G.R. No. L-19819 October 26, 1977 WILLIAM UY, plaintiff-appellee, vs.

BARTOLOME PUZON, substituted by FRANCO PUZON, defendantappellant. R.P. Sarandi for appellant. Jose L. Uy & Andres P. Salvador for appellee. CONCEPCION JR., J.: 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" 3which 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 5 P50,000.00 in cash. 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 7 Corporation. 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 9 18, 1957, 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 15 afore-mentioned projects. By virtue of said assignment, the Bureau of Public Highways paid the money due on the partial accomplishments on the government projects in question to the Philippine National Bank which, in turn, applied portions of it in payment of Puzon's loan. Of the amount of P1,047,181.07, released by the Bureau of Public Highways in payment of the partial work completed by the partnership on the projects, the amount of P332,539.60 was applied in payment of Puzon's loan and only the amount of P27,820.80 was deposited in the partnership funds, 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 19 in additional capital to continue with the projects. Failing to reach an agreement with William Uy, Bartolome Puzon, as prime contractor of the construction projects, wrote the subcontractor, U.P. Construction Company, 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 23 contribution to the partnership. Thereafter, the appellant failed to make any further contributions the partnership funds as shown in his letters to the appellee wherein he confessed his inability to put in additional capital to continue with the projects. 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 25 capital. Thus, in the receipt for P10,000.00 dated October 24, 1956, the appellant stated:+.wph!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, appellant also said: +.wph!1
26

the

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. 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 MalangasGanyangan 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

30

released to him by the Philippine National Bank and in whose account these funds are deposited . 35 36 37 In due time, the loners so appointed, submitted their report 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 38 had a balance of P8,242.39. 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 the Court, considering that Han's explanation thereof is the more plausible because if they were employed in the prosecution of the partners projects, the corresponding disbursements would have certainly been recorded in its books, which is not the case. Taking into account defendant is the custodian of the books of account, his failure to so enter therein the alleged disbursements, accentuates the falsity of his claim on this point. 40 Besides, as further noted by the trial court, the report Commissioner Ablaza is unreliable in view of his proclivity to favor the appellant and because of the

inaccurate accounting procedure adopted by him in auditing the books of account of the partnership unlike Mr. Tayag's report which inspires faith and 41 credence. As explained by Mr. Tayag, the amount of P7,497.80 represen expenses paid by the appellee out of his personal funds which not been entered in the books of the partnership but which been recognized and conceded to by the auditor designated by the appellant who included the said amount under 42 Expenses. The explanation of Mr. Tayag on the inclusion of the amount of P65,103.77 is likewise clear and convincing. 43 As for the sum of of P26,027.04, the same represents the expenses which the appelle paid in connection withe the projects and not entered in the books of the partnership since all vouchers and receipts were sent to the Manila office which were under the control of the appellant. However, officer which were under the control of the appellant. However, a list of these expenses are incorporated in Exhibits ZZ, ZZ-1 to ZZ-4. In resume', the appelllee's credit balance would be as follows: +.wph!1 Undisputed balance as of Dec. 1967 Add: Items omitted from the books but recognized and charged to Miscellaneous Expenses by Mr. Ablaza Add: Payrolls paid by the appellee Less: Payroll remittances received Add: Other expenses incurred at the site (Exhs, ZZ, ZZ-1 to 26,027.04 P128,103.77 7,497.80 P 8,242.

