G.R. No.

L-25532

February 28, 1969

COMMISSIONER OF INTERNAL RE EN!E, petitioner, vs. "ILLIAM #. S!TER a$% T&E CO!RT OF TA' A((EALS, respondents. Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo R. Rosete and Special Attorneys B. Gatdula, Jr. and T. Temprosa Jr. for petitioner. A. S. Mon on, Gutierre , Farrales and On! for respondents. RE)ES, #.*.L., J.: A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed on 3 Septem!er "#$% !& herein respondent William J. Suter as the 'eneral partner, and Julia Spiri' and (ustav Carlson, as the limited partners. )he partners contri!uted, respectivel&, *+ , . , *",, . and *+, . to the partnership. -n " -cto!er "#$%, the limited partnership was re'istered with the Securities and ./chan'e Commission. )he firm en'a'ed, amon' other activities, in the importation, mar0etin', distri!ution and operation of automatic phono'raphs, radios, television sets and amusement machines, their parts and accessories. 1t had an office and held itself out as a limited partnership, handlin' and carr&in' merchandise, usin' invoices, !ills and letterheads !earin' its trade2 name, maintainin' its own !oo0s of accounts and !an0 accounts, and had a 3uota allocation with the Central 4an0. 1n "#$,, however, 'eneral partner Suter and limited partner Spiri' 'ot married and, thereafter, on ", 5ecem!er "#$,, limited partner Carlson sold his share in the partnership to Suter and his wife. )he sale was dul& recorded with the Securities and ./chan'e Commission on + 5ecem!er "#$,. )he limited partnership had !een filin' its income ta/ returns as a corporation, without o!6ection !& the herein petitioner, Commissioner of 1nternal 7evenue, until in "#8# when the latter, in an assessment, consolidated the income of the firm and the individual incomes of the partners2spouses Suter and Spiri' resultin' in a determination of a deficienc& income ta/ a'ainst respondent Suter in the amount of *+,9%,. 9 for "#8$ and *$,89%. for "#88. 7espondent Suter protested the assessment, and re3uested its cancellation and withdrawal, as not in accordance with law, !ut his re3uest was denied. :na!le to secure a reconsideration, he appealed to the Court of )a/ Appeals, which court, after trial, rendered a decision, on "" ;ovem!er "#98, reversin' that of the Commissioner of 1nternal 7evenue. )he present case is a petition for review, filed !& the Commissioner of 1nternal 7evenue, of the ta/ court's aforesaid decision. 1t raises these issues< =a> Whether or not the corporate personalit& of the William J. Suter "Morcoin" Co., Ltd. should !e disre'arded for income ta/ purposes, considerin' that respondent William J. Suter and his wife, Julia Spiri' Suter actuall& formed a sin'le ta/a!le unit? and =!> Whether or not the partnership was dissolved after the marria'e of the

partners, respondent William J. Suter and Julia Spiri' Suter and the su!se3uent sale to them !& the remainin' partner, (ustav Carlson, of his participation of *+, . in the partnership for a nominal amount of *". . )he theor& of the petitioner, Commissioner of 1nternal 7evenue, is that the marria'e of Suter and Spiri' and their su!se3uent ac3uisition of the interests of remainin' partner Carlson in the partnership dissolved the limited partnership, and if the& did not, the fiction of 6uridical personalit& of the partnership should !e disre'arded for income ta/ purposes !ecause the spouses have e/clusive ownership and control of the !usiness? conse3uentl& the income ta/ return of respondent Suter for the &ears in 3uestion should have included his and his wife's individual incomes and that of the limited partnership, in accordance with Section $8 =d> of the ;ational 1nternal 7evenue Code, which provides as follows< =d> "us#and and $ife. @ 1n the case of married persons, whether citiAens, residents or non2residents, onl& one consolidated return for the ta/a!le &ear shall !e filed !& either spouse to cover the income of !oth spouses? .... 1n refutation of the fore'oin', respondent Suter maintains, as the Court of )a/ Appeals held, that his marria'e with limited partner Spiri' and their ac3uisition of Carlson's interests in the partnership in "#$, is not a 'round for dissolution of the partnership, either in the Code of Commerce or in the ;ew Civil Code, and that since its 6uridical personalit& had not !een affected and since, as a limited partnership, as contra distin'uished from a dul& re'istered 'eneral partnership, it is ta/a!le on its income similarl& with corporations, Suter was not !ound to include in his individual return the income of the limited partnership. We find the Commissioner's appeal unmeritorious. )he thesis that the limited partnership, William J. Suter "Morcoin" Co., Ltd., has !een dissolved !& operation of law !ecause of the marria'e of the onl& 'eneral partner, William J. Suter to the ori'inall& limited partner, Julia Spiri' one &ear after the partnership was or'aniAed is rested !& the appellant upon the opinion of now Senator )olentino in Commentaries and Jurisprudence on Commercial Laws of the *hilippines, Bol. ", $th .d., pa'e 8,, that reads as follows< A hus!and and a wife ma& not enter into a contract of !eneral copartnership, !ecause under the Civil Code, which applies in the a!sence of e/press provision in the Code of Commerce, persons prohi!ited from ma0in' donations to each other are prohi!ited from enterin' into uni%ersal partnerships. =+ .chaverri "#9> 1t follows that the marria'e of partners necessaril& !rin's a!out the dissolution of a pre2e/istin' partnership. =" (u& de Montella 8,> )he petitioner2appellant has evidentl& failed to o!serve the fact that William J. Suter "Morcoin" Co., Ltd. wasnot a uni%ersal partnership, !ut a particular one. As appears from Articles "9%$ and "9%8 of the Spanish Civil Code, of ",,# =which was the law in force when the su!6ect firm was or'aniAed in "#$%>, a uni%ersal partnership re3uires either that the o!6ect of the association !e all the present property of the partners, as contri!uted !& them to the common fund, or else "all that the partners ma& ac3uire !& their industry or $or& durin' the e/istence of the partnership". William J. Suter "Morcoin" Co., Ltd. was not such a universal partnership, since the contri!utions of the partners were fi/ed

sums of mone&, *+ , . !& William Suter and *",, . !& Julia Spiri' and neither one of them was an industrial partner. 1t follows that William J. Suter "Morcoin" Co., Ltd. was not a partnership that spouses were for!idden to enter !& Article "9%% of the Civil Code of ",,#. )he former Chief Justice of the Spanish Supreme Court, 5. Jose Casan, in his 5erecho Civil, %th .dition, "#8+, Bolume $, pa'e 8$9, footnote ", sa&s with re'ard to the prohi!ition contained in the aforesaid Article "9%%< Los con&u'es, se'un esto, no pueden cele!rar entre si el contrato de sociedad universal, pero o podran constituir sociedad particularC Aun3ue el punto ha sido mu& de!atido, nos inclinamos a la tesis permisiva de los contratos de sociedad particular entre esposos, &a 3ue nin'un precepto de nuestro Codi'o los prohi!e, & ha& 3ue estar a la norma 'eneral se'un la 3ue toda persona es capaA para contratar mientras no sea declarado incapaA por la le&. La 6urisprudencia de la 5ireccion de los 7e'istros fue favora!le a esta misma tesis en su resolution de 3 de fe!rero de "#39, mas parece cam!iar de rum!o en la de # de marAo de "#$3. ;or could the su!se3uent marria'e of the partners operate to dissolve it, such marria'e not !ein' one of the causes provided for that purpose either !& the Spanish Civil Code or the Code of Commerce. )he appellant's view, that !& the marria'e of !oth partners the compan& !ecame a sin'le proprietorship, is e3uall& erroneous. )he capital contri!utions of partners William J. Suter and Julia Spiri' were separatel& owned and contri!uted !& them #efore their marria'e? and after the& were 6oined in wedloc0, such contri!utions remained their respective separate propert& under the Spanish Civil Code =Article "3#9>< )he followin' shall !e the e'clusi%e propert& of each spouse< =a> )hat which is !rou'ht to the marria'e as his or her own? .... )hus, the individual interest of each consort in William J. Suter "Morcoin" Co., Ltd. did not !ecome common propert& of !oth after their marria'e in "#$,. 1t !ein' a !asic tenet of the Spanish and *hilippine law that the partnership has a 6uridical personalit& of its own, distinct and separate from that of its partners =unli0e American and .n'lish law that does not reco'niAe such separate 6uridical personalit&>, the !&passin' of the e/istence of the limited partnership as a ta/pa&er can onl& !e done !& i'norin' or disre'ardin' clear statutor& mandates and !asic principles of our law. )he limited partnership's separate individualit& ma0es it impossi!le to e3uate its income with that of the component mem!ers. )rue, section +$ of the 1nternal 7evenue Code mer'es re'istered 'eneral co2 partnerships =compa(ias colecti%as> with the personalit& of the individual partners for income ta/ purposes. 4ut this rule is e/ceptional in its disre'ard of a cardinal tenet of our partnership laws, and can not !e e/tended !& mere implication to limited partnerships. )he rulin's cited !& the petitioner =Collector of 1nternal 7evenue vs. :niversit& of the Bisa&as, L2"388$, 7esolution of 3 -cto!er "#9$, and Doppel E*hil.F, 1nc. vs. Gatco, %% *hil. 8 $> as authorit& for disre'ardin' the fiction of

