G.R. No. 142612, 29 July 2005

Doctrine:
The purpose of registration of the contract of partnership with the SEC 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, nor does it affect the partnership’s juridical personality. A partnership may exist even if the partners do not use the words “partner” or “partnership.”

FACTS:

Angeles spouses filed a criminal complaint for estafa against Mercado, their brother-in-law and claimed that Mercado convinced them to enter into a contract of antichresis, to last for 5 years, covering 8 parcels of land planted with fruit-bearing lanzones trees in Nagcarlan, Laguna and owned by Juan Sanzo. The parties agreed that Mercado would administer the ands and complete the necessary paperwork. However, after 3 years, the Angeles spouses asked for an accounting from Mercado, and they claim that only after this demand for an accounting did they\ discover that Mercado had put the contract of antichresis over the subject land under Mercado and his spouse’s names.

On the other hand, Mercado denied the Angeles spouses’ allegations and 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 financiers, and that this had existed since 1991, before the contract of antichresis over the subject land. 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.

During the barangay conciliation proceedings, Oscar Angeles stated that there was a written sosyo industrial agreement: capital would come from the Angeles spouses while the profit would be divided evenly between Mercado and the Angeles spouses. The Provincial Prosecution Office first recommended the filing of a criminal information for estafa, but after Mercado filed his counter-affidavit and moved for reconsideration, issued an amended resolution dismissing the complaint.

The Angeles spouses appealed to Sec. of Justice, saying that the document evidencing the contract of antichresis executed in the name of the Mercado spouses, instead of the Angeles spouses, and that such document alone proves Mercado’s misappropriation of their P210, 000 which the Sec. of Justice dismissed.

Accordingly, Angeles spouses failed to show sufficient proof that Mercado deliberately deceived them in the transaction. Mercado satisfactorily explained that the Angeles spouses do not want to be revealed as the financiers. Under the circumstances, it was more likely that the Angeles spouses knew from the very start that the questioned document was not really in their names. A partnership truly existed between the Angeles spouses and Mercado, which was clear from the fact that they contributed money to a common fund and divided the profits among themselves. Angeles spouses acknowledged their joint business venture in the barangay conciliation proceedings although they assailed the manner the business was conducted. Although the legal formalities for the formation were not adhered to, the partnership relationship was evident. There is no estafa where money is delivered by a partner to his co-partner on the latter’s representation that the amount shall be applied to the business of their partnership. In case of the money received, the co-partner’s liability is civil in nature.

ISSUE:

Whether or not a partnership existed between Mercado and the Angeles spouses – Yes

RULING:

Angeles spouses allege that they had no partnership with Mercado, relying on Arts. 1771 to 1773 of the Civil Code. 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 SEC holds no water since they contributed money to the partnership and not immovable property. The court ruled that 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 is to give notice to third parties. Failure to register does not affect the liability of the partnership and of the partners to third persons, nor does it affect the partnership’s juridical personality. Furthermore, the Angeles spouses admit to facts that prove the existence of a partnership since there exist a contract showing a sosyo industrial or industrial partnership, contribution of money & industry to a common fund and division of profits between the Angeles spouses and Mercado.

*Case digest by Radolf Zell Adasa JD-IV, Andres Bonifacio Law School, SY 2019-2020