities (Development cost not incl.
Housing) 400 x 30,000 sqms. 12,000,000.00
TOTAL EXPENSES (A+B+C+D+E) P132,224,000.00
RECONCILIATION OF
INCOME VS. EXPENSES
Total Projected Income (incl. income
from interest earn.) P307,769,740.00
less: 132,224,000.00
Total Expenses P175,545,740.00[9]
The
parties agreed that any unsettled or unresolved misunderstanding or conflicting
opinions between the parties relative to the interpretation, scope and reach,
and the enforcement/implementation of any provision of the agreement shall be
referred to Voluntary Arbitration in accordance with the Arbitration Law.[10]
The
Lazatins agreed to subject the title over the subject property to an escrow
agreement. Conformably with the escrow
agreement, the owner’s duplicate of the title was deposited with the China
Banking Corporation.[11] However, Primelink failed to immediately secure
a Development Permit from
In
a Letter[13] dated
Subsequently, on
Plaintiffs also claimed that in a
sales-income-costs projection prepared and submitted by defendants, they (plaintiffs)
stood to receive the amount of P70,218,296.00 as their net share in the
joint venture project; to date, however, after almost four (4) years and
despite the undertaking in the JVA that plaintiffs shall initially get 20% of
the agreed net revenue during the first two (2) years (on the basis of the
60%-40% sharing) and their full 40% share thereafter, defendants had yet to
deliver these shares to plaintiffs which by conservative estimates would amount
to no less than P40,000,000.00.[15]
Plaintiffs
prayed that, after due proceedings, judgment be rendered in their favor, thus:
WHEREFORE, it is respectfully prayed of this Honorable Court that a temporary restraining order be forthwith issued enjoining the defendants to immediately stop their land development, construction and marketing of the housing units in the aforesaid project; after due proceedings, to issue a writ of preliminary injunction enjoining and prohibiting said land development, construction and marketing of housing units, pending the disposition of the instant case.
After trial, a decision be rendered:
1. Rescinding the Joint Venture Agreement executed between the plaintiffs and the defendants;
2. Immediately restoring to the plaintiffs possession of the subject parcels of land;
3. Ordering the defendants to render an accounting of all income generated as well as expenses incurred and disbursement made in connection with the project;
4. Making the Writ of Preliminary Injunction permanent;
5. Ordering the defendants, jointly and
severally, to pay the plaintiffs the amount Forty Million Pesos (P40,000,000.00)
in actual and/or compensatory damages;
6. Ordering the defendants, jointly and
severally, to pay the plaintiffs the amount of Two Million Pesos (P2,000,000.00)
in exemplary damages;
7. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount equivalent to ten percent (10%) of the total amount due as and for attorney’s fees; and
8. To pay the costs of this suit.
Other
reliefs and remedies as are just and equitable are likewise being prayed for.[16]
Defendants opposed plaintiffs’ plea
for a writ of preliminary injunction on the ground that plaintiffs’ complaint
was premature, due to their failure to refer their complaint to a Voluntary
Arbitrator pursuant to the JVA in relation to Section 2 of Republic Act No. 876
before filing their complaint in the RTC.
They prayed for the dismissal of the complaint under Section 1(j), Rule
16 of the Rules of Court:
WHEREFORE, it is respectfully prayed that an Order be issued:
a) dismissing the Complaint on the basis of Section 1(j), Rule 16 of the aforecited Rules of Court, or, in the alternative,
b) requiring the plaintiffs to make initiatory step for arbitration by filing the demand to arbitrate, and then asking the parties to resolve their controversies, pursuant to the Arbitration Law, or in the alternative;
c) staying or suspending the proceedings in captioned case until the completion of the arbitration, and
d) denying the plaintiffs’ prayer for the issuance of a temporary restraining order or writ of preliminary injunction.
