Case Summary (G.R. No. 183374)
Technical Services Contract and Partial Performance
PGI was engaged under a Technical Services Contract to perform subsurface soil exploration, laboratory tests, seismic study, and geotechnical engineering. PGI completed only four of five boreholes—citing uncleared terrain—and finished the seismic study. It billed the JV ₱284,553.50 (soil tests) and ₱250,800 (seismic) but received no payment despite repeated demands. The JV project was later shelved for economic reasons.
Trial Court Decision
The Regional Trial Court (RTC) of Quezon City ruled in favor of PGI, holding both Marsman Drysdale and Gotesco jointly liable. It awarded:
- ₱535,353.50 plus legal interest;
- ₱200,000 exemplary damages;
- ₱200,000 attorney’s fees; and
- Costs of suit.
It granted Marsman Drysdale’s cross-claim against Gotesco for reimbursement of ₱535,353.50 and ₱100,000 attorney’s fees.
Appellate Court Decision and Rationale
The Court of Appeals affirmed the RTC decision with modifications:
- Deleted exemplary damages award;
- Deleted ₱100,000 attorney’s fees in Marsman Drysdale’s favor;
- Ordered Gotesco to reimburse Marsman Drysdale 50% of the amount due PGI rather than the full lump sum.
It held that the JVA could not bind PGI, a third party, invoking the principle of relativity of contracts, and presumed joint liability under Arts. 1207–1208 (Civil Code).
Issues on Review
- Whether Marsman Drysdale should be jointly liable for PGI’s claim and attendant damages and fees.
- Whether Gotesco bears liability given Marsman Drysdale’s alleged failure to clear the site.
- Proper application of partnership law to allocate losses between the venturers.
- Validity of attorney’s fees awards and reimbursement cross-claim.
Court’s Analysis on Liability to PGI
The Supreme Court declined to disturb the factual findings affirming PGI’s entitlement. PGI contracted solely with the JV, naming both Marsman Drysdale and Gotesco as owners. The JVA, a contract among the venturers, could not defeat PGI’s claim. Under Arts. 1207–1208, in the absence of express solidarity, debtor obligations are presumed divided among joint debtors—but here both owe the whole to PGI.
Application of Partnership Law on Joint Venturers
A joint venture is treated as a partnership under Civil Code Art. 1797. Losses and profits follow the agreed ratio—in this case 50–50. The obligation to PGI, as a loss of the venture, must thus be shared equally. The Court rejected the appellate ruling requiring Gotesco to reimburse Marsman Drysdale for half the JV obligation, chara
Case Syllabus (G.R. No. 183374)
Facts of the Joint Venture and Services Contract
- On February 12, 1997, Marsman Drysdale Land, Inc. (“Marsman Drysdale”) and Gotesco Properties, Inc. (“Gotesco”) executed a Joint Venture Agreement (JVA) to develop an office building on land in Makati City owned by Marsman Drysdale.
- Under Section 4 of the JVA, the venture’s capital was to be contributed 50:50:
- Marsman Drysdale contributed the land, appraised at ₱420 million, to be delivered in “buildable condition” within 90 days.
- Gotesco contributed ₱420 million in cash: ₱50 million upon signing; ₱370 million in progress billings within 10 months from land delivery.
- Section 4.3 of the JVA provided that construction funding would come from Gotesco’s cash, presales of units, or bank loans arranged by Gotesco; all advances were to be repaid by the joint venture; a defaulting partner would indemnify the advancing party.
Technical Services Contract with PGI
- On July 14, 1997, the joint venture engaged Philippine Geoanalytics, Inc. (“PGI”) under a Technical Services Contract (TSC) for subsurface soil exploration, lab testing, seismic study, and geotechnical engineering.
- PGI drilled four of five boreholes; its failure to complete one was attributed to the joint venture’s failure to clear debris.
- PGI completed the seismic study and billed the venture:
- ₱284,553.50 on November 24, 1997 (partial subsurface exploration).
- ₱250,800 on January 15, 1998 (seismic study).
- Despite repeated demands, the joint venture did not pay; unfavorable economic conditions led to shelving the building project.
Trial Court Proceedings
- On November 11, 1999, PGI sued Marsman Drysdale and Gotesco for collection of sum of money and damages in the Quezon City RTC.
- Marsman Drysdale’s answer shifted liability to Gotesco per the JVA; Gotesco countered that PGI had not fully performed and blamed Marsman Drysdale for obstructing site clearance.
- RTC Branch 226 (June 2, 2004) ruled for PGI, ordering Marsman Drysdale and Gotesco, jointly, to pay:
- ₱535,353.50 plus legal interest;
- ₱200,000 exempl