LITONJUA JR. v. LITONJUA SR. a.

He and Eduardo entered into a joint venture (JV)/partnership

Dec 13, 2005 | Garcia, J. | Legal Personality of Partnership – In General agreement in the theater business which expanded into other
industries like shipping and real estate
PETITIONERS: AURELIO K. LITONJUA, JR b. Yang is their “partner” in the business
RESPONDENTS: EDUARDO K. LITONJUA, SR., ROBERT T. YANG, ANGLO PHILS. c. JV/Partnership agreement was contained in a Memorandum, which
MARITIME, INC., CINEPLEX, INC., DDM GARMENTS, INC., EDDIE K. LITONJUA was attached to the complaint, whereby Eduardo allegedly will give
P1M or 10% equity in consideration of Aurelio’s contribution of his industry:
SHIPPING AGENCY, INC., EDDIE K. LITONJUA SHIPPING CO., INC., LITONJUA
i. Whatever is left in the corporation, I will make sure that you get
SECURITIES, INC. (formerly E. K. Litonjua Sec), LUNETA THEATER, INC., E & L
ONE MILLION PESOS (P1,000,000.00) or ten percent
REALTY, (formerly E & L INTL SHIPPING CORP.), FNP CO., INC., HOME (10%) equity, whichever is greater. We two will gamble the
ENTERPRISES, INC., BEAUMONT DEV. REALTY CO., INC., GLOED LAND CORP., whole thing of what I have and what you are entitled to. .... It will
EQUITY TRADING CO., INC., 3D CORP., L DEV. CORP, LCM THEATRICAL be you and me alone on this
ENTERPRISES, INC., LITONJUA SHIPPING CO. INC., MACOIL INC., ODEON REALTY d. That subsequently, their relationship turned sour and so Eduardo
CORP., SARATOGA REALTY, INC., ACT THEATER INC. (formerly General Theatrical & registered the properties of the JV to the other parties , in fraud of
Film Exchange, INC.), AVENUE REALTY, INC., AVENUE THEATER, INC. and LVF him.
3. Eduardo and Yang denied under oath the material allegations, arguing that Aurelio
PHILIPPINES, INC., (Formerly VF PHILIPPINES)
had no cause of action against them.
4. RTC ruled in favour of Aurelio.
SUMMARY: Aurelio sued his brother Eduardo and a certain Yang to recognize his 5. CA: reversed; in favor of Eduardo and Yang and dismissed the case on the
share in the alleged partnership which was based on a Memorandum. SC held that the ground that the alleged partnership is void or legally inexistent.
said Memorandum is void for it didn’t observe the requirements needed for the validity.
ISSUES:
DOCTRINE: Requirements for the validity of the partnership:
1. WON there exists a partnership among the parties – NO
Art. 1771. A partnership may be constituted in any form, except where immovable RATIO:
property or real rights are contributed thereto, in which case a public instrument 1. Aurelio had no cause of action because the Memorandum is not an actionable
shall be necessary document for lack of correct form.
a. A partnership exists when two or more persons agree to place their money,
Art. 1772. Every contract of partnership having a capital of three thousand pesos or effects, labor, and skill in lawful commerce or business, with the
more, in money or property, shall appear in a public instrument, which must be understanding that there shall be a proportionate sharing of the
recorded in the Office of the Securities and Exchange Commission. profits and losses between them.
b. A JV is like a partnership since their elements are similar, i.e., community of
Art. 1773. A contract of partnership is void, whenever immovable property is interests in the business and sharing of profits and losses. Being a form of
contributed thereto, if an inventory of said property is not made, signed by the partnership, a joint venture is generally governed by the law on partnership.
c. Requirements for the validity of the partnership:
parties, and attached to the public instrument.
i. 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
FACTS:
ii. Art. 1772. Every contract of partnership having a capital of three
1. PET Aurelio Litonjua, Jr. and RESP Eduardo Litonjua, Sr. are brothers. Aurelio filed thousand pesos or more, in money or property, shall appear in
a suit against Eduardo and RESP Robert Yang for specific performance and a public instrument, which must be recorded in the Office of
accounting. the Securities and Exchange Commission.
2. Aurelio alleged that:
iii. Art. 1773. A contract of partnership is void, whenever immovable
 property is contributed thereto, if an inventory of said property 1403 (2)(a). (GRANTING THE 1M OR 10% SOMETIME IN THE FUTURE)
is not made, signed by the parties, and attached to the public a. Unenforceable for non-compliance: some note or memorandum be in
instrument. writing and subscribed by the party charged
2. In the case at bar, Aurelio’s contributions, if any, consisted of immovable and 5. Therefore, if no action can successfully be maintained against Eduardo because no
real rights which was his supposed share in the family business and his valid partnership existed, there is also no cause of action against Yang
industry a. More importantly, Yang’s name did not even appear in the Memorandum.
3. Aurelio argues that: Aurelio has not sufficiently established the legal vinculum where he
a. The Memorandum is an actionable document conferring rights upon Aurelio sourced his right to drag Yang into the fray
to the share in the JV
i. The Court ruled that the Memorandum is defective as: DISPOSITIVE: WHEREFORE, the instant petition is DENIED and the impugned
1. It is unsigned and undated Decision and Resolution of the Court of Appeals AFFIRMED.
2. MEANING  It did not meet the public instrumentation
requirements under Art. 1771
3. Being unsigned and that the alleged partnership
involves more than P3,000 in money or property, it
cannot be presented for notarization, let alone be
registered with SEC
ii. The purported JV is legally inexistent, produces no effect
whatsoever and cannot be the source of any contractual or
legal right.
b. IN ADDITION contract-validating inventory requirement under Article 1773
of the Civil Code applies as long real property or real rights are initially
brought into the partnership.  AURELIO ARG: The immovables in
question were not contributed but were acquired after the formation
of the supposed partnership (He was trying to avoid 1773 coz they didn’t
do inventory)  NOT DISPUTED THAT REAL
RIGHTS/IMMOVABLES WERE CONTRIBUTED TO THE BUSINESS
i. According to the Court, Aurelio himself admitted contributing
his share which was already owned even before the
execution of the Memorandum
ii. an inventory to be signed by the parties and attached to
the public instrument is also indispensable to the validity of
the partnership whenever immovable property is
contributed to it.
c. Assuming that the Memorandum is ineffective or null as a partnership
document, it nevertheless created demandable rights. It may be
considered as an innominate contract
i. The Court ruled that this was only an afterthought by Aurelio.
His act of changing his original theory is an impermissible
practice by the Rules of Court and is an implied admission
that the very theory/claim he had in the first place (i.e.
partnership) is erroneous
4. The Court ruled that the nature of the contract is a promise not to be performed
within one year from contract execution covered by Statute of Frauds under Art.