G.R. No.

L-13680

April 27, 1960

MAURO LOZANA, plaintiff-appellee, -versus- SERAFIN DEPAKAKIBO, defendant-appellant. LABRADOR, J.: Lozana entered into a partnership with Depakakibo wherein they established a capital of P30,000, Lozana furnishing 60% and Depakakibo, 40%, for the purpose of maintaining, operating and distributing electric light and power in the Municipality of Dumangas, under a franchise issued to Mrs. Piadosa Buenaflor. However, the franchise or certificate of public necessity and convenience in favor of 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 SC and a temporary certificate of public convenience was issued in the name of Olimpia D. Decolongon. Evidently because of the cancellation of the franchise in the name of Buenaflor, Lozana sold a generator to Decolongon in 1955. Depakakibo, on the other hand, sold one Crossly Diesel Engine, to the spouses Felix Jimenea and Felina Harder in 1956. Lozana brought an action against Serafin, 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, and that he is entitled to the possession thereof, but that Serafin has wrongfully detained them as a consequence of which Lozana suffered damages. He prayed that said properties be delivered back to him. Judge 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 favor of the defendant (for subsequent delivery to the plaintiff). Serafin denied 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. 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. 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. Issue: W/N Lozana violated the partnership agreement. Held: Yes. Ratio: As it appears 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 has 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. 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 Anti-Dummy law has not been violated as parties plaintiff and defendant are not aliens but Filipinos. 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.

G.R. No. L-33580

February 6, 1931

MAXIMILIANO SANCHO, plaintiff-appellant, vs. SEVERIANO LIZARRAGA, defendant-appellee. ROMUALDEZ, J.: The plaintiff brought an action for the rescission of a partnership contract between himself and the defendant, the reimbursement by the latter of his 50,000 peso investment therein, with interest at 12 per cent per annum from October 15, 1920. The defendant denies generally and specifically all the allegations of the complaint and asks 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. The CFI of Manila held 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. Issue: W/N Sancho entitled to rescission of the partnership contract and to the return of his investment. Held: No Ratio: Counsel for the appellee, says that the appeal is premature. 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. 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. But even going into the merits of the case, the affirmation of the judgment appealed from is inevitable. Articles 1681 and 1682 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.

G.R. No. L-19819 October 26, 1977 WILLIAM UY, plaintiff-appellee, vs. BARTOLOME PUZON, substituted by FRANCO PUZON, defendant-appellant. CONCEPCION JR., J.: Bartolome Puzon had a contract with the government for the construction of the Ganyangan Bato Section of the Pagadian Zamboanga City Road, and of five (5) bridges in the Malangas-Ganyangan Road. Finding difficulty in accomplishing both projects, Puzon sought the financial assistance of 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". 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. But 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 PNB 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 encumbrances first. For this purpose, Uy gave Puzon the amount of P10,000 as advance contribution of his share in the partnership to be organized which amount will be used by Puzon to pay his obligations with the PNB. Uy again gave Puzon the amount of P30,000 as his partial contribution to the proposed partnership and which Puzon was to use in payment of his obligation to the Rehabilitation Finance Corporation. Puzon promised Uy that the amount of P150,000 would be given to the partnership to be applied thusly: P40,000.00, as reimbursement of the capital contribution of Uy which 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. Although the partnership agreement was signed by the parties in 1957, work on the projects was started by the partnership in 1956 in view of the insistence of the Bureau of Public Highways to complete the project right away. Since Puzon was busy with his other projects, Uy was entrusted with the management of the projects and whatever expense the latter might incur, would be considered as part of his contribution. At the end of December 1957, Uy had contributed to the partnership the amount of P115,453.39, including his capital. The loan of Puzon was approved and he gave to Uy the amount of P60,000.00. Of this amount, P40,000.00 was for the reimbursement of Uy's contribution, and the P20,000.00 as Puzon's contribution to the partnership capital. To guarantee the repayment of the loan, Puzon, without the knowledge and consent of Uy, assigned to PNB all the payments to be received on account of the contracts with the Bureau of Public Highways. By virtue of said assignment, the Bureau of Public Highways paid the money due on the partial accomplishments on the government projects to PNB 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, 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, Uy, who supervised the said projects, found difficulty in obtaining the necessary funds with which to pursue the construction projects. Uy called on Puzon to comply with his obligations under the terms of their partnership and to place, at least, his capital contribution at the disposal of the partnership. Despite several promises, Puzon, however, failed to do so.

