G.R. No. L-33580 February 6, 1931MAXIMILIANO SANCHO,plaintiff-appellant,vs.SEVERIANO LIZARRAGA,defendant-appellee.Jose Perez Cardenas and Jose M. Casal for appellant.Celso B. Jamora and Antonio Gonzalez for appellee.ROMUALDEZ,J.:The plaintiff brought an action for the rescission of a partnership contract between himself and the defendant, entered into on October 15, 1920, the reimbursement by the latter of his 50,000 peso investment therein, 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 which are incompatible with his special defenses, cross-complaint and counterclaim, setting up the latter and asking for the dissolution of the partnership, and the payment to him as its manager and administrator of P500 monthly from October 15, 1920, until the final dissolution, with interest, one-half of said amount to be charged to the plaintiff. He also prays for any other just and equitable remedy.The Court of First Instance of Manila, having heard the cause, and finding it duly proved that the defendant had not contributed all the capital he had bound himself to invest, and that the plaintiff had 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, without costs.The plaintiff appealed from said decision making the following assignments of error:1. In holding that the plaintiff and appellant is not entitled to the rescission of the partnership contract, Exhibit A, and that article 1124 of the Civil Code is not applicable to the present case.2. In failing to order the defendant to return the sum of P50,000 to the plaintiff with interest from October 15, 1920, until fully paid.3. In denying the motion for a new trial.In the brief filed by counsel for the appellee, a preliminary question is raised purporting to show that this appeal is premature and therefore will not lie. The point is based on the contention that inasmuch as the liquidation ordered by the trial court, and the consequent accounts, have not been made and submitted, the case cannot be deemed terminated in said court and its ruling is not yet appealable. In support of this contention counsel cites section 123 of the Code of Civil Procedure, and the decision of this court in the case ofNatividad vs. Villarica(31 Phil., 172).This contention is well founded. Until the accounts have been rendered as ordered by the trial court, and until they have been either approved or disapproved, the litigation involved in this action cannot be considered as completely decided; and, as it was held in said case of Natividad vs .Villarica, also with reference to an appeal taken from a decision ordering the rendition of accounts following the dissolution of partnership, the appeal in the instant case must be deemed premature.But even going into the merits of the case, the affirmation of the judgment appealed from is inevitable. In view of the lower court's findings referred to above, which we cannot revise because the parol evidence has not been forwarded to this court, articles 1681 and 1682 of the Civil Code have been properly applied. Owing to the defendant's failure to pay to the partnership the whole amount which he bound himself to pay, he became indebted to it 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. This article cannot be applied to the case in question, because it refers to the resolution of obligations in general, whereas article 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.By virtue of the foregoing, this appeal is hereby dismissed, leaving the decision appealed from in full force, without special pronouncement of costs. So ordered.MAXIMILIANO SANCHO,vs. SEVERIANO LIZARRAGAG.R.No. L-33580 February 6, 1931FACTS: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 defendants 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.

G.R. No. L-45464 April 28, 1939JOSUE SONCUYA,plaintiff-appellant,vs.CARMEN DE LUNA,defendant-appellee.Josue Soncuya in his own behalf.Conrado V. Sanchez and Jesus de Veyra for appellee.VILLA-REAL,J.:On September 11, 1936, plaintiff Josue Soncuya filed with the Court of First Instance of Manila and amended complaint against Carmen de Luna in her own name and as co-administratrix of the intestate estate, of Librada Avelino, in which, upon the facts therein alleged, he prayed that defendant be sentenced to pay him the sum of P700,432 as damages and costs.To the aforesaid amended complaint defendant Carmen de Luna interposed a demurrer based on the following grounds: (1) That the complaint does not contain facts sufficient to constitute a cause of action; and (2) that the complaint is ambiguous, unintelligible and vague.Trial on the demurrer having been held and the parties heard, the court found the same well-founded and sustained it, ordering the plaintiff to amend his complaint within a period of ten days from receipt of notice of the order.Plaintiff having manifested that he would prefer not to amend his amended complaint, the attorney for the defendant, Carmen de Luna, filed a motion praying that the amended complaint be dismissed with costs against the plaintiff. Said motion was granted by The Court of First Instance of Manila which ordered the dismissal of the aforesaid amended complaint, with costs against the plaintiff.From this order of dismissal, the appellant took an appeal, assigning twenty alleged errors committed by the lower court in its order referred to.The demurrer interposed by defendant to the amended complaint filed by plaintiff having been sustained on the grounds that the facts alleged in said complaint are not sufficient to constitute a cause of action and that the complaint is ambiguous, unintelligible and vague, the only questions which may be raised and considered in the present appeal are those which refer to said grounds.In the amended complaint it is prayed that defendant Carmen de Luna be sentenced to pay plaintiff damages in the sum of P700,432 as a result of the administration, said to be fraudulent, of he partnership, "Centro Escolar de Seoritas", of which plaintiff, defendant and the deceased Librada Avelino were members. For the purpose of adjudicating to plaintiff damages which he alleges to have suffered as a partner by reason of the supposed fraudulent management of he partnership referred to, it is first necessary that a liquidation of the business thereof be made to the end that the profits and losses may be known and the causes of the latter and the responsibility of the defendant as well as the damages which each partner may have suffered, may be determined. It is not alleged in the complaint that such a liquidation has been effected nor is it prayed that it be made. Consequently, there is no reason or cause for plaintiff to institute the action for damages which he claims from the managing partner Carmen de Luna (Po Yeng Cheo vs. Lim Ka Yam, 44 Phil., 172).Having reached the conclusion that the facts alleged in the complaint are not sufficient to constitute a cause of action on the part of plaintiff as member of the partnership "Centro Escolar de Seoritas" to collect damages from defendant as managing partner thereof, without a previous liquidation, we do not deem it necessary to discuss the remaining question of whether or not the complaint is ambiguous, unintelligible and vague.In view of the foregoing considerations, we are of the opinion and so hold that for a partner to be able to claim from another partner who manages the general copartnership, damages allegedly suffered by him by reason of the fraudulent administration of the latter, a previous liquidation of said partnership is necessary.Wherefore, finding no error in the order appealed from the same is affirmed in all its parts, with costs against the appellant. So ordered.

