G.R. No. L-33580 February 6, 1931MAXIMILIANO
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 ofNatividad vs. Villarica(31
Phil., 172).This contention is well founded. Until the accounts
have been rendered as ordered by the trial court, and until they
have been either approved or disapproved, the litigation involved
in this action cannot be considered as completely decided; and, as
it was held in said case of Natividad vs .Villarica, also with
reference to an appeal taken from a decision ordering the rendition
of accounts following the dissolution of partnership, the appeal in
the instant case must be deemed premature.But even going into the
merits of the case, the affirmation of the judgment appealed from
is inevitable. In view of the lower court's findings referred to
above, which we cannot revise because the parol evidence has not
been forwarded to this court, articles 1681 and 1682 of the Civil
Code have been properly applied. Owing to the defendant's failure
to pay to the partnership the whole amount which he bound himself
to pay, he became indebted to it for the remainder, with interest
and any damages occasioned thereby, but the plaintiff did not
thereby acquire the right to demand rescission of the partnership
contract according to article 1124 of the Code. This article cannot
be applied to the case in question, because it refers to the
resolution of obligations in general, whereas article 1681 and 1682
specifically refer to the contract of partnership in particular.
And it is a well known principle that special provisions prevail
over general provisions.By virtue of the foregoing, this appeal is
hereby dismissed, leaving the decision appealed from in full force,
without special pronouncement of costs. So ordered.MAXIMILIANO
SANCHO,vs. SEVERIANO LIZARRAGAG.R.No. L-33580 February 6,
1931FACTS:The plaintiff brought an action for the rescission of the
partnership contract between himself and the defendant and the
reimbursement of his investment worth 50,000php 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 and asked for the dissolution of the partnership, and the
payment to him as its manager and administrator P500 monthly from
October 15, 1920 until the final dissolution with interest.The CFI
found that the defendant had not contributed all the capital he had
bound himself to invest hence it 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. 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:WON plaintiff acquired the right to demand
rescission of the partnership contract according to article 1124 of
the Civil Code.HELD:The SC ruled 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 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.
G.R. No. L-45464 April 28, 1939JOSUE
SONCUYA,plaintiff-appellant,vs.CARMEN DE
LUNA,defendant-appellee.Josue Soncuya in his own behalf.Conrado V.
Sanchez and Jesus de Veyra for appellee.VILLA-REAL,J.:On September
11, 1936, plaintiff Josue Soncuya filed with the Court of First
Instance of Manila and amended complaint against Carmen de Luna in
her own name and as co-administratrix of the intestate estate, of
Librada Avelino, in which, upon the facts therein alleged, he
prayed that defendant be sentenced to pay him the sum of P700,432
as damages and costs.To the aforesaid amended complaint defendant
Carmen de Luna interposed a demurrer based on the following
grounds: (1) That the complaint does not contain facts sufficient
to constitute a cause of action; and (2) that the complaint is
ambiguous, unintelligible and vague.Trial on the demurrer having
been held and the parties heard, the court found the same
well-founded and sustained it, ordering the plaintiff to amend his
complaint within a period of ten days from receipt of notice of the
order.Plaintiff having manifested that he would prefer not to amend
his amended complaint, the attorney for the defendant, Carmen de
Luna, filed a motion praying that the amended complaint be
dismissed with costs against the plaintiff. Said motion was granted
by The Court of First Instance of Manila which ordered the
dismissal of the aforesaid amended complaint, with costs against
the plaintiff.From this order of dismissal, the appellant took an
appeal, assigning twenty alleged errors committed by the lower
court in its order referred to.The demurrer interposed by defendant
to the amended complaint filed by plaintiff having been sustained
on the grounds that the facts alleged in said complaint are not
sufficient to constitute a cause of action and that the complaint
is ambiguous, unintelligible and vague, the only questions which
may be raised and considered in the present appeal are those which
refer to said grounds.In the amended complaint it is prayed that
defendant Carmen de Luna be sentenced to pay plaintiff damages in
the sum of P700,432 as a result of the administration, said to be
fraudulent, of he partnership, "Centro Escolar de Seoritas", of
which plaintiff, defendant and the deceased Librada Avelino were
members. For the purpose of adjudicating to plaintiff damages which
he alleges to have suffered as a partner by reason of the supposed
fraudulent management of he partnership referred to, it is first
necessary that a liquidation of the business thereof be made to the
end that the profits and losses may be known and the causes of the
latter and the responsibility of the defendant as well as the
damages which each partner may have suffered, may be determined. It
is not alleged in the complaint that such a liquidation has been
effected nor is it prayed that it be made. Consequently, there is
no reason or cause for plaintiff to institute the action for
damages which he claims from the managing partner Carmen de Luna
(Po Yeng Cheo vs. Lim Ka Yam, 44 Phil., 172).Having reached the
conclusion that the facts alleged in the complaint are not
sufficient to constitute a cause of action on the part of plaintiff
as member of the partnership "Centro Escolar de Seoritas" to
collect damages from defendant as managing partner thereof, without
a previous liquidation, we do not deem it necessary to discuss the
remaining question of whether or not the complaint is ambiguous,
unintelligible and vague.In view of the foregoing considerations,
we are of the opinion and so hold that for a partner to be able to
claim from another partner who manages the general copartnership,
damages allegedly suffered by him by reason of the fraudulent
administration of the latter, a previous liquidation of said
partnership is necessary.Wherefore, finding no error in the order
appealed from the same is affirmed in all its parts, with costs
against the appellant. So ordered.
Soncuya v. de Luna G.R. No. L-45464, April 28, 1939, Villa-Real,
J.Facts:Petitioner filed a complaint against respondent for damages
as a result of the fraudulent administration of the partnership,
Centro Escolar de Senoritas of which petitioner and the deceased
Avelino Librada were members. For the purpose of adjudicating to
plaintiff damages which he alleges to have suffered as a partner,
it is necessary that a liquidation of the business be made that the
end profits and losses maybe known and the causes of the latter and
the responsibility of the defendant as well as the damages in which
each partner may have suffered, maybe determined.Issue:Whether the
petitioner is entitled to damages.Ruling:According to the Supreme
Court the complaint is not sufficient to constitute a cause of
action on the part of the plaintiff as member of the partnership to
collect damages from defendant as managing partner thereof, without
previous liquidation. Thus, for a partner to be able to claim from
another partner who manages the general co-partnership, allegedly
suffered by him by reason of the fraudulent administration of the
latter, a previous liquidation of said partnership is
necessary.
G.R. No. L-31684 June 28, 1973EVANGELISTA & CO., DOMINGO C.