Failing to reach an agreement with Uy, Puzon, as prime contractor of the construction projects, wrote the subcontractor, U.P. Construction Company, 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 subcontract 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. On November 27, 1957, Bartolome Puzon again wrote the U.P.Construction Company finally terminating their subcontract agreement as of December 1, 1957. Thereafter, 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 Puzon who continued with the construction projects alone. On May 20, 1958, Uy, claiming that Bartolome Puzon had violated the terms of their partnership agreement, instituted an action in court, seeking the dissolution of the partnership and payment of damages. 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 and ordered the dissolution of the partnership. The trial court further ordered the defendant to pay the plaintiff the sum of P320,103.13. Issue: W/N Puzon is guilty of breach of contract. Held: Yes Ratio: After giving the amount of 60,00 he obtained from the loan, the appellant failed to make any further contributions to 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. 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 is merely a personal loan of Puzon which he had paid to Uy, is plainly untenable. The terms of the receipts signed by Puzon are clear and unequivocal that the sums of money given by the Uy are Uy's partial contributions to the partnership capital. The findings of the trial court that Puzon misapplied partnership funds is, likewise, sustained by competent evidence. It is of record that he assigned to PNB all the payments to be received on account of the contracts to guarantee the repayment of the bank. By virtue of his personal loan with the said bank assignment, the Bureau of Public Highways paid the money due on the partial accomplishments on the construction projects in question to PNB who, in turn, applied portions of it in payment of the appellant's loan. Uy categorically stated that the assignment was made without his prior knowledge and consent and that when he learned of said assignment, he called the attention of Puzon 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. That the assignment to PNB was prejudicial to the partnership cannot be denied. The record shows that 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 assignment made by Puzon to PNB, 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. If Puzon gave to the partnership all that were earned 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. 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. Since the defendant appellant was at fault, the trial 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? The commissioners are agreed that at the end of December, 1957, the appellee had a balance of P8,242.39. 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, 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 expenses 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. However, defendant admitted that said checks 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 checks he received were exchanged 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.

As for the sum of P26,027.04, the same represents the expenses which the appellee paid in connection with 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. In resume', the appellee's credit balance would be as follows: Undisputed balance as of Dec. 1957

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

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. 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

3,917,39

Add: Payments to Munoz, as subcontractor of five Bridges

4,665.00

Total Investments

P115,453.39

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. Contrary to the appellant's claim, the partnership showed some profits during the period from July 2, 1956 to December 31, 1957. It showed a net loss of P134,019.43 due to the confusing accounting method employed by the auditor. 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. Besides, as We have heretofore pointed out, the appellant received from the Bureau of Public Highways, in payment of the construction projects in question, the amount of P1,047,181.01 and disbursed the amount of P952,839.77, 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 from the projects in question, in the custody of the Bureau of Public Highways, in the amount of P128,669.75, representing the 10% retention. After the trial of this case, it was shown that the total retentions amounted to P145,358.00. 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.

G.R. No. 5840

September 17, 1910

THE UNITED STATES, plaintiff-appellee, vs. EUSEBIO CLARIN, defendant-appellant. ARELLANO, C.J.: 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. 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 one arising from the partnership contract for a liquidation of the partnership and a levy on its assets if there should be any. 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. People v. Campos FACTS Leoncio Campos and Bonifacio Guzman entered into a contract of partnership. The contract states that Campos owns a bulldozer and will work the fields in Barrio Cambabalo at the rate of Php 55.00 per hectare. The two of them will share the expenses; Campos will pay for the bulldozer while Guzman will pay for the oil (not more than 15 drums), they will share the cost of the seeds. Guzman leased from Juan Alonzo for 75 cavans of palay. February 25, 1955 Campos told Guzman that the harvested palay was ready for threshing. Guzman sent his nephew, Manuel Mathias, to observe the threshing with specific instructions to segregate the their of the palay, the share of the tenants and the 75 cavans of palay for rent woth Php 750.00. Guzmans share is to be deposited at the warehouse Payment for rent is to be delivered to Campos for delivery to Alonzo. o Mathias and Campos fetched Alonzos daughter, Concepcion, and advised her to pick it up. She cant make it today and promised to come back the next day. But, when she came for the palay, it was already missing and Campos begged her not to tell Guzman. o She told her father, who asked Guzman about it. Guzman wrote Campos a letter, to which he never replied to. Guzman filed a complaint for estafa against Campos for misappropriating and converting the goods received by him in trust or commission or for administration. Campos claims that overall, they havent liquidated their partnership yet because they still have unsettled accounts. Before the partnership formed, he already worked the land and allegedly spent Php 2,000.00 with half being shouldered by Guzman o Guzman hired him to construct a dike for Php 1.20 per cubic meter for this particular land. They had a similar partnership for the agricultural year of 1954-1955, leasing the land of Avelino Odollo For the 2 previous jobs, Guzman made partial settlements but still has an unpaid balance of Php 1,000.00 Trial Court found him guilty of Estafa, sentenced to imprisonment (1 month & 1 day to 1 year & 1 day) and to indemnify Guzman Php 750.00 ISSUE/HELD/RATIO W/N there was material variance between the information and the evidence? No.

