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SANTOS VS REYES 368 SCRA 261

FACTS:
Petitioner Fernando Santos, Respondent Nieves Reyes and Meliton Zabat started a
lending Business venture together proposed by Nieves. It was agreed on the Articles of
Agreement that petitioner will get 70% of the profits and Nieves and Zabat would earn 15%
each.- Nievas introduced Gragera (chairman of Monte Maria Development Corporation) to
petitioner, and sought short term loans for its members and with an agreement that Monte Maria
will be entitled to P1.31commission per thousand paid daily. Nieves acted as bookkeeper while
her husband Arsenio acted as credit investigator.- Gragera complained that his commissions
were inadequately remitted. This prompt petitioner to file a complaint against respondent
allegedly in their capacities as employees of petitioner, with having misappropriated funds.
ISSUE
Whether or not the business relationship between petitioner and respondent was one of
partnership
HELD
YES- Nieves herself provided the initiative in the lending activities with Monte Maria.The fact that in their Articles of Agreement, the parties agreed to divide the profits of a lending
business in a 70
-15-15, manner, with petitioner getting the lions share proved the establishment of a
partnership, even when the other parties to the agreement were given separate compensation
as bookkeeper and creditor investigator.- 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. (Art. 1767 NCC)

Rojas v. Maglana
Facts:
Maglana and Rojas executed their Articles of Co-Partnership called Eastcoast
Development Enterprises (EDE). It was a partnership with an indefinite term of existence.
Maglana shall manage the business affairs while Rojas shall be the logging superintendant and
shall manage the logging operation. They shall share in all profits and loss equally. Due to
difficulties encountered they decided to avail of the sources of Pahamatong as industrial
partners. They again executed their Articles of Co-Partnership under EDE. The term is 30 years.
After sometime Pamahatong sold his interest to Maglana and Rojas including equipment
contributed. After withdrawal of Pamahatong, Maglana and Rojas continued the partnership.
After 3 months, Rojas entered into a management contract with another logging enterprise. He
left and abandoned the partnership. He even withdrew his equipment from the partnership and
was transferred to CMS. He never told Maglana that he will not be able to comply with the
promised contributions and he will not work as logging superintendent. Maglana then told Rojas
that the latter share will just be 20% of the net profits. Rojas took funds from the partnership
more than his contribution. Thus, Maglana notified Rojas that he dissolved the partnership.
Issue: What is the nature of the partnership and legal relationship of Maglana and Rojas after
Pahamatong retired from the second partnership
Ruling:
It was not the intention of the partners to dissolve the first partnership, upon the constitution of
the second one, which they unmistakably called additional agreement. Otherwise stated even
during the existence of the second partnership, all business transactions were carried out under
the duly registered articles. No rights and obligations accrued in the name of the second
partnership except in favor of Pahamatong which was fully paid by the duly registered
partnership.

Moran Jr vs CA
Facts:
In February 1971, Isabelo Moran and Mariano Pecson entered into a partnership
agreement where they agreed to contribute P15k each for the purpose of printing 95k posters of
the delegates to the then 1971 Constitutional Commission. Moran shall be in charge in
managing the printing of the posters. It was further agreed that Pecson will receive a
commission of P1k a month starting from April 1971 to December 1971; that the partnership is
to be liquidated on December 15, 1971. Pecson partially fulfilled his obligation to the partnership
when he issued P10k in favor of the partnership. He gave the P10k to Moran as the managing
partner. Moran however did not add anything and, instead, he only used P4k out of the P10k in
printing 2,000 posters. He only printed 2,000 posters because he felt that printing all 95k posters
is a losing venture because of the delay by the COMELEC in announcing the full delegates. All
the posters were sold for a total of P10k. Pecson sued Moran. The trial court ordered Moran to
pay Pecson damages. The Court of Appeals affirmed the decision of the trial court but modified
the same as it ordered Moran to pay P47.5k for unrealized profit; P8k for Pecsons monthly
commissions; P7k as return of investment because the venture never took off; plus interest.
ISSUE: Whether or not the CA judgment is correct.
HELD:
No. The award of P47.5k for unrealized profit is speculative. There is no evidence
whatsoever that the partnership between the Moran and Pecson would have been a profitable
venture (because base on the circumstances then i.e. the delay of the COMELEC in proclaiming
the candidates, profit is highly unlikely). In fact, it was a failure doomed from the start. There is
therefore no basis for the award of speculative damages in favor of Pecson. Further, there is
mutual breach in this case, Pecson only gave P10k instead of P15k while Moran gave nothing
at all.
As for the P8k monthly commission, this is without basis. The agreement does not state the
basis of the commission. The payment of the commission could only have been predicated on
relatively extravagant profits. The parties could not have intended the giving of a commission
inspite of loss or failure of the venture. Since the venture was a failure, Pecson is not entitled to
the P8k commission.

As for the P7k award as return for Pecsons investment, the CA erred in his ruling too. Though
the venture failed, it did took off the ground as evidenced by the 2,000 posters printed. Hence,
return of investment is not proper in this case. There are risks in any business venture and the
failure of the undertaking cannot entirely be blamed on the managing partner alone, specially if
the latter exercised his best business judgment, which seems to be true in this case.
Moran must however return the unused P6k of Pecsons contribution to the partnership plus P3k
representing Pecsons profit share in the sale of the printed posters. Computation of P3k profit
share is as follows: (P10k profit from the sale of the 2,000 posters printed) (P4k expense in
printing the 2k posters) = (P6k profit); Profit 2 = P3k each.