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.

G.R. No. L-31684 June 28, 1973EVANGELISTA & CO., DOMINGO C. EVANGELISTA, JR., CONCHITA B. NAVARRO and LEONARDA ATIENZA ABAD SABTOS,petitioners,vs.ESTRELLA ABAD SANTOS,respondent.Leonardo Abola for petitioners.Baisas, Alberto & Associates for respondent.MAKALINTAL,J.:On October 9, 1954 a co-partnership was formed under the name of "Evangelista & Co." On June 7, 1955 the Articles of Co-partnership was amended as to include herein respondent, Estrella Abad Santos, as industrial partner, with herein petitioners Domingo C. Evangelista, Jr., Leonardo Atienza Abad Santos and Conchita P. Navarro, the original capitalist partners, remaining in that capacity, with a contribution of P17,500 each. The amended Articles provided,inter alia, that "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 Leonardo Atienza Abad Santos to be divided among them equally; and 30% for the fourth partner Estrella Abad Santos."On December 17, 1963 herein respondent filed suit against the three other partners in the Court of First Instance 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 and let her examine the partnership books or to give her information regarding the partnership affairs to pay her any share in the dividends declared by the partnership. She therefore prayed that the defendants be ordered to render accounting to her of the partnership business and to pay her corresponding share in the partnership profits after such accounting, plus attorney's fees and costs.The defendants, in their answer, 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 byway 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 promisory note as co-maker and mortgaged her property as security.The parties are in agreement that the main issue in this case is "whether the plaintiff-appellee (respondent here) is an industrial partner as claimed by her or merely a profit sharer entitled to 30% of the net profits that may be realized by the partnership from June 7, 1955 until the mortgage loan from the Rehabilitation Finance Corporation shall be fully paid, as claimed by appellants (herein petitioners)." On that issue the Court of First Instance found for the plaintiff and rendered judgement "declaring her an industrial partner of Evangelista & Co.; ordering the defendants to render an accounting of the business operations of the (said) partnership ... from June 7, 1955; to pay the plaintiff such amounts as may be due as her share in the partnership profits and/or dividends after such an accounting has been properly made; to pay plaintiff attorney's fees in the sum of P2,000.00 and the costs of this suit."The defendants appealed to the Court of Appeals, which thereafter affirmed judgments of the courta quo.In the petition before Us the petitioners have assigned the following errors:I. The Court of Appeals erred in the finding that the respondent is an industrial partner of Evangelista & Co., notwithstanding the admitted fact that since 1954 and until after promulgation of the decision of the appellate court the said respondent was one of the judges of the City Court of Manila, and despite its findings that respondent had been paid for services allegedly contributed by her to the partnership. In this connection the Court of Appeals erred:(A) In finding that the "amended Articles of Co-partnership," Exhibit "A" is conclusive evidence that respondent was in fact made an industrial partner of Evangelista & Co.(B) In not finding that a portion of respondent's testimony quoted in the decision proves that said respondent did not bind herself to contribute her industry, and she could not, and in fact did not, because she was one of the judges of the City Court of Manila since 1954.(C) In finding that respondent did not in fact contribute her industry, despite the appellate court's own finding that she has been paid for the services allegedly rendered by her, as well as for the loans of money made by her to the partnership.II. The lower court erred in not finding that in any event the respondent was lawfully excluded from, and deprived of, her alleged share, interests and participation, as an alleged industrial partner, in the partnership Evangelista & Co., and its profits or net income.III. The Court of Appeals erred in affirmingin totothe decision of the trial court whereby respondent was declared an industrial partner of the petitioner, and petitioners were ordered to render an accounting of the business operation of the partnership from June 7, 1955, and to pay the respondent her alleged share in the net profits of the partnership plus the sum of P2,000.00 as attorney's fees and the costs of the suit, instead of dismissing respondent's complaint, with costs, against the respondent.It is quite obvious that the questions raised in the first assigned errors refer to the facts as found by the Court of Appeals. The evidence presented by the parties as the trial in support of their respective positions on the issue of whether or not the respondent was an industrial partner was thoroughly analyzed by the Court of Appeals on its decision, to the extent of reproducingverbatimtherein the lengthy testimony of the witnesses.It is not the function of the Supreme Court to analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing errors of law that might have been commited by the lower court. It should be observed, in this regard, that the Court of Appeals 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.The findings of the Court of Appeals on the various points raised in the first assignment of error are hereunder reproduced if only to demonstrate that the same were made after a through analysis of then evidence, and hence are beyond this Court's power of review.The aforequoted findings of the lower Court are assailed under Appellants' first assigned error, wherein it is pointed out that "Appellee's documentary evidence does not conclusively prove that appellee was in fact admitted by appellants as industrial partner of Evangelista & Co." and that "The grounds relied upon by the lower Court are untenable" (Pages 21 and 26, Appellant's Brief).The first point refers to Exhibit A, B, C, K, K-1, J, N