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Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-13680

April 27, 1960

MAURO LOZANA, plaintiff-appellee,


vs.
SERAFIN DEPAKAKIBO, defendant-appellant.
Antonio T. Lozada for appellee.
Agustin T. Misola and Tomas D. Dominado for appellant.
LABRADOR, J.:
This is an appeal from a judgment of the Court of First Instance of Iloilo, certified to us by the Court of Appeals, for
the reason that only questions of law are involved in said appeal.
The record discloses that on November 16, 1954 plaintiff Mauro Lozana entered into a contract with defendant
Serafin Depakakibo wherein they established a partnership capitalized at the sum of P30,000, plaintiff furnishing 60%
thereof and the defendant, 40%, for the purpose of maintaining, operating and distributing electric light and power in
the Municipality of Dumangas, Province of Iloilo, under a franchise issued to Mrs. Piadosa Buenaflor. However, the
franchise or certificate of public necessity and convenience in favor of the said Mrs. Piadosa Buenaflor was cancelled
and revoked by the Public Service Commission on May 15, 1955. But the decision of the Public Service Commission
was appealed to Us on October 21, 1955. A temporary certificate of public convenience was issued in the name of
Olimpia D. Decolongon on December 22, 1955 (Exh. "B"). Evidently because of the cancellation of the franchise in
the name of Mrs. Piadosa Buenaflor, plaintiff herein Mauro Lozana sold a generator, Buda (diesel), 75 hp. 30 KVA
capacity, Serial No. 479, to the new grantee Olimpia D. Decolongon, by a deed dated October 30, 1955 (Exhibit "C").
Defendant Serafin Depakakibo, on the other hand, sold one Crossly Diesel Engine, 25 h. p., Serial No. 141758, to
the spouses Felix Jimenea and Felina Harder, by a deed dated July 10, 1956.
On November 15, 1955, plaintiff Mauro Lozana brought an action against the defendant, alleging that he is the owner
of the Generator Buda (Diesel), valued at P8,000 and 70 wooden posts with the wires connecting the generator to
the different houses supplied by electric current in the Municipality of Dumangas, and that he is entitled to the
possession thereof, but that the defendant has wrongfully detained them as a consequence of which plaintiff suffered
damages. Plaintiff prayed that said properties be delivered back to him. Three days after the filing of the complaint,
that is on November 18, 1955, Judge Pantaleon A. Pelayo issued an order in said case authorizing the sheriff to take
possession of the generator and 70 wooden posts, upon plaintiff's filing of a bond in the amount of P16,000 in favor
of the defendant (for subsequent delivery to the plaintiff). On December 5, 1955, defendant filed an answer, denying
that the generator and the equipment mentioned in the complaint belong to the plaintiff and alleging that the same
had been contributed by the plaintiff to the partnership entered into between them in the same manner that defendant
had contributed equipments also, and therefore that he is not unlawfully detaining them. By way of counterclaim,
defendant alleged that under the partnership agreement the parties were to contribute equipments, plaintiff
contributing the generator and the defendant, the wires for the purpose of installing the main and delivery lines; that
the plaintiff sold his contribution to the partnership, in violation of the terms of their agreement. He, therefore, prayed
that the complaint against him be dismissed; that plaintiff be adjudged guilty of violating the partnership contract and
be ordered to pay the defendant the sum of P3,000, as actual damages, P600.00 as attorney's fees and P2,600
annually as actual damages; that the court order dissolution of the partnership, after the accounting and liquidation of
the same.

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On September 27, 1956, the defendant filed a motion to declare plaintiff in default on his counterclaim, but this was
denied by the court. Hearings on the case were conducted on October 25, 1956 and November 5, 1956, and on the
latter date the judge entered a decision declaring plaintiff owner of the equipment and entitled to the possession
thereof, with costs against defendant. It is against this judgment that the defendant has appealed.
The above judgment of the court was rendered on a stipulation of facts, which is as follows:
1. That on November 16, 1954, in the City of Iloilo, the aforementioned plaintiff, and the defendant entered into a
contract of Partnership, a copy of which is attached as Annex "A" of defendant's answer and counterclaim, for the
purpose set forth therein and under the national franchise granted to Mrs. Piadosa Buenaflor;
2. That according to the aforementioned Partnership Contract, the plaintiff Mr. Mauro Lozana, contributed the amount
of Eighteen Thousand Pesos (P18,000.00); said contributions of both parties being the appraised values of their
respective properties brought into the partnership;
3. That the said Certificate of Public Convenience and Necessity was revoked and cancelled by order of the Public
Service Commission dated March 15, 1955, promulgated in case No. 58188, entitled, "Piadosa Buenaflor, applicant",
which order has been appealed to the Supreme Court by Mrs. Buenaflor;
4. That on October 30, 1955, the plaintiff sold properties brought into by him to the said partnership in favor of
Olimpia Decolongon in the amount of P10,000.00 as per Deed of Sale dated October 30, 1955 executed and ratified
before Notary Public, Delfin Demaisip, in and for the Municipality of Dumangas, Iloilo and entered in his Notarial
Registry as Doc. No. 832; Page No. 6; Book No. XIII; and Series of 1955, a copy thereof is made as Annex "B" of
defendant's answer and counterclaim;
5. That there was no liquidation of partnership and that at the time of said Sale on October 30, 1955, defendant was
the manager thereof;
6. That by virtue of the Order of this Honorable Court dated November 18, 1955, those properties sold were taken by
the Provincial Sheriff on November 20, 1955 and delivered to the plaintiff on November 25, 1955 upon the latter
posting the required bond executed by himself and the Luzon Surety Co., dated November 17, 1955 and ratified
before the Notary Public, Eleuterio del Rosario in and for the province of Iloilo known as Doc. No. 200; Page 90;
Book No. VII; and Series of 1955; of said Notary Public;
7. That the said properties sold are now in the possession of Olimpia Decolongon, the purchaser, who is presently
operating an electric light plant in Dumangas, Iloilo;
8. That the defendant sold certain properties in favor of the spouses, Felix Jimenea and Felisa Harder contributed by
him to the partnership for P3,500.00 as per Deed of Sale executed and ratified before the Notary Public Rodrigo J.
Harder in and for the Province of Iloilo, known as Doc. No. 76; Page 94; Book No. V; and Series of 1955, a certified
copy of which is hereto attached marked as Annex "A", and made an integral part hereof; (pp, 27-29 ROA).
As it appears from the above stipulation of facts that the plaintiff and the defendant entered into the contract of
partnership, plaintiff contributing the amount of P18,000, and as it is not stated therein that there bas been a
liquidation of the partnership assets at the time plaintiff sold the Buda Diesel Engine on October 15, 1955, and since
the court below had found that the plaintiff had actually contributed one engine and 70 posts to the partnership, it
necessarily follows that the Buda diesel engine contributed by the plaintiff had become the property of the
partnership. As properties of the partnership, the same could not be disposed of by the party contributing the same
without the consent or approval of the partnership or of the other partner. (Clemente vs. Galvan, 67 Phil., 565).

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The lower court declared that the contract of partnership was null and void, because by the contract of partnership,
the parties thereto have become dummies of the owner of the franchise. The reason for this holding was the
admission by defendant when being cross-examined by the court that he and the plaintiff are dummies. We find that
this admission by the defendant is an error of law, not a statement of a fact. The Anti-Dummy law has not been
violated as parties plaintiff and defendant are not aliens but Filipinos. The Anti-Dummy law refers to aliens only
(Commonwealth Act 108 as amended).
Upon examining the contract of partnership, especially the provision thereon wherein the parties agreed to maintain,
operate and distribute electric light and power under the franchise belonging to Mrs. Buenaflor, we do not find the
agreement to be illegal, or contrary to law and public policy such as to make the contract of partnership, null and void
ab initio. The agreement could have been submitted to the Public Service Commission if the rules of the latter require
them to be so presented. But the fact of furnishing the current to the holder of the franchise alone, without the
previous approval of the Public Service Commission, does not per se make the contract of partnership null and void
from the beginning and render the partnership entered into by the parties for the purpose also void and non-existent.
Under the circumstances, therefore, the court erred in declaring that the contract was illegal from the beginning and
that parties to the partnership are not bound therefor, such that the contribution of the plaintiff to the partnership did
not pass to it as its property. It also follows that the claim of the defendant in his counterclaim that the partnership be
dissolved and its assets liquidated is the proper remedy, not for each contributing partner to claim back what he had
contributed.
For the foregoing considerations, the judgment appealed from as well as the order of the court for the taking of the
property into custody by the sheriff must be, as they hereby are set aside and the case remanded to the court below
for further proceedings in accordance with law.

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Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-33580

February 6, 1931

MAXIMILIANO SANCHO, plaintiff-appellant,


vs.
SEVERIANO LIZARRAGA, defendant-appellee.
Jose Perez Cardenas and Jose M. Casal for appellant.
Celso B. Jamora and Antonio Gonzalez for appellee.
ROMUALDEZ, J.:
The plaintiff brought an action for the rescission of a partnership contract between himself and the defendant, entered
into on October 15, 1920, the reimbursement by the latter of his 50,000 peso investment therein, with interest at 12
per cent per annum form October 15, 1920, with costs, and any other just and equitable remedy against said
defendant.
The defendant denies generally and specifically all the allegations of the complaint which are incompatible with his
special defenses, cross-complaint and counterclaim, setting up the latter and asking for the dissolution of the
partnership, and the payment to him as its manager and administrator of P500 monthly from October 15, 1920, until
the final dissolution, with interest, one-half of said amount to be charged to the plaintiff. He also prays for any other
just and equitable remedy.
The Court of First Instance of Manila, having heard the cause, and finding it duly proved that the defendant had not
contributed all the capital he had bound himself to invest, and that the plaintiff had demanded that the defendant
liquidate the partnership, declared it dissolved on account of the expiration of the period for which it was constituted,
and ordered the defendant, as managing partner, to proceed without delay to liquidate it, submitting to the court the
result of the liquidation together with the accounts and vouchers within the period of thirty days from receipt of notice
of said judgment, without costs.
The plaintiff appealed from said decision making the following assignments of error:
1. In holding that the plaintiff and appellant is not entitled to the rescission of the partnership contract, Exhibit A, and
that article 1124 of the Civil Code is not applicable to the present case.
2. In failing to order the defendant to return the sum of P50,000 to the plaintiff with interest from October 15, 1920,
until fully paid.
3. In denying the motion for a new trial.
In the brief filed by counsel for the appellee, a preliminary question is raised purporting to show that this appeal is
premature and therefore will not lie. The point is based on the contention that inasmuch as the liquidation ordered by
the trial court, and the consequent accounts, have not been made and submitted, the case cannot be deemed
terminated in said court and its ruling is not yet appealable. In support of this contention counsel cites section 123 of
the Code of Civil Procedure, and the decision of this court in the case of Natividad vs. Villarica (31 Phil., 172).

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This contention is well founded. Until the accounts have been rendered as ordered by the trial court, and until they
have been either approved or disapproved, the litigation involved in this action cannot be considered as completely
decided; and, as it was held in said case of Natividad vs .Villarica, also with reference to an appeal taken from a
decision ordering the rendition of accounts following the dissolution of partnership, the appeal in the instant case
must be deemed premature.
But even going into the merits of the case, the affirmation of the judgment appealed from is inevitable. In view of the
lower court's findings referred to above, which we cannot revise because the parol evidence has not been forwarded
to this court, articles 1681 and 1682 of the Civil Code have been properly applied. Owing to the defendant's failure to
pay to the partnership the whole amount which he bound himself to pay, he became indebted to it for the remainder,
with interest and any damages occasioned thereby, but the plaintiff did not thereby acquire the right to demand
rescission of the partnership contract according to article 1124 of the Code. This article cannot be applied to the case
in question, because it refers to the resolution of obligations in general, whereas article 1681 and 1682 specifically
refer to the contract of partnership in particular. And it is a well known principle that special provisions prevail over
general provisions.
By virtue of the foregoing, this appeal is hereby dismissed, leaving the decision appealed from in full force, without
special pronouncement of costs. So ordered.

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Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-19819 October 26, 1977
WILLIAM UY, plaintiff-appellee,
vs.
BARTOLOME PUZON, substituted by FRANCO PUZON, defendant-appellant.
R.P. Sarandi for appellant.
Jose L. Uy & Andres P. Salvador for appellee.

CONCEPCION JR., J.:t.hqw


Appeal from the decision of the Court of First Instanre of Manila, dissolving the "U.P. Construction Company" and
ordering the defendant Bartolome Puzon to pay the plaintiff the amounts of: (1) P115,102.13, with legal interest
thereon from the date of the filing of the complaint until fully paid; (2) P200,000.00, as plaintiffs share in the
unrealized profits of the "U.P. Construction Company" and (3) P5,000.00, as and for attorney's fees.
It is of record that the defendant Bartolome Puzon had a contract with the Republic of the Philippines for the
construction of the Ganyangan Bato Section of the Pagadian Zamboanga City Road, province of Zamboanga del Sur
1 and of five (5) bridges in the Malangas-Ganyangan Road. 2 Finding difficulty in accomplishing both projects,
Bartolome Puzon sought the financial assistance of the plaintiff, William Uy. As an inducement, Puzon proposed the
creation of a partnership between them which would be the sub-contractor of the projects and the profits to be
divided equally between them. William Uy inspected the projects in question and, expecting to derive considerable
profits therefrom, agreed to the proposition, thus resulting in the formation of the "U.P. Construction Company" 3
which was subsequently engaged as subcontractor of the construction projects. 4
The partners agreed that the capital of the partnership would be P100,000.00 of which each partner shall contribute
the amount of P50,000.00 in cash. 5 But, as heretofore stated, Puzon was short of cash and he promised to
contribute his share in the partnership capital as soon as his application for a loan with the Philippine National Bank
in the amount of P150,000.00 shall have been approved. However, before his loan application could be acted upon,
he had to clear his collaterals of its incumbrances first. For this purpose, on October 24, 1956, Wilham Uy gave
Bartolome Puzon the amount of P10,000.00 as advance contribution of his share in the partnership to be organized
between them under the firm name U.P. CONSTRUCTION COMPANY which amount mentioned above will be used
by Puzon to pay his obligations with the Philippine National Bank to effect the release of his mortgages with the said
Bank. 6 On October 29, 1956, William Uy again gave Puzon the amount of P30,000.00 as his partial contribution to
the proposed partnership and which the said Puzon was to use in payment of his obligation to the Rehabilitation
Finance Corporation. 7 Puzon promised William Uy that the amount of P150,000.00 would be given to the
partnership to be applied thusly: P40,000.00, as reimbursement of the capital contribution of William Uy which the
said Uy had advanced to clear the title of Puzon's property; P50,000.00, as Puzon's contribution to the partnership;
and the balance of P60,000.00 as Puzon's personal loan to the partnership. 8
Although the partnership agreement was signed by the parties on January 18, 1957,9 work on the projects was
started by the partnership on October 1, 1956 in view of the insistence of the Bureau of Public Highways to complete

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the project right away. 10 Since Puzon was busy with his other projects, William Uy was entrusted with the
management of the projects and whatever expense the latter might incur, would be considered as part of his
contribution. 11 At the end of December, 1957, William Uy had contributed to the partnership the amount of
P115,453.39, including his capital. 12
The loan of Puzon was approved by the Philippine National Bank in November, 1956 and he gave to William Uy the
amount of P60,000.00. Of this amount, P40,000.00 was for the reimbursement of Uy's contribution to the partnership
which was used to clear the title to Puzon's property, and the P20,000.00 as Puzon's contribution to the partnership
capital. 13
To guarantee the repayment of the above-mentioned loan, Bartolome Puzon, without the knowledge and consent of
William Uy, 14 assigned to the Philippine National Bank all the payments to be received on account of the contracts
with the Bureau of Public Highways for the construction of the afore-mentioned projects. 15 By virtue of said
assignment, the Bureau of Public Highways paid the money due on the partial accomplishments on the government
projects in question to the Philippine National Bank which, in turn, applied portions of it in payment of Puzon's loan.
Of the amount of P1,047,181.07, released by the Bureau of Public Highways in payment of the partial work
completed by the partnership on the projects, the amount of P332,539.60 was applied in payment of Puzon's loan
and only the amount of P27,820.80 was deposited in the partnership funds, 16 which, for all practical purposes, was
also under Puzon's account since Puzon was the custodian of the common funds.
As time passed and the financial demands of the projects increased, William Uy, who supervised the said projects,
found difficulty in obtaining the necessary funds with which to pursue the construction projects. William Uy
correspondingly called on Bartolome Puzon to comply with his obligations under the terms of their partnership
agreement and to place, at lest, his capital contribution at the disposal of the partnership. Despite several promises,
Puzon, however, failed to do so. 17 Realizing that his verbal demands were to no avail, William Uy consequently
wrote Bartolome Puzon pormal letters of demand, 18 to which Puzon replied that he is unable to put in additional
capital to continue with the projects. 19
Failing to reach an agreement with William Uy, Bartolome Puzon, as prime contractor of the construction projects,
wrote the subcontractor, U.P. Construction Company, on November 20, 1957, advising the partnership, of which he is
also a partner, that unless they presented an immediate solution and capacity to prosecute the work effectively, he
would be constrained to consider the sub-contract terminated and, thereafter, to assume all responsibilities in the
construction of the projects in accordance with his original contract with the Bureau of Public Highways. 20 On
November 27, 1957, Bartolome Puzon again wrote the U.P.Construction Company finally terminating their
subcontract agreement as of December 1, 1957. 21
Thereafter, William Uy was not allowed to hold office in the U.P. Construction Company and his authority to deal with
the Bureau of Public Highways in behalf of the partnership was revoked by Bartolome Puzon who continued with the
construction projects alone. 22
On May 20, 1958, William Uy, claiming that Bartolome Puzon had violated the terms of their partnership agreement,
instituted an action in court, seeking, inter alia, the dissolution of the partnership and payment of damages.
Answering, Bartolome Puzon denied that he violated the terms of their agreement claiming that it was the plaintiff,
William Uy, who violated the terms thereof. He, likewise, prayed for the dissolution of the partnership and for the
payment by the plaintiff of his, share in the losses suffered by the partnership.
After appropriate proceedings, the trial court found that the defendant, contrary to the terms of their partnership
agreement, failed to contribute his share in the capital of the partnership applied partnership funds to his personal
use; ousted the plaintiff from the management of the firm, and caused the failure of the partnership to realize the
expected profits of at least P400,000.00. As a consequence, the trial court dismissed the defendant's counterclaim

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and ordered the dissolution of the partnership. The trial court further ordered the defendant to pay the plaintiff the
sum of P320,103.13.
Hence, the instant appeal by the defendant Bartolome Puzon during the pendency of the appeal before this Court,
the said Bartolome Puzon died, and was substituted by Franco Puzon.
The appellant makes in his brief nineteen (19) assignment of errors, involving questions of fact, which relates to the
following points:
(1)

That the appellant is not guilty of breach of contract; and

(2)
That the amounts of money the appellant has been order to pay the appellee is not supported by the
evidence and the law.
After going over the record, we find no reason for rejecting the findings of fact below, justifying the reversal of the
decision appealed from.
The findings of the trial court that the appellant failed to contribute his share in the capital of the partnership is clear
incontrovertible. The record shows that after the appellant's loan the amount of P150,000.00 was approved by the
Philippin National Bank in November, 1956, he gave the amount P60,000.00 to the appellee who was then managing
the construction projects. Of this amount, P40,000.00 was to be applied a reimbursement of the appellee's
contribution to the partnership which was used to clear the title to the appellant's property, and th balance of
P20,000.00, as Puzon's contribution to the partnership. 23 Thereafter, the appellant failed to make any further
contributions the partnership funds as shown in his letters to the appellee wherein he confessed his inability to put in
additional capital to continue with the projects. 24
Parenthetically, the claim of the appellant that the appellee is equally guilty of not contributing his share in the
partnership capital inasmuch as the amount of P40,000.00, allegedly given to him in October, 1956 as partial
contribution of the appellee is merely a personal loan of the appellant which he had paid to the appellee, is plainly
untenable. The terms of the receipts signed by the appellant are clear and unequivocal that the sums of money given
by the appellee are appellee's partial contributions to the partnership capital. Thus, in the receipt for P10,000.00
dated October 24, 1956, 25 the appellant stated:+.wph!1
Received from Mr. William Uy the sum of TEN THOUSAND PESOS (P10,000.00) in Check No. SC 423285 Equitable
Banking Corporation, dated October 24, 1956, as advance contribution of the share of said William Uy in the
partnership to be organized between us under the firm name U.P. CONSTRUCTION COMPANY which amount
mentioned above will be used by the undersigned to pay his obligations with the Philippine National Bank to effect
the release of his mortgages with the said bank. (Emphasis supplied)
In the receipt for the amount of P30,000.00 dated October 29, 1956, 26 the appellant also said:+.wph!1
Received from William Uy the sum of THIRTY THOUSAND PESOS (P30,000.00) in Check No. SC423287, of the
Equitable Banking Corporation, as partial contribution of the share of the said William Uy to the U.P.
CONSTRUCTION COMPANY for which the undersigned will use the said amount in payment of his obligation to the
Rehabilitation Finance Corporation. (Emphasis supplied)
The findings of the trial court that the appellant misapplied partnership funds is, likewise, sustained by competent
evidence. It is of record that the appellant assigned to the Philippine National Bank all the payments to be received
on account of the contracts with the Bureau of Public Highways for the construction of the aforementioned projects to
guarantee the repayment of the bank. 27 By virtue of the said appeflant's personal loan with the said bank
assignment, the Bureau of Public Highways paid the money due on the partial accomplishments on the construction