EVANGELISTA, JR., CONCHITA B. NAVARRO and LEONARDA ATIENZA ABAD
SABTOS,petitioners,vs.ESTRELLA ABAD SANTOS,respondent.Leonardo
Abola for petitioners.Baisas, Alberto & Associates for
respondent.MAKALINTAL,J.:On October 9, 1954 a co-partnership was
formed under the name of "Evangelista & Co." On June 7, 1955
the Articles of Co-partnership was amended as to include herein
respondent, Estrella Abad Santos, as industrial partner, with
herein petitioners Domingo C. Evangelista, Jr., Leonardo Atienza
Abad Santos and Conchita P. Navarro, the original capitalist
partners, remaining in that capacity, with a contribution of
P17,500 each. The amended Articles provided,inter alia, that "the
contribution of Estrella Abad Santos consists of her industry being
an industrial partner", and that the profits and losses "shall be
divided and distributed among the partners ... in the proportion of
70% for the first three partners, Domingo C. Evangelista, Jr.,
Conchita P. Navarro and Leonardo Atienza Abad Santos to be divided
among them equally; and 30% for the fourth partner Estrella Abad
Santos."On December 17, 1963 herein respondent filed suit against
the three other partners in the Court of First Instance of Manila,
alleging that the partnership, which was also made a
party-defendant, had been paying dividends to the partners except
to her; and that notwithstanding her demands the defendants had
refused and continued to refuse and let her examine the partnership
books or to give her information regarding the partnership affairs
to pay her any share in the dividends declared by the partnership.
She therefore prayed that the defendants be ordered to render
accounting to her of the partnership business and to pay her
corresponding share in the partnership profits after such
accounting, plus attorney's fees and costs.The defendants, in their
answer, denied ever having declared dividends or distributed
profits of the partnership; denied likewise that the plaintiff ever
demanded that she be allowed to examine the partnership books; and
byway of affirmative defense alleged that the amended Articles of
Co-partnership did not express the true agreement of the parties,
which was that the plaintiff was not an industrial partner; that
she did not in fact contribute industry to the partnership; and
that her share of 30% was to be based on the profits which might be
realized by the partnership only until full payment of the loan
which it had obtained in December, 1955 from the Rehabilitation
Finance Corporation in the sum of P30,000, for which the plaintiff
had signed a promisory note as co-maker and mortgaged her property
as security.The parties are in agreement that the main issue in
this case is "whether the plaintiff-appellee (respondent here) is
an industrial partner as claimed by her or merely a profit sharer
entitled to 30% of the net profits that may be realized by the
partnership from June 7, 1955 until the mortgage loan from the
Rehabilitation Finance Corporation shall be fully paid, as claimed
by appellants (herein petitioners)." On that issue the Court of
First Instance found for the plaintiff and rendered judgement
"declaring her an industrial partner of Evangelista & Co.;
ordering the defendants to render an accounting of the business
operations of the (said) partnership ... from June 7, 1955; to pay
the plaintiff such amounts as may be due as her share in the
partnership profits and/or dividends after such an accounting has
been properly made; to pay plaintiff attorney's fees in the sum of
P2,000.00 and the costs of this suit."The defendants appealed to
the Court of Appeals, which thereafter affirmed judgments of the
courta 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 affirmingin totothe 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 reproducingverbatimtherein 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.
EVANGELISTA & CO. v. ABAD SANTOSG.R. No. L-31684; June 28,
1973Ponente: J. Makalintal
FACTS: On October 9, 1954 a co-partnership was formed under the
name of "Evangelista & Co." On June 7, 1955 the Articles of
Co-partnership were amended so as to include herein respondent,
Estrella Abad Santos, as industrial partner, with herein
petitioners Domingo C. Evangelista, Jr., Leonarda Atienza Abad
Santos and Conchita P. Navarro, the original capitalist partners,
remaining in that capacity, with a contribution of P17,500 each On
December 17, 1963 herein respondent filed suit against the three
other partners, 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 to let her examine the partnership
books or to give her information regarding the partnership affairs
or to pay her any share in the dividends declared by the
partnership 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 by way of affirmative
defense alleged that the amended Articles of Co-partnership did not
express the true agreement of the parties, which was that the
plaintiff was not an industrial partner; that she did not in fact
contribute industry to the partnership.ISSUE: Whether Abad Santos
is entitled to see the partnership books because she is an
industrial partner in the partnershipHELD: Yes, Abad Santos is
entitled to see the partnership books.The Supreme Court ruled that
according toART. 1299. 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
circumstances render it just and reasonable."
In the case at hand, the company is stopped from denying Abad
Santos as an industrial partner because it has been 8 years and the
company never corrected their agreement in order to show their true
intentions. The company never bothered to correct those up until
Abad Santos filed a complaint.
G.R. No. L-5236 January 10, 1910PEDRO
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; and7. 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 themandatum. (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 storethe 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.MARTINEZ v. ONG PONG
COArellano, CJ (1910)MARTINEZ delivered to Ong Pong Co and Ong Lay
(ONGS) the sum of P1,500. The ONGS, in a private document,
acknowledged that they had received the money with the agreement
that they will invest it in a store, and the profits or losses
therefrom was to be divided with MARTINEZ in equal shares
Later, MARTINEZ filed a complaint in order to compel the ONGS to
render him an accounting of the partnership, or else to refund him
the P1,500 that he had given them
Ong Pong Co alone appeared to answer the complaint. He admitted
the fact of the agreement, but he alleged that Ong Lay(deceased)
was the one who had managed the business, and thatnothing had
resulted therefrom except the loss of the capital ofP1,500, to
which loss MARTINEZ agreed to bear
CFI rendered decision ordering Ong Pong Co to return to MARTINEZ
one-half of the capital of P1,500 (P750) plus P90 as one-half of
the profits, calculated at the rate of 12% per annum for the six
months that the store was supposed to have been open(total of P840)
with legal interest of 6% until the full payment,with costs
hence, this appeal by Ong Pong Co
ISSUE:WON MARTINEZ is entitled to the capital he contributed to
the partnership
HELD:YES. The ONGS failed to fulfill their obligation as
partners who, acting as MARTINEZs agents in receiving money, did
not render proper accounting therefor. Such renders them jointly
liable for the losses, solidarity not having been established.CFI
decision is AFFRIMED in this regard but REVERSED inasmuchas it
found that the capital invested earned profits. Thus, the CFI
ruling awarding MARTINEZ another P840 is DELETED. Ong Pong Co is
only liable to pay MARTINEZ half of the capital, or
P750,representing half of the loss which both ONGS should
jointlybear due to their omission, to earn legal interest of 6%
from time offiling this complaint, and costs
RATIO:In his defense, Ong Pong Co raised the issue of the
closure/failure of the store by virtue of ejectment proceedings
instituted againstthem. THIS, however, has no real significance in
the determination of the merits of this case
To be sure, the whole action is based upon the fact that the
ONGS received capital from MARTINEZ for the purpose of organizing a
store. The ONGS, according to the agreement, were to handle the
said money and invest it in a store which was the object of the
associationThe ONGS had no special agreement vesting in one sole
person the management of the business. Thus, both ONGS were the
actual administrators thereof; and as such administrators, they
were the agents of the company and incurred the liabilities
peculiar to every agent, among which is that of rendering accountto
the principal of their transactions, and paying him everything they
may have received by virtue of the mandatumSince neither of them
has rendered such account nor proven the losses, they are therefore
obliged to refund the money that they received for the purpose of
establishing the said storeThere is no evidence presented that the
entire capital or any partthereof was lost. Without proof, the
allegation that the effects ofthe store were ejected is, as earlier
mentioned, of no moment. Even if we assume this to be true, it
could still not be inferred thatthe 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 partnershipWith regard
to the CFIs finding of profits, it appears that thesame was based
on the statements of Ong Pong Co, to the effectthat"there were some
profits, but not large ones." this, however, was never proven. And
even we admit the same, such statement still does not make it
possible to estimate the alleged profits. As such, the CFI ruling
on this point is REVERSED
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 complaintArt. 1688 is NOT 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 thatcontributed as is involved Art. 1138,
CC is also NOT applicable here as this deals with debts of a
partnership where the obligation is NOT joint. Likewise, Art1723
regarding the liability of two or more agents with respect to the
return of the money that they received from their principal is NOT
applicable. No showing of solidarity having been established, their
liability is JOINT!
