Uy vs.

Puzon
FACTS:
Puzon entered into a contract with the Republic of the Philippines for the
construction of a road and brid!es. "owever# Puzon found di$culty in
acco%plishin! both pro&ects# so he established a partnership with Uy as sub'
contractor of the pro&ects for f inancial assistance and the pro(ts shall be divided
e)ually between the%* the resultin! partnership is +UP Construction Co%pany,.
The partners a!reed to contribute P-# --- each as capital. "owever# Puzon failed
to pay but pro%ised to contribute his share as soon as his application of loan with
the P./ shall be approved. Uy !ave Puzon advance contribution of his share in
partnership for Puzon to pay his obli!ations with P./. Uy was entrusted with the
%ana!e%ent of the pro&ect since Puzon is busy with his other pro&ects* whatever
e0pense Uy%ay incur shall be considered part of his contribution. Upon approval of
Puzon1s loan with the P./# he !ave Uy P2-# --- forrei%burse%ent of Uy1s
contribution and Puzon1s contribution to the partnership capital.
To !uarantee the pay%ent of the loan# Puzon assi!ned to P./ all pay%ents to be
received on account of the contracts with the /ureau of Public "i!hways for the
construction* this was done without the 3nowled!e and consent of Uy. Financial
de%ands of the pro&ect increased# thus# Uy called on Puzon to place his capital
contribution* Puzon failed to doso. Uy thereafter sent letters of de%and to which
Puzon replied that he1s not capable of puttin! additional capital.
Puzon wrote UP Construction Co%pany ter%inatin! their subcontract a!ree%ent.
Uy was then not allowed in the o$ce of UP Construction Co%pany and his authority
to deal with /P" was revo3ed. "ence# he instituted an action a!ainst Puzon see3in!
the dissolution of the partnership and pay%ent of da%a!es for the violation of the
latter of the ter%s of their partnership a!ree%ent. RTC found that Puzon failed to
contribute his share in the capital of the partnership and caused the failure of
partnership to realize e0pected pro(ts. The court ordered the dissolution of the
partnership and Puzon to pay Uy a certain su%. Franco Puzon substituted /artolo%e
Puzon on the appeal of the case before the Supre%e Court.
4SSU56S:
76. the a%ount of %oney ordered by the trial court for the failure to contribute his
share in the capital of the partnership is proper.
RU84.9:
:es.
The rule is# when a partner who has underta3en to contribute a su% of %oney fails
to do so# he beco%es a debtor of the partnership for whatever he %ay have
pro%ised to contribute ;Art. <=>2# Civil Code? and for interests and da%a!es fro%
the ti%e he should have co%plied with his obli!ation ;Art. <=>># Civil Code?.
The re%edies available to the partnership and the other partners with respect to the
failure or refusal to co%ply with contribution obli!ation ta3es the nor%al re%edies
of interest and da%a!es# includin! co%pensatory da%a!es constitutin! his shares
of the pro(ts.
@oran vs. CA
4n February <A=<# 4sabelo @oran and @ariano Pecson entered into a partnership
a!ree%ent where they a!reed to contribute P<3 each for the purpose of printin!
A3 posters of the dele!ates to the then <A=< Constitutional Co%%ission. @oran
shall be in char!e in %ana!in! the printin! of the posters. 4t was further a!reed that
Pecson will receive a co%%ission of P<3 a %onth startin! fro% April <A=< to
Bece%ber <A=<* that the partnership is to be li)uidated on Bece%ber <# <A=<.
Pecson partially ful(lled his obli!ation to the partnership when he issued P<-3 in
favor of the partnership. "e !ave the P<-3 to @oran as the %ana!in! partner.
@oran however did not add anythin! and# instead# he only used PC3 out of the P<-3
in printin! D#--- posters. "e only printed D#--- posters because he felt that printin!
all A3 posters is a losin! venture because of the delay by the CE@585C in
announcin! the full dele!ates. All the posters were sold for a total of P<-3.
Pecson sued @oran. The trial court ordered @oran to pay Pecson da%a!es. The
Court of Appeals a$r%ed the decision of the trial court but %odi(ed the sa%e as it
ordered @oran to pay PC=.3 for unrealized pro(t* P>3 for Pecson1s %onthly
co%%issions* P=3 as return of invest%ent because the venture never too3 oF* plus
interest.
4SSU5: 7hether or not the CA &ud!%ent is correct.