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projects in question to the Philippine National Bank who, in turn, applied portions of it in payment of the appellant's
loan. 28
The appellant claims, however, that the said assignment was made with the consent of the appellee and that the
assignment not prejudice the partnership as it was reimbursed by the appellant.
But, the appellee categorically stated that the assignment to the Philippine National Bank was made without his prior
knowledge and consent and that when he learned of said assignment, he cal the attention of the appellant who
assured him that the assignment was only temporary as he would transfer the loan to the Rehabilitation Finance
Corporation within three (3) months time. 29
The question of whom to believe being a matter large dependent on the trier's discretion, the findings of the trial court
who had the better opportunity to examine and appraise the fact issue, certainly deserve respect.
That the assignment to the Philippine National Bank prejudicial to the partnership cannot be denied. The record show
that during the period from March, 1957 to September, 1959, the appellant Bartolome Puzon received from the
Bureau of Public highways, in payment of the work accomplished on the construction projects, the amount of
P1,047,181.01, which amount rightfully and legally belongs to the partnership by virtue of the subcontract
agreements between the appellant and the U.P. Construction Company. In view of the assignemt made by Puzon to
the Philippine National Bank, the latter withheld and applied the amount of P332,539,60 in payment of the appellant's
personal loan with the said bank. The balance was deposited in Puzon's current account and only the amount of
P27,820.80 was deposited in the current account of the partnership. 30 For sure, if the appellant gave to the
partnership all that were eamed and due it under the subcontract agreements, the money would have been used as a
safe reserve for the discharge of all obligations of the firm and the partnership would have been able to successfully
and profitably prosecute the projects it subcontracted.
When did the appellant make the reimbursement claimed by him?
For the same period, the appellant actually disbursed for the partnership, in connection with the construction projects,
the amount of P952,839.77. 31 Since the appellant received from the Bureau of Public Highways the sum of
P1,047,181.01, the appellant has a deficit balance of P94,342.24. The appellant, therefore, did not make complete
restitution.
The findings of the trial court that the appellee has been ousted from the management of the partnership is also
based upon persuasive evidence. The appellee testified that after he had demanded from the appellant payment of
the latter's contribution to the partnership capital, the said appellant did not allow him to hold office in the U.P.
Construction Company and his authority to deal with the Bureau of Public Highways was revoked by the appellant.
32
As the record stands, We cannot say, therefore, that the decis of the trial court is not sustained by the evidence of
record as warrant its reverw.
Since the defendantappellant was at fauh, the tral court properly ordered him to reimburse the plaintiff-appellee
whatever amount latter had invested in or spent for the partnership on account of construction projects.
How much did the appellee spend in the construction projects question?
It appears that although the partnership agreement stated the capital of the partnership is P100,000.00 of which each
part shall contribute to the partnership the amount of P50,000.00 cash 33 the partners of the U.P. Construction
Company did contribute their agreed share in the capitalization of the enterprise in lump sums of P50,000.00 each.
Aside from the initial amount P40,000.00 put up by the appellee in October, 1956, 34 the partners' investments took,

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the form of cash advances coveting expenses of the construction projects as they were incurred. Since the
determination of the amount of the disbursements which each of them had made for the construction projects require
an examination of the books of account, the trial court appointed two commissioners, designated by the parties, "to
examine the books of account of the defendant regarding the U.P. Construction Company and his personal account
with particular reference to the Public Works contract for the construction of the Ganyangan-Bato Section, PagadianZamboanga City Road and five (5) Bridges in Malangas-Ganyangan Road, including the payments received by
defendant from the Bureau of Public Highways by virtue of the two projects above mentioned, the disbursements or
disposition made by defendant of the portion thereof released to him by the Philippine National Bank and in whose
account these funds are deposited . 35
In due time, the loners so appointed, 36 submitted their report 37 they indicated the items wherein they are in
agreement, as well as their points of disagreement.
In the commissioners' report, the appellant's advances are listed under Credits; the money received from the firm,
under Debits; and the resulting monthly investment standings of the partners, under Balances. The commissioners
are agreed that at the end of December, 1957, the appellee had a balance of P8,242.39. 38 It is in their respective
adjustments of the capital account of the appellee that the commissioners had disagreed.
Mr. Ablaza, designated by the appellant, would want to charge the appellee with the sum of P24,239.48, representing
the checks isssued by the appellant, 39 and encashed by the appellee or his brother, Uy Han so that the appellee
would owe the partnership the amount of P15,997.09.
Mr. Tayag, designated by the appellee, upon the other hand, would credit the appellee the following additional
amounts:
(1)
P7,497.80 items omitted from the books of partnership but recognized and charged to Miscellaneous
Expenses by Mr. Ablaza;
(2)
P65,103.77 payrolls paid by the appellee in the amount P128,103.77 less payroll remittances from the
appellant in amount of P63,000.00; and
(3)

P26,027.04 other expeses incurred by the appellee at construction site.

With respect to the amount of P24,239.48, claimed by appellant, we are hereunder adopting the findings of the trial
which we find to be in accord with the evidence:
To enhance defendant's theory that he should be credited P24,239.48, he presented checks allegedly given to
plaintiff and the latter's brother, Uy Han, marked as Exhibits 2 to 11. However, defendant admitted that said cheeks
were not entered nor record their books of account, as expenses for and in behalf of partnership or its affairs. On the
other hand, Uy Han testified that of the cheeks he received were exchange for cash, while other used in the purchase
of spare parts requisitioned by defendant. This testimony was not refuted to the satisfaction of the Court, considering
that Han's explanation thereof is the more plausible because if they were employed in the prosecution of the partners
projects, the corresponding disbursements would have certainly been recorded in its books, which is not the case.
Taking into account defendant is the custodian of the books of account, his failure to so enter therein the alleged
disbursements, accentuates the falsity of his claim on this point. 40
Besides, as further noted by the trial court, the report Commissioner Ablaza is unreliable in view of his proclivity to
favor the appellant and because of the inaccurate accounting procedure adopted by him in auditing the books of
account of the partnership unlike Mr. Tayag's report which inspires faith and credence. 41

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As explained by Mr. Tayag, the amount of P7,497.80 represen expenses paid by the appellee out of his personal
funds which not been entered in the books of the partnership but which been recognized and conceded to by the
auditor designated by the appellant who included the said amount under Expenses. 42
The explanation of Mr. Tayag on the inclusion of the amount of P65,103.77 is likewise clear and convincing. 43
As for the sum of of P26,027.04, the same represents the expenses which the appelle paid in connection withe the
projects and not entered in the books 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 expenses are incorporated in Exhibits ZZ, ZZ-1 to ZZ-4.
In resume', the appelllee's credit balance would be as follows:
+.wph!1
Undisputed balance as of Dec. 1967

Add: Items omitted from the books but


P 8,242.
recognized and charged to Miscellaneous

Expenses by Mr. Ablaza


7,497.80
Add: Payrolls paid by the appellee
P128,103.77

Less: Payroll remittances received


63,000.00
65,103.77
Add: Other expenses incurred at the

site (Exhs, ZZ, ZZ-1 to ZZ-4)

12 | P a g e
26,027.04

TOTAL
P106,871.00
At the trial, the appellee presented a claim for the amounts of P3,917.39 and P4,665.00 which he also advanced for
the construction projects but which were not included in the Commissioner's Report. 44
Appellee's total investments in the partnership would, therefore, be:
Appellee's total credits
P106,871.00
Add: unrecorded balances for the month of Dec. 1957 (Exhs. KKK, KK-1 to KKK_19, KKK-22)
3,917,39
Add: Payments to Munoz, as subcontractor of five,(5) Bridges (p. 264 tsn; Exhs. KKK-20, KKK-21)
4,665.00
Total Investments
Pl 15,453.39
Regarding the award of P200,000.00 as his share in the unrealized profits of the partnership, the appellant contends
that the findings of the trial court that the amount of P400,000.00 as reasonable profits of the partnership venture is
without any basis and is not supported by the evidence. The appemnt maintains that the lower court, in making its
determination, did not take into consideration the great risks involved in business operations involving as it does the
completion of the projects within a definite period of time, in the face of adverse and often unpredictable
circumstances, as well as the fact that the appellee, who was in charge of the projects in the field, contributed in a
large measure to the failure of the partnership to realize such profits by his field management.
This argument must be overruled in the light of the law and evidence on the matter. Under Article 2200 of the Civil
Code, indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the
profits which the obligee failed to obtain. In other words lucrum cessans is also a basis for indemnification.
Has the appellee failed to make profits because of appellant's breach of contract?
There is no doubt that the contracting business is a profitable one and that the U.P. Construction Company derived
some profits from' co io oa ects its sub ntracts in the construction of the road and bridges projects its deficient
working capital and the juggling of its funds by the appellant.
Contrary to the appellant's claim, the partnership showed some profits during the period from July 2, 1956 to
December 31, 1957. If the Profit and Loss Statement 45 showed a net loss of P134,019.43, this was primarily due to

13 | P a g e
the confusing accounting method employed by the auditor who intermixed h and accthe cas ruamethod of accounting
and the erroneous inclusion of certain items, like personal expenses of the appellant and afteged extraordinary
losses due to an accidental plane crash, in the operating expenses of the partnership, Corrected, the Profit and Loss
Statement would indicate a net profit of P41,611.28.
For the period from January 1, 1958 to September 30, 1959, the partnership admittedly made a net profit of
P52,943.89. 46
Besides, as We have heretofore pointed out, the appellant received from the Bureau of Public Highways, in payment
of the zonstruction projects in question, the amount of P1,047,181.01 47 and disbursed the amount of P952,839.77,
48 leaving an unaccounted balance of P94,342.24. Obviously, this amount is also part of the profits of the
partnership.
During the trial of this case, it was discovered that the appellant had money and credits receivable froin the projects
in question, in the custody of the Bureau of Public Highways, in the amount of P128,669.75, representing the 10%
retention of said projects.49 After the trial of this case, it was shown that the total retentions Wucted from the
appemnt amounted to P145,358.00. 50 Surely, these retained amounts also form part of the profits of the
partnership.
Had the appellant not been remiss in his obligations as partner and as prime contractor of the construction projects in
question as he was bound to perform pursuant to the partnership and subcontract agreements, and considering the
fact that the total contract amount of these two projects is P2,327,335.76, it is reasonable to expect that the
partnership would have earned much more than the P334,255.61 We have hereinabove indicated. The award,
therefore, made by the trial court of the amount of P200,000.00, as compensatory damages, is not speculative, but
based on reasonable estimate.
WHEREFORE, finding no error in the decision appealed from, the said decision is hereby affirmed with costs against
the appellant, it being understood that the liability mentioned herein shall be home by the estate of the deceased
Bartolome Puzon, represented in this instance by the administrator thereof, Franco Puzon.
SO ORDERED.

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Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 5840

September 17, 1910

THE UNITED STATES, plaintiff-appellee,


vs.
EUSEBIO CLARIN, defendant-appellant.
Francisco Dominguez, for appellant.
Attorney-General Villamor, for appellee.
ARELLANO, C.J.:
Pedro Larin delivered to Pedro Tarug P172, in order that the latter, in company with Eusebio Clarin and Carlos de
Guzman, might buy and sell mangoes, and, believing that he could make some money in this business, the said
Larin made an agreement with the three men by which the profits were to be divided equally between him and them.
Pedro Tarug, Eusebio Clarin, and Carlos de Guzman did in fact trade in mangoes and obtained P203 from the
business, but did not comply with the terms of the contract by delivering to Larin his half of the profits; neither did they
render him any account of the capital.
Larin charged them with the crime of estafa, but the provincial fiscal filed an information only against Eusebio Clarin
in which he accused him of appropriating to himself not only the P172 but also the share of the profits that belonged
to Larin, amounting to P15.50.
Pedro Tarug and Carlos de Guzman appeared in the case as witnesses and assumed that the facts presented
concerned the defendant and themselves together.
The trial court, that of First Instance of Pampanga, sentenced the defendant, Eusebio Clarin, to six months' arresto
mayor, to suffer the accessory penalties, and to return to Pedro Larin P172, besides P30.50 as his share of the
profits, or to subsidiary imprisonment in case of insolvency, and to pay the costs. The defendant appealed, and in
deciding his appeal we arrive at the following conclusions:
When two or more persons bind themselves to contribute money, property, or industry to a common fund, with the
intention of dividing the profits among themselves, a contract is formed which is called partnership. (Art. 1665, Civil
Code.)
When Larin put the P172 into the partnership which he formed with Tarug, Clarin, and Guzman, he invested his
capital in the risks or benefits of the business of the purchase and sale of mangoes, and, even though he had
reserved the capital and conveyed only the usufruct of his money, it would not devolve upon of his three partners to
return his capital to him, but upon the partnership of which he himself formed part, or if it were to be done by one of
the three specifically, it would be Tarug, who, according to the evidence, was the person who received the money
directly from Larin.
The P172 having been received by the partnership, the business commenced and profits accrued, the action that lies
with the partner who furnished the capital for the recovery of his money is not a criminal action for estafa, but a civil

15 | P a g e
one arising from the partnership contract for a liquidation of the partnership and a levy on its assets if there should be
any.
No. 5 of article 535 of the Penal Code, according to which those are guilty of estafa "who, to the prejudice of another,
shall appropriate or misapply any money, goods, or any kind of personal property which they may have received as a
deposit on commission for administration or in any other character producing the obligation to deliver or return the
same," (as, for example, in commodatum, precarium, and other unilateral contracts which require the return of the
same thing received) does not include money received for a partnership; otherwise the result would be that, if the
partnership, instead of obtaining profits, suffered losses, as it could not be held liable civilly for the share of the
capitalist partner who reserved the ownership of the money brought in by him, it would have to answer to the charge
of estafa, for which it would be sufficient to argue that the partnership had received the money under obligation to
return it.
We therefore freely acquit Eusebio Clarin, with the costs de oficio. The complaint for estafa is dismissed without
prejudice to the institution of a civil action.

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Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-5236

January 10, 1910

PEDRO MARTINEZ, plaintiff-appellee,


vs.
ONG PONG CO and ONG LAY, defendants.
ONG PONG CO., appellant.
Fernando de la Cantera for appellant.
O'Brien and DeWitt for appellee.
ARELLANO, C.J.:
On the 12th of December, 1900, the plaintiff herein delivered P1,500 to the defendants who, in a private document,
acknowledged that they had received the same with the agreement, as stated by them, "that we are to invest the
amount in a store, the profits or losses of which we are to divide with the former, in equal shares."
The plaintiff filed a complaint on April 25, 1907, in order to compel the defendants to render him an accounting of the
partnership as agreed to, or else to refund him the P1,500 that he had given them for the said purpose. Ong Pong Co
alone appeared to answer the complaint; he admitted the fact of the agreement and the delivery to him and to Ong
Lay of the P1,500 for the purpose aforesaid, but he alleged that Ong Lay, who was then deceased, was the one who
had managed the business, and that nothing had resulted therefrom save the loss of the capital of P1,500, to which
loss the plaintiff agreed.
The judge of the Court of First Instance of the city of Manila who tried the case ordered Ong Pong Co to return to the
plaintiff one-half of the said capital of P1,500 which, together with Ong Lay, he had received from the plaintiff, to wit,
P750, plus P90 as one-half of the profits, calculated at the rate of 12 per cent per annum for the six months that the
store was supposed to have been open, both sums in Philippine currency, making a total of P840, with legal interest
thereon at the rate of 6 per cent per annum, from the 12th of June, 1901, when the business terminated and on which
date he ought to have returned the said amount to the plaintiff, until the full payment thereof with costs.
From this judgment Ong Pong Co appealed to this court, and assigned the following errors:
1. For not having taken into consideration the fact that the reason for the closing of the store was the ejectment from
the premises occupied by it.
2. For not having considered the fact that there were losses.
3. For holding that there should have been profits.
4. For having applied article 1138 of the Civil Code.
5. and 6. For holding that the capital ought to have yielded profits, and that the latter should be calculated 12 per cent
per annum; and
7. The findings of the ejectment.

17 | P a g e

As to the first assignment of error, the fact that the store was closed by virtue of ejectment proceedings is of no
importance for the effects of the suit. The whole action is based upon the fact that the defendants received certain
capital from the plaintiff for the purpose of organizing a company; they, according to the agreement, were to handle
the said money and invest it in a store which was the object of the association; they, in the absence of a special
agreement vesting in one sole person the management of the business, were the actual administrators thereof; as
such administrators they were the agent of the company and incurred the liabilities peculiar to every agent, among
which is that of rendering account to the principal of their transactions, and paying him everything they may have
received by virtue of the mandatum. (Arts. 1695 and 1720, Civil Code.) Neither of them has rendered such account
nor proven the losses referred to by Ong Pong Co; they are therefore obliged to refund the money that they received
for the purpose of establishing the said store the object of the association. This was the principal pronouncement
of the judgment.
With regard to the second and third assignments of error, this court, like the court below, finds no evidence that the
entire capital or any part thereof was lost. It is no evidence of such loss to aver, without proof, that the effects of the
store were ejected. Even though this were proven, it could not be inferred therefrom that the ejectment was due to
the fact that no rents were paid, and that the rent was not paid on account of the loss of the capital belonging to the
enterprise.
With regard to the possible profits, the finding of the court below are based on the statements of the defendant Ong
Pong Co, to the effect that "there were some profits, but not large ones." This court, however, does not find that the
amount thereof has been proven, nor deem it possible to estimate them to be a certain sum, and for a given period of
time; hence, it can not admit the estimate, made in the judgment, of 12 per cent per annum for the period of six
months.
Inasmuch as in this case nothing appears other than the failure to fulfill an obligation on the part of a partner who
acted as agent in receiving money for a given purpose, for which he has rendered no accounting, such agent is
responsible only for the losses which, by a violation of the provisions of the law, he incurred. This being an obligation
to pay in cash, there are no other losses than the legal interest, which interest is not due except from the time of the
judicial demand, or, in the present case, from the filing of the complaint. (Arts. 1108 and 1100, Civil Code.) We do not
consider that article 1688 is applicable in this case, in so far as it provides "that the partnership is liable to every
partner for the amounts he may have disbursed on account of the same and for the proper interest," for the reason
that no other money than that contributed as is involved.
As in the partnership there were two administrators or agents liable for the above-named amount, article 1138 of the
Civil Code has been invoked; this latter deals with debts of a partnership where the obligation is not a joint one, as is
likewise provided by article 1723 of said code with respect to the liability of two or more agents with respect to the
return of the money that they received from their principal. Therefore, the other errors assigned have not been
committed.
In view of the foregoing judgment appealed from is hereby affirmed, provided, however, that the defendant Ong Pong
Co shall only pay the plaintiff the sum of P750 with the legal interest thereon at the rate of 6 per cent per annum from
the time of the filing of the complaint, and the costs, without special ruling as to the costs of this instance. So ordered.