Defense: Information states that the palay should have been delivered to Guzman when Campos was under obligation to deliver it to Alonzo. Campos should not be convicted for estafa with Guzman as the offended party, it should have been Alonzo. Court: If the palay was not delivered to Alonzo, Guzman will have to pay him Php 750.00. Guzman is the offended party because his indebtedness for the rent would still subsist of Campos did not deliver the palay to Alonzo. W/N Campos is guilty of estafa? Yes. Defense: The partnership had not yet been liquidated. No accounting had been made between them. Guzman still havent fully paid for his share of under the partnership The expenses incurred still havent been deducted from the 120 cavanes of harvested palay. Mathias: Segregation of the harvests had already been made, thus liquidating the partnership Concepcion: Affirmed that Mathias and Campos went to her and informed her that she can pick-up the palay for the rentals. Court: 1. There had already been liquidation; 75 cavanes of palay couldnt have been segregated without some sort accounting. 2. Asking Concepcion not to report to Guzman reveals a guilty conscience. 3. Even if the partnership had not yet been liquidated, the 75 cavanes of palay no longer belonged to the partnership. He had a duty of deliver it to Alonzo in payment of their rentals. a. A partner is guilty of estafa if he fraudulently appropriates partnership property delivered to him with specific instructions to apply it to the used of the partnership. (People v. Dela Cruz) b. Campos converted and misappropriated the 75 cavanes of palay to his own personal use and benefit, instead of performing his duty. RULING: AFFIRMED, guilty of estafa beyond reasonable doubt.

G.R. No. L-5236

January 10, 1910

PEDRO MARTINEZ, plaintiff-appellee, vs. ONG PONG CO and ONG LAY, defendants. ONG PONG CO., appellant. 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. 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 was 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 findings 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 cannot 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.

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.: Facts : 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 P1,000 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. Pecson filed an action for the recovery of a sum of money (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 CFI held that Moran return to plaintiff Pecson the sum of P17,000.00, with interest at the legal rate. From this decision, both parties appealed to the respondent Court of Appeals. The latter likewise rendered a decision against the petitioner ordering him to pay 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 Issue: W/N Pecson is entitled to the amounts stated above. Held: Ratio:

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. 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. 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 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: 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. 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: ... 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: (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; (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) ... 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. 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 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. 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. This P 7,000 is part consideration, and in cash, of the P20,000 promissory note and it is being presented to show the consideration for the P20,000 note and the existence and validity of the obligation.

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 which, together with the promised profit of P8,000 made up for the consideration of the P14,000 promissory note. 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. N-Receipt of plaintiff dated March 30, 1971 for the return of his P3,000 out of his capital investment of P6,000 in the P14,000 promissory note. 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. 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. 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. 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, especially 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) 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 Teehankee (Chairman), Melencio-Herrera, Plana and Relova, JJ., concur. De la Fuente J., took no part.

M. TEAGUE vs. H. MARTIN, J. T. MADDY and L.H. GOLUCKE, September 12, 1929 Facts: 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. 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. "Plans for formation of a limited partnership," Captain Maddy would have charge of the Barracuda and its navigation, with a salary of P300 per month Martin would have charge of the southern station, cold stores, commisary and procuring fish, with a salary of P300 per month, Teague (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. CFI: dissolved the partnership and liquidated its assets 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 Plaintiff appeals the ruling of the Trial Court Plaintiff contends that he is managing partner of the partnership and the three properties (Lapu-Lapu, Barracuda & Ford truck) are properties of the partnership since they were paid from the profits of the partnership thus do not belong to him. Issue: 1.) Whether the plaintiff is a managing partner of a partnership (Thus can make purchases for the partnership without the knowledge and/or consent of his copartners) 2.) Whether the three properties are owned by the partnership Held/Ratio: 1.) YES. All three of the partners are general managers in their particular part of business 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." 2.) NO. 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. The plaintiff's 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. Plaintiff must be compensated for the partnership's use of the Lapu-Lapu (a lighter; a type of flat-bottomed barge) Court ruled he is entitled for P2,000 Decision: CFI ruling affirmed. GAVINO SANTOS vs. CENON VILLANUEVA, J.B.L. Ryes, Sept. 7, 1953 Facts: Santos filed a recission of the sale of a tailoring shop (named Esquire) executed between defendants Emiliano del Rosario (vendor) and Cenon Villanueva and/or Corazon del Rosario (vendee)