"58B: .o. The award of PC=.3 for unrealized pro(t is speculative. There is no
evidence whatsoever that the partnership between the @oran and Pecson would
have been a pro(table venture ;because base on the circu%stances then i.e. the
delay of the CE@585C in proclai%in! the candidates# pro(t is hi!hly unli3ely?. 4n
fact# it was a failure doo%ed fro% the start. There is therefore no basis for the
award of speculative da%a!es in favor of Pecson. Further# there is %utual breach in
this case# Pecson only !ave P<-3 instead of P<3 while @oran !ave nothin! at all.
As for the P>3 %onthly co%%ission# this is without basis. The a!ree%ent does not
state the basis of the co%%ission. The pay%ent of the co%%ission could only have
been predicated on relatively e0trava!ant pro(ts. The parties could not have
intended the !ivin! of a co%%ission inspite of loss or failure of the venture. Since
the venture was a failure# Pecson is not entitled to the P>3 co%%ission.
As for the P=3 award as return for Pecson1s invest%ent# the CA erred in his rulin!
too. Thou!h the venture failed# it did too3 oF the !round as evidenced by the D#---
posters printed. "ence# return of invest%ent is not proper in this case. There are
ris3s in any business venture and the failure of the underta3in! cannot entirely be
bla%ed on the %ana!in! partner alone# specially if the latter e0ercised his best
business &ud!%ent# which see%s to be true in this case.
@oran %ust however return the unused P23 of Pecson1s contribution to the
partnership plus PG3 representin! Pecson1s pro(t share in the sale of the printed
posters. Co%putation of PG3 pro(t share is as follows: ;P<-3 pro(t fro% the sale of
the D#--- posters printed? H ;PC3 e0pense in printin! the D3 posters? I ;P23 pro(t?*
Pro(t J D I PG3 each.
@AK4@484A.E SA.C"E# vs. S5L5R4A.E 84MARRA9A
9.R..o. 8'GG>- February 2# <AG<
Sub&ect: /usEr! <
FACTS:
The plaintiF brou!ht an action for the rescission of the partnership contract between
hi%self and the defendant and the rei%burse%ent of his invest%ent worth
-#---php with interest at <D per cent per annu% for% Ectober <# <AD-# with
costs# and any other &ust and e)uitable re%edy a!ainst said defendant. The
defendant denies !enerally and speci(cally all the alle!ations of the co%plaint and
as3ed for the dissolution of the partnership# and the pay%ent to hi% as its %ana!er
and ad%inistrator P-- %onthly fro% Ectober <# <AD- until the (nal dissolution
with interest.
The CF4 found that the defendant had not contributed all the capital he had bound
hi%self to invest hence it de%anded that the defendant li)uidate the partnership#
declared it dissolved on account of the e0piration of the period for which it was
constituted# and ordered the defendant# as %ana!in! partner# to proceed without
delay to li)uidate it# sub%ittin! to the court the result of the li)uidation to!ether
with the accounts and vouchers within the period of thirty days fro% receipt of
notice of said &ud!%ent. The plaintiF appealed fro% said decision prayin! for the
rescission of the partnership contract between hi% and the defendant in accordance
with Art. <<DC.
4SSU5: 7E. plaintiF ac)uired the ri!ht to de%and rescission of the partnership
contract accordin! to article <<DC of the Civil Code.
"58B: When a partner fails to comply with his obligation to deliver what he promised to contribute to the partnership, and there is no desire
to dissolve the partnership, the remedy that is available to the other partners cannot be rescission, but rather one for specific performance
The SC ruled that owin! to the defendant1s failure to pay to the partnership the
whole a%ount which he bound hi%self to pay# he beca%e indebted to the
partnership for the re%ainder# with interest and any da%a!es occasioned thereby#
but the plaintiF did not thereby ac)uire the ri!ht to de%and rescission of the
partnership contract accordin! to article <<DC of the Code. Article <<DC cannot be
applied to the case in )uestion# because it refers to the resolution of obli!ations in
!eneral# whereas articles <2>< and <2>D speci(cally refer to the contract of
partnership in particular. And it is a well 3nown principle that special provisions
prevail over !eneral provisions. "ence# SC dis%issed the appeal left the decision
appealed fro% in full force.