and S, appellants' complaint being that "In finding that the appellee is an industrial partner of appellant Evangelista & Co., herein referred to as the partnership the lower court relied mainly on the appellee's documentary evidence, entirely disregarding facts and circumstances established by appellants" evidence which contradict the said finding' (Page 21, Appellants' Brief). The lower court could not have done otherwise but rely on the exhibits just mentioned, first, because appellants have admitted their genuineness and due execution, hence they were admitted without objection by the lower court when appellee rested her case and, secondly the said exhibits indubitably show the appellee is an industrial partner of appellant company. Appellants are virtually estopped from attempting to detract from the probative force of the said exhibits because they all bear the imprint of their knowledge and consent, and there is no credible showing that they ever protested against or opposed their contents prior of the filing of their answer to appellee's complaint. As a matter of fact, all the appellant Evangelista, Jr., would have us believe as against the cumulative force of appellee's aforesaid documentary evidence is the appellee's Exhibit "A", as confirmed and corroborated by the other exhibits already mentioned, does not express the true intent and agreement of the parties thereto, the real understanding between them being the appellee would be merely a profit sharer entitled to 30% of the net profits that may be realized between the partners from June 7, 1955, until the mortgage loan of P30,000.00 to be obtained from the RFC shall have been fully paid. This version, however, is discredited not only by the aforesaid documentary evidence brought forward by the appellee, but also by the fact that from June 7, 1955 up to the filing of their answer to the complaint on February 8, 1964 or a period of over eight (8) years appellants did nothing to correct the alleged false agreement of the parties contained in Exhibit "A". It is thus reasonable to suppose that, had appellee not filed the present action, appellants would not have advanced this obvious afterthought that Exhibit "A" does not express the true intent and agreement of the parties thereto.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.The Court of Appeals then proceeded to consider appellee's testimony on this point, quoting it in the decision, and then concluded as follows:One cannot read appellee's testimony just quoted without gaining the very definite impression that, even as she was and still is a Judge of the City Court of Manila, she has rendered services for appellants without which they would not have had the wherewithal to operate the business for which appellant company was organized. Article 1767 of the New Civil Code which provides that "By 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, 'does not specify the kind of industry that a partner may thus contribute, hence the said services may legitimately be considered as appellee's contribution to the common fund. Another article of the same Code relied upon appellants reads:'ART. 1789. An industrial partner cannot engage in business for himself, unless the partnership expressly permits him to do so; and if he should do so, the capitalist partners may either exclude him from the firm or avail themselves of the benefits which he may have obtained in violation of this provision, with a right to damages in either case.'It is not disputed that the provision against the 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 this prestation. There is no pretense, however, even on the part of the 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 filing of the complaint in this case and the answer thereto appellants exercised their right of exclusion under the codal art just mentioned by alleging in their Supplemental Answer dated June 29, 1964 or after around nine (9) years from June 7, 1955 subsequent to the filing of defendants' answer to the complaint, defendants reached an agreement whereby the herein plaintiff been excluded from, and deprived of, her alleged share, interests or participation, as an alleged industrial partner, in the defendant partnership and/or in its net profits or income, on the ground plaintiff has never contributed her industry to the partnership, 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 performance of her duties as such judge and enjoying the privilege 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). Having always knows as a appellee as a City judge even before she joined appellant company on June 7, 1955 as an industrial partner, why did it take appellants many yearn before excluding her from said company as aforequoted allegations? And how can they reconcile such exclusive with their main theory that appellee has never been such a partner because "The real agreement evidenced by Exhibit "A" was to grant the appellee a share of 30% of the net profits which the appellant partnership may realize from June 7, 1955, until the mortgage of P30,000.00 obtained from the Rehabilitation Finance Corporal shall have been fully paid." (Appellants Brief, p. 38).What has gone before persuades us to hold with the lower Court that appellee is an industrial partner of appellant company, with the right to demand for a formal accounting and to receive her share in the net profit that may result from such an accounting, which right appellants take exception under their second assigned error. Our said holding is based on the following article of the New Civil Code:'ART. 1899. Any partner shall have the right to a formal account as to partnership affairs:(1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners;(2) If the right exists under the terms of any agreement;(3) As provided by article 1807;(4) Whenever other circumstance render it just and reasonable.We find no reason in this case to depart from the rule which limits this Court's appellate jurisdiction to reviewing only errors of law, accepting as conclusive the factual findings of the lower court upon its own assessment of the evidence.The judgment appealed from is affirmed, with costs.