18 | P a g e

EN BANC
[G.R. No. 85494. July 10, 2001]
CHOITHRAM JETHMAL RAMNANI and/or NIRMLA V. RAMNANI and MOTI C. RAMNANI, petitioners, vs. COURT
OF APPEALS, SPS. ISHWAR RAMNANI AND OVERSEAS HOLDING CO., LTD., respondents.
[G.R. No. 85496. July 10, 2001]
SPS. ISHWAR JETHMAL RAMNANI and SONYA JETHMAL RAMNANI, petitioners, vs. THE HONORABLE COURT
OF APPEALS, ORTIGAS & COMPANY, LTD. PARTNERSHIP and OVERSEAS HOLDING CO., LTD., et. al.,
respondents.
[G.R. No. 195071. July 10, 2001]
OVERSEAS HOLDING CO., LTD., petitioner, vs. ISHWAR JETHMAL, RAMNANI and SONYA RAMNANI,
respondents.
RESOLUTION
SANDOVAL-GUTIERREZ, J.:
Execution of a judgment is the fruit and end of the suit and is the life of the law. To frustrate it for almost a decade by
means of deception and dilatory schemes on the part of the losing litigants is to frustrate all the efforts, time and
expenditure of the courts. This Courts Decision in this case became final and executory as early as 1992. After years
of continuous wrangling during the execution stage, it is unfortunate that the judgment still awaits full implementation.
Delaying tactics employed by the said losing litigants have prevented the orderly execution. It is in the interest of
justice that we should write finis to this litigation.
For resolution is the Motion for Reconsideration of this Courts Resolution dated August 17, 1999 filed by spouses
Ishwar and Sonya Ramnani. Our assailed Resolution denied their Manifestation and Urgent Motion dated May 6,
1994 and affirmed the orders of the Regional Trial Court of Pasay City, Branch 119 dated January 27 and April 5,
1994.
The factual backdrop, culled from the voluminous records in these cases, are:
In the latter part of 1965, spouses Ishwar Jethmal Ramnani, an American citizen, and Sonya Jethmal Ramnani, both
from New York (hereinafter referred to as spouses Ishwar), invested substantial amount of money for a profitable
business venture in the Philippines. Since they could not personally manage their investments, they appointed two of
Ishwars brothers, Choithram Jethmal Ramnani and Navalrai Jethmal Ramnani, as their attorneys-in-fact.
Choithram decided to invest in the real estate business. On February 1, 1966 and May 16, 1966, Choithram, in his
capacity as attorney-in-fact of Ishwar, bought two parcels of land located in Barrio Ugong, Pasig, Rizal from Ortigas &
Company, Ltd. Partnership (Ortigas, for short) and had buildings constructed thereon. Through the industry and
genius of Choithram, Ishwars property was developed and improved into a valuable asset worth millions of pesos.
Unfortunately, Choithram, while showing himself to be a good manager, proved unfaithful to the trust reposed in him
by spouses Ishwar. Without their knowledge, Choithram started to appropriate his brothers property and other assets
as his own.
In 1973, upon complete payments of Ishwars lots which he purchased from Ortigas, Choithram caused the latter to
execute the corresponding deeds of sale in favor of his daughter-in-law, Nirmla. Eventually, TCT Nos. 403150 and
403152 were issued by the Registry of Deeds of Rizal in her favor.

19 | P a g e
Choithram also donated 2,500 shares of stock in a garment corporation to his children. He also fraudulently
mortgaged $3,000,000.00 worth of the spouses property to Overseas Holding Co. Records show that the
$3,000,000.00 mortgage was executed on June 20, 1989, or 6 days before the corporation was organized.
Spouses Ishwar learned what Choithram was doing. Hence, they asked him to render an accounting, but there was
none forthcoming. They then revoked Choithrams general power of attorney. He earnestly pleaded in writing to
Ishwar to issue another power of attorney, but to no avail.
Choithram repudiated all well-meaning efforts to solve the controversy within the Ramnani family. Moreover, he
denied the genuine nature of the trust relationship between him and his brother Ishwar.
Agitated, spouses Ishwar filed on October 6, 1982 with the Court of First Instance of Rizal a complaint for
reconveyance and damages against Choithram and his son Moti and daughter-in-law Nirmla (Choithram family for
short). Ironically, the CFI dismissed the complaint and recognized Choithrams full ownership of the questioned two
parcels of land. On appeal, the Court of Appeals reversed the trial courts decision, finding that spouses Ishwar
entrusted capital to Choithram to be invested in the Philippines. The appellate court held the Choithram family and
Ortigas jointly and severally liable to spouses Ishwar.
Subsequently, the Court of Appeals modified its earlier decision by dismissing the case against Ortigas. Both parties
appealed to this Court. In G.R. No. 85494, the Choithram family vigorously asserted their right of ownership over the
disputed lots, while in G.R. No. 85496, spouses Ishwar faulted the Court of Appeals in dismissing the case against
Ortigas.
In the meantime, Choithram continued to dissipate Ishwars assets.
On May 7, 1991, this Court rendered a joint Decision in G.R. Nos. 85494 and 85496, now in 196 SCRA 731. This
Court held that Choithram violated the trust relationship between him and Ishwar. Considering, however, that the two
protagonists are brothers and that Choithram made wise investments of spouses Ishwars money, this Court applied a
Solomonic solution by dividing equally between spouses Ishwar and the Choithram family the two parcels of land
subject of the litigation, including all the improvements thereon and income from 1967. This Court also ruled that
Ortigas is solidarily liable with Choithram family to spouses Ishwar because of its bad faith in executing the deeds of
sale in favor of Nirmla despite its knowledge that Choithrams general power of attorney had been revoked by Ishwar.
Later, this Court realized that its Solomonic Decision, in effect, formulated a new contract for the parties. Thus, in its
Resolution dated February 26, 1992, this Court declared that the disputed lots are solely owned by spouses Ishwar.
The motion for reconsideration of the Choithram family was denied with finality.
On March 18, 1992, this Court also denied Choithrams motion for clarification and/or second motion for
reconsideration. Entry of final judgment was then made on March 20, 1992.
Still obstinate to abide with this Courts final judgment, the Choithram family filed a petition for certiorari, through the
Overseas Holding Corporation, (docketed as G.R. No. 105071) seeking to set aside as unconstitutional this Courts
May 7, 1991 joint Decision declaring, among others, that the mortgaged contract involving the two parcels of land
executed between Nirmla and Overseas Holding is void. This Court denied the said petition for being in the nature of
a third motion for reconsideration and stressed that a writ of certiorari may not issue from the Court en banc to annul
a Decision of one of the Courts Divisions. This Court forthwith ordered the Regional Trial Court of Pasay City, Branch
112 to execute with dispatch its joint Decision of May 7, 1991 and Resolution dated February 26, 1992. The parties
and counsel were also warned to desist from further assailing an already final Decision and raising anew issues
already passed upon.

20 | P a g e
Per Resolution of this Court dated August 26, 1992, the case was re-assigned to the RTC of Pasay City, Branch 119.
Thereafter, execution proceedings and hearing on the valuation of the disputed properties ensued.
Because of the Choithram familys continuing delaying tactics and evasive moves against the execution of this Courts
Decision and due to the desire of spouses Ishwar to quickly obtain the fruits of their many years of court battle, the
latter were constrained to agree to a compromise agreement which was denominated as Tripartite Agreement.
It bears stressing that spouses Ishwar were claiming for the value of the two lots, not the lots themselves. To clear up
this issue, the July 19, 1993 Tripartite Agreement fixed the valuation at P65,000,000.00 which the Choithram family,
together with Ortigas, agreed to pay spouses Ishwar, thus:
(a) P40 Million upon the signing hereof by the parties;
b) P10 Million within thirty (30) days from July 5, 1993 or on or before September 3, 1993;
c) P15 Million within sixty (60) days from July 5, 1993 or on or before September 3, 1993;
Choithram and/or Harish Ramnani shall issue to plaintiffs postdated checks on the amounts covered by paragraph (b
and c above) immediately encashable on due dates.[1]
There is also a specific agreement on default by the Choithram family, thus:
6. In the event of default of defendants Ortigas and Choithram Jethmal Ramnani to pay any of the amounts within the
agreed period, proceedings in execution, including hearings on valuation, shall immediately resume and plaintiff shall
be entitled to enforce and execute the Supreme Courts judgment against the defendants in accordance with the
terms thereof and the final and total monetary entitlements described in paragraph 1 above, less whatever amounts
plaintiffs may have partially recovered from the defendants. In case of execution of the balance due Ishwar as finally
determined by the Court, plaintiffs shall proceeds to first sell the subject properties mentioned in par. 6 hereof.[2]
The Choithram family paid spouses Ishwar 40,000,000.00, as agreed upon. However, when the payment of the
P25,000,000.00 balance became due, they defaulted and again balked at complying with their commitments under
the compromise agreement.
On August 3, 1993, or one day before August 4, 1993, the due date of the second payment, the Choithram family
wrote the Bureau of Internal Revenue, ostensibly requesting clarification whether or not, as payors of P65 million,
they should pay the government any tax. Significantly, they did not inform the BIR that Ishwar is a permanent resident
alien here and that the amount he will receive under the Tripartite Agreement is not subject to withholding tax at
source. In response, the BIR Commissioner, in a letter dated August 6, 1993, informed Choithram and Ortigas that
the 65 million compromise settlement is subject to 30% withholding tax collectible against spouses Ishwar and at the
same time constituted Choithram and Ortigas as withholding agents.
The side issue arising from the Choithram familys report to BIR of alleged non-payment of taxes due was eventually
decided in favor of spouses Ishwar. But it gave the Choithram family a convenient excuse for not complying with their
obligation to pay when due the balance under the compromise agreement.
On September 3, 1993, the Choithram family filed a manifestation tendering payment of the balance of P25 million as
evidenced by checks payable, not to spouses Ishwar, but to the Branch Clerk of Court of the RTC. Subsequently, or
particularly on September 7, 1993, or three days after the maturity date of the second set of checks, spouses Ishwar
filed with the court a quo an urgent motion for immediate resumption of hearing, arguing that pursuant to Paragraph 6
of the Tripartite Agreement, Choithram and Ortigas were already in default, hence, execution proceedings should be
resumed. The trial court, in its assailed order dated January 27, 1994, denied the motion, thus:

21 | P a g e

That defendants desire to pay the balance of the amount stipulated in their Tripartite Agreement is apparent. Under
the aforestated facts and circumstances, is it equitable that they be held in default? Article 1229 of the Civil Code
gives the court the power to equitably reduce penalty when the principal obligation has been partly complied with by
the debtor. In default cases, the court may likewise reconsider its order of default when the interest of justice so
dictates.
In order not to put to naught all the efforts of the parties in forging the Tripartite Agreement which took them a long
period of time to arrive at, the branch Clerk of Court is directed to immediately endorse to the counsel of plaintiffs, up
to the time the same is encashed, under the following terms:
1. That the Quasha Law (F)irm receives the balance of the amount of P25 million in compliance with the Tripartite
Agreement, adverted to, and subject to the tax claim of the BIR;
2. That it shall release to the plaintiffs the amount due them after the tax matter on said amount shall have been
resolved, and in the meanwhile the said amount shall be deposited in an interest bearing account and/or money
placement in treasury bills; and
3. T he upon receipt of the aforestated amount, plaintiffs shall execute the Deed of Assignment of Judgment in favor
of defendants Ortigas & Co., Ltd., Partnership and Choithram Jethmal Ramnani in the proportion agreed upon by the
said defendants.
In view of the foregoing, plaintiffs Motion for continuation of hearing is DENIED.[3]
Spouses Ishwar filed a Motion for Reconsideration but was denied. This prompted them to file with this Court a
Manifestation and Urgent Motion contending inter alia that the lower court committed grave abuse of discretion in
denying their motion for resumption of the execution proceedings.
On August 17, 1999, this Court issued a Resolution denying spouses Ishwars Manifestation and Urgent Motion and
sustaining the challenged orders of the RTC.
Hence, the present Motion for Reconsideration of the said Resolution.
In their motion, spouses Ishwar contend that we are rewarding bad faith and fraudulent maneuverings on the part of
the Choitram family. To allow non-compliance with the terms of the Tripartite Agreement and, therefore, a deviation
from our May 7, 1991 Decision and February 26, 1992 Resolution is an act of injustice.
Spouses Ishwar specified in their motion the reprehensible acts of Choithram, among them:
a) Patent violation of a clear compromise agreement burdensome to Ishwar Ramnani;
b) In spite of Ishwars generous concessions, Choithram repaid the favors with bad faith, delaying tactics and sinister
moves intended to thwart him (Ishwar) from getting what is justly due him, resulting in extreme anxiety, considerable
distress and needless expenses on his part;
c) Filing fabricated charges with the BIR regarding Ishwars alleged tax liabilities, all of them found without basis but
only after causing the delayed settlement of what Choithram promised to pay under the compromise agreement; and
d) Continued maneuver to delay or prevent the execution of this Courts Decision dated May 7, 1991 and February
26, 1992.

22 | P a g e
In what spouses Ishwar call a plea for simple justice, they now ask, Should deceit and unscrupulous(ness) be
rewarded?
It is elementary that nothing beneficial or lucrative should arise from subterfuge or deception. Bad faith has
characterized the history of this case. It started with Choithrams violations of the trust agreement and has continued
throughout the execution stage. Dilatory tactics, including a misleading report to the BIR, have resulted in nonimplementation for ten (10) years of a final and executory Decision of this Court. Moreover, there have been late and
faulty payments under a compromise agreement.
We rule that under the above circumstances, the Choitram family should strictly comply with the terms of the
compromise agreement in an expeditious manner.
A compromise is defined in the Civil Code as:
Art. 2028. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put
an end to one already commenced.
A compromise is intended to prevent or put an end to a lawsuit. The parties adjust their difficulties by mutual consent.
Each of the parties prefers the terms of the compromise to their earlier hope of gaining, balanced by the danger of
losing. It is intended to end litigation because of the uncertainty of its result. Prolonging a litigation is anathema to a
compromise agreement.
In this particular case, there is no longer any uncertainty over the result of litigation. Judgments were rendered ten
(10) years back. Spouses Ishwar have won their cases. The Choithram family should have accepted this settled
matter a long time ago. Spouses Ishwar agreed to the compromise simply because after more than a decade of
litigation, their lots or the value thereof have not been returned to them. In fact, up to the present time, or 17 years
from the filing of the complaint and more than nine (9) years after our denied-with-finality judgment, they have not
been fully paid.
A compromise agreement is valid and binding, not because it is the settlement of a controversy. Once the
compromise is perfected, the parties are bound to abide by it in good faith.
In the cases at bar, the Choithram family persisted in dilatory tactics even after the court battle was supposed to have
ended with finality. Their claims have been adjudged invalid but they continued the conflict.
Under the compromise agreement, the post-dated check for P10,000,000.00 should have been cashed not later than
August 4, 1993, and the P15,000,000.00 check not later than September 3, 1993. The post dated checks could not
be cashed. Instead, a P10,000,000.00 check was tendered on September 12, 1993, or 8 days late. The checks were
personal checks payable to the Clerk of Court, meaning that spouses Ishwar could not even encash them until
ordered by the trial court. The check for P15,000,000.00 was tendered on September 12, 1993, or 8 days late. It has
to be emphasized at this point that the compromise agreement is evidently in amounts substantially less than what
the Choitram family should pay spouses Ishwar. The compromise is spouses Ishwars concession to the Choithram
family for them to end the seemingly interminable litigation.
We thus rule that the trial court committed reversible error when it applied equitable considerations under Article 1229
of the Civil Code to justify the defaults of Choithram and Ortigas.
In Commercial Credit Corporation of Cagayan de Oro v. Court of Appeals,[4] this Court held:
(Article 1229) . . . applies only to obligations or contract, subject of a litigation, the condition being that the same has
been partly or irregularly complied with by the debtor. The provision also applies even if there has been no

23 | P a g e
performance, as long as the penalty is iniquitous or unconscionable. It cannot apply to a final and executory
judgment.
Moreover, equity does not apply to a situation when fraud and dilatory schemes exist. The incidents, during the
supposed tender of payment, support a finding of continuing insincerity, recalcitrance, and bad faith on the part of the
Choitram family. But these were not taken into account by the trial court.
In the first place, the tender of payment was effected late with no valid reason for the delay.
Second, the tender of payment is of doubtful validity. It bears reiterating that the checks were personal checks
payable, not to spouses Ishwar, but to the RTC Branch Clerk of Court. They were not managers or cashiers checks.
Spouses Ishwar also state that the tender was conditional. It carried what they called unacceptable conditions. The
checks could not be indorsed to them because they were Not transferable. The term and maturity were limited in
nature.
Third and most important, the intent to really pay as agreed upon was missing. It was not a genuine or sincere
tender. Instead of making good on the stipulated payment, the Choithram family created a situation in such a way
that the balance of P25 million was to be paid to the Bureau of Internal Revenue, not to spouses Ishwar. Thus,
Choitram peremptorily wrote a poison letter to the BIR requesting clarification on the alleged tax liabilities of spouses
Ishwar, and of his (Choithrams) obligations as payor. Choithram maliciously concealed from the BIR the material fact
that Ishwar, although an alien, is a permanent resident of the Philippines, and his income and amounts received
under the Tripartite Agreement are, therefore, not subject to 30% withholding tax at source. Under the Tax Code, a
final 30% withholding tax at source is mandated to be collected only from non-resident aliens. The BIR promptly
issued an assessment based on an incomplete presentation of facts by Choithram, directing him to withhold Twenty
Million One Hundred Fifty Thousand Pesos (P20,150,000.00)
For the mischief of the Choithram family, spouses Ishwar were needlessly compelled to litigate before the Court of
Tax Appeals and subsequently before the Court of Appeals, and in the process wasted time and incurred expenses
just to correct the harm done by the said family. The Court of Tax appeals reversed the BIR and ruled that Ishwar is a
resident alien and his income is not subject to 30% automatic final withholding tax at source. Subsequently, the Court
of Appeals affirmed the CTA ruling on the status of Ishwar as a resident alien.
The administrative and judicial processes which Ishwar had to undergo because of the deceit and unscrupulous acts
of the Choithram family consumed five (5) exhausting years, from 1993 until the dispute was finally resolved in 1998.
Indeed, incessant bad faith on the part of the Family Choithram is evident.
A second hard look at the history of these cases shows that it was a mis-step and when we upheld the orders of the
trial court dated January 7, 1994 and April 5, 1994. They should be rescinded.
By way of conclusion, it is elementary that if a party fails or refuses to abide by a compromise agreement, the other
party may either enforce the compromise or regard it as rescinded and insist upon his original demand.[5] This rule
must be followed. For indeed, it is not the province of the court to alter a contract by construction or to make a new
contract for the parties; its duty is confined to the interpretation of the one which they have made for themselves
without regard to its wisdom or folly as the court cannot supply material stipulations or read into the contract words
which it does not contain.[6]
WHEREFORE, this Courts Resolution dated August 17, 1999 is reconsidered. The January 27, 1994 and April 5,
1994 orders of the Regional Trial Court, Branch 119, Pasay City, in Civil Case No. 0534-P are set aside. The trial
court is ordered to speedily enforce and execute this Courts final and executory Decision dated May 7, 1991 and the
Resolution dated February 26, 1992; and to expeditiously resume and complete the proceedings in execution,
including the valuation of the parcels of land covered by TCT Nos. 403150 and 403152 of the Registry of Deeds of

24 | P a g e
Pasig City for the purpose of determining the final and total monetary entitlement of spouses Ishwar Jethmal and
Sonya Jethmal Ramnani, less the amount of Forty Million (40,000,000.00) Pesos received by them, strictly according
to the tenor of the above Decision and Resolution of this Court. The trial court is further directed to report the
progress of its compliance within 15 days from notice and every 10 days thereafter, until the execution is terminated.
SO ORDERED.

25 | P a g e
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-59956 October 31, 1984
ISABELO MORAN, JR., petitioner,
vs.
THE HON. COURT OF APPEALS and MARIANO E. PECSON, respondents.