Other reliefs and remedies just and
equitable in the premises are prayed for.[17]
In the meantime, before the
expiration of the reglementary period to answer the complaint, defendants,
invoking their counsel’s heavy workload, prayed for a 15-day extension[18]
within which to file their answer. The
additional time prayed for was granted by the
On
Defendants thereafter interposed an
appeal to the CA assailing the Order declaring them in default, as well as the Order
denying their motion to set aside the order of default, alleging that these
were contrary to facts of the case, the law and jurisprudence.[31]On
In the meantime, plaintiffs adduced ex parte their testimonial and
documentary evidence. On
WHEREFORE,
judgment is hereby rendered in favor of the plaintiffs and against the
defendants as follows:
1. Ordering the
rescission of the Joint Venture Agreement as of the date of filing of this
complaint;
2. Ordering the
defendants to return possession, including all improvements therein, of the
real estate property belonging to the plaintiffs which is described in, and
covered by Transfer Certificate of Title No. T-10848 of the Register of Deeds
of Tagaytay City, and located in Barangay Anulin, City of Tagaytay;
3. Ordering the
defendants to turn over all documents, records or papers that have been
executed, prepared and retained in connection with any contract to sell or deed
of sale of all lots/units sold during the effectivity of the joint venture agreement;
4. Ordering the
defendants to pay the plaintiffs the sum of P1,041,524.26 representing
their share of the net income of the P2,603,810.64 as of
5. Ordering the
defendants to pay the plaintiffs’ attorney’s fees in the amount of P104,152.40;
6. Ordering the
defendants to pay the costs.
SO
ORDERED.[33]
The
trial court anchored its decision on the following findings:
x x
x Evidence on record have shown patent violations by the defendants of the
stipulations particularly paragraph II covering Developer’s (defendant)
undertakings, as well as paragraph
x x
x x
Rummaging
through the evidence presented in the course of the testimony of Mrs. Maminta
on P2,603,810.64.
This amount, however, was drastically reduced in a subsequent financial report
submitted by the defendants to P1,954,216.39. Shortly thereafter, and to
the dismay of the plaintiffs, the defendants submitted an income statement and
a balance sheet (Exhibits “R” and “R-1”)
indicating a net loss of P5,122,906.39 as of
Of
the reported net income of P2,603,810.64 (Exhibit “P-2”) the plaintiffs
should have received the sum of P1,041,524.26 representing their 40%
share under paragraph II and V of the JVA. But this was not to be so. Even
before the plaintiffs could get hold of their share as indicated above, the
defendants closed the chance altogether by declaring a net loss. The court
perceives this to be one calculated coup-de-grace
that would put to thin air plaintiffs’ hope of getting their share in the
profit under the JVA.
That
this matter had reached the court is no longer a cause for speculation. The way
the defendants treated the JVA and the manner by which they handled the project
itself vis-à-vis their partners, the plaintiffs herein, there is bound to be
certain conflict as the latter repeatedly would received the losing end of the
bargain.
Under
the intolerable circumstances, the plaintiffs could not have opted for some
other recourse but to file the present action to enforce their rights. x x x[34]
On
On P1,000,000.00 by
plaintiffs, a writ of execution pending appeal was issued on
Defendants appealed the decision to
the CA on the following assignment of errors:
I
THE TRIAL COURT
ERRED IN DECIDING THE CASE WITHOUT FIRST REFERRING THE COMPLAINT FOR VOLUNTARY
ARBITRATION (RA NO. 876), CONTRARY TO THE MANDATED VOLUNTARY ARBITRATION CLAUSE
UNDER THE JOINT VENTURE AGREEMENT, AND THE DOCTRINE IN “MINDANAO PORTLAND CEMENT CORPORATION V. MCDONOUGH CONSTRUCTION COMPANY
OF
II
THE TRIAL COURT ERRED IN ISSUING A WRIT OF EXECUTION PENDING APPEAL EVEN IN THE ABSENCE OF GOOD AND COMPELLING REASONS TO JUSTIFY SAID ISSUANCE, AND DESPITE PRIMELINK’S STRONG OPPOSITION THERETO.
III
THE TRIAL COURT
ERRED IN REFUSING TO DECIDE PRIMELINK’S MOTION TO QUASH THE WRIT OF EXECUTION
PENDING APPEAL AND THE MOTION FOR RECONSIDERATION, ALTHOUGH THE COURT HAS
RETAINED ITS JURISDICTION TO
IV
THE TRIAL COURT ERRED IN RESCINDING THE JOINT VENTURE AGREEMENT ALTHOUGH PRIMELINK HAS SUBSTANTIALLY DEVELOPED THE PROJECT AND HAS SPENT MORE OR LESS FORTY MILLION PESOS, AND DESPITE APPELLEES’ FAILURE TO PRESENT SUFFICIENT EVIDENCE JUSTIFYING THE SAID RESCISSION.
