Uy Vs.

Puzon
Socialize Us
Facts:
 Bartolome Puzon had two contracts with the government for the construction of roads
and bridges. (Bureau of Public Highways)
 He sought the financial assistance of William Uy, so he proposed that they create a
partnership which would be the sub-contractor of the projects.
 They also agreed that the profits will be divided among themselves.
 William Uy agreed to the formation of the partnership "U.P. Construction Company".
They agreed to contribute P50,000 each. (Note: P40,000 was advanced by William Uy while
Puzon was waiting for the approval of his P150,000 PNB Loan. Upon release of the loan, he
promised to reimburse William Uy of the P40,000; pay his share of P50,000 and loan P60,000 to
the partnership).
 Loan was approved by November 1956. Note: At the end of 1957, Uy contributed a total
of P115,
 The partnership agreement was signed in 1957 (January 18) although the work for the
projects began as early as 1956 (October 1).
 Since Puzon was busy with other projects, Uy was the one who managed the
partnership.
 In order to guarantee the PNB Loan, Puzon, without the knowledge of Uy, assigned the
payments to the payments to be received from the projects to PNB.
 Due to the financial demands of the projects, Uy demanded that Puzon comply with his
obligation to place his capital contribution in the company.
 However, Puzon failed to comply even after formal demand letters were sent to him.
 Thereafter, Puzon (as the primary contractor of the projects) wrote terminated the
subcontract agreement with the partnership to which he is also a partner. (November 27, 1957)
 Thereafter, Uy was not allowed to hold office in the UP Construction Company and his
authority to negotiate with the Bureau was revoked by Puzon.
 Uy clamied that Puzon had violated the terms of their partnership agreement. He sought
for the dissolution of the partnership with damages.
 The lower court ruled in favor of Uy.

Issue: WON Puzon failed to comply with his obligation of paying the capital contribution to the
company. YES

Ruling: YES

According to the court, there was failure on the part of Puzon to contribute capital to the
partnership. When his load with PNB was approved, he only gave P60,000 to Uy; P40,000 was for
reimbursement to the payments made by Uy and the other P20,000 was for the capital
contribution. Thereafter, Puzon never made additional contribution.

Also, it was found by the SC that Puzon misapplied partnership funds by assigning all payments
for the projects to PNB.

Such assignment was prejudicial to the partnership since the partnership only received a small
share from the total payments made by the Bureau of Public Highways. As a result, the
partnership was unable to discharge its obligations.

Here, the Court ordered Puzon to reimburse whatever amount Uy had invested in or spent for
the partnership on account of construction projects. The amount P200,000 as compensatory
damages was also awarded in favor of Uy.

RULING:

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.

WHEREFORE, finding no error in the decision appealed from, the said decision is hereby affirmed
with costs against the appellant, it being understood that the liability mentioned herein shall be
home by the estate of the deceased Bartolome Puzon, represented in this instance by the
administrator thereof, Franco Puzon.