Santos contends that the tailoring shop is owned in common by 3 partners, namely, himself, Luisito del Rosario, and defendant Emiliano del Rosario; although the contract was not reduced in writing because they were brothers but each partner contributed P5,000 to the common fund, and Emiliano, being the one managing the tailor shop, registered such business Plaintiff also contends that and the sale made by Cenon Villanueva and/or Corazon del Rosario was w/o the knowledge and consent of the other partners hence void under Art. 143 of the Code of Commerce which gives us that "no partner can transfer to another person the interest he may have in the co-partnership Defense of Cenon Villanueva and Corazon del Rosario The licenses awarded to the tailoring shop was under the name of Emiliano del Rosario At the office of SEC, they found no partnership operating as a tailoring shop and registered under the name of Esquire CFI ruled there is a partnership Esquire is owned in common by the 3 partners hence the sale is null and void for it was done without the consent & knowledge of the other partner Issue: 1.) Whether a partnership is formed 2.) Whether the defendants are buyers in good faith Held/Ratio: 1.) YES. In Emiliano's application for the registration of the firm name "Esquire" in the Bureau of Commerce, wherein he not only named his partners in the business but expressly stated there shares in the partnership as well. 2.) NO. At the time of the perfection of the contract of sale, the defendants knew that Emiliano does not solely owns the tailor shop by himself as evidenced by the registration of the firm name "Esquire" in the Bureau of Commerce. Decision: CFI ruling affirmed.

G.R. No. 70926 January 31, 1989 DAN FUE LEUNG, petitioner, vs. HON. INTERMEDIATE APPELLATE COURT and LEUNG YIU, respondents. GUTIERREZ, JR., J.: Facts: This case originated from a complaint filed by Leung Yiu with the then CFI of Manila, to recover the sum equivalent to twenty-two percent (22%) of the annual profits derived from the operation of Sun Wah Panciteria from petitioner Dan Fue Leung. The Sun Wah Panciteria 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 Fue Leung as the sole proprietor. 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 wherein the petitioner acknowledged his acceptance of

the P4,000.00 by affixing his signature thereto. Witnesses So Sia and Antonio Ah Heng corroborated the private respondents testimony to the effect that they were both present when the receipt was signed by the petitioner. Furthermore, the private respondent received from the petitioner the amount of P12,000.00 from the profits of the operation of the restaurant for the year 1974. The petitioner denied having received from the private respondent the amount of P4,000.00. He contested and impugned the genuineness of the receipt. 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 and waiter 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. The trial court ruled in favor of the private respondent. The petitioner appealed the trial court's decision to the then IAC which affirmed the lower court's decision. Issue: Whether or not the private respondent is a partner of the petitioner in the establishment of Sun Wah Panciteria. Held: Yes Ratio: 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. 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. 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 proven allegations 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". 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'. The records show that when the pay envelopes 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 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; (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 extra-judicial demand by the creditor, and when there is any written acknowledgment of the debt by the debtor.' The argument is not well-taken. 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. The private respondent presented the cashier of Sun Wah Panciteria, a certain Mrs. Sarah L. Licup, to testify on the income of the restaurant. 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. Q And ten thousand pesos during pay day.?

A Yes. 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. 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. The resolution of the IAC 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: (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; (6) Other circumstances render a dissolution equitable.

G.R. No. L-6304

December 29, 1953

SERGIO V. SISON, plaintiff-appellant, vs. HELEN J. MCQUAID, defendant-appellee. REYES, J.: Facts: During the year 1938 Helen borrowed from Sison 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. Helen was not able to pay the loan, as she had promised, she proposed to take in Sison as a partner in her lumber business, Sison to contribute to the partnership the said sum of P2,210 due him from Helen in addition to his personal services. Sison agreed to Helen's proposal and, as a result, a partnership was formed in which they were to share 50-50 in the income or profits of the business. In accordance with said contract, plaintiff, together with defendant, rendered services to the partnership without compensation from June 15, 1938 to December, 1941.

