G.R. No. L-33580 February 6, 1931
In failing to order the defendant to return
MAXIMILIANO SANCHO, plaintiff-appellant,
vs.
SEVERIANO LIZARRAGA, defendant-appellee.
Jose Perez Cardenas and Jose M. Casal for
appellant.
Celso B. Jamora and Antonio Gonzalez for appellee.
ROMUALDEZ, J.:
The plaintiff brought an action for the rescission of a
partnership contract between himself and the
defendant, entered into on October 15, 1920, the
reimbursement by the latter of his 50,000 peso
investment therein, with interest at 12 per cent per
annum form October 15, 1920, with costs, and any
other just and equitable remedy against said
defendant.
The defendant denies generally and specifically all
the allegations of the complaint which are
incompatible with his special defenses, cross-
complaint and counterclaim, setting up the latter and
asking for the dissolution of the partnership, and the
payment to him as its manager and administrator of
P500 monthly from October 15, 1920, until the final
dissolution, with interest, one-half of said amount to
be charged to the plaintiff. He also prays for any
other just and equitable remedy.
The Court of First Instance of Manila, having heard
the cause, and finding it duly proved that the
defendant had not contributed all the capital he had
bound himself to invest, and that the plaintiff had
demanded that the defendant liquidate the
partnership, declared it dissolved on account of the
expiration of the period for which it was constituted,
and ordered the defendant, as managing partner, to
proceed without delay to liquidate it, submitting to
the court the result of the liquidation together with
the accounts and vouchers within the period of thirty
days from receipt of notice of said judgment, without
costs.
The plaintiff appealed from said decision making the
following assignments of error:
1. In holding that the plaintiff and appellant is
not entitled to the rescission of the
partnership contract, Exhibit A, and that
article 1124 of the Civil Code is not
applicable to the present case.
2.
the sum of P50,000 to the plaintiff with
interest from October 15, 1920, until fully
paid.
3. In denying the motion for a new trial.
In the brief filed by counsel for the appellee, a
preliminary question is raised purporting to show
that this appeal is premature and therefore will not
lie. The point is based on the contention that
inasmuch as the liquidation ordered by the trial court,
and the consequent accounts, have not been made
and submitted, the case cannot be deemed
terminated in said court and its ruling is not yet
appealable. In support of this contention counsel
cites section 123 of the Code of Civil Procedure, and
the decision of this court in the case of Natividad vs.
Villarica (31 Phil., 172).
This contention is well founded. Until the accounts
have been rendered as ordered by the trial court,
and until they have been either approved or
disapproved, the litigation involved in this action
cannot be considered as completely decided; and,
as it was held in said case of Natividad vs .Villarica,
also with reference to an appeal taken from a
decision ordering the rendition of accounts following
the dissolution of partnership, the appeal in the
instant case must be deemed premature.
But even going into the merits of the case, the
affirmation of the judgment appealed from is
inevitable. In view of the lower court's findings
referred to above, which we cannot revise because
the parol evidence has not been forwarded to this
court, articles 1681 and 1682 of the Civil Code have
been properly applied. Owing to the defendant's
failure to pay to the partnership the whole amount
which he bound himself to pay, he became indebted
to it for the remainder, with interest and any
damages occasioned thereby, but the plaintiff did
not thereby acquire the right to demand rescission of
the partnership contract according to article 1124 of
the Code. This article cannot be applied to the case
in question, because it refers to the resolution of
obligations in general, whereas article 1681 and
1682 specifically refer to the contract of partnership
in particular. And it is a well known principle that
special provisions prevail over general provisions.
By virtue of the foregoing, this appeal is hereby
dismissed, leaving the decision appealed from in full
force, without special pronouncement of costs. So
ordered.
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.:ñé+.£ªwph!1
This is a petition for review on certiorari of the
decision of the respondent Court of Appeals which
ordered petitioner Isabelo Moran, Jr. to pay
damages to respondent Mariano E, Pecson.
As found by the respondent Court of Appeals, the
undisputed facts indicate that: têñ.£îhqwâ£
xxx xxx xxx
... on February 22, 1971 Pecson and
Moran entered into an agreement
whereby both would contribute
P15,000 each for the purpose of
printing 95,000 posters (featuring the
delegates to the 1971 Constitutional
Convention), with Moran actually
supervising the work; that Pecson
would receive a commission of P
l,000 a month starting on April 15,
1971 up to December 15, 1971; that
on December 15, 1971, a liquidation
of the accounts in the distribution and
printing of the 95,000 posters would
be made, that Pecson gave Moran
P10,000 for which the latter issued a
receipt; that only a few posters were
printed; that on or about May 28,
1971, Moran executed in favor of
Pecson a promissory note in the
amount of P20,000 payable in two
equal installments (P10,000 payable
on or before June 15, 1971 and
P10,000 payable on or before June
30, 1971), the whole sum becoming
due upon default in the payment of
the first installment on the date due,
complete with the costs of collection.
Private respondent Pecson filed with the Court of
First Instance of Manila an action for the recovery of
a sum of money and alleged in his complaint three
(3) causes of action, namely: (1) on the alleged
partnership agreement, the return of his contribution
of P10,000.00, payment of his share in the profits
that the partnership would have earned, and,
payment of unpaid commission; (2) on the alleged
promissory note, payment of the sum of P20,000.00;
and, (3) moral and exemplary damages and
attorney's fees.
After the trial, the Court of First Instance held
that: têñ.£îhqwâ£
From the evidence presented it is
clear in the mind of the court that by
virtue of the partnership agreement
entered into by the parties-plaintiff
and defendant the plaintiff did
contribute P10,000.00, and another
sum of P7,000.00 for the Voice of the
Veteran or Delegate Magazine. Of
the expected 95,000 copies of the
posters, the defendant was able to
print 2,000 copies only authorized of
which, however, were sold at P5.00
each. Nothing more was done after
this and it can be said that the venture
did not really get off the ground. On
the other hand, the plaintiff failed to
give his full contribution of
P15,000.00. Thus, each party is
entitled to rescind the contract which
right is implied in reciprocal
obligations under Article 1385 of the
Civil Code whereunder 'rescission
creates the obligation to return the
things which were the object of the
contract ...
WHEREFORE, the court hereby
renders judgment ordering defendant
Isabelo C. Moran, Jr. to return to
plaintiff Mariano E. Pecson the sum
of P17,000.00, with interest at the
legal rate from the filing of the
complaint on June 19, 1972, and the
costs of the suit.
For insufficiency of evidence, the
counterclaim is hereby dismissed.
From this decision, both parties appealed to the
respondent Court of Appeals. The latter likewise
rendered a decision against the petitioner. The
dispositive portion of the decision
reads: têñ.£îhqwâ£
PREMISES CONSIDERED, the
decision appealed from is hereby
SET ASIDE, and a new one is hereby
 rendered, ordering defendant-
appellant Isabelo C. Moran, Jr. to pay
plaintiff- appellant Mariano E.
Pecson:
(a) Forty-seven thousand five
hundred (P47,500) (the amount that
could have accrued to Pecson under
their agreement);
(b) Eight thousand (P8,000), (the
commission for eight months);
(c) Seven thousand (P7,000) (as a
return of Pecson's investment for the
Veteran's Project);
(d) Legal interest on (a), (b) and (c)
from the date the complaint was filed
(up to the time payment is made)
The petitioner contends that the respondent Court of
Appeals decided questions of substance in a way
not in accord with law and with Supreme Court
decisions when it committed the following errors:
I between the petitioner and the private respondent. It
THE HONORABLE COURT OF APPEALS
GRIEVOUSLY ERRED IN HOLDING PETITIONER
ISABELO C. MORAN, JR. LIABLE TO
RESPONDENT MARIANO E. PECSON IN THE
SUM OF P47,500 AS THE SUPPOSED EXPECTED
PROFITS DUE HIM.
II
THE HONORABLE COURT OF APPEALS
GRIEVOUSLY ERRED IN HOLDING PETITIONER
ISABELO C. MORAN, JR. LIABLE TO
RESPONDENT MARIANO E. PECSON IN THE
SUM OF P8,000, AS SUPPOSED COMMISSION IN
THE PARTNERSHIP ARISING OUT OF PECSON'S
INVESTMENT.
III
THE HONORABLE COURT OF APPEALS
GRIEVOUSLY ERRED IN HOLDING PETITIONER
ISABELO C. MORAN, JR. LIABLE TO
RESPONDENT MARIANO E. PECSON IN THE
SUM OF P7,000 AS A SUPPOSED RETURN OF
INVESTMENT IN A MAGAZINE VENTURE.
IV
ASSUMING WITHOUT ADMITTING THAT
PETITIONER IS AT ALL LIABLE FOR ANY
AMOUNT, THE HONORABLE COURT OF
APPEALS DID NOT EVEN OFFSET PAYMENTS
ADMITTEDLY RECEIVED BY PECSON FROM
MORAN.
V
THE HONORABLE COURT OF APPEALS
GRIEVOUSLY ERRED IN NOT GRANTING THE
PETITIONER'S COMPULSORY COUNTERCLAIM
FOR DAMAGES.
The first question raised in this petition refers to the
award of P47,500.00 as the private respondent's
share in the unrealized profits of the partnership. The
petitioner contends that the award is highly
speculative. The petitioner maintains that the
respondent court did not take into account the great
risks involved in the business undertaking.
We agree with the petitioner that the award of
speculative damages has no basis in fact and law.
There is no dispute over the nature of the agreement
is a contract of partnership. The latter in his
complaint alleged that he was induced by the
petitioner to enter into a partnership with him under
the following terms and conditions: têñ.£îhqwâ£
1. That the partnership will print
colored posters of the delegates to
the Constitutional Convention;
2. That they will invest the amount of
Fifteen Thousand Pesos
(P15,000.00) each;
3. That they will print Ninety Five
Thousand (95,000) copies of the said
posters;
4. That plaintiff will receive a
commission of One Thousand Pesos
(P1,000.00) a month starting April 15,
1971 up to December 15, 1971;
5. That upon the termination of the
partnership on December 15, 1971, a
liquidation of the account pertaining
to the distribution and printing of the
said 95,000 posters shall be made.
The petitioner on the other hand admitted in his
answer the existence of the partnership.
The rule is, when a partner who has undertaken to
contribute a sum of money fails to do so, he
becomes a debtor of the partnership for whatever he
may have promised to contribute (Art. 1786, Civil
Code) and for interests and damages from the time
he should have complied with his obligation (Art.
1788, Civil Code). Thus in Uy v. Puzon (79 SCRA
598), which interpreted Art. 2200 of the Civil Code of
the Philippines, we allowed a total of P200,000.00
compensatory damages in favor of the appellee
because the appellant therein was remiss in his
obligations as a partner and as prime contractor of
the construction projects in question. This case was
decided on a particular set of facts. We awarded
compensatory damages in the Uy case because
there was a finding that the constructing business is
a profitable one and that the UP construction
company derived some profits from its contractors in
the construction of roads and bridges despite its
deficient capital." Besides, there was evidence to
show that the partnership made some profits during
the periods from July 2, 1956 to December 31, 1957
and from January 1, 1958 up to September 30, 1959.
The profits on two government contracts worth
P2,327,335.76 were not speculative. In the instant
case, there is no evidence whatsoever that the
partnership between the petitioner and the private
respondent would have been a profitable venture. In
fact, it was a failure doomed from the start. There is
therefore no basis for the award of speculative
damages in favor of the private respondent.
Furthermore, in the Uy case, only Puzon failed to
give his full contribution while Uy contributed much
more than what was expected of him. In this case,
however, there was mutual breach. Private
respondent failed to give his entire contribution in the
amount of P15,000.00. He contributed only
P10,000.00. The petitioner likewise failed to give any
of the amount expected of him. He further failed to
comply with the agreement to print 95,000 copies of
the posters. Instead, he printed only 2,000 copies.
Article 1797 of the Civil Code provides: têñ.£îhqwâ£
The losses and profits shall be
distributed in conformity with the
agreement. If only the share of each
partner in the profits has been agreed
upon, the share of each in the losses
shall be in the same proportion.
Being a contract of partnership, each partner must
share in the profits and losses of the venture. That is
the essence of a partnership. And even with an
assurance made by one of the partners that they
would earn a huge amount of profits, in the absence
of fraud, the other partner cannot claim a right to
recover the highly speculative profits. It is a rare
business venture guaranteed to give 100% profits.
In this case, on an investment of P15,000.00, the
respondent was supposed to earn a guaranteed
P1,000.00 a month for eight months and around
P142,500.00 on 95,000 posters costing P2.00 each
but 2,000 of which were sold at P5.00 each. The
fantastic nature of expected profits is obvious. We
have to take various factors into account. The failure
of the Commission on Elections to proclaim all the
320 candidates of the Constitutional Convention on
time was a major factor. The petitioner undesirable
his best business judgment and felt that it would be
a losing venture to go on with the printing of the
agreed 95,000 copies of the posters. Hidden risks in
any business venture have to be considered.
It does not follow however that the private
respondent is not entitled to recover any amount
from the petitioner. The records show that the private
respondent gave P10,000.00 to the petitioner. The
latter used this amount for the printing of 2,000
posters at a cost of P2.00 per poster or a total
printing cost of P4,000.00. The records further show
that the 2,000 copies were sold at P5.00 each. The
gross income therefore was P10,000.00. Deducting
the printing costs of P4,000.00 from the gross
income of P10,000.00 and with no evidence on the
cost of distribution, the net profits amount to only
P6,000.00. This net profit of P6,000.00 should be
divided between the petitioner and the private
respondent. And since only P4,000.00 was
undesirable by the petitioner in printing the 2,000
copies, the remaining P6,000.00 should therefore be
returned to the private respondent.
Relative to the second alleged error, the petitioner
submits that the award of P8,000.00 as Pecson's
supposed commission has no justifiable basis in law.
Again, we agree with the petitioner.
The partnership agreement stipulated that the
petitioner would give the private respondent a
monthly commission of Pl,000.00 from April 15,
1971 to December 15, 1971 for a total of eight (8)
monthly commissions. The agreement does not
state the basis of the commission. The payment of
the commission could only have been predicated on
relatively extravagant profits. The parties could not
have intended the giving of a commission inspite of of the
loss or failure of the venture. Since the venture was Vetera
a failure, the private respondent is not entitled to the ns');
P8,000.00 commission.
(b)
Anent the third assigned error, the petitioner P10,00
maintains that the respondent Court of Appeals 0 — to
erred in holding him liable to the private respondent cover
in the sum of P7,000.00 as a supposed return of the
investment in a magazine venture. return
of
In awarding P7,000.00 to the private respondent as Pecso
his supposed return of investment in the "Voice of n's
the Veterans" magazine venture, the respondent contrib
court ruled that: têñ.£îhqw⣠ution in
the
xxx xxx xxx project
of the
... Moran admittedly signed the Poster
promissory note of P20,000 in favor s;
of Pecson. Moran does not question
the due execution of said note. Must (c)
Moran therefore pay the amount of P3,000
P20,000? The evidence indicates —
that the P20,000 was assigned by repres
Moran to cover the enting
following: têñ.£îhqw⣠Pecso
n's
(a) P commi
7,000 ssion
— the for
amoun three
t of the month
PNB s
check (April,
given May,
by June,
Pecso 1971).
n to
Moran Of said P20,000 Moran has to pay
repres P7,000 (as a return of Pecson's
enting investment for the Veterans' project,
Pecso for this project never left the ground)
n's ...
invest
ment in As a rule, the findings of facts of the Court of Appeals
Moran' are final and conclusive and cannot be reviewed on
s other appeal to this Court (Amigo v. Teves, 96 Phil. 252),
project provided they are borne out by the record or are
(the based on substantial evidence (Alsua-Betts v. Court
publica of Appeals, 92 SCRA 332). However, this rule
tion admits of certain exceptions. Thus, in Carolina
and Industries Inc. v. CMS Stock Brokerage, Inc., et al.,
printin (97 SCRA 734), we held that this Court retains the
g of the power to review and rectify the findings of fact of the
'Voice Court of Appeals when (1) the conclusion is a finding
grounded entirely on speculation, surmises and
conjectures; (2) when the inference made is
manifestly mistaken absurd and impossible; (3)
where there is grave abuse of discretion; (4) when
the judgment is based on a misapprehension of
facts; and (5) when the court, in making its findings,
went beyond the issues of the case and the same
are contrary to the admissions of both the appellant
and the appellee.
In this case, there is misapprehension of facts. The
evidence of the private respondent himself shows
that his investment in the "Voice of Veterans" project
amounted to only P3,000.00. The remaining
P4,000.00 was the amount of profit that the private
respondent expected to receive.
The records show the following
exhibits- têñ.£îhqwâ£
E — Xerox copy of PNB Manager's
Check No. 234265 dated March 22,
1971 in favor of defendant.
Defendant admitted the authenticity
of this check and of his receipt of the
proceeds thereof (t.s.n., pp. 3-4, Nov.
29, 1972). This exhibit is being
offered for the purpose of showing
plaintiff's capital investment in the
printing of the "Voice of the Veterans"
for which he was promised a fixed
profit of P8,000. This investment of
P6,000.00 and the promised profit of
P8,000 are covered by defendant's
promissory note for P14,000 dated
March 31, 1971 marked by defendant
as Exhibit 2 (t.s.n., pp. 20-21, Nov.
29, 1972), and by plaintiff as Exhibit
P. Later, defendant returned
P3,000.00 of the P6,000.00
investment thereby proportionately
reducing the promised profit to
P4,000. With the balance of P3,000
(capital) and P4,000 (promised
profit), defendant signed and
executed the promissory note for
P7,000 marked Exhibit 3 for the
defendant and Exhibit M for plaintiff.
Of this P7,000, defendant paid
P4,000 representing full return of the
capital investment and P1,000 partial
payment of the promised profit. The
P3,000 balance of the promised profit
was made part consideration of the
P20,000 promissory note (t.s.n., pp.
22-24, Nov. 29, 1972). It is, therefore,
being presented to show the
consideration for the P20,000
promissory note.
F — Xerox copy of PNB Manager's
check dated May 29, 1971 for P7,000
in favor of defendant. The
authenticity of the check and his
receipt of the proceeds thereof were
admitted by the defendant (t.s.n., pp.
3-4, Nov. 29, 1972). This P 7,000 is
part consideration, and in cash, of the
P20,000 promissory note (t.s.n., p.
25, Nov. 29, 1972), and it is being
presented to show the consideration
for the P20,000 note and the
existence and validity of the
obligation.
xxx xxx xxx
L-Book entitled "Voice of the
Veterans" which is being offered for
the purpose of showing the subject
matter of the other partnership
agreement and in which plaintiff
invested the P6,000 (Exhibit E)
which, together with the promised
profit of P8,000 made up for the
consideration of the P14,000
promissory note (Exhibit 2; Exhibit P).
As explained in connection with
Exhibit E. the P3,000 balance of the
promised profit was later made part
consideration of the P20,000
promissory note.
M-Promissory note for P7,000 dated
March 30, 1971. This is also
defendant's Exhibit E. This document
is being offered for the purpose of
further showing the transaction as
explained in connection with Exhibits
E and L.
N-Receipt of plaintiff dated March 30,
1971 for the return of his P3,000 out
of his capital investment of P6,000
(Exh. E) in the P14,000 promissory
note (Exh. 2; P). This is also
defendant's Exhibit 4. This document
is being offered in support of plaintiff's
explanation in connection with
Exhibits E, L, and M to show the
transaction mentioned therein.
 xxx xxx xxx A It represents the
P6,000.00 cash which
P-Promissory note for P14,000.00. I gave to Mr. Moran,
This is also defendant's Exhibit 2. It is as evidenced by the
being offered for the purpose of Philippine National
showing the transaction as explained Bank Manager's
in connection with Exhibits E, L, M, check and the
and N above. P8,000.00 profit
assured me by Mr.
Explaining the above-quoted exhibits, respondent Moran which I will
Pecson testified that: têñ.£îhqw⣠derive from the
printing of this "Voice
Q During the pre-trial of the Veterans" book.
of this case, Mr.
Pecson, the Q You said that the
defendant presented P6,000.00 of this
a promissory note in P14,000.00 is covered
the amount of by, a Manager's
P14,000.00 which has check. I show you
been marked as Exhibit E, is this the
Exhibit 2. Do you Manager's check that
know this promissory mentioned?
note?
A Yes, sir.
A Yes, sir.
Q What happened to
Q What is this this promissory note
promissory note, in of P14,000.00 which
connection with your you said represented
transaction with the P6,000.00 of your
defendant? investment and
P8,000.00 promised
A This promissory profits?
note is for the printing
of the "Voice of the A Latter, Mr. Moran
Veterans". returned to me
P3,000.00 which
Q What is this "Voice represented one-half
of the Veterans", Mr. (1/2) of the P6,000.00
Pecson? capital I gave to him.

