THIRD DIVISION

G.R. No. 143340 August 15, 2001

LILIBETH SUNGA-CHAN and CECILIA SUNGA, petitioners,
vs.
LAMBERTO T. CHUA, respondent.
GONZAGA-REYES, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court of the Decision1 of the Court of
Appeals dated January 31, 2000 in the case entitled "Lamberto T. Chua vs. Lilibeth Sunga Chan and Cecilia Sunga"
and of the Resolution dated May 23, 2000 denying the motion for reconsideration of herein petitioners Lilibeth
Sunga and Cecilia Sunga (hereafter collectively referred to as petitioners).
The pertinent facts of this case are as follows:
On June 22, 1992, Lamberto T. Chua (hereafter respondent) filed a complaint against Lilibeth Sunga Chan
(hereafter petitioner Lilibeth) and Cecilia Sunga (hereafter petitioner Cecilia), daughter and wife, respectively of
the deceased Jacinto L. Sunga (hereafter Jacinto), for "Winding Up of Partnership Affairs, Accounting, Appraisal
and Recovery of Shares and Damages with Writ of Preliminary Attachment" with the Regional Trial Court, Branch
11, Sindangan, Zamboanga del Norte.
Respondent alleged that in 1977, he verbally entered into a partnership with Jacinto in the distribution of Shellane
Liquefied Petroleum Gas (LPG) in Manila. For business convenience, respondent and Jacinto allegedly agreed to
register the business name of their partnership, SHELLITE GAS APPLIANCE CENTER (hereafter Shellite), under the
name of Jacinto as a sole proprietorship. Respondent allegedly delivered his initial capital contribution of
P100,000.00 to Jacinto while the latter in turn produced P100,000.00 as his counterpart contribution, with the
intention that the profits would be equally divided between them. The partnership allegedly had Jacinto as
manager, assisted by Josephine Sy (hereafter Josephine), a sister of the wife respondent, Erlinda Sy. As
compensation, Jacinto would receive a manager's fee or remuneration of 10% of the gross profit and Josephine
would receive 10% of the net profits, in addition to her wages and other remuneration from the business.
Allegedly, from the time that Shellite opened for business on July 8, 1977, its business operation went quite and
was profitable. Respondent claimed that he could attest to success of their business because of the volume of
orders and deliveries of filled Shellane cylinder tanks supplied by Pilipinas Shell Petroleum Corporation. While
Jacinto furnished respondent with the merchandise inventories, balance sheets and net worth of Shellite from
1977 to 1989, respondent however suspected that the amount indicated in these documents were understated
and undervalued by Jacinto and Josephine for their own selfish reasons and for tax avoidance.
Upon Jacinto's death in the later part of 1989, his surviving wife, petitioner Cecilia and particularly his daughter,
petitioner Lilibeth, took over the operations, control, custody, disposition and management of Shellite without
respondent's consent. Despite respondent's repeated demands upon petitioners for accounting, inventory,
appraisal, winding up and restitution of his net shares in the partnership, petitioners failed to comply. Petitioner
Lilibeth allegedly continued the operations of Shellite, converting to her own use and advantage its properties.
On March 31, 1991, respondent claimed that after petitioner Lilibeth ran out the alibis and reasons to evade
respondent's demands, she disbursed out of the partnership funds the amount of P200,000.00 and partially paid
the same to respondent. Petitioner Lilibeth allegedly informed respondent that the P200,000.00 represented
partial payment of the latter's share in the partnership, with a promise that the former would make the complete
inventory and winding up of the properties of the business establishment. Despite such commitment, petitioners
I can do all things through
“ Him who strengthens me.”
1
Philippians 4:13
allegedly failed to comply with their duty to account, and continued to benefit from the assets and income of
Shellite to the damage and prejudice of respondent.
On December 19, 1992, petitioners filed a Motion to Dismiss on the ground that the Securities and Exchange
Commission (SEC) in Manila, not the Regional Trial Court in Zamboanga del Norte had jurisdiction over the action.
Respondent opposed the motion to dismiss.
On January 12, 1993, the trial court finding the complaint sufficient in from and substance denied the motion to
dismiss.
