Sancho vs.

Lizarraga
Case Digest

FACTS:
Sancho and Lizarraga entered into a contract of partnership. Sancho thereafter brought an action for the
rescission of the partnership and prayed for the reimbursement of the P 50, 000 investment he contributed with
interest at 12% per annum against Lizarraga.
Lizarraga denied allegations and asked for the dissolution of their partnership and payment to him as
manager and administrator of the partnership of P500 monthly from October 15, 1920 [the day the contract was
entered into] until final dissolution.
CFI Manila proceedings proved Lizarraga had not contributed all the capital he bound himself to invest
and that Sancho demanded Lizarraga to liquidate partnership. CFI declared partnership dissolved on account of the
expiration period for which it was constituted and ordered liquidation of the partnership.
The plaintiff appealed from said decision praying for the rescission of the partnership contract between
him and the defendant in accordance with Art. 1124.

ISSUE/S:
W/N plaintiff acquired the right to demand rescission of the partnership contract according to article 1124 of the
Civil Code.

RULING:
RIGHT TO DEMAND RESCISSION OF THE PARTNERSHIP CONTRACT. The Supreme Court ruled that plaintiff
has not acquired the right to demand rescission of the partnership contract according to Article 1124 of the Civil
Code. The Court ratiocinated that owing to the defendants failure to pay to the partnership the whole amount
which he bound himself to pay, he became indebted to the partnership 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. Article 1124 cannot be applied to the case in question,
because it refers to the resolution of obligations in general, whereas articles 1681 and 1682 [of Old Civil Code]
specifically refer to the contract of partnership in particular. And it is a well known principle that special provisions
prevail over general provisions. Hence, SC dismissed the appeal left the decision appealed from in full force.

ART. 1786. Every partner is a debtor of the partnership for whatever he may have promised to contribute thereto.
He shall also be bound for warranty in case of eviction with regard to specifi c and determinate things which
he may have contributed to the partnership, in the same cases and in the same manner as the vendor is bound
with respect to the vendee. He shall also be liable for the fruits thereof from the time they should have been
delivered, without the need of any demand. (1681a)

ART. 1788. A partner who has undertaken to contribute a sum of money and fails to do so becomes a debtor for
the interest and damages from the time he should have complied with his obligation.
The same rule applies to any amount he may have taken from the partnership coffers, and his liability shall
begin from the time he converted the amount to his own use. (1682)