A It is a Q As a consequence
book.têñ.£îhqw⣠of the return by Mr.
Moran of one-half
(T.S.N. (1/2) of the P6,000.00
, p. 19, capital you gave to
Nov. him, what happened
29, to the promised profit
1972) of P8,000.00?

Q And what does the A It was reduced to

amount of P14,000.00 one-half (1/2) which is
indicated in the P4,000.00.
promissory note,
Exhibit 2, represent? Q Was there any
document executed
by Mr. Moran in covering this payment
connection with the of P4,000.00 in favor
Balance of P3,000.00 of Mr. Moran?
of your capital
investment and the A Yes, sir.
P4,000.00 promised
profits? (T.S.N., p. 23, Nov.
29, 1972).
A Yes, sir, he
executed a Q You stated that Mr.
promissory note. Moran paid the
amount of P4,000.00
Q I show you a on account of the
promissory note in the P7,000.00 covered by
amount of P7,000.00 the promissory note,
dated March 30, 1971 Exhibit M. What does
which for purposes of this P4,000.00
Identification I request covered by Exhibit N
the same to be represent?
marked as Exhibit M. .
. A This P4,000.00
represents the
Court têñ.£îhqw⣠P3,000.00 which he
has returned of my
Mark it P6,000.00 capital
as investment and the
Exhibit P1,000.00 represents
M. partial payment of the
P4,000.00 profit that
Q (continuing) is this was promised to me
the promissory note by Mr. Moran.
which you said was
executed by Mr. Q And what happened
Moran in connection to the balance of
with your transaction P3,000.00 under the
regarding the printing promissory note,
of the "Voice of the Exhibit M?
Veterans"?
A The balance of
A Yes, sir. (T.S.N., pp. P3,000.00 and the
20-22, Nov. 29, 1972). rest of the profit was
applied as part of the
Q What happened to consideration of the
this promissory note promissory note of
executed by Mr. P20,000.00.
Moran, Mr. Pecson?
(T.S.N., pp. 23-24, Nov. 29, 1972).
A Mr. Moran paid me
P4,000.00 out of the The respondent court erred when it concluded that
P7,000.00 as shown the project never left the ground because the project
by the promissory did take place. Only it failed. It was the private
note. respondent himself who presented a copy of the
book entitled "Voice of the Veterans" in the lower
Q Was there a receipt court as Exhibit "L". Therefore, it would be error to
issued by you state that the project never took place and on this
basis decree the return of the private respondent's
investment.

As already mentioned, there are risks in any

business venture and the failure of the undertaking
cannot entirely be blamed on the managing partner
alone, specially if the latter exercised his best
business judgment, which seems to be true in this
case. In view of the foregoing, there is no reason to
pass upon the fourth and fifth assignments of errors
raised by the petitioner. We likewise find no valid
basis for the grant of the counterclaim.