EVANGELISTA & CO. v. ABAD SANTOSG.R. No. L-31684; June 28, 1973Ponente: J. Makalintal

FACTS: On October 9, 1954 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 On December 17, 1963 herein respondent filed suit against the three other partners, 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 defendants, in their answer, 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.ISSUE: Whether Abad Santos is entitled to see the partnership books because she is an industrial partner in the partnershipHELD: Yes, Abad Santos is entitled to see the partnership books.The Supreme Court ruled that according toART. 1299. Any partner shall have the right to a formal account as to partnership affairs:(1)If he is wrongfully excluded from the partnership business or possession of its property by his co-partners;(2)If the right exists under the terms of any agreement;(3)As provided by article 1807;(4)Whenever other circumstances render it just and reasonable."

In the case at hand, the company is stopped from denying Abad Santos as an industrial partner because it has been 8 years and the company never corrected their agreement in order to show their true intentions. The company never bothered to correct those up until Abad Santos filed a complaint.

G.R. No. L-5236 January 10, 1910PEDRO MARTINEZ,plaintiff-appellee,vs.ONG PONG CO and ONG LAY,defendants.ONG PONG CO.,appellant.Fernando de la Cantera for appellant.O'Brien and DeWitt for appellee.ARELLANO,C.J.:On the 12th of December, 1900, the plaintiff herein delivered P1,500 to the defendants who, in a private document, acknowledged that they had received the same with the agreement, as stated by them, "that we 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 plaintiff filed a complaint on April 25, 1907, in order to compel the defendants to render him an accounting of the partnership as agreed to, or else to refund him the P1,500 that he had given them for the said purpose. Ong Pong Co alone appeared to answer the complaint; he admitted the fact of the agreement and the delivery to him and to Ong Lay of the P1,500 for the purpose aforesaid, but he alleged that Ong Lay, who was then deceased, was the one who had managed the business, and that nothing had resulted therefrom save the loss of the capital of P1,500, to which loss the plaintiff agreed.The judge of the Court of First Instance of the city of Manila who tried the case ordered Ong Pong Co to return to the plaintiff one-half of the said capital of P1,500 which, together with Ong Lay, he had received from the plaintiff, to wit, P750, plus P90 as one-half of the profits, calculated at the rate of 12 per cent per annum for the six months that the store was supposed to have been open, both sums in Philippine currency, making a total of P840, with legal interest thereon at the rate of 6 per cent per annum, from the 12th of June, 1901, when the business terminated and on which date he ought to have returned the said amount to the plaintiff, until the full payment thereof with costs.From this judgment Ong Pong Co appealed to this court, and assigned the following errors:1. For not having taken into consideration the fact that the reason for the closing of the store was the ejectment from the premises occupied by it.2. For not having considered the fact that there were losses.3. For holding that there should have been profits.4. For having applied article 1138 of the Civil Code.5. and 6. For holding that the capital ought to have yielded profits, and that the latter should be calculated 12 per cent per annum; and7. The findings of the ejectment.As to the first assignment of error, the fact that the store was closed by virtue of ejectment proceedings is of no importance for the effects of the suit. The whole action is based upon the fact that the defendants received certain capital from the plaintiff for the purpose of organizing a company; they, according to the agreement, were to handle the said money and invest it in a store which was the object of the association; they, in the absence of a special agreement vesting in one sole person the management of the business, were the actual administrators thereof; as such administrators they were the agent of the company and incurred the liabilities peculiar to every agent, among which is that of rendering account to the principal of their transactions, and paying him everything they may have received by virtue of themandatum. (Arts. 1695 and 1720, Civil Code.) Neither of them has rendered such account nor proven the losses referred to by Ong Pong Co; they are therefore obliged to refund the money that they received for the purpose of establishing the said storethe object of the association. This was the principal pronouncement of the judgment.With regard to the second and third assignments of error, this court, like the court below, finds no evidence that the entire capital or any part thereof was lost. It is no evidence of such loss to aver, without proof, that the effects of the store were ejected. Even though this were proven, it could not be inferred therefrom that the ejectment was due to the fact that no rents were paid, and that the rent was not paid on account of the loss of the capital belonging to the enterprise.With regard to the possible profits, the finding of the court below are based on the statements of the defendant Ong Pong Co, to the effect that "there were some profits, but not large ones." This court, however, does not find that the amount thereof has been proven, nor deem it possible to estimate them to be a certain sum, and for a given period of time; hence, it can not admit the estimate, made in the judgment, of 12 per cent per annum for the period of six months.Inasmuch as in this case nothing appears other than the failure to fulfill an obligation on the part of a partner who acted as agent in receiving money for a given purpose, for which he has rendered no accounting, such agent is responsible only for the losses which, by a violation of the provisions of the law, he incurred. This being an obligation to pay in cash, there are no other losses than the legal interest, which interest is not due except from the time of the judicial demand, or, in the present case, from the filing of the complaint. (Arts. 1108 and 1100, Civil Code.) We do not consider that article 1688 is applicable in this case, in so far as it 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," for the reason that no other money than that contributed as is involved.As in the partnership there were two administrators or agents liable for the above-named amount, article 1138 of the Civil Code has been invoked; this latter deals with debts of a partnership where the obligation is not a joint one, as is likewise provided by article 1723 of said code with respect to the liability of two or more agents with respect to the return of the money that they received from their principal. Therefore, the other errors assigned have not been committed.In view of the foregoing judgment appealed from is hereby affirmed, provided, however, that the defendant Ong Pong Co shall only pay the plaintiff the sum of P750 with the legal interest thereon at the rate of 6 per cent per annum from the time of the filing of the complaint, and the costs, without special ruling as to the costs of this instance. So ordered.MARTINEZ v. ONG PONG COArellano, CJ (1910)MARTINEZ delivered to Ong Pong Co and Ong Lay (ONGS) the sum of P1,500. The ONGS, in a private document, acknowledged that they had received the money with the agreement that they will invest it in a store, and the profits or losses therefrom was to be divided with MARTINEZ in equal shares

Later, MARTINEZ filed a complaint in order to compel the ONGS to render him an accounting of the partnership, or else to refund him the P1,500 that he had given them

Ong Pong Co alone appeared to answer the complaint. He admitted the fact of the agreement, but he alleged that Ong Lay(deceased) was the one who had managed the business, and thatnothing had resulted therefrom except the loss of the capital ofP1,500, to which loss MARTINEZ agreed to bear