V
THE TRIAL COURT
ERRED IN DECIDING THAT THE APPELLEES HAVE THE RIGHT TO TAKE OVER THE
SUBDIVISION AND TO APPROPRIATE FOR THEMSELVES ALL THE EXISTING IMPROVEMENTS
INTRODUCED THEREIN BY PRIMELINK, ALTHOUGH SAID RIGHT WAS NEITHER ALLEGED NOR
PRAYED FOR IN THE COMPLAINT, MUCH LESS PROVEN DURING THE EX PARTE HEARING, AND EVEN WITHOUT ORDERING APPELLEES TO FIRST
REIMBURSE PRIMELINK OF THE SUBSTANTIAL DIFFERENCE BETWEEN THE MARKET VALUE OF
APPELLEES’ RAW, UNDEVELOPED AND UNPRODUCTIVE LAND (CONTRIBUTED TO THE PROJECT)
AND THE SUM OF MORE OR LESS FORTY MILLION PESOS WHICH PRIMELINK HAD SPENT FOR
THE HORIZONTAL AND VERTICAL DEVELOPMENT OF THE PROJECT, THEREBY ALLOWING
APPELLEES TO UNJUSTLY ENRICH THEMSELVES AT THE EXPENSE OF PRIMELINK.[39]
The appeal was docketed in the CA as
CA-G.R. CV No. 69200.
On
WHEREFORE,
in view of the foregoing, the assailed decision of the
SO
ORDERED.[40]
Citing the ruling of this Court in Aurbach v. Sanitary Wares Manufacturing Corporation,[41]
the appellate court ruled that, under Philippine law, a joint venture is a form
of partnership and is to be governed by the laws of partnership. The aggrieved parties filed a motion for
reconsideration,[42] which
the CA denied in its Resolution[43]
dated
Petitioners thus filed the instant Petition
for Review on Certiorari, alleging
that:
1) DID THE HONORABLE COURT OF APPEALS COMMIT A FATAL AND REVERSIBLE LEGAL ERROR AND/OR GRAVE ABUSE OF DISCRETION IN ORDERING THE RETURN TO THE RESPONDENTS OF THE PROPERTY WITH ALL IMPROVEMENTS THEREON, EVEN WITHOUT ORDERING/REQUIRING THE RESPONDENTS TO FIRST PAY OR REIMBURSE PRIMELINK OF ALL EXPENSES INCURRED IN DEVELOPING AND MARKETING THE PROJECT, LESS THE ORIGINAL VALUE OF THE PROPERTY, AND THE SHARE DUE RESPONDENTS FROM THE PROFITS (IF ANY) OF THE JOINT VENTURE PROJECT?
2) IS THE AFORESAID ORDER ILLEGAL AND
CONFISCATORY, OPPRESSIVE AND UNCONSCIONABLE, CONTRARY TO THE TENETS OF GOOD
HUMAN RELATIONS AND VIOLATIVE OF EXISTING LAWS AND JURISPRUDENCE ON JUDICIAL
NOTICE, DEFAULT, UNJUST ENRICHMENT AND RESCISSION OF CONTRACT WHICH REQUIRES
MUTUAL RESTITUTION, NOT UNILATERAL APPROPRIATION, OF PROPERTY BELONGING TO
ANOTHER?[44]
Petitioners maintain that the
aforesaid portion of the decision which unconditionally awards to respondents
“all improvements” on the project without requiring them to pay the value
thereof or to reimburse Primelink for all expenses incurred therefore is
inherently and essentially illegal and confiscatory, oppressive and
unconscionable, contrary to the tenets of good human relations, and will allow
respondents to unjustly enrich themselves at Primelink’s expense. At the time respondents contributed the two
parcels of land, consisting of 30,000 square meters to the joint venture
project when the JVA was signed on P500.00 per square meter, the “price tag” agreed upon the
parties for the purpose of the JVA.