WHEREFORE, the petition is GRANTED. The

decision of the respondent Court of Appeals (now
Intermediate Appellate Court) is hereby SET ASIDE
and a new one is rendered ordering the petitioner
Isabelo Moran, Jr., to pay private respondent
Mariano Pecson SIX THOUSAND (P6,000.00)
PESOS representing the amount of the private
respondent's contribution to the partnership but
which remained unused; and THREE THOUSAND
(P3,000.00) PESOS representing one half (1/2) of
the net profits gained by the partnership in the sale
of the two thousand (2,000) 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.1äwphï1.ñët
G.R. No. L-19819 October 26, 1977
WILLIAM UY, plaintiff-appellee,
vs.
BARTOLOME PUZON, substituted by FRANCO
PUZON, defendant-appellant.
CONCEPCION JR., J.:têñ.£îhqwâ£
Appeal from the decision of the Court of First
Instanre of Manila, dissolving the "U.P. Construction
Company" and ordering the defendant Bartolome
Puzon to pay the plaintiff the amounts of: (1)
P115,102.13, with legal interest thereon from the
date of the filing of the complaint until fully paid; (2)
P200,000.00, as plaintiffs share in the unrealized
profits of the "U.P. Construction Company" and (3)
P5,000.00, as and for attorney's fees.
It is of record that the defendant Bartolome Puzon
had a contract with the Republic of the Philippines
for the construction of the Ganyangan Bato Section
of the Pagadian Zamboanga City Road, province of
Zamboanga del Sur 1 and of five (5) bridges in the
Malangas-Ganyangan Road. 2 Finding difficulty in
accomplishing both projects, Bartolome Puzon
sought the financial assistance of the plaintiff,
William Uy. As an inducement, Puzon proposed the
creation of a partnership between them which would
be the sub-contractor of the projects and the profits
to be divided equally between them. William Uy
inspected the projects in question and, expecting to
derive considerable profits therefrom, agreed to the
proposition, thus resulting in the formation of the
"U.P. Construction Company" 3 which was
subsequently engaged as subcontractor of the
construction projects. 4
The partners agreed that the capital of the
partnership would be P100,000.00 of which each
partner shall contribute the amount of P50,000.00 in
cash. 5 But, as heretofore stated, Puzon was short of
cash and he promised to contribute his share in the
partnership capital as soon as his application for a
loan with the Philippine National Bank in the amount
of P150,000.00 shall have been approved. However,
before his loan application could be acted upon, he
had to clear his collaterals of its incumbrances first.
For this purpose, on October 24, 1956, Wilham Uy
gave Bartolome Puzon the amount of P10,000.00 as
advance contribution of his share in the partnership
to be organized between them under the firm name
U.P. CONSTRUCTION COMPANY which amount
mentioned above will be used by Puzon to pay his
obligations with the Philippine National Bank to
effect the release of his mortgages with the said
Bank. 6 On October 29, 1956, William Uy again gave
Puzon the amount of P30,000.00 as his partial
contribution to the proposed partnership and which
the said Puzon was to use in payment of his
obligation to the Rehabilitation Finance
Corporation. 7 Puzon promised William Uy that the
amount of P150,000.00 would be given to the
partnership to be applied thusly: P40,000.00, as
reimbursement of the capital contribution of William
Uy which the said Uy had advanced to clear the title
of Puzon's property; P50,000.00, as Puzon's
contribution to the partnership; and the balance of
P60,000.00 as Puzon's personal loan to the
partnership. 8
Although the partnership agreement was signed by
the parties on January 18, 1957,9 work on the
projects was started by the partnership on October
1, 1956 in view of the insistence of the Bureau of
Public Highways to complete the project right
away. 10 Since Puzon was busy with his other
projects, William Uy was entrusted with the
management of the projects and whatever expense
the latter might incur, would be considered as part of
his contribution. 11 At the end of December, 1957,
William Uy had contributed to the partnership the
amount of P115,453.39, including his capital. 12
The loan of Puzon was approved by the Philippine
National Bank in November, 1956 and he gave to
William Uy the amount of P60,000.00. Of this
amount, P40,000.00 was for the reimbursement of
Uy's contribution to the partnership which was used
to clear the title to Puzon's property, and the
P20,000.00 as Puzon's contribution to the
partnership capital. 13
To guarantee the repayment of the above-
mentioned loan, Bartolome Puzon, without the
knowledge and consent of William Uy, 14 assigned to
the Philippine National Bank all the payments to be
received on account of the contracts with the Bureau
of Public Highways for the construction of the afore-
mentioned projects. 15 By virtue of said assignment,
the Bureau of Public Highways paid the money due
on the partial accomplishments on the government
projects in question to the Philippine National Bank
which, in turn, applied portions of it in payment of
Puzon's loan. Of the amount of P1,047,181.07,
released by the Bureau of Public Highways in
payment of the partial work completed by the
partnership on the projects, the amount of
P332,539.60 was applied in payment of Puzon's
loan and only the amount of P27,820.80 was
deposited in the partnership funds, 16 which, for all
practical purposes, was also under Puzon's account
since Puzon was the custodian of the common
funds.
As time passed and the financial demands of the
projects increased, William Uy, who supervised the
said projects, found difficulty in obtaining the
necessary funds with which to pursue the
construction projects. William Uy correspondingly
called on Bartolome Puzon to comply with his
obligations under the terms of their partnership
agreement and to place, at lest, his capital
contribution at the disposal of the partnership.
Despite several promises, Puzon, however, failed to
do so. 17 Realizing that his verbal demands were to
no avail, William Uy consequently wrote Bartolome
Puzon pormal letters of demand, 18 to which Puzon
replied that he is unable to put in additional capital to
continue with the projects. 19
Failing to reach an agreement with William Uy,
Bartolome Puzon, as prime contractor of the
construction projects, wrote the subcontractor, U.P.
Construction Company, on November 20, 1957,
advising the partnership, of which he is also a
partner, that unless they presented an immediate
solution and capacity to prosecute the work
effectively, he would be constrained to consider the
sub-contract terminated and, thereafter, to assume
all responsibilities in the construction of the projects
in accordance with his original contract with the
Bureau of Public Highways. 20 On November 27,
1957, Bartolome Puzon again wrote the
U.P.Construction Company finally terminating their
subcontract agreement as of December 1, 1957. 21
Thereafter, William Uy was not allowed to hold office
in the U.P. Construction Company and his authority
to deal with the Bureau of Public Highways in behalf
of the partnership was revoked by Bartolome Puzon
who continued with the construction projects
alone. 22
On May 20, 1958, William Uy, claiming that
Bartolome Puzon had violated the terms of their
partnership agreement, instituted an action in court,
seeking, inter alia, the dissolution of the partnership
and payment of damages.
Answering, Bartolome Puzon denied that he violated
the terms of their agreement claiming that it was the
plaintiff, William Uy, who violated the terms thereof.
He, likewise, prayed for the dissolution of the
partnership and for the payment by the plaintiff of
his, share in the losses suffered by the partnership.
After appropriate proceedings, the trial court found
that the defendant, contrary to the terms of their
partnership agreement, failed to contribute his share
in the capital of the partnership applied partnership
funds to his personal use; ousted the plaintiff from
the management of the firm, and caused the failure
of the partnership to realize the expected profits of
at least P400,000.00. As a consequence, the trial
court dismissed the defendant's counterclaim and
ordered the dissolution of the partnership. The trial
court further ordered the defendant to pay the
plaintiff the sum of P320,103.13.
Hence, the instant appeal by the defendant
Bartolome Puzon during the pendency of the appeal
before this Court, the said Bartolome Puzon died,
and was substituted by Franco Puzon.
The appellant makes in his brief nineteen (19)
assignment of errors, involving questions of fact,
which relates to the following points:
(1) That the appellant is not guilty of breach of
contract; and
(2) That the amounts of money the appellant has
been order to pay the appellee is not supported by
the evidence and the law.
After going over the record, we find no reason for
rejecting the findings of fact below, justifying the
reversal of the decision appealed from.
The findings of the trial court that the appellant failed
to contribute his share in the capital of the
partnership is clear incontrovertible. The record
shows that after the appellant's loan the amount of
P150,000.00 was approved by the Philippin National
Bank in November, 1956, he gave the amount
P60,000.00 to the appellee who was then managing
the construction projects. Of this amount,
P40,000.00 was to be applied a reimbursement of
the appellee's contribution to the partnership which
was used to clear the title to the appellant's property,
and th balance of P20,000.00, as Puzon's
contribution to the partnership. 23 Thereafter, the
appellant failed to make any further contributions the
partnership funds as shown in his letters to the
appellee wherein he confessed his inability to put in
additional capital to continue with the projects. 24
Parenthetically, the claim of the appellant that the
appellee is equally guilty of not contributing his share
in the partnership capital inasmuch as the amount of
P40,000.00, allegedly given to him in October, 1956
as partial contribution of the appellee is merely a
personal loan of the appellant which he had paid to
the appellee, is plainly untenable. The terms of the
receipts signed by the appellant are clear and
unequivocal that the sums of money given by the
appellee are appellee's partial contributions to the
partnership capital. Thus, in the receipt for
P10,000.00 dated October 24, 1956, 25 the appellant
stated:ñé+.£ªwph!1
Received from Mr. William Uy the
sum of TEN THOUSAND PESOS
(P10,000.00) in Check No. SC
423285 Equitable Banking
Corporation, dated October 24,
1956, as advance contribution of the
share of said William Uy in the
partnership to be organized between
us under the firm name U.P.
CONSTRUCTION COMPANY which
amount mentioned above will be
used by the undersigned to pay his
obligations with the Philippine
National Bank to effect the release of
his mortgages with the said bank.
(Emphasis supplied)
In the receipt for the amount of P30,000.00 dated
October 29, 1956, 26 the appellant also
said:ñé+.£ªwph!1
Received from William Uy the sum of
THIRTY THOUSAND PESOS
(P30,000.00) in Check No.
SC423287, of the Equitable Banking
Corporation, as partial contribution of
the share of the said William Uy to the
U.P. CONSTRUCTION
COMPANY for which the
undersigned will use the said amount
in payment of his obligation to the
Rehabilitation Finance Corporation.
(Emphasis supplied)
The findings of the trial court that the appellant
misapplied partnership funds is, likewise, sustained
by competent evidence. It is of record that the
appellant assigned to the Philippine National Bank
all the payments to be received on account of the
contracts with the Bureau of Public Highways for the
construction of the aforementioned projects to
guarantee the repayment of the bank. 27 By virtue of
the said appeflant's personal loan with the said bank
assignment, the Bureau of Public Highways paid the
money due on the partial accomplishments on the
construction projects in question to the Philippine
National Bank who, in turn, applied portions of it in
payment of the appellant's loan. 28
The appellant claims, however, that the said
assignment was made with the consent of the
appellee and that the assignment not prejudice the
partnership as it was reimbursed by the appellant.
But, the appellee categorically stated that the
assignment to the Philippine National Bank was
made without his prior knowledge and consent and
that when he learned of said assignment, he cal the
attention of the appellant who assured him that the
assignment was only temporary as he would transfer
the loan to the Rehabilitation Finance Corporation
within three (3) months time. 29
The question of whom to believe being a matter
large dependent on the trier's discretion, the findings
of the trial court who had the better opportunity to
examine and appraise the fact issue, certainly
deserve respect.
That the assignment to the Philippine National Bank
prejudicial to the partnership cannot be denied. The
record show that during the period from March, 1957
to September, 1959, the appellant Bartolome Puzon
received from the Bureau of Public highways, in
payment of the work accomplished on the
construction projects, the amount of P1,047,181.01,
which amount rightfully and legally belongs to the
partnership by virtue of the subcontract agreements
between the appellant and the U.P. Construction
Company. In view of the assignemt made by Puzon
to the Philippine National Bank, the latter withheld
and applied the amount of P332,539,60 in payment
of the appellant's personal loan with the said bank.
The balance was deposited in Puzon's current
account and only the amount of P27,820.80 was
deposited in the current account of the
partnership. 30 For sure, if the appellant gave to the
partnership all that were eamed and due it under the
subcontract agreements, the money would have
been used as a safe reserve for the discharge of all
obligations of the firm and the partnership would
have been able to successfully and profitably
prosecute the projects it subcontracted.
When did the appellant make the reimbursement
claimed by him?
For the same period, the appellant actually
disbursed for the partnership, in connection with the
construction projects, the amount of
P952,839.77. 31 Since the appellant received from
the Bureau of Public Highways the sum of
P1,047,181.01, the appellant has a deficit balance of
P94,342.24. The appellant, therefore, did not make
complete restitution.
The findings of the trial court that the appellee has
been ousted from the management of the
partnership is also based upon persuasive evidence.
The appellee testified that after he had demanded
from the appellant payment of the latter's
contribution to the partnership capital, the said
appellant did not allow him to hold office in the U.P.
Construction Company and his authority to deal with
the Bureau of Public Highways was revoked by the
appellant. 32
As the record stands, We cannot say, therefore, that
the decis of the trial court is not sustained by the
evidence of record as warrant its reverw.
Since the defendantappellant was at fauh, the tral
court properly ordered him to reimburse the plaintiff-
appellee whatever amount latter had invested in or
spent for the partnership on account of construction
projects.
How much did the appellee spend in the construction
projects question?
It appears that although the partnership agreement
stated the capital of the partnership is P100,000.00
of which each part shall contribute to the partnership
the amount of P50,000.00 cash 33 the partners of the
U.P. Construction Company did contribute their
agreed share in the capitalization of the enterprise in
lump sums of P50,000.00 each. Aside from the initial
amount P40,000.00 put up by the appellee in
October, 1956, 34 the partners' investments took, the
form of cash advances coveting expenses of the
construction projects as they were incurred. Since
the determination of the amount of the
disbursements which each of them had made for the
construction projects require an examination of the
books of account, the trial court appointed two
commissioners, designated by the parties, "to
examine the books of account of the defendant
regarding the U.P. Construction Company and his
personal account with particular reference to the
Public Works contract for the construction of the
Ganyangan-Bato Section, Pagadian-Zamboanga
City Road and five (5) Bridges in Malangas-
Ganyangan Road, including the payments received
by defendant from the Bureau of Public Highways by
virtue of the two projects above mentioned, the
disbursements or disposition made by defendant of
the portion thereof released to him by the Philippine
National Bank and in whose account these funds are
deposited . 35
In due time, the loners so appointed, 36 submitted
their report 37 they indicated the items wherein they
are in agreement, as well as their points of
disagreement.
In the commissioners' report, the appellant's
advances are listed under Credits; the money
received from the firm, under Debits; and the
resulting monthly investment standings of the
partners, under Balances. The commissioners are
agreed that at the end of December, 1957, the
appellee had a balance of P8,242.39. 38 It is in their
respective adjustments of the capital account of the
appellee that the commissioners had disagreed.
Mr. Ablaza, designated by the appellant, would want
to charge the appellee with the sum of P24,239.48,
representing the checks isssued by the
appellant, 39 and encashed by the appellee or his
brother, Uy Han so that the appellee would owe the
partnership the amount of P15,997.09.
Mr. Tayag, designated by the appellee, upon the
other hand, would credit the appellee the following
additional amounts:
(1) P7,497.80 — items omitted from the books of
partnership but recognized and charged to
Miscellaneous Expenses by Mr. Ablaza;
(2) P65,103.77 — payrolls paid by the appellee in
the amount P128,103.77 less payroll remittances
from the appellant in amount of P63,000.00; and
(3) P26,027.04 other expeses incurred by the
appellee at construction site.
With respect to the amount of P24,239.48, claimed
by appellant, we are hereunder adopting the findings
of the trial which we find to be in accord with the
evidence:
To enhance defendant's theory that he should be
credited P24,239.48, he presented checks allegedly
given to plaintiff and the latter's brother, Uy Han,
marked as Exhibits 2 to 11. However, defendant
admitted that said cheeks were not entered nor
record their books of account, as expenses for and
in behalf of partnership or its affairs. On the other
hand, Uy Han testified that of the cheeks he received
were exchange for cash, while other used in the
purchase of spare parts requisitioned by defendant.
This testimony was not refuted to the satisfaction of balances
the Court, considering that Han's explanation thereof for the
is the more plausible because if they were employed month of
in the prosecution of the partners projects, the Dec.
corresponding disbursements would have certainly 1957
been recorded in its books, which is not the case. (Exhs.
Taking into account defendant is the custodian of the KKK, KK-
books of account, his failure to so enter therein the 1 to
alleged disbursements, accentuates the falsity of his KKK_19,
claim on this point. 40 KKK-22)