"

le'al personalit& of the corporations involved therein are not applica!le to the present case. 1n the cited cases, the corporations were alread& su#)ect to ta/ when the fiction of their corporate personalit& was pierced? in the present case, to do so would e'empt the limited partnership from income ta/ation !ut would throw the ta/ !urden upon the partners2spouses in their individual capacities. )he corporations, in the cases cited, merel& served as !usiness conduits or alter e!os of the stoc0holders, a factor that 6ustified a disre'ard of their corporate personalities for ta/ purposes. )his is not true in the present case. Here, the limited partnership is not a mere !usiness conduit of the partner2spouses? it was or'aniAed for le'itimate !usiness purposes? it conducted its own dealin's with its customers prior to appellee's marria'e, and had !een filin' its own income ta/ returns as such independent entit&. )he chan'e in its mem!ership, !rou'ht a!out !& the marria'e of the partners and their su!se3uent ac3uisition of all interest therein, is no 'round for withdrawin' the partnership from the covera'e of Section +$ of the ta/ code, re3uirin' it to pa& income ta/. As far as the records show, the partners did not enter into matrimon& and thereafter !u& the interests of the remainin' partner with the premeditated scheme or desi'n to use the partnership as a !usiness conduit to dod'e the ta/ laws. 7e'ularit&, not otherwise, is presumed. As the limited partnership under consideration is ta/a!le on its income, to re3uire that income to !e included in the individual ta/ return of respondent Suter is to overstretch the letter and intent of the law. 1n fact, it would even conflict with what it specificall& provides in its Section +$< for the appellant Commissioner's stand results in e3ual treatment, ta/ wise, of a 'eneral copartnership =compa(ia colecti%a> and a limited partnership, when the code plainl& differentiates the two. )hus, the code ta/es the latter on its income, !ut not the former, !ecause it is in the case of compa(ias colecti%as that the mem!ers, and not the firm, are ta/a!le in their individual capacities for an& dividend or share of the profit derived from the dul& re'istered 'eneral partnership =Section +9, ;.1.7.C.? AraIas, Anno. J Juris. on the ;.1.7.C., As Amended, Bol. ", pp. ,,2,#>.la$phi*.n+t 4ut it is ar'ued that the income of the limited partnership is actuall& or constructivel& the income of the spouses and forms part of the con6u'al partnership of 'ains. )his is not wholl& correct. As pointed out in A'apito vs. Molo 8 *hil. %%#, and *eople's 4an0 vs. 7e'ister of 5eeds of Manila, 9 *hil. "9%, the fruits of the wife's parapherna !ecome con6u'al onl& when no lon'er needed to defra& the e/penses for the administration and preservation of the paraphernal capital of the wife. )hen a'ain, the appellant's ar'ument erroneousl& confines itself to the 3uestion of the le'al personalit& of the limited partnership, which is not essential to the income ta/a!ilit& of the partnership since the law ta/es the income of even 6oint accounts that have no personalit& of their own. " Appellant is, li0ewise, mista0en in that it assumes that the con6u'al partnership of 'ains is a ta/a!le unit, which it is not. What is ta/a!le is the "income of !oth spouses" =Section $8 EdF in their individual capacities. )hou'h the amount of income =income of the con6u'al partnership %is,a,%is the 6oint income of hus!and and wife> ma& !e the same for a 'iven ta/a!le &ear, their conse3uences would !e different, as their contri!utions in the !usiness partnership are not the same. )he difference in ta/ rates !etween the income of the limited partnership !ein' consolidated with, and when split from the income of the spouses, is not a 6ustification for re3uirin' consolidation? the revenue code, as it presentl& stands, does not authoriAe it, and even !ars it !& re3uirin' the limited partnership to pa& ta/ on its own income.

K-7 )H. K-7.(-1;( 7.AS-;S, the decision under review is here!& affirmed. ;o costs.

G.R. No. 1+92,8 #u-y 3, 1995 GREGORIO F. ORTEGA, TOMAS O. .EL CASTILLO, #R., a$% *EN#AMIN T. *ACORRO, petitioners, vs. &ON. CO!RT OF A((EALS, SEC!RITIES AN. E'C&ANGE COMMISSION a$% #OA/!IN L. MISA,respondents.

"Kurther to m& letter to &ou toda&, 1 would li0e to have a meetin' with all of &ou with re'ard to the mechanics of li3uidation, and more particularl&, m& interest in the two floors of this !uildin'. 1 would li0e to have this resolved soon !ecause it has to do with m& own plans." -n "# Ke!ruar& "#,,, petitioner2appellant wrote respondents2appellees another letter statin'< ")he partnership has ceased to !e mutuall& satisfactor& !ecause of the wor0in' conditions of our emplo&ees includin' the assistant attorne&s. All m& efforts to ameliorate the !elow su!sistence level of the pa& scale of our emplo&ees have !een thwarted !& the other partners. ;ot onl& have the& refused to 'ive meanin'ful increases to the emplo&ees, even attorne&s, are dressed down pu!licl& in a loud voice in a manner that deprived them of their self2respect. )he result of such policies is the formation of the union, includin' the assistant attorne&s." -n 3 June "#,,, petitioner filed with this Commission's Securities 1nvesti'ation and Clearin' 5epartment =S1C5> a petition for dissolution and li3uidation of partnership, doc0eted as S.C Case ;o. 33,$ pra&in' that the Commission< "". 5ecree the formal dissolution and order the immediate li3uidation of =the partnership of> 4ito, Misa J LoAada? "+. -rder the respondents to deliver or pa& for petitioner's share in the partnership assets plus the profits, rent or interest attri!uta!le to the use of his ri'ht in the assets of the dissolved partnership? "3. .n6oin respondents from usin' the firm name of 4ito, Misa J LoAada in an& of their correspondence, chec0s and pleadin's and to pa& petitioners dama'es for the use thereof despite the dissolution of the partnership in the amount of at least *8 , . ? "$. -rder respondents 6ointl& and severall& to pa& petitioner attorne&'s fees and e/pense of liti'ation in such amounts as ma&!e proven durin' the trial and which the Commission ma& deem 6ust and e3uita!le under the premises !ut in no case less than ten =" M> per cent of the value of the shares of petitioner or *" , . ?

"8. -rder the respondents to pa& petitioner moral dama'es with the amount of *8 , . and e/emplar& dama'es in the amount of *+ , . . "*etitioner li0ewise pra&ed for such other and further reliefs that the Commission ma& deem 6ust and e3uita!le under the premises." -n "3 Jul& "#,,, respondents2appellees filed their opposition to the petition. -n "3 Jul& "#,,, petitioner filed his 7epl& to the -pposition. -n 3" March "#,#, the hearin' officer rendered a decision rulin' that< "E*Fetitioner's withdrawal from the law firm 4ito, Misa J LoAada did not dissolve the said law partnership. Accordin'l&, the petitioner and respondents are here!& en6oined to a!ide !& the provisions of the A'reement relative to the matter 'overnin' the li3uidation of the shares of an& retirin' or withdrawin' partner in the partnership interest." 1 -n appeal, the S.C en #anc reversed the decision of the Hearin' -fficer and held that the withdrawal of Attorne& Joa3uin L. Misa had dissolved the partnership of "4ito, Misa J LoAada." )he Commission ruled that, !ein' a partnership at will, the law firm could !e dissolved !& an& partner at an&time, such as !& his withdrawal therefrom, re'ardless of 'ood faith or !ad faith, since no partner can !e forced to continue in the partnership a'ainst his will. 1n its decision, dated "% Januar& "## , the S.C held< WH.7.K-7., premises considered the appealed order of 3" March "#,# is here!& 7.B.7S.5 insofar as it concludes that the partnership of 4ito, Misa J LoAada has not !een dissolved. )he case is here!& 7.MA;5.5 to the Hearin' -fficer for determination of the respective ri'hts and o!li'ations of the parties. 2 )he parties sou'ht a reconsideration of the a!ove decision. Attorne& Misa, in addition, as0ed for an appointment of a receiver to ta0e over the assets of the dissolved partnership and to ta0e char'e of the windin' up of its affairs. -n $ April "##", respondent S.C issued an order den&in' reconsideration, as well as re6ectin' the petition for receivership, and reiteratin' the remand of the case to the Hearin' -fficer. )he parties filed with the appellate court separate appeals =doc0eted CA2(.7. S* ;o. +$93, and CA2(.7. S* ;o. +$9$,>. 5urin' the pendenc& of the case with the Court of Appeals, Attorne& Jesus 4ito and Attorne& Mariano LoAada !oth died on, respectivel&, 8 Septem!er "##" and +" 5ecem!er "##". )he death of the two partners, as well as the admission of new partners, in the law firm prompted Attorne& Misa to renew his application for