Moreover, before respondents rescinded the JVA sometime in
October/November 1997, the property had already been substantially developed as
improvements had already been introduced thereon; petitioners had likewise
incurred administrative and marketing expenses, among others, amounting to more
or less P40,000,000.00.[45]
Petitioners
point out that respondents did not pray in their complaint that they be
declared the owners and entitled to the possession of the improvements made by
petitioner Primelink on the property; neither did they adduce evidence to prove
their entitlement to said improvements. It
follows, petitioners argue, that respondents were not entitled to the
improvements although petitioner Primelink was declared in default.
They also aver that, under Article
1384 of the New Civil Code, rescission shall be only to the extent necessary to
cover the damages caused and that, under Article 1385 of the same Code, rescission
creates the obligation to return the things which were not object of the
contract, together with their fruits, and the price with its interest;
consequently, it can be effected only when respondents can return whatever they
may be obliged to return. Respondents
who sought the rescission of the JVA must place petitioner Primelink in the status
quo.
They insist that respondents cannot rescind and, at the same time,
retain the consideration, or part of the consideration received under the JVA. They cannot have the benefits of rescission
without assuming its burden. All parties
must be restored to their original positions as nearly as possible upon the
rescission of a contract. In the event that
restoration to the status quo is
impossible, rescission may be granted if the Court can balance the equities and
fashion an appropriate remedy that would be equitable to both parties and afford
complete relief.
Petitioners insist that being
defaulted in the court a quo would in
no way defeat their claim for reimbursement because “[w]hat matters is that the
improvements exist and they cannot be denied.”[46] Moreover, they point out, the ruling of this
Court in Aurbach v. Sanitary Wares
Manufacturing Corporation[47] cited
by the CA is not in point.
On
the other hand, the CA ruled that although respondents therein (plaintiffs
below) did not specifically pray for their takeover of the property and for the
possession of the improvements on the parcels of land, nevertheless,
respondents were entitled to said relief as a necessary consequence of the
ruling of the trial court ordering the rescission of the JVA. The appellate court cited the ruling of this
Court in the Aurbach case and Article
1838 of the New Civil Code, to wit:
As a general rule, the relation of
the parties in joint ventures is governed by their agreement. When the agreement is silent on any
particular issue, the general principles of partnership may be resorted to.[48]
Respondents,
for their part, assert that Articles 1380 to 1389 of the New Civil Code deal
with rescissible contracts. What applies
is Article 1191 of the New Civil Code, which reads:
ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without
prejudice to the rights of third persons who have acquired the thing, in
accordance with articles 1385 and 1388 and the Mortgage Law.
They
insist that petitioners are not entitled to rescission for the improvements because,
as found by the RTC and the CA, it was petitioner Primelink that enriched itself
at the expense of respondents.
Respondents reiterate the ruling of the CA, and argue as follows:
PRIMELINK argued that the LAZATINs in their complaint did not allege, did not prove and did not pray that they are and should be entitled to take over the development of the project, and that the improvements and existing structures which were introduced by PRIMELINK after spending more or less Forty Million Pesos – be awarded to them. They merely asked in the complaint that the joint venture agreement be rescinded, and that the parcels of land they contributed to the project be returned to them.
PRIMELINK’s argument lacks merit. The order of the court for PRIMELINK to return possession of the real estate property belonging to the LAZATINs including all improvements thereon was not a judgment that was different in kind than what was prayed for by the LAZATINs. The order to return the property with all the improvements thereon is just a necessary consequence to the order of rescission.
As a general rule, the relation of the parties in joint ventures is governed by their agreement. When the agreement is silent on any particular issue, the general principles of partnership may be resorted to. In Aurbach v. Sanitary Wares Manufacturing Corporation, the Supreme Court discussed the following points regarding joint ventures and partnership:
The legal concept
of a joint venture is of common law origin.