Besides, as further noted by the trial court, the report Add: 4,665.00
Commissioner Ablaza is unreliable in view of his Payment
proclivity to favor the appellant and because of the s to
inaccurate accounting procedure adopted by him in Munoz,
auditing the books of account of the partnership as
unlike Mr. Tayag's report which inspires faith and subcontra
credence. 41 ctor of
five,(5)
As explained by Mr. Tayag, the amount of P7,497.80 Bridges
represen expenses paid by the appellee out of his (p. 264
personal funds which not been entered in the books tsn; Exhs.
of the partnership but which been recognized and KKK-20,
conceded to by the auditor designated by the KKK-21)
appellant who included the said amount under Total Pl
Expenses. 42 Investme 15,453.3
nts 9
The explanation of Mr. Tayag on the inclusion of the
amount of P65,103.77 is likewise clear and
Regarding the award of P200,000.00 as his share in
convincing. 43
the unrealized profits of the partnership, the
appellant contends that the findings of the trial court
As for the sum of of P26,027.04, the same that the amount of P400,000.00 as reasonable
represents the expenses which the appelle paid in profits of the partnership venture is without any basis
connection withe the projects and not entered in the and is not supported by the evidence. The appemnt
books of the partnership since all vouchers and maintains that the lower court, in making its
receipts were sent to the Manila office which were determination, did not take into consideration the
under the control of the appellant. However, officer great risks involved in business operations involving
which were under the control of the appellant. as it does the completion of the projects within a
However, a list of these expenses are incorporated definite period of time, in the face of adverse and
in Exhibits ZZ, ZZ-1 to ZZ-4. often unpredictable circumstances, as well as the
fact that the appellee, who was in charge of the
At the trial, the appellee presented a claim for the projects in the field, contributed in a large measure
amounts of P3,917.39 and P4,665.00 which he also to the failure of the partnership to realize such profits
advanced for the construction projects but which by his field management.
were not included in the Commissioner's Report. 44
This argument must be overruled in the light of the
Appellee's total investments in the partnership law and evidence on the matter. Under Article 2200
would, therefore, be: of the Civil Code, indemnification for damages shall
comprehend not only the value of the loss suffered,
Appellee' P106,87 but also that of the profits which the obligee failed to
s total 1.00 obtain. In other words lucrum cessans is also a
credits basis for indemnification.
Add: 3,917,39 Has the appellee failed to make profits because of
unrecord appellant's breach of contract?
ed
There is no doubt that the contracting business is a is not speculative, but based on reasonable
profitable one and that the U.P. Construction estimate.
Company derived some profits from' co io oa ects its
sub ntracts in the construction of the road and WHEREFORE, finding no error in the decision
bridges projects its deficient working capital and the appealed from, the said decision is hereby affirmed
juggling of its funds by the appellant. with costs against the appellant, it being understood
that the liability mentioned herein shall be home by
Contrary to the appellant's claim, the partnership the estate of the deceased Bartolome Puzon,
showed some profits during the period from July 2, represented in this instance by the administrator
1956 to December 31, 1957. If the Profit and Loss thereof, Franco Puzon.
Statement 45 showed a net loss of P134,019.43, this
was primarily due to the confusing accounting SO ORDERED.
method employed by the auditor who intermixed h
and accthe cas ruamethod of accounting and the
erroneous inclusion of certain items, like personal
expenses of the appellant and afteged extraordinary
losses due to an accidental plane crash, in the
operating expenses of the partnership, Corrected,
the Profit and Loss Statement would indicate a net
profit of P41,611.28.

For the period from January 1, 1958 to September

30, 1959, the partnership admittedly made a net
profit of P52,943.89. 46

Besides, as We have heretofore pointed out, the

appellant received from the Bureau of Public
Highways, in payment of the zonstruction projects in
question, the amount of P1,047,181.01 47 and
disbursed the amount of P952,839.77, 48 leaving an
unaccounted balance of P94,342.24. Obviously, this
amount is also part of the profits of the partnership.

During the trial of this case, it was discovered that

the appellant had money and credits receivable froin
the projects in question, in the custody of the Bureau
of Public Highways, in the amount of P128,669.75,
representing the 10% retention of said
projects.49 After the trial of this case, it was shown
that the total retentions Wucted from the appemnt
amounted to P145,358.00. 50 Surely, these retained
amounts also form part of the profits of the
partnership.

