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Case Digest on Partnership and Commercial Law: Angeles vs. Secretary of Justice, 465 SCRA 106, G.R. No. 142612, July 29, 2005

Angeles vs. Secretary of Justice, 465 SCRA 106, G.R. No. 142612, July 29, 2005


Facts: 

On 19 November 1996, the Angeles spouses filed a criminal complaint for estafa against Mercado.

In their affidavits, the Angeles spouses claimed that Mercado convinced them to enter into a contract of antichresis, colloquially known as sanglaang-perde, covering eight parcels of land planted with fruit- bearing lanzones trees. As the Angeles spouses stay in Manila during weekdays and go to Laguna only on weekends, the parties agreed that Mercado would administer the lands and complete the necessary paperwork.

After three years, the Angeles spouses asked for an accounting from Mercado. Mercado explained that the subject land earned P46,210 in 1993, which he used to buy more lanzones trees. Mercado also reported that the trees bore no fruit in 1994. Mercado gave no accounting for 1995. The Angeles spouses claim that only after this demand for an accounting did they discover that Mercado had put the contract of sanglaang-perde over the subject land under Mercado and his spouse’s names.

In his counter-affidavit, Mercado denied the Angeles spouses’ allegations. Mercado claimed that there exists an industrial partnership, colloquially known as sosyo industrial, between him and his spouse as industrial partners and the Angeles spouses as the financiers. This industrial partnership had existed since 1991, before the contract of antichresis over the subject land. As the years passed, Mercado used his and his spouse’s earnings as part of the capital in the business transactions which he entered into in behalf of the Angeles spouses. It was their practice to enter into business transactions with other people under the name of Mercado because the Angeles spouses did not want to be identified as the financiers.

Issues: 

  • Whether a partnership existed between the Angeles spouses and Mercado.
  • Assuming that there was a partnership, whether there was misappropriation by Mercado of the proceeds of the lanzones. 
Ruling:

Whether a Partnership Existed Between Mercado and the Angeles Spouses

The Angeles spouses allege that they had no partnership with Mercado. The Angeles spouses rely on Articles 1771 to 1773 of the Civil Code, which state that:

Art. 1771. A partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be necessary. 
 
Art. 1772. Every contract of partnership having a capital of three thousand pesos or more, in money or property, shall appear in a public instrument, which must be recorded in the Office of the Securities and Exchange Commission.  
 
Failure to comply with the requirements of the preceding paragraph shall not affect the liability of the partnership and the members thereof to third persons. 
 
Art. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument.

The Angeles spouses’ position that there is no partnership because of the lack of a public instrument indicating the same and a lack of registration with the Securities and Exchange Commission (“SEC”) holds no water. First, the Angeles spouses contributed money to the partnership and not immovable property. Second, mere failure to register the contract of partnership with the SEC does not invalidate a contract that has the essential requisites of a partnership. The purpose of registration of the contract of partnership is to give notice to third parties. Failure to register the contract of partnership does not affect the liability of the partnership and of the partners to third persons. Neither does such failure to register affect the partnership’s juridical personality. A partnership may exist even if the partners do not use the words “partner” or “partnership.”

Indeed, the Angeles spouses admit to facts that prove the existence of a partnership: a contract showing a sosyo industrial or industrial partnership, contribution of money and industry to a common fund, and division of profits between the Angeles spouses and Mercado.

Whether there was Misappropriation by Mercado

The Secretary of Justice adequately explained the alleged misappropriation by Mercado: “The document alone, which was in the name of [Mercado and his spouse], failed to convince us that there was deceit or false representation on the part of [Mercado] that induced the [Angeles spouses] to part with their money. [Mercado] satisfactorily explained that the [Angeles spouses] do not want to be revealed as the financiers. 

OSCAR ANGELES and EMERITA ANGELES, petitioners, vs. THE HON. SECRETARY OF JUSTICE and FELINO MERCADO, respondents. 

465 SCRA 106

G.R. No. 142612 

July 29, 2005

J. Carpio

Full text here

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