G.R. No. L-45624 April 25, 1939GEORGE
LITTON,petitioner-appellant,vs.HILL & CERON, ET
AL.,respondents-appellees.George E. Reich for appellant.Roy and De
Guzman for appellees.Espeleta, Quijano and Liwag for appellee
Hill.CONCEPCION,J.:This is a petition to review oncertiorarithe
decision of the Court of Appeals in a case originating from the
Court of First Instance of Manila wherein the herein petitioner
George Litton was the plaintiff and the respondents Hill &
Ceron, Robert Hill, Carlos Ceron and Visayan Surety & Insurance
Corporation were defendants.The facts are as follows: On February
14, 1934, the plaintiff sold and delivered to Carlos Ceron, who is
one of the managing partners of Hill & Ceron, a certain number
of mining claims, and by virtue of said transaction, the defendant
Carlos Ceron delivered to the plaintiff a document reading as
follows:Feb. 14, 1934Received from Mr. George Litton share
certificates Nos. 4428, 4429 and 6699 for 5,000, 5,000 and 7,000
shares respectively total 17,000 shares of Big Wedge Mining
Company, which we have sold at P0.11 (eleven centavos) per share or
P1,870.00 less 1/2 per cent brokerage.HILL & CERON
By: (Sgd.) CARLOS CERONCeron paid to the plaintiff the sum or
P1,150 leaving an unpaid balance of P720, and unable to collect
this sum either from Hill & Ceron or from its surety Visayan
Surety & Insurance Corporation, Litton filed a complaint in the
Court of First Instance of Manila against the said defendants for
the recovery of the said balance. The court, after trial, ordered
Carlos Ceron personally to pay the amount claimed and absolved the
partnership Hill & Ceron, Robert Hill and the Visayan Surety
& Insurance Corporation. On appeal to the Court of Appeals, the
latter affirmed the decision of the court on May 29, 1937, having
reached the conclusion that Ceron did not intend to represent and
did not act for the firm Hill & Ceron in the transaction
involved in this litigation.Accepting, as we cannot but accept, the
conclusion arrived at by the Court of Appeals as to the question of
fact just mentioned, namely, that Ceron individually entered into
the transaction with the plaintiff, but in view, however, of
certain undisputed facts and of certain regulations and provisions
of the Code of Commerce, we reach the conclusion that the
transaction made by Ceron with the plaintiff should be understood
in law as effected by Hill & Ceron and binding upon it.In the
first place, it is an admitted fact by Robert Hill when he
testified at the trial that he and Ceron, during the partnership,
had the same power to buy and sell; that in said partnership Hill
as well as Ceron made the transaction as partners in equal parts;
that on the date of the transaction, February 14, 1934, the
partnership between Hill and Ceron was in existence. After this
date, or on February 19th, Hill & Ceron sold shares of the Big
Wedge; and when the transaction was entered into with Litton, it
was neither published in the newspapers nor stated in the
commercial registry that the partnership Hill & Ceron had been
dissolved.Hill testified that a few days before February 14th he
had a conversation with the plaintiff in the course of which he
advised the latter not to deliver shares for sale or on commission
to Ceron because the partnership was about to be dissolved; but
what importance can be attached to said advice if the partnership
was not in fact dissolved on February 14th, the date when the
transaction with Ceron took place?Under article 226 of the Code of
Commerce, the dissolution of a commercial association shall not
cause any prejudice to third parties until it has been recorded in
the commercial registry. (See also Cardellvs.Maeru, 14 Phil., 368.)
The Supreme Court of Spain held that the dissolution of a
partnership by the will of the partners which is not registered in
the commercial registry, does not prejudice third persons. (Opinion
of March 23, 1885.)Aside from the aforecited legal provisions, the
order of the Bureau of Commerce of December 7, 1933, prohibits
brokers from buying and selling shares on their own account. Said
order reads:The stock and/or bond broker is, therefore, merely an
agent or an intermediary, and as such, shall not be allowed. . .
.(c) To buy or to sell shares of stock or bonds on his own account
for purposes of speculation and/or for manipulating the market,
irrespective of whether the purchase or sale is made from or to a
private individual, broker or brokerage firm.In its decision the
Court of Appeals states:But there is a stronger objection to the
plaintiff's attempt to make the firm responsible to him. According
to the articles of copartnership of 'Hill & Ceron,' filed in
the Bureau of Commerce.Sixth. That the management of the business
affairs of the copartnership shall be entrusted to both copartners
who shall jointly administer the business affairs, transactions and
activities of the copartnership, shall jointly open a current
account or any other kind of account in any bank or banks, shall
jointly sign all checks for the withdrawal of funds and shall
jointly or singly sign, in the latter case, with the consent of the
other partner. . . .Under this stipulation, a written contract of
the firm can only be signed by one of the partners if the other
partner consented. Without the consent of one partner, the other
cannot bind the firm by a written contract. Now, assuming for the
moment that Ceron attempted to represent the firm in this contract
with the plaintiff (the plaintiff conceded that the firm name was
not mentioned at that time), the latter has failed to prove that
Hill had consented to such contract.It follows from the sixth
paragraph of the articles of partnership of Hill &n Ceron above
quoted that the management of the business of the partnership has
been entrusted to both partners thereof, but we dissent from the
view of the Court of Appeals that for one of the partners to bind
the partnership the consent of the other is necessary. Third
persons, like the plaintiff, are not bound in entering into a
contract with any of the two partners, to ascertain whether or not
this partner with whom the transaction is made has the consent of
the other partner. The public need not make inquires as to the
agreements had between the partners. Its knowledge, is enough that
it is contracting with the partnership which is represented by one
of the managing partners.There is a general presumption that each
individual partner is an authorized agent for the firm and that he
has authority to bind the firm in carrying on the partnership
transactions. (Millsvs.Riggle, 112 Pac., 617.)The presumption is
sufficient to permit third persons to hold the firm liable on
transactions entered into by one of members of the firm acting
apparently in its behalf and within the scope of his authority. (Le
Royvs.Johnson, 7 U. S. [Law. ed.], 391.)The second paragraph of the
articles of partnership of Hill & Ceron reads in part:Second:
That the purpose or object for which this copartnership is
organized is to engage in the business of brokerage in general,
such as stock and bond brokers, real brokers, investment security
brokers, shipping brokers, and other activities pertaining to the
business of brokers in general.The kind of business in which the
partnership Hill & Ceron is to engage being thus determined,
none of the two partners, under article 130 of the Code of
Commerce, may legally engage in the business of brokerage in
general as stock brokers, security brokers and other activities
pertaining to the business of the partnership. Ceron, therefore,
could not have entered into the contract of sale of shares with
Litton as a private individual, but as a managing partner of Hill
& Ceron.The respondent argues in its brief that even admitting
that one of the partners could not, in his individual capacity,
engage in a transaction similar to that in which the partnership is
engaged without binding the latter, nevertheless there is no law
which prohibits a partner in the stock brokerage business for
engaging in other transactions different from those of the
partnership, as it happens in the present case, because the
transaction made by Ceron is a mere personal loan, and this
argument, so it is said, is corroborated by the Court of Appeals.
