Uy vs.
Puzon
Facts:
 Bartolome Puzon had two contracts with the
government for the construction of roads and
bridges. (Bureau of Public Highways)
 He sought the financial assistance of William
Uy, so he proposed that they create a
partnership which would be the sub-
contractor of the projects.
 They also agreed that the profits will be
divided among themselves.
 William Uy agreed to the formation of the
partnership "U.P. Construction Company".
They agreed to contribute P50,000
each. (Note: P40,000 was advanced by
William Uy while Puzon was waiting for the
approval of his P150,000 PNB Loan. Upon
release of the loan, he promised to reimburse
William Uy of the P40,000; pay his share of
P50,000 and loan P60,000 to the partnership).
 Loan was approved by November 1956. Note:
At the end of 1957, Uy contributed a total of
P115,
 The partnership agreement was signed in
1957 (January 18) although the work for the
projects began as early as 1956 (October 1).
 Since Puzon was busy with other projects, Uy
was the one who managed the partnership.
 In order to guarantee the PNB Loan, Puzon,
without the knowledge of Uy, assigned the
payments to the payments to be received from
the projects to PNB.
 Due to the financial demands of the projects,
Uy demanded that Puzon comply with his
obligation to place his capital contribution in
the company.
 However, Puzon failed to comply even after
formal demand letters were sent to him.
 Thereafter, Puzon (as the primary contractor
of the projects) wrote terminated the
subcontract agreement with the partnership
to which he is also a partner. (November 27,
1957)
 Thereafter, Uy was not allowed to hold office
in the UP Construction Company and his
authority to negotiate with the Bureau was
revoked by Puzon.
 Uy clamied that Puzon had violated the terms
of their partnership agreement. He sought for
the dissolution of the partnership with
damages.
 The lower court ruled in favor of Uy.
Issue: WON Puzon failed to comply with his
obligation of paying the capital contribution to the
company. YES
Ruling: YES
According to the court, there was failure on the part
of Puzon to contribute capital to the partnership.
When his load with PNB was approved, he only
gave P60,000 to Uy; P40,000 was for reimbursement
to the payments made by Uy and the other P20,000
was for the capital contribution. Thereafter, Puzon
never made additional contribution.
Also, it was found by the SC that Puzon misapplied
partnership funds by assigning all payments for the
projects to PNB.
Such assignment was prejudicial to the partnership
since the partnership only received a small share
from the total payments made by the Bureau of
Public Highways. As a result, the partnership was
unable to discharge its obligations.
Here, the Court ordered Puzon to reimburse
whatever amount Uy had invested in or spent for
the partnership on account of construction projects.
The amount P200,000 as compensatory damages
was also awarded in favor of Uy.
RULING:
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.