63,000.00

65,103.77

sub ntracts in the construction of the road and bridges projects its deficient working capital and the juggling of its funds by the appellant. Contrary to the appellant's claim, the partnership showed some profits during the period from July 2, 1956 to December 31, 1957. If the Profit and Loss TOTAL P106,871.00 Statement 45 showed a net loss of P134,019.43, this was primarily due to the At the trial, the appellee presented a claim for the amounts of P3,917.39 and confusing accounting method employed by the auditor who intermixed h and P4,665.00 which he also advanced for the construction projects but which accthe cas ruamethod of accounting and the erroneous inclusion of certain 44 were not included in the Commissioner's Report. items, like personal expenses of the appellant and afteged extraordinary Appellee's total investments in the partnership would, therefore, be: losses due to an accidental plane crash, in the operating expenses of the partnership, Corrected, the Profit and Loss Statement would indicate a net Appellee's total credits P106,871.00 profit of P41,611.28. For the period from January 1, 1958 to September 30, 1959, the partnership Add: unrecorded balances for the 3,917,39 admittedly made a net profit of P52,943.89. 46 month of Dec. 1957 (Exhs. KKK, Besides, as We have heretofore pointed out, the appellant received from the KK-1 to KKK_19, KKK-22) 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 48 Add: Payments to Munoz, as 4,665.00 P952,839.77, leaving an unaccounted balance of P94,342.24. Obviously, this amount is also part of the profits of the partnership. subcontractor of five,(5) Bridges During the trial of this case, it was discovered that the appellant had money (p. 264 tsn; Exhs. KKK-20, KKKand credits receivable froin the projects in question, in the custody of the 21) 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 Total Investments Pl 15,453.39 the total retentions Wucted from the appemnt amounted to P145,358.00. 50 Surely, these retained amounts also form part of the profits Regarding the award of P200,000.00 as his share in the unrealized profits of of the partnership. the partnership, the appellant contends that the findings of the trial court that Had the appellant not been remiss in his obligations as partner and as prime the amount of P400,000.00 as reasonable profits of the partnership venture contractor of the construction projects in question as he was bound to is without any basis and is not supported by the evidence. The appemnt perform pursuant to the partnership and subcontract agreements, and maintains that the lower court, in making its determination, did not take into considering the fact that the total contract amount of these two projects is consideration the great risks involved in business operations involving as it P2,327,335.76, it is reasonable to expect that the partnership would have does the completion of the projects within a definite period of time, in the earned much more than the P334,255.61 We have hereinabove indicated. face of adverse and often unpredictable circumstances, as well as the fact The award, therefore, made by the trial court of the amount of P200,000.00, that the appellee, who was in charge of the projects in the field, contributed as compensatory damages, is not speculative, but based on reasonable in a large measure to the failure of the partnership to realize such profits by estimate. his field management. WHEREFORE, finding no error in the decision appealed from, the said This argument must be overruled in the light of the law and evidence on the decision is hereby affirmed with costs against the appellant, it being matter. Under Article 2200 of the Civil Code, indemnification for damages understood that the liability mentioned herein shall be home by the estate of shall comprehend not only the value of the loss suffered, but also that of the the deceased Bartolome Puzon, represented in this instance by the profits which the obligee failed to obtain. In other words lucrum cessans is administrator thereof, Franco Puzon. also a basis for indemnification. SO ORDERED. Has the appellee failed to make profits because of appellant's breach of contract? There is no doubt that the contracting business is a profitable one and that the U.P. Construction Company derived some profits from' co io oa ects its ZZ-4)

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.:+.wph!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: t.hqw 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: t. hqw 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: t.hqw 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 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 between the petitioner and the private respondent. It is a contract of partnership. The latter in his complaint alleged that he was induced by the petitioner to enter into a partnership with him under the following terms and conditions: t.hqw 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: t .hqw 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 loss or failure of the venture. Since the venture was a failure, the private respondent is not entitled to the P8,000.00 commission.

Anent the third assigned error, the petitioner maintains that the respondent Court of Appeals erred in holding him liable to the private respondent in the sum of P7,000.00 as a supposed return of investment in a magazine venture. In awarding P7,000.00 to the private respondent as his supposed return of investment in the "Voice of the Veterans" magazine venture, the respondent court ruled that: t.hqw xxx xxx xxx ... Moran admittedly signed the promissory note of P20,000 in favor of Pecson. Moran does not question the due execution of said note. Must Moran therefore pay the amount of P20,000? The evidence indicates that the P20,000 was assigned by Moran to cover the following: t.hqw (a) P 7,000 the amount of the PNB check given by Pecson to Moran representing Pecson's investment in Moran's other project (the publication and printing of the 'Voice of the Veterans'); (b) P10,000 to cover the return of Pecson's contribution in the project of the Posters; (c) P3,000 representing Pecson's commission for three months (April, May, June, 1971). Of said P20,000 Moran has to pay P7,000 (as a return of Pecson's investment for the Veterans' project, for this project never left the ground) ... 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 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- t.hqw E Xerox copy of PNB Manager's Check No. 234265 dated March 22, 1971 in favor of defendant. Defendant admitted the authenticity of this check and of his receipt of the proceeds thereof (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 P-Promissory note for P14,000.00. This is also defendant's Exhibit 2. It is being offered for the purpose of showing the transaction as explained in connection with Exhibits E, L, M, and N above. Explaining the above-quoted exhibits, respondent Pecson testified that: t.hqw Q During the pre-trial of this case, Mr. Pecson, the defendant presented a promissory note in the amount of P14,000.00 which has been marked as Exhibit 2. Do you know this promissory note? A Yes, sir.

Q What is this promissory note, in connection with your transaction with the defendant? A This promissory note is for the printing of the "Voice of the Veterans". Q What is this "Voice of the Veterans", Mr. Pecson? A It is a book.t.hqw (T.S.N., p. 19, Nov. 29, 1972) Q And what does the amount of P14,000.00 indicated in the promissory note, Exhibit 2, represent? A It represents the P6,000.00 cash which I gave to Mr. Moran, as evidenced by the Philippine National Bank Manager's check and the P8,000.00 profit assured me by Mr. Moran which I will derive from the printing of this "Voice of the Veterans" book. Q You said that the P6,000.00 of this P14,000.00 is covered by, a Manager's check. I show you Exhibit E, is this the Manager's check that mentioned? A Yes, sir. Q What happened to this promissory note of P14,000.00 which you said represented P6,000.00 of your investment and P8,000.00 promised profits? A Latter, Mr. Moran returned to me P3,000.00 which represented one-half (1/2) of the P6,000.00 capital I gave to him. Q As a consequence of the return by Mr. Moran of one-half (1/2) of the P6,000.00 capital you gave to him, what happened to the promised profit of P8,000.00? A It was reduced to one-half (1/2) which is P4,000.00. Q Was there any document executed by Mr. Moran in connection with the Balance of P3,000.00 of your capital