It has no precise legal definition, but it has been generally understood
to mean an organization formed for some temporary purpose. (Gates
v. Megargel, 266 Fed. 811 [1920]) It is, in fact, hardly distinguishable from
the partnership, since elements are similar – community of interest in the
business, sharing of profits and losses, and a mutual right of control. (Blackner
v. McDermott, 176 F.2d 498 [1949]; Carboneau
v. Peterson, 95 P.2d 1043 [1939]; Buckley
v. Chadwick, 45 Cal.2d 183, 288 P.2d 12, 289 P.2d 242 [1955]) The main distinction cited by most opinions
in common law jurisdictions is that the partnership contemplates a general
business with some degree of continuity, while the joint venture is formed for
the execution of a single transaction, and is thus of a temporary nature. (Tuffs
v. Mann, 116 Cal.App. 170, 2 P.2d 500 [1931]; Harmon v. Martin, 395 III. 595, 71 N.E.2d 74 [1947]; Gates v. Megargel, 266 Fed. 811
[1920]) This observation is not entirely
accurate in this jurisdiction, since under the Civil Code, a partnership may be
particular or universal, and a particular partnership may have for its object a
specific undertaking. (Art. 1783, Civil
Code). It would seem therefore that, under Philippine law, a joint venture is a
form of partnership and should thus be governed by the laws of partnership. The Supreme Court has, however, recognized a
distinction between these two business forms, and has held that although a
corporation cannot enter into a partnership contract, it may, however, engage
in a joint venture with others. (At p.
12, Tuazon v. Bolanos, 95 Phil. 906
[1954]; Campos and Lopez – Campos Comments, Notes and Selected Cases,
Corporation Code 1981) (Emphasis
Supplied)
The LAZATINs were able to establish fraud on the part of PRIMELINK which, in the words of the court a quo, was a pattern of what appears to be a scheme or plot to reduce and eventually blot out the net incomes generated from sales of housing units by the defendants. Under Article 1838 of the Civil Code, where the partnership contract is rescinded on the ground of the fraud or misrepresentation of one of the parties thereto, the party entitled to rescind is, without prejudice to any other right is entitled to a lien on, or right of retention of, the surplus of the partnership property after satisfying the partnership liabilities to third persons for any sum of money paid by him for the purchase of an interest in the partnership and for any capital or advance contributed by him. In the instant case, the joint venture still has outstanding liabilities to third parties or the buyers of the property.
It is not amiss to state that title
to the land or TCT No. T-10848 which is now held by Chinabank for safekeeping
pursuant to the Escrow Agreement executed between Primelink Properties and
Development Corporation and Ma. Clara T. Lazatin-Magat should also be returned
to the LAZATINs as a necessary consequence of the order of rescission of
contract. The reason for the existence
of the Escrow Agreement has ceased to exist when the joint venture agreement
was rescinded.[49]
Respondents
stress that petitioners must bear any damages or losses they may have suffered. They likewise stress that they did not enrich
themselves at the expense of petitioners.
In
reply, petitioners assert that it is unjust and inequitable for respondents to
retain the improvements even if their share in the P1,041,524.26 of the
net income of the property and the sale of the land were to be deducted from
the value of the improvements, plus administrative and marketing expenses in
the total amount of P40,000,000.00.
Petitioners will still be entitled to an accounting from respondents. Respondents cannot deny the existence and
nature of said improvements as they are visible to the naked eye.
The
threshold issues are the following: (1) whether respondents are entitled to the
possession of the parcels of land covered by the JVA and the improvements
thereon introduced by petitioners as their contribution to the JVA; (2) whether
petitioners are entitled to reimbursement for the value of the improvements on
the parcels of land.
The
petition has no merit.
On
the first issue, we agree with petitioners that respondents did not
specifically pray in their complaint below that possession of the improvements
on the parcels of land which they contributed to the JVA be transferred to
them. Respondents made a specific prayer
in their complaint that, upon the rescission of the JVA, they be placed in
possession of the parcels of land subject of the agreement, and for other “reliefs
and such other remedies as are just and equitable in the premises.” However, the trial court was not precluded
from awarding possession of the improvements on the parcels of land to
respondents in its decision. Section
2(c), Rule 7 of the Rules of Court provides that a pleading shall specify the
relief sought but it may add as general prayer for such further or other relief
as may be deemed just and equitable. Even
without the prayer for a specific remedy, proper relief may be granted by the
court if the facts alleged in the complaint and the evidence introduced so
warrant.[50] The court shall grant relief warranted by the
allegations and the proof even if no such relief is prayed for.[51] The prayer in the complaint for other reliefs
equitable and just in the premises justifies the grant of a relief not
otherwise specifically prayed for.[52]
The
trial court was not proscribed from placing respondents in possession of the
parcels of land and the improvements on the said parcels of land. It bears stressing that the parcels of land,
as well as the improvements made thereon, were contributed by the parties to
the joint venture under the JVA, hence, formed part of the assets of the joint
venture.[53] The trial court declared that respondents
were entitled to the possession not only of the parcels of land but also of the
improvements thereon as a consequence of its finding that petitioners breached
their agreement and defrauded respondents of the net income under the JVA.
