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G.R. No. 134559 – 378 Phil. 170 – Civil Law – Partnership – Sharing of Loss in a Partnership – Industrial Partner not Liable for Losses
In 1969, sisters Antonia Torres and Emeteria Baring entered into a joint venture agreement with Manuel Torres. Under the agreement, the sisters agreed to execute a deed of sale in favor Manuel over a parcel of land, the sisters received no cash payment from Manuel but the promise of profits (60% for the sisters and 40% for Manuel) – said parcel of land is to be developed as a subdivision.
Manuel then had the title of the land transferred in his name and he subsequently mortgaged the property. He used the proceeds from the mortgage to start building roads, curbs and gutters. Manuel also contracted an engineering firm for the building of housing units. But due to adverse claims in the land, prospective buyers were scared off and the subdivision project eventually failed.
The sisters then filed a civil case against Manuel for damages equivalent to 60% of the value of the property, which according to the sisters, is what’s due them as per the contract.
The lower court ruled in favor of Manuel and the Court of Appeals affirmed the lower court.
The sisters then appealed before the Supreme Court where they argued that there is no partnership between them and Manuel because the joint venture agreement is void.
ISSUE: Whether or not there exists a partnership.
HELD: Yes. The joint venture agreement the sisters entered into with Manuel is a partnership agreement whereby they agreed to contribute property (their land) which was to be developed as a subdivision. While on the other hand, though Manuel did not contribute capital, he is an industrial partner for his contribution for general expenses and other costs. Furthermore, the income from the said project would be divided according to the stipulated percentage (60-40). Clearly, the contract manifested the intention of the parties to form a partnership. Further still, the sisters cannot invoke their right to the 60% value of the property and at the same time deny the same contract which entitles them to it.
At any rate, the failure of the partnership cannot be blamed on the sisters, nor can it be blamed to Manuel (the sisters on their appeal did not show evidence as to Manuel’s fault in the failure of the partnership). The sisters must then bear their loss (which is 60%). Manuel does not bear the loss of the other 40% because as an industrial partner he is exempt from losses.