investment and the P4,000.00 promised profits? A Yes, sir, he executed a promissory note. Q I show you a promissory note in the amount of P7,000.00 dated March 30, 1971 which for purposes of Identification I request the same to be marked as Exhibit M. . . Court t.hqw Mark it as Exhibit M. Q (continuing) is this the promissory note which you said was executed by Mr. Moran in connection with your transaction regarding the printing of the "Voice of the Veterans"? A Yes, sir. (T.S.N., pp. 20-22, Nov. 29, 1972). Q What happened to this promissory note executed by Mr. Moran, Mr. Pecson? A Mr. Moran paid me P4,000.00 out of the P7,000.00 as shown by the promissory note. Q Was there a receipt issued by you covering this payment of P4,000.00 in favor of Mr. Moran? A Yes, sir. (T.S.N., p. 23, Nov. 29, 1972). Q You stated that Mr. Moran paid the amount of P4,000.00 on account of the P7,000.00 covered by the promissory note, Exhibit M. What does this P4,000.00 covered by Exhibit N represent? A This P4,000.00 represents the P3,000.00 which he has returned of my P6,000.00 capital investment and the P1,000.00 represents partial payment of the P4,000.00 profit that was promised to me by Mr. Moran. Q And what happened to the balance of P3,000.00 under the promissory note, Exhibit M?

A The balance of P3,000.00 and the rest of the profit was applied as part of the consideration of the promissory note of P20,000.00. (T.S.N., pp. 23-24, Nov. 29, 1972). 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. 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.1wph1.t

February 2, 1903 G.R. No. 413 JOSE FERNANDEZ, plaintiff-appellant, vs. FRANCISCO DE LA ROSA, defendant-appellee. Vicente Miranda, for appellant. Simplicio del Rosario, for appellee. LADD, J.: The object of this action is to obtain from the court a declaration that a partnership exists between the parties, that the plaintiff has a consequent interested in certain cascoes which are alleged to be partnership property, and that the defendant is bound to render an account of his administration of the cascoes and the business carried on with them. Judgment was rendered for the defendant in the court below and the plaintiff appealed. The respective claims of the parties as to the facts, so far as it is necessary to state them in order to indicate the point in dispute, may be briefly summarized. The plaintiff alleges that in January, 1900, he entered into a verbal agreement with the defendant to form a partnership for the purchase of cascoes and the carrying on of the business of letting the same for hire in Manila, the defendant to buy the cascoes and each partner to furnish for that purpose such amount of money as he could, the profits to be divided proportionately; that in the same January the plaintiff furnished the defendant 300 pesos to purchase a casco designated as No. 1515, which the defendant did purchase for 500 pesos of Doa Isabel Vales, taking the title in his own name; that the plaintiff furnished further sums aggregating about 300 pesos for repairs on this casco; that on the fifth of the following March he furnished the defendant 825 pesos to purchase another casco designated as No. 2089, which the defendant did purchase for 1,000 pesos of Luis R. Yangco, taking the title to this casco also in his own name; that in April the parties undertook to draw up articles of partnership for the purpose of embodying the same in an authentic document, but that the defendant having proposed a draft of such articles which differed materially from the terms of the earlier verbal agreement, and being unwillingly to include casco No. 2089 in the partnership, they were unable to come to any understanding and no written agreement was executed; that the defendant having in the meantime had the control and management of the two cascoes, the plaintiff made a demand for an accounting upon him, which the defendant refused to render, denying the existence of the partnership altogether.

The defendant admits that the project of forming a partnership in the casco business in which he was already engaged to some extent individually was discussed between himself and the plaintiff in January, 1900, and earlier, one Marcos Angulo, who was a partner of the plaintiff in a bakery business, being also a party to the negotiations, but he denies that any agreement was ever consummated. He denies that the plaintiff furnished any money in January, 1900, for the purchase of casco No. 1515, or for repairs on the same, but claims that he borrowed 300 pesos on his individual account in January from the bakery firm, consisting of the plaintiff, Marcos Angulo, and Antonio Angulo. The 825 pesos, which he admits he received from the plaintiff March 5, he claims was for the purchase of casco No. 1515, which he alleged was bought March 12, and he alleges that he never received anything from the defendant toward the purchase of casco No. 2089. He claims to have paid, exclusive of repairs, 1,200 pesos for the first casco and 2,000 pesos for the second one. The case comes to this court under the old procedure, and it is therefore necessary for us the review the evidence and pass upon the facts. Our general conclusions may be stated as follows: (1) Doa Isabel Vales, from whom the defendant bought casco No. 1515, testifies that the sale was made and the casco delivered in January, although the public document of sale was not executed till some time afterwards. This witness is apparently disinterested, and we think it is safe to rely upon the truth of her testimony, especially as the defendant, while asserting that the sale was in March, admits that he had the casco taken to the ways for repairs in January. It is true that the public document of sale was executed March 10, and that the vendor declares therein that she is the owner of the casco, but such declaration does not exclude proof as to the actual date of the sale, at least as against the plaintiff, who was not a party to the instrument. (Civil Code, sec. 1218.) It often happens, of course, in such cases, that the actual sale precedes by a considerable time the execution of the formal instrument of transfer, and this is what we think occurred here. (2) The plaintiff presented in evidence the following receipt: I have this day received from D. Jose Fernandez eight hundred and twenty-five pesos for the cost of a casco which we are to purchase in company. Manila, March 5, 1900. Francisco de la Rosa. The authenticity of this receipt is admitted by the defendant. If casco No. 1515 was bought, as we think it was, in January, the casco referred to in the receipt which the parties are to purchase in company must be casco No. 2089, which was bought March 22. We find this to be the fact, and that the plaintiff furnished and the defendant received