IT!G, J.: )he instant petition see0s a review of the decision rendered !& the Court of Appeals, dated +9 Ke!ruar& "##3, in CA2(.7. S* ;o. +$93, and ;o. +$9$, affirmin' in toto that of the Securities and ./chan'e Commission ="S.C"> in S.C AC +8$. )he antecedents of the controvers&, summariAed !& respondent Commission and 3uoted at len'th !& the appellate court in its decision, are hereunder restated. )he law firm of 7-SS, LAW7.;C., S.L*H and CA77ASC-Swas dul& re'istered in the Mercantile 7e'istr& on $ Januar& "#3% and reconstituted with the Securities and ./chan'e Commission on $ Au'ust "#$,. )he S.C records show that there were several su!se3uent amendments to the articles of partnership on ", Septem!er "#8,, to chan'e the firm EnameF to 7-SS, S.L*H and CA77ASC-S-? on 9 Jul& "#98 . . . to 7-SS, S.L*H, SALC.5-, 5.L 7-SA71-, 41)- J M1SA? on ", April "#%+ to SALC.5-, 5.L 7-SA71-, 41)-, M1SA J L-LA5A? on $ 5ecem!er "#%+ to SALC.5-, 5.L 7-SA71-, 41)-, M1SA J L-LA5A? on "" March "#%% to 5.L 7-SA71-, 41)-, M1SA J L-LA5A? on % June "#%% to 41)-, M1SA J L-LA5A? on "# 5ecem!er "#, , EJoa3uin L. MisaF appellees Jesus 4. 4ito and Mariano M. LoAada associated themselves to'ether, as senior partners with respondents2appellees (re'orio K. -rte'a, )omas -. del Castillo, Jr., and 4en6amin 4acorro, as 6unior partners. -n Ke!ruar& "%, "#,,, petitioner2appellant wrote the respondents2 appellees a letter statin'< 1 am withdrawin' and retirin' from the firm of 4ito, Misa and LoAada, effective at the end of this month. "1 trust that the accountants will !e instructed to ma0e the proper li3uidation of m& participation in the firm." -n the same da&, petitioner2appellant wrote respondents2appellees another letter statin'<

receivership =in CA (.7. S* ;o. +$9$,>. He e/pressed concern over the need to preserve and care for the partnership assets. )he other partners opposed the pra&er. )he Court of Appeals, findin' no reversi!le error on the part of respondent Commission, AKK17M.5 in toto the S.C decision and order appealed from. 1n fine, the appellate court held, per its decision of +9 Ke!ruar& "##3, =a> that Att&. Misa's withdrawal from the partnership had chan'ed the relation of the parties and inevita!l& caused the dissolution of the partnership? =!> that such withdrawal was not in !ad faith? =c> that the li3uidation should !e to the e/tent of Attorne& Misa's interest or participation in the partnership which could !e computed and paid in the manner stipulated in the partnership a'reement? =d> that the case should !e remanded to the S.C Hearin' -fficer for the correspondin' determination of the value of Attorne& Misa's share in the partnership assets? and =e> that the appointment of a receiver was unnecessar& as no sufficient proof had !een shown to indicate that the partnership assets were in an& such dan'er of !ein' lost, removed or materiall& impaired. 1n this petition for review under 7ule $8 of the 7ules of Court, petitioners confine themselves to the followin' issues< ". Whether or not the Court of Appeals has erred in holdin' that the partnership of 4ito, Misa J LoAada =now 4ito, LoAada, -rte'a J Castillo> is a partnership at will? +. Whether or not the Court of Appeals has erred in holdin' that the withdrawal of private respondent dissolved the partnership re'ardless of his 'ood or !ad faith? and 3. Whether or not the Court of Appeals has erred in holdin' that private respondent's demand for the dissolution of the partnership so that he can 'et a ph&sical partition of partnership was not made in !ad faith? to which matters we shall, accordin'l&, li0ewise limit ourselves. A partnership that does not fi/ its term is a partnership at will. )hat the law firm "4ito, Misa J LoAada," and now "4ito, LoAada, -rte'a and Castillo," is indeed such a partnership need not !e undul& !ela!ored. We 3uote, with approval, li0e did the appellate court, the findin's and dis3uisition of respondent S.C on this matter? %i < )he partnership a'reement =amended articles of "# Au'ust "#$,> does not provide for a specified period or underta0in'. )he "5:7A)1-;" clause simpl& states< "8. 5:7A)1-;. )he partnership shall continue so lon' as mutuall& satisfactor& and upon the death or le'al incapacit& of one of the partners, shall !e continued !& the survivin' partners." )he hearin' officer however opined that the partnership is one for a specific underta0in' and hence not a partnership at will, citin'

para'raph + of the Amended Articles of *artnership ="# Au'ust "#$,>< "+. Purpose. )he purpose for which the partnership is formed, is to act as le'al adviser and representative of an& individual, firm and corporation en'a'ed in commercial, industrial or other lawful !usinesses and occupations? to counsel and advise such persons and entities with respect to their le'al and other affairs? and to appear for and represent their principals and client in all courts of 6ustice and 'overnment departments and offices in the *hilippines, and elsewhere when le'all& authoriAed to do so." )he "purpose" of the partnership is not the specific underta0in' referred to in the law. -therwise, all partnerships, which necessaril& must have a purpose, would all !e considered as partnerships for a definite underta0in'. )here would therefore !e no need to provide for articles on partnership at will as none would so e/ist. Apparentl& what the law contemplates, is a specific underta0in' or "pro6ect" which has a definite or defina!le period of completion. 3 )he !irth and life of a partnership at will is predicated on the mutual desire and consent of the partners. )he ri'ht to choose with whom a person wishes to associate himself is the ver& foundation and essence of that partnership. 1ts continued e/istence is, in turn, dependent on the constanc& of that mutual resolve, alon' with each partner's capa!ilit& to 'ive it, and the a!sence of a cause for dissolution provided !& the law itself. Beril&, an& one of the partners ma&, at his sole pleasure, dictate a dissolution of the partnership at will. He must, however, act in 'ood faith, not that the attendance of !ad faith can prevent the dissolution of the partnership , !ut that it can result in a lia!ilit& for dama'es. 5 1n passin', neither would the presence of a period for its specific duration or the statement of a particular purpose for its creation prevent the dissolution of an& partnership !& an act or will of a partner. 6 Amon' partners, 0 mutual a'enc& arises and the doctrine of delectus personae allows them to have the po$er, althou'h not necessaril& theri!ht, to dissolve the partnership. An un6ustified dissolution !& the partner can su!6ect him to a possi!le action for dama'es. )he dissolution of a partnership is the chan'e in the relation of the parties caused !& an& partner ceasin' to !e associated in the carr&in' on, as mi'ht !e distin'uished from the windin' up of, the !usiness. 8 :pon its dissolution, the partnership continues and its le'al personalit& is retained until the complete windin' up of its !usiness culminatin' in its termination. 9 )he li3uidation of the assets of the partnership followin' its dissolution is 'overned !& various provisions of the Civil Code? 1+ however, an a'reement of the partners, li0e an& other contract, is !indin' amon' them and normall& ta0es precedence to the e/tent applica!le over the Code's 'eneral provisions. We here ta0e note of para'raph , of the "Amendment to Articles of *artnership" readin' thusl&< . . . 1n the event of the death or retirement of an& partner, his interest in the partnership shall !e li3uidated and paid in accordance with the e/istin' a'reements and his partnership participation shall revert to the

Senior *artners for allocation as the Senior *artners ma& determine? pro%ided, ho$e%er, that with respect to the two =+> floors of office condominium which the partnership is now ac3uirin', consistin' of the 8th and the 9th floors of the Alpap 4uildin', "$ Alfaro Street, Salcedo Billa'e, Ma0ati, Metro Manila, their true value at the time of such death or retirement shall !e determined !& two =+> independent appraisers, one to !e appointed =!& the partnership and the other !& the> retirin' partner or the heirs of a deceased partner, as the case ma& !e. 1n the event of an& disa'reement !etween the said appraisers a third appraiser will !e appointed !& them whose decision shall !e final. )he share of the retirin' or deceased partner in the aforementioned two =+> floor office condominium shall !e determined upon the !asis of the valuation a!ove mentioned which shall !e paid monthl& within the first ten =" > da&s of ever& month in installments of not less than *+ , . for the Senior *artners, *" , . in the case of two =+> e/istin' Junior *artners and *8, . in the case of 11 the new Junior *artner. )he term "retirement" must have !een used in the articles, as we so hold, in a 'eneric sense to mean the dissociation !& a partner, inclusive of resi'nation or withdrawal, from the partnership that there!& dissolves it. -n the third and final issue, we accord due respect to the appellate court and respondent Commission on their common factual findin', i.e., that Attorne& Misa did not act in !ad faith. *u!lic respondents viewed his withdrawal to have !een spurred !& "interpersonal conflict" amon' the partners. 1t would not !e ri'ht, we a'ree, to let an& of the partners remain in the partnership under such an atmosphere of animosit&? certainl&, not a'ainst their will. 121ndeed, for as lon' as the reason for withdrawal of a partner is not contrar& to the dictates of 6ustice and fairness, nor for the purpose of undul& visitin' harm and dama'e upon the partnership, #ad faith cannot !e said to characteriAe the act. 4ad faith, in the conte/t here used, is no different from its normal concept of a conscious and intentional desi'n to do a wron'ful act for a dishonest purpose or moral o!li3uit&. WH.7.K-7., the decision appealed from is AKK17M.5. ;o pronouncement on costs. S- -75.7.5.

G.R. No. L-19819 O12ober 26, 1900 "ILLIAM !), plaintiff2appellee, vs. *ARTOLOME (!3ON, 4ub4252u2e% by FRANCO (!3ON, defendant2 appellant. R.P. Sarandi for appellant. Jose -. .y / Andres P. Sal%ador for appellee.

*8 , *9 ,

. .