Before the last World War, the partnership sold to the US Army 230,000 board feet of lumber for P13,800. When the claim was "finally" approved and the full amount paid, 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. 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. Issue: W/N Sison is entitled to one half of the proceeds from the sale of board feet to the US Army. Held: No. Ratio: 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 cannot be sustained on a mere motion to dismiss based on what appears on the face of the complaint. 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. 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.

LEYTE-SAMAR SALES CO VS CFI GR NO L-5963 FACTS:

MAY 20, 1953

LEYTE SAMAR SALES (LSS) and Raymond Tomassi are claiming damages against Far Eastern Lumber (FELCO), Hall, Brown, and Roxas. CFI awarded P31.589.14+costs of damages to LSS and Tomassi, CA confirmed this but removed the P2,000 Attys fees erroneously included The sheriff sold FLECO et. als buildings and properties to Dorfe and Asturias forP8,100. 4 Jun 1951 Lastrilla filed a claim on the sold property because he supposedly bought the shares and interests of Brown on 29 Sep1949 13Jun1951 Lastrillas claim was granted and the sheriff was required to retain for him 17% of the money 14Aug1951 Lastrilla was declared entilted to the 17% share

ISSUES: Does Lastrilla have a claim on the proceeds of the sale? NO RATIO: If he was a creditor of the FELCO, perhaps or maybe. But he was no. The partner of a partnership is not a creditor of such partnership for the amount of his shares. So Lastrilla acquired no right to demand any part of the money paid by Dorfe and Austrias to he sheriff any part of the money paid by Dorfe and Austrias to the sheriff for the benefit of FELCO and Tomassi, the plaintiffs in that case, for the reason that, as he says, his shares (acquired from Brown) could not have been and were not auctioned off to Dorfe and Austrias. Wherefore, the orders of the court recognizing Lastrilla's right and ordering payment to him of a part of the proceeds were patently erroneous, because promulgated in excess or outside of its jurisdiction. For this reason the respondents' argument resting on plaintiffs' failure to appeal from the orders on time, although ordinarily decisive, carries no persuasive force in this instance.

LA COMPANIA MARITIMA V. FRANCISCO MUNOZ ET AL (1907) Facts: March, 1905 - Francisco Muoz, Emilio Muoz, and Rafael Naval formed on ordinary general mercantile partnership under the name of Francisco Muoz & Sons for the purpose of carrying on a mercantile business in the Province of Albay Francisco Muoz was a capitalist partner and Emilio Muoz and Rafael Naval were industrial partners Against the partnership, La Compania Maritima is seeking to recover the sum of P26,828.30 CFI Manila, acting on the complaint, ruled against the defendant partnership, Francisco Muoz & Sons, and Francisco Muoz de Bustillo, but acquitted Emilio Muoz de Bustillo and Rafael Naval, discharging them from liability

Issue: WON ordinary general partnership was indeed formed the nature of the involvement of Emilio and Rafael in the partnership and their corresponding liability, if any, to the plaintiff

Held/Ratio: the articles of partnership, duly recorded in the mercantile registry in Albay, evidenced the fact of formation by the defendants of an ordinary general partnership; the claim that no such partnership was formed is not supported by any evidence as to the participation of Emilio in the partnership, neither the fact that he would receive his 1/8 share of the profits after only five years nor the fact that he is excluded from its management do not preclude his membership in the said partnership (such set-up was as agreed upon by the parties when they signed the articles of partnership, with Emilio as one of its industrial partners); Emilio is, in fact, a general partner as to the liability of Emilio and Rafael, the Court ratiocinated as follows:

 Paragraph 12 of the articles of partnership states: Twelfth. All profits arising from mercantile transactions carried on, as well as such as may be obtained from the sale of property and other assets which constitute the corporate capital, shall be distributed, on completion of the term of five years agreed to for the continuation of the partnership, in the following manner: Three-fourths thereof for the capitalist partner Francisco Muoz de Bustillo and one-eighth thereof for the industrial partner Emilio Muoz de Bustillo y Carpiso, and the remaining one-eighth thereof for the partner Rafael Naval y Garcia. If, in lieu of profits, losses should result in the winding up of the partnership, the same shall be for the sole and exclusive account of the capitalist partner Francisco Muoz de Bustillo, without either of the two industrial partners participating in such losses. On the other hand, Article 127 of the Code of Commerce is as follows: All the members of the general copartnership, be they or be they not managing partners of the same, are liable personally and in solidum with all their property for the results of the transactions made in the name and for the account of the partnership, under the signature of the latter, and by a person authorized to make use thereof.

