AuENCY, PARTNERSBIP ANB TR0STS BIuESTS (2u1S - 2u14) ATTY.

}0AQ0IN 0BIETA


RACBELLE ANNE u0TIERREZ
G.k. No. L-19819 Cctober 26, 1977

U v. U2CN

lalnLlffs: Wllllam uy

uefendanL: 8arLolome uzon (durlng Lhe pendency of Lhe appeal before
Lhls CourL, Lhe sald 8arLolome uzon dled, and was subsLlLuLed by
lranco uzon)

onenLe: Concepclon !r.

CASL: 8arLolome uzon had Lwo consLrucLlon pro[ecLs wlLh Lhe
CovernmenL where ls Lhe prlmary conLracLor. Pe esLabllshed a
parLnershlp wlLh Wllllam uy Lo help flnance Lhese pro[ecLs, and Lhus
u.. ConsLrucLlon Company was esLabllshed and hlred as subconLracLor.
uzon and uy were supposed Lo conLrlbuLe 30,000 each as caplLal, buL
uzon was walLlng on hls loan from n8 (130k) whlch was Lo be
approved upon uzon's clearlng hls collaLerals of Lhelr encumbrances.
uy gave a LoLal of 40,000 whlch he allowed uzon Lo use Lo clear hls
obllgaLlons so as Lo geL Lhe loan from n8. 1hls was supposed Lo be
relmbursed by uzon. n8 released Lhe loan, and uzon gave 60,000
Lo Lhe parLnershlp (40k as uy's relmbursemenL, 20k as hls conLrlbuLlon).
Also, uzon secured hls loan by a ueed of AsslgnmenL whereby all Lhe
paymenLs Lo be made ln connecLlon wlLh Lhe pro[ecLs were Lo be
applled Lo hls loan wlLh n8. uue Lo flnanclal dlfflculLles, uy demanded
LhaL uzon conLrlbuLe Lhe resL of hls caplLal, buL uzon falled. uzon,
acLlng as prlmary conLracLor, LermlnaLed Lhe conLracL wlLh u..
ConsLrucLlon Company on Lhe ground LhaL lL has falled Lo prosecuLe
work effecLlvely. uy flled for dlssoluLlon of Lhe parLnershlp on Lhe
ground LhaL uzon breached Lhelr agreemenLs.

1he Supreme CourL 8uled LhaL (1) conLrary Lo uzon's clalm, Lhe
40,000 glven by uy was as conLrlbuLlon Lo Lhe parLnershlp and noL as a
personal loan Lo uzon, (2) uzon's asslgnmenL ln favor of n8 was
pre[udlclal Lo Lhe parLnershlp because lL Look away money LhaL was
supposed Lo be earnlngs of Lhe parLnershlp, (3) uy ls enLlLled Lo
relmbursemenL of Lhe LoLal amounL of money he has spenL ln Lhe
parLnershlp, and (4) uy ls enLlLled Lo compensaLory damages for uzon's
breach of conLracL.

uCC18lnL: (ln connecLlon wlLh Art|c|e 1809(1)) A parLner ls enLlLled Lo
accounLlng of Lhe parLnershlp and Lherefore Lhe proflLs earned by lL
when he ls wrongfully excluded from Lhe buslness by hls parLners.

8ACkGkCUND:
! 8arLolome uzon had a conLracL wlLh Lhe CovernmenL for Lhe
consLrucLlon of Lhe Canyangan 8aLo SecLlon of Lhe agadlan
Zamboanga ClLy 8oad, provlnce of Zamboanga del Sur and of 3
brldges ln Lhe Malangas-Canyangan 8oad.
! uzon soughL Lhe flnanclal asslsLance of Wllllam uy, and
proposed Lhe creaLlon of a parLnershlp beLween Lhem whlch
would be Lhe sub-conLracLor of Lhe pro[ecLs and Lhe proflLs Lo
be dlvlded equally beLween Lhem.
! 1hls gave blrLh Lo Lhe u.. ConsLrucLlon Company.
o 1he caplLal would be 100,000 (30k each conLrlbuLlon)
o uzon was shorL ln cash, buL promlsed Lo pay hls
conLrlbuLlon once hls loan (for 130,000) wlLh Lhe
hlllpplne naLlonal 8ank was approved. 8u1, before Lhe
loan could be approved, uzon flrsL had Lo clear hls
collaLerals of Lhelr encumbrances.
o uy gave (1) 10,000 as an advanced conLrlbuLlon Lo Lhe
parLnershlp, whlch uzon used Lo seLLle hls obllgaLlons
wlLh n8, and (2) 30,000 also as parLlal conLrlbuLlon Lo
Lhe parLnershlp whlch uzon was Lo use Lo seLLle hls
obllgaLlon wlLh 8ehablllLaLlon llnance CorporaLlon.
! uzon promlsed uy LhaL Lhe amounL of 130,000.00 would be
glven Lo Lhe parLnershlp Lo be applled Lhusly:
AuENCY, PARTNERSBIP ANB TR0STS BIuESTS (2u1S - 2u14) ATTY. }0AQ0IN 0BIETA