We do not find this alleged corroboration because the only finding
of fact made by the Court of Appeals is to the effect that the
transaction made by Ceron with the plaintiff was in his individual
capacity.The appealed decision is reversed and the defendants are
ordered to pay to the plaintiff, jointly and severally, the sum of
P720, with legal interest, from the date of the filing of the
complaint, minus the commission of one-half per cent (%) from the
original price of P1,870, with the costs to the respondents. So
ordered.G.R. No. L-45624 April 25, 1939Facts:This is a petition to
review oncertiorarithe decision of the Court of Appeals. On
February 14, 1934, Litton sold and delivered to Carlos Ceron, who
is one of the managing partners of Hill & Ceron, a certain
number of mining claims, and by virtue of said transaction, Ceron
delivered to plaintiff a document (receipt) acknowledging that he
received from Litton certain share certificates of Big Wedge Mining
Company totaling P1870. Ceron paid to the plaintiff the sum or
P1,150 leaving an unpaid balance of P720, and unable to collect
this sum either from Hill & Ceron or from its surety Visayan
Surety & Insurance Corporation, Litton filed a complaint in the
Court of First Instance of Manila against the said defendants for
the recovery of the said balance.The lower court, after trial,
ordered Carlos Ceron personally to pay the amount claimed and
absolved the partnership Hill & Ceron, Robert Hill and the
Visayan Surety & Insurance Corporation. On appeal to the CA,
the latter affirmed the decision of the lower court, having reached
the conclusion that Ceron did not intend to represent and did not
act for the firm Hill & Ceron in the transaction involved in
this litigation.Issue:WON Cerons act binds the partnership.
Held:Yes, we reach the conclusion that the transaction made by
Ceron with the plaintiff should be understood in law as effected by
Hill & Ceron and binding upon it.In the first place, it is an
admitted fact by Robert Hill when he testified at the trial that he
and Ceron, during the partnership, had the same power to buy and
sell; that in said partnership Hill as well as Ceron made the
transaction as partners in equal parts; that on the date of the
transaction, February 14, 1934, the partnership between Hill and
Ceron was in existence.According to the articles of copartnership
of Hill & Ceron, a written contract of the firm can only be
signed by one of the partners if the other partner consented.
Without the consent of one partner, the other cannot bind the firm
by a written contract. Now, assuming for the moment that Ceron
attempted to represent the firm in this contract with the plaintiff
(the plaintiff conceded that the firm name was not mentioned at
that time), the latter has failed to prove that Hill had consented
to such contract. Also, third persons, like the plaintiff, are not
bound in entering into a contract with any of the two partners, to
ascertain whether or not this partner with whom the transaction is
made has the consent of the other partner. The public need not make
inquires as to the agreements had between the partners. Its
knowledge, is enough that it is contracting with the partnership
which is represented by one of the managing partners.The respondent
argues in its brief that even admitting that one of the partners
could not, in his individual capacity, engage in a transaction
similar to that in which the partnership is engaged without binding
the latter, nevertheless there is no law which prohibits a partner
in the stock brokerage business for engaging in other transactions
different from those of the partnership, as it happens in the
present case, because the transaction made by Ceron is a mere
personal loan, and this argument, so it is said, is corroborated by
the Court of Appeals. We do not find this alleged corroboration
because the only finding of fact made by the Court of Appeals is to
the effect that the transaction made by Ceron with the plaintiff
was in his individual capacity.The appealed decision is reversed
and the defendants are ordered to pay to the plaintiff, jointly and
severally, the sum of P720, with legal interest, from the date of
the filing of the complaint, minus the commission of one-half per
cent (%) from the original price of P1,870, with the costs to the
respondents. So ordered.
G.R. No. 135813 October 25, 2001FERNANDO
SANTOS,petitioner,vs.SPOUSES ARSENIO and NIEVES
REYES,respondents.PANGANIBAN,J.:As a general rule, the factual
findings of the Court of Appeals affirming those of the trial court
are binding on the Supreme Court. However, there are several
exceptions to this principle. In the present case, we find occasion
to apply both the rule and one of the exceptions.The CaseBefore us
is a Petition for Review on Certiorari assailing the November 28,
1997 Decision,1as well as the August 17, 1998 and the October 9,
1998 Resolutions,2issued by the Court of Appeals (CA) in CA-GR CV
No. 34742. The Assailed Decision disposed as follows:"WHEREFORE,
the decision appealed from is AFFIRMED save as for the counterclaim
which is hereby DISMISSED. Costs against [petitioner]."3Resolving
respondent's Motion for Reconsideration, the August 17, 1998
Resolution ruled as follows:"WHEREFORE, [respondents'] motion for
reconsideration is GRANTED. Accordingly, the court's decision dated
November 28, 1997 is hereby MODIFIED in that the decision appealed
from is AFFIRMEDin toto, with costs against [petitioner]."4The
October 9, 1998 Resolution denied "for lack of merit" petitioner's
Motion for Reconsideration of the August 17, 1998 Resolution.5The
FactsThe events that led to this case are summarized by the CA as
follows:"Sometime in June, 1986, [Petitioner] Fernando Santos and
[Respondent] Nieves Reyes were introduced to each other by one
Meliton Zabat regarding a lending business venture proposed by
Nieves. It was verbally agreed that [petitioner would] act as
financier while [Nieves] and Zabat [would] take charge of
solicitation of members and collection of loan payments. The
venture was launched on June 13, 1986, with the understanding that
[petitioner] would receive 70% of the profits while x x x Nieves
and Zabat would earn 15% each."In July, 1986, x x x Nieves
introduced Cesar Gragera to [petitioner]. Gragera, as chairman of
the Monte Maria Development Corporation6(Monte Maria, for brevity),
sought short-term loans for members of the corporation.