GUTIERREZ, JR., J.:+.wph!1


This is a petition for review on certiorari of the decision of the respondent Court of Appeals which ordered petitioner
Isabelo Moran, Jr. to pay damages to respondent Mariano E, Pecson.
As found by the respondent Court of Appeals, the undisputed facts indicate that: t.hqw
xxx

xxx

xxx

... on February 22, 1971 Pecson and Moran entered into an agreement whereby both would contribute P15,000 each
for the purpose of printing 95,000 posters (featuring the delegates to the 1971 Constitutional Convention), with Moran
actually supervising the work; that Pecson would receive a commission of P l,000 a month starting on April 15, 1971
up to December 15, 1971; that on December 15, 1971, a liquidation of the accounts in the distribution and printing of
the 95,000 posters would be made, that Pecson gave Moran P10,000 for which the latter issued a receipt; that only a
few posters were printed; that on or about May 28, 1971, Moran executed in favor of Pecson a promissory note in the
amount of P20,000 payable in two equal installments (P10,000 payable on or before June 15, 1971 and P10,000
payable on or before June 30, 1971), the whole sum becoming due upon default in the payment of the first
installment on the date due, complete with the costs of collection.
Private respondent Pecson filed with the Court of First Instance of Manila an action for the recovery of a sum of
money and alleged in his complaint three (3) causes of action, namely: (1) on the alleged partnership agreement, the
return of his contribution of P10,000.00, payment of his share in the profits that the partnership would have earned,
and, payment of unpaid commission; (2) on the alleged promissory note, payment of the sum of P20,000.00; and, (3)
moral and exemplary damages and attorney's fees.
After the trial, the Court of First Instance held that: t.hqw
From the evidence presented it is clear in the mind of the court that by virtue of the partnership agreement entered
into by the parties-plaintiff and defendant the plaintiff did contribute P10,000.00, and another sum of P7,000.00 for
the Voice of the Veteran or Delegate Magazine. Of the expected 95,000 copies of the posters, the defendant was
able to print 2,000 copies only authorized of which, however, were sold at P5.00 each. Nothing more was done after
this and it can be said that the venture did not really get off the ground. On the other hand, the plaintiff failed to give
his full contribution of P15,000.00. Thus, each party is entitled to rescind the contract which right is implied in
reciprocal obligations under Article 1385 of the Civil Code whereunder 'rescission creates the obligation to return the
things which were the object of the contract ...

26 | P a g e
WHEREFORE, the court hereby renders judgment ordering defendant Isabelo C. Moran, Jr. to return to plaintiff
Mariano E. Pecson the sum of P17,000.00, with interest at the legal rate from the filing of the complaint on June 19,
1972, and the costs of the suit.
For insufficiency of evidence, the counterclaim is hereby dismissed.
From this decision, both parties appealed to the respondent Court of Appeals. The latter likewise rendered a decision
against the petitioner. The dispositive portion of the decision reads: t.hqw
PREMISES CONSIDERED, the decision appealed from is hereby SET ASIDE, and a new one is hereby rendered,
ordering defendant-appellant Isabelo C. Moran, Jr. to pay plaintiff- appellant Mariano E. Pecson:
(a) Forty-seven thousand five hundred (P47,500) (the amount that could have accrued to Pecson under their
agreement);
(b) Eight thousand (P8,000), (the commission for eight months);
(c) Seven thousand (P7,000) (as a return of Pecson's investment for the Veteran's Project);
(d) Legal interest on (a), (b) and (c) from the date the complaint was filed (up to the time payment is made)
The petitioner contends that the respondent Court of Appeals decided questions of substance in a way not in accord
with law and with Supreme Court decisions when it committed the following errors:
I
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING PETITIONER ISABELO C. MORAN,
JR. LIABLE TO RESPONDENT MARIANO E. PECSON IN THE SUM OF P47,500 AS THE SUPPOSED EXPECTED
PROFITS DUE HIM.
II
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING PETITIONER ISABELO C. MORAN,
JR. LIABLE TO RESPONDENT MARIANO E. PECSON IN THE SUM OF P8,000, AS SUPPOSED COMMISSION IN
THE PARTNERSHIP ARISING OUT OF PECSON'S INVESTMENT.
III
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING PETITIONER ISABELO C. MORAN,
JR. LIABLE TO RESPONDENT MARIANO E. PECSON IN THE SUM OF P7,000 AS A SUPPOSED RETURN OF
INVESTMENT IN A MAGAZINE VENTURE.
IV
ASSUMING WITHOUT ADMITTING THAT PETITIONER IS AT ALL LIABLE FOR ANY AMOUNT, THE HONORABLE
COURT OF APPEALS DID NOT EVEN OFFSET PAYMENTS ADMITTEDLY RECEIVED BY PECSON FROM
MORAN.
V

27 | P a g e
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT GRANTING THE PETITIONER'S
COMPULSORY COUNTERCLAIM FOR DAMAGES.
The first question raised in this petition refers to the award of P47,500.00 as the private respondent's share in the
unrealized profits of the partnership. The petitioner contends that the award is highly speculative. The petitioner
maintains that the respondent court did not take into account the great risks involved in the business undertaking.
We agree with the petitioner that the award of speculative damages has no basis in fact and law.
There is no dispute over the nature of the agreement between the petitioner and the private respondent. It is a
contract of partnership. The latter in his complaint alleged that he was induced by the petitioner to enter into a
partnership with him under the following terms and conditions: t.hqw
1. That the partnership will print colored posters of the delegates to the Constitutional Convention;
2.

That they will invest the amount of Fifteen Thousand Pesos (P15,000.00) each;

3.

That they will print Ninety Five Thousand (95,000) copies of the said posters;

4. That plaintiff will receive a commission of One Thousand Pesos (P1,000.00) a month starting April 15, 1971 up to
December 15, 1971;
5. That upon the termination of the partnership on December 15, 1971, a liquidation of the account pertaining to the
distribution and printing of the said 95,000 posters shall be made.
The petitioner on the other hand admitted in his answer the existence of the partnership.
The rule is, when a partner who has undertaken to contribute a sum of money fails to do so, he becomes a debtor of
the partnership for whatever he may have promised to contribute (Art. 1786, Civil Code) and for interests and
damages from the time he should have complied with his obligation (Art. 1788, Civil Code). Thus in Uy v. Puzon (79
SCRA 598), which interpreted Art. 2200 of the Civil Code of the Philippines, we allowed a total of P200,000.00
compensatory damages in favor of the appellee because the appellant therein was remiss in his obligations as a
partner and as prime contractor of the construction projects in question. This case was decided on a particular set of
facts. We awarded compensatory damages in the Uy case because there was a finding that the constructing
business is a profitable one and that the UP construction company derived some profits from its contractors in the
construction of roads and bridges despite its deficient capital." Besides, there was evidence to show that the
partnership made some profits during the periods from July 2, 1956 to December 31, 1957 and from January 1, 1958
up to September 30, 1959. The profits on two government contracts worth P2,327,335.76 were not speculative. In
the instant case, there is no evidence whatsoever that the partnership between the petitioner and the private
respondent would have been a profitable venture. In fact, it was a failure doomed from the start. There is therefore no
basis for the award of speculative damages in favor of the private respondent.
Furthermore, in the Uy case, only Puzon failed to give his full contribution while Uy contributed much more than what
was expected of him. In this case, however, there was mutual breach. Private respondent failed to give his entire
contribution in the amount of P15,000.00. He contributed only P10,000.00. The petitioner likewise failed to give any
of the amount expected of him. He further failed to comply with the agreement to print 95,000 copies of the posters.
Instead, he printed only 2,000 copies.
Article 1797 of the Civil Code provides: t.hqw

28 | P a g e
The losses and profits shall be distributed in conformity with the agreement. If only the share of each partner in the
profits has been agreed upon, the share of each in the losses shall be in the same proportion.
Being a contract of partnership, each partner must share in the profits and losses of the venture. That is the essence
of a partnership. And even with an assurance made by one of the partners that they would earn a huge amount of
profits, in the absence of fraud, the other partner cannot claim a right to recover the highly speculative profits. It is a
rare business venture guaranteed to give 100% profits. In this case, on an investment of P15,000.00, the respondent
was supposed to earn a guaranteed P1,000.00 a month for eight months and around P142,500.00 on 95,000 posters
costing P2.00 each but 2,000 of which were sold at P5.00 each. The fantastic nature of expected profits is obvious.
We have to take various factors into account. The failure of the Commission on Elections to proclaim all the 320
candidates of the Constitutional Convention on time was a major factor. The petitioner undesirable his best business
judgment and felt that it would be a losing venture to go on with the printing of the agreed 95,000 copies of the
posters. Hidden risks in any business venture have to be considered.
It does not follow however that the private respondent is not entitled to recover any amount from the petitioner. The
records show that the private respondent gave P10,000.00 to the petitioner. The latter used this amount for the
printing of 2,000 posters at a cost of P2.00 per poster or a total printing cost of P4,000.00. The records further show
that the 2,000 copies were sold at P5.00 each. The gross income therefore was P10,000.00. Deducting the printing
costs of P4,000.00 from the gross income of P10,000.00 and with no evidence on the cost of distribution, the net
profits amount to only P6,000.00. This net profit of P6,000.00 should be divided between the petitioner and the
private respondent. And since only P4,000.00 was undesirable by the petitioner in printing the 2,000 copies, the
remaining P6,000.00 should therefore be returned to the private respondent.
Relative to the second alleged error, the petitioner submits that the award of P8,000.00 as Pecson's supposed
commission has no justifiable basis in law.
Again, we agree with the petitioner.
The partnership agreement stipulated that the petitioner would give the private respondent a monthly commission of
Pl,000.00 from April 15, 1971 to December 15, 1971 for a total of eight (8) monthly commissions. The agreement
does not state the basis of the commission. The payment of the commission could only have been predicated on
relatively extravagant profits. The parties could not have intended the giving of a commission inspite of loss or failure
of the venture. Since the venture was a failure, the private respondent is not entitled to the P8,000.00 commission.
Anent the third assigned error, the petitioner maintains that the respondent Court of Appeals erred in holding him
liable to the private respondent in the sum of P7,000.00 as a supposed return of investment in a magazine venture.
In awarding P7,000.00 to the private respondent as his supposed return of investment in the "Voice of the Veterans"
magazine venture, the respondent court ruled that: t.hqw
xxx

xxx

xxx

... Moran admittedly signed the promissory note of P20,000 in favor of Pecson. Moran does not question the due
execution of said note. Must Moran therefore pay the amount of P20,000? The evidence indicates that the P20,000
was assigned by Moran to cover the following: t.hqw
(a) P 7,000 the amount of the PNB check given by Pecson to Moran representing Pecson's investment in Moran's
other project (the publication and printing of the 'Voice of the Veterans');
(b) P10,000 to cover the return of Pecson's contribution in the project of the Posters;

29 | P a g e
(c) P3,000 representing Pecson's commission for three months (April, May, June, 1971).
Of said P20,000 Moran has to pay P7,000 (as a return of Pecson's investment for the Veterans' project, for this
project never left the ground) ...
As a rule, the findings of facts of the Court of Appeals are final and conclusive and cannot be reviewed on appeal to
this Court (Amigo v. Teves, 96 Phil. 252), provided they are borne out by the record or are based on substantial
evidence (Alsua-Betts v. Court of Appeals, 92 SCRA 332). However, this rule admits of certain exceptions. Thus, in
Carolina Industries Inc. v. CMS Stock Brokerage, Inc., et al., (97 SCRA 734), we held that this Court retains the
power to review and rectify the findings of fact of the Court of Appeals when (1) the conclusion is a finding grounded
entirely on speculation, surmises and conjectures; (2) when the inference made is manifestly mistaken absurd and
impossible; (3) where there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of
facts; and (5) when the court, in making its findings, went beyond the issues of the case and the same are contrary to
the admissions of both the appellant and the appellee.
In this case, there is misapprehension of facts. The evidence of the private respondent himself shows that his
investment in the "Voice of Veterans" project amounted to only P3,000.00. The remaining P4,000.00 was the amount
of profit that the private respondent expected to receive.
The records show the following exhibits- t.hqw
E Xerox copy of PNB Manager's Check No. 234265 dated March 22, 1971 in favor of defendant. Defendant
admitted the authenticity of this check and of his receipt of the proceeds thereof (t.s.n., pp. 3-4, Nov. 29, 1972). This
exhibit is being offered for the purpose of showing plaintiff's capital investment in the printing of the "Voice of the
Veterans" for which he was promised a fixed profit of P8,000. This investment of P6,000.00 and the promised profit of
P8,000 are covered by defendant's promissory note for P14,000 dated March 31, 1971 marked by defendant as
Exhibit 2 (t.s.n., pp. 20-21, Nov. 29, 1972), and by plaintiff as Exhibit P. Later, defendant returned P3,000.00 of the
P6,000.00 investment thereby proportionately reducing the promised profit to P4,000. With the balance of P3,000
(capital) and P4,000 (promised profit), defendant signed and executed the promissory note for P7,000 marked Exhibit
3 for the defendant and Exhibit M for plaintiff. Of this P7,000, defendant paid P4,000 representing full return of the
capital investment and P1,000 partial payment of the promised profit. The P3,000 balance of the promised profit was
made part consideration of the P20,000 promissory note (t.s.n., pp. 22-24, Nov. 29, 1972). It is, therefore, being
presented to show the consideration for the P20,000 promissory note.
F Xerox copy of PNB Manager's check dated May 29, 1971 for P7,000 in favor of defendant. The authenticity of
the check and his receipt of the proceeds thereof were admitted by the defendant (t.s.n., pp. 3-4, Nov. 29, 1972). This
P 7,000 is part consideration, and in cash, of the P20,000 promissory note (t.s.n., p. 25, Nov. 29, 1972), and it is
being presented to show the consideration for the P20,000 note and the existence and validity of the obligation.
xxx

xxx

xxx

L-Book entitled "Voice of the Veterans" which is being offered for the purpose of showing the subject matter of the
other partnership agreement and in which plaintiff invested the P6,000 (Exhibit E) which, together with the promised
profit of P8,000 made up for the consideration of the P14,000 promissory note (Exhibit 2; Exhibit P). As explained in
connection with Exhibit E. the P3,000 balance of the promised profit was later made part consideration of the
P20,000 promissory note.
M-Promissory note for P7,000 dated March 30, 1971. This is also defendant's Exhibit E. This document is being
offered for the purpose of further showing the transaction as explained in connection with Exhibits E and L.

30 | P a g e
N-Receipt of plaintiff dated March 30, 1971 for the return of his P3,000 out of his capital investment of P6,000 (Exh.
E) in the P14,000 promissory note (Exh. 2; P). This is also defendant's Exhibit 4. This document is being offered in
support of plaintiff's explanation in connection with Exhibits E, L, and M to show the transaction mentioned therein.
xxx

xxx

xxx

P-Promissory note for P14,000.00. This is also defendant's Exhibit 2. It is being offered for the purpose of showing
the transaction as explained in connection with Exhibits E, L, M, and N above.
Explaining the above-quoted exhibits, respondent Pecson testified that: t.hqw
Q During the pre-trial of this case, Mr. Pecson, the defendant presented a promissory note in the amount of
P14,000.00 which has been marked as Exhibit 2. Do you know this promissory note?
A

Yes, sir.

What is this promissory note, in connection with your transaction with the defendant?

A This promissory note is for the printing of the "Voice of the Veterans".
Q

What is this "Voice of the Veterans", Mr. Pecson?

A It is a book.t.hqw
(T.S.N., p. 19, Nov. 29, 1972)
Q

And what does the amount of P14,000.00 indicated in the promissory note, Exhibit 2, represent?

A It represents the P6,000.00 cash which I gave to Mr. Moran, as evidenced by the Philippine National Bank
Manager's check and the P8,000.00 profit assured me by Mr. Moran which I will derive from the printing of this "Voice
of the Veterans" book.
Q You said that the P6,000.00 of this P14,000.00 is covered by, a Manager's check. I show you Exhibit E, is this the
Manager's check that mentioned?
A Yes, sir.
Q What happened to this promissory note of P14,000.00 which you said represented P6,000.00 of your investment
and P8,000.00 promised profits?
A Latter, Mr. Moran returned to me P3,000.00 which represented one-half (1/2) of the P6,000.00 capital I gave to him.
Q As a consequence of the return by Mr. Moran of one-half (1/2) of the P6,000.00 capital you gave to him, what
happened to the promised profit of P8,000.00?
A It was reduced to one-half (1/2) which is P4,000.00.
Q Was there any document executed by Mr. Moran in connection with the Balance of P3,000.00 of your capital
investment and the P4,000.00 promised profits?
A Yes, sir, he executed a promissory note.

31 | P a g e

Q I show you a promissory note in the amount of P7,000.00 dated March 30, 1971 which for purposes of
Identification I request the same to be marked as Exhibit M. . .
Court t.hqw
Mark it as Exhibit M.
Q (continuing) is this the promissory note which you said was executed by Mr. Moran in connection with your
transaction regarding the printing of the "Voice of the Veterans"?
A Yes, sir. (T.S.N., pp. 20-22, Nov. 29, 1972).
Q What happened to this promissory note executed by Mr. Moran, Mr. Pecson?
A Mr. Moran paid me P4,000.00 out of the P7,000.00 as shown by the promissory note.
Q Was there a receipt issued by you covering this payment of P4,000.00 in favor of Mr. Moran?
A Yes, sir.
(T.S.N., p. 23, Nov. 29, 1972).
Q You stated that Mr. Moran paid the amount of P4,000.00 on account of the P7,000.00 covered by the promissory
note, Exhibit M. What does this P4,000.00 covered by Exhibit N represent?
A This P4,000.00 represents the P3,000.00 which he has returned of my P6,000.00 capital investment and the
P1,000.00 represents partial payment of the P4,000.00 profit that was promised to me by Mr. Moran.
Q And what happened to the balance of P3,000.00 under the promissory note, Exhibit M?
A The balance of P3,000.00 and the rest of the profit was applied as part of the consideration of the promissory note
of P20,000.00.
(T.S.N., pp. 23-24, Nov. 29, 1972).
The respondent court erred when it concluded that the project never left the ground because the project did take
place. Only it failed. It was the private respondent himself who presented a copy of the book entitled "Voice of the
Veterans" in the lower court as Exhibit "L". Therefore, it would be error to state that the project never took place and
on this basis decree the return of the private respondent's investment.
As already mentioned, there are risks in any business venture and the failure of the undertaking cannot entirely be
blamed on the managing partner alone, specially if the latter exercised his best business judgment, which seems to
be true in this case. In view of the foregoing, there is no reason to pass upon the fourth and fifth assignments of
errors raised by the petitioner. We likewise find no valid basis for the grant of the counterclaim.
WHEREFORE, the petition is GRANTED. The decision of the respondent Court of Appeals (now Intermediate
Appellate Court) is hereby SET ASIDE and a new one is rendered ordering the petitioner Isabelo Moran, Jr., to pay
private respondent Mariano Pecson SIX THOUSAND (P6,000.00) PESOS representing the amount of the private
respondent's contribution to the partnership but which remained unused; and THREE THOUSAND (P3,000.00)
PESOS representing one half (1/2) of the net profits gained by the partnership in the sale of the two thousand (2,000)

32 | P a g e
copies of the posters, with interests at the legal rate on both amounts from the date the complaint was filed until full
payment is made.
SO ORDERED.1wph1.t

[No. 10318-R. April 23, 1954]


Ng Ya, doing business under the Trade Name SiO Eng Store, plaintiff and appellee, vs. Sugbu Commercial Co.,
defendant and appellant. SuGBU Commercial Co., third-party Jilaintiflf, vs. Pow Sun Gke, third-party defendant.
C<IMBBCIAI. Law; VmsmRsmv; Powers of tse ULmnmsLr-A. manager of a partnership is pi esumed to have all the
incidental powers to carry out the object of the partnership in the transaction of the business.
There is of course an exception to this general rule, that is, when the powers of a manager are specifically restricted
he could not exercise the powers expressly limited from him. But when the articles of association do not specify the
powers of the manager, it is admitted on principle that a manager has tJie powers of a general agent, and even more.
When the object of the eimpany is determined, the manager has all fte powers meiseBsary for the atteininient of
SHch wbject. (1 Gay de BHpajtiito, lOOj Garcia Ron us. CoMpania de Minas, 12 Phil., 130; Smith Bell & Co., vs.
Aznar & Co., 40 Off. Gaz., 1882, quoted in VoL I, p. 62, 5th Ed., Commercial Laws by Tolentino.)
APPEAL from a judgment of tite Court of First Instance of Cebu. Saguin, J.
The facts are stated in ih& opinion of the court. Florencio L. Albino, Pedro R. Pmqmao and Nicolas Jw- mapao for
defendant and appellant. Borromeo, Yap & Borromeo for plaintiff and appellee.
PEf?A, J.:
Ng Ya was a Chinese merchant who owned the Sio Eng Store in Surigao, Surigao, while the Sugbu Commercial
Company was a partnership doing business in Cebu City In the month of December, 1949, Ng Ya ordered from said
company a total of 1,000 galvanized iron and aluminum sheets (Exhibits A & D). It was agreed that the goods 4014
OFFICIAL GAZETTE , - 50, No. 10 were to be shipped in a week's time, or on or before January 5, 1950.
As Ng Ya failed to receive the goods o#! this date, she personally inquired about the same from tib.e Sugbu
Commercial Company in Cebu City, and Pow Sun Gee, the managing partner, told her that delivery of the goods