, as *uAon's contri!ution to the partnership? and the !alance of as *uAon's personal loan to the partnership. 8

of the partnership was revo0ed !& 4artolome *uAon who continued with the construction pro6ects alone. 22 -n Ma& + , "#8,, William :&, claimin' that 4artolome *uAon had violated the terms of their partnership a'reement, instituted an action in court, see0in', inter alia, the dissolution of the partnership and pa&ment of dama'es. Answerin', 4artolome *uAon denied that he violated the terms of their a'reement claimin' that it was the plaintiff, William :&, who violated the terms thereof. He, li0ewise, pra&ed for the dissolution of the partnership and for the pa&ment !& the plaintiff of his, share in the losses suffered !& the partnership. After appropriate proceedin's, the trial court found that the defendant, contrar& to the terms of their partnership a'reement, failed to contri!ute his share in the capital of the partnership applied partnership funds to his personal use? ousted the plaintiff from the mana'ement of the firm, and caused the failure of the partnership to realiAe the e/pected profits of at least *$ , . . As a conse3uence, the trial court dismissed the defendant's counterclaim and ordered the dissolution of the partnership. )he trial court further ordered the defendant to pa& the plaintiff the sum of *3+ ," 3."3. Hence, the instant appeal !& the defendant 4artolome *uAon durin' the pendenc& of the appeal !efore this Court, the said 4artolome *uAon died, and was su!stituted !& Kranco *uAon. )he appellant ma0es in his !rief nineteen ="#> assi'nment of errors, involvin' 3uestions of fact, which relates to the followin' points< ="> )hat the appellant is not 'uilt& of !reach of contract? and =+> )hat the amounts of mone& the appellant has !een order to pa& the appellee is not supported !& the evidence and the law. After 'oin' over the record, we find no reason for re6ectin' the findin's of fact !elow, 6ustif&in' the reversal of the decision appealed from. )he findin's of the trial court that the appellant failed to contri!ute his share in the capital of the partnership is clear incontroverti!le. )he record shows that after the appellant's loan the amount of *"8 , . was approved !& the *hilippin ;ational 4an0 in ;ovem!er, "#89, he 'ave the amount *9 , . to the appellee who was then mana'in' the construction pro6ects. -f this amount, *$ , . was to !e applied a reim!ursement of the appellee's contri!ution to the partnership which was used to clear the title to the appellant's propert&, and th !alance of *+ , . , as *uAon's contri!ution to the partnership. 23 )hereafter, the appellant failed to ma0e an& further contri!utions the partnership funds as shown in his letters to the appellee wherein he confessed his ina!ilit& to put in additional capital to continue with the pro6ects. 2, *arentheticall&, the claim of the appellant that the appellee is e3uall& 'uilt& of not contri!utin' his share in the partnership capital inasmuch as the amount of *$ , . , alle'edl& 'iven to him in -cto!er, "#89 as partial contri!ution of the appellee is merel& a personal loan of the appellant which he had paid to the appellee, is plainl& untena!le. )he terms of the receipts si'ned !& the appellant

Althou'h the partnership a'reement was si'ned !& the parties on Januar& ",, "#8%,9 wor0 on the pro6ects was started !& the partnership on -cto!er ", "#89 in view of the insistence of the 4ureau of *u!lic Hi'hwa&s to complete the pro6ect ri'ht awa&. 1+ Since *uAon was !us& with his other pro6ects, William :& was entrusted with the mana'ement of the pro6ects and whatever e/pense the latter mi'ht incur, would !e considered as part of his contri!ution. 11 At the end of 5ecem!er, "#8%, William :& had contri!uted to the partnership the amount of *""8,$83.3#, includin' his capital. 12 )he loan of *uAon was approved !& the *hilippine ;ational 4an0 in ;ovem!er, "#89 and he 'ave to William :& the amount of *9 , . . -f this amount, *$ , . was for the reim!ursement of :&'s contri!ution to the partnership which was used to clear the title to *uAon's propert&, and the *+ , . as *uAon's contri!ution to the partnership capital. 13 )o 'uarantee the repa&ment of the a!ove2mentioned loan, 4artolome *uAon, without the 0nowled'e and consent of William :&, 1, assi'ned to the *hilippine ;ational 4an0 all the pa&ments to !e received on account of the contracts with the 4ureau of *u!lic Hi'hwa&s for the construction of the afore2mentioned pro6ects. 15 4& virtue of said assi'nment, the 4ureau of *u!lic Hi'hwa&s paid the mone& due on the partial accomplishments on the 'overnment pro6ects in 3uestion to the *hilippine ;ational 4an0 which, in turn, applied portions of it in pa&ment of *uAon's loan. -f the amount of *", $%,",". %, released !& the 4ureau of *u!lic Hi'hwa&s in pa&ment of the partial wor0 completed !& the partnership on the pro6ects, the amount of *33+,83#.9 was applied in pa&ment of *uAon's loan and onl& the amount of *+%,,+ ., was deposited in the partnership funds, 16 which, for all practical purposes, was also under *uAon's account since *uAon was the custodian of the common funds. As time passed and the financial demands of the pro6ects increased, William :&, who supervised the said pro6ects, found difficult& in o!tainin' the necessar& funds with which to pursue the construction pro6ects. William :& correspondin'l& called on 4artolome *uAon to compl& with his o!li'ations under the terms of their partnership a'reement and to place, at lest, his capital contri!ution at the disposal of the partnership. 5espite several promises, *uAon, however, failed to do so. 10 7ealiAin' that his ver!al demands were to no avail, William :& conse3uentl& wrote 4artolome *uAon pormal letters of demand, 18 to which *uAon replied that he is una!le to put in additional capital to continue with the pro6ects. 19 Kailin' to reach an a'reement with William :&, 4artolome *uAon, as prime contractor of the construction pro6ects, wrote the su!contractor, :.*. Construction Compan&, on ;ovem!er + , "#8%, advisin' the partnership, of which he is also a partner, that unless the& presented an immediate solution and capacit& to prosecute the wor0 effectivel&, he would !e constrained to consider the su!2 contract terminated and, thereafter, to assume all responsi!ilities in the construction of the pro6ects in accordance with his ori'inal contract with the 4ureau of *u!lic Hi'hwa&s. 2+ -n ;ovem!er +%, "#8%, 4artolome *uAon a'ain wrote the :.*.Construction Compan& finall& terminatin' their su!contract a'reement as of 5ecem!er ", "#8%. 21 )hereafter, William :& was not allowed to hold office in the :.*. Construction Compan& and his authorit& to deal with the 4ureau of *u!lic Hi'hwa&s in !ehalf

CONCE(CION #R., J.:t.hqw Appeal from the decision of the Court of Kirst 1nstanre of Manila, dissolvin' the ":.*. Construction Compan&" and orderin' the defendant 4artolome *uAon to pa& the plaintiff the amounts of< ="> *""8," +."3, with le'al interest thereon from the date of the filin' of the complaint until full& paid? =+> *+ , . , as plaintiffs share in the unrealiAed profits of the ":.*. Construction Compan&" and =3> *8, . , as and for attorne&'s fees. 1t is of record that the defendant 4artolome *uAon had a contract with the 7epu!lic of the *hilippines for the construction of the (an&an'an 4ato Section of the *a'adian Lam!oan'a Cit& 7oad, province of Lam!oan'a del Sur 1 and of five =8> !rid'es in the Malan'as2(an&an'an 7oad. 2 Kindin' difficult& in accomplishin' !oth pro6ects, 4artolome *uAon sou'ht the financial assistance of the plaintiff, William :&. As an inducement, *uAon proposed the creation of a partnership !etween them which would !e the su!2contractor of the pro6ects and the profits to !e divided e3uall& !etween them. William :& inspected the pro6ects in 3uestion and, e/pectin' to derive considera!le profits therefrom, a'reed to the proposition, thus resultin' in the formation of the ":.*. Construction Compan&" 3which was su!se3uentl& en'a'ed as su!contractor of the construction pro6ects. , )he partners a'reed that the capital of the partnership would !e *" , . of which each partner shall contri!ute the amount of *8 , . in cash. 5 4ut, as heretofore stated, *uAon was short of cash and he promised to contri!ute his share in the partnership capital as soon as his application for a loan with the *hilippine ;ational 4an0 in the amount of *"8 , . shall have !een approved. However, !efore his loan application could !e acted upon, he had to clear his collaterals of its incum!rances first. Kor this purpose, on -cto!er +$, "#89, Wilham :& 'ave 4artolome *uAon the amount of *" , . as advance contri!ution of his share in the partnership to !e or'aniAed !etween them under the firm name :.*. C-;S)7:C)1-; C-M*A;G which amount mentioned a!ove will !e used !& *uAon to pa& his o!li'ations with the *hilippine ;ational 4an0 to effect the release of his mort'a'es with the said 4an0. 6 -n -cto!er +#, "#89, William :& a'ain 'ave *uAon the amount of *3 , . as his partial contri!ution to the proposed partnership and which the said *uAon was to use in pa&ment of his o!li'ation to the 7eha!ilitation Kinance Corporation. 0 *uAon promised William :& that the amount of *"8 , . would !e 'iven to the partnership to !e applied thusl&< *$ , . , as reim!ursement of the capital contri!ution of William :& which the said :& had advanced to clear the title of *uAon's propert&?