[Petitioner] and Gragera executed an agreement providing funds for
Monte Maria's members. Under the agreement, Monte Maria,
represented by Gragera, was entitled to P1.31 commission per
thousand paid daily to [petitioner] (Exh. 'A')x x x . Nieves kept
the books as representative of [petitioner] while [Respondent]
Arsenio, husband of Nieves, acted as credit investigator."On August
6, 1986, [petitioner], x x x [Nieves] and Zabat executed the
'Article of Agreement' which formalized their earlier verbal
arrangement."[Petitioner] and [Nieves] later discovered that their
partner Zabat engaged in the same lending business in competition
with their partnership[.] Zabat was thereby expelled from the
partnership. The operations with Monte Maria continued."On June 5,
1987, [petitioner] filed a complaint for recovery of sum of money
and damages. [Petitioner] charged [respondents], allegedly in their
capacities as employees of [petitioner], with having
misappropriated funds intended for Gragera for the period July 8,
1986 up to March 31, 1987. Upon Gragera's complaint that his
commissions were inadequately remitted, [petitioner] entrusted
P200,000.00 to x x x Nieves to be given to Gragerax x x . Nieves
allegedly failed to account for the amount. [Petitioner] asserted
that after examination of the records, he found that of the total
amount of P4,623,201.90 entrusted to [respondents], only
P3,068,133.20 was remitted to Gragera, thereby leaving the balance
of P1,555,065.70 unaccounted for."In their answer, [respondents]
asserted that they were partners and not mere employees of
[petitioner]. The complaint, they alleged, was filed to preempt and
prevent them from claiming their rightful share to the profits of
the partnership."x x x Arsenio alleged that he was enticed by
[petitioner] to take the place of Zabat after [petitioner] learned
of Zabat's activities. Arsenio resigned from his job at the Asian
Development Bank to join the partnership."For her part, x x x
Nieves claimed that she participated in the business as a partner,
as the lending activity with Monte Maria originated from her
initiative. Except for the limited period of July 8, 1986 through
August 20, 1986, she did not handle sums intended for Gragera.
Collections were turned over to Gragera because he guaranteed 100%
payment of all sums loaned by Monte Maria. Entries she made on
worksheets were based on this assumptive 100% collection of all
loans. The loan releases were made less Gragera's agreed
commission. Because of this arrangement, she neither received
payments from borrowers nor remitted any amount to Gragera. Her job
was merely to make worksheets (Exhs. '15' to '15-DDDDDDDDDD') to
convey to [petitioner] how much he would earn if all the sums
guaranteed by Gragera were collected."[Petitioner] on the other
hand insisted that [respondents] were his mere employees and not
partners with respect to the agreement with Gragera. He claimed
that after he discovered Zabat's activities, he ceased infusing
funds, thereby causing the extinguishment of the partnership. The
agreement with Gragera was a distinct partnership [from] that of
[respondent] and Zabat. [Petitioner] asserted that [respondents]
were hired as salaried employees with respect to the partnership
between [petitioner] and Gragera."[Petitioner] further asserted
that in Nieves' capacity as bookkeeper, she received all payments
from which Nieves deducted Gragera's commission. The commission
would then be remitted to Gragera. She likewise determined loan
releases."During the pre-trial, the parties narrowed the issues to
the following points: whether [respondents] were employees or
partners of [petitioner], whether [petitioner] entrusted money to
[respondents] for delivery to Gragera, whether the P1,555,068.70
claimed under the complaint was actually remitted to Gragera and
whether [respondents] were entitled to their counterclaim for share
in the profits."7Ruling of the Trial CourtIn its August 13, 1991
Decision, the trial court held that respondents were partners, not
mere employees, of petitioner. It further ruled that Gragera was
only a commission agent of petitioner, not his partner. Petitioner
moreover failed to prove that he had entrusted any money to Nieves.
Thus, respondents' counterclaim for their share in the partnership
and for damages was granted. The trial court disposed as
follows:"39.WHEREFORE, the Court hereby renders judgment as
follows:
39.1.THE SECOND AMENDED COMPLAINT dated July 26, 1989 is
DISMISSED.
39.2.The [Petitioner] FERNANDO J. SANTOS is ordered to pay the
[Respondent] NIEVES S. REYES, the following:
39.2.1.P3,064,428.00- The 15 percent share of the [respondent]
NIEVES S. REYES in the profits of her joint venture with the
[petitioner].
39.2.2.Six(6) percent of P3,064,428.00- As damages from August
3, 1987 until the P3,064,428.00 is fully paid.
39.2.3.P50,000.00- As moral damages
39.2.4.P10,000.00- As exemplary damages
39.3.The [petitioner] FERNANDO J. SANTOS is ordered to pay the
[respondent] ARSENIO REYES, the following:
39.3.1.P2,899,739.50- The balance of the 15 percent share of the
[respondent] ARSENIO REYES in the profits of his joint venture with
the [petitioner].
39.3.2.Six(6) percent of P2,899,739.50- As damages from August
3, 1987 until the P2,899,739.50 is fully paid.
39.3.3.P25,000.00- As moral damages
39.3.4.P10,000.00- As exemplary damages
39.4.The [petitioner] FERNANDO J. SANTOS is ordered to pay the
[respondents]:
39.4.1.P50,000.00- As attorney's fees; and
39.4.2.The cost of the suit."8
Ruling of the Court of AppealsOn appeal, the Decision of the
trial court was upheld, and the counterclaim of respondents was
dismissed. Upon the latter's Motion for Reconsideration, however,
the trial court's Decision was reinstatedin toto. Subsequently,
petitioner's own Motion for Reconsideration was denied in the CA
Resolution of October 9, 1998.The CA ruled that the following
circumstances indicated the existence of a partnership among the
parties: (1) it was Nieves who broached to petitioner the idea of
starting a money-lending business and introduced him to Gragera;
(2) Arsenio received "dividends" or "profit-shares" covering the
period July 15 to August 7, 1986 (Exh. "6"); and (3) the
partnership contract was executed after the Agreement with Gragera
and petitioner and thus showed the parties' intention to consider
it as a transaction of the partnership. In their common venture,
petitioner invested capital while respondents contributed industry
or services, with the intention of sharing in the profits of the
business.The CA disbelieved petitioner's claim that Nieves had
misappropriated a total of P200,000 which was supposed to be
delivered to Gragera to cover unpaid commissions. It was his task
to collect the amounts due, while hers was merely to prepare the
daily cash flow reports (Exhs. "15-15DDDDDDDDDD") to keep track of
his collections.Hence, this Petition.9IssuePetitioner asks this
Court to rule on the following issues:10"Whether or not Respondent
Court of Appeals acted with grave abuse of discretion tantamount to
excess or lack of jurisdiction in:1. Holding that private
respondents were partners/joint venturers and not employees of
Santos in connection with the agreement between Santos and Monte
Maria/Gragera;2. Affirming the findings of the trial court that the
phrase 'Received by' on documents signed by Nieves Reyes signified
receipt of copies of the documents and not of the sums shown
thereon;3. Affirming that the signature of Nieves Reyes on Exhibit
'E' was a forgery;4. Finding that Exhibit 'H' [did] not establish
receipt by Nieves Reyes of P200,000.00 for delivery to Gragera;5
Affirming the dismissal of Santos' [Second] Amended Complaint;6.