33 | P a g e
would be made by the end of January. Again she failed to receive the goods on that date, and on inquiring about
them she was told by the same manager that the company had not yet received the galvanized iron sheets which
might arrive in February or March. Shih Tiong Chu informed her that he was going to Manila and promised her that
he would ship her order direct to Surigao. On February 28, 1950, Ng Ya again went to Cebu City to verify from the
company if the galvanized and aluminum sheets had already arrived, bringing with her P4,000 with which she
intended to buy cigarettes for resale in Surigao.
For the third time, she was informed that her order had not yet arrived and that it was to arrive by March. Upon
learning Ng Ya's other purpose in coming to Cebu, Pow Sun Gee informed her that the company had an order for
cigarettes and that as soon as they arrive they would sell the same at a low price provided payment therefor would
be deposited. At the same time she was made to understand that the cigarettes were of "Vir^nia** and "Red Crown"
brands which were not then for sale in Cebu.
Attracted by this proposition, and believing that the delay of the arrival of the galvanized iron and aluminum sheets
was not the company's fault, she yielded to Pow Sun Gee's offer. Thus, she delivered to the company the P4,000
which she had then with her as deposit ftjar the payment of the cigarettes (Exhibit E), and was promised that delivery
of the cigarettes would be made on July of 1950. The amount of P4,000 was secured by Ng Ya from one Tan Chun
Pia, owner of Lana Bakery in Surigao, with whom, before going to Cebu, she had an understanding of splitting the
profits she hoped to realize from the buy and sell of cigarrettes.
Thus, in making the deposit with the Sugbu Commercial Company, the receipt for the deposit was issued in the name
of Lana Bakery (Exhibit "E"). March came, then July, but neither the galvanized and aluminum sheets nor the
cigarettes reached Ng Ya. Consequently, Tan Chun Pia of Lana Bakery, from whom she obtained the aforesaid
amount of P4,000 got angry witii her, and, for this reason, Ng Ya was forced to reim- burse him of this amount
(Exhibits F, "F-1" and "F-2") and kept going to the Sugbu Commercial Company to alternatively demand either the
delivery of the galvanized iron and aluminum sheets and cigarettes, or the return to her of the total sum of P9,400.
Unfortunately every- time she dropped in there, poor Ng Ya was challenged by Shih Tiong Chu to file a complaint,
and she had to seek the help of the Chinese Chamber of Commerce for OKPlGtAL aAZETTE 4911 to ^i^Kfflent of her
claim with the Sugbu Commercial Company.
As this was fruitless, Ng Ya finally filed a complaint with the Court of First Instance of Cebu against the Sugbu
Commercial Company, praying that
(1) Defendant be ordered to pay to the plaintiif on the first cause of action the sum of P5,400, plus damages
amounting to P500;
(2) Defendant be ordered to pay the plaintiff on the second cause of action &iB sum of P4,00Oj plus dama^a
amounting to f400;
(3) Defendant be orde)?ed to ps^ to the plaintiff on the third cause of action the suxs of F1000;
(4) A writ of attatteaeat immediately issue ^linst the property of the defendant, as security for the satisfaction of any
judgment that may be recovered;
(5) Plaintiff be granted such other reliefs as may be just and equitable in the premises. Answering the complaint,
defendant Sugbu Commercial Company made specifis denials of the allegations of said complaint, and by way of
counterclaim it alleged that for the unjust and illegal presentation thereof it suffered damages in the amount of
P2,000.
Defendant, therefore, prayed that the complaint filed in this case be dismissed with costs against the plaintiff, ^nd that
she be ordered to pay P2,000 and for any other relief just and equitable. The Sugbu Commercial Company then filed
a third party complaint against Pow Sun Gee, alleging that said company was dissolved on January 19, 1951, by the
agreement of the partners, Pow Sun Gee and Shih Tiong Chu; that it continued to exist only insofar as it was
necessary and for the sole purposes of making a Hquidatlon and settle- ment of its business; and that Pow Sun Gee
assumed the responsibility of settling the accounts with Ng Ya and also of dropping this case of Ng Ya against the
Sugbu Commercial Company. Thus, third-party plaintiff prayed for judgment

34 | P a g e
1. Ordering the Third-Patty ctefendant to indemnify the TMr4- Party plaintiff for whatever is adjudged against the
latter in fa-ror of the plaisfiif^
2. Ordering the Third-Barty defendant to pay the costs of the proceedings and such other relief which the court may
find just and equitable.
As the motion to dismiss the third-'party complaint was denied, the tiiird^party defendant filed his answer after
rendition of another order denying his motion for reconsi- deration. After due trial, the lower court rendered decision,
senten- cing defendant Sugbu Commercial Company to pay plaintiff Ng Ya the sum of F9,400 with legal interest from
the filing of the complaint and to pay the costs, and condenmil^l Pow Sun Gee to reimburse the Sugbu Commercial
Company of any amount paid by the latter by virtue of this judgment. From the aforesaid decision, defendant Sugbu
Commer- cial Company appealed and now maintains that the lower court erred 4916 OFFICIAL GAZETTE -OZqi,.
50, No. 10
1. In failing to consider facts and circumstances of weight and influence, and in not finding that the transactions upon
which plaintiff's claim are based are simulated, fictitious and in fraud of the defendant partnership ;
2. In giving full credenise ta the Hncorroborated, inconisistiBnt and improbable testimony 6f plaintiff Ng Ya relative to
the alleged transaetians evidenced by Exhibits A, C, and E;
3. In disregarding upon motion of plaintiff, parol evidence showing the circumstances under which Exhibit "29" was
executed, and in holding that said Exhibit constitutes an admission of defendant's liability to the plaintiff;
4. In not giving weight to the testimony of the bookkeeper relative to the entries in the books of account and in not
considering the significance of said entries; and
5. In rendering judgment against the defendant and in favor of the plaintiff. Whether or not Pow Sun Gee had a bad
reputation among some merchants in Cebu City is of no importance at least insofar as the claim of Ng Ya against the
Sugbu Commercial Company, which had a different and distinct personality from Pow Sun Gee and from which Ng
Ya ordered the galvanized iron and aluminum sheets as well as the cigarettes, is concerned.
Pow Sun Gee receipted the aforementioned amounts of P5,400 and P4,000 in his capa- city as manager of the
Sugbu Commercial Company, and it is of no avail that the defendant company in its desire to evade liability to Ng Ya
would gratuitously allege now that its manager, Pow Sun Gee, was not authorized to issue official receipts. Indeed, it
would be quite queer that the manager of any juridical entity would not be authorized to issue receipts for amounts
delivered to that entity through said manager, and that only his co-partner Shih Tiong Chu, who was most of the time
in Manila, could do so. This is not in keeping with present day business dealings, for it is slow and highly
inconvenient to those who transact business with the company.
As manager, Pow Sun Gee, can be presumed to have all the incidental powers to carry out the object of the
partnership in the transaction of business. Of course we are not unaware of the exception to this general rule, that is,
when the powers of a manager are specifically restricted he could not exercise the powers expressly limited from
him. But when the articles of association do not specify the powers of the manager, it is admitted on principle that a
manager has the power of a general agent, and even more.
When the object of &e eomiiany is detei-mined, the manager has all the i^omem necessary for the attainment of such
object. (1 Gay de Montilla, 100; Garcia Ron vs. Compania de Minas, 12 Phil., 130; Smith Bell & Co. vs. Aznar & Co.,
40 Off. Gaz., 1882, quoted in Vol. I, p. 62, 5th Ed., Commer- cial Laws by Tolentino.) Appellant did not even dare to
present the articles of co-partnership that would show any limitation upon the powders of its manager an indication
October, 1954 _ ^ OFFICIAL GAZETTE 4917 that there was none. For this reason, we hold and declare that the
minor power of issuing official receipts is included in the general powers of the manager. Similarly of no moment is
the allegation of appellant company that Ng Ya and Pow Sun Gee are closely related.
If this allegation were true, Pow Sun Gee should have favorably accommodated Ng Ya, contraiy tO what he had done
to this poor Chinese woman. His co-partner Shih Tiong CIiu even played as a second fiddle when he promised Ng Ya
that as he was going to Manila he would see to it that the galvanized and iron sheets would be shipped to her from
Manila to Surigao (p. 10, t. s. n.). Un- doubtedly, such promise further made Ng Ya to have faith in the company.

35 | P a g e
Apparently desperate over what defendant-appellant had unjustly done to innocent Ng Ya, the former caused to be
ptibMi^ed in the newspaper "The Eepublie*' the loss of some of its receipts \Yhich conveniently included the very
numbers of the receipts issued to Ng Ya in December 1949, and February, 1950 (Exhibits "16", "16-A" to "16-C), and
after the publication, defendant filed its answer on January 24, 1951.
Appellant's strategy is quite obvious and we can easily glean the predatory purpose that motivated said publication. If
those receipts were really lost, such fact should have been published long time before, and not after summons was
served upon defendant company. Certainly, such predatory move is frowned upon by professional and business
ethics and should have been considered from a higher perspective before adopting it in a litigation like this. For
defendant-appellant to allege that invoices Nos. 0554 and 0555 (Exhibits "B" & "D") did not contain the notations "to
be shipped on or before January 5, 1950" when they were entered in the books, is preposterous. Referring to the
original and duplicate copies of these invoices (Exhibits "B, D, 1 and X-4"), we have readily noted the phrase "to be
shipped on or before January 5, 1950" written below the notations:
"Above Merchandise deposited in Bodega and Insured." Further examin- ing these invoices, both originals and
duplicates, we failed to note that the phrases quoted above were added of late on such duplicates which were always
in the possession of appellant company. In another desperate move, appellant alleges that the transaction entered
into by Pow Sun Gee in behalf of Sugbu Commercial Company with Ng Ya was kept secret from Pow Sun Giao who,
according to him, was assigned by ShSii Tiong Chu as supervisor in the store. Admitting for a moment that the
manager Pow Sun Gee kept the transaction a secret from Pow Sun Giao that could not prejudice Ng Ya, and shall
not be forgotten that Pow i r 4918 OFFICIAL GAZETTE Vol. 50, No. 10 Sun Gee was the manager-employer of
Pow Sun Giao.
Would the latter pretend that he was the super-manager' on top of his employer? Queer and funny. At any rate if he
wanted to supervise the manager, he should have looked into the books of the company to verify what transactions
were entered into by manager Pow Sun Gee and kept secret. We would rather blame Pow Sun Giao than believe
him, for all we know he was a mere salesman in the Sugbu Commercial Company. The trial court had carefully
considered Ng Ya's frank, straight-forward and sincere testimony which perfectly dovetails the exhibits she had
presented. Tliere is no cir- cumstance of weight and influence that was overlooked, and we do not feel justified in
disturbing this particular finding, considering that the determination of the credi- bility of witnesses properly falls within
the province of trial courts.
The lower court correctly ordered the striking out of that portion of Shih Tiong Chu's testimony where he attempted to
show that he agreed not too willingly in recognizing in the dissolution agreement (Exhibit "29") the company's
indebtedness to Ng Ya. The motion to strike out was not based upon the parol evidence rule, as wrongly contended
by appellant, but on a<toiission under section 7 of Rule 123 of the Rules of Court. "Facts alleged in. the complaint are
deemed admissions of the plain- tiff and binding upon him. Facte alleged in the answer are deemed
admissions of tihe defendant and Mnding upon. him. * * *.
Facts stated m a motion are deemed admis^ons of the movant aud binding upon him." (Ill Moran's Commente on the
Bules of Court, 1952 Ed., p. 64.) Appellant may, however, claim in this connection that the foregoing rule is not
applicable in this case, for its allegation that the terms in the dissolution agreement embodied the true and genuine
intention of the parties was not made in the answer to the complaint, but in the answer to the counterclaim of the
third-party de- fendant. But^ the Supreme CSoort in the case of Mag- dalena Estate Corporation vs. Nytick, 40 Off.
Gaz., No. 21, Supp. 13, p. 141, held
"A party cannot in the course of a litigation or in dealings in pais, be permitted to repudiate his representations or
occupy inconsistent positions, or in the letter of the Scotch Law, 'to aprobate and reprobate.'" Anent the fourth
assignment of error, suffice it to say that the determination of the credibility of witnesses properly falls within the
sphere of trial courts and, for this reason, if the court below did not give weight to the testimony of witness Honorio
Gonzales, it was because in considering the same it was not worth believing. October, 19M ^ ^ OFFICIAL GAZETTE

36 | P a g e
4919 Wherefore, and no reversible error having been com- mitted by the trial court, the appealed judgment is hereby
afBnaed, v?ith triple costs against defendant-appeltent. It is so ord^ed. Felix and Rodas, JJ., concur. Judgment
affirmed with triple costs against defendant- appellant.

Republic of the Philippines

37 | P a g e
SUPREME COURT
Manila
EN BANC
G.R. No. 30286

September 12, 1929

M. TEAGUE, plaintiff-appellant,
vs.
H. MARTIN, J. T. MADDY and L.H. GOLUCKE, defendants-appellees.
Abad Santos, Camu and Delgado, for appellant.
J.W. Ferrier for appellees.
STATEMENT
Plaintiff alleges that about December 23, 1926, he and the defendants formed a partnership for the operation of a fish
business and similar commercial transactions, which by mutual contest was called "Malangpaya Fish Co," with a
capital of P35,000, of which plaintiff paid P25,000, the defendant Martin P5,000, P2,500, and Golucke P2,500. That
as such partnership, they agreed to share in the profits and losses of the business in proportion to the amount of
capital which each contributed. That the plaintiff was named the general manager to take charge of the business, with
full power to do and perform all acts necessary to carry out of the purposes of the partnership. That there was no
agreement as to the duration of the partnership. That plaintiff wants to dissolve it, but that the defendants refused to
do so. A statement marked Exhibit A, which purports to be a cash book, is made a part of the complaint. That the
partnership purchased and now owns a lighter called Lapu-Lapu, and a motorship called Barracuda, and other
properties. That the lighter and the motorship are in the possession of the defendants who are making use of them,
to the damage and prejudice of the plaintiff, for any damage which plaintiff may sustain. That it is for the best interest
of the parties to have a receiver appointed pending this litigation, to take possession of the properties, and he prays
that the Philippine Trust Company be appointed receiver, and for judgment dissolving the partnership, with costs.
Each of the defendants filed a separate answer, but the same nature, in which they admit that about December 10,
1926, the plaintiff and the defendants formed a partnership for the purpose of the equipment of the Manila Fish Co.,
Inc., and the conduct of a fish business. That the terms of the partnership were never evidenced by a truth and in
fact, the partnership was formed under a written plan, of which each member received a copy and to which all
agreed. That by its terms the amount of the capital was P45,000, of which the plaintiff agreed to contribute P35,000.
That P20,000 of the capital was to be used for the purchase of the equipment of the Manila Fish Co., Inc. and the
balance placed to the checking account o the new company.
It is then alleged that "the new owners agree to duties as follows:
Capt. Maddy will have charger of the Barracuda and the navigating of the same. Salary P300 per month.
Mr. Martin will have charge of the southern station, cold stores, commissary and procuring fish. Salary P300 per
month.
Mr. Teague will have charge of selling fish in Manila and purchasing supplies. No salary until business is on paying
basis, then the same as Maddy or Martin.
The principal office shall be in Manila, each party doing any business shall keep books showing plainly all
transactions, the books shall be available at all time for inspections of any member of the partnership.

38 | P a g e
If Mr. Martin or Mr. Maddy wishes at some future time to repurchase a larger share in the business Teague agrees to
sell part of his shares to each on the basis double the amount originally invested by each or ten thousand to Martin
and five thousand to Maddy.
This offer will expire after two years.
That no charge was ever made in the terms of said agreement of copartnership as set forth above except that it was
later agreed among the partners that the business of the partnership should be conducted under the trade name
"Malangpaya Fish Company."
That as shown by the foregoing quoted agreement the agreed capital of the copartnership was P45,000 and not
P35,000 as stated in the third paragraph of plaintiff's amended complaint, and the plaintiff herein, M. Teague, bound
himself and agreed to contribute to the said copartnership the sum of P35,000 and not the sum of P25,000 as stated
in the third paragraph of his said amended complaint.
Defendant Martin specificaly denies the "plaintiff was named general manager of the partnership," and alleged "that
all the duties and powers of the said plaintiff were specifically set forth in the above quoted written agreement and
that no further or additional powers were ever given the said plaintiff." But he admits the purchase of the motorship
Barracuda, by the partnership. He denies that Exhibit A is a true or correct statement of the cash received and paid
out by or on behalf of the partnership, or that the partnership over purchased or that it now owns the lighter LapuLapu, "And/ or any other properties" as mentioned in said ninth paragraph, except such motorship and a smoke in
the house," or that the defendants are making use of any of the properties of the partnership, to the damage and
prejudice of the plaintiff, or that they do not have any visible means to answer for any damages, and alleges that at
the time of the filing of the complaint, partnership in cold storage, of the value of P6,000, for which he has never
accounted on the books of the partnership or mentioned in the complaint, and defendant prays that plaintiff's
complaint be dismissed, and that he be ordered and required to render an accounting , and to pay to partnership the
balance of his unpaid subscription amounting to P10,000.
In his answer the defendant Maddy claimed and asserted that there is due and owing him from the plaintiff
P1,385.53, with legal interest, and in his amended answer, the defendant Martin prays for judgment for P615.49.
To all which the plaintiff made a general and specific denial.
Upon such issues the lower court on April 30, 1928, rendered the following judgment:
In view of the foregoing considerations, the court decrees:
That the partnership, existing among the parties in this suit, is hereby declared dissolved; that all the existing
properties of the said partnership are ordered to be sold at public auction; and that all the proceeds and other
unexpended funds of the partnership be used, first, to pay he P529.48 tax to the Government of the Philippine
Islands; second, to pay debts owing to third persons; third, to reimburse the partners for their advances and salaries
due; and lastly, to return to the partners the amounts they contributed to the capital of the association and any other
remaining such to be distributed proportionately among them as profits:
That the plaintiff immediately render a true and proper account of all the money due to and received by him for the
partnership.
That the barge Lapu-Lapu as well as the Ford truck No. T-3019 and adding machine belong exclusively to the
plaintiff, M. Teague, but the said plaintiff must return to and reimburse the partnership the sum of P14,032.26 taken
from its funds for the purchase and equipment of the said barge Lapu-Lapu; and also to return the sum of P1,230 and
P228 used for buying the Ford truck and adding machine, respectively:

39 | P a g e

That the sum of P,1512.03 be paid to the defendant, J. T. Maddy, and the sum of P615.49 be paid to defendant, H.
Martin, for their advances and their unpaid salaries, with legal interest from October 27, 1927, until paid; that the
plaintiff pay the costs of this action.
So ordered.
May 16, 1928, plaintiff filed a motion praying for an order "directing the court's stenographic notes taken by them of
the evidence presented in the present case, as soon as possible." This motion was denied on May 19th, and on May
16th, the court denied the plaintiff's motion for reconsideration. To all of which exceptions were duly taken.
June 7, 1928, plaintiff filed a petition praying, for the reasons therein stated, that the decision of the court in the case
be set aside, and that the parties be permitted to again present their testimony and to have the case decided upon its
merits. To which objections were duly made, and on June 28, 1928, the court denied plaintiff's motion for a new trial.
To which exceptions were duly taken, and on July 10, 1928, the plaintiff filed a motion in which he prayed that the
period for the appeal interposed by the plaintiff be suspended, and that the order of June 28, 1928, be set aside, "and
that another be entered ordering the re-taking of the evidence in this case." To which objections were also filed and
later overruled, from all of which the plaintiff appealed and assigns the following errors:
I.
The trial court erred in not having confined itself, in the determination of this case, to the question as to
whether or not it is proper to dissolve the partnership and to liquidate its assets, for all other issues raised by
appellees are incidental with the process of liquidation provided for by law.
II.
The trial court erred in not resolving the primary and most important question at issue in his case, namely,
whether or not the appellant M. Teague was the manager of the unregistered partnership Malangpaya Fish Company.
III.
The trial court erred in holding that the appellant had no authority to buy the Lapu-Lapu, the Ford truck and
the adding machine without the consent of his copartners, for in accordance with article 131 of the Code of
Commerce the managing partner of a partnership can make purchases for the partnership without the knowledge
and/or consent of his copartners.
IV.
The trial court erred in holding that the Lapu-Lapu, the Ford truck and the adding machine purchased by
appellant, as manager of the Malangpaya Fish Company, for and with funds of the partnership, do not form part of
the assets of the partnership.
V.
The trial court erred in requiring the appellant to pay to the partnership the sum of P14,032.26, purchase
price, cost of repairs and equipment of the barge Lapu-Lapu; P1,230 purchase price of the adding machine, for these
properties were purchased for and they form part of the assets of the partnership.
VI.
The trial court erred in disapproving appellant's claim for salary and expenses incurred by him for and in
connection with the partnership's business.
VII.
The trial court erred in approving the claims of appellees J.T. Maddy and H. Martin and in requiring the
appellant to pay them the sum of P1,512.03 and P615.49 respectively.
VIII.
The trial court erred in not taking cognizance of appellant's claim for reimbursement for advances made by
him for the partnerships, as shown in the statement attached to the complaint marked Exhibit A, in which there is a
balance in his favor and against the partnership amounting to over P16,000.
X.
Lastly, considering the irregularities committed, the disappearance of the stenographic notes for a
considerable length of time, during which time changes in the testimonies of the witnesses could have been made