On January 30, 1993, petitioners filed their Answer with Compulsory Counter-claims, contending that they are not
liable for partnership shares, unreceived income/profits, interests, damages and attorney's fees, that respondent
does not have a cause of action against them, and that the trial court has no jurisdiction over the nature of the
action, the SEC being the agency that has original and exclusive jurisdiction over the case. As counterclaim,
petitioner sought attorney's fees and expenses of litigation.
On August 2, 1993, petitioner filed a second Motion to Dismiss this time on the ground that the claim for winding
up of partnership affairs, accounting and recovery of shares in partnership affairs, accounting and recovery of
shares in partnership assets/properties should be dismissed and prosecuted against the estate of deceased
Jacinto in a probate or intestate proceeding.
On August 16, 1993, the trial denied the second motion to dismiss for lack of merit.
On November 26, 1993, petitioners filed their Petition for Certiorari, Prohibition and Mandamus with the Court of
Appeals docketed as CA-G.R. SP No. 32499 questioning the denial of the motion to dismiss.
On November 29, 1993, petitioners filed with the trial court a Motion to Suspend Pre-trial Conference.
On December 13, 1993, the trial court granted the motion to suspend pre-trial conference.
On November 15, 1994, the Court of Appeals denied the petition for lack of merit.
On January 16, 1995, this Court denied the petition for review on certiorari filed by petitioner, "as petitioners
failed to show that a reversible error was committed by the appellate court."2
On February 20, 1995, entry of judgment was made by the Clerk of Court and the case was remanded to the trial
court on April 26, 1995.
On September 25, 1995, the trial court terminated the pre-trial conference and set the hearing of the case of
January 17, 1996. Respondent presented his evidence while petitioners were considered to have waived their
right to present evidence for their failure to attend the scheduled date for reception of evidence despite notice.
On October 7, 1997, the trial court rendered its Decision ruling for respondent. The dispositive of the Decision
reads:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, as follows:
(1) DIRECTING them to render an accounting in acceptable form under accounting procedures and standards of
the properties, assets, income and profits of the Shellite Gas Appliance Center Since the time of death of Jacinto L.
Sunga, from whom they continued the business operations including all businesses derived from Shellite Gas
Appliance Center, submit an inventory, and appraisal of all these properties, assets, income, profits etc. to the
Court and to plaintiff for approval or disapproval;
(2) ORDERING them to return and restitute to the partnership any and all properties, assets, income and profits
they misapplied and converted to their own use and advantage the legally pertain to the plaintiff and account for
the properties mentioned in pars. A and B on pages 4-5 of this petition as basis;
(3) DIRECTING them to restitute and pay to the plaintiff ½ shares and interest of the plaintiff in the partnership of
the listed properties, assets and good will (sic) in schedules A, B and C, on pages 4-5 of the petition;
(4) ORDERING them to pay the plaintiff earned but unreceived income and profits from the partnership from 1988
to May 30, 1992, when the plaintiff learned of the closure of the store the sum of P35,000.00 per month, with legal
rate of interest until fully paid;
I can do all things through
“ Him who strengthens me.”
2
Philippians 4:13
(5) ORDERING them to wind up the affairs of the partnership and terminate its business activities pursuant to law,
after delivering to the plaintiff all the ½ interest, shares, participation and equity in the partnership, or the value
thereof in money or money's worth, if the properties are not physically divisible;
(6) FINDING them especially Lilibeth Sunga-Chan guilty of breach of trust and in bad faith and hold them liable to
the plaintiff the sum of P50,000.00 as moral and exemplary damages; and,
(7) DIRECTING them to reimburse and pay the sum of P25,000.00 as attorney's (sic) and P25,000.00 as litigation
expenses.
NO special pronouncements as to COSTS.
SO ORDERED."3
On October 28, 1997, petitioners filed a Notice of Appeal with the trial court, appealing the case to the Court of
Appeals.
On January 31, 2000, the Court of Appeals dismissed the appeal. The dispositive portion of the Decision reads:
"WHEREFORE, the instant appeal is dismissed. The appealed decision is AFFIRMED in all respects."4
On May 23, 2000, the Court of Appeals denied the motion for reconsideration filed by petitioner.
