G.R. No. 101847 May 27, 1993 LOURDES NAVARRO AND MENARDO NAVARRO, petitioners, vs.

COURT OF APPEALS, JUDGE BETHEL KATALBAS-MOSCARDON, Presiding Judge, Regional Trial Court of
Bacolod City, Branch 52, Sixth Judicial Region and Spouses OLIVIA V. YANSON AND RICARDO B.
YANSON,respondents.

 
FACTS:
 
Private respondent Olivia V. Yanson and Petitioner Lourdes Navarro were engaged in the business of Air Freight
Service Agency. Pursuant to the Agreement which they entered, they agreed to operate the said Agency; It is the
Private Respondent Olivia Yanson who supplies the necessary equipment and money used in the operation of
the agency. Her brother in the person of Atty. Rodolfo Villaflores was the manager thereof while petitioner
Lourdes Navarro was the Cashier; In compliance to her obligation as stated in their agreement, private
respondent brought into their business certain chattels or movables or personal properties. However, those
personal properties remain to be registered in her name; Among the provisions stipulated in their agreement is
the equal sharing of whatever proceeds realized from their business; However, sometime on July 23, 1976,
private respondent Olivia V. Yanson, in order for her to recovery the above mentioned personal properties
which she brought into their business, filed a complaint against petitioner Lourdes Navarro for "Delivery of
Personal Properties With Damages and with an application for a writ of replevin. Private respondents'
application for a writ of replevin was later approved/granted by the trial court. For her defense, petitioner
Navarro argue that she and private respondent Yanson actually formed a verbal partnership which was engaged
in the business of Air Freight Service Agency. She contended that the decision sustaining the writ of replevin is
void since the properties belonging to the partnership do not actually belong to any of the parties until the final
disposition and winding up of the partnership.
 
ISSUE:
1. Whether or not there was a partnership that existed between the parties.
2. Whether the properties that were commonly used in the operation of Allied Air Freight belonged to the
alleged partnership business.
 
RULING:
 
Article 1767 of the New Civil Code defines the contract of partnership: Art. 1767. By the contract of partnership
two or more persons bind themselves to contribute money, property, or industry to a common fund, with the
intention of dividing the proceeds among themselves. A cursory examination of the evidences presented no
proof that a partnership, whether oral or written had been constituted. In fact, those movables brought by the
plaintiff for the use in the operation of the business remain registered in her name. While there may have been
co-ownership or co-possession of some items and/or any sharing of proceeds by way of advances received by
both plaintiff and the defendant, these are not indicative and supportive of the existence of any partnership
between them. Art. 1769 par. 2 provides: Co-ownership or co-possession does not of itself establish a
partnership, whether such co-owners or co-possessors do or do not share any profits made by the use of the
property” Besides, the alleged profit was a difference found after valuating the assets and not arising from the
real operation of the business. In accounting procedures, strictly, this could not be profit but a net worth.
G.R. No. 101847 May 27, 1993
LOURDES NAVARRO AND MENARDO NAVARRO, petitioners,
vs.
COURT OF APPEALS, JUDGE BETHEL KATALBAS-MOSCARDON, Presiding Judge, Regional Trial Court of
Bacolod City, Branch 52, Sixth Judicial Region and Spouses OLIVIA V. YANSON AND RICARDO B.
YANSON, respondents.
George L. Howard Law Office for petitioners
Geocadin, Vinco, Guance, Laudenorio & Cario Law Office for private respondents.

MELO, J.:
Assailed and sought to be set aside by the petition before us is the Resolution of the Court of Appeals dated June
20, 1991 which dismissed the petition for annulment of judgment filed by the Spouses Lourdes and Menardo
Navarro, thusly:

The instant petition for annulment of decision is DISMISSED.

1. Judgments may be annulled only on the ground of extrinsic or collateral fraud, as

2. Even if the judgment rendered by the respondent Court were erroneous, it is not necessarily
void (Chereau vs. Fuentebella, 43 Phil. 216). Hence, it cannot be annulled by the proceeding
sought to be commenced by the petitioners.

3. The petitioners' remedy against the judgment enforcement of which is sought to be stopped
should have been appeal.

SO ORDERED. (pp. 24-25, Rollo.)

The antecedent facts of the case are as follows:

On July 23, 1976, herein private respondent Olivia V. Yanson filed a complaint against petitioner Lourdes
Navarro for "Delivery of Personal Properties With Damages". The complaint incorporated an application for a
writ of replevin. The complaint was later docketed as Civil Case No. 716 (12562) of the then Court of First
Instance of Bacolod (Branch 55) and was subsequently amended to include private respondent's husband,
Ricardo B. Yanson, as co-plaintiff, and petitioner's husband, as co-defendant.