825 pesos toward the purchase of this casco, with the understanding that it was to be purchased on joint account. (3) Antonio Fernandez testifies that in the early part of January, 1900, he saw Antonio Angulo give the defendant, in the name of the plaintiff, a sum of money, the amount of which he is unable to state, for the purchase of a casco to be used in the plaintiffs and defendants business. Antonio Angulo also testifies, but the defendant claims that the fact that Angulo was a partner of the plaintiff rendered him incompetent as a witness under the provisions of article 643 of the then Code of Civil Procedure, and without deciding whether this point is well taken, we have discarded his testimony altogether in considering the case. The defendant admits the receipt of 300 pesos from Antonio Angulo in January, claiming, as has been stated, that it was a loan from the firm. Yet he sets up the claim that the 825 pesos which he received from the plaintiff in March were furnished toward the purchase of casco No. 1515, thereby virtually admitting that casco was purchased in company with the plaintiff. We discover nothing in the evidence to support the claim that the 300 pesos received in January was a loan, unless it may be the fact that the defendant had on previous occasions borrowed money from the bakery firm. We think all the probabilities of the case point to the truth of the evidence of Antonio Fernandez as to this transaction, and we find the fact to be that the sum in question was furnished by the plaintiff toward the purchase for joint ownership of casco No. 1515, and that the defendant received it with the understanding that it was to be used for this purposed. We also find that the plaintiff furnished some further sums of money for the repair of casco. (4) The balance of the purchase price of each of the two cascoes over and above the amount contributed by the plaintiff was furnished by the defendant. (5) We are unable to find upon the evidence before us that there was any specific verbal agreement of partnership, except such as may be implied from the fact as to the purchase of the casco. (6) Although the evidence is somewhat unsatisfactory upon this point, we think it more probable than otherwise that no attempt was made to agree upon articles of partnership till about the middle of the April following the purchase of the cascoes. (7) At some time subsequently to the failure of the attempt to agree upon partnership articles and after the defendant had been operating the cascoes for some time, the defendant returned to the plaintiff 1,125 pesos, in two different sums, one of 300 and one of 825 pesos. The only evidence in the record as to the circumstances under which the plaintiff received these sums is contained in his answer to the interrogatories proposed to him by the

defendant, and the whole of his statement on this point may properly be considered in determining the fact as being in the nature of an indivisible admission. He states that both sums were received with an express reservation on his part of all his rights as a partner. We find this to be the fact. Two questions of law are raised by the foregoing facts: (1) Did a partnership exist between the parties? (2) If such partnership existed, was it terminated as a result of the act of the defendant in receiving back the 1,125 pesos? (1) Partnership is a contract by which 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. (Civil Code, art. 1665.) The essential points upon which the minds of the parties must meet in a contract of partnership are, therefore, (1) mutual contribution to a common stock, and (2) a joint interest in the profits. If the contract contains these two elements the partnership relation results, and the law itself fixes the incidents of this relation if the parties fail to do so. (Civil Code, secs. 1689, 1695.) We have found as a fact that money was furnished by the plaintiff and received by the defendant with the understanding that it was to be used for the purchase of the cascoes in question. This establishes the first element of the contract, namely, mutual contribution to a common stock. The second element, namely, the intention to share profits, appears to be an unavoidable deduction from the fact of the purchase of the cascoes in common, in the absence of any other explanation of the object of the parties in making the purchase in that form, and, it may be added, in view of the admitted fact that prior to the purchase of the first casco the formation of a partnership had been a subject of negotiation between them. Under other circumstances the relation of joint ownership, a relation distinct though perhaps not essentially different in its practical consequence from that of partnership, might have been the result of the joint purchase. If, for instance, it were shown that the object of the parties in purchasing in company had been to make a more favorable bargain for the two cascoes that they could have done by purchasing them separately, and that they had no ulterior object except to effect a division of the common property when once they had acquired it, the affectio societatis would be lacking and the parties would have become joint tenants only; but, as nothing of this sort appears in the case, we must assume that the object of the purchase was active use and profit and not mere passive ownership in common. It is thus apparent that a complete and perfect contract of partnership was entered into by the parties. This contract, it is true, might have been subject