40 | P a g e
and the impossibility of having an accurate and complete transcript of the stenographic notes, the trial court erred in
denying appellant's petition for the retaking of the evidence in this case.
JOHNS, J.:
By their respective pleadings, all parties agreed that there was a partnership between them, which appears at one
time to have done a good business. In legal effect, plaintiff asked for its dissolution and the appointment of a receiver
pendente lite. The defendants did not object to the dissolution of the partnership, but prayed for an accounting with
the plaintiff. It was upon such issues that the evidence was taken and the case tried. Hence, there is no merit in the
first in the first assignment of error. Complaint is made that the lower court did not specifically decide as to whether or
not the plaintiff was the manager of the unregistered partnership. But upon that question the lower court, in legal
effect, followed and approved the contention of the defendants that the duties of each partners were specified and
defined in the "plans for formation of a limited partnership," in which it is stated that Captain Maddy would have
charge of the Barracuda and its navigation, with a salary of P300 per month, and that Martin would have charge of
the southern station, cold stores, commisary and procuring fish, with a salary of P300 per month, and that the plaintiff
would have charge of selling fish in Manila and purchasing supplies, without salary until such time as the business is
placed on a paying basis, when his salary would be the same as that of Maddy and Martin, and that the principal
office of the partnership "shall keep books showing plainly all transactions," which shall be available at all time for
inspection of any of the members.
It will thus be noted that the powers and duties of Maddy Martin, and the plaintiff are specifically defined, and that
each of them was more or less the general manager in his particular part of the business. That is to say, that Maddy's
power and duties are confined and limited to the charge of the Barracuda and its navigation, and Martin's to the
southern station, cold stores, commissary and procuring fish, and that plaintiff's powers and duties are confined and
limited to "selling fish in Manila and the purchase of supplies." In the selling of fish, plaintiff received a substantial
amount of money which he deposited to the credit of the company signed by him as manager, but it appears that was
a requirement which the bank made in the ordinary course of business, as to who was authorized to sign checks for
the partnership; otherwise, it would not cash the checks.
In the final analysis, the important question in this case is the ownership of the Lapu-Lapu, the Ford truck, and the
adding machine. The proof is conclusive that they were purchased by the plaintiff and paid for him from and out of
the money of the partnership. That at the time of their purchase, the Lapu-Lapu was purchased in the name of the
plaintiff, and that he personally had it registered in the customs house in his own name, for which he made an
affidavit that he was its owner. After the purchase, he also had the Ford truck registered in his won name. His
contention that this was done as a matter of convenience is not tenable. The record shows that when the partnership
purchased the Barracuda, it was registered in the customs house in the name of the partnership, and that it was a
very simple process to have it so registered.
Without making a detailed analysis of the evidence, we agree with the trial court that the Lapu-Lapu, the Ford truck,
and the adding machine were purchased by the plaintiff and paid for out of the funds of the partnership, and that by
his own actions and conduct, and the taking of the title in his own name, he is now estopped to claim or assert that
they are not his property or that they are the property of the company. Again, under his powers and duties as
specified in the tentative, unsigned written agreement, his authority was confined and limited to the "selling of fish in
Manila and the purchase of supplies." It must be conceded that, standing alone, the power to sell fish and purchase
supplies does not carry with it or imply the authority to purchase the Lapu-Lapu, or the Ford truck, or the adding
machine. From which it must follow that he had no authority to purchase the lighter Lapu-Lapu, the Ford truck, or the
adding machine, as neither of them can be construed as supplies for the partnership business. While it is true that
the tentative agreement was never personally signed by any member of the firm, the trial court found as a fact, and
that finding is sustained by the evidence, that this unsigned agreement was acted upon and accepted by all parties
as the basis of the partnership. It was upon that theory that the lower court allowed the defendant s Maddy and

41 | P a g e
Martin a salary of P300 per month and the money which each of them paid out and advanced in the discharged of
their respective duties, and denied any salary to the plaintiff, for the simple reason that the business was never on a
paying basis.
Much could be said about this division of powers, and that Maddy and Martin's duties were confined and limited to
the catching and procuring of fish, which were then shipped to the plaintiff who sold them on the Manila market and
received the proceeds of the sales. In other words, Maddy and Martin were supplying the fish to plaintiff who sold
them under an agreement that he would account for the money.
Upon the question of accounting, his testimony as to the entries which he made and how he kept the books of the
partnership is very interesting:
Q.

Then this salary does not take into consideration the fact that you claim the company is very badly in debt?

A.

Well, I put the salary in there.

Q.

I am asking you if that is true?

A.

I do not think I will decide that, I think it will be decided by the court.

Q.

I will ask you to answer the question?

A.

You asked me my opinion and I said that I am entitled to it.

xxx

xxx

xxx

I am not on trial as a bookkeeper; if my lawyers won't object to the question I will object myself; I am not on trial as a
bookkeeper; I keep my books any way I want to, put in what I want to, and I leave out anything I don't choose to put
in,
xxx

xxx

xxx

Q.

You have your own bookkeeping?

A.
Well, I run my business to suit myself, I put in the books what I want to, and I leave out what I want to, and I
have a quarter of a million pesos to show for it,
xxx

xxx

xxx

Q.

Did you not say that you paid yourself a salary in August because you made a profit?

A.
Yes. This profit was made counting the stock on hand and equipment on hand, but as far as cash to pay
this balance, I did not have it. when I wanted a salary I just took it. I ran things to suit myself.
xxx

xxx

xxx

Q.

In other words in going against these partners you are going to tax them for the services of your attorney?

42 | P a g e
A.
You are mistaken; I am not against them. I paid this out for filing this complaint and if the honorable court
strikes it out, all right. I think it was a just charge. When I want to sue them the Company can pay for my suit.
Q.
Would you have any objection to their asking for their attorney's fees from the company as partners also in
the business?
A.

Yes.

Q.
You would object to your partners having their attorney's fees here paid out of the copartnership like you
have had yours paid?
A.

Yes, that is the way I do my business.

To say the least, this kind of evidence does not appeal to the court. This case has been bitterly contested, and there
is much feeling between the parties and even their respective attorneys. Be that as it may, we are clearly of the
opinion that the findings of the lower court upon questions of fact are well sustained by the evidence. Plaintiff's case
was tried on the theory that the partnership was the owner of the property in question, and no claim was made for the
use of the Lapu-Lapu, and it appears that P14,032.26 of the partnership money was used in its purchase,
overhauling, expenses and repairs. That in truth and in fact the partnership had the use and benefit of the Lapu-Lapu
in its business from sometime in May until the receiver was appointed on November 11, 1927, or a period of about six
months, and that the partnership has never paid anything for its use. it is true that there is no testimony as to the
value of such use, but the cost of the Lapu-Lapu and the time of its use and the purpose for which it was used, all
appear in the record. For such reason, in the interest of justice, plaintiff should be compensated for the reasonable
value of the time which the partnership made use of the Lapu-Lapu.
All things considered, we are of the opinion that P2,000 is a reasonable, amount which the plaintiff should receive for
its use.
In all things and respects, the judgment of the lower court as to the merits is affirmed, with the modification only that
P2,000 shall be deducted from the amount of the judgment which was awarded against the plaintiff, such deduction
to be made for and on account of such use of the Lapu-Lapu by the partnership, with costs against the appellant. So
ordered.
Avancea, C.J., Street, Villamor, Romualdez and Villa-Real, JJ. concur.
Johnson, J., reserves his vote.

Republic of the Philippines


SUPREME COURT
Manila

43 | P a g e

EN BANC
G.R. No. L-11624

January 21, 1918

E. M. BACHRACH, plaintiff-appellee,
vs.
"LA PROTECTORA", ET AL., defendants-appellants.
Vicente Foz for appellants.
A. J. Burke for appellee.
STREET, J.:
In the year 1913, the individuals named as defendants in this action formed a civil partnership, called "La Protectora,"
for the purpose of engaging in the business of transporting passengers and freight at Laoag, Ilocos Norte. In order to
provide the enterprise with means of transportation, Marcelo Barba, acting as manager, came to Manila and upon
June 23, 1913, negotiated the purchase of two automobile trucks from the plaintiff, E. M. Bachrach, for the agree
price of P16,500. He paid the sum of 3,000 in cash, and for the balance executed promissory notes representing the
deferred payments. These notes provided for the payment of interest from June 23, 1913, the date of the notes, at
the rate of 10 per cent per annum. Provision was also made in the notes for the payment of 25 per cent of the
amount due if it should be necessary to place the notes in the hands of an attorney for collection. Three of these
notes, for the sum of P3,375 each, have been made the subject of the present action, and there are exhibited with
the complaint in the cause. One was signed by Marcelo Barba in the following manner:
P. P. La Protectora
By Marcelo Barba
Marcelo Barba.
The other two notes are signed in the same way with the word "By" omitted before the name of Marcelo Barba in the
second line of the signature. It is obvious that in thus signing the notes Marcelo Barba intended to bind both the
partnership and himself. In the body of the note the word "I" (yo) instead of "we" (nosotros) is used before the words
"promise to pay" (prometemos) used in the printed form. It is plain that the singular pronoun here has all the force of
the plural.
As preliminary to the purchase of these trucks, the defendants Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and
Modesto Serrano, upon June 12, 1913, executed in due form a document in which they declared that they were
members of the firm "La Protectora" and that they had granted to its president full authority "in the name and
representation of said partnership to contract for the purchase of two automobiles" (en nombre y representacion de la
mencionada sociedad contratante la compra de dos automoviles). This document was apparently executed in
obedience to the requirements of subsection 2 of article 1697 of the Civil Code, for the purpose of evidencing the
authority of Marcelo Barba to bind the partnership by the purchase. The document in question was delivered by him
to Bachrach at the time the automobiles were purchased.
From time to time after this purchase was made, Marcelo Barba purchased of the plaintiff various automobile effects
and accessories to be used in the business of "La Protectora." Upon May 21, 1914, the indebtedness resulting from
these additional purchases amounted to the sum of P2,916.57
In May, 1914, the plaintiff foreclosed a chattel mortgage which he had retained on the trucks in order to secure the
purchase price. The amount realized from this sale was P1,000. This was credited unpaid. To recover this balance,
together with the sum due for additional purchases, the present action was instituted in the Court of First Instance of

44 | P a g e
the city of Manila, upon May 29, 1914, against "La Protectora" and the five individuals Marcelo Barba, Nicolas
Segundo, Antonio Adiarte, Ignacio Flores, and Modesto Serrano. No question has been made as to the propriety of
impleading "La Protectora" as if it were a legal entity. At the hearing, judgment was rendered against all of the
defendants. From this judgment no appeal was taken in behalf either of "La Protectora" or Marcelo Barba; and their
liability is not here under consideration. The four individuals who signed the document to which reference has been
made, authorizing Barba to purchase the two trucks have, however, appealed and assigned errors. The question
here to be determined is whether or not these individuals are liable for the firm debts and if so to what extent.
The amount of indebtedness owing to the plaintiff is not in dispute, as the principal of the debt is agreed to be
P7,037. Of this amount it must now be assumed, in view of the finding of the trial court, from which no appeal has
been taken by the plaintiff, that the unpaid balance of the notes amounts to P4,121, while the remainder (P2,916)
represents the amount due for automobile supplies and accessories.
The business conducted under the name of "La Protectora" was evidently that of a civil partnership; and the liability
of the partners to this association must be determined under the provisions of the Civil Code. The authority of
Marcelo Barba to bind the partnership, in the purchase of the trucks, is fully established by the document executed by
the four appellants upon June 12, 1913. The transaction by which Barba secured these trucks was in conformity with
the tenor of this document. The promissory notes constitute the obligation exclusively of "La Protectora" and of
Marcelo Barba; and they do not in any sense constitute an obligation directly binding on the four appellants. Their
liability is based on the fact that they are members of the civil partnership and as such are liable for its debts. It is true
that article 1698 of the Civil Code declares that a member of a civil partnership is not liable in solidum
(solidariamente) with his fellows for its entire indebtedness; but it results from this article, in connection with article
1137 of the Civil Code, that each is liable with the others (mancomunadamente) for his aliquot part of such
indebtedness. And so it has been held by this court. (Co-Pitco vs. Yulo, 8 Phil. Rep., 544.)
The Court of First Instance seems to have founded its judgment against the appellants in part upon the idea that the
document executed by them constituted an authority for Marcelo Barba to bind them personally, as contemplated in
the second clause of article 1698 of the Civil Code. That cause says that no member of the partnership can bind the
others by a personal act if they have not given him authority to do so. We think that the document referred to was
intended merely as an authority to enable Barba to bind the partnership and that the parties to that instrument did not
intend thereby to confer upon Barba an authority to bind them personally. It is obvious that the contract which Barba
in fact executed in pursuance of that authority did not by its terms profess to bind the appellants personally at all, but
only the partnership and himself. It follows that the four appellants cannot be held to have been personally obligated
by that instrument; but, as we have already seen, their liability rests upon the general principles underlying
partnership liability.
As to so much of the indebtedness as is based upon the claim for automobile supplies and accessories, it is obvious
that the document of June 12, 1913, affords no authority for holding the appellants liable. Their liability upon this
account is, however, no less obvious than upon the debt incurred by the purchase of the trucks; and such liability is
derived from the fact that the debt was lawfully incurred in the prosecution of the partnership enterprise.
There is no proof in the record showing what the agreement, if any, was made with regard to the form of
management. Under these circumstances it is declared in article 1695 of the Civil Code that all the partners are
considered agents of the partnership. Barba therefore must be held to have had authority to incur these expenses.
But in addition to this he is shown to have been in fact the president or manager, and there can be no doubt that he
had actual authority to incur this obligation.
From what has been said it results that the appellants are severally liable for their respective shares of the entire
indebtedness found to be due; and the Court of First Instance committed no error in giving judgment against them.
The amount for which judgment should be entered is P7,037, to which shall be added (1) interest at 10 per cent per
annum from June 23, 1913, to be calculated upon the sum of P4.121; (2) interest at 6 per cent per annum from July

45 | P a g e
21, 1915, to be calculated upon the sum of P2,961; (3) the further sum of P1,030.25, this being the amount stipulated
to be paid by way of attorney's fees. However, it should be noted that any property pertaining to "La Protectora"
should first be applied to this indebtedness pursuant to the judgment already entered in this case in the court below;
and each of the four appellants shall be liable only for the one-fifth part of the remainder unpaid.
Let judgment be entered accordingly, without any express finding of costs of this instance. So ordered.

Republic of the Philippines


SUPREME COURT
Manila

46 | P a g e
EN BANC
G.R. No. 1011

May 13, 1903

JOSE MACHUCA, plaintiff-appellee,


vs.
CHUIDIAN, BUENAVENTURA & CO., defendants-appellants.
Simplicio del Rosario for appellants.
Joaquin Rodriguez Serra for appellee.
LADD, J.:
Most of the allegations of the complaint were admitted by the defendant at the hearing, and the judgment of the court
below is based on the state of facts appearing from such admissions, no evidence having been taken.
The defendants are a regular general partnership, organized in Manila, December 29, 1882, as a continuation of a
prior partnership of the same name. The original partners constituting the partnership of 1882 were D. Telesforo
Chuidian, Doa Raymunda Chuidian, Doa Candelaria Chuidian, and D. Mariano Buenaventura. The capital was
fixed in the partnership agreement at 16,000 pesos, of which the first three partners named contributed 50,000 pesos
each, and the last named 10,000 pesos, and it was stipulated that the liability of the partners should be "limited to the
amounts brought in by them to form the partnership stock."
In addition to the amounts contributed by the partners to the capital, it appears from the partnership agreement that
each one of them had advanced money to the preexisting partnership, which advances were assumed or accountscurrent aggregated something over 665,000 pesos, of which sum about 569,000 pesos represented the advances
from the Chuidians and the balance that balance that from D. Mariano Buenaventura.
Doa Raymunda Chuidian retired from the partnership November 4, 1885. On January 1, 1888, the partnership went
into liquidation, and it does not appear that the liquidation had been terminated when this action was brought.
Down to the time the partnership went into liquidation the accounts-current of D. Telesforo Chuidian and Doa
Candelaria Chuidian had been diminished in an amount aggregating about 288,000 pesos, while that of D. Mariano
Buenaventura had been increased about 51,000 pesos. During the period from the commencement of the liquidation
down to January 1, 1896, the account-current of each of the Chuidians had been still further decreased, while that of
D. Mariano Buenaventura had been still further increased.
On January 1, 1894, D. Mariano Buenaventura died, his estate passing by will to his children, among whom was D.
Vicente Buenaventura. Upon the partition of the estate the amount of the interest of D. Vicente Buenaventura in his
father's account-current and in the capital was ascertained and recorded in the books of the firm.
On December 15, 1898, D. Vicente Buenaventura executed a public instrument in which for a valuable consideration
he "assigns to D. Jose Gervasio Garcia . . . a 25 per cent share in all that may be obtained by whatever right in
whatever form from the liquidation of the partnership of Chuidian, Buenaventura & Co., in the part pertaining to him in
said partnership, . . . the assignee, being expressly empowered to do in his own name, and as a part owner, by virtue
of this assignment in the assets of the partnership, whatever things may be necessary for the purpose of accelerating
the liquidation, and of obtaining on judicially or extrajudicially the payment of the deposits account-current pertaining
to the assignor, it being understood that D. Jose Gervasio Garcia is to receive the 25 per cent assigned to him, in the
same form in which it may be obtained from said partnership, whether in cash, credits, goods, movables or
immovables, and on the date when Messrs. Chuidian, Buenaventura & Co., in liquidation, shall have effected the
operations necessary in order to satisfy the credits and the share in the partnership capital hereinbefore mentioned."