Affirming the decision of the trial court, upholding private
respondents' counterclaim;7. Denying Santos' motion for
reconsideration dated September 11, 1998."Succinctly put, the
following were the issues raised by petitioner: (1) whether the
parties' relationship was one of partnership or of employer
employee; (2) whether Nieves misappropriated the sums of money
allegedly entrusted to her for delivery to Gragera as his
commissions; and (3) whether respondents were entitled to the
partnership profits as determined by the trial court.The Court's
RulingThe Petition is partly meritorious.First Issue:Business
RelationshipPetitioner maintains that he employed the services of
respondent spouses in the money-lending venture with Gragera, with
Nieves as bookkeeper and Arsenio as credit investigator. That
Nieves introduced Gragera to Santos did not make her a partner. She
was only a witness to the Agreement between the two. Separate from
the partnership between petitioner and Gragera was that which
existed among petitioner, Nieves and Zabat, a partnership that was
dissolved when Zabat was expelled.On the other hand, both the CA
and the trial court rejected petitioner's contentions and ruled
that the business relationship was one of partnership. We quote
from the CA Decision, as follows:"[Respondents] were industrial
partners of [petitioner]x x x . Nieves herself provided the
initiative in the lending activities with Monte Maria. In
consonance with the agreement between appellant, Nieves and Zabat
(later replaced by Arsenio), [respondents] contributed industry to
the common fund with the intention of sharing in the profits of the
partnership. [Respondents] provided services without which the
partnership would not have [had] the wherewithal to carry on the
purpose for which it was organized and as such [were] considered
industrial partners (Evangelista v. Abad Santos, 51 SCRA 416
[1973])."While concededly, the partnership between [petitioner,]
Nieves and Zabat was technically dissolved by the expulsion of
Zabat therefrom, the remaining partners simply continued the
business of the partnership without undergoing the procedure
relative to dissolution. Instead, they invited Arsenio to
participate as a partner in their operations. There was therefore,
no intent to dissolve the earlier partnership. The partnership
between [petitioner,] Nieves and Arsenio simply took over and
continued the business of the former partnership with Zabat, one of
the incidents of which was the lending operations with Monte
Maria.xxx xxx xxx"Gragera and [petitioner] were not partners. The
money-lending activities undertaken with Monte Maria was done in
pursuit of the business for which the partnership between
[petitioner], Nieves and Zabat (later Arsenio) was organized.
Gragera who represented Monte Maria was merely paid commissions in
exchange for the collection of loans. The commissions were fixed on
gross returns, regardless of the expenses incurred in the operation
of the business. The sharing of gross returns does not in itself
establish a partnership."11We agree with both courts on this point.
By the 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.12The
"Articles of Agreement" stipulated that the signatories shall share
the profits of the business in a 70-15-15 manner, with petitioner
getting the lion's share.13This stipulation clearly proved the
establishment of a partnership.We find no cogent reason to disagree
with the lower courts that the partnership continued lending money
to the members of the Monte Maria Community Development Group,
Inc., which later on changed its business name to Private
Association for Community Development, Inc. (PACDI). Nieves was not
merely petitioner's employee. She discharged her bookkeeping duties
in accordance with paragraphs 2 and 3 of the Agreement, which
states as follows:"2. That the SECOND PARTY and THIRD PARTY shall
handle the solicitation and screening of prospective borrowers, and
shall x x x each be responsible in handling the collection of the
loan payments of the borrowers that they each solicited."3. That
the bookkeeping and daily balancing of account of the business
operation shall be handled by the SECOND PARTY."14The "Second
Party" named in the Agreement was none other than Nieves Reyes. On
the other hand, Arsenio's duties as credit investigator are
subsumed under the phrase "screening of prospective borrowers."
Because of this Agreement and the disbursement of monthly
"allowances" and "profit shares" or "dividends" (Exh. "6") to
Arsenio, we uphold the factual finding of both courts that he
replaced Zabat in the partnership.Indeed, the partnership was
established to engage in a money-lending business, despite the fact
that it was formalized only after the Memorandum of Agreement had
been signed by petitioner and Gragera. Contrary to petitioner's
contention, there is no evidence to show that a different business
venture is referred to in this Agreement, which was executed on
August 6, 1986, or about a month after the Memorandum had been
signed by petitioner and Gragera on July 14, 1986. The Agreement
itself attests to this fact:"WHEREAS, the parties have decided to
formalize the terms of their business relationship in order that
their respective interests may be properly defined and established
for their mutual benefit and understanding."15Second Issue:No Proof
of Misappropriation of Gragera's Unpaid CommissionPetitioner faults
the CA finding that Nieves did not misappropriate money intended
for Gragera's commission. According to him, Gragera remitted his
daily collection to Nieves. This is shown by Exhibit "B." (the
"Schedule of Daily Payments"), which bears her signature under the
words "received by." For the period July 1986 to March 1987,
Gragera should have earned a total commission of P4,282,429.30.
However, only P3,068,133.20 was received by him. Thus, petitioner
infers that she misappropriated the difference of P1,214,296.10,
which represented the unpaid commissions. Exhibit "H." is an
untitled tabulation which, according to him, shows that Gragera was
also entitled to a commission of P200,000, an amount that was never
delivered by Nieves.16On this point, the CA ruled that Exhibits
"B," "F," "E" and "H" did not show that Nieves received for
delivery to Gragera any amount from which the P1,214,296.10 unpaid
commission was supposed to come, and that such exhibits were
insufficient proof that she had embezzled P200,000. Said the
CA:"The presentation of Exhibit "D" vaguely denominated as 'members
ledger' does not clearly establish that Nieves received amounts
from Monte Maria's members. The document does not clearly state
what amounts the entries thereon represent. More importantly,
Nieves made the entries for the limited period of January 11, 1987
to February 17, 1987 only while the rest were made by Gragera's own
staff."Neither can we give probative value to Exhibit 'E' which
allegedly shows acknowledgment of the remittance of commissions to
Verona Gonzales. The document is a private one and its due
execution and authenticity have not been duly proved as required in
[S]ection 20, Rule 132 of the Rules of Court which states:'SECTION
20. Proof of Private Document Before any private document offered
as authentic is received in evidence, its due execution and
authenticity must be proved either:(a) By anyone who saw the
document executed or written; or(b) By evidence of the genuineness
of the signature or handwriting of the maker.'Any other private
document need only be identified as that which it is claimed to
be.'"The courta quoeven ruled that the signature thereon was a
forgery, as it found that:'x x x . But NIEVES denied that Exh. E-1
is her signature; she claimed that it is a forgery. The initial
stroke of Exh. E-1 starts from up and goes downward. The initial
stroke of the genuine signatures of NIEVES (Exhs. A-3, B-1, F-1,
among others) starts from below and goes upward. This difference in
the start of the initial stroke of the signatures Exhs. E-1 and of
the genuine signatures lends credence to Nieves' claim that the
signature Exh. E-1 is a forgery.'xxx xxx xxx"Nieves' testimony that
the schedules of daily payment (Exhs. 'B' and 'F') were based on
the predetermined 100% collection as guaranteed by Gragera is
credible and clearly in accord with the evidence. A perusal of
Exhs. "B" and "F" as well as Exhs. '15' to 15-DDDDDDDDDD' reveal
that the entries were indeed based on the 100% assumptive
collection guaranteed by Gragera. Thus, the total amount recorded
on Exh. 'B' is exactly the number of borrowers multiplied by the
projected collection of P150.00 per borrower. This holds true for
Exh. 'F.'"Corollarily, Nieves' explanation that the documents
werepro formaand that she signed them not to signify that she
collected the amounts but that she received the documents
themselves is more believable than [petitioner's] assertion that
she actually handled the amounts."Contrary to [petitioner's]
assertion, Exhibit 'H' does not unequivocally establish that x x x
Nieves received P200,000.00 as commission for Gragera. As correctly
stated by the courta quo, the document showed a liquidation
ofP240.000 00and not P200,000.00."Accordingly, we find Nieves'
testimony that after August 20, 1986, all collections were made by
Gragera believable and worthy of credence. Since Gragera guaranteed
a daily 100% payment of the loans, he took charge of the
collections. As [petitioner's] representative,Nieves merely
prepared the daily cash flow reports (Exh. '15' to '15 DDDDDDDDDD')
to enable [petitioner] to keep track of Gragera's operations.