Had the appellant not been remiss in his obligations

as partner and as prime contractor of the
construction projects in question as he was bound to
perform pursuant to the partnership and subcontract
agreements, and considering the fact that the total
contract amount of these two projects is
P2,327,335.76, it is reasonable to expect that the
partnership would have earned much more than the
P334,255.61 We have hereinabove indicated. The
award, therefore, made by the trial court of the
amount of P200,000.00, as compensatory damages,
US VS CLARIN
17 Phil. 84
ARELLANO, C.J.:
Pedro Larin delivered to Pedro Tarug P172, in order
that the latter, in company with Eusebio Clarin and
Carlos de Guzman, might buy and sell mangoes,
and, believing that he could make some money in
this business, the said Larin made an agreement
with the three men by which the profits were to be
divided equally between him and them.
Pedro Tarug, Eusebio Clarin, and Carlos de Guzman
did in fact trade in mangoes and obtained P203 from
the business, but did not comply with the terms of
the contract by delivering to Larin his half of the
profits; neither did they render him any account of
the capital.
Larin charged them with the crime
of estafa, but the provincial fiscal filed an
information only against Eusebio Clarin in which he
accused him of appropriating to himself not only the
P172 but also the share of the profits that belonged
to Larin, amounting to P15.50.
Pedro Tarug and Carlos de Guzman appeared in the
case as witnesses and assumed that the
facts presented concerned the defendant and
themselves together.
The trial court, that of First Instance of Pampanga,
sentenced the defendant, Eusebio Clarin, to six
months' arresto mayor, to suffer the accessory
penalties, and to return to Pedro Larin P172, besides
P30.50 as his share of the profits, or to subsidiary
imprisonment in case of insolvency, and to pay the
costs. The defendant appealed, and in deciding his
appeal we arrive at the following conclusions:
When two or more persons bind themselves to
contribute money, property, or industry to
a common fund, with the intention of dividing the
profits among themselves, a contract is formed
which is called partnership. (Art. 1665, Civil Code.)
When Larin put the P172 into the partnership which
he formed with Tarug, Clarin, and Guzman, he
invested his capital in the risks or benefits of the
business of the purchase and sale of mangoes,
and, even though he had reserved the capital and
conveyed only the usufruct of his money, it would
not devolve upon one 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.
No. 5 of article 535 of the Penal Code, according to
which those are guilty of estafa "who, to the
prejudice of another, shall appropriate or misapply
any money, goods, or any kind of personal property
which they may have received as a deposit on
commission for administration or in any other
character producing the obligation to deliver or
return the same," (as, for example,
in commodatum, precarium, and other unilateral
contracts which require the return of the same thing
received) does not include money received for
a partnership; otherwise the result would be that,
if the partnership, instead of obtaining
profits, suffered losses, as it could not be held liable
civilly for the share of the capitalist partner who
reserved the ownership of the money brought in by
him, it would have to answer to the charge
of estafa, for which it would be sufficient to argue
that the partnership had received the money
under obligation to return it
We therefore freely acquit Eusebio Clarin, with the
costs de oficio. The complaint for estafa is
dismissed without prejudice to the institution of a
civil action.
[G.R. No. 114398. October 24, 1997]
CARMEN LIWANAG, petitioner, vs. THE HON.
COURT OF APPEALS and THE PEOPLE
OF THE PHILIPPINES, represented by the
Solicitor General, respondents.
DECISION
ROMERO, J.:
Petitioner was charged with the crime
of estafa before the Regional Trial Court (RTC),
Branch 93, Quezon City, in an information which
reads as follows:
That on or between the month of May 19, 1988 and
August, 1988 in Quezon City, Philippines and within the
jurisdiction of this Honorable Court, the said accused,
with intent of gain, with unfaithfulness, and abuse of
confidence, did then and there, willfully, unlawfully and
feloniously defraud one ISIDORA ROSALES, in the
following manner, to wit: on the date and in the place
aforementioned, said accused received in trust from the
offended party cash money amounting to P536,650.00,
Philippine Currency, with the express obligation
involving the duty to act as complainants agent in
purchasing local cigarettes (Philip Morris and Marlboro
cigarettes), to resell them to several stores, to give her
commission corresponding to 40% of the profits; and to
return the aforesaid amount of offended party, but said
accused, far from complying her aforesaid obligation, and
once in possession thereof, misapplied, misappropriated
and converted the same to her personal use and benefit,
despite repeated demands made upon her, accused failed
and refused and still fails and refuses to deliver and/or
return the same to the damage and prejudice of the said
ISIDORA ROSALES, in the aforementioned amount and
in such other amount as may be awarded under the
provision of the Civil Code.
CONTRARY TO LAW.
The antecedent facts are as follows:
Petitioner Carmen Liwanag (Liwanag) and a
certain Thelma Tabligan went to the house of
complainant Isidora Rosales (Rosales) and asked
her to join them in the business of buying and selling
cigarettes. Convinced of the feasibility of the
venture, Rosales readily agreed. Under their
agreement, Rosales would give the money needed
to buy the cigarettes while Liwanag and Tabligan
would act as her agents, with a corresponding 40%
commission to her if the goods are sold; otherwise
the money would be returned to
Rosales. Consequently, Rosales gave several cash
advances to Liwanag and Tabligan amounting
to P633,650.00.
During the first two months, Liwanag and
Tabligan made periodic visits to Rosales to report on
the progress of the transactions. The visits,
however, suddenly stopped, and all efforts by
Rosales to obtain information regarding their
business proved futile.
Alarmed by this development and believing that
the amounts she advanced were being
misappropriated, Rosales filed a case of estafa
against Liwanag.
After trial on the merits, the trial court rendered
a decision dated January 9, 1991, finding Liwanag
guilty as charged. The dispositive portion of the
decision reads thus:
WHEREFORE, the Court holds, that the prosecution has
established the guilt of the accused, beyond reasonable
doubt, and therefore, imposes upon the accused, Carmen
Liwanag, an Indeterminate Penalty of SIX (6) YEARS,
EIGHT (8) MONTHS AND TWENTY ONE (21) DAYS
OF PRISION CORRECCIONAL TO FOURTEEN (14)
YEARS AND EIGHT (8) MONTHS OF PRISION
MAYOR AS MAXIMUM, AND TO PAY THE COSTS.
The accused is likewise ordered to reimburse the private
complainant the sum of P526,650.00, without subsidiary
imprisonment, in case of insolvency.
SO ORDERED.
Said decision was affirmed with modification by
the Court of Appeals in a decision dated November
29, 1993, the decretal portion of which reads:
WHEREFORE, in view of the foregoing, the judgment
appealed from is hereby affirmed with the correction of
the nomenclature of the penalty which should be: SIX (6)
YEARS, EIGHT (8) MONTHS and TWENTY ONE (21)
DAYS of prision mayor, as minimum, to FOURTEEN
(14) YEARS and EIGHT (8) MONTHS of reclusion
temporal, as maximum. In all other respects, the decision
is AFFIRMED.
SO ORDERED.
Her motion for reconsideration having been
denied in the resolution of March 16, 1994, Liwanag
filed the instant petition, submitting the following
assignment of errors:
1. RESPONDENT APPELLATE COURT GRAVELY
ERRED IN AFFIRMING THE CONVICTION OF THE
ACCUSED-PETITIONER FOR THE CRIME OF
ESTAFA, WHEN CLEARLY THE CONTRACT THAT
EXIST (sic) BETWEEN THE ACCUSED-PETITIONER
AND COMPLAINANT IS EITHER THAT OF A
SIMPLE LOAN OR THAT OF A PARTNERSHIP OR
JOINT VENTURE HENCE THE NON RETURN OF
THE MONEY OF THE COMPLAINANT IS PURELY
CIVIL IN NATURE AND NOT CRIMINAL.
2. RESPONDENT APPELLATE COURT GRAVELY
ERRED IN NOT ACQUITTING THE ACCUSED-
PETITIONER ON GROUNDS OF REASONABLE
DOUBT BY APPLYING THE EQUIPOISE RULE.
Liwanag advances the theory that the intention
of the parties was to enter into a contract of
partnership, wherein Rosales would contribute the
funds while she would buy and sell the cigarettes,
and later divide the profits between them.[1] She also
argues that the transaction can also be interpreted
as a simple loan, with Rosales lending to her the
amount stated on an installment basis.[2]
The Court of Appeals correctly rejected these
pretenses.
While factual findings of the Court of Appeals
are conclusive on the parties and not reviewable by
the Supreme Court, and carry more weight when
these affirm the factual findings of the trial
court,[3] we deem it more expedient to resolve the
instant petition on its merits.
Estafa is a crime committed by a person who
defrauds another causing him to suffer damages, by
means of unfaithfulness or abuse of confidence, or
of false pretenses of fraudulent acts.[4]
From the foregoing, the elements of estafa are
present, as follows: (1) that the accused defrauded
another by abuse of confidence or deceit; and (2)
that damage or prejudice capable of pecuniary
estimation is caused to the offended party or third
party,[5] and it is essential that there be a fiduciary
relation between them either in the form of a trust,
commission or administration.[6]
The receipt signed by Liwanag states thus:
May 19, 1988 Quezon City
Received from Mrs. Isidora P. Rosales the sum of FIVE
HUNDRED TWENTY SIX THOUSAND AND SIX
HUNDRED FIFTY PESOS (P526,650.00) Philippine
Currency, to purchase cigarrets (sic) (Philip & Marlboro)
to be sold to customers. In the event the said cigarrets (sic)
are not sold, the proceeds of the sale or the said products
(shall) be returned to said Mrs. Isidora P. Rosales the said
amount of P526,650.00 or the said items on or before
August 30, 1988.
(SGD & Thumbedmarked) (sic)
CARMEN LIWANAG
26 H. Kaliraya St.
Quezon City
Signed in the presence of:
(Sgd) Illegible (Sgd) Doming Z. Baligad
The language of the receipt could not be any
clearer. It indicates that the money delivered to
Liwanag was for a specific purpose, that is, for the
purchase of cigarettes, and in the event the
cigarettes cannot be sold, the money must be
returned to Rosales.
Thus, even assuming that a contract of
partnership was indeed entered into by and between
the parties, we have ruled that when money or
property have been received by a partner for a
specific purpose (such as that obtaining in the
instant case) and he later misappropriated it, such
partner is guilty of estafa.[7]
Neither can the transaction be considered a
loan, since in a contract of loan once the money is
received by the debtor, ownership over the same is
transferred.[8] Being the owner, the borrower can
dispose of it for whatever purpose he may deem
proper.
In the instant petition, however, it is evident that
Liwanag could not dispose of the money as she
pleased because it was only delivered to her for a
single purpose, namely, for the purchase of
cigarettes, and if this was not possible then to return
the money to Rosales. Since in this case there was
no transfer of ownership of the money delivered,
Liwanag is liable for conversion under Art. 315, par.
1(b) of the Revised Penal Code.
WHEREFORE, in view of the foregoing, the
appealed decision of the Court of Appeals dated
November 29, 1993, is AFFIRMED. Costs against
petitioner.
SO ORDERED.
G.R. No. 30286 September 12, 1929
M. TEAGUE, plaintiff-appellant,
vs.
H. MARTIN, J. T. MADDY and L.H.
GOLUCKE, defendants-appellees.
Abad Santos, Camu and Delgado, for appellant.
J.W. Ferrier for appellees.
STATEMENT
Plaintiff alleges that about December 23, 1926, he
and the defendants formed a partnership for the
operation of a fish business and similar commercial
transactions, which by mutual contest was called
"Malangpaya Fish Co," with a capital of P35,000, of
which plaintiff paid P25,000, the defendant Martin
P5,000, P2,500, and Golucke P2,500. That as such
partnership, they agreed to share in the profits and
losses of the business in proportion to the amount of
capital which each contributed. That the plaintiff was
named the general manager to take charge of the
business, with full power to do and perform all acts
necessary to carry out of the purposes of the
partnership. That there was no agreement as to the
duration of the partnership. That plaintiff wants to
dissolve it, but that the defendants refused to do so.
A statement marked Exhibit A, which purports to be
a cash book, is made a part of the complaint. That
the partnership purchased and now owns a lighter
called Lapu-Lapu, and a motorship
called Barracuda, and other properties. That the
lighter and the motorship are in the possession of
the defendants who are making use of them, to the
damage and prejudice of the plaintiff, for any
damage which plaintiff may sustain. That it is for the
best interest of the parties to have a receiver
appointed pending this litigation, to take possession
of the properties, and he prays that the Philippine
Trust Company be appointed receiver, and for
judgment dissolving the partnership, with costs.