In a general partnership, all members are general partners. The fact that some may be industrial and some capitalist partners do not make a difference. Whether capitalist or industrial, both retain the right to participate in the management of the partnership, examine its books, use the firm name and among others, be obligated to pay the liabilities of the partnership with their private property after exhaustion of the partnerships property. To bolster the Courts position, and to disprove the seeming conflict presented by the Articles aforequoted, the Court notes that the Civil Code has distinct sections treating of the obligations of the partners between themselves and the liability of the partners as to third persons. The partitioning of the burden of losses among the partners and the responsibility of the partners toward third persons are therefore distinct and different. Also, if indeed it was intended by the law that industrial partners be excluded from responsibility towards third persons, what would happen then to the creditors of the partnership if the partnership consisted of only industrial partners? Thus, neither on principle nor on authority can the industrial partner be relieved from liability to third persons for the debts of the partnership. Thus, the judgment of the lower court is reversed and all the defendants are ordered to pay the sum of P26,828.30, with interest thereon at the rate of 8 per cent per annum. Following Article 237 of the Code of Commerce, however, the execution of such judgment shall not issue against the private property of the defendants Francisco Muoz, Emilio Muoz, or Rafael Naval until the property of the defendant Francisco Muoz & Sons is exhausted.

DIETRICH V. FREEMAN (1911) Facts: George Dietrich employed by the Manila Steam Laundry on 9 January, 1907, when the steam laundry was owned and operated by Freeman and Pierce. Pierce, on the 18th of January, 1907, sold all of his right, title, and interest in the said laundry to Whitcomb, who, together with Freeman, then became the owners of this laundry and continued to operate the same as long as the plaintiff was employed.

Dietrich is seeking to recover the sum of P952 alleged to be the balance due to him for services performed during the period from January 9, 1907, to December 31, 1908. Lower court rendered judgment in favor of the plaintiff and against Freeman and Whitcomb, jointly and severally, for the sum of P752, with interest. The complaint as to Pierce was dismissed, Whitcomb alone appealing.

Issue: WON Whitcomb liable to the plaintiff

Held/Ratio: It appears from the record that Whitcomb never knew the plaintiff, never had anything to do with personally, and that the plaintiff's contract was with Freeman, the managing partner of the laundry. It further appears from the record that Pierce, after he sold his interest in this laundry to Whitcomb, continued to look after Whitcomb's interest by authority of the latter. Also, Freeman and Whitcombs organization of the partnership were not compliant with the provisions of the Code of Commerce*; that is, no formal partnership was ever entered into by them, notwithstanding the fact that they were engaged in the operation of this laundry.

*(Art. 17. The record in the commercial registry shall be optional for private merchants and compulsory for associations established in accordance with this code or with special laws, and for vessels. Art. 119. Every commercial association before beginning business shall be obliged to record its establishment, agreements, and conditions in a public instrument, which shall be presented for record in the commercial registry, in accordance with the provisions of article 17.) The purpose for which this partnership was entered into by Freeman and Whitcomb show clearly that such partnership was not a commercial one; hence the provisions of the Civil Code and not the Code of Commerce must govern in determining the liability of the partners. Moreover, although the partnership was not organized according to the provisions of the Code Commerce, it could not be deemed as a cuentas en participacion where because it is constituted in such a manner that its existence is only known to those who had an interest in the same, there being no mutual agreement between the partners, and without a corporate name indicating to the public in some way that there were other people besides the one who ostensibly managed and conducted the business right of action can only be taken against such person in whose name the business is being conducted, and not against other persons interested in the partnership. In fact, in the case at bar, the plaintiff was employed by and performed services for the Manila Steam Laundry and was not employed by nor did he perform services for Freeman alone. The public did not deal with Freeman and Whitcomb personally, but with the Manila Steam Laundry. By the express provisions of articles 1698 and 1137 of the Civil Code the partners are not liable individually for the entire amount due the plaintiff. The liability is pro rata and in this case the appellant is responsible to the plaintiff for only one-half of the debt Judgment of the court below is reversed and judgment entered in favor of the plaintiff and against the defendant Whitcomb for the sum of P376, with interest as fixed by the court below.