8ozana vs. Bepa3a3ibo
Facts: the plaintiF and the defendant entered into thecontract of partnership#
plaintiF contributin! the a%ount of P<>#---# and as it is not stated therein thatthere
bas been a li)uidation of the partnership assets at the ti%e plaintiF sold the /uda
Biesel 5n!ine onEctober <# <A# and since the court below had found that the
plaintiF had actually contributed oneen!ine and =- posts to the partnership# it
necessarily follows that the /uda diesel en!ine contributed bythe plaintiF had
beco%e the property of the partnership
"eld: An e)uip%ent which was contributed by one of the partners to the partnership
beco%es the property of the partnership and as such cannot be disposed of by the
party contributin! the sa%e without the consent of the partnership or the other
partner.
Sancho v. 8izarra!a
Facts: The plaintiF brou!ht an action for the rescission of the partnership contract
between hi%self and the defendant and the rei%burse%ent of his invest%ent worth
-#---php with interest at <D per cent per annu% for% Ectober <# <AD-# with
costs# and any other &ust and e)uitable re%edy a!ainst said defendant. The
defendant denies !enerally and speci(cally all the alle!ations of the co%plaint and
as3ed for the dissolution of the partnership# and the pay%ent to hi% as its %ana!er
and ad%inistrator P-- %onthly fro% Ectober <# <AD- until the (nal dissolution
with interest.
The CF4 found that the defendant had not contributed all the capital he had bound
hi%self to invest hence it de%anded that the defendant li)uidate the partnership#
declared it dissolved on account of the e0piration of the period for which it was
constituted# and ordered the defendant# as %ana!in! partner# to proceed without
delay to li)uidate it# sub%ittin! to the court the result of the li)uidation to!ether
with the accounts and vouchers within the period of thirty days fro% receipt of
notice of said &ud!%ent. The plaintiF appealed fro% said decision prayin! for the
rescission of the partnership contract between hi% and the defendant in accordance
with Art. <<DC.
"eld: .or%ally# the contract of partnership bein! one constituted of bilateral
;%ultilateral? obli!ations# the re%edy to the other partners when one of the% fails
to co%ply with his obli!ation to contribute# would either be speci(c perfor%ance or
rescission. Under the provisions of the old Civil Code# the Court held in Sancho v.
8izarra!a# Phil. 2-< ;<AG<?# that the re%edy of rescission of the contract of
partnership which would %ean the return of the contribution of the co%plainin!
partner with interest and da%a!es proven# is not available because then Articles
<2>< and <2>D Nnow Articles <=>2 and <=>>O provided for speci(c re%edies to the
contract of partnership# thus:
Ewin! to the defendant1s failure to pay to the partnership the whole a%ount which
he bound hi%self to pay# he beca%e indebted to it for the re%ainder# with interest
and any da%a!es occasioned thereby# but the plaintiF did not thereby ac)uire the
ri!ht to de%and rescission of the partnership contract accordin! to article <<DC of
the Code. This article cannot be applied to the case in )uestion# because it refers to
the resolution of obli!ations in !eneral# whereas articles <2>< and <2>D speci(cally
refer to the contract of partnership in particular. And it is a well 3nown principle that
special provisions prevail over !eneral provisions.
the re%edy of rescission# which see3s to e0tin!uish the contractual relationship and
eFect %utual restitution# is not allowed under the contract of partnership. The
proper re%edies would be to see3 a collection of the pro%ised contribution# with
recovery of interests and da%a!es as provided for in Articles <=>2 and <=>># or as3
for dissolution of the partnership under Article <>G<.
"anlon vs. "ausser%ann and /ea%
Facts: four contractin! parties a!reed to a &oint enterprise to rehabilitate a %inin!
plant# where the en!a!e%ent of the three of the% was li%ited to raisin! %oney
within a stated period by subscribin! to or sellin! shares of the %inin! co%pany.
Ene of the parties who had underta3en thus to raise %oney defaulted# and under
the e0press resolutory conditions of the contract the two other parties were
dischar!ed. Subse)uently# the two parties thus dischar!ed# who were at the sa%e
ti%e stoc3holders and o$cials of the %inin! co%pany# procured a contract fro% the
%inin! co%pany by which they proceeded to restore the %inin! plant upon their
own account. The other two %e%bers of the ori!inal enterprise sued to recover
shares in the %inin! co%pany and dividends declared upon such shares on the
!round that they were earned pursuant to the &oint enterprise to which they were
entitled to receive their shares.