Hence, this petition wherein petitioner relies upon following grounds:
"1. The Court of Appeals erred in making a legal conclusion that there existed a partnership between respondent
Lamberto T. Chua and the late Jacinto L. Sunga upon the latter'' invitation and offer and that upon his death the
partnership assets and business were taken over by petitioners.
2. The Court of Appeals erred in making the legal conclusion that laches and/or prescription did not apply in the
instant case.
3. The Court of Appeals erred in making the legal conclusion that there was competent and credible evidence to
warrant the finding of a partnership, and assuming arguendo that indeed there was a partnership, the finding of
highly exaggerated amounts or values in the partnership assets and profits."5
Petitioners question the correctness of the finding of the trial court and the Court of Appeals that a partnership
existed between respondent and Jacinto from 1977 until Jacinto's death. In the absence of any written document
to show such partnership between respondent and Jacinto, petitioners argues that these courts were proscribes
from hearing the testimonies of respondent and his witness, Josephine, to prove the alleged partnership three
years after Jacinto's death. To support this argument, petitioners invoke the "Dead Man's Statute' or "Survivorship
Rule" under Section 23, Rule 130 of the Rules of Court that provides:
"SEC. 23. Disqualification by reason of death or insanity of adverse party. – Parties or assignors of parties to a
case, or persons in whose behalf a case is prosecuted, against an executor or administrator or other
representative of a deceased person, or against a person of unsound mind, upon a claim or demand against the
estate of such deceased person, or against such person of unsound mind, cannot testify as to any matter of fact
occurring before the death of such deceased person or before such person became of unsound mind."
Petitioners thus implore this Court to rule that the testimonies of respondent and his alter ego, Josephine, should
not have been admitted to prove certain claims against a deceased person (Jacinto), now represented by
petitioners.
We are not persuaded.
A partnership may be constituted in any form, except where immovable property of real rights are contributed
thereto, in which case a public instrument shall necessary.6 Hence, based on the intention of the parties, as
gathered from the facts and ascertained from their language and conduct, a verbal contract of partnership may
arise.7 The essential profits that must be proven to that a8 partnership was agreed upon are (1) mutual contribution
to a common stock, and (2) a joint interest in the profits. Understandably so, in view of the absence of the written
contract of partnership between respondent and Jacinto, respondent resorted to the introduction of documentary
and testimonial evidence to prove said partnership. The crucial issue to settle then is to whether or not the "Dead
Man's Statute" applies to this case so as to render inadmissible respondent's testimony and that of his witness,
I can do all things through
“ Him who strengthens me.”
3
Philippians 4:13
Josephine.
The "Dead Man's Statute" provides that if one party to the alleged transaction is precluded from testifying by
death, insanity, or other mental disabilities, the surviving party is 9not entitled to the undue advantage of giving his
own uncontradicted and unexplained account of the transaction. But before this rule can be successfully invoked
to bar the introduction of testimonial evidence, it is necessary that:
"1. The witness is a party or assignor of a party to case or persons in whose behalf a case in prosecuted.
2. The action is against an executor or administrator or other representative of a deceased person or a person of
unsound mind;
3. The subject-matter of the action is a claim or demand against the estate of such deceased person or against
person of unsound mind;
4. His testimony refers to any matter of fact of 10which occurred before the death of such deceased person or
before such person became of unsound mind."
Two reasons forestall the application of the "Dead Man's Statute" to this case.
First, petitioners filed a compulsory counterclaim11 against respondents in their answer before the trial court, and
with the filing of their12counterclaim, petitioners themselves effectively removed this case from the ambit of the
"Dead Man's Statute". Well entrenched is the rule that when it is the executor or administrator or representatives
of the estates that sets up the counterclaim, the plaintiff, herein respondent, may testify to occurrences before the
death of the deceased to defeat the counterclaim. Moreover, as defendant in the counterclaim, respondent is
13
not disqualified from testifying as to matters of facts occurring before the death of14the deceased, said action not
having been brought against but by the estate or representatives of the deceased.
