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Uy vs. Puzon

Case Digest

Puzon entered into a contract with the Republic of the Philippines for the construction of a road and 5 bridges. However, Puzon found difficulty in accomplishing both projects, so he established a partnership with Uy as sub-contractor of the projects for financial assistance and the profits shall be divided equally between them; the resulting partnership is “UP Construction Company”.

The partners agreed to contribute P50, 000 each as capital. However, Puzon failed to pay but promised to contribute his share as soon as his application of loan with the PNB shall be approved. Uy gave Puzon advance contribution of his share in partnership for Puzon top pay his obligations with PNB.

Uy was entrusted with the management of the project since Puzon is busy with his other projects; whatever expense Uy may incur shall be considered part of his contribution. Upon approval of Puzon’s loan with the PNB, he gave Uy P60, 000 for reimbursement of Uy’s contribution and Puzon’s contribution to the partnership capital. To guarantee the payment of the loan, Puzon assigned to PNB all payments to be received on account of the contracts with the Bureau of Public Highways for the construction; this was done without the knowledge and consent of Uy.

Financial demands of the project increased, thus, Uy called on Puzon to place his capital contribution; Puzon failed to do so. Uy thereafter sent letters of demand to which Puzon replied that he’s not capable of putting additional capital. Puzon wrote UP Construction Company terminating their subcontract agreement.

Uy was then not allowed in the office of UP Construction Company and his authority to deal with BPH was revoked. Hence, he instituted an action against Puzon seeking the dissolution of the partnership and payment of damages for th e violation of the latter of the terms of their partnership agreement.

RTC found that Puzon failed to contribute his share in the capital of the partnership and caused the failure of partnership to realize expected profits. The court ordered the dissolution of the partnership and Puzon to pay Uy a certain sum. Franco Puzon substituted Bartolome Puzon on the appeal of the case before the Supreme Court.

W/N the amount of money ordered by the trial court for the failure to contribute his share in the capital of thePuzon on the appeal of the case before the Supreme Court. partnership is proper. RULING: The

partnership is proper.


The award of P200,000.00 as his share in the unrealized profits of the partnership is proper. Under Article 2200 of the Civil Code, indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain. In other words lucrum cessans is also a basis for indemnification. There is no doubt Uy failed to make profits because of Puzon's breach of contract. The partnership showed some profits even though the profit and loss statement showed net loss; it may be due to error in accounting.

Had the appellant not been remiss in his obligations as partner and as prime contractor of the construction projects in question as he was bound to perform pursuant to the partnership and subcontract agreements, and considering the fact that the total contract amount of these two projects is P2,327,335.76, it is reasonable to expect that the partnership would have earned much more than the P334,255.61 We have hereinabove indicated. The award, therefore, made by the trial court of the amount of P200,000.00, as compensatory damages, is not speculative, but based on reasonable estimate.

As cited in Moran vs. CA:

The rule is, when a partner who has undertaken to contribute a sum of money fails to do so, he becomes a debtor of the partnership for whatever he may have promised to contribute (Art. 1786, Civil Code) and for interests and damages from the time he should have complied with his obligation (Art. 1788, Civil Code). Thus in Uy v. Puzon (79 SCRA 598), which interpreted Art. 2200 of the Civil Code of the Philippines, we allowed a total of P200,000.00 compensatory damages in favor of the appellee because the appellant therein was remiss in his obligations as a partner and as prime contractor of the construction projects in question. This case was decided on a particular set of facts. We awarded compensatory damages in the Uy case because there was a finding that the constructing business is a profitable one and that the UP construction company derived some profits from its contractors in the construction of roads and bridges despite its deficient capital.” Besides, there was evidence to show that the partnership made some profits during the periods from July 2, 1956 to December 31, 1957 and from January 1, 1958 up to September 30, 1959. The profits on two government contracts worth P2,327,335.76 were not speculative. In the instant case, there is no evidence whatsoever that the partnership between the petitioner and th e private respondent would have been a profitable venture. In fact, it was a failure doomed from the start. There is therefore no basis for the award of speculative damages in favor of the private respondent.

Furthermore, in the Uy case, only Puzon failed to give his full contribution while Uy contributed much more than what was expected of him.