Gragera on the other hand devised the schedule of daily payment
(Exhs. 'B' and 'F') to record the projected gross daily
collections."As aptly observed by the courta quo:'26.1. As between
the versions of SANTOS and NIEVES on how the commissions of GRAGERA
[were] paid to him[,] that of NIEVES is more logical and practical
and therefore, more believable. SANTOS' version would have given
rise to this improbable situation: GRAGERA would collect the daily
amortizations and then give them to NIEVES; NIEVES would get
GRAGERA's commissions from the amortizations and then give such
commission to GRAGERA."'17These findings are in harmony with the
trial court's ruling, which we quote below:"21. Exh. H does not
prove that SANTOS gave to NIEVES and the latter received
P200,000.00 for delivery to GRAGERA. Exh. H shows under its sixth
column 'ADDITIONAL CASH' that the additional cash was P240,000.00.
If Exh. H were the liquidation of the P200,000.00 as alleged by
SANTOS, then his claim is not true. This is so because it is a
liquidation of the sum of P240,000.00."21.1. SANTOS claimed that he
learned of NIEVES' failure to give the P200,000.00 to GRAGERA when
he received the latter's letter complaining of its delayed release.
Assuming as true SANTOS' claim that he gave P200,000.00 to GRAGERA,
there is no competent evidence that NIEVES did not give it to
GRAGERA. The only proof that NIEVES did not give it is the letter.
But SANTOS did not even present the letter in evidence. He did not
explain why he did not."21.2. The evidence shows that all money
transactions of the money-lending business of SANTOS were covered
by petty cash vouchers. It is therefore strange why SANTOS did not
present any voucher or receipt covering the P200,000.00."18In sum,
the lower courts found it unbelievable that Nieves had embezzled
P1,555,068.70 from the partnership. She did not remit P1,214,296.10
to Gragera, because he had deducted his commissions before
remitting his collections. Exhibits "B" and "F" are merely
computations of what Gragera should collect for the day; they do
not show that Nieves received the amounts stated therein. Neither
is there sufficient proof that she misappropriated P200,000,
because Exhibit "H." does not indicate that such amount was
received by her; in fact, it shows a different figure.Petitioner
has utterly failed to demonstrate why a review of these factual
findings is warranted. Well-entrenched is the basic rule that
factual findings of the Court of Appeals affirming those of the
trial court are binding and conclusive on the Supreme
Court.19Although there are exceptions to this rule, petitioner has
not satisfactorily shown that any of them is applicable to this
issue.Third Issue:Accounting of PartnershipPetitioner refuses any
liability for respondents' claims on the profits of the
partnership. He maintains that "both business propositions were
flops," as his investments were "consumed and eaten up by the
commissions orchestrated to be due Gragera" a situation that "could
not have been rendered possible without complicity between Nieves
and Gragera."Respondent spouses, on the other hand, postulate that
petitioner instituted the action below to avoid payment of the
demands of Nieves, because sometime in March 1987, she "signified
to petitioner that it was about time to get her share of the
profits which had already accumulated to some P3 million."
Respondents add that while the partnership has not declared
dividends or liquidated its earnings, the profits are already
reflected on paper. To prove the counterclaim of Nieves, the
spouses show that from June 13, 1986 up to April 19, 1987, the
profit totaled P20,429,520 (Exhs. "10" et seq. and "15" et seq.).
Based on that income, her 15 percent share under the joint venture
amounts to P3,064,428 (Exh. "10-I-3"); and Arsenio's, P2,026,000
minus the P30,000 which was already advanced to him (Petty Cash
Vouchers, Exhs. "6, 6-A to 6-B").The CA originally held that
respondents' counterclaim was premature, pending an accounting of
the partnership. However, in its assailed Resolution of August 17,
1998, it turnedvolte face. Affirming the trial court's ruling on
the counterclaim, it held as follows:"We earlier ruled that there
is still need for an accounting of the profits and losses of the
partnership before we can rule with certainty as to the respective
shares of the partners. Upon a further review of the records of
this case, however, there appears to be sufficient basis to
determine the amount of shares of the parties and damages incurred
by [respondents]. The fact is that the courta quoalready made such
a determination [in its] decision dated August 13, 1991 on the
basis of the facts on record."20The trial court's ruling alluded to
above is quoted below:"27. The defendants' counterclaim for the
payment of their share in the profits of their joint venture with
SANTOS is supported by the evidence."27.1. NIEVES testified that:
Her claim to a share in the profits is based on the agreement
(Exhs. 5, 5-A and 5-B). The profits are shown in the working papers
(Exhs. 10 to 10-I, inclusive) which she prepared. Exhs. 10 to 10-I
(inclusive) were based on the daily cash flow reports of which Exh.
3 is a sample. The originals of the daily cash flow reports (Exhs.
3 and 15 to 15-D(10) were given to SANTOS. The joint venture had a
net profit of P20,429,520.00 (Exh. 10-I-1), from its operations
from June 13, 1986 to April 19, 1987 (Exh. 1-I-4). She had a share
of P3,064,428.00 (Exh. 10-I-3) and ARSENIO, about P2,926,000.00, in
the profits."27.1.1 SANTOS never denied NIEVES' testimony that the
money-lending business he was engaged in netted a profit and that
the originals of the daily case flow reports were furnished to him.