47 | P a g e

The plaintiff claims under Garcia by virtue of a subsequent assignment, which has been notified to the liquidator of
the partnership.
The liquidator of the partnership having declined to record in the books of the partnership the plaintiff's claim under
the assignment as a credit due from the concern to him this action is brought to compel such record to be made, and
the plaintiff further asks that he be adjudicated to be a creditor of the partnership in an amount equal to 25 per cent of
D. Vicente Buenaventura's share in his father's account-current, as ascertained when the record was made in the
books of the partnership upon the partition of the latters estate, with interest, less the liability to which the plaintiff is
subject by reason of his share in the capital; that the necessary liquidation being first had, the partnership pay to the
plaintiff the balance which may be found to be due him; and that if the partnership has no funds with which to
discharge this obligation an adjudication of bankruptcy be made. He also asks to recover the damages caused by
reason of the failure of the liquidator to record his credit in the books of partnership.
The judgment of the court below goes beyond the relief asked by the plaintiff in the complaint, the plaintiff being held
entitled not only to have the credit assigned him recorded in the books of the partnership but also to receive forthwith
25 per cent of an amount representing the share of D. Vicente Buenaventura in the account-current at the time of the
partition of his father's estate, with interest, the payment of the 25 percent of Buenaventura's share in the capital to
be postponed till the termination of the liquidation. This point has not, however, been taken by counsel, and we have
therefore considered the case upon its merits.
The underlying question in the case relates to the construction of clause 19 of the partnership agreement, by which it
was stipulated that "upon the dissolution of the company, the pending obligations in favor of outside parties should be
satisfied, the funds of the minors Jose and Francisco Chuidian [it does not appear what their interest in the
partnership was or when or how it was acquired] should be taken out, and afterwards the resulting balance of the
account-current of each one of those who had put in money (imponentes) should be paid."
Our construction of this clause is that it establishes a a basis for the final adjustment of the affairs of the partnership;
that that basis is that the liabilities to noncompartners are to be first discharged; that the claims of the Chuidian
minors are to be next satisfied; and that what is due to the respective partners on account of their advances to the
firm is to be paid last of all, leaving the ultimate residue, of course, if there be any, to be distributed, among the
partners in the proportions in which they may be entitled thereto.
Although in a sense the partners, being at the same time creditors, were "outside parties," it is clear that a distinction
is made in this clause between creditors who were partners and creditors who were not partners, and that the
expression "outside parties" refers to the latter class. And the words "pending obligations," we think, clearly
comprehend outstanding obligations of every kind in favor of such outside parties, and do not refer merely, as
claimed by counsel for the plaintiff, to the completion of mercantile operations unfinished at the time of the dissolution
of the partnership, such as consignments of goods and the like. As respects the claims of the Chuidian minors, the
suggestion of counsel is that the clause in question means that their accounts are to be adjusted before those of the
partners but not paid first. Such a provision would have been of no practical utility, and the language used that the
funds should be "taken out" (se dedujeran) does not admit of such a construction.
Such being the basis upon which by agreement of the partners the assets of the partnership are to be applied to the
discharge of the various classes of the firm's liabilities, it follows that D. Vicente Buenaventura, whose rights are
those of his father, is in no case entitled to receive any part of the assets until the creditors who are nonpartners and
the Chuidian minors are paid. Whatever rights he had either as creditor or partner, he could only transfer subject to
this condition. And it is clear, from the language of the instrument under which the plaintiff claims, that this conditional
interest was all that D. Vicente Buenaventura ever intended to transfer. By that instrument he undertakes to assign to
Garcia not a present interest in the assets of the partnership but an interest in whatever "may be obtained from the
liquidation of the partnership," which Garcia is to receive "in the same form in which it may be obtained from said

48 | P a g e
partnership," and "on the date when Messrs. Chuidian, Buenaventura & Co., in liquidation, shall have effected the
operations necessary in order to satisfy" the claims of D. Vicente Buenaventura.
Upon this interpretation of the assignment, it becomes unnecessary to inquire whether article 143 of the Code of
Commerce, prohibiting a partner from transferring his interest in the partnership without the consent of the other
partners, applies to partnerships in liquidation, as contended by the defendant. The assignment by its terms is not to
take effect until all the liabilities of the partnership have been discharged and nothing remains to be done except to
distribute the assets, if there should be any, among the partners. Meanwhile the assignor, Buenaventura, is to
continue in the enjoyment of the rights and is to remain subject to the liabilities of a partner as though no assignment
had been made. In other words, the assignment does not purport to transfer an interest in the partnership, but only a
future contingent right to 25 per cent of such portion of the ultimate residue of the partnership property as the
assignor may become entitled to receive by virtue of his proportionate interest in the capital.
There is nothing in the case to show either that the nonpartner creditors of the partnership have been paid or that the
claims of the Chuidian minors have been satisfied. Such rights as the plaintiff has acquired against the partnership
under the assignment still remain, therefore, subject to the condition which attached to them in their origin, a
condition wholly uncertain of realization, since it may be that the entire assets of the partnership will be exhausted in
the payment of the creditors entitled to preference under the partnership agreement, thus extinguishing the plaintiff's
right to receive anything from the liquidation.
It is contended by the plaintiff that, as the partnership was without authority to enter upon new mercantile operations
after the liquidation commenced, the increase in D. Mariano Buenaventura's account-current during that period was
the result of a void transaction, and that therefore the plaintiff is entitled to withdraw at once the proportion of such
increase to which he is entitled under the assignment. With reference to this contention, it is sufficient to say that it
nowhere appears in the case that the increase in D. Mariano Buenaventura's account-current during the period of
liquidation was the result of new advances to the firm, and the figures would appear to indicate that it resulted from
the accumulation of interest.
Counsel for the plaintiff have discussed at length in their brief the meaning of the clause in the partnership agreement
limiting the liability of the partners to the amounts respectively brought into the partnership by them, and the effect of
this stipulation upon their rights as creditors of the firm. These are questions which relate to the final adjustment of
the affairs of the firm, the distribution of the assets remaining after all liabilities have been discharged, or, on the other
hand, the apportionment of the losses if the assets should not be sufficient to meet the liabilities. They are in no way
involved in the determination of the present case.
The plaintiff having acquired no rights under the assignment which are now enforceable against the defendant, this
action can not be maintained. The liquidator of the defendant having been notified of the assignment, the plaintiff will
be entitled to receive from the assets of the partnership, if any remain, at the termination of the liquidation, 25 per
cent of D. Vicente's resulting interest, both as partner and creditor. The judgment in this case should not affect the
plaintiff's right to bring another action against the partnership when the affairs of the same are finally wound up. The
proper judgment will be that the action be dismissed. The judgment of the court below is reversed and the case is
remanded to that court with directions to enter a judgment of dismissal. So ordered.

Republic of the Philippines


SUPREME COURT
Manila

49 | P a g e
THIRD DIVISION
G.R. No. 70926 January 31, 1989
DAN FUE LEUNG, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT and LEUNG YIU, respondents.
John L. Uy for petitioner.
Edgardo F. Sundiam for private respondent.

GUTIERREZ, JR., J.:


The petitioner asks for the reversal of the decision of the then Intermediate Appellate Court in AC-G.R. No. CV-00881
which affirmed the decision of the then Court of First Instance of Manila, Branch II in Civil Case No. 116725 declaring
private respondent Leung Yiu a partner of petitioner Dan Fue Leung in the business of Sun Wah Panciteria and
ordering the petitioner to pay to the private respondent his share in the annual profits of the said restaurant.
This case originated from a complaint filed by respondent Leung Yiu with the then Court of First Instance of Manila,
Branch II to recover the sum equivalent to twenty-two percent (22%) of the annual profits derived from the operation
of Sun Wah Panciteria since October, 1955 from petitioner Dan Fue Leung.
The Sun Wah Panciteria, a restaurant, located at Florentino Torres Street, Sta. Cruz, Manila, was established
sometime in October, 1955. It was registered as a single proprietorship and its licenses and permits were issued to
and in favor of petitioner Dan Fue Leung as the sole proprietor. Respondent Leung Yiu adduced evidence during the
trial of the case to show that Sun Wah Panciteria was actually a partnership and that he was one of the partners
having contributed P4,000.00 to its initial establishment.
The private respondents evidence is summarized as follows:
About the time the Sun Wah Panciteria started to become operational, the private respondent gave P4,000.00 as his
contribution to the partnership. This is evidenced by a receipt identified as Exhibit "A" wherein the petitioner
acknowledged his acceptance of the P4,000.00 by affixing his signature thereto. The receipt was written in Chinese
characters so that the trial court commissioned an interpreter in the person of Ms. Florence Yap to translate its
contents into English. Florence Yap issued a certification and testified that the translation to the best of her
knowledge and belief was correct. The private respondent identified the signature on the receipt as that of the
petitioner (Exhibit A-3) because it was affixed by the latter in his (private respondents') presence. Witnesses So Sia
and Antonio Ah Heng corroborated the private respondents testimony to the effect that they were both present when
the receipt (Exhibit "A") was signed by the petitioner. So Sia further testified that he himself received from the
petitioner a similar receipt (Exhibit D) evidencing delivery of his own investment in another amount of P4,000.00 An
examination was conducted by the PC Crime Laboratory on orders of the trial court granting the private respondents
motion for examination of certain documentary exhibits. The signatures in Exhibits "A" and 'D' when compared to the
signature of the petitioner appearing in the pay envelopes of employees of the restaurant, namely Ah Heng and Maria
Wong (Exhibits H, H-1 to H-24) showed that the signatures in the two receipts were indeed the signatures of the
petitioner.
Furthermore, the private respondent received from the petitioner the amount of P12,000.00 covered by the latter's
Equitable Banking Corporation Check No. 13389470-B from the profits of the operation of the restaurant for the year

50 | P a g e
1974. Witness Teodulo Diaz, Chief of the Savings Department of the China Banking Corporation testified that said
check (Exhibit B) was deposited by and duly credited to the private respondents savings account with the bank after
it was cleared by the drawee bank, the Equitable Banking Corporation. Another witness Elvira Rana of the Equitable
Banking Corporation testified that the check in question was in fact and in truth drawn by the petitioner and debited
against his own account in said bank. This fact was clearly shown and indicated in the petitioner's statement of
account after the check (Exhibit B) was duly cleared. Rana further testified that upon clearance of the check and
pursuant to normal banking procedure, said check was returned to the petitioner as the maker thereof.
The petitioner denied having received from the private respondent the amount of P4,000.00. He contested and
impugned the genuineness of the receipt (Exhibit D). His evidence is summarized as follows:
The petitioner did not receive any contribution at the time he started the Sun Wah Panciteria. He used his savings
from his salaries as an employee at Camp Stotsenberg in Clark Field and later as waiter at the Toho Restaurant
amounting to a little more than P2,000.00 as capital in establishing Sun Wah Panciteria. To bolster his contention that
he was the sole owner of the restaurant, the petitioner presented various government licenses and permits showing
the Sun Wah Panciteria was and still is a single proprietorship solely owned and operated by himself alone. Fue
Leung also flatly denied having issued to the private respondent the receipt (Exhibit G) and the Equitable Banking
Corporation's Check No. 13389470 B in the amount of P12,000.00 (Exhibit B).
As between the conflicting evidence of the parties, the trial court gave credence to that of the plaintiffs. Hence, the
court ruled in favor of the private respondent. The dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering the latter to
deliver and pay to the former, the sum equivalent to 22% of the annual profit derived from the operation of Sun Wah
Panciteria from October, 1955, until fully paid, and attorney's fees in the amount of P5,000.00 and cost of suit. (p.
125, Rollo)
The private respondent filed a verified motion for reconsideration in the nature of a motion for new trial and, as
supplement to the said motion, he requested that the decision rendered should include the net profit of the Sun Wah
Panciteria which was not specified in the decision, and allow private respondent to adduce evidence so that the said
decision will be comprehensively adequate and thus put an end to further litigation.
The motion was granted over the objections of the petitioner. After hearing the trial court rendered an amended
decision, the dispositive portion of which reads:
FOR ALL THE FOREGOING CONSIDERATIONS, the motion for reconsideration filed by the plaintiff, which was
granted earlier by the Court, is hereby reiterated and the decision rendered by this Court on September 30, 1980, is
hereby amended. The dispositive portion of said decision should read now as follows:
WHEREFORE, judgment is hereby rendered, ordering the plaintiff (sic) and against the defendant, ordering the latter
to pay the former the sum equivalent to 22% of the net profit of P8,000.00 per day from the time of judicial demand,
until fully paid, plus the sum of P5,000.00 as and for attorney's fees and costs of suit. (p. 150, Rollo)
The petitioner appealed the trial court's amended decision to the then Intermediate Appellate Court. The questioned
decision was further modified by the appellate court. The dispositive portion of the appellate court's decision reads:
WHEREFORE, the decision appealed from is modified, the dispositive portion thereof reading as follows:
1. Ordering the defendant to pay the plaintiff by way of temperate damages 22% of the net profit of P2,000.00 a day
from judicial demand to May 15, 1971;

51 | P a g e
2. Similarly, the sum equivalent to 22% of the net profit of P8,000.00 a day from May 16, 1971 to August 30, 1975;
3. And thereafter until fully paid the sum equivalent to 22% of the net profit of P8,000.00 a day.
Except as modified, the decision of the court a quo is affirmed in all other respects. (p. 102, Rollo)
Later, the appellate court, in a resolution, modified its decision and affirmed the lower court's decision. The dispositive
portion of the resolution reads:
WHEREFORE, the dispositive portion of the amended judgment of the court a quo reading as follows:
WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendant, ordering the latter to pay to
the former the sum equivalent to 22% of the net profit of P8,000.00 per day from the time of judicial demand, until
fully paid, plus the sum of P5,000.00 as and for attorney's fees and costs of suit.
is hereby retained in full and affirmed in toto it being understood that the date of judicial demand is July 13, 1978. (pp.
105-106, Rollo).
In the same resolution, the motion for reconsideration filed by petitioner was denied.
Both the trial court and the appellate court found that the private respondent is a partner of the petitioner in the
setting up and operations of the panciteria. While the dispositive portions merely ordered the payment of the
respondents share, there is no question from the factual findings that the respondent invested in the business as a
partner. Hence, the two courts declared that the private petitioner is entitled to a share of the annual profits of the
restaurant. The petitioner, however, claims that this factual finding is erroneous. Thus, the petitioner argues: "The
complaint avers that private respondent extended 'financial assistance' to herein petitioner at the time of the
establishment of the Sun Wah Panciteria, in return of which private respondent allegedly will receive a share in the
profits of the restaurant. The same complaint did not claim that private respondent is a partner of the business. It
was, therefore, a serious error for the lower court and the Hon. Intermediate Appellate Court to grant a relief not
called for by the complaint. It was also error for the Hon. Intermediate Appellate Court to interpret or construe
'financial assistance' to mean the contribution of capital by a partner to a partnership;" (p. 75, Rollo)
The pertinent portions of the complaint state:
xxx xxx xxx
2. That on or about the latter (sic) of September, 1955, defendant sought the financial assistance of plaintiff in
operating the defendant's eatery known as Sun Wah Panciteria, located in the given address of defendant; as a
return for such financial assistance. plaintiff would be entitled to twenty-two percentum (22%) of the annual profit
derived from the operation of the said panciteria;
3. That on October 1, 1955, plaintiff delivered to the defendant the sum of four thousand pesos (P4,000.00),
Philippine Currency, of which copy for the receipt of such amount, duly acknowledged by the defendant is attached
hereto as Annex "A", and form an integral part hereof; (p. 11, Rollo)
In essence, the private respondent alleged that when Sun Wah Panciteria was established, he gave P4,000.00 to the
petitioner with the understanding that he would be entitled to twenty-two percent (22%) of the annual profit derived
from the operation of the said panciteria. These allegations, which were proved, make the private respondent and the
petitioner partners in the establishment of Sun Wah Panciteria because Article 1767 of the Civil Code provides that
"By the contract of partnership two or more persons bind themselves to contribute money, property or industry to a
common fund, with the intention of dividing the profits among themselves".

52 | P a g e

Therefore, the lower courts did not err in construing the complaint as one wherein the private respondent asserted his
rights as partner of the petitioner in the establishment of the Sun Wah Panciteria, notwithstanding the use of the term
financial assistance therein. We agree with the appellate court's observation to the effect that "... given its ordinary
meaning, financial assistance is the giving out of money to another without the expectation of any returns therefrom'.
It connotes an ex gratia dole out in favor of someone driven into a state of destitution. But this circumstance under
which the P4,000.00 was given to the petitioner does not obtain in this case.' (p. 99, Rollo) The complaint explicitly
stated that "as a return for such financial assistance, plaintiff (private respondent) would be entitled to twenty-two
percentum (22%) of the annual profit derived from the operation of the said panciteria.' (p. 107, Rollo) The wellsettled doctrine is that the '"... nature of the action filed in court is determined by the facts alleged in the complaint as
constituting the cause of action." (De Tavera v. Philippine Tuberculosis Society, Inc., 113 SCRA 243; Alger Electric,
Inc. v. Court of Appeals, 135 SCRA 37).
The appellate court did not err in declaring that the main issue in the instant case was whether or not the private
respondent is a partner of the petitioner in the establishment of Sun Wah Panciteria.
The petitioner also contends that the respondent court gravely erred in giving probative value to the PC Crime
Laboratory Report (Exhibit "J") on the ground that the alleged standards or specimens used by the PC Crime
Laboratory in arriving at the conclusion were never testified to by any witness nor has any witness identified the
handwriting in the standards or specimens belonging to the petitioner. The supposed standards or specimens of
handwriting were marked as Exhibits "H" "H-1" to "H-24" and admitted as evidence for the private respondent over
the vigorous objection of the petitioner's counsel.
The records show that the PC Crime Laboratory upon orders of the lower court examined the signatures in the two
receipts issued separately by the petitioner to the private respondent and So Sia (Exhibits "A" and "D") and
compared the signatures on them with the signatures of the petitioner on the various pay envelopes (Exhibits "H", "H1" to 'H-24") of Antonio Ah Heng and Maria Wong, employees of the restaurant. After the usual examination
conducted on the questioned documents, the PC Crime Laboratory submitted its findings (Exhibit J) attesting that the
signatures appearing in both receipts (Exhibits "A" and "D") were the signatures of the petitioner.
The records also show that when the pay envelopes (Exhibits "H", "H-1" to "H-24") were presented by the private
respondent for marking as exhibits, the petitioner did not interpose any objection. Neither did the petitioner file an
opposition to the motion of the private respondent to have these exhibits together with the two receipts examined by
the PC Crime Laboratory despite due notice to him. Likewise, no explanation has been offered for his silence nor was
any hint of objection registered for that purpose.
Under these circumstances, we find no reason why Exhibit "J" should be rejected or ignored. The records sufficiently
establish that there was a partnership.
The petitioner raises the issue of prescription. He argues: The Hon. Respondent Intermediate Appellate Court gravely
erred in not resolving the issue of prescription in favor of petitioner. The alleged receipt is dated October 1, 1955 and
the complaint was filed only on July 13, 1978 or after the lapse of twenty-two (22) years, nine (9) months and twelve
(12) days. From October 1, 1955 to July 13, 1978, no written demands were ever made by private respondent.
The petitioner's argument is based on Article 1144 of the Civil Code which provides:
Art. 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;

53 | P a g e

(3) Upon a judgment.


in relation to Article 1155 thereof which provides:
Art. 1155. The prescription of actions is interrupted when they are filed before the court, when there is a written extrajudicial demand by the creditor, and when there is any written acknowledgment of the debt by the debtor.'
The argument is not well-taken.
The private respondent is a partner of the petitioner in Sun Wah Panciteria. The requisites of a partnership which are
1) two or more persons bind themselves to contribute money, property, or industry to a common fund; and 2)
intention on the part of the partners to divide the profits among themselves (Article 1767, Civil Code; Yulo v. Yang
Chiao Cheng, 106 Phil. 110)-have been established. As stated by the respondent, a partner shares not only in profits
but also in the losses of the firm. If excellent relations exist among the partners at the start of business and all the
partners are more interested in seeing the firm grow rather than get immediate returns, a deferment of sharing in the
profits is perfectly plausible. It would be incorrect to state that if a partner does not assert his rights anytime within ten
years from the start of operations, such rights are irretrievably lost. The private respondent's cause of action is
premised upon the failure of the petitioner to give him the agreed profits in the operation of Sun Wah Panciteria. In
effect the private respondent was asking for an accounting of his interests in the partnership.
It is Article 1842 of the Civil Code in conjunction with Articles 1144 and 1155 which is applicable. Article 1842 states:
The right to an account of his interest shall accrue to any partner, or his legal representative as against the winding
up partners or the surviving partners or the person or partnership continuing the business, at the date of dissolution,
in the absence or any agreement to the contrary.
Regarding the prescriptive period within which the private respondent may demand an accounting, Articles 1806,
1807, and 1809 show that the right to demand an accounting exists as long as the partnership exists. Prescription
begins to run only upon the dissolution of the partnership when the final accounting is done.
Finally, the petitioner assails the appellate court's monetary awards in favor of the private respondent for being
excessive and unconscionable and above the claim of private respondent as embodied in his complaint and
testimonial evidence presented by said private respondent to support his claim in the complaint.
Apart from his own testimony and allegations, the private respondent presented the cashier of Sun Wah Panciteria, a
certain Mrs. Sarah L. Licup, to testify on the income of the restaurant.
Mrs. Licup stated:
ATTY. HIPOLITO (direct examination to Mrs. Licup).
Q Mrs. Witness, you stated that among your duties was that you were in charge of the custody of the cashier's box,
of the money, being the cashier, is that correct?
A

Yes, sir.

Q
So that every time there is a customer who pays, you were the one who accepted the money and you gave
the change, if any, is that correct?
A

Yes.