Each of the defendants filed a separate answer, but
the same nature, in which they admit that about
December 10, 1926, the plaintiff and the defendants
formed a partnership for the purpose of the
equipment of the Manila Fish Co., Inc., and the
conduct of a fish business. That the terms of the
partnership were never evidenced by a truth and in
fact, the partnership was formed under a written
plan, of which each member received a copy and to
which all agreed. That by its terms the amount of the
capital was P45,000, of which the plaintiff agreed to
contribute P35,000. That P20,000 of the capital was
to be used for the purchase of the equipment of the
Manila Fish Co., Inc. and the balance placed to the
checking account o the new company.
It is then alleged that "the new owners agree to
duties as follows:
Capt. Maddy will have charger of the
Barracuda and the navigating of the same.
Salary P300 per month.
Mr. Martin will have charge of the southern
station, cold stores, commissary and
procuring fish. Salary P300 per month.
Mr. Teague will have charge of selling fish in
Manila and purchasing supplies. No salary
until business is on paying basis, then the
same as Maddy or Martin.
The principal office shall be in Manila, each
party doing any business shall keep books
showing plainly all transactions, the books
shall be available at all time for inspections
of any member of the partnership.
If Mr. Martin or Mr. Maddy wishes at some
future time to repurchase a larger share in
the business Teague agrees to sell part of his
shares to each on the basis double the
amount originally invested by each or ten
thousand to Martin and five thousand to
Maddy.
This offer will expire after two years.
That no charge was ever made in the terms
of said agreement of copartnership as set
forth above except that it was later agreed
among the partners that the business of the
partnership should be conducted under the
trade name "Malangpaya Fish Company."
That as shown by the foregoing quoted
agreement the agreed capital of the
copartnership was P45,000 and not P35,000
as stated in the third paragraph of plaintiff's
amended complaint, and the plaintiff herein,
M. Teague, bound himself and agreed to
contribute to the said copartnership the sum
of P35,000 and not the sum of P25,000 as
stated in the third paragraph of his said
amended complaint.
Defendant Martin specificaly denies the "plaintiff was
named general manager of the partnership," and
alleged "that all the duties and powers of the said
plaintiff were specifically set forth in the above
quoted written agreement and that no further or
additional powers were ever given the said plaintiff."
But he admits the purchase of the
motorship Barracuda, by the partnership. He denies
that Exhibit A is a true or correct statement of the
cash received and paid out by or on behalf of the
partnership, or that the partnership over purchased
or that it now owns the lighter Lapu-Lapu, "And/ or
any other properties" as mentioned in said ninth
paragraph, except such motorship and a smoke in
the house," or that the defendants are making use of
any of the properties of the partnership, to the
damage and prejudice of the plaintiff, or that they do
not have any visible means to answer for any
damages, and alleges that at the time of the filing of
the complaint, partnership in cold storage, of the
value of P6,000, for which he has never accounted
on the books of the partnership or mentioned in the
complaint, and defendant prays that plaintiff's
complaint be dismissed, and that he be ordered and
required to render an accounting , and to pay to
partnership the balance of his unpaid subscription
amounting to P10,000.
In his answer the defendant Maddy claimed and
asserted that there is due and owing him from the
plaintiff P1,385.53, with legal interest, and in his
amended answer, the defendant Martin prays for
judgment for P615.49.
To all which the plaintiff made a general and specific
denial.
Upon such issues the lower court on April 30, 1928,
rendered the following judgment:
In view of the foregoing considerations, the
court decrees:
That the partnership, existing among the
parties in this suit, is hereby declared
dissolved; that all the existing properties of
the said partnership are ordered to be sold at
public auction; and that all the proceeds and
other unexpended funds of the partnership
be used, first, to pay he P529.48 tax to the
Government of the Philippine Islands;
second, to pay debts owing to third persons;
third, to reimburse the partners for their
advances and salaries due; and lastly, to
return to the partners the amounts they
contributed to the capital of the association
and any other remaining such to be
distributed proportionately among them as
profits:
That the plaintiff immediately render a true
and proper account of all the money due to
and received by him for the partnership.
That the barge Lapu-Lapu as well as the
Ford truck No. T-3019 and adding machine
belong exclusively to the plaintiff, M. Teague,
but the said plaintiff must return to and
reimburse the partnership the sum of
P14,032.26 taken from its funds for the
purchase and equipment of the said
barge Lapu-Lapu; and also to return the sum
of P1,230 and P228 used for buying the Ford
truck and adding machine, respectively:
That the sum of P,1512.03 be paid to the
defendant, J. T. Maddy, and the sum of
P615.49 be paid to defendant, H. Martin, for
their advances and their unpaid salaries, with
legal interest from October 27, 1927, until
paid; that the plaintiff pay the costs of this
action.
So ordered.
May 16, 1928, plaintiff filed a motion praying for an
order "directing the court's stenographic notes taken
by them of the evidence presented in the present
case, as soon as possible." This motion was denied
on May 19th, and on May 16th, the court denied the
plaintiff's motion for reconsideration. To all of which
exceptions were duly taken.
June 7, 1928, plaintiff filed a petition praying, for the
reasons therein stated, that the decision of the court
in the case be set aside, and that the parties be
permitted to again present their testimony and to
have the case decided upon its merits. To which
objections were duly made, and on June 28, 1928,
the court denied plaintiff's motion for a new trial. To
which exceptions were duly taken, and on July 10,
1928, the plaintiff filed a motion in which he prayed
that the period for the appeal interposed by the
plaintiff be suspended, and that the order of June 28,
1928, be set aside, "and that another be entered
ordering the re-taking of the evidence in this case."
To which objections were also filed and later
overruled, from all of which the plaintiff appealed and
assigns the following errors:
I. The trial court erred in not having confined
itself, in the determination of this case, to the
question as to whether or not it is proper to
dissolve the partnership and to liquidate its
assets, for all other issues raised by
appellees are incidental with the process of
liquidation provided for by law.
II. The trial court erred in not resolving the
primary and most important question at issue
in his case, namely, whether or not the
appellant M. Teague was the manager of the
unregistered partnership Malangpaya Fish
Company.
III. The trial court erred in holding that the
appellant had no authority to buy the Lapu-
Lapu, the Ford truck and the adding machine
without the consent of his copartners, for in
accordance with article 131 of the Code of
Commerce the managing partner of a
partnership can make purchases for the
partnership without the knowledge and/or
consent of his copartners.
IV. The trial court erred in holding that
the Lapu-Lapu, the Ford truck and the
adding machine purchased by appellant, as
manager of the Malangpaya Fish Company,
for and with funds of the partnership, do not
form part of the assets of the partnership.
V. The trial court erred in requiring the
appellant to pay to the partnership the sum
of P14,032.26, purchase price, cost of
repairs and equipment of the barge Lapu-
Lapu; P1,230 purchase price of the adding
machine, for these properties were
purchased for and they form part of the
assets of the partnership.
VI. The trial court erred in disapproving
appellant's claim for salary and expenses
incurred by him for and in connection with the
partnership's business.
VII. The trial court erred in approving the
claims of appellees J.T. Maddy and H. Martin
and in requiring the appellant to pay them the
sum of P1,512.03 and P615.49 respectively.
VIII. The trial court erred in not taking
cognizance of appellant's claim for
reimbursement for advances made by him
for the partnerships, as shown in the
statement attached to the complaint marked
Exhibit A, in which there is a balance in his
favor and against the partnership amounting
to over P16,000.
X. Lastly, considering the irregularities
committed, the disappearance of the
stenographic notes for a considerable length
of time, during which time changes in the
testimonies of the witnesses could have
been made and the impossibility of having an
accurate and complete transcript of the
stenographic notes, the trial court erred in
denying appellant's petition for the retaking
of the evidence in this case.
JOHNS, J.:
By their respective pleadings, all parties agreed that
there was a partnership between them, which
appears at one time to have done a good business.
In legal effect, plaintiff asked for its dissolution and
the appointment of a receiver pendente lite. The
defendants did not object to the dissolution of the
partnership, but prayed for an accounting with the
plaintiff. It was upon such issues that the evidence
was taken and the case tried. Hence, there is no
merit in the first in the first assignment of error.
Complaint is made that the lower court did not
specifically decide as to whether or not the plaintiff
was the manager of the unregistered partnership.
But upon that question the lower court, in legal
effect, followed and approved the contention of the
defendants that the duties of each partners were
specified and defined in the "plans for formation of a
limited partnership," in which it is stated that Captain
Maddy would have charge of the Barracuda and its
navigation, with a salary of P300 per month, and that
Martin would have charge of the southern station,
cold stores, commisary and procuring fish, with a
salary of P300 per month, and that the plaintiff would
have charge of selling fish in Manila and purchasing
supplies, without salary until such time as the
business is placed on a paying basis, when his
salary would be the same as that of Maddy and
Martin, and that the principal office of the partnership
"shall keep books showing plainly all transactions,"
which shall be available at all time for inspection of
any of the members.
It will thus be noted that the powers and duties of
Maddy Martin, and the plaintiff are specifically
defined, and that each of them was more or less the
general manager in his particular part of the
business. That is to say, that Maddy's power and
duties are confined and limited to the charge of
the Barracuda and its navigation, and Martin's to the
southern station, cold stores, commissary and
procuring fish, and that plaintiff's powers and duties
are confined and limited to "selling fish in Manila and
the purchase of supplies." In the selling of fish,
plaintiff received a substantial amount of money
which he deposited to the credit of the company
signed by him as manager, but it appears that was a
requirement which the bank made in the ordinary
course of business, as to who was authorized to sign
checks for the partnership; otherwise, it would not
cash the checks.
In the final analysis, the important question in this
case is the ownership of the Lapu-Lapu, the Ford
truck, and the adding machine. The proof is
conclusive that they were purchased by the plaintiff
and paid for him from and out of the money of the
partnership. That at the time of their purchase,
the Lapu-Lapu was purchased in the name of the
plaintiff, and that he personally had it registered in
the customs house in his own name, for which he
made an affidavit that he was its owner. After the
purchase, he also had the Ford truck registered in
his won name. His contention that this was done as
a matter of convenience is not tenable. The record
shows that when the partnership purchased
the Barracuda, it was registered in the customs
house in the name of the partnership, and that it was
a very simple process to have it so registered.
court allowed the defendant s Maddy and Martin a
salary of P300 per month and the money which each
of them paid out and advanced in the discharged of
their respective duties, and denied any salary to the
plaintiff, for the simple reason that the business was
never on a paying basis.
Much could be said about this division of powers,
and that Maddy and Martin's duties were confined
and limited to the catching and procuring of fish,
which were then shipped to the plaintiff who sold
them on the Manila market and received the
proceeds of the sales. In other words, Maddy and
Martin were supplying the fish to plaintiff who sold
them under an agreement that he would account for
the money.
Upon the question of accounting, his testimony as to
the entries which he made and how he kept the
books of the partnership is very interesting:
Q. Then this salary does not
take into consideration the fact that
you claim the company is very badly
in debt? —
A. Well, I put the salary in
there.