to a suspensive condition, postponing its operation until an agreement was reached as to the respective participation of the partners in the profits, the character of the partnership as collective or en comandita, and other details, but although it is asserted by counsel for the defendant that such was the case, there is little or nothing in the record to support this claim, and that fact that the defendant did actually go on and purchase the boat, as it would seem, before any attempt had been made to formulate partnership articles, strongly discountenances the theory. The execution of a written agreement was not necessary in order to give efficacy to the verbal contract of partnership as a civil contract, the contributions of the partners not having been in the form of immovables or rights in immovables. (Civil Code, art. 1667.) The special provision cited, requiring the execution of a public writing in the single case mentioned and dispensing with all formal requirements in other cases, renders inapplicable to this species of contract the general provisions of article 1280 of the Civil Code. (2) The remaining question is as to the legal effect of the acceptance by the plaintiff of the money returned to him by the defendant after the definitive failure of the attempt to agree upon partnership articles. The amount returned fell short, in our view of the facts, of that which the plaintiff had contributed to the capital of the partnership, since it did not include the sum which he had furnished for the repairs of casco No. 1515. Moreover, it is quite possible, as claimed by the plaintiff, that a profit may have been realized from the business during the period in which the defendant have been administering it prior to the return of the money, and if so he still retained that sum in his hands. For these reasons the acceptance of the money by the plaintiff did not have the effect of terminating the legal existence of the partnership by converting it into a societas leonina, as claimed by counsel for the defendant. Did the defendant waive his right to such interest as remained to him in the partnership property by receiving the money? Did he by so doing waive his right to an accounting of the profits already realized, if any, and a participation in them in proportion to the amount he had originally contributed to the common fund? Was the partnership dissolved by the will or withdrawal of one of the partners under article 1705 of the Civil Code? We think these questions must be answered in the negative. There was no intention on the part of the plaintiff in accepting the money to relinquish his rights as a partner, nor is there any evidence that by anything that he said or by anything that he omitted to say he gave the defendant any ground whatever to believe that he intended to relinquish them. On the contrary he notified the defendant that he waived none of his rights in the

partnership. Nor was the acceptance of the money an act which was in itself inconsistent with the continuance of the partnership relation, as would have been the case had the plaintiff withdrawn his entire interest in the partnership. There is, therefore, nothing upon which a waiver, either express or implied, can be predicated. The defendant might have himself terminated the partnership relation at any time, if he had chosen to do so, by recognizing the plaintiffs right in the partnership property and in the profits. Having failed to do this he can not be permitted to force a dissolution upon his co-partner upon terms which the latter is unwilling to accept. We see nothing in the case which can give the transaction in question any other aspect than that of the withdrawal by one partner with the consent of the other of a portion of the common capital. The result is that we hold and declare that a partnership was formed between the parties in January, 1900, the existence of which the defendant is bound to recognize; that cascoes No. 1515 and 2089 constitute partnership property, and that the plaintiff is entitled to an accounting of the defendants administration of such property, and of the profits derived therefrom. This declaration does not involve an adjudication as to any disputed items of the partnership account. The judgment of the court below will be reversed without costs, and the record returned for the execution of the judgment now rendered. So ordered. Arellano, C.J., Torres, Cooper, and Mapa, JJ., concur. Willard, J., dissenting. ON MOTION FOR A REHEARING. MAPA, J.: This case has been decided on appeal in favor of the plaintiff, and the defendant has moved for a rehearing upon the following grounds: 1. 2. Because that part of the decision which refers to the existence of the partnership which is the object of the complaint is not based upon clear and decisive legal grounds; and Because, upon the supposition of the existence of the partnership, the decision does not clearly determine whether the juridical relation between the partners suffered any modification in consequence of the withdrawal by the plaintiff of the sum of 1,125 pesos from the funds of the partnership, or if it continued as before, the parties being thereby deprived, he alleges, of one of the principal bases for determining with exactness the amount due to each.

With respect to the first point, the appellant cites the fifth conclusion of the decision, which is as follows: We are unable to find from the evidence before us that there was any specific verbal agreement of partnership, except such as may be implied from the facts as to the purchase of the cascoes. Discussing this part of the decision, the defendant says that, in the judgment of the court, if on the one hand there is no direct evidence of a contract, on the other its existence can only be inferred from certain facts, and the defendant adds that the possibility of an inference is not sufficient ground upon which to consider as existing what may be inferred to exist, and still less as sufficient ground for declaring its efficacy to produce legal effects. This reasoning rests upon a false basis. We have not taken into consideration the mere possibility of an inference, as the appellant gratuitously stated, for the purpose of arriving at a conclusion that a contract of partnership was entered into between him and the plaintiff, but have considered the proof which is derived from the facts connected with the purchase of the cascoes. It is stated in the decision that with the exception of this evidence we find no other which shows the making of the contract. But this does not mean (for it says exactly the contrary) that this fact is not absolutely proven, as the defendant erroneously appears to think. From this data we infer a fact which to our mind is certain and positive, and not a mere possibility; we infer not that it is possible that the contract may have existed, but that it actually did exist. The proofs constituted by the facts referred to, although it is the only evidence, and in spite of the fact that it is not direct, we consider, however, sufficient to produce such a conviction, which may certainly be founded upon any of the various classes of evidence which the law admits. There is all the more reason for its being so in this case, because a civil partnership may be constituted in any form, according to article 1667 of the Civil Code, unless real property or real rights are contributed to it the only case of exception in which it is necessary that the agreement be recorded in a public instrument. It is of no importance that the parties have failed to reach an agreement with respect to the minor details of contract. These details pertain to the accidental and not to the essential part of the contract. We have already stated in the opinion what are the essential requisites of a contract of partnership, according to the definition of article 1665. Considering as a whole the probatory facts which appears from the record, we have reached the conclusion that the plaintiff and the defendant agreed to the essential parts of that contract, and did in fact constitute a partnership, with the funds of which were purchased the cascoes with which this litigation deals, although it is true that they did not take the precaution to precisely establish and determine from the beginning the conditions with respect to the