On July 27, 1976, then Executive Judge Oscar R. Victoriano (later to be promoted and to retire as Presiding
Justice of the Court of Appeals) approved private respondents' application for a writ of replevin. The Sheriff's
Return of Service dated March 3, 1978 affirmed receipt by private respondents of all pieces of personal
property sought to be recovered from petitioners.

On April 30, 1990, Presiding Judge Bethel Katalbas-Moscardon rendered a decision, disposing as follows :

Accordingly, in the light of the aforegoing findings, all chattels already recovered by plaintiff by
virtue of the Writ of Replevin and as listed in the complaint are hereby sustained to belong to
plaintiff being the owner of these properties; the motor vehicle, particularly that Ford Fiera Jeep
registered in and which had remain in the possession of the defendant is likewise declared to
belong to her, however, said defendant is hereby ordered to reimburse plaintiff the sum of
P6,500.00 representing the amount advanced to pay part of the price therefor; and said
defendant is likewise hereby ordered to return to plaintiff such other equipment[s] as were
brought by the latter to and during the operation of their business as were listed in the
complaint and not recovered as yet by virtue of the previous Writ of Replevin. (p. 12, Rollo.)

Petitioner received a copy of the decision on January 10, 1991 (almost 9 months after its rendition) and filed on
January 16, 1991 a "Motion for Extension of Time To File a Motion for Reconsideration". This was granted on
January 18, 1991. Private respondents filed their opposition, citing the ruling in the case of Habaluyas
Enterprises, Inc. vs. Japson (142 SCRA 208 [1986]) proscribing the filing of any motion for extension of time to
file a motion for a new trial or reconsideration. The trial judge vacated the order dated January 18, 1991 and
declared the decision of April 30, 1990 as final and executory. (Petitioners' motion for reconsideration was
subsequently filed on February 1, 1991 or 22 days after the receipt of the decision).

On February 4, 1991, the trial court issued a writ of execution (Annex "5", p. 79, Rollo). The Sheriff's Return of
Service (Annex "6", p. 82, Rollo) declared that the writ was "duly served and satisfied". A receipt for the amount
of P6,500.00 issued by Mrs. Lourdes Yanson, co-petitioner in this case, was likewise submitted by the Sheriff
(Annex "7", p. 83, Rollo).

On June 26, 1991, petitioners filed with respondent court a petition for annulment of the trial court's decision,
claiming that the trial judge erred in declaring the non-existence of a partnership, contrary to the evidence on
record.

The appellate court, as aforesaid, outrightly dismissed the petition due to absence of extrinsic or collateral
fraud, observing further that an appeal was the proper remedy.

In the petition before us, petitioners claim that the trial judge ignored evidence that would show that the parties
"clearly intended to form, and (in fact) actually formed a verbal partnership engaged in the business of Air
Freight Service Agency in Bacolod"; and that the decision sustaining the writ of replevin is void since the
properties belonging to the partnership do not actually belong to any of the parties until the final disposition
and winding up of the partnership" (p. 15, Rollo). These issues, however, were extensively discussed by the trial
judge in her 16-page, single-spaced decision.

We agree with respondents that the decision in this case has become final. In fact a writ of execution had been
issued and was promptly satisfied by the payment of P6,500.00 to private respondents.

Having lost their right to appeal, petitioners resorted to annulment proceedings to justify a belated judicial
review of their case. This was, however, correctly thrown out by the Court of Appeals because petitioners failed
to cite extrinsic or collateral fraud to warrant the setting aside of the trial court's decision. We respect the
appellate court's finding in this regard.

Petitioners have come to us in a petition for review. However, the petition is focused solely on factual issues
which can no longer be entertained. Petitioners' arguments are all directed against the decision of the regional
trial court; not a word is said in regard to the appellate's court disposition of their petition for annulment of
judgment. Verily, petitioners keeps on pressing that the idea of a partnership exists on account of the so-called
admissions in judicio. But the factual premises of the trial court were more than enough to suppress and negate
petitioners submissions along this line:

To be resolved by this Court factually involved in the issue of whether there was a partnership
that existed between the parties based on their verbal contention; whether the properties that
were commonly used in the operation of Allied Air Freight belonged to the alleged partnership
business; and the status of the parties in this transaction of alleged partnership. On the other
hand, the legal issues revolves on the dissolution and winding up in case a partnership so
existed as well as the issue of ownership over the properties subject matter of recovery.