are clear and une3uivocal that the sums of mone& 'iven !& the appellee are appellee's partial contri!utions to the partnership capital. )hus, in the receipt for *" , . dated -cto!er +$, "#89, 25 the appellant stated<(01.23$ph4* 7eceived from Mr. William :& the sum of ).; )H-:SA;5 *.S-S =*" , . > in Chec0 ;o. SC $+3+,8 .3uita!le 4an0in' Corporation, dated -cto!er +$, "#89, as ad%ance contri#ution of the share of said 5illiam .y in the partnership to #e or!ani ed #et$een us under the firm name ..P. 6O7STR.6T8O7 6OMPA79 which amount mentioned a!ove will !e used !& the undersi'ned to pa& his o!li'ations with the *hilippine ;ational 4an0 to effect the release of his mort'a'es with the said !an0. =.mphasis supplied> 1n the receipt for the amount of *3 , appellant also said<(01.23$ph4* . dated -cto!er +#, "#89, 26 the

*u!lic hi'hwa&s, in pa&ment of the wor0 accomplished on the construction pro6ects, the amount of *", $%,",". ", which amount ri'htfull& and le'all& !elon's to the partnership !& virtue of the su!contract a'reements !etween the appellant and the :.*. Construction Compan&. 1n view of the assi'nemt made !& *uAon to the *hilippine ;ational 4an0, the latter withheld and applied the amount of *33+,83#,9 in pa&ment of the appellant's personal loan with the said !an0. )he !alance was deposited in *uAon's current account and onl& the amount of *+%,,+ ., was deposited in the current account of the partnership. 3+ Kor sure, if the appellant 'ave to the partnership all that were eamed and due it under the su!contract a'reements, the mone& would have !een used as a safe reserve for the dischar'e of all o!li'ations of the firm and the partnership would have !een a!le to successfull& and profita!l& prosecute the pro6ects it su!contracted. When did the appellant ma0e the reim!ursement claimed !& himC Kor the same period, the appellant actuall& dis!ursed for the partnership, in connection with the construction pro6ects, the amount of *#8+,,3#.%%. 31 Since the appellant received from the 4ureau of *u!lic Hi'hwa&s the sum of *", $%,",". ", the appellant has a deficit !alance of *#$,3$+.+$. )he appellant, therefore, did not ma0e complete restitution. )he findin's of the trial court that the appellee has !een ousted from the mana'ement of the partnership is also !ased upon persuasive evidence. )he appellee testified that after he had demanded from the appellant pa&ment of the latter's contri!ution to the partnership capital, the said appellant did not allow him to hold office in the :.*. Construction Compan& and his authorit& to deal with the 4ureau of *u!lic Hi'hwa&s was revo0ed !& the appellant.32 As the record stands, We cannot sa&, therefore, that the decis of the trial court is not sustained !& the evidence of record as warrant its reverw. Since the defendantappellant was at fauh, the tral court properl& ordered him to reim!urse the plaintiff2appellee whatever amount latter had invested in or spent for the partnership on account of construction pro6ects. How much did the appellee spend in the construction pro6ects 3uestionC

1n due time, the loners so appointed, 36 su!mitted their report 30 the& indicated the items wherein the& are in a'reement, as well as their points of disa'reement. 1n the commissioners' report, the appellant's advances are listed under Credits? the mone& received from the firm, under 5e!its? and the resultin' monthl& investment standin's of the partners, under 4alances. )he commissioners are a'reed that at the end of 5ecem!er, "#8%, the appellee had a !alance of *,,+$+.3#. 38 1t is in their respective ad6ustments of the capital account of the appellee that the commissioners had disa'reed. Mr. A!laAa, desi'nated !& the appellant, would want to char'e the appellee with the sum of *+$,+3#.$,, representin' the chec0s isssued !& the appellant, 39 and encashed !& the appellee or his !rother, :& Han so that the appellee would owe the partnership the amount of *"8,##%. #. Mr. )a&a', desi'nated !& the appellee, upon the other hand, would credit the appellee the followin' additional amounts< ="> *%,$#%., @ items omitted from the !oo0s of partnership !ut reco'niAed and char'ed to Miscellaneous ./penses !& Mr. A!laAa? =+> *98," 3.%% @ pa&rolls paid !& the appellee in the amount *"+,," 3.%% less pa&roll remittances from the appellant in amount of *93, . ? and =3> *+9, +%. $ other e/peses incurred !& the appellee at construction site. With respect to the amount of *+$,+3#.$,, claimed !& appellant, we are hereunder adoptin' the findin's of the trial which we find to !e in accord with the evidence< )o enhance defendant's theor& that he should !e credited *+$,+3#.$,, he presented chec0s alle'edl& 'iven to plaintiff and the latter's !rother, :& Han, mar0ed as ./hi!its + to "". However, defendant admitted that said chee0s were not entered nor record their !oo0s of account, as e/penses for and in !ehalf of partnership or its affairs. -n the other hand, :& Han testified that of the chee0s he received were e/chan'e for cash, while other used in the purchase of spare parts re3uisitioned !& defendant. )his testimon& was not refuted to the satisfaction of the Court, considerin' that Han's e/planation thereof is the more plausi!le !ecause if the& were emplo&ed in the prosecution of the partners pro6ects, the correspondin' dis!ursements would have certainl& !een recorded in its !oo0s, which is not the case. )a0in' into account defendant is the custodian of the !oo0s of account, his failure to so enter therein the alle'ed dis!ursements, accentuates the falsit& of his claim on this point. ,+ 4esides, as further noted !& the trial court, the report Commissioner A!laAa is unrelia!le in view of his proclivit& to favor the appellant and !ecause of the inaccurate accountin' procedure adopted !& him in auditin' the !oo0s of account of the partnership unli0e Mr. )a&a''s report which inspires faith and credence. ,1 As e/plained !& Mr. )a&a', the amount of *%,$#%., represen e/penses paid !& the appellee out of his personal funds which not !een entered in the !oo0s of the partnership !ut which !een reco'niAed and conceded to !& the auditor desi'nated !& the appellant who included the said amount under ./penses. ,2

7eceived from William :& the sum of )H17)G )H-:SA;5 *.S-S =*3 , . > in Chec0 ;o. SC$+3+,%, of the .3uita!le 4an0in' Corporation, as partial contri#ution of the share of the said 5illiam .y to the ..P. 6O7STR.6T8O7 6OMPA79 for which the undersi'ned will use the said amount in pa&ment of his o!li'ation to the 7eha!ilitation Kinance Corporation. =.mphasis supplied> )he findin's of the trial court that the appellant misapplied partnership funds is, li0ewise, sustained !& competent evidence. 1t is of record that the appellant assi'ned to the *hilippine ;ational 4an0 all the pa&ments to !e received on account of the contracts with the 4ureau of *u!lic Hi'hwa&s for the construction of the aforementioned pro6ects to 'uarantee the repa&ment of the !an0. 20 4& virtue of the said appeflant's personal loan with the said !an0 assi'nment, the 4ureau of *u!lic Hi'hwa&s paid the mone& due on the partial accomplishments on the construction pro6ects in 3uestion to the *hilippine ;ational 4an0 who, in turn, applied portions of it in pa&ment of the appellant's loan. 28 )he appellant claims, however, that the said assi'nment was made with the consent of the appellee and that the assi'nment not pre6udice the partnership as it was reim!ursed !& the appellant. 4ut, the appellee cate'oricall& stated that the assi'nment to the *hilippine ;ational 4an0 was made without his prior 0nowled'e and consent and that when he learned of said assi'nment, he cal the attention of the appellant who assured him that the assi'nment was onl& temporar& as he would transfer the loan to the 7eha!ilitation Kinance Corporation within three =3> months time. 29 )he 3uestion of whom to !elieve !ein' a matter lar'e dependent on the trier's discretion, the findin's of the trial court who had the !etter opportunit& to e/amine and appraise the fact issue, certainl& deserve respect. )hat the assi'nment to the *hilippine ;ational 4an0 pre6udicial to the partnership cannot !e denied. )he record show that durin' the period from March, "#8% to Septem!er, "#8#, the appellant 4artolome *uAon received from the 4ureau of

1t appears that althou'h the partnership a'reement stated the capital of the partnership is *" , . of which each part shall contri!ute to the partnership the amount of *8 , . cash 33 the partners of the :.*. Construction Compan& did contri!ute their a'reed share in the capitaliAation of the enterprise in lump sums of *8 , . each. Aside from the initial amount *$ , . put up !& the appellee in -cto!er, "#89, 3, the partners' investments too0, the form of cash advances covetin' e/penses of the construction pro6ects as the& were incurred. Since the determination of the amount of the dis!ursements which each of them had made for the construction pro6ects re3uire an e/amination of the !oo0s of account, the trial court appointed two commissioners, desi'nated !& the parties, "to e/amine the !oo0s of account of the defendant re'ardin' the :.*. Construction Compan& and his personal account with particular reference to the *u!lic Wor0s contract for the construction of the (an&an'an24ato Section, *a'adian2Lam!oan'a Cit& 7oad and five =8> 4rid'es in Malan'as2(an&an'an 7oad, includin' the pa&ments received !& defendant from the 4ureau of *u!lic Hi'hwa&s !& virtue of the two pro6ects a!ove mentioned, the dis!ursements or disposition made !& defendant of the portion thereof released to him !& the *hilippine ;ational 4an0 and in whose account these funds are deposited . 35

)he e/planation of Mr. )a&a' on the inclusion of the amount of *98," 3.%% is li0ewise clear and convincin'. ,3 As for the sum of of *+9, +%. $, the same represents the e/penses which the appelle paid in connection withe the pro6ects and not entered in the !oo0s of the partnership since all vouchers and receipts were sent to the Manila office which were under the control of the appellant. However, officer which were under the control of the appellant. However, a list of these e/penses are incorporated in ./hi!its LL, LL2" to LL2$. 1n resume', the appelllee's credit !alance would !e as follows<