CFI rendered decision ordering Ong Pong Co to return to MARTINEZ one-half of the capital of P1,500 (P750) plus P90 as one-half of the profits, calculated at the rate of 12% per annum for the six months that the store was supposed to have been open(total of P840) with legal interest of 6% until the full payment,with costs

hence, this appeal by Ong Pong Co

ISSUE:WON MARTINEZ is entitled to the capital he contributed to the partnership

HELD:YES. The ONGS failed to fulfill their obligation as partners who, acting as MARTINEZs agents in receiving money, did not render proper accounting therefor. Such renders them jointly liable for the losses, solidarity not having been established.CFI decision is AFFRIMED in this regard but REVERSED inasmuchas it found that the capital invested earned profits. Thus, the CFI ruling awarding MARTINEZ another P840 is DELETED. Ong Pong Co is only liable to pay MARTINEZ half of the capital, or P750,representing half of the loss which both ONGS should jointlybear due to their omission, to earn legal interest of 6% from time offiling this complaint, and costs

RATIO:In his defense, Ong Pong Co raised the issue of the closure/failure of the store by virtue of ejectment proceedings instituted againstthem. THIS, however, has no real significance in the determination of the merits of this case

To be sure, the whole action is based upon the fact that the ONGS received capital from MARTINEZ for the purpose of organizing a store. The ONGS, according to the agreement, were to handle the said money and invest it in a store which was the object of the associationThe ONGS had no special agreement vesting in one sole person the management of the business. Thus, both ONGS were the actual administrators thereof; and as such administrators, they were the agents of the company and incurred the liabilities peculiar to every agent, among which is that of rendering accountto the principal of their transactions, and paying him everything they may have received by virtue of the mandatumSince neither of them has rendered such account nor proven the losses, they are therefore obliged to refund the money that they received for the purpose of establishing the said storeThere is no evidence presented that the entire capital or any partthereof was lost. Without proof, the allegation that the effects ofthe store were ejected is, as earlier mentioned, of no moment. Even if we assume this to be true, it could still not be inferred thatthe ejectment was due to the fact that no rents were paid, and that the rent was not paid on account of the loss of the capital belonging to the partnershipWith regard to the CFIs finding of profits, it appears that thesame was based on the statements of Ong Pong Co, to the effectthat"there were some profits, but not large ones." this, however, was never proven. And even we admit the same, such statement still does not make it possible to estimate the alleged profits. As such, the CFI ruling on this point is REVERSED

Inasmuch as in this case nothing appears other than the failure to fulfill an obligation on the part of a partner who acted as agent in receiving money for a given purpose, for which he has rendered no accounting, such agent is responsible only for the losses which, by a violation of the provisions of the law, he incurred. This being an obligation to pay in cash, there are no other losses than the legal interest, which interest is not due except from the time of the judicial demand, or, in the present case, from the filing of the complaintArt. 1688 is NOT applicable in this case, in so far as it 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," for the reason that no other money than thatcontributed as is involved Art. 1138, CC is also NOT applicable here as this deals with debts of a partnership where the obligation is NOT joint. Likewise, Art1723 regarding the liability of two or more agents with respect to the return of the money that they received from their principal is NOT applicable. No showing of solidarity having been established, their liability is JOINT!

G.R. No. L-45624 April 25, 1939GEORGE LITTON,petitioner-appellant,vs.HILL & CERON, ET AL.,respondents-appellees.George E. Reich for appellant.Roy and De Guzman for appellees.Espeleta, Quijano and Liwag for appellee Hill.CONCEPCION,J.:This is a petition to review oncertiorarithe decision of the Court of Appeals in a case originating from the Court of First Instance of Manila wherein the herein petitioner George Litton was the plaintiff and the respondents Hill & Ceron, Robert Hill, Carlos Ceron and Visayan Surety & Insurance Corporation were defendants.The facts are as follows: On February 14, 1934, the plaintiff 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, the defendant Carlos Ceron delivered to the plaintiff a document reading as follows:Feb. 14, 1934Received from Mr. George Litton share certificates Nos. 4428, 4429 and 6699 for 5,000, 5,000 and 7,000 shares respectively total 17,000 shares of Big Wedge Mining Company, which we have sold at P0.11 (eleven centavos) per share or P1,870.00 less 1/2 per cent brokerage.HILL & CERON