participation of each partner in the profits or losses of the partnership. The disagreements subsequently arising between them, when endeavoring to fix these conditions, should not and can not produce the effect of destroying that which has been done, to the prejudice of one of the partners, nor could it divest his rights under the partnership which had accrued by the actual contribution of capital which followed the agreement to enter into a partnership, together with the transactions effected with partnership funds. The law has foreseen the possibility of the constitution of a partnership without an express stipulation by the partners upon those conditions, and has established rules which may serve as a basis for the distribution of profits and losses among the partners. (Art. 1689 of the Civil Code. ) We consider that the partnership entered into by the plaintiff and the defendant falls within the provisions of this article. With respect to the second point, it is obvious that upon declaring the existence of a partnership and the right of the plaintiff to demand from the defendant an itemized accounting of his management thereof, it was impossible at the same time to determine the effects which might have been produced with respect to the interest of the partnership by the withdrawal by the plaintiff of the sum of 1,125 pesos. This could only be determined after a liquidation of the partnership. Then, and only then, can it be known if this sum is to be charged to the capital contributed by the plaintiff, or to his share of the profits, or to both. It might well be that the partnership has earned profits, and that the plaintiffs participation therein is equivalent to or exceeds the sum mentioned. In this case it is evident that, notwithstanding that payment, his interest in the partnership would still continue. This is one case. It would be easy to imagine many others, as the possible results of a liquidation are innumerable. The liquidation will finally determine the condition of the legal relations of the partners inter se at the time of the withdrawal of the sum mentioned. It was not, nor is it possible to determine this status a priori without prejudging the result, as yet unknown, of the litigation. Therefore it is that in the decision no direct statement has been made upon this point. It is for the same reason that it was expressly stated in the decision that it does not involve an adjudication as to any disputed item of the partnership account. The contentions advanced by the moving party are so evidently unfounded that we can not see the necessity or convenience of granting the rehearing prayed for, and the motion is therefore denied.

G.R. No. L-4281

March 30, 1908

JOSE GARRIDO, plaintiff-appellant, vs. AGUSTIN ASENCIO, defendant-appellee. Gregorio Yulo for appellant. P.Q. Rothrock for appellee. CARSON, J.: Plaintiff and defendant were members of a partnership doing business under the firm name of Asencio y Cia. The business of the partnership did not prosper and it was dissolved by mutual agreement of the members. The plaintiff brings this action to recover from the defendant, who appears to have been left in charge of the books and the funds of the firm, the amount of the capital which he had invested in the business. The defendant, alleging that there had been considerable losses in the conduct of the business of the partnership, denied that there was anything due the plaintiff as claimed, and filed a cross complaint wherein he prayed for a judgment against the plaintiff for a certain amount which he alleged to be due by the plaintiff under the articles of partnership on account of plaintiff's share of these losses. The trial court found that the evidence substantially sustains the claim of the defendant as to the alleged losses in the business of the partnership and gave judgment in his favor. The only question submitted on appeal is the competency and sufficiently of the evidence on which the trial court based its findings as to the status of the accounts of the company. Plaintiff and appellant makes the following assignment of errors: First. The trial court erred in holding the estado de cuentas (statement of account) of the partnership of Asencio y Cia. submitted by the defendant as competent and sufficient evidence in this case. Second. The trial court erred in holding that evidence of record proved the existence of losses in the business of the said partnership. Third. The trial court erred in refusing to give judgment in favor of the plaintiff. It appears from the record that by mutual agreement the defendant had general charge and supervision of the books and funds of the firm, but it appears that these books were at all times open to the inspection of the plaintiff, and there is evidence which tends to show that the plaintiff himself made entries in these books touching particular transactions in which he