As a premise, Article 1767 of the New Civil Code defines the contract of partnership to quote:

Art. 1767. By the contract of partnership two or more persons bind themselves to contribute
money, property, or industry to a common fund, with the intention of dividing the proceeds
among themselves.

xxx xxx xxx

Corollary to this definition is the provision in determining whether a partnership exist as so

xxx xxx xxx

Furthermore, the Code provides under Article 1771 and 1772 that while a partnership may be
constituted in any form, a public instrument is necessary where immovables or any rights is
constituted. Likewise, if the partnership involves a capitalization of P3,000.00 or more in money
 or property, the same must appear in a public instrument which must be recorded in the Office
of the Securities and Exchange Commission. Failure to comply with these requirements shall
only affect liability of the partners to third persons.

In consideration of the above, it is undeniable that both the plaintiff and the defendant-wife
made admission to have entered into an agreement of operating this Allied Air Freight Agency
of which the plaintiff personally constituted with the Manila Office in a sense that the plaintiff
did supply the necessary equipments and money while her brother Atty. Rodolfo Villaflores was
the Manager and the defendant the Cashier. It was also admitted that part of this agreement was
an equal sharing of whatever proceeds realized. Consequently, the plaintiff brought into this
transaction certain chattels in compliance with her obligation. The same has been done by the
herein brother and the herein defendant who started to work in the business. A cursory
examination of the evidences presented no proof that a partnership, whether oral or written
had been constituted at the inception of this transaction. True it is that even up to the filing of
this complaint those movables brought by the plaintiff for the use in the operation of the
business remain registered in her name.

While there may have been co-ownership or co-possession of some items and/or any sharing of
proceeds by way of advances received by both plaintiff and the defendant, these are not
indicative and supportive of the existence of any partnership between them. Article 1769 of the
New Civil Code is explicit. Even the books and records retrieved by the Commissioner
appointed by the Court did not show proof of the existence of a partnership as conceptualized
by law. Such that if assuming that there were profits realized in 1975 after the two-year deficits
were compensated, this could only be subject to an equal sharing consonant to the agreement to
equally divide any profit realized. However, this Court cannot overlook the fact that the Audit
Report of the appointed Commissioner was not highly reliable in the sense that it was more of
his personal estimate of what is available on hand. Besides, the alleged profits was a difference
found after valuating the assets and not arising from the real operation of the business. In
accounting procedures, strictly, this could not be profit but a net worth.

In view of the above factual findings of the Court it follows inevitably therefore that there being
no partnership that existed, any dissolution, liquidation or winding up is beside the point. The
plaintiff himself had summarily ceased from her contract of agency and it is a personal
prerogative to desist. On the other hand, the assumption by the defendant in negotiating for
herself the continuance of the Agency with the principal in Manila is comparable to plaintiff's.
Any account of plaintiff with the principal as alleged, bore no evidence as no collection was ever
demanded of from her. The alleged P20,000.00 assumption specifically, as would have been
testified to by the defendant's husband remain a mere allegation.

As to the properties sought to be recovered, the Court sustains the possession by plaintiff of all
equipments and chattels recovered by virtue of the Writ of Replevin. Considering the other
vehicle which appeared registered in the name of the defendant, and to which even she
admitted that part of the purchase price came from the business claimed mutually operated,
although the Court have not as much considered all entries in the Audit Report as totally
reliable to be sustained insofar as the operation of the business is concerned, nevertheless, with
this admission of the defendant and the fact that as borne out in said Report there has been
disbursed and paid for in this vehicle out of the business funds in the total sum of P6,500.00, it
is only fitting and proper that validity of these disbursements must be sustained as true (Exhs.
M-1 to M-3, p. 180, Records). In this connection and taking into account the earlier agreement
that only profits were to be shared equally, the plaintiff must be reimbursed of this cost if only
to allow the defendant continuous possession of the vehicle in question. It is a fundamental
moral, moral and civil injunction that no one shall enrich himself at the expense of another. (pp.
71-75, Rollo.)

Withal, the appellate court acted properly in dismissing the petition for annulment of judgment, the issue raised
therein having been directly litigated in, and passed upon by, the trial court.

WHEREFORE, the petition is DISMISSED. The Resolution of the Court of Appeals dated June 20, 1991 is
AFFIRMED in all respects.

No special pronouncement is made as to costs.

Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.