DDD2+"> )otal 1nvestments

(01.23$ph4* :ndisputed !alance as of 5ec. "#9% Add< 1tems omitted from the !oo0s !ut reco'niAed and char'ed to Miscellaneous ./penses !& Mr. A!laAa Add< *a&rolls paid !& the appellee Less< *a&roll remittances received Add< -ther e/penses incurred at the site =./hs, LL, LL2" to LL2$> +9, +%. $ )-)AL *"+,," 3.%%

7e'ardin' the award of *+ , . as his share in the unrealiAed profits of the partnership, the appellant contends that the findin's of the trial court that the amount of *$ , . as reasona!le profits of the partnership venture is without an& !asis and is not supported !& the evidence. )he appemnt maintains that the lower court, in ma0in' its determination, did not ta0e into consideration the 'reat ris0s involved in !usiness operations involvin' as it does the completion of the pro6ects within a definite period of time, in the face of adverse and often unpredicta!le circumstances, as well as the fact that the appellee, who was in char'e of the pro6ects in the field, contri!uted in a lar'e measure to the failure of the partnership to realiAe such profits !& his field mana'ement. )his ar'ument must !e overruled in the li'ht of the law and evidence on the matter. :nder Article ++ of the Civil Code, indemnification for dama'es shall comprehend not onl& the value of the loss suffered, !ut also that of the profits which the o!li'ee failed to o!tain. 1n other words lucrum cessans is also a !asis for indemnification. Has the appellee failed to ma0e profits !ecause of appellant's !reach of contractC )here is no dou!t that the contractin' !usiness is a profita!le one and that the :.*. Construction Compan& derived some profits from' co io oa ects its su! ntracts in the construction of the road and !rid'es pro6ects its deficient wor0in' capital and the 6u''lin' of its funds !& the appellant. Contrar& to the appellant's claim, the partnership showed some profits durin' the period from Jul& +, "#89 to 5ecem!er 3", "#8%. 1f the *rofit and Loss Statement ,5 showed a net loss of *"3$, "#.$3, this was primaril& due to the confusin' accountin' method emplo&ed !& the auditor who intermi/ed h and accthe cas ruamethod of accountin' and the erroneous inclusion of certain items, li0e personal e/penses of the appellant and afte'ed e/traordinar& losses due to an accidental plane crash, in the operatin' e/penses of the partnership, Corrected, the *rofit and Loss Statement would indicate a net profit of *$",9"".+,. Kor the period from Januar& ", "#8, to Septem!er 3 , "#8#, the partnership admittedl& made a net profit of *8+,#$3.,#. ,6 4esides, as We have heretofore pointed out, the appellant received from the 4ureau of *u!lic Hi'hwa&s, in pa&ment of the Aonstruction pro6ects in 3uestion, the amount of *", $%,",". " ,0 and dis!ursed the amount of *#8+,,3#.%%, ,8 leavin' an unaccounted !alance of *#$,3$+.+$. -!viousl&, this amount is also part of the profits of the partnership. 5urin' the trial of this case, it was discovered that the appellant had mone& and credits receiva!le froin the pro6ects in 3uestion, in the custod& of the 4ureau of *u!lic Hi'hwa&s, in the amount of *"+,,99#.%8, representin' the " M retention of said pro6ects.,9 After the trial of this case, it was shown that the total retentions Wucted from the appemnt amounted to *"$8,38,. . 5+ Surel&, these retained amounts also form part of the profits of the partnership.

Had the appellant not !een remiss in his o!li'ations as partner and as prime contractor of the construction pro6ects in 3uestion as he was !ound to perform pursuant to the partnership and su!contract a'reements, and considerin' the fact that the total contract amount of these two pro6ects is *+,3+%,338.%9, it is reasona!le to e/pect that the partnership would have earned much more than the *33$,+88.9" We have hereina!ove indicated. )he award, therefore, made !& the trial court of the amount of *+ , . , as compensator& dama'es, is not speculative, !ut !ased on reasona!le estimate. WH.7.K-7., findin' no error in the decision appealed from, the said decision is here!& affirmed with costs a'ainst the appellant, it !ein' understood that the lia!ilit& mentioned herein shall !e home !& the estate of the deceased 4artolome *uAon, represented in this instance !& the administrator thereof, Kranco *uAon. S- -75.7.5.

93,

At the trial, the appellee presented a claim for the amounts of *3,#"%.3# and *$,998. which he also advanced for the construction pro6ects !ut which were not included in the Commissioner's 7eport. ,, Appellee's total investments in the partnership would, therefore, !e<

Appellee's total credits Add< unrecorded !alances for the month of 5ec. "#8% =./hs. DDD, DD2" to DDDN"#, DDD2++> Add< *a&ments to MunoA, as su!contractor of five,=8> 4rid'es =p. +9$ tsn? ./hs. DDD2+ ,

CARMEN LIWANAG, petitioner, vs. THE HON. COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES, represented
!& the Solicitor (eneral, respondents.

PWH.7.K-7., the Court holds, that the prosecution has esta!lished the 'uilt of the accused, !e&ond reasona!le dou!t, and therefore, imposes upon the accused, Carmen Liwana', an 1ndeterminate *enalt& of S1T =9> G.A7S, .1(H) =,> M-;)HS A;5 )W.;)G -;. =+"> 5AGS -K *71S1-; C-77.CC1-;AL )- K-:7)..; ="$> G.A7S A;5 .1(H) =,> M-;)HS -K *71S1-; MAG-7 AS MAT1M:M, A;5 )- *AG )H. C-S)S. )he accused is li0ewise ordered to reim!urse the private complainant the sum of *8+9,98 . , without su!sidiar& imprisonment, in case of insolvenc&.

.stafa is a crime committed !& a person who defrauds another causin' him to suffer dama'es, !& means of unfaithfulness or a!use of confidence, or of false pretenses of fraudulent acts.E$F Krom the fore'oin', the elements of estafa are present, as follows< ="> that the accused defrauded another !& a!use of confidence or deceit? and =+> that dama'e or pre6udice capa!le of pecuniar& estimation is caused to the offended part& or third part&, E8F and it is essential that there !e a fiduciar& relation !etween them either in the form of a trust, commission or administration. E9F )he receipt si'ned !& Liwana' states thus<

7-M.7-, J.< E(.7. ;o. ""$3#,. -cto!er +$, "##%F *etitioner was char'ed with the crime of estafa !efore the 7e'ional )rial Court =7)C>, 4ranch #3, OueAon Cit&, in an information which reads as follows< P)hat on or !etween the month of Ma& "#, "#,, and Au'ust, "#,, in OueAon Cit&, *hilippines and within the 6urisdiction of this Honora!le Court, the said accused, with intent of 'ain, with unfaithfulness, and a!use of confidence, did then and there, willfull&, unlawfull& and feloniousl& defraud one 1S15-7A 7-SAL.S, in the followin' manner, to wit< on the date and in the place aforementioned, said accused received in trust from the offended part& cash mone& amountin' to*839,98 . , *hilippine Currenc&, with the e/press o!li'ation involvin' the dut& to act as complainantQs a'ent in purchasin' local ci'arettes =*hilip Morris and Marl!oro ci'arettes>, to resell them to several stores, to 'ive her commission correspondin' to $ M of the profits? and to return the aforesaid amount of offended part&, !ut said accused, far from compl&in' her aforesaid o!li'ation, and once in possession thereof, misapplied, misappropriated and converted the same to her personal use and !enefit, despite repeated demands made upon her, accused failed and refused and still fails and refuses to deliver andRor return the same to the dama'e and pre6udice of the said 1S15-7A 7-SAL.S, in the aforementioned amount and in such other amount as ma& !e awarded under the provision of the Civil Code. C-;)7A7G )- LAW.S )he antecedent facts are as follows< *etitioner Carmen Liwana' =Liwana'> and a certain )helma )a!li'an went to the house of complainant 1sidora 7osales =7osales> and as0ed her to 6oin them in the !usiness of !u&in' and sellin' ci'arettes. Convinced of the feasi!ilit& of the venture, 7osales readil& a'reed. :nder their a'reement, 7osales would 'ive the mone& needed to !u& the ci'arettes while Liwana' and )a!li'an would act as her a'ents, with a correspondin' $ M commission to her if the 'oods are sold? otherwise the mone& would !e returned to 7osales. Conse3uentl&, 7osales 'ave several cash advances to Liwana' and )a!li'an amountin' to *933,98 . . 5urin' the first two months, Liwana' and )a!li'an made periodic visits to 7osales to report on the pro'ress of the transactions. )he visits, however, suddenl& stopped, and all efforts !& 7osales to o!tain information re'ardin' their !usiness proved futile. Alarmed !& this development and !elievin' that the amounts she advanced were !ein' misappropriated, 7osales filed a case of estafa a'ainst Liwana'. After trial on the merits, the trial court rendered a decision dated Januar& #, "##", findin' Liwana' 'uilt& as char'ed. )he dispositive portion of the decision reads thus<