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Now, after 11:30 (P.M.) which is the closing time as you said, what do you do with the money?

A We balance it with the manager, Mr. Dan Fue Leung.


ATTY. HIPOLITO:
I see.
Q

So, in other words, after your job, you huddle or confer together?

Yes, count it all. I total it. We sum it up.

Q
Now, Mrs. Witness, in an average day, more or less, will you please tell us, how much is the gross income of
the restaurant?
A For regular days, I received around P7,000.00 a day during my shift alone and during pay days I receive more than
P10,000.00. That is excluding the catering outside the place.
Q What about the catering service, will you please tell the Honorable Court how many times a week were there
catering services?
A Sometimes three times a month; sometimes two times a month or more.
xxx

xxx

xxx

Now more or less, do you know the cost of the catering service?

A Yes, because I am the one who receives the payment also of the catering.
Q

How much is that?

That ranges from two thousand to six thousand pesos, sir.

Per service?

Per service, Per catering.

Q
So in other words, Mrs. witness, for your shift alone in a single day from 3:30 P.M. to 11:30 P.M. in the
evening the restaurant grosses an income of P7,000.00 in a regular day?
A

Yes.

And ten thousand pesos during pay day.?

Yes.

(TSN, pp. 53 to 59, inclusive, November 15,1978)


xxx

xxx

xxx

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COURT:
Any cross?
ATTY. UY (counsel for defendant):
No cross-examination, Your Honor. (T.S.N. p. 65, November 15, 1978). (Rollo, pp. 127-128)
The statements of the cashier were not rebutted. Not only did the petitioner's counsel waive the cross-examination on
the matter of income but he failed to comply with his promise to produce pertinent records. When a subpoena duces
tecum was issued to the petitioner for the production of their records of sale, his counsel voluntarily offered to bring
them to court. He asked for sufficient time prompting the court to cancel all hearings for January, 1981 and reset
them to the later part of the following month. The petitioner's counsel never produced any books, prompting the trial
court to state:
Counsel for the defendant admitted that the sales of Sun Wah were registered or recorded in the daily sales book.
ledgers, journals and for this purpose, employed a bookkeeper. This inspired the Court to ask counsel for the
defendant to bring said records and counsel for the defendant promised to bring those that were available.
Seemingly, that was the reason why this case dragged for quite sometime. To bemuddle the issue, defendant instead
of presenting the books where the same, etc. were recorded, presented witnesses who claimed to have supplied
chicken, meat, shrimps, egg and other poultry products which, however, did not show the gross sales nor does it
prove that the same is the best evidence. This Court gave warning to the defendant's counsel that if he failed to
produce the books, the same will be considered a waiver on the part of the defendant to produce the said books
inimitably showing decisive records on the income of the eatery pursuant to the Rules of Court (Sec. 5(e) Rule 131).
"Evidence willfully suppressed would be adverse if produced." (Rollo, p. 145)
The records show that the trial court went out of its way to accord due process to the petitioner.
The defendant was given all the chance to present all conceivable witnesses, after the plaintiff has rested his case on
February 25, 1981, however, after presenting several witnesses, counsel for defendant promised that he will present
the defendant as his last witness. Notably there were several postponement asked by counsel for the defendant and
the last one was on October 1, 1981 when he asked that this case be postponed for 45 days because said defendant
was then in Hongkong and he (defendant) will be back after said period. The Court acting with great concern and
understanding reset the hearing to November 17, 1981. On said date, the counsel for the defendant who again failed
to present the defendant asked for another postponement, this time to November 24, 1981 in order to give said
defendant another judicial magnanimity and substantial due process. It was however a condition in the order granting
the postponement to said date that if the defendant cannot be presented, counsel is deemed to have waived the
presentation of said witness and will submit his case for decision.
On November 24, 1981, there being a typhoon prevailing in Manila said date was declared a partial non-working
holiday, so much so, the hearing was reset to December 7 and 22, 1981. On December 7, 1981, on motion of
defendant's counsel, the same was again reset to December 22, 1981 as previously scheduled which hearing was
understood as intransferable in character. Again on December 22, 1981, the defendant's counsel asked for
postponement on the ground that the defendant was sick. the Court, after much tolerance and judicial magnanimity,
denied said motion and ordered that the case be submitted for resolution based on the evidence on record and gave
the parties 30 days from December 23, 1981, within which to file their simultaneous memoranda. (Rollo, pp. 148-150)
The restaurant is located at No. 747 Florentino Torres, Sta. Cruz, Manila in front of the Republic Supermarket. It is
near the corner of Claro M. Recto Street. According to the trial court, it is in the heart of Chinatown where people who
buy and sell jewelries, businessmen, brokers, manager, bank employees, and people from all walks of life converge
and patronize Sun Wah.

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There is more than substantial evidence to support the factual findings of the trial court and the appellate court. If the
respondent court awarded damages only from judicial demand in 1978 and not from the opening of the restaurant in
1955, it is because of the petitioner's contentions that all profits were being plowed back into the expansion of the
business. There is no basis in the records to sustain the petitioners contention that the damages awarded are
excessive. Even if the Court is minded to modify the factual findings of both the trial court and the appellate court, it
cannot refer to any portion of the records for such modification. There is no basis in the records for this Court to
change or set aside the factual findings of the trial court and the appellate court. The petitioner was given every
opportunity to refute or rebut the respondent's submissions but, after promising to do so, it deliberately failed to
present its books and other evidence.
The resolution of the Intermediate Appellate Court ordering the payment of the petitioner's obligation shows that the
same continues until fully paid. The question now arises as to whether or not the payment of a share of profits shall
continue into the future with no fixed ending date.
Considering the facts of this case, the Court may decree a dissolution of the partnership under Article 1831 of the
Civil Code which, in part, provides:
Art. 1831. On application by or for a partner the court shall decree a dissolution whenever:
xxx xxx xxx
(3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business;
(4) A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself
in matters relating to the partnership business that it is not reasonably practicable to carry on the business in
partnership with him;
xxx xxx xxx
(6) Other circumstances render a dissolution equitable.
There shall be a liquidation and winding up of partnership affairs, return of capital, and other incidents of dissolution
because the continuation of the partnership has become inequitable.
WHEREFORE, the petition for review is hereby DISMISSED for lack of merit. The decision of the respondent court is
AFFIRMED with a MODIFICATION that as indicated above, the partnership of the parties is ordered dissolved.
SO ORDERED.

EN BANC
G.R. No. L-6304

December 29, 1953

SERGIO V. SISON, Plaintiff-Appellant, vs. HELEN J. MCQUAID, Defendant-Appellee.


Manansala and Manansala for appellant.

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J.C. Orendain for appllee.
REYES, J.:
On March 28, 1951, plaintiff brought an action in the Court of First Instance of Manila against defendant, alleging that
during the year 1938 the latter borrowed from him various sums of money, aggregating P2,210, to enable her to pay
her obligation to the Bureau of Forestry and to add to her capital in her lumber business, receipt of the amounts
advanced being acknowledged in a document, Exhibit A, executed by her on November 10, 1938 and attached to the
complaint; that as defendant was not able to pay the loan in 1938, as she had promised, she proposed to take in
plaintiff as a partner in her lumber business, plaintiff to contribute to the partnership the said sum of P2,210 due him
from defendant in addition to his personal services; that plaintiff agreed to defendant's proposal and, as a result,
there was formed between them, under the provisions of the Civil Code, a partnership in which they were to share
alike in the income or profits of the business, each to get one-half thereof; that in accordance with said contract,
plaintiff, together with defendant, rendered services to the partnership without compensation from June 15, 1938 to
December, 1941; that before the last World War, the partnership sold to the United States Army 230,000 board feet of
lumber for P13,800, for the collection of which sum defendant, as manager of the partnership, filed the corresponding
claim with the said army after the war; that the claim was "finally" approved and the full amount paid - the complaint
does not say when - but defendant has persistently refused to deliver one-half of it, or P6,900, to plaintiff
notwithstanding repeated demands, investing the whole sum of P13,800 for her own benefit. Plaintiff, therefore, prays
for judgment declaring the existence of the alleged partnership and requiring the defendant to pay him the said sum
of P6,900, in addition to damages and costs.chanroblesvirtualawlibrary chanrobles virtual law library
Notified of the action, defendant filed a motion to dismiss on the grounds that plaintiff's action had already prescribed,
that plaintiff's claim was not provable under the Statute of Frauds, and that the complaint stated no cause of action.
Sustaining the first ground, the court dismissed the case, whereupon, plaintiff appealed to the Court of Appeals; but
that court has certified the case here on the ground that the appeal involved only questions of
law.chanroblesvirtualawlibrary chanrobles virtual law library
It is not clear from the allegations of the complaint just when plaintiff's cause of action accrued. Consequently, it
cannot be determined with certainty whether that action has already prescribed or not. Such being the case, the
defense of prescription can not be sustained on a mere motion to dismiss based on what appears on the face of the
complaint.chanroblesvirtualawlibrary chanrobles virtual law library
But though the reason given for the order of dismissal be untenable, we find that the said order should be upheld on
the ground that the complaint states no cause of action, which is also one of the grounds on which defendant's
motion to dismiss was based. Plaintiff seeks to recover from defendant one-half of the purchase price of lumber sold
by the partnership to the United States Army. But his complaint does not show why he should be entitled to the sum
he claims. It does not allege that there has been a liquidation of the partnership business and the said sum has been
found to be due him as his share of the profits. The proceeds from the sale of a certain amount of lumber cannot be
considered profits until costs and expenses have been deducted. Moreover, the profits of the business cannot be
determined by taking into account the result of one particular transaction instead of all the transactions had. Hence,
the need for a general liquidation before a member of a partnership may claim a specific sum as his share of the
profits.chanroblesvirtualawlibrary chanrobles virtual law library
In view of the foregoing, the order of dismissal is affirmed, but on the ground that the complaint states no cause of
action and without prejudice to the filing of an action for accounting or liquidation should that be what plaintiff really
wants. Without costs in this instance.cha

58 | P a g e

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-47823

July 26, 1943

59 | P a g e
JOSE ORNUM and EMERENCIANA ORNUM, petitioners,
vs.
MARIANO, LASALA, et al., respondent.
Marcelino Lontok for petitioners.
Duran, Lim and Bausa and Augusto Francisco for respondents.
PARAS, J.:
The following facts are practically admitted in the pleadings and briefs of the parties: The respondents (plaintiffs
below) are natives of Taal, Batangas, and resided therein or in Manila. The petitioners (defendants below) are also
natives of Taal, but resided in the barrio of Tan-agan, municipality of Tablas, Province of Romblon. In 1908 Pedro
Lasala, father of the respondents, and Emerenciano Ornum formed a partnership, whereby the former, as capitalist,
delivered the sum of P1,000 to the latter who, as industrial partner, was to conduct a business at his place of
residence in Romblon. In 1912, when the assets of the partnership consisted of outstanding accounts and old stock
of merchandise, Emerenciano Ornum, following the wishes of his wife, asked for the dissolution of the Lasala,
Emerenciano Ornum looked for some one who could take his place and he suggested the names of the petitioners
who accordingly became the new partners. Upon joining the business, the petitioners, contributed P505.54 as their
capital, with the result that in the new partnership Pedro Lasala had a capital of P1,000, appraised value of the
assets of the former partnership, plus the said P505.54 invested by the petitioners who, as industrial partners, were
to run the business in Romblon. After the death of Pedro Lasala, his children (the respondents) succeeded to all his
rights and interest in the partnership. The partners never knew each other personally. No formal partnership
agreement was ever executed. The petitioners, as managing partners, were received one-half of the net gains, and
the other half was to be divided between them and the Lasala group in proportion to the capital put in by each group.
During the course divided, but the partners were given the election, as evidenced by the statements of accounts
referred to in the decision of the Court of Appeals, to invest their respective shares in such profits as additional
capital. The petitioners accordingly let a greater part of their profits as additional investment in the partnership. After
twenty years the business had grown to such an extent that is total value, including profits, amounted to P44,618.67.
Statements of accounts were periodically prepared by the petitioners and sent to the respondents who invariably did
not make any objection thereto. Before the last statement of accounts was made, the respondents had received
P5,387.29 by way of profits. The last and final statement of accounts, dated May 27, 1932, and prepared by the
petitioners after the respondents had announced their desire to dissolve the partnership, read as follows:
Ganancia total desde el ultimo balance hasta la fecha
P575.45
Participacion del capital de los hermanos Lasala en la ganancia
P55.39
Participacion del capital de Jose Ornum en el ganancia
125.79
Participacion de Jose Ornum como socio industrial
143.96
Participacion del capital de Emerenciana Ornum en la ganancia

60 | P a g e
106.54
Participacion de Emerenciana Ornum como socia industrial
143.86
Siendo este el balance final lo siguiente es la cantidad que debe corresponder a cada socio:
Capital de los hermanos Lasala segun el ultimo balance
P4,393.08
Ganancia de este capital
55.39
P4,448.47
Pero se debe deducir la cantidad tomada por los hermanos Lasala
1,730.00
Cantidad nota que debe corresponder a los hermanos Lasala
P2,718.47
Capital de Jose Ornum segun el ultimo balance
P9,975.13
Ganancia de este capital
125.79
Participacion de Jose Ornum como socio industrial
143.86
P10,244.65
Pero se debe deducir la cantidad tomada por Jose Ornum
1,650.00
Cantidad neta que debe corresponder a Jose Ornum
P8,594.65
Capital de Emerenciana Ornum segun el ultimo balance
P8,448.00

61 | P a g e

Ganancia de este capital


106.54
Participacion de Emerenciana Ornum como socia industrial
143.86
P8,698.40
Pero se debe deducir la cantidad tomada por Emerenciana Ornum
1,850.00
Cantidad neta que debe corresponder a Emerenciana Ornum
P6,848.40
After the receipt of the foregoing statement of accounts, Father Mariano Lasala, spokesman for the respondents,
wrote the following letter to the petitioners on July 19, 1932:
Ya te manifestamos francamente aqui, como consocio, y te autorizamos tambien para que lo repitas a tu hermana
Mering, viuda, que el motivo porque recogemos el capital y utilidades de nuestra sociedad en todo nuestro negocio
que esta al cuidado vosotros dos, es que tenemos un grande compromiso que casi no podemos evitarlo. Por esto
volvemos a rogarles que por cualquier medio antes de terminar este mes de julio, 1932, nosotros esperamos vuestra
consideracion. Gracias.
En cuanto hayamos recibido esto, entonces firmaremos el balance que habeis hecho alli, cuya copia has dejado
aqui.
Recuerdos a todos alli y mandar.
Pursuant to the request contained in this letter, the petitioners remitted and paid to the respondents the total amount
corresponding to them under the above-quoted statement of accounts which, however, was not signed by the latter.
Thereafter the complaint in this case was filed by the respondents, praying for an accounting and final liquidation of
the assets of the partnership. The Court of First Instance of Manila held that the last and final statement of accounts
prepared by the petitioners was tacitly approved and accepted by the respondents who, by virtue of the abovequoted letter of Father Mariano Lasala, lost their right to a further accounting from the moment they received and
accepted their shares as itemized in said statement. This judgment was reversed by the Court of Appeals principally
on the ground that as the final statement of accounts remains unsigned by the respondents, the same stands
disapproved. The decision appealed by the petitioners thus said:
To support a plea of a stated account so as to conclude the parties in relation to all dealings between them, the
accounting must be shown to have been final. (1 Cyc. 366.) All the first nine statements which the defendants sent
the plaintiffs were partial settlements, while the last, although intended to be final, has not been signed.
We hold that the last and final statement of accounts hereinabove quoted, had been approved by the respondents.
This approval resulted, by virtue of the letter of Father Mariano Lasala of July 19, 1932, quoted in part in the
appealed decision from the failure of the respondents to object to the statement and from their promise to sign the
same as soon as they received their shares as shown in said statement. After such shares had been paid by the

62 | P a g e
petitioners and accepted by the respondents without any reservation, the approval of the statement of accounts was
virtually confirmed and its signing thereby became a mere formality to be complied with by the respondents
exclusively. Their refusal to sign, after receiving their shares, amounted to a waiver to that formality in favor of the
petitioners who has already performed their obligation.
This approval precludes any right on the part of the respondents to a further liquidation, unless the latter can show
that there was fraud, deceit, error or mistake in said approval. (Pastor, vs. Nicasio, 6 Phil., 152; Aldecoa & Co., vs.
Warner, Barnes & Co., 16 Phil., 423; Gonsalez vs. Harty, 32 Phil. 328.) The Court of Appeals did not make any
findings that there was fraud, and on the matter of error or mistake it merely said:
The question, then is, have mistakes, been committed in the statements sent appellants? Not only do plaintiffs so
allege, and not only does not evidence so tend to prove, but the charge is seconded by the defendants themselves
when in their counterclaims they said:
"(a) Que recientemente se ha hecho una acabada revision de las cuentas y libros del negocio, y, se ha descubierto
que los demandados cometieron un error al hacer las entregas de las varias cantidades en efectivo a los
demandantes, entregando en total mayor cantidades a la que tenian derecho estos por su participacion y ganancias
en dicho negocio;
"(b) Que el exceso entregado a los demandantes, asciende a la suma de quinientos setenta y cinco pesos con doce
centimos (P575.12), y que los demandados reclaman ahora de aquellos su devolucion o pago en la presente
contrademanda;"
In our opinion, the pronouncement that the evidence tends to prove that there were mistakes in the petitioners'
statements of accounts, without specifying the mistakes, merely intimates as suspicion and is not such a positive and
unmistakable finding of fact (Cf. Concepcion vs. People, G.R. No. 48169, promulgated December 28, 1942) as to
justify a revision, especially because the Court of Appeals has relied on the bare allegations of the parties, Even
admitting that, as alleged by the petitioners in their counterclaim, they overpaid the respondents in the sum of
P575.12, this error is essentially fatal to the latter's theory what the statement of accounts shows, and is therefore not
the kind of error that calls for another accounting which will serve the purpose of the respondent's suit. Moreover, as
the petitioners did not appeal from the decision of the Court abandoned such allegation in the Court of Appeals.
If the liquidation is ordered in the absence of any particular error, found as a fact, simply because no damage will be
suffered by the petitioners in case the latter's final statement of the accounts proves to be correct, we shall be
assuming a fundamentally inconsistent position. If there is not mistake, the only reason for a new accounting
disappears. The petitioners may not be prejudiced in the sense that they will be required to pay anything to the
respondents, but they will have to go to the trouble of itemizing accounts covering a period of twenty years mostly
from memory, its appearing that no regular books of accounts were kept. Stated more emphatically, they will be told
to do what seems to be hardly possible. When it is borne in mind that this case has been pending for nearly nine
years and that, if another accounting is ordered, a costly action or proceeding may arise which may not be disposed
of within a similar period, it is not improbable that the intended relief may in fact be the respondents' funeral.
We are reversing the appealed decision on the legal ground that the petitioners' final statement of accounts had been
approved by the respondents and no justifiable reason (fraud, deceit, error or mistake) has been positively and
unmistakably found by the Court of Appeals so as to warrant the liquidations sought by the respondents. In justice to
the petitioners, however, we may add that, considering that they ran the business of the partnership for about twenty
years at a place far from the residence of the respondents and without the latter's intervention; that the partners did
not even know each other personally; that no formal partnership agreement was entered into which bound the
petitioners under specific conditions; that the petitioners could have easily and freely alleged that the business
became partial, or even a total, loss for any plausible reason which they could have concocted, it appearing that the
partnership engaged in such uncertain ventures as agriculture, cattle raising and operation of rice mill, and the

63 | P a g e
petitioners did not keep any regular books of accounts; that the petitioners were still frank enough to disclose that the
original capital of P1,505.54 amounted, as of the date of the dissolution of the partnership, to P44,618.67; and that
the respondents had received a total of P8,105.76 out of their capital of P1,000, without any effort on their part, we
are reluctant even to make the conjecture that the petitioners had ever intended to, or actually did, take undue
advantage of the absence and confidence of the respondents. Indeed, we feel justified in stating that the petitioners
have here given a remarkable demonstration of the legendary honesty, good faith and industry with which the natives
of Taal pursue business arrangements similar to the partnership in question, and we would hate, in the absence of
any sufficient reason, to let such a beautiful legend have a distateful ending.
The appealed decision is hereby reversed and the petitioners (defendants below) absolved from the complaints of
the respondents (plaintiffs below), with costs against the latter.
Yulo, C.J., and Hontiveros, J., concur.

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