happened to be interested; so that while it is clear that the defendant was more especially burdened with the care of the books and accounts of the partnership, it would appear that the plaintiff had equal rights with the defendant in this regard, and that during the existence of the partnership they were equally responsible for the mode in which the books were kept and that the entries made by one had the same effect as if they had been made by the other. At the trial the principal question at issue was the amount of the profits or losses of the business of the partnership during the period of its operation. The plaintiff made no allegation as to profits, but denied defendant's allegation as to the losses. The defendant in support of his allegations offered in evidence the estado de cuentas(general statement of accounts) of the partnership, supported by a number of vouchers, and by his own testimony under oath as to the accuracy and correctness of the items set out therein. The plaintiff assigns as error the admission of this account on the ground that the books of the partnership were not kept in accordance with the provisions of Title III, Book I, of the Code of Commerce. It is not necessary for us to consider this assignment of error as to the inadmissibility of this account on the ground that the books were not kept in accordance with the provisions of the Commercial Code, because no objection was made to its admission in the court below; and further, because in any event it was admissible under the provisions of section 338 of the Code of Civil Procedure as memorandum used to refresh the memory of the witness. (Tan Machan vs. Gan Aya, 3 Phil. Rep., 684.) We think further that in view of the testimony of record that the plaintiff jointly with the defendant kept these books, made entries therein, and was responsible with him therefor, the doctrine laid down in Behn, Meyer & Co., vs. Rosatzin (5 Phil. Rep., 660) is applicable in this case, and the correctness of the entries in these books must be taken to be admitted by him, except so far as it is made to appear that they are erroneous as a result of fraud or mistake. It appears from the record that the statement of account, the vouchers, and the books of the company were placed at the disposition of the plaintiff for more than six weeks prior to the trial, and that during the trial he was given every opportunity to indicate any erroneous or fraudulent items appearing in the account, yet he was unable, or in any event he declined to specify such items, contenting himself with a general statement to the effect that there must be some mistake, as he did not and could not believe that the business had been conducted at a loss. The court below seems to have scrutinized the account with painstaking care, and to have been satisfied as to its accuracy, except as to some unimportant items, which he corrected, but counsel for the appellant

reiterates in this court his general allegations as to the inaccuracy of the account, and points out some instances wherein he alleges that items of expenditure appear to have been charged against the partnership more than once. Upon the whole record as brought here by the appellant we are not able to say that the weight of the evidence does not sustain the findings of the trial court, and the judgment entered in that court should be, and is hereby, affirmed with the costs of this instance against the appellant. So ordered.

G.R. No. L-5236

January 10, 1910

PEDRO MARTINEZ, plaintiff-appellee, vs. ONG PONG CO and ONG LAY, defendants. ONG PONG CO., appellant. Fernando de la Cantera for appellant. O'Brien and DeWitt for appellee. ARELLANO, C.J.: On the 12th of December, 1900, the plaintiff herein delivered P1,500 to the defendants who, in a private document, acknowledged that they had received the same with the agreement, as stated by them, "that we are to invest the amount in a store, the profits or losses of which we are to divide with the former, in equal shares." The plaintiff filed a complaint on April 25, 1907, in order to compel the defendants to render him an accounting of the partnership as agreed to, or else to refund him the P1,500 that he had given them for the said purpose. Ong Pong Co alone appeared to answer the complaint; he admitted the fact of the agreement and the delivery to him and to Ong Lay of the P1,500 for the purpose aforesaid, but he alleged that Ong Lay, who was then deceased, was the one who had managed the business, and that nothing had resulted therefrom save the loss of the capital of P1,500, to which loss the plaintiff agreed. The judge of the Court of First Instance of the city of Manila who tried the case ordered Ong Pong Co to return to the plaintiff one-half of the said capital of P1,500 which, together with Ong Lay, he had received from the plaintiff, to wit, P750, plus P90 as one-half of the profits, calculated at the rate of 12 per cent per annum for the six months that the store was supposed to have been open, both sums in Philippine currency, making a total of P840, with legal interest thereon at the rate of 6 per cent per annum, from the 12th of June, 1901, when the business terminated and on which date he ought to have returned the said amount to the plaintiff, until the full payment thereof with costs. From this judgment Ong Pong Co appealed to this court, and assigned the following errors: 1. For not having taken into consideration the fact that the reason for the closing of the store was the ejectment from the premises occupied by it.

2. For not having considered the fact that there were losses. 3. For holding that there should have been profits. 4. For having applied article 1138 of the Civil Code. 5. and 6. For holding that the capital ought to have yielded profits, and that the latter should be calculated 12 per cent per annum; and 7. The findings of the ejectment. As to the first assignment of error, the fact that the store was closed by virtue of ejectment proceedings is of no importance for the effects of the suit. The whole action is based upon the fact that the defendants received certain capital from the plaintiff for the purpose of organizing a company; they, according to the agreement, were to handle the said money and invest it in a store which was the object of the association; they, in the absence of a special agreement vesting in one sole person the management of the business, were the actual administrators thereof; as such administrators they were the agent of the company and incurred the liabilities peculiar to every agent, among which is that of rendering account to the principal of their transactions, and paying him everything they may have received by virtue of the mandatum. (Arts. 1695 and 1720, Civil Code.) Neither of them has rendered such account nor proven the losses referred to by Ong Pong Co; they are therefore obliged to refund the money that they received for the purpose of establishing the said store the object of the association. This was the principal pronouncement of the judgment. With regard to the second and third assignments of error, this court, like the court below, finds no evidence that the entire capital or any part thereof was lost. It is no evidence of such loss to aver, without proof, that the effects of the store were ejected. Even though this were proven, it could not be inferred therefrom that the ejectment was due to the fact that no rents were paid, and that the rent was not paid on account of the loss of the capital belonging to the enterprise. With regard to the possible profits, the finding of the court below are based on the statements of the defendant Ong Pong Co, to the effect that "there were some profits, but not large ones." This court, however, does not find that the amount thereof has been proven, nor deem it possible to estimate them to be a certain sum, and for a given period of time; hence, it can not admit the estimate, made in the judgment, of 12 per cent per annum for the period of six months. Inasmuch as in this case nothing appears other than the failure to fulfill an obligation on the part of a partner who acted as agent in receiving money for a given purpose, for which he has rendered no accounting, such agent is responsible only for the losses which, by a violation of the provisions of the law, he incurred. This being an obligation to pay in cash, there are no other