S- -75.7.5.S PMa& "#, "#,, Said decision was affirmed with modification !& the Court of Appeals in a decision dated ;ovem!er +#, "##3, the decretal portion of which reads< PWH.7.K-7., in view of the fore'oin', the 6ud'ment appealed from is here!& affirmed with the correction of the nomenclature of the penalt& which should !e< S1T =9> G.A7S, .1(H) =,> M-;)HS and )W.;)G -;. =+"> 5AGS ofprision ma&or, as minimum, to K-:7)..; ="$> G.A7S and .1(H) =,> M-;)HS of reclusion temporal, as ma/imum. 1n all other respects, the decision is AKK17M.5. S- -75.7.5.S Her motion for reconsideration havin' !een denied in the resolution of March "9, "##$, Liwana' filed the instant petition, su!mittin' the followin' assi'nment of errors< P". 7.S*-;5.;) A**.LLA). C-:7) (7AB.LG .77.5 1; AKK17M1;( )H. C-;B1C)1-; -K )H. ACC:S.52*.)1)1-;.7 K-7 )H. C71M. -K .S)AKA, WH.; CL.A7LG )H. C-;)7AC) )HA) .T1S) =sic> 4.)W..; )H. ACC:S.52*.)1)1-;.7 A;5 C-M*LA1;A;) 1S .1)H.7 )HA) -K A S1M*L. L-A; -7 )HA) -K A *A7);.7SH1* -7 J-1;) B.;):7. H.;C. )H. ;-; 7.):7; -K )H. M-;.G -K )H. C-M*LA1;A;) 1S *:7.LG C1B1L 1; ;A):7. A;5 ;-) C71M1;AL. +. 7.S*-;5.;) A**.LLA). C-:7) (7AB.LG .77.5 1; ;-) ACO:1))1;( )H. ACC:S.52*.)1)1-;.7 -; (7-:;5S -K 7.AS-;A4L. 5-:4) 4G A**LG1;( )H. U.O:1*-1S. 7:L.Q.S Liwana' advances the theor& that the intention of the parties was to enter into a contract of partnership, wherein 7osales would contri!ute the funds while she would !u& and sell the ci'arettes, and later divide the profits !etween them. E"F She also ar'ues that the transaction can also !e interpreted as a simple loan, with 7osales lendin' to her the amount stated on an installment !asis. E+F )he Court of Appeals correctl& re6ected these pretenses. While factual findin's of the Court of Appeals are conclusive on the parties and not reviewa!le !& the Supreme Court, and carr& more wei'ht when these affirm the factual findin's of the trial court, E3F we deem it more e/pedient to resolve the instant petition on its merits. Si'ned in the presence of< =S'd> 1lle'i!le =S'd> 5omin' L. 4ali'adS OueAon Cit&

7eceived from Mrs. 1sidora *. 7osales the sum of K1B. H:;57.5 )W.;)G S1T )H-:SA;5 A;5 S1T H:;57.5 K1K)G *.S-S =*8+9,98 . > *hilippine Currenc&, to purchase ci'arrets =sic> =*hilip J Marl!oro> to !e sold to customers. 1n the event the said ci'arrets =sic> are not sold, the proceeds of the sale or the said products =shall> !e returned to said Mrs. 1sidora *. 7osales the said amount of *8+9,98 . or the said items on or !efore Au'ust 3 , "#,,. =S(5 J )hum!edmar0ed> =sic> CA7M.; L1WA;A( +9 H. Dalira&a St. OueAon Cit&

)he lan'ua'e of the receipt could not !e an& clearer. 1t indicates that the mone& delivered to Liwana' was for a specific purpose, that is, for the purchase of ci'arettes, and in the event the ci'arettes cannot !e sold, the mone& must !e returned to 7osales. )hus, even assumin' that a contract of partnership was indeed entered into !& and !etween the parties, we have ruled that when mone& or propert& have !een received !& a partner for a specific purpose =such as that o!tainin' in the instant case> and he later misappropriated it, such partner is 'uilt& of estafa.E%F ;either can the transaction !e considered a loan, since in a contract of loan once the mone& is received !& the de!tor, ownership over the same is transferred. E,F 4ein' the owner, the !orrower can dispose of it for whatever purpose he ma& deem proper. 1n the instant petition, however, it is evident that Liwana' could not dispose of the mone& as she pleased !ecause it was onl& delivered to her for a sin'le purpose, namel&, for the purchase of ci'arettes, and if this was not possi!le then to return the mone& to 7osales. Since in this case there was no transfer of ownership of the mone& delivered, Liwana' is lia!le for conversion under Art. 3"8, par. "=!> of the 7evised *enal Code. "&EREFORE, in view of the fore'oin', the appealed decision of the Court of Appeals dated ;ovem!er +#, "##3, is AKK17M.5. Costs a'ainst petitioner. S- -75.7.5.

(.7. ;o. L23"9,$ June +,, "#%3

E ANGELISTA 6 CO., .OMINGO C. E ANGELISTA, #R., CONC&ITA *. NA ARRO a$% LEONAR.A ATIEN3A A*A. SA*TOS, petitioners, vs. ESTRELLA A*A. SANTOS, respondent. -eonardo A#ola for petitioners. Baisas, Al#erto / Associates for respondent.

plaintiff2appellee =respondent here> is an industrial partner as claimed !& her or merel& a profit sharer entitled to 3 M of the net profits that ma& !e realiAed !& the partnership from June %, "#88 until the mort'a'e loan from the 7eha!ilitation Kinance Corporation shall !e full& paid, as claimed !& appellants =herein petitioners>." -n that issue the Court of Kirst 1nstance found for the plaintiff and rendered 6ud'ement "declarin' her an industrial partner of .van'elista J Co.? orderin' the defendants to render an accountin' of the !usiness operations of the =said> partnership ... from June %, "#88? to pa& the plaintiff such amounts as ma& !e due as her share in the partnership profits andRor dividends after such an accountin' has !een properl& made? to pa& plaintiff attorne&'s fees in the sum of *+, . and the costs of this suit." )he defendants appealed to the Court of Appeals, which thereafter affirmed 6ud'ments of the court a :uo. 1n the petition !efore :s the petitioners have assi'ned the followin' errors< 1. )he Court of Appeals erred in the findin' that the respondent is an industrial partner of .van'elista J Co., notwithstandin' the admitted fact that since "#8$ and until after promul'ation of the decision of the appellate court the said respondent was one of the 6ud'es of the Cit& Court of Manila, and despite its findin's that respondent had !een paid for services alle'edl& contri!uted !& her to the partnership. 1n this connection the Court of Appeals erred< =A> 1n findin' that the "amended Articles of Co2partnership," ./hi!it "A" is conclusive evidence that respondent was in fact made an industrial partner of .van'elista J Co. =4> 1n not findin' that a portion of respondent's testimon& 3uoted in the decision proves that said respondent did not !ind herself to contri!ute her industr&, and she could not, and in fact did not, !ecause she was one of the 6ud'es of the Cit& Court of Manila since "#8$. =C> 1n findin' that respondent did not in fact contri!ute her industr&, despite the appellate court's own findin' that she has !een paid for the services alle'edl& rendered !& her, as well as for the loans of mone& made !& her to the partnership. 11. )he lower court erred in not findin' that in an& event the respondent was lawfull& e/cluded from, and deprived of, her alle'ed share, interests and participation, as an alle'ed industrial partner, in the partnership .van'elista J Co., and its profits or net income.

111. )he Court of Appeals erred in affirmin' in toto the decision of the trial court where!& respondent was declared an industrial partner of the petitioner, and petitioners were ordered to render an accountin' of the !usiness operation of the partnership from June %, "#88, and to pa& the respondent her alle'ed share in the net profits of the partnership plus the sum of *+, . as attorne&'s fees and the costs of the suit, instead of dismissin' respondent's complaint, with costs, a'ainst the respondent. 1t is 3uite o!vious that the 3uestions raised in the first assi'ned errors refer to the facts as found !& the Court of Appeals. )he evidence presented !& the parties as the trial in support of their respective positions on the issue of whether or not the respondent was an industrial partner was thorou'hl& anal&Aed !& the Court of Appeals on its decision, to the e/tent of reproducin' %er#atim therein the len'th& testimon& of the witnesses. 1t is not the function of the Supreme Court to anal&Ae or wei'h such evidence all over a'ain, its 6urisdiction !ein' limited to reviewin' errors of law that mi'ht have !een commited !& the lower court. 1t should !e o!served, in this re'ard, that the Court of Appeals did not hold that the Articles of Co2partnership, identified in the record as ./hi!it "A", was conclusive evidence that the respondent was an industrial partner of the said compan&, !ut considered it to'ether with other factors, consistin' of !oth testimonial and documentar& evidences, in arrivin' at the factual conclusion e/pressed in the decision. )he findin's of the Court of Appeals on the various points raised in the first assi'nment of error are hereunder reproduced if onl& to demonstrate that the same were made after a throu'h anal&sis of then evidence, and hence are !e&ond this Court's power of review. )he afore3uoted findin's of the lower Court are assailed under Appellants' first assi'ned error, wherein it is pointed out that "Appellee's documentar& evidence does not conclusivel& prove that appellee was in fact admitted !& appellants as industrial partner of .van'elista J Co." and that ")he 'rounds relied upon !& the lower Court are untena!le" =*a'es +" and +9, Appellant's 4rief>. )he first point refers to ./hi!it A, 4, C, D, D2", J, ; and S, appellants' complaint !ein' that "1n findin' that the appellee is an industrial partner of appellant .van'elista J Co., herein referred to as the partnership @ the lower court relied mainl& on the appellee's documentar& evidence, entirel& disre'ardin' facts and circumstances esta!lished !& appellants" evidence which contradict the said findin'' =*a'e +", Appellants' 4rief>. )he lower court could not have done otherwise !ut rel& on the e/hi!its 6ust mentioned, first, !ecause appellants have admitted their 'enuineness and due e/ecution, hence the& were admitted without o!6ection !& the lower court when appellee rested her case and, secondl& the said e/hi!its indu!ita!l& show the appellee is an industrial partner of appellant compan&. Appellants are virtuall& estopped from attemptin' to detract from the pro!ative force of the said e/hi!its !ecause the& all !ear the imprint of their 0nowled'e and consent, and