RACBELLE ANNE u0TIERREZ
o 40,000 !as relmbursemenL of Lhe caplLal conLrlbuLlon
of Wllllam uy whlch Lhe sald uy had advanced Lo clear
Lhe LlLle of uzon's properLy
o 30,000 ! as uzon's conLrlbuLlon Lo Lhe parLnershlp
o 60,000 ! as uzon's personal loan Lo Lhe parLnershlp
! !anuary 18, 1937 ! Lhe parLnershlp agreemenL was slgned
AL1PCuCP work began as early as CcLober 1, 1936 because Lhe
pro[ecLs wlLh Lhe 8ureau of ubllc Plghways had Lo be
compleLed lmmedlaLely.
o Slnce uzon was busy wlLh hls oLher pro[ecLs, Wllllam
uy was enLrusLed wlLh Lhe managemenL of Lhe pro[ecLs
and whaLever expense Lhe laLLer mlghL lncur, would be
consldered as parL of hls conLrlbuLlon.
! Lnd of uecember 1937 ! uy had conLrlbuLed Lo Lhe
parLnershlp a LoLal of 113,433.39 (see raLlo for breakdown).
(8acktrack a b|t)
november 1936 ! n8 approved uzon's loan, who ln Lurn
gave uy 60,000 and dlsLrlbuLed Lhusly:
o 40,000 ! relmbursemenL for uy's caplLal conLrlbuLlon.
o 20,000 ! uzon's parLnershlp caplLal conLrlbuLlon.
1C CuA8An1LL Lhe 130,000 loan wlLh n8, uzon, wlLhouL
knowledge and consenL of uy, asslgned Lo n8 Lhe paymenLs Lo
be recelved on accounL of Lhe conLracLs wlLh Lhe 8ureau.
8? vl81uL Cl 1PL ASSlCnMLn1, Lhe 8ureau made paymenLs Lo
Lhe n8 who ln Lurn applled as paymenL for uzon's loan.
o 1he 8ureau released a LoLal of 1,047,181.07
" 332,339.60 ! paymenL of uzon's loan
" 27,820.80 only ! was deposlLed ln Lhe
parLnershlp funds
As Llme passed and Lhe flnanclal demands of Lhe pro[ecLs
lncreased, uy (who supervlsed Lhe sald pro[ecLs) found dlfflculLy
ln obLalnlng Lhe necessary funds wlLh whlch Lo pursue Lhe
consLrucLlon pro[ecLs, so he demanded LhaL uzon comply wlLh
hls obllgaLlon Lo place hls caplLal conLrlbuLlon ln Lhe
parLnershlp. Powever, uzon falled Lo comply even afLer formal
demand leLLers from uy.
november 20, 1937 ! uzon, as prlme conLracLor of Lhe
pro[ecLs, advlsed u.. ConsLrucLlon Company (of whlch he ls
also a parLner) LhaL unless Lhey presenLed an lmmedlaLe
soluLlon and capaclLy Lo prosecuLe Lhe work effecLlvely, he
would conslder Lhe sub-conLracL LermlnaLed.
november 27, 1937 ! uzon wroLe u.. ConsLrucLlon Company
flnally LermlnaLlng Lhelr subconLracL agreemenL as of uec.1.
1hereafLer, Wllllam uy was noL allowed Lo hold offlce ln Lhe u..
ConsLrucLlon Company and hls auLhorlLy Lo deal wlLh Lhe
8ureau of ubllc Plghways ln behalf of Lhe parLnershlp was
revoked
1r|a| Court found LhaL Lhe defendanL.
1. lalled Lo conLrlbuLe hls share ln Lhe caplLal of Lhe parLnershlp
applled parLnershlp funds Lo hls personal use
2. CusLed Lhe plalnLlff from Lhe managemenL of Lhe flrm, and
caused Lhe fallure of Lhe parLnershlp Lo reallze Lhe expecLed
proflLs of aL leasL 400,000.00.
3. Pence, ordered Lhe dlssoluLlon of Lhe parLnershlp.
4. lurLher ordered Lhe defendanL Lo pay Lhe plalnLlff Lhe sum of
320,103.13.