Second, the testimony of Josephine is not covered by the "Dead Man's Statute" for the simple reason that she is
not "a party or assignor of a party to a case or persons in whose behalf a case is prosecuted." Records show that
respondent offered the testimony of Josephine to establish the existence of the partnership between respondent
and Jacinto. Petitioners' insistence that Josephine is the alter ego of respondent does not make her an assignor
because the term "assignor" of a party means "assignor of15a cause of action which has arisen, and not the assignor
of a right assigned before any cause of action has arisen." Plainly then, Josephine is merely a witness of
respondent, the latter being the party plaintiff.
We are not convinced by petitioners' allegation that Josephine's testimony lacks probative value because she was
allegedly coerced coerced by respondent, her brother-in-law, to testify in his favor, Josephine merely declared in
court that she was requested by respondent to testify and that if she were not requested to do so she would not
have testified. We fail to see how we can conclude from this candid admission that Josephine's testimony is
involuntary when she did not in any way categorically say that she was forced to be a witness of respondent.
Also, the fact that Josephine is the sister of the wife of respondent does not diminish16 the value of her testimony
since relationship per se, without more, does not affect the credibility of witnesses.
Petitioners' reliance alone on the "Dead Man's Statute" to defeat respondent's claim cannot prevail over the
factual findings of the trial court and the Court of Appeals that a partnership was established between
respondent and Jacinto. Based not only on the testimonial evidence, but the documentary evidence as well, the
trial court and the Court of Appeals considered the evidence for respondent as sufficient to prove the formation
of partnership, albeit an informal one.
Notably, petitioners did not present any evidence in their favor during trial. By the weight of judicial precedents, a
factual matter like the finding of the existence of a partnership between respondent and Jacinto cannot be
inquired into by this Court on review.17 This Court can no longer be tasked to go over the proofs presented by the
parties and analyze, assess and weigh them to ascertain if the trial court and the appellate court were correct in
according superior credit to this or that piece of evidence of one party or the other.18 It must be also pointed out
that petitioners failed to attend the presentation of evidence of respondent. Petitioners cannot now turn to this
Court to question the admissibility and authenticity of the documentary evidence of respondent19 when petitioners
failed to object to the admissibility of the evidence at the time that such evidence was offered.
With regard to petitioners' insistence that laches and/or prescription should have extinguished respondent's claim,
I can do all things through
“ Him who strengthens me.”
4
Philippians 4:13
we agree with the trial court and the Court of Appeals that the action for accounting filed by respondents three (3)
years after Jacinto's death was well within20the prescribed period. The Civil Code provides that an action to enforce
an oral contract prescribes in six (6) years while the right to demand an accounting for a partner's interest as
against the 21person continuing the business accrues at the date of dissolution, in the absence of any contrary
agreement. Considering that the death of a partner results in the dissolution of the partnership22 , in this case, it
was Jacinto's death that respondent as the surviving partner had the right to an account of his interest as against
petitioners. It bears stressing that while Jacinto's death23 dissolved the partnership, the dissolution did not
immediately terminate the partnership. The Civil Code expressly provides that upon dissolution, the partnership
continues and24 its legal personality is retained until the complete winding up of its business, culminating in its
termination.
In a desperate bid to cast doubt on the validity of the oral partnership between respondent and Jacinto,
petitioners maintain that said partnership that had initial capital of P200,000.00 should have been registered with
the Securities and Exchange Commission (SEC) since registration is mandated by the Civil Code, True, Article 1772
of the Civil Code requires that partnerships with a capital of P3,000.00 or more must register with the SEC,
however, this registration requirement is not mandatory. Article 1768 of the Civil Code25 explicitly provides that
the partnership retains its juridical personality even if it fails to register. The failure to register the contract of
partnership does not invalidate the same as among the partners, so long as the contract has the essential
requisites, because the main purpose of registration is to give notice to third parties, and it can be assumed that
the members themselves knew of the contents of their contract.26 In the case at bar, non-compliance with this
directory provision of the law will not invalidate the partnership considering that the totality of the evidence
proves that respondent and Jacinto indeed forged the partnership in question.
WHEREFORE, in view of the foregoing, the petition is DENIED and the appealed decision is AFFIRMED.
SO ORDERED.1âwphi1.nêt

I can do all things through

“ Him who strengthens me.”
5
Philippians 4:13