On the second issue, we agree with
the CA ruling that petitioner Primelink and respondents entered into a joint
venture as evidenced by their JVA which, under the Court’s ruling in Aurbach, is a form of partnership, and
as such is to be governed by the laws on partnership.
When the RTC rescinded the JVA on
complaint of respondents based on the evidence on record that petitioners
willfully and persistently committed a breach of the JVA, the court thereby
dissolved/cancelled the partnership.[54] With the rescission of the JVA on account of petitioners’
fraudulent acts, all authority of any partner to act for the partnership is terminated
except so far as may be necessary to wind up the partnership affairs or to
complete transactions begun but not yet finished.[55] On dissolution, the partnership is not
terminated but continues until the winding up of partnership affairs is
completed.[56] Winding up means the administration of the
assets of the partnership for the purpose of terminating the business and
discharging the obligations of the partnership.
The transfer of the possession of the
parcels of land and the improvements thereon to respondents was only for a
specific purpose: the winding up of partnership affairs, and the partition and
distribution of the net partnership assets as provided by law.[57] After all, Article 1836 of the New Civil Code
provides that unless otherwise agreed by the parties in their JVA, respondents
have the right to wind up the partnership affairs:
Art. 1836. Unless otherwise agreed, the partners who
have not wrongfully dissolved the partnership or the legal representative of
the last surviving partner, not insolvent, has the right to wind up the
partnership affairs, provided, however, that any partner, his legal
representative or his assignee, upon cause shown, may obtain winding up by the
court.
It must be stressed, too, that although
respondents acquired possession of the lands and the improvements thereon, the
said lands and improvements remained partnership property, subject to the
rights and obligations of the parties, inter
se, of the creditors and of third parties under Articles 1837 and 1838 of
the New Civil Code, and subject to the outcome of the settlement of the
accounts between the parties as provided in Article 1839 of the New Civil Code,
absent any agreement of the parties in their JVA to the contrary.[58] Until the partnership accounts are
determined, it cannot be ascertained how much any of the parties is entitled
to, if at all.
It
was thus premature for petitioner Primelink to be demanding that it be
indemnified for the value of the improvements on the parcels of land owned by
the joint venture/partnership. Notably,
the JVA of the parties does not contain any provision designating any party to
wind up the affairs of the partnership.
Thus,
under Article 1837 of the New Civil Code, the rights of the parties when
dissolution is caused in contravention of the partnership agreement are as
follows:
(1) Each partner who has not caused dissolution wrongfully shall have:
(a) All the rights specified in the first paragraph of this article, and
(b) The right, as against each partner who has caused the dissolution wrongfully, to damages for breach of the agreement.
(2) The partners who have not caused the dissolution wrongfully, if they all desire to continue the business in the same name either by themselves or jointly with others, may do so, during the agreed term for the partnership and for that purpose may possess the partnership property, provided they secure the payment by bond approved by the court, or pay to any partner who has caused the dissolution wrongfully, the value of his interest in the partnership at the dissolution, less any damages recoverable under the second paragraph, No. 1(b) of this article, and in like manner indemnify him against all present or future partnership liabilities.
(3) A partner who has caused the dissolution wrongfully shall have:
(a) If the business is not continued under the provisions of the second paragraph, No. 2, all the rights of a partner under the first paragraph, subject to liability for damages in the second paragraph, No. 1(b), of this article.
(b) If the business is continued under the
second paragraph, No. 2, of this article, the right as against his co-partners
and all claiming through them in respect of their interests in the partnership,
to have the value of his interest in the partnership, less any damage caused to
his co-partners by the dissolution, ascertained and paid to him in cash, or the
payment secured by a bond approved by the court, and to be released from all
existing liabilities of the partnership; but in ascertaining the value of the
partner’s interest the value of the good-will of the business shall not be
considered.