By: (Sgd.) CARLOS CERONCeron 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 surety 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 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 Court of Appeals, the latter affirmed the decision of the court on May 29, 1937, 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.Accepting, as we cannot but accept, the conclusion arrived at by the Court of Appeals as to the question of fact just mentioned, namely, that Ceron individually entered into the transaction with the plaintiff, but in view, however, of certain undisputed facts and of certain regulations and provisions of the Code of Commerce, 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. After this date, or on February 19th, Hill & Ceron sold shares of the Big Wedge; and when the transaction was entered into with Litton, it was neither published in the newspapers nor stated in the commercial registry that the partnership Hill & Ceron had been dissolved.Hill testified that a few days before February 14th he had a conversation with the plaintiff in the course of which he advised the latter not to deliver shares for sale or on commission to Ceron because the partnership was about to be dissolved; but what importance can be attached to said advice if the partnership was not in fact dissolved on February 14th, the date when the transaction with Ceron took place?Under article 226 of the Code of Commerce, the dissolution of a commercial association shall not cause any prejudice to third parties until it has been recorded in the commercial registry. (See also Cardellvs.Maeru, 14 Phil., 368.) The Supreme Court of Spain held that the dissolution of a partnership by the will of the partners which is not registered in the commercial registry, does not prejudice third persons. (Opinion of March 23, 1885.)Aside from the aforecited legal provisions, the order of the Bureau of Commerce of December 7, 1933, prohibits brokers from buying and selling shares on their own account. Said order reads:The stock and/or bond broker is, therefore, merely an agent or an intermediary, and as such, shall not be allowed. . . .(c) To buy or to sell shares of stock or bonds on his own account for purposes of speculation and/or for manipulating the market, irrespective of whether the purchase or sale is made from or to a private individual, broker or brokerage firm.In its decision the Court of Appeals states:But there is a stronger objection to the plaintiff's attempt to make the firm responsible to him. According to the articles of copartnership of 'Hill & Ceron,' filed in the Bureau of Commerce.Sixth. That the management of the business affairs of the copartnership shall be entrusted to both copartners who shall jointly administer the business affairs, transactions and activities of the copartnership, shall jointly open a current account or any other kind of account in any bank or banks, shall jointly sign all checks for the withdrawal of funds and shall jointly or singly sign, in the latter case, with the consent of the other partner. . . .Under this stipulation, 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.It follows from the sixth paragraph of the articles of partnership of Hill &n Ceron above quoted that the management of the business of the partnership has been entrusted to both partners thereof, but we dissent from the view of the Court of Appeals that for one of the partners to bind the partnership the consent of the other is necessary. 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.There is a general presumption that each individual partner is an authorized agent for the firm and that he has authority to bind the firm in carrying on the partnership transactions. (Millsvs.Riggle, 112 Pac., 617.)The presumption is sufficient to permit third persons to hold the firm liable on transactions entered into by one of members of the firm acting apparently in its behalf and within the scope of his authority. (Le Royvs.Johnson, 7 U. S. [Law. ed.], 391.)The second paragraph of the articles of partnership of Hill & Ceron reads in part:Second: That the purpose or object for which this copartnership is organized is to engage in the business of brokerage in general, such as stock and bond brokers, real brokers, investment security brokers, shipping brokers, and other activities pertaining to the business of brokers in general.The kind of business in which the partnership Hill & Ceron is to engage being thus determined, none of the two partners, under article 130 of the Code of Commerce, may legally engage in the business of brokerage in general as stock brokers, security brokers and other activities pertaining to the business of the partnership. Ceron, therefore, could not have entered into the contract of sale of shares with Litton as a private individual, but as a managing partner of Hill & Ceron.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 (%) from the original price of P1,870, with the costs to the respondents. So ordered.G.R. No. L-45624 April 25, 1939Facts:This is a petition to review oncertiorarithe 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 surety 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 Cerons 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 (%) from the original price of P1,870, with the costs to the respondents. So ordered.

G.R. No. 135813 October 25, 2001FERNANDO SANTOS,petitioner,vs.SPOUSES ARSENIO and NIEVES REYES,respondents.PANGANIBAN,J.:As a general rule, the factual findings of the Court of Appeals affirming those of the trial court are binding on the Supreme Court. However, there are several exceptions to this principle. In the present case, we find occasion to apply both the rule and one of the exceptions.The CaseBefore us is a Petition for Review on Certiorari assailing the November 28, 1997 Decision,1as well as the August 17, 1998 and the October 9, 1998 Resolutions,2issued by the Court of Appeals (CA) in CA-GR CV No. 34742. The Assailed Decision disposed as follows:"WHEREFORE, the decision appealed from is AFFIRMED save as for the counterclaim which is hereby DISMISSED. Costs against [petitioner]."3Resolving respondent's Motion for Reconsideration, the August 17, 1998 Resolution ruled as follows:"WHEREFORE, [respondents'] motion for reconsideration is GRANTED. Accordingly, the court's decision dated November 28, 1997 is hereby MODIFIED in that the decision appealed from is AFFIRMEDin toto, with costs against [petitioner]."4The October 9, 1998 Resolution denied "for lack of merit" petitioner's Motion for Reconsideration of the August 17, 1998 Resolution.5The FactsThe events that led to this case are summarized by the CA as follows:"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 x x x Nieves and Zabat would earn 15% each."In July, 1986, x x x Nieves introduced Cesar Gragera to [petitioner]. Gragera, as chairman of the Monte Maria Development Corporation6(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. Under the agreement, Monte Maria, represented by Gragera, was entitled to P1.31 commission per thousand paid daily to [petitioner] (Exh. 'A')x x x . Nieves kept the books as representative of [petitioner] while [Respondent] Arsenio, husband of Nieves, acted as credit investigator."On August 6, 1986, [petitioner], x x x [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. Upon Gragera's complaint that his commissions were inadequately remitted, [petitioner] entrusted P200,000.00 to x x x Nieves to be given to Gragerax x x . Nieves allegedly failed to account for the amount. [Petitioner] asserted that after examination of the records, he found that of the total amount of P4,623,201.90 entrusted to [respondents], only P3,068,133.20 was remitted to Gragera, thereby leaving the balance of P1,555,065.70 unaccounted for."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."x x x Arsenio alleged that he was enticed by [petitioner] to take the place of Zabat after [petitioner] learned of Zabat's activities. Arsenio resigned from his job at the Asian Development Bank to join the partnership."For her part, x x x Nieves claimed that she participated in the business as a partner, as the lending activity with Monte Maria originated from her initiative. Except for the limited period of July 8, 1986 through August 20, 1986, she did not handle sums intended for Gragera. Collections were turned over to Gragera because he guaranteed 100% payment of all sums loaned by Monte Maria. Entries she made on worksheets were based on this assumptive 100% collection of all loans. The loan releases were made less Gragera's agreed commission. Because of this arrangement, she neither received payments from borrowers nor remitted any amount to Gragera. Her job was merely to make worksheets (Exhs. '15' to '15-DDDDDDDDDD') to convey to [petitioner] how much he would earn if all the sums guaranteed by Gragera were collected."[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."[Petitioner] further asserted that in Nieves' capacity as bookkeeper, she received all payments from which Nieves deducted Gragera's commission. The commission would then be remitted to Gragera. She likewise determined loan releases."During the pre-trial, the parties narrowed the issues to the following points: whether [respondents] were employees or partners of [petitioner], whether [petitioner] entrusted money to [respondents] for delivery to Gragera, whether the P1,555,068.70 claimed under the complaint was actually remitted to Gragera and whether [respondents] were entitled to their counterclaim for share in the profits."7Ruling of the Trial CourtIn its August 13, 1991 Decision, the trial court held that respondents were partners, not mere employees, of petitioner. It further ruled that Gragera was only a commission agent of petitioner, not his partner. Petitioner moreover failed to prove that he had entrusted any money to Nieves. Thus, respondents' counterclaim for their share in the partnership and for damages was granted. The trial court disposed as follows:"39.WHEREFORE, the Court hereby renders judgment as follows:

39.1.THE SECOND AMENDED COMPLAINT dated July 26, 1989 is DISMISSED.

39.2.The [Petitioner] FERNANDO J. SANTOS is ordered to pay the [Respondent] NIEVES S. REYES, the following:

39.2.1.P3,064,428.00- The 15 percent share of the [respondent] NIEVES S. REYES in the profits of her joint venture with the [petitioner].

39.2.2.Six(6) percent of P3,064,428.00- As damages from August 3, 1987 until the P3,064,428.00 is fully paid.

39.2.3.P50,000.00- As moral damages

39.2.4.P10,000.00- As exemplary damages

39.3.The [petitioner] FERNANDO J. SANTOS is ordered to pay the [respondent] ARSENIO REYES, the following:

39.3.1.P2,899,739.50- The balance of the 15 percent share of the [respondent] ARSENIO REYES in the profits of his joint venture with the [petitioner].

39.3.2.Six(6) percent of P2,899,739.50- As damages from August 3, 1987 until the P2,899,739.50 is fully paid.

39.3.3.P25,000.00- As moral damages

39.3.4.P10,000.00- As exemplary damages

39.4.The [petitioner] FERNANDO J. SANTOS is ordered to pay the [respondents]:

39.4.1.P50,000.00- As attorney's fees; and

39.4.2.The cost of the suit."8

Ruling of the Court of AppealsOn appeal, the Decision of the trial court was upheld, and the counterclaim of respondents was dismissed. Upon the latter's Motion for Reconsideration, however, the trial court's Decision was reinstatedin toto. Subsequently, petitioner's own Motion for Reconsideration was denied in the CA Resolution of October 9, 1998.The CA ruled that the following circumstances indicated the existence of a partnership among the parties: (1) it was Nieves who broached to petitioner the idea of starting a money-lending business and introduced him to Gragera; (2) Arsenio received "dividends" or "profit-shares" covering the period July 15 to August 7, 1986 (Exh. "6"); and (3) the partnership contract was executed after the Agreement with Gragera and petitioner and thus showed the parties' intention to consider it as a transaction of the partnership. In their common venture, petitioner invested capital while respondents contributed industry or services, with the intention of sharing in the profits of the business.The CA disbelieved petitioner's claim that Nieves had misappropriated a total of P200,000 which was supposed to be delivered to Gragera to cover unpaid commissions. It was his task to collect the amounts due, while hers was merely to prepare the daily cash flow reports (Exhs. "15-15DDDDDDDDDD") to keep track of his collections.Hence, this Petition.9IssuePetitioner asks this Court to rule on the following issues:10"Whether or not Respondent Court of Appeals acted with grave abuse of discretion tantamount to excess or lack of jurisdiction in:1. Holding that private respondents were partners/joint venturers and not employees of Santos in connection with the agreement between Santos and Monte Maria/Gragera;2. Affirming the findings of the trial court that the phrase 'Received by' on documents signed by Nieves Reyes signified receipt of copies of the documents and not of the sums shown thereon;3. Affirming that the signature of Nieves Reyes on Exhibit 'E' was a forgery;4. Finding that Exhibit 'H' [did] not establish receipt by Nieves Reyes of P200,000.00 for delivery to Gragera;5 Affirming the dismissal of Santos' [Second] Amended Complaint;6. Affirming the decision of the trial court, upholding private respondents' counterclaim;7. Denying Santos' motion for reconsideration dated September 11, 1998."Succinctly put, the following were the issues raised by petitioner: (1) whether the parties' relationship was one of partnership or of employer employee; (2) whether Nieves misappropriated the sums of money allegedly entrusted to her for delivery to Gragera as his commissions; and (3) whether respondents were entitled to the partnership profits as determined by the trial court.The Court's RulingThe Petition is partly meritorious.First Issue:Business RelationshipPetitioner maintains that he employed the services of respondent spouses in the money-lending venture with Gragera, with Nieves as bookkeeper and Arsenio as credit investigator. That Nieves introduced Gragera to Santos did not make her a partner. She was only a witness to the Agreement between the two. Separate from the partnership between petitioner and Gragera was that which existed among petitioner, Nieves and Zabat, a partnership that was dissolved when Zabat was expelled.On the other hand, both the CA and the trial court rejected petitioner's contentions and ruled that the business relationship was one of partnership. We quote from the CA Decision, as follows:"[Respondents] were industrial partners of [petitioner]x x x . 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 (Evangelista v. Abad Santos, 51 SCRA 416 [1973])."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.xxx xxx xxx"Gragera and [petitioner] were not partners. The money-lending activities undertaken with Monte Maria was done in pursuit of the business for which the partnership between [petitioner], Nieves and Zabat (later Arsenio) was organized. Gragera who represented Monte Maria was merely paid commissions in exchange for the collection of loans. The commissions were fixed on gross returns, regardless of the expenses incurred in the operation of the business. The sharing of gross returns does not in itself establish a partnership."11We agree with both courts on this point. 