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No. L-59956. October 31, 1984.*

ISABELO MORAN, JR., petitioner, vs. THE HON. COURT OF APPEALS and MARIANO E. PECSON, respondents.
Damages; Partnership; There is no factual or legal basis for award of speculative damages for likely partnership
profits.—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.

Same; Same; Partner who promises to contribute to partnership becomes promissory debtor of latter.—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).

Same; Same; Essence of partnership is that partners share in profits and losses.—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 used 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.

Same; Same; Partner entitled to recover share of profits actually realized by venture.—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 used by the petitioner in printing the 2,000 copies, the remaining P6,000.00 should therefore be returned to the
private respondent.

Same; Same; Agency; Where partnership venture is a failure, a partner is not entitled to any commission
promised by co-partner where agreement does not state basis of commission.—The partnership agreement stipulated
that the petitioner would give the private respondent a monthly commission of P1,000.00 from April 15, 1971 to
December 15, 1971 for a total of eight (8) monthly commissions.
The agreement does not state the basis of the commission. The payment of the commission could only have
been predicated on relatively extravagant profits. The parties could not have intended the giving of a commission
inspite of loss or failure of the venture. Since the venture was a failure, the private respondent is not entitled to the
P8,000.00 commission.

Appeal; When Supreme Court will review factual findings of Court of Appeals.—As a rule, the findings of facts of
the Court of Appeals are final and conclusive and cannot be reviewed on appeal to this Court (Amigo v. Teves, 96 Phil.
252), provided they are borne out by the record or are based on substantial evidence (Alsua-Betts v. Court of
Appeals, 92 SCRA 332). However, this rule admits of certain exceptions. Thus, in Carolina Industries Inc. v. CMS Stock
Brokerage, Inc., et al, (97 SCRA 734), we held that this Court retains the power to review and rectify the findings of
fact of the Court of Appeals when (1) the conclusion is a finding grounded entirely on speculation, surmises and
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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.

Same; C.A. erred in its factual finding in the case at bar.—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.

Same; Partnership; Damages; Factual finding of C.A. that venture never left the ground and on this basis
decreed full return of respondent’s investment is erroneous.—The respondent court erred when it concluded that the
project never left the ground because the project did take place. Only it failed. It was the private respondent himself
who presented a copy of the book entitled “Voice of the Veterans” in the lower court as Exhibit “L”. Therefore, it would
be error to state that the project never took place and on this basis decree the return of the private respondent’s
investment.
MORAN, JR. v. CA
G.R. No. L-59956 Oct. 31, 1984

FACTS:

Pecson and Moran entered into an agreement for the printing of posters featuring the delegates of the 1971
Constitutional Convention; that 95k posters were supposed to be printed and sold at P2/each; that each would
contribute P15k.That Moran will supervise the work, while Pecson would receive a P1k monthly commission Pecson
gave Moran P10k for which the latter issued a receipt Only 2k posters were printed, but each was sold for P5 Moran
then executed 2 promissory notes in favor of Pecson. Pecson then filed an action for the recovery of a sum of money
for the return of his P10, 000 contribution, payment of his share in the profits that the partnership would have earned.
The trial court held that each party is entitled to rescind the contract since both failed to fulfill their respective promises
(Moran the printing of the 95k posters; Pecson the P15k contribution).
The Court of Appeals held that Moran must pay Pecson, among others, the amount of expected profits and the latter’s
commission in the partnership.
ISSUE:
Whether or not Moran is obliged to give Pecson the amount of expected profits from their partnership.
RULING:
No, he is not. 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) and for interests and damages from the
time he should have complied with his obligations (Art. 1788).
Being a contract of partnership, each partner must share in the profits and losses of the venture, for that is the essence
of partnership. Even in the assurance of the other partner that they would earn a huge amount of profits, in the absence
of fraud, the other cannot claim a right to recover the highly speculative profits
In the present case, the fantastic nature of expected profits is obvious that various factors need to be considered. The
failure of COMELEC to proclaim all 320 candidates of the Constitutional Convention on time was a major factor in
Moran’s decision not to go on with the printing of all 95,000 posters.