4. Torres v.

Court of Appeals (Gail)

Dec 9, 1999 | Panganiban, J. | Formalities Required (Partnership) FACTS:
1. Sisters Antonia Torres and Emeteria Baring (petitioners), entered into a
PETITIONER: Antonia Torres and Emeteria Baring “joint venture agreement” (JVA) with Manuel Torres (respondent) for the
RESPONDENT: Court of Appeals and Manuel Torres development of a parcel of land into a subdivision. They executed a Deed
of Sale covering said land in favor of Manuel, who then had it registered
SUMMARY: Sisters Antonia Torres and Emeteria Baring (petitioners), entered in his name.
into a JVA with Manual Torres (respondent) for the development of land into 2. By mortgaging the property, Manuel obtained from Equitable Bank a loan
subdivision. They executed a Deed of Sale in favor of Manuel. He registered it of P40,000 which, under the JVA, was to be used for the development of
under his name and obtained a P40,000 loan from Equitable Bank by mortgaging
the subdivision. All three of them also agreed to share the proceeds from
the property. All 3 of them also agreed to share the proceeds from the sale of the
subdivided lots. However, the project did not push through and the land was the sale of the subdivided lots.
foreclosed by the Bank. Petitioners argue that the JVA is void under Art. 1773 3. However, the project did not push through and the land was subsequently
since the parties did not make, sign, or attach to the public instrument an foreclosed by the bank.
inventory of the real property contributed. 4. According to petitioners, the project failed because of “respondent’s lack
ISSUE: WON the partnership is void for failure to prepare an inventory of of funds or means and skills.” They add that respondent used the loan not
immovable property contributed? NO for the development of the subdivision, but in furtherance of his own
HELD: Failure to prepare an inventory of immovable property contributed,
company, Universal Umbrella Company.
would not render the partnership void when:
(a) No third-party is involved since Art. 1773 was intended for the protection 5. Respondent Manuel alleged that he used the loan to implement the
of third parties; and Agreement. With the said amount,
(b) partners have made a claim on the partnership agreement which is a. he was able to effect the survey and the subdivision of the lots
deemed binding between them as any other contract b. He caused the construction of roads, curbs and gutters.
c. He entered into a contract with engineering firm for the building
DOCTRINE: of 60 low-cost housing units and even set up a model house on
1. GENERAL RULE: Art. 1773. A contract of partnership is void, one of the subdivision lots.
whenever immovable property is contributed thereto, if an inventory of d. He did all these for a total expense of P85,000
said property is not made, signed by the parties, and attached to the 6. Respondent claimed that the subdivision project failed, however, because
public instrument. petitioners and their relatives had separately caused the annotations of
2. EXCEPTION: adverse claims on the title to the land, which eventually scared away
a. No third-party is involved since Art. 1773 was intended for prospective buyers. Despite his requests, petitioners refused to cause the
the protection of third parties; and clearing of the claims, thereby forcing him to give up on the project.
b. partners have made a claim on the partnership agreement 7. Petitioners filed a civil case before the RTC Cebu which was later
which is deemed binding between them as any other dismissed by RTC and CA.
contract - CA held that petitioner and respondent formed partnership for the
development of the subdivision. Thus, they must bear the loss
 suffered by the partnership in the same proportion as their share bind themselves to contribute money, property, or industry to a common
in the profits stipulated in the contract. fund, with the intention of dividing the profits among themselves.
8. Hence, this petition. Petitioners argue that the JVA is void under Art. 1773 4. Petitioners would contribute property to the partnership in the form of land
of the CC, which provides: which was to be developed into a subdivision; while respondent would
- Art. 1773. A contract of partnership is void, whenever immovable give, in addition to his industry, the amount needed for general expenses
property is contributed thereto, if an inventory of said property is and other costs. Furthermore, the income from the said project would be
not made, signed by the parties, and attached to the public divided according to the stipulated percentage. Clearly, the contract
instrument. manifested the intention of the parties to form a partnership.
9. Petitioners contend that since the parties did not make, sign or attach to the 5. Respondent's actions (fact #5 enumeration - construction of roads, etc.)
public instrument an inventory of the real property contributed, the clearly belie petitioners' contention that he made no contribution to the
partnership is void. partnership. Under Article 1767 of the Civil Code, a partner may
contribute not only money or property, but also industry.

ISSUE: RELEVANT ISSUE:

1. MAIN ISSUE: WON a partnership exist? - YES PARTNERSHIP IS NOT VOID UNDER ART. 1773 FOR FAILURE TO
2. RELEVANT ISSUE: WON the partnership is void for failure to prepare PREPARE AN INVENTORY OF IMMOVABLE PROPERTY CONTRIBUTED
an inventory of immovable property contributed? - NO 1. First, Art. 1773 was intended primarily to protect third persons. Thus,
under the aforecited provision which is a complement of Art. 1771, “the
RATIO: execution of a public instrument would be useless if there is no inventory
of the property contributed, because without its designation and
MAIN ISSUE: description, they cannot be subject to its inscription in the Registry of
1. Petitioners deny having formed a partnership with respondent. They Property, and their contribution cannot prejudice third persons. This will
contend that the Joint Venture Agreement and the earlier Deed of Sale, result in fraud to those who contract with the partnership in the belief in
both of which were the bases of the appellate court's finding of a the efficacy of the guaranty in which the immovable may consist. Thus,
partnership, were void. the contract is declared void by law when no such inventory is made.” The
2. In the same breath, however, they assert that under those very same case at bar does not involve 3rd parties who may be prejudiced.
contracts, respondent is liable for his failure to implement the project. 2. Second, petitioner themselves invoke the allegedly void contract as basis
Because the agreement entitled them to receive 60 percent of the proceeds for their claim that respondent should pay them 60 percent of the value of
from the sale of the subdivision lots, they pray that respondent pay them the property. They cannot in one breath deny the contract and in
damages equivalent to 60% of the value of the property. another recognize it, depending on what momentarily suits their
3. SC held that a reading of the terms embodied in the Agreement indubitably purpose. Parties cannot adopt inconsistent position in regard to a contract
shows the existence of a partnership pursuant to Article 1767 of the Civil and courts will not tolerate, much less approved, such practice.
Code, which provides: By the contract of partnership two or more persons 3. In short, the alleged nullity of the partnership will not prevent courts from
considering the Joint Venture Agreement an ordinary contract from which
 the parties' rights and obligations to each other may be inferred and
enforced.
4. CLV OUTLINE:
Failure to prepare an inventory of immovable property contributed,
would not render the partnership void when:
(a) No third-party is involved since Art. 1773 was intended
for the protection of third parties; and
(b) partners have made a claim on the partnership agreement
which is deemed binding between them as any other contract