SANTOS however alleged that the money-lending operation of his
joint venture with NIEVES and ZABAT resulted in a loss of about
half a million pesos to him. But such loss, even if true, does not
negate NIEVES' claim that overall, the joint venture among them
SANTOS, NIEVES and ARSENIO netted a profit. There is no reason for
the Court to doubt the veracity of [the testimony of] NIEVES."27.2
The P26,260.50 which ARSENIO received as part of his share in the
profits (Exhs. 6, 6-A and 6-B) should be deducted from his total
share."21After a close examination of respondents' exhibits, we
find reason to disagree with the CA. Exhibit "10-I"22shows that the
partnership earned a "total income" of P20,429,520 for the period
June 13, 1986 until April 19, 1987. This entry is derived from the
sum of the amounts under the following column headings: "2-Day
Advance Collection," "Service Fee," "Notarial Fee," "Application
Fee," "Net Interest Income" and "Interest Income on Investment."
Such entries represent the collections of the money-lending
business or its gross income.The "total income" shown on Exhibit
"10-I" did not consider the expenses sustained by the partnership.
For instance, it did not factor in the "gross loan releases"
representing the money loaned to clients. Since the business is
money-lending, such releases are comparable with the inventory or
supplies in other business enterprises.Noticeably missing from the
computation of the "total income" is the deduction of the weekly
allowance disbursed to respondents. Exhibits "I" et seq. and "J" et
seq.23show that Arsenio received allowances from July 19, 1986 to
March 27, 1987 in the aggregate amount of P25,500; and Nieves, from
July 12, 1986 to March 27, 1987, in the total amount of P25,600.
These allowances are different from the profit already received by
Arsenio. They represent expenses that should have been deducted
from the business profits. The point is that all expenses incurred
by the money-lending enterprise of the parties must first be
deducted from the "total income" in order to arrive at the "net
profit" of the partnership. The share of each one of them should be
based on this "net profit" and not from the "gross income" or
"total income" reflected in Exhibit "10-I," which the two courts
invariably referred to as "cash flow" sheets.Similarly, Exhibits
"15" et seq.,24which are the "Daily Cashflow Reports," do not
reflect the business expenses incurred by the parties, because they
show only the daily cash collections. Contrary to the rulings of
both the trial and the appellate courts, respondents' exhibits do
not reflect thecompletefinancial condition of the money-lending
business. The lower courts obviously labored over a mistaken notion
that Exhibit " 10-I-1" represented the "net profits" earned by the
partnership.For the purpose of determining the profit that should
go to an industrial partner (who shares in the profits but is not
liable for the losses), the gross income from all the transactions
carried on by the firm must be added together, and from this sum
must be subtracted the expenses or the losses sustained in the
business. Only in the difference representing the net profits does
the industrial partner share. But if, on the contrary, the losses
exceed the income, the industrial partner does not share in the
losses.25When the judgment of the CA is premised on a
misapprehension of facts or a failure to notice certain relevant
facts that would otherwise justify a different conclusion, as in
this particular issue, a review of its factual findings may be
conducted, as an exception to the general rule applied to the first
two issues.26The trial court has the advantage of observing the
witnesses while they are testifying, an opportunity not available
to appellate courts. Thus, its assessment of the credibility of
witnesses and their testimonies are accorded great weight, even
finality, when supported by substantial evidence; more so when such
assessment is affirmed by the CA. But when the issue involves the
evaluation of exhibits or documents that are attached to the case
records, as in the third issue, the rule may be relaxed. Under that
situation, this Court has a similar opportunity to inspect, examine
and evaluate those records, independently of the lower courts.
Hence, we deem the award of the partnership share, as computed by
the trial court and adopted by the CA, to be incomplete and not
binding on this Court.WHEREFORE, the Petition is partly GRANTED.
The assailed November 28, 1997 Decision is AFFIRMED, but the
challenged Resolutions dated August 17, 1998 and October 9, 1998
are REVERSED and SET ASIDE. No costs.SO ORDERED.
Business Organization Partnership, Agency, Trust Shares in
Liquidation Net Profit vs Gross Income
In June 1986, Fernando Santos (70%), Nieves Reyes (15%), and
Melton Zabat (15%) orally instituted a partnership with them as
partners. Their venture is to set up a lending business where it
was agreed that Santos shall be financier and that Nieves and Zabat
shall contribute their industry.**The percentages after their names
denote their share in the profit.Later, Nieves introduced Cesar
Gragera to Santos. Gragera was the chairman of a corporation. It
was agreed that the partnership shall provide loans to the
employees of Grageras corporation and Gragera shall earn commission
from loan payments.In August 1986, the three partners put into
writing their verbal agreement to form the partnership. As earlier
agreed, Santos shall finance and Nieves shall do the daily cash
flow more particularly from their dealings with Gragera, Zabat on
the other hand shall be a loan investigator. But then later, Nieves
and Santos found out that Zabat was engaged in another lending
business which competes with their partnership hence Zabat was
expelled.The two continued with the partnership and they took with
them Nieves husband, Arsenio, who became their loan
investigator.Later, Santos accused the spouses of not remitting
Grageras commissions to the latter. He sued them for collection of
sum of money. The spouses countered that Santos merely filed the
complaint because he did not want the spouses to get their shares
in the profits. Santos argued that the spouses, insofar as the
dealing with Gragera is concerned, are merely his employees. Santos
alleged that there is a distinct partnership between him and
Gragera which is separate from the partnership formed between him,
Zabat and Nieves.The trial court as well as the Court of Appeals
ruled against Santos and ordered the latter to pay the shares of
the spouses.
ISSUE:Whether or not the spouses are partners.
HELD:Yes. Though it is true that the original partnership
between Zabat, Santos and Nieves was terminated when Zabat was
expelled, the said partnership was however considered continued
when Nieves and Santos continued engaging as usual in the lending
business even getting Nieves husband, who resigned from the Asian
Development Bank, to be their loan investigator who, in effect,
substituted Zabat.There is no separate partnership between Santos
and Gragera. The latter being merely a commission agent of the
partnership. This is even though the partnership was formalized
shortly after Gragera met with Santos (Note that Nieves was even
the one who introduced Gragera to Santos exactly for the purpose of
setting up a lending agreement between the corporation and the
partnership).HOWEVER, the order of the Court of Appeals directing
Santos to give the spouses their shares in the profit is premature.
The accounting made by the trial court is based on the total income
of the partnership. Such total income calculated by the trial court
did not consider the expenses sustained by the partnership. All
expenses incurred by the money-lending enterprise of the parties
must first be deducted from the total income in order to arrive at
the net profit of the partnership. The share of each one of them
should be based on this net profit and not from the gross income or
total income.
G.R. No. L-59956 October 31, 1984ISABELO MORAN,
JR.,petitioner,vs.THE HON. COURT OF APPEALS and MARIANO E.
PECSON,respondents.GUTIERREZ, JR.,J.:+.wph!1This 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.hqwxxx 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.hqwFrom 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. Mor