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.12The "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.13This stipulation clearly proved the establishment of a partnership.We find no cogent reason to disagree with the lower courts that the partnership continued lending money to the members of the Monte Maria Community Development Group, Inc., which later on changed its business name to Private Association for Community Development, Inc. (PACDI). Nieves was not merely petitioner's employee. She discharged her bookkeeping duties in accordance with paragraphs 2 and 3 of the Agreement, which states as follows:"2. That the SECOND PARTY and THIRD PARTY shall handle the solicitation and screening of prospective borrowers, and shall x x x each be responsible in handling the collection of the loan payments of the borrowers that they each solicited."3. That the bookkeeping and daily balancing of account of the business operation shall be handled by the SECOND PARTY."14The "Second Party" named in the Agreement was none other than Nieves Reyes. On the other hand, Arsenio's duties as credit investigator are subsumed under the phrase "screening of prospective borrowers." Because of this Agreement and the disbursement of monthly "allowances" and "profit shares" or "dividends" (Exh. "6") to Arsenio, we uphold the factual finding of both courts that he replaced Zabat in the partnership.Indeed, the partnership was established to engage in a money-lending business, despite the fact that it was formalized only after the Memorandum of Agreement had been signed by petitioner and Gragera. Contrary to petitioner's contention, there is no evidence to show that a different business venture is referred to in this Agreement, which was executed on August 6, 1986, or about a month after the Memorandum had been signed by petitioner and Gragera on July 14, 1986. The Agreement itself attests to this fact:"WHEREAS, the parties have decided to formalize the terms of their business relationship in order that their respective interests may be properly defined and established for their mutual benefit and understanding."15Second Issue:No Proof of Misappropriation of Gragera's Unpaid CommissionPetitioner faults the CA finding that Nieves did not misappropriate money intended for Gragera's commission. According to him, Gragera remitted his daily collection to Nieves. This is shown by Exhibit "B." (the "Schedule of Daily Payments"), which bears her signature under the words "received by." For the period July 1986 to March 1987, Gragera should have earned a total commission of P4,282,429.30. However, only P3,068,133.20 was received by him. Thus, petitioner infers that she misappropriated the difference of P1,214,296.10, which represented the unpaid commissions. Exhibit "H." is an untitled tabulation which, according to him, shows that Gragera was also entitled to a commission of P200,000, an amount that was never delivered by Nieves.16On this point, the CA ruled that Exhibits "B," "F," "E" and "H" did not show that Nieves received for delivery to Gragera any amount from which the P1,214,296.10 unpaid commission was supposed to come, and that such exhibits were insufficient proof that she had embezzled P200,000. Said the CA:"The presentation of Exhibit "D" vaguely denominated as 'members ledger' does not clearly establish that Nieves received amounts from Monte Maria's members. The document does not clearly state what amounts the entries thereon represent. More importantly, Nieves made the entries for the limited period of January 11, 1987 to February 17, 1987 only while the rest were made by Gragera's own staff."Neither can we give probative value to Exhibit 'E' which allegedly shows acknowledgment of the remittance of commissions to Verona Gonzales. The document is a private one and its due execution and authenticity have not been duly proved as required in [S]ection 20, Rule 132 of the Rules of Court which states:'SECTION 20. Proof of Private Document Before any private document offered as authentic is received in evidence, its due execution and authenticity must be proved either:(a) By anyone who saw the document executed or written; or(b) By evidence of the genuineness of the signature or handwriting of the maker.'Any other private document need only be identified as that which it is claimed to be.'"The courta quoeven ruled that the signature thereon was a forgery, as it found that:'x x x . But NIEVES denied that Exh. E-1 is her signature; she claimed that it is a forgery. The initial stroke of Exh. E-1 starts from up and goes downward. The initial stroke of the genuine signatures of NIEVES (Exhs. A-3, B-1, F-1, among others) starts from below and goes upward. This difference in the start of the initial stroke of the signatures Exhs. E-1 and of the genuine signatures lends credence to Nieves' claim that the signature Exh. E-1 is a forgery.'xxx xxx xxx"Nieves' testimony that the schedules of daily payment (Exhs. 'B' and 'F') were based on the predetermined 100% collection as guaranteed by Gragera is credible and clearly in accord with the evidence. A perusal of Exhs. "B" and "F" as well as Exhs. '15' to 15-DDDDDDDDDD' reveal that the entries were indeed based on the 100% assumptive collection guaranteed by Gragera. Thus, the total amount recorded on Exh. 'B' is exactly the number of borrowers multiplied by the projected collection of P150.00 per borrower. This holds true for Exh. 'F.'"Corollarily, Nieves