WILLIAM UY vs.

BARTOLOME PUZON, substituted by FRANCO PUZON

G.R. No. L-19819, October 26, 1977
Facts:
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 and of fve (5) bridges in
the Malangas-Ganyangan Road. Finding difculty in accomplishing both projects, he sought the fnancial
assistance of the plaintif, 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 profts to be divided equally between them.William Uy 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.
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
frst. For this purpose, 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 frm name U.P. CONSTRUCTION
COMPANY which amount mentioned above will be used by Puzon to pay his obligations with the Philippine
National Bank to efect the release of his mortgages with the said Bank.
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.
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.
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.
To guarantee the repayment of the above-mentioned loan, Bartolome Puzon, without the knowledge and
consent of William Uy, 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. 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, 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 fnancial demands of the projects increased, William Uy, who supervised the said
projects, found difculty 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. Realizing that his verbal demands were to no avail,
William Uy consequently wrote Bartolome Puzon formal letters of demand, to which Puzon replied that he is
unable to put in additional capital to continue with the projects.
Failing to reach an agreement with William Uy, Bartolome 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 efectively, 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.
Puzon again wrote the U.P.Construction Company fnally terminating their subcontract agreement.
Thereafter, William Uy was not allowed to hold ofce 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.
Uy now claims that Puzon had violated the terms of their partnership agreement, instituted an action in
court, seeking the dissolution of the partnership and payment of damages. Puzon denied that he violated the
terms of their agreement claiming that it was the plaintif, William Uy, who violated the terms thereof.
The trial court ordered Puzon to pay the Uy the sum of P320,103.13. Bartolome died during the pendency of
appeal thus was substituted by Franco.
Issue: WON Puzon caused the failure of the partnership to realize its profts and also failed to contribute his
share in the capital of the partnership.
Ruling: Yes
Rationale:
The fndings 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. 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.
The fndings 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. By virtue of the said appefant's
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 the Philippine National Bank who, in
turn, applied portions of it in payment of the appellant's loan.
Since Puzon was at fault, the trial court properly ordered him to reimburse Uy whatever amount latter
had invested in or spent for the partnership on account of construction projects. A partnership in a
construction venture who failed to stand by his commitment to the partnership will be ordered to
reimburse to his co-partner whatever the latter invested and spent for the projects of the venture.
ISABELO MORAN, JR. vs. THE HON. COURT OF APPEALS and MARIANO E. PECSON
G.R. No. L-59956 October 31, 1984
Facts:
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.
Also it was agreed upon 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.
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 frst installment on the date due, complete
with the costs of collection.
Pecson fled with the Court of First Instance of Manila an action for the recovery of a sum of money. CFI of
Manila ruled that:
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-plaintif and defendant the plaintif 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 of the ground. On the other hand,
the plaintif 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
Both parties appealed to the Court of Appeals ruled in favor of Pecson and awarded P47,500.00 as share in
the unrealized profts of the partnership.
Issue: WON Pecson is entitled to the P47,500 share awarded by the C.A as unrealized proft of the partnership
Ruling: No.
Rationale:
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).
In the instant case, there is no evidence whatsoever that the partnership between the petitioner and the private
respondent would have been a proftable 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.
In this case, there was mutual breach. Pecson failed to give his entire contribution in the amount of P15,000.00. He
contributed only P10,000.00. The Moran 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.
Being a contract of partnership, each partner must share in the profts 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 profts, in
the absence of fraud, the other partner cannot claim a right to recover the highly speculative profts.
It does not follow however that Pecson is not entitled to recover any amount from the Moran. The records show that the
Pecson gave P10,000.00 to the Moran. Moran 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 profts amount to only P6,000.00. This net proft of P6,000.00
should be divided between the Pecson and the Moran. 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 Pecson.
E. M. BACHRACH, vs."LA PROTECTORA", ET AL
G.R. No. L-11624 January 21, 1918
Facts:
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 negotiated the purchase of two automobile trucks from the plaintif, E. M.
Bachrach, for the agree price of P16,500.
Barba 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 frm "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 plaintif various automobile
efects 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, Bachrach 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 the city of Manila, upon May 29, 1914, against "La Protectora" and the fve 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 alleging they are not liable for the frms debts.
Issue: WON the said individuals are not liable for the partnerships debt.
Ruling: They are still liable.
Rationale:
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.
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, afords 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.