ISSULS 1C 8L kLSCLVLD:
1. WheLher or noL boLh uzon and uy falled Lo conLrlbuLe Lhelr
shares because Lhe 40k from uy was acLually a loan Lo uzon
and noL uy's caplLa conLrlbuLlon Lo Lhe parLnershlp.
2. WheLher or noL uzon mlsapplled Lhe parLnershlp's funds Lhus
causlng pre[udlce Lo Lhe parLnershlp.
3. WheLher or noL uy ls enLlLled Lo relmbursemenL for Lhe amounL
he has spenL on Lhe parLnershlp.
4. WheLher or noL uy falled Lo make proflLs because of uzon's
breach of conLracL.

AuENCY, PARTNERSBIP ANB TR0STS BIuESTS (2u1S - 2u14) ATTY. }0AQ0IN 0BIETA


RACBELLE ANNE u0TIERREZ
kLSCLU1ICNS AND AkGUMLN1S
ISSUL 1 ! WheLher or noL boLh uzon and uy falled Lo conLrlbuLe Lhelr
shares because Lhe 40k from uy was acLually a loan Lo uzon and noL
uy's caplLa conLrlbuLlon Lo Lhe parLnershlp ! nC.

Ma[or olnL 1: 1he 40k was uy's conLrlbuLlon, noL a personal loan.
AfLer Lhe 60,000 LhaL uzon gave Lo uy (see breakdown ln
8ackground), uzon dld noL glve any oLher conLrlbuLlon.
1he 40,000 glven by uy was hls conLrlbuLlon Lo Lhe parLnershlp
and noL merely a personal loan Lo uzon.
1he Lerms of Lhe recelpLs (daLed CcLober 24, 1936 for 10k, and
CcLober 29, 1936 for 30k) slgned by Lhe uzon are clear and
unequlvocal LhaL Lhe sums of money glven by Lhe uy are uy's
parLlal conLrlbuLlons Lo Lhe parLnershlp caplLal.

ISSUL 2 ! WheLher or noL uzon mlsapplled Lhe parLnershlp's funds
Lhus causlng pre[udlce Lo Lhe parLnershlp ! ?LS.

Ma[or olnL 1: 1he asslgnmenL of paymenLs made by uzon ln favor ln
n8 was made wlLhouL Lhe knowledge and consenL of uy.
uzon clalms (1) uy had knowledge and consenLed Lo Lhe
asslgnmenL and (2) Lhere was noL pre[udlce Lo Lhe parLnershlp
because he relmbursed all of Lhe paymenLs applled Lo hls loan.
8arLolome uzon recelved from Lhe 8ureau of ubllc hlghways,
1,047,181.01, whlch amounL rlghLfully and legally belongs Lo
Lhe parLnershlp. Cf Lhls, only 27,820.80 was deposlLed ln Lhe
currenL accounL of Lhe parLnershlp.
lor sure, lf uzon gave Lo Lhe parLnershlp all LhaL were eamed
and due lL under Lhe subconLracL agreemenLs, Lhe money would
have been used as a safe reserve for Lhe dlscharge of all
obllgaLlons of Lhe flrm and Lhe parLnershlp would have been
able Lo successfully and proflLably prosecuLe Lhe pro[ecLs lL
subconLracLed.

Ma[or olnL 2: 1here has been no compleLe relmbursemenL.
uzon dlsbursed a LoLal of 932,839.77 Lo Lhe parLnershlp.
Slnce Lhe 8ureau released 1,047,181.01, uzon sLlll has a
deflclL balance of 94,342.24.