Without making a detailed analysis of the evidence, Q. I am asking you if that is

we agree with the trial court that the Lapu-Lapu, the true? —
Ford truck, and the adding machine were purchased
by the plaintiff and paid for out of the funds of the A. I do not think I will decide
partnership, and that by his own actions and that, I think it will be decided by the
conduct, and the taking of the title in his own name, court.
he is now estopped to claim or assert that they are
not his property or that they are the property of the
Q. I will ask you to answer the
company. Again, under his powers and duties as
question? —
specified in the tentative, unsigned written
agreement, his authority was confined and limited to
the "selling of fish in Manila and the purchase of A. You asked me my opinion
supplies." It must be conceded that, standing alone, and I said that I am entitled to it.
the power to sell fish and purchase supplies does
not carry with it or imply the authority to purchase xxx xxx xxx
the Lapu-Lapu, or the Ford truck, or the adding
machine. From which it must follow that he had no I am not on trial as a bookkeeper; if my
authority to purchase the lighter Lapu-Lapu, the lawyers won't object to the question I will
Ford truck, or the adding machine, as neither of them object myself; I am not on trial as a
can be construed as supplies for the partnership bookkeeper; I keep my books any way I want
business. While it is true that the tentative to, put in what I want to, and I leave out
agreement was never personally signed by any anything I don't choose to put in, —
member of the firm, the trial court found as a fact,
and that finding is sustained by the evidence, that xxx xxx xxx
this unsigned agreement was acted upon and
accepted by all parties as the basis of the Q. You have your own
partnership. It was upon that theory that the lower bookkeeping? —
 A. Well, I run my business to
suit myself, I put in the books what I
want to, and I leave out what I want
to, and I have a quarter of a million
pesos to show for it, —
xxx xxx xxx
Q. Did you not say that you
paid yourself a salary in August
because you made a profit? —
A. Yes. This profit was made
counting the stock on hand and
equipment on hand, but as far as
cash to pay this balance, I did not
have it. when I wanted a salary I just
took it. I ran things to suit myself.
well sustained by the evidence. Plaintiff's case was
tried on the theory that the partnership was the
owner of the property in question, and no claim was
made for the use of the Lapu-Lapu, and it appears
that P14,032.26 of the partnership money was used
in its purchase, overhauling, expenses and repairs.
That in truth and in fact the partnership had the use
and benefit of the Lapu-Lapu in its business from
sometime in May until the receiver was appointed on
November 11, 1927, or a period of about six months,
and that the partnership has never paid anything for
its use. it is true that there is no testimony as to the
value of such use, but the cost of the Lapu-Lapu and
the time of its use and the purpose for which it was
used, all appear in the record. For such reason, in
the interest of justice, plaintiff should be
compensated for the reasonable value of the time
which the partnership made use of the Lapu-Lapu.

xxx xxx xxx
Q. In other words in going
against these partners you are going
to tax them for the services of your
attorney? —
A. You are mistaken; I am not
against them. I paid this out for filing
this complaint and if the honorable
court strikes it out, all right. I think it
was a just charge. When I want to sue
them the Company can pay for my
suit.
All things considered, we are of the opinion that
P2,000 is a reasonable, amount which the plaintiff
should receive for its use.
In all things and respects, the judgment of the lower
court as to the merits is affirmed, with the
modification only that P2,000 shall be deducted from
the amount of the judgment which was awarded
against the plaintiff, such deduction to be made for
and on account of such use of the Lapu-Lapu by the
partnership, with costs against the appellant. So
ordered.