losses than the legal interest, which interest is not due except from the time of the judicial demand, or, in the present case, from the filing of the complaint. (Arts. 1108 and 1100, Civil Code.) We do not consider that article 1688 is applicable in this case, in so far as it provides "that the partnership is liable to every partner for the amounts he may have disbursed on account of the same and for the proper interest," for the reason that no other money than that contributed as is involved. As in the partnership there were two administrators or agents liable for the above-named amount, article 1138 of the Civil Code has been invoked; this latter deals with debts of a partnership where the obligation is not a joint one, as is likewise provided by article 1723 of said code with respect to the liability of two or more agents with respect to the return of the money that they received from their principal. Therefore, the other errors assigned have not been committed. In view of the foregoing judgment appealed from is hereby affirmed, provided, however, that the defendant Ong Pong Co shall only pay the plaintiff the sum of P750 with the legal interest thereon at the rate of 6 per cent per annum from the time of the filing of the complaint, and the costs, without special ruling as to the costs of this instance. So ordered.

G.R. No. L-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 Copartnership 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 "amended Articles of Co-partnership," Exhibit "A" is conclusive evidence that respondent was in fact made an industrial partner of Evangelista & Co. (B) In not finding that a portion of respondent's testimony quoted in the decision proves that said respondent did not bind herself to contribute her industry, and she could not, and in fact did not, because she was one of the judges of the City Court of Manila since 1954. (C) In finding that respondent did not in fact contribute her industry, despite the

appellate court's own finding that she has been paid for the services allegedly rendered by her, as well as for the loans of money made by her to the partnership. II. The lower court erred in not finding that in any event the respondent was lawfully excluded from, and deprived of, her alleged share, interests and participation, as an alleged industrial partner, in the partnership Evangelista & Co., and its profits or net income. III. The Court of Appeals erred in affirming in toto the decision of the trial court whereby respondent was declared an industrial partner of the petitioner, and petitioners were ordered to render an accounting of the business operation of the partnership from June 7, 1955, and to pay the respondent her alleged share in the net profits of the partnership plus the sum of P2,000.00 as attorney's fees and the costs of the suit, instead of dismissing respondent's complaint, with costs, against the respondent. It is quite obvious that the questions raised in the first assigned errors refer to the facts as found by the Court of Appeals. The evidence presented by the parties as the trial in support of their respective positions on the issue of whether or not the respondent was an industrial partner was thoroughly analyzed by the Court of Appeals on its decision, to the extent of reproducing verbatim therein the lengthy testimony of the witnesses. It is not the function of the Supreme Court to analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing errors of law that might have been commited by the lower court. It should be observed, in this regard, that the Court of Appeals did not hold that the Articles of Co-partnership, identified in the record as Exhibit "A", was conclusive evidence that the respondent was an industrial partner of the said company, but considered it together with other factors, consisting of both testimonial and documentary evidences, in arriving at the factual conclusion expressed in the decision. The findings of the Court of Appeals on the various points raised in the first assignment of error are hereunder reproduced if only to demonstrate that the same were made after a through analysis of then evidence, and hence are beyond this Court's power of review. The aforequoted findings of the lower Court are assailed under Appellants' first assigned error, wherein it is pointed out that "Appellee's documentary evidence does not

conclusively prove that appellee was in fact admitted by appellants as industrial partner of Evangelista & Co." and that "The grounds relied upon by the lower Court are untenable" (Pages 21 and 26, Appellant's Brief). The first point refers to Exhibit A, B, C, K, K-1, J, N and S, appellants' complaint being that "In finding that the appellee is an industrial partner of appellant Evangelista & Co., herein 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.

December 31, 1930 G.R. No. 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. In failing to order the defendant to return 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 courts 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 defendants 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. 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, [4] or of false pretenses of fraudulent acts. 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. 5840

September 17, 1910

THE UNITED STATES, plaintiff-appellee, vs. EUSEBIO CLARIN, defendant-appellant. Francisco Dominguez, for appellant. Attorney-General Villamor, for appellee. 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 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.