EVANGELISTA & CO., DOMINGO C. EVANGELISTA, JR., CONCHITA B. NAVARRO and LEONARDA ATIENZA ABAD SABTOS,
vs. ESTRELLA ABAD SANTOS
G.R. No. L-31684 June 28, 1973
Facts:
On October 9, 1954 a co-partnership was formed under the name of "Evangelista & Co." On June 7, 1955 the Articles of Co-
partnership was amended as to include herein respondent, Estrella Abad Santos, as industrial partner, with herein petitioners
Domingo C. Evangelista, Jr., Leonardo Atienza Abad Santos and Conchita P. Navarro, the original capitalist partners, remaining
in that capacity, with a contribution of P17,500 each.
The amended Articles provided, inter alia, that "the contribution of Estrella Abad Santos consists of her industry being an
industrial partner", and that the profts and losses "shall be divided and distributed among the partners ... in the proportion of
70% for the frst three partners, Domingo C. Evangelista, Jr., Conchita P. Navarro and Leonardo Atienza Abad Santos to be
divided among them equally; and 30% for the fourth partner Estrella Abad Santos."
On December 17, 1963 Estrella fled suit against the three other partners in the Court of First Instance of Manila, alleging that
the partnership, which was also made a party-defendant, had been paying dividends to the partners except to her; and that
notwithstanding her demands the defendants had refused and continued to refuse and let her examine the partnership books or
to give her information regarding the partnership afairs to pay her any share in the dividends declared by the partnership. She
therefore prayed that the defendants be ordered to render accounting to her of the partnership business and to pay her
corresponding share in the partnership profts after such accounting, plus attorney's fees and costs.
Evangelista et.al denied ever having declared dividends or distributed profts of the partnership. They also aver that Estrella did
not ever demanded that she be allowed to examine the partnership books. That the amended Articles of Co-partnership did not
express the true agreement of the parties, which was that the plaintif was not an industrial partner. And moreover they also
allege that Estrella did not in fact contribute industry to the partnership; and that her share of 30% was to be based on the
profts which might be realized by the partnership only until full payment of the loan which it had obtained in December, 1955
from the Rehabilitation Finance Corporation in the sum of P30,000, for which the plaintif had signed a promisory note as co-
maker and mortgaged her property as security.
Issue: WON Estrella is an industrial partner and is entitled to the share of the partnership.
Ruling: yes.
Rationale:
Article 1767 of the New Civil Code which provides that "By 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 profts among themselves, 'does not
specify the kind of industry that a partner may thus contribute, hence the said services may legitimately be considered as
appellee's contribution to the common fund. Another article of the same Code relied upon appellants reads:
'ART. 1789. An industrial partner cannot engage in business for himself, unless the partnership expressly permits him
to do so; and if he should do so, the capitalist partners may either exclude him from the frm or avail themselves of the
benefts which he may have obtained in violation of this provision, with a right to damages in either case.'
It is not disputed that the provision against the industrial partner engaging in business for himself seeks to prevent any
confict of interest between the industrial partner and the partnership, and to insure faithful compliance by said partner
with this prestation. There is no pretense, however, even on the part of Estrella is engaged in any business antagonistic
to that of appellant company, since being a Judge of one of the branches of the City Court of Manila can hardly be
characterized as a business.
That Estrella has faithfully complied with her prestation with respect to Evangelista et. Al. is clearly shown by the fact that it was
only after fling of the complaint in this case and the answer thereto appellants exercised their right of exclusion under the codal
art just mentioned by alleging in their Supplemental Answer dated June 29, 1964 or after around nine (9) years from June 7,
1955 subsequent to the fling of Evangelista et.al' answer to the complaint, Evangelista et.al reached an agreement whereby
Estrella been excluded from, and deprived of, her alleged share, interests or participation, as an alleged industrial partner, in the
defendant partnership and/or in its net profts or income, on the ground Estrella has never contributed her industry to the
partnership, instead she has been and still is a judge of the City Court (formerly Municipal Court) of the City of Manila, devoting
her time to performance of her duties as such judge and enjoying the privilege and emoluments appertaining to the said ofce,
aside from teaching in law school in Manila, without the express consent of the herein defendants' (Record On Appeal, pp. 24-25).
Having always known Estrella as a City judge even before she joined appellant company on June 7, 1955 as an industrial partner,
why did it take appellants many years before excluding her from said company as aforequoted allegations? And how can they
reconcile such exclusive with their main theory that appellee has never been such a partner because "The real agreement
evidenced by Exhibit "A" was to grant the appellee a share of 30% of the net profts which the appellant partnership may realize
from June 7, 1955, until the mortgage of P30,000.00 obtained from the Rehabilitation Finance Corporal shall have been fully
paid.