1.

) MAXIMILIANO SANCHO,  vs. SEVERIANO LIZARRAGA

G.R.No. L-33580  February 6, 1931

FACTS:
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 defendant’s 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.
2.) Soncuya v. de Luna
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.
3.) Evangelista & Co. v. Abad Santos

Facts:
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. "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 Leonarda Atienza Abad Santos to be divided among
them equally; and 30% for the fourth partner, Estrella Abad Santos."

Respondent filed suit against the three other partners in the CFI 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 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
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; 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 promissory note as co-maker and
mortgaged her property as security.

Issue:
Whether or not the CA erred in finding that the respondent is an industrial partner of Evangelista
& Co., notwithstanding the admitted fact that since 1954 and until after the promulgation of the
decision of the CA the said respondent was one of the judges of the City Court of Manila, and
despite its finding that respondent has been paid for services allegedly contributed by her to the
partnership.

Held:
CA 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.

“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.

“It is not disputed that the prohibition against an 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 his prestation. There is no
pretense, however, even on the part of appellants that 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
the filing of the complaint in this case and the answer thereto that appellants exercised their right
of exclusion under the codal article just mentioned by alleging in their Supplemental Answer
dated July 29, 1964 — or after around nine (9) years from June 7, 1955 — 'That subsequent to
the filing of defendants' answer to the complaint, the defendants reached an agreement whereby
the herein plaintiff has been excluded from, and deprived of, her alleged share, interest or
participation, as an alleged industrial partner, in the defendant partnership and/or in its net profits
or income, on the ground that plaintiff has never contributed her industry to the partnership, and
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 the performance of her duties as such judge and enjoying the
privileges 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).”
4.) PEDRO MARTINEZ VS. ONG PONG CO AND ONG LAY
G.R. No. L-5236, January 10, 1910

FACTS:
Pedro Martinez (plaintiff) delivered Php.1,500.00 to Ong Pong Co and Ong Lay
(defendants).
Said amount was reflected in a private instrument where the plaintiff and
defendants agreed that
“they 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 store business was a failure and the plaintiff
demanded from the
defendants either to render an accounting of the partnership as agreed to, or
to refund him the
Php.1,500.00. Ong Pong Co alleged in his defense that his co-defendant Ong
Lay, now deceased,
was the one who managed the business. He also alleged that nothing had
resulted from the business
venture save the loss of the capital of Php.1,500.00, to which the plaintiff
agreed.

ISSUE:
Upto what extent are partners liable?

HELD:
The partners are liable jointly. The defendants acted as administrators and as
such, they were
obliged to render an accounting of the business. Since both failed in this
aspect, they are obliged to
return the capital. Article 1688 of the Civil Code (Article 1796 of the New Civil
Code) which 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” does not apply to the case at bar since
no other money than the
one contributed by the plaintiff was involved. The court ruled that Ong Pong
Co should pay Pedro
Martinez the sum of Php.750.00 with the legal interest thereon, being liable
jointly.
5.) GEORGE LITTON, petitioner-appellant,
vs.
HILL & CERON, ET AL., respondents-appellees.
G.R. No. L-45624             April 25, 1939

Facts:
This is a petition to review on certiorari the 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 s,urety 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 Ceron’s 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 (½%) from the original price of P1,870, with the
costs to the respondents. So ordered.
5.) GEORGE LITTON, petitioner-appellant,
vs.
HILL & CERON, ET AL., respondents-appellees.
G.R. No. L-45624             April 25, 1939

Facts:
This is a petition to review on certiorari the 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 s,urety 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 Ceron’s 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 (½%) from the original price of P1,870, with the
costs to the respondents. So ordered.
6.) Santos v. Spouses Reyes
G.R. No. 135813, 25 October 2001

FACTS:

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
Nieves and Zabat would earn 15% each.

In July, 1986, Nieves introduced Cesar Gragera to petitioner. Gragera, as chairman of the Monte
Maria Development Corporation 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.

On August 6, 1986, petitioner 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.
Nieves allegedly failed to account for the amount. 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.

For her part, Nieves claimed that she participated in the business as a partner, as the lending activity
with Monte Maria originated from her initiative. 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. RTC held
that respondents were partners, not mere employees, of petitioner.

ISSUE:

Whether there was a partnership established.

RULING:

Yes. Respondents were industrial partners of petitioner. 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.

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.

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. The
“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. This stipulation clearly proved the
establishment of a partnership.
7.)Moran Jr. v. CA

Facts:
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 P1,000 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."

Pecson filed with the CFI of Manila alleging that: (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.
CFI held that ordering defendant Isabelo C. Moran, Jr. to return to plaintiff Mariano E. Pecson
the sum of P17,000.00, with interest at the legal rate from the filing of the complaint on June 19,
1972. Parties appealed to the CA which rendered a decision against the petitioner to pay: Forty-
seven thousand five hundred (P47,500) (the amount that could have accrued to Pecson under
their agreement); (b) Eight thousand (P8,000), (the commission for eight months); (c) Seven
thousand (P7,000) (as a return of Pecson's investment for the Veteran's Project); and (d) Legal
interest on (a), (b) and (c) from the date the complaint was filed (up to the time payment is
made).