ISSUL 3 ! WheLher or noL uy ls enLlLled Lo relmbursemenL for Lhe
amounL he has spenL on Lhe parLnershlp ! ?LS. uy ls enLlLled Lo an
accounLlng and proper relmbursemenL for he has been wrongfully
excluded by uzon from Lhe parLnershlp buslness, when uzon was
acLually aL faulL (see lssue 4).

Ma[or olnL 1: Aslde from Lhe 40,000.00 puL up by uy ln CcLober 1936,
Lhe parLners' lnvesLmenLs Look, Lhe form of cash advances coveLlng
expenses of Lhe consLrucLlon pro[ecLs as Lhey were lncurred.
1he Lrlal courL appolnLed Lwo commlssloners - (1) Mr. Ablaza
deslgnaLed by uzon, and (2) Mr. 1ayag deslgnaLed by uy - Lo
examlne Lhe books of accounLs of uzon, boLh personal and
Lhose relaLed Lo Lhe pro[ecLs.
keport of the comm|ss|oners:
Mr. Ablaza ! clalms LhaL check were lssued Lo uy and encashed
by hls broLher, uy Pan. As such, uy owes Lhe parLnershlp
13,997.09.
1

Mr. 1ayag ! clalms LhaL uy deserves Lhe followlng:
o 7,497.80 ! lLems omlLLed from Lhe books of
parLnershlp buL recognlzed and charged Lo
Mlscellaneous Lxpenses even by Mr. Ablaza.
o 63,103.77 ! payrolls pald by uy ln Lhe amounL
128,103.77 less payroll remlLLances from Lhe uzon ln
amounL of 63,000.00

1
0y Ban testifieu that of the cheeks he ieceiveu weie exchange foi cash, while otheis weie
useu in the puichase of spaie paits iequisitioneu by uefenuant. The Couit founu Ban's
explanation moie plausible because if they weie employeu in the piosecution of the paitneis
piojects, the coiiesponuing uisbuisements woulu have ceitainly been iecoiueu in its books,
which is not the case. Taking into account uefenuant is the custouian of the books of account,
his failuie to so entei theiein the allegeu uisbuisements, accentuates the falsity of his claim on
this point.
AuENCY, PARTNERSBIP ANB TR0STS BIuESTS (2u1S - 2u14) ATTY. }0AQ0IN 0BIETA


RACBELLE ANNE u0TIERREZ
o 26,027.04 ! oLher expenses lncurred by Lhe uy aL
consLrucLlon slLe.
uy, ln addlLlon Lo whaL Mr. 1ayag reporLed, clalms LhaL he also
deserves:
o 3,917.39 ! unrecorded balances for uec.1937
o 4,663.00 ! paymenLs Lo subconLracLor Munoz
All ln all, uy clalms he should recelve 113,433.39
Slnce uzon was aL faulL, Lhe Lrlal courL properly ordered hlm Lo
relmburse uy whaLever amounL laLLer had lnvesLed ln or spenL
for Lhe parLnershlp on accounL of consLrucLlon pro[ecLs.

ISSUL 4 ! WheLher or noL uy falled Lo make proflLs because of uzon's
breach of conLracL ! ?LS.

Ma[or olnL 1:
ConLrary Lo uzon's argumenLs, Lhe parLnershlp acLually reallzed
proflLs beLween !uly 2, 1936 Lo uecember 31, 1937 and
beLween !anuary 1, 1938 Lo SepLember 30, 1939.
Pad uzon noL been remlss ln hls obllgaLlons as parLner and as
prlme conLracLor of Lhe consLrucLlon pro[ecLs ln quesLlon, and
conslderlng Lhe facL LhaL Lhe LoLal conLracL amounL of Lhese Lwo
pro[ecLs ls 2,327,333.76, lL ls reasonable Lo expecL LhaL Lhe
parLnershlp would have earned much more Lhan Lhe
334,233.61
We have herelnabove lndlcaLed. 1he award, Lherefore, made by
Lhe Lrlal courL of Lhe amounL of 200,000.00, as compensaLory
damages, ls noL speculaLlve, buL based on reasonable esLlmaLe.


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