And
under Article 1838 of the New Civil Code, the party entitled to rescind is,
without prejudice to any other right, entitled:
(1) To a lien on, or right of retention of, the surplus of the partnership property after satisfying the partnership liabilities to third persons for any sum of money paid by him for the purchase of an interest in the partnership and for any capital or advances contributed by him;
(2) To stand, after all liabilities to third persons have been satisfied, in the place of the creditors of the partnership for any payments made by him in respect of the partnership liabilities; and
(3) To
be indemnified by the person guilty of the fraud or making the representation
against all debts and liabilities of the partnership.
The
accounts between the parties after dissolution have to be settled as provided
in Article 1839 of the New Civil Code:
Art. 1839. In settling accounts between the partners after dissolution, the following rules shall be observed, subject to any agreement to the contrary:
(1) The assets of the partnership are:
(a) The partnership property,
(b) The contributions of the partners necessary for the payment of all the liabilities specified in No. 2.
(2) The liabilities of the partnership shall rank in order of payment, as follows:
(a) Those owing to creditors other than partners,
(b) Those owing to partners other than for capital and profits,
(c) Those owing to partners in respect of capital,
(d) Those owing to partners in respect of profits.
(3) The assets shall be applied in the order of their declaration in No. 1 of this article to the satisfaction of the liabilities.
(4) The partners shall contribute, as provided by article 1797, the amount necessary to satisfy the liabilities.
(5) An assignee for the benefit of creditors or any person appointed by the court shall have the right to enforce the contributions specified in the preceding number.
(6) Any partner or his legal representative shall have the right to enforce the contributions specified in No. 4, to the extent of the amount which he has paid in excess of his share of the liability.
(7) The individual property of a deceased partner shall be liable for the contributions specified in No. 4.
(8) When partnership property and the individual properties of the partners are in possession of a court for distribution, partnership creditors shall have priority on partnership property and separate creditors on individual property, saving the rights of lien or secured creditors.
(9) Where a partner has become insolvent or his estate is insolvent, the claims against his separate property shall rank in the following order:
(a) Those owing to separate creditors;
(b) Those owing to partnership creditors;
(c) Those owing to partners by way of
contribution.
IN LIGHT OF ALL THE FOREGOING, the
petition is DENIED. The assailed Decision and Resolution of the
Court of Appeals in CA-G.R. CV No. 69200 are AFFIRMED insofar as they conform to this Decision of the Court.
Costs against petitioners.
SO ORDERED.
ROMEO J.
CALLEJO, SR.
Associate Justice
WE CONCUR:
ARTEMIO V.
PANGANIBAN
Chief Justice
Chairperson
CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
Pursuant to Section 13, Article VIII of the
Constitution, it is hereby certified that the conclusions in the above Decision
were reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
ARTEMIO
V. PANGANIBAN
Chief Justice
[1] Penned by Associate Justice Regalado E.
Maambong, with Associate Justices Eloy R. Bello, Jr. and Lucenito N. Tagle,
concurring; rollo, pp. 33-53.
[2] Rollo, pp. 72-74.
[3]
[4] Records, pp. 12-13.
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
[21] Records, p. 119.
[22]
[23]
[24]
[25]
[26]
[27]
[28]
[29]
[30]
[31]
[32]
[33]
[34]
[35]
[36]
[37]
[38]
[39] CA rollo, pp. 63-65.
[40] Rollo, p. 53.
[41] G.R.
Nos. 75875, 75951 and 75975-76,
[42] Rollo, p. 55.
[43]
[44]
[45]
[46]
[47] Supra
note 41.
[48] Rollo, pp. 50-51.
[49]
[50] Eugenio v. Velez, G.R. No. 85140,
[51] Banco Filipino Savings and Mortgage Bank v.
Court of Appeals, 388 Phil. 27, 41 (2000).
[52] Arroyo, Jr. v. Taduran, G.R. No. 147012,
[53] Lipscomb v. Aulenbacker, 272 S.W. 363,
168
[54] Article 1831 in relation to Article 1831(4)(b), New Civil Code.
[55] Article 1832 in relation to Article 1834, New Civil Code.
[56] Article 1829, New Civil Code.
[57] Sy v. Court of Appeals, 372 Phil. 207, 299 (1999).
[58] Ortega v. Court of Appeals, 315 Phil.
573, 581-582 (1995).