Q. Would you have any

objection to their asking for their
attorney's fees from the company as
partners also in the business? —

A. Yes.

Q. You would object to your

partners having their attorney's fees
here paid out of the copartnership like
you have had yours paid? —

A. Yes, that is the way I do my

business.

To say the least, this kind of evidence does not

appeal to the court. This case has been bitterly
contested, and there is much feeling between the
parties and even their respective attorneys. Be that
as it may, we are clearly of the opinion that the
findings of the lower court upon questions of fact are
G.R. No. L-31684 June 28, 1973
EVANGELISTA & CO., DOMINGO C.
EVANGELISTA, JR., CONCHITA B. NAVARRO
and LEONARDA ATIENZA ABAD
SABTOS, petitioners,
vs.
ESTRELLA ABAD SANTOS, respondent.
Leonardo Abola for petitioners.
Baisas, Alberto & Associates for respondent.
MAKALINTAL, J.:
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 profits and losses
"shall be divided and distributed among the partners
... in the proportion of 70% for the first 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 herein respondent filed 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 affairs 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 profits after
such accounting, plus attorney's fees and costs.
The defendants, in their answer, denied ever having
declared dividends or distributed profits of the
partnership; denied likewise that the plaintiff ever
demanded that she be allowed to examine the
partnership books; and byway of affirmative defense
alleged that the amended Articles of Co-partnership
did not express the true agreement of the parties,
which was that the plaintiff was not an industrial
partner; that she did not in fact contribute industry to
the partnership; and that her share of 30% was to be
based on the profits 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 plaintiff had signed a
promisory note as co-maker and mortgaged her
property as security.
The parties are in agreement that the main issue in
this case is "whether the plaintiff-appellee
(respondent here) is an industrial partner as claimed
by her or merely a profit sharer entitled to 30% of the
net profits that may be realized by the partnership
from June 7, 1955 until the mortgage loan from the
Rehabilitation Finance Corporation shall be fully
paid, as claimed by appellants (herein petitioners)."
On that issue the Court of First Instance found for
the plaintiff and rendered judgement "declaring her
an industrial partner of Evangelista & Co.; ordering
the defendants to render an accounting of the
business operations of the (said) partnership ... from
June 7, 1955; to pay the plaintiff such amounts as
may be due as her share in the partnership profits
and/or dividends after such an accounting has been
properly made; to pay plaintiff attorney's fees in the
sum of P2,000.00 and the costs of this suit."
The defendants appealed to the Court of Appeals,
which thereafter affirmed judgments of the court a
quo.
In the petition before Us the petitioners have
assigned the following errors:
I. The Court of Appeals erred in the
finding that the respondent is an
industrial partner of Evangelista &
Co., notwithstanding the admitted
fact that since 1954 and until after
promulgation of the decision of the
appellate court the said respondent
was one of the judges of the City
Court of Manila, and despite its
findings that respondent had been
paid for services allegedly
contributed by her to the partnership.
In this connection the Court of
Appeals erred:
 (A) In finding that the in the net profits of the partnership
"amended Articles of plus the sum of P2,000.00 as
Co-partnership," attorney's fees and the costs of the
Exhibit "A" is suit, instead of dismissing
conclusive evidence respondent's complaint, with costs,
that respondent was against the respondent.
in fact made an
industrial partner of It is quite obvious that the questions raised in the first
Evangelista & Co. assigned errors refer to the facts as found by the
Court of Appeals. The evidence presented by the
(B) In not finding that a parties as the trial in support of their respective
portion of positions on the issue of whether or not the
respondent's respondent was an industrial partner was thoroughly
testimony quoted in analyzed by the Court of Appeals on its decision, to
the decision proves the extent of reproducing verbatim therein the
that said respondent lengthy testimony of the witnesses.
did not bind herself to
contribute her It is not the function of the Supreme Court to analyze
industry, and she or weigh such evidence all over again, its jurisdiction
could not, and in fact being limited to reviewing errors of law that might
did not, because she have been commited by the lower court. It should be
was one of the judges observed, in this regard, that the Court of Appeals
of the City Court of did not hold that the Articles of Co-partnership,
Manila since 1954. identified in the record as Exhibit "A", was conclusive
evidence that the respondent was an industrial
(C) In finding that partner of the said company, but considered it
respondent did not in together with other factors, consisting of both
fact contribute her testimonial and documentary evidences, in arriving
industry, despite the at the factual conclusion expressed in the decision.
appellate court's own
finding that she has The findings of the Court of Appeals on the various
been paid for the points raised in the first assignment of error are
services allegedly hereunder reproduced if only to demonstrate that the
rendered by her, as same were made after a through analysis of then
well as for the loans of evidence, and hence are beyond this Court's power
money made by her to of review.
the partnership.
The aforequoted findings of the lower
II. The lower court erred in not finding Court are assailed under Appellants'
that in any event the respondent was first assigned error, wherein it is
lawfully excluded from, and deprived pointed out that "Appellee's
of, her alleged share, interests and documentary evidence does not
participation, as an alleged industrial conclusively prove that appellee was
partner, in the partnership in fact admitted by appellants as
Evangelista & Co., and its profits or industrial partner of Evangelista &
net income. Co." and that "The grounds relied
upon by the lower Court are
III. The Court of Appeals erred in untenable" (Pages 21 and 26,
affirming in toto the decision of the Appellant's Brief).
trial court whereby respondent was
declared an industrial partner of the The first point refers to Exhibit A, B,
petitioner, and petitioners were C, K, K-1, J, N and S, appellants'
ordered to render an accounting of complaint being that "In finding that
the business operation of the the appellee is an industrial partner of
partnership from June 7, 1955, and to appellant Evangelista & Co., herein
pay the respondent her alleged share referred to as the partnership — the
lower court relied mainly on the
appellee's documentary evidence,
entirely disregarding facts and
circumstances established by
appellants" evidence which
contradict the said finding' (Page 21,
Appellants' Brief). The lower court
could not have done otherwise but
rely on the exhibits just mentioned,
first, because appellants have
admitted their genuineness and due
execution, hence they were admitted
without objection by the lower court
when appellee rested her case and,
secondly the said exhibits indubitably
show the appellee is an industrial
partner of appellant company.
Appellants are virtually estopped
from attempting to detract from the
probative force of the said exhibits
because they all bear the imprint of
their knowledge and consent, and
there is no credible showing that they
ever protested against or opposed
their contents prior of the filing of their
answer to appellee's complaint. As a
matter of fact, all the appellant
Evangelista, Jr., would have us
believe — as against the cumulative
force of appellee's aforesaid
documentary evidence — is the
appellee's Exhibit "A", as confirmed
and corroborated by the other
exhibits already mentioned, does not
express the true intent and
agreement of the parties thereto, the
real understanding between them
being the appellee would be merely a
profit sharer entitled to 30% of the net
profits that may be realized between
the partners from June 7, 1955, until
the mortgage loan of P30,000.00 to
be obtained from the RFC shall have
been fully paid. This version,
however, is discredited not only by
the aforesaid documentary evidence
brought forward by the appellee, but
also by the fact that from June 7,
1955 up to the filing of their answer to
the complaint on February 8, 1964 —
or a period of over eight (8) years —
appellants did nothing to correct the
alleged false agreement of the
parties contained in Exhibit "A". It is
thus reasonable to suppose that, had
appellee not filed the present action,
appellants would not have advanced
this obvious afterthought that Exhibit
"A" does not express the true intent
and agreement of the parties thereto.
At pages 32-33 of appellants' brief,
they also make much of the argument
that 'there is an overriding fact which
proves that the parties to the
Amended Articles of Partnership,
Exhibit "A", did not contemplate to
make the appellee Estrella Abad
Santos, an industrial partner of
Evangelista & Co. It is an admitted
fact that since before the execution of
the amended articles of partnership,
Exhibit "A", the appellee Estrella
Abad Santos has been, and up to the
present time still is, one of the judges
of the City Court of Manila, devoting
all her time to the performance of the
duties of her public office. This fact
proves beyond peradventure that it
was never contemplated between the
parties, for she could not lawfully
contribute her full time and industry
which is the obligation of an industrial
partner pursuant to Art. 1789 of the
Civil Code.
The Court of Appeals then proceeded to consider
appellee's testimony on this point, quoting it in the
decision, and then concluded as follows:
One cannot read appellee's
testimony just quoted without gaining
the very definite impression that,
even as she was and still is a Judge
of the City Court of Manila, she has
rendered services for appellants
without which they would not have
had the wherewithal to operate the
business for which appellant
company was organized. 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 profits 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 firm or
avail themselves of
the benefits 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 conflict 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 the appellee 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
appellee has faithfully complied with
her prestation with respect to
appellants is clearly shown by the
fact that it was only after filing 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 filing of defendants' answer to the
complaint, defendants reached an
agreement whereby the herein
plaintiff 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 profits or income, on the ground
plaintiff 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 office, aside
from teaching in law school in Manila,
without the express consent of the
herein defendants' (Record On
Appeal, pp. 24-25). Having always
knows as a appellee as a City judge
even before she joined appellant
company on June 7, 1955 as an
industrial partner, why did it take
appellants many yearn 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
profits 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." (Appellants
Brief, p. 38).
What has gone before persuades us
to hold with the lower Court that
appellee is an industrial partner of
appellant company, with the right to
demand for a formal accounting and
to receive her share in the net profit
that may result from such an
accounting, which right appellants
take exception under their second
assigned error. Our said holding is
based on the following article of the
New Civil Code:
'ART. 1899. Any
partner shall have the
right to a formal
account as to
partnership affairs:
(1) If he is wrongfully excluded from
the partnership business or
 possession of its property by his co-
partners;

(2) If the right exists under the terms

of any agreement;

(3) As provided by article 1807;

(4) Whenever other circumstance

render it just and reasonable.

We find no reason in this case to depart from the rule

which limits this Court's appellate jurisdiction to
reviewing only errors of law, accepting as conclusive
the factual findings of the lower court upon its own
assessment of the evidence.

The judgment appealed from is affirmed, with costs.