Issues:
Whether or not CA grievously erred in holding petitioner liable to respondent in the sum of
P47,500 as the supposed expected profits due him;

Whether or not CA grievously erred in holding petitioner liable to respondent in the sum of
P8,000, as supposed commission in the partnership arising out of Pecson's investment;

Whether or not CA grievously erred in holding petitioner liable to respondent in the sum of
P7,000 as a supposed return of investment in a magazine venture.

Held:
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 and for
interests and damages from the time he should have complied with his obligation. Thus in Uy v.
Puzon (19 SCRA 598), which interpreted Art. 2200 of the Civil Code of the Philippines, the
Court 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.

Being a contract of partnership, each partner must share in the profits and losses of the venture.
That is the essence of a partnership. And even with an assurance made by one of the partners that
they would earn a huge amount of profits, in the absence of fraud, the other partner cannot claim
a right to recover the highly speculative profits. It is a rare business venture guaranteed to give
100% profits. The records show that the private respondent gave P10,000.00 to the petitioner.
The latter used this amount for the printing of 2,000 posters at a cost of P2.00 per poster or a
total printing cost of P4,000.00. The records further show that the 2,000 copies were sold at
P5.00 each. The gross income therefore w as P10,000.00. Deducting the printing costs of
P4,000.00 from the gross income of P10,000.00 and with no evidence on the cost of distribution,
the net profits amount to only P6,000.00. Relative to the second alleged error, the petitioner
submits that the award of P8,000.00 as Pecson's supposed commission has no justifiable basis in
law. The partnership agreement stipulated that the petitioner would give the private respondent a
monthly commission of P1,000.00 from April 15, 1971 to December 15, 1971 for a total of eight
monthly commissions. The agreement does not state the basis of the commission. The payment
of the commission could only have been predicated on relatively extravagant profits.

There is misapprehension of facts. The evidence of the private respondent himself shows that his
investment in the "Voice of Veterans" project amounted to only P3,000.00. The remaining
P4,000.00 was the amount of profit that the private respondent expected to receive.

The respondent court erred when it concluded that the project never left the ground because the
project did take place. Only it failed. It was the private respondent himself who presented a copy
of the book entitled "Voice of the Veterans" in the lower court as Exhibit "L". Therefore, it
would be error to state that the project never took place and on this basis decree the return of the
private respondent's investment.
8.) Lozana vs. Depakakibo

FACTS:

Lozana and Depakakibo established a partnership for the purpose of maintaining, operating, and
distributing electric light and power in the Municipality of Dumangas. The partnership is
capitalized at the sum of P30, 000.00 where Lozana agreed to furnish 60% while Depakakibo,
40%. However, the franchise for venture in favor of Buenaflor was cancelled and revoked by the
Public Service Commission. Lozana thereafter sold Generator Buda [Lozana’s contribution to
the partnership; no liquidation made] to Decologon. When the decision was appealed, a
temporary certificate of public convenience was issued in the name of Decolongon. Depakakibo
sold one Crossly Diesel Engine [Depakakibo’s contribution to the partnership] to Spouses
Jimenea and Harder. Lozana brought action against Depakakibo alleging the latter wrongfully
detained the Generator Buda and wooden posts to which he is entitled to the possession of.
Lozano prayed the properties be delivered back to him. CFI ordered sheriff to take possession of
the properties and the delivery thereof to Lozano. Depakakibo alleged properties have been
contributed to the partnership and therefor he is not unlawfully detaining them. In addition,
Lozano sold his contribution to partnership in violation of terms of their agreement. CFI declared
Lozano owner of and entitled to the equipment. Depakakibo appealed decision to the Supreme
Court.

ISSUE: W/N partnership is void or the act of the partnership in furnishing electric current to the
franchise holder without previous approval of Public Service Commission render the partnership
void? W/N disposal of contribution of parties is allowed.

RULING:

Validity of the Partnership. Partnership is valid. The fact of furnishing the current to the holder
of the franchise alone, without the previous approval of the Public Service Commission, does not
per se make the contract of partnership null and void from the beginning and render the
partnership entered into by the parties for the purpose also void and non-existent Disposal of
Contributed Property to the Partnership. Facts show that parties entered into the contract of
partnership, Lozana contributing the amount of P18, 000, and there has not been liquidation prior
to the sale of the contributed properties: Buda Diesel Engine and 70 posts. It necessarily follows
that the Buda diesel engine contributed by the plaintiff had become the property of the
partnership. As properties of the partnership, the same could not be disposed of by the party
contributing the same without the consent or approval of the partnership or of the other partner.
(Clemente vs. Galvan, 67 Phil., 565)
9.)Uy vs. Puzon
FACTS:

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 the 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.

ISSUE/S: W/N the amount of money ordered by the trial court for the failure to contribute his share in
the capital of the partnership is proper.

RULING:

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 the 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.