"eld: After the ter%ination of an a!ency# partnership# or &oint adventure# each of
the parties is free to act in his own interest# provided he has done nothin! durin!
the continuance of the relation to lay a foundation for an undue advanta!e to
hi%self. To act as a!ent for another does not necessarily i%ply the creation of a
per%anent disability in the a!ent to act for hi%self in re!ard to the sa%e sub&ect'
%atter* and certainly no case has been called to our attention in which the
e)uitable doctrine above referred to has been so applied as to prevent an owner of
property fro% doin! what he pleased with his own after such a contract Nof
partnershipO between the parties to this lawsuit had lapsed
8i% Tan! "u v. Ra%olete
Facst: Tan Put (led an co%plaint a!ainst spouses 8i% Tanhu and By Echay.She later
a%ended her co%plaint and included so%e other people asdefendants
Tan Put alle!es that she is the widow of Tee "oon 8i% Po Chuan# whowas a partner
of defendants in the co%%ercial partnership 9loryCo%%ercial Co.
Tan Put alle!es# a%on! others# that Tanhu et. al.# throu!h fraud and%achinations#
too3 actual and active %ana!e%ent of the partnership.#and that althou!h her
deceased husband was the %ana!er of 9lory#Tanhu et.al %ana!ed to use the funds
of the partnership to purchaselands and buildin!s in diFerent cities in Lisayas.
Further# she also alle!es that after the death of Tee "oon 8i% Po Chuan#Tanhu et.
al. continued the business without li)uidation by or!anizin! acorporation she
alle!es that the assets of the corporation are actuallythe assets of the defunct
partnership.
4n the CF4 level# Tan Put prayed for an accountin! of the real andpersonal
properties of the 9lory Co%%ercial Co.# and to subse)uentlydeliver to her <6G of the
total value of the properties.
Befendant1s defense: That Tan Put was not the le!iti%ate wife of the deceased*
that the assets of the partnership has already been properlyli)uidated# and that it
was the le!iti%ate wife An! Sio3 Tin who hadreceived Tee "oon1s share.
"eld: for%er partners have no obli!ation to account on how they ac)uired
properties in their na%es# when such ac)uisition were eFected +lon! after the
partnership had been auto%atically dissolved as a result of the death of Po Chuan
Nthe pri%ary %ana!in! partnerO. Accordin!ly# defendants have no obli!ation to
account to anyone for such ac)uisitions in the absence of clear proof that they had
violated the trust of Po Chuan durin! the e0istence of the partnership.,
Catalan vs. 9atchalian
"eld: when partnership real property had been %ort!a!e and foreclosed# the
rede%ption by any of the partners# even when usin! his separate funds# does not
allow such rede%ption to be in his sole favor. The su%%ary reported reads in part
as follows:
. . . Under the !eneral principle of law# a partner is an a!ent of the partnership ;Art.
<><># new Civil Code?. Further%ore# every partner beco%es a trustee for his
copartner with re!ard to any bene(ts or pro(ts derived fro% his act as a partner
;Article <>-=# new Civil Code?. Conse)uently# when Catalan redee%ed the
properties in )uestion he beca%e a trustee and held the sa%e in trust for his
copartner 9atchalian# sub&ect of course to his ri!ht to de%and fro% the latter his
contribution to the a%ount of rede%ption.
4n 5van!elista P Co. v. Abad Santos#
"eld: ?# an article of co'partnership was e0ecuted between three capitalist partners
on one hand# and Qud!e Abad Santos# as an industrial partner on the other hand#
with the capitalist partners bein! entitled to =-R of the pro(ts# while the industrial
partner was entitled to G-R thereof. Several years into the partnership ter%# Qud!e
Abad Santos sou!ht to have an accountin! of the partnership aFairs and to be !iven
her share of the pro(ts of the co%pany which had been distributed only a%on! the
capitalist partners. The capitalist partners sou!ht to have the relationship declared
as not a true partnership on the !round that the articles were drawn'up %erely to
cover the special arran!e%ent entitle%ent by which Qud!e Abad Santos had
arran!ed for a loan (nancin! for the co%pany to be paid only after the loan has
been fully paid* and that in fact bein! an incu%bent &ud!e she rendered to service
to the co%pany# thus:
4t is an ad%itted fact that since before the e0ecution of the a%ended articles of
partnership . . . the appellee 5strella Abad Santos has been# and up to the present
ti%e still is# one of the &ud!es of the City Court of @anila# devotin! all her ti%e to
the perfor%ance of the duties of her public o$ce. This fact proves beyond
peradventure that it was never conte%plated between the parties# for she could not
lawfully contribute her full ti%e and industry which is the obli!ation of an industrial
partner pursuant to Art. <=>A of the Civil Code.