MA7ALINTAL, J.: -n -cto!er #, "#8$ a co2partnership was formed under the name of ".van'elista J Co." -n June %, "#88 the Articles of Co2partnership was amended as to include herein respondent, .strella A!ad Santos, as industrial partner, with herein petitioners 5omin'o C. .van'elista, Jr., Leonardo AtienAa A!ad Santos and Conchita *. ;avarro, the ori'inal capitalist partners, remainin' in that capacit&, with a contri!ution of *"%,8 each. )he amended Articles provided, inter alia, that "the contri!ution of .strella A!ad Santos consists of her industr& !ein' an industrial partner", and that the profits and losses "shall !e divided and distri!uted amon' the partners ... in the proportion of % M for the first three partners, 5omin'o C. .van'elista, Jr., Conchita *. ;avarro and Leonardo AtienAa A!ad Santos to !e divided amon' them e3uall&? and 3 M for the fourth partner .strella A!ad Santos." -n 5ecem!er "%, "#93 herein respondent filed suit a'ainst the three other partners in the Court of Kirst 1nstance of Manila, alle'in' that the partnership, which was also made a part&2defendant, had !een pa&in' dividends to the partners e/cept to her? and that notwithstandin' her demands the defendants had refused and continued to refuse and let her e/amine the partnership !oo0s or to 'ive her information re'ardin' the partnership affairs to pa& her an& share in the dividends declared !& the partnership. She therefore pra&ed that the defendants !e ordered to render accountin' to her of the partnership !usiness and to pa& her correspondin' share in the partnership profits after such accountin', plus attorne&'s fees and costs. )he defendants, in their answer, denied ever havin' declared dividends or distri!uted profits of the partnership? denied li0ewise that the plaintiff ever demanded that she !e allowed to e/amine the partnership !oo0s? and !&wa& of affirmative defense alle'ed that the amended Articles of Co2partnership did not e/press the true a'reement of the parties, which was that the plaintiff was not an industrial partner? that she did not in fact contri!ute industr& to the partnership? and that her share of 3 M was to !e !ased on the profits which mi'ht !e realiAed !& the partnership onl& until full pa&ment of the loan which it had o!tained in 5ecem!er, "#88 from the 7eha!ilitation Kinance Corporation in the sum of *3 , , for which the plaintiff had si'ned a promisor& note as co2ma0er and mort'a'ed her propert& as securit&. )he parties are in a'reement that the main issue in this case is "whether the

there is no credi!le showin' that the& ever protested a'ainst or opposed their contents prior of the filin' of their answer to appellee's complaint. As a matter of fact, all the appellant .van'elista, Jr., would have us !elieve @ as a'ainst the cumulative force of appellee's aforesaid documentar& evidence @ is the appellee's ./hi!it "A", as confirmed and corro!orated !& the other e/hi!its alread& mentioned, does not e/press the true intent and a'reement of the parties thereto, the real understandin' !etween them !ein' the appellee would !e merel& a profit sharer entitled to 3 M of the net profits that ma& !e realiAed !etween the partners from June %, "#88, until the mort'a'e loan of *3 , . to !e o!tained from the 7KC shall have !een full& paid. )his version, however, is discredited not onl& !& the aforesaid documentar& evidence !rou'ht forward !& the appellee, !ut also !& the fact that from June %, "#88 up to the filin' of their answer to the complaint on Ke!ruar& ,, "#9$ @ or a period of over ei'ht =,> &ears @ appellants did nothin' to correct the alle'ed false a'reement of the parties contained in ./hi!it "A". 1t is thus reasona!le to suppose that, had appellee not filed the present action, appellants would not have advanced this o!vious afterthou'ht that ./hi!it "A" does not e/press the true intent and a'reement of the parties thereto. At pa'es 3+233 of appellants' !rief, the& also ma0e much of the ar'ument that 'there is an overridin' fact which proves that the parties to the Amended Articles of *artnership, ./hi!it "A", did not contemplate to ma0e the appellee .strella A!ad Santos, an industrial partner of .van'elista J Co. 1t is an admitted fact that since !efore the e/ecution of the amended articles of partnership, ./hi!it "A", the appellee .strella A!ad Santos has !een, and up to the present time still is, one of the 6ud'es of the Cit& Court of Manila, devotin' all her time to the performance of the duties of her pu!lic office. )his fact proves !e&ond peradventure that it was never contemplated !etween the parties, for she could not lawfull& contri!ute her full time and industr& which is the o!li'ation of an industrial partner pursuant to Art. "%,# of the Civil Code. )he Court of Appeals then proceeded to consider appellee's testimon& on this point, 3uotin' it in the decision, and then concluded as follows< -ne cannot read appellee's testimon& 6ust 3uoted without 'ainin' the ver& definite impression that, even as she was and still is a Jud'e of the Cit& Court of Manila, she has rendered services for appellants without which the& would not have had the wherewithal to operate the !usiness for which appellant compan& was or'aniAed. Article "%9% of the ;ew Civil Code which provides that "4& contract of partnership two or more persons !ind themselves, to contri!ute mone&, propert&, or industr& to a common fund, with the intention of dividin' the profits amon' themselves, 'does not specif& the 0ind of industr& that a partner ma& thus contri!ute, hence the said services ma& le'itimatel& !e considered as appellee's contri!ution to the common fund.

Another article of the same Code relied upon appellants reads< 'A7). "%,#. An industrial partner cannot en'a'e in !usiness for himself, unless the partnership e/pressl& permits him to do so? and if he should do so, the capitalist partners ma& either e/clude him from the firm or avail themselves of the !enefits which he ma& have o!tained in violation of this provision, with a ri'ht to dama'es in either case.' 1t is not disputed that the provision a'ainst the industrial partner en'a'in' in !usiness for himself see0s to prevent an& conflict of interest !etween the industrial partner and the partnership, and to insure faithful compliance !& said partner with this prestation. )here is no pretense, however, even on the part of the appellee is en'a'ed in an& !usiness anta'onistic to that of appellant compan&, since !ein' a Jud'e of one of the !ranches of the Cit& Court of Manila can hardl& !e characteriAed as a !usiness. )hat appellee has faithfull& complied with her prestation with respect to appellants is clearl& shown !& the fact that it was onl& after filin' of the complaint in this case and the answer thereto appellants e/ercised their ri'ht of e/clusion under the codal art 6ust mentioned !& alle'in' in their Supplemental Answer dated June +#, "#9$ @ or after around nine =#> &ears from June %, "#88 @ su!se3uent to the filin' of defendants' answer to the complaint, defendants reached an a'reement where!& the herein plaintiff !een e/cluded from, and deprived of, her alle'ed share, interests or participation, as an alle'ed industrial partner, in the defendant partnership andRor in its net profits or income, on the 'round plaintiff has never contri!uted her industr& to the partnership, instead she has !een and still is a 6ud'e of the Cit& Court =formerl& Municipal Court> of the Cit& of Manila, devotin' her time to performance of her duties as such 6ud'e and en6o&in' the privile'e and emoluments appertainin' to the said office, aside from teachin' in law school in Manila, without the e/press consent of the herein defendants' =7ecord -n Appeal, pp. +$2+8>. Havin' alwa&s 0nows as a appellee as a Cit& 6ud'e even !efore she 6oined appellant compan& on June %, "#88 as an industrial partner, wh& did it ta0e appellants man& &earn !efore e/cludin' her from said compan& as afore3uoted alle'ationsC And how can the& reconcile such e/clusive with their main theor& that appellee has never !een such a partner !ecause ")he real a'reement evidenced !& ./hi!it "A" was to 'rant the appellee a share of 3 M of the net profits which the appellant partnership ma& realiAe from June %, "#88, until the mort'a'e of *3 , . o!tained from the 7eha!ilitation Kinance Corporal shall have !een full& paid." =Appellants 4rief, p. 3,>.

What has 'one !efore persuades us to hold with the lower Court that appellee is an industrial partner of appellant compan&, with the ri'ht to demand for a formal accountin' and to receive her share in the net profit that ma& result from such an accountin', which ri'ht appellants ta0e e/ception under their second assi'ned error. -ur said holdin' is !ased on the followin' article of the ;ew Civil Code< 'A7). ",##. An& partner shall have the ri'ht to a formal account as to partnership affairs< ="> 1f he is wron'full& e/cluded from the partnership !usiness or possession of its propert& !& his co2partners? =+> 1f the ri'ht e/ists under the terms of an& a'reement? =3> As provided !& article ", %? =$> Whenever other circumstance render it 6ust and reasona!le. We find no reason in this case to depart from the rule which limits this Court's appellate 6urisdiction to reviewin' onl& errors of law, acceptin' as conclusive the factual findin's of the lower court upon its own assessment of the evidence. )he 6ud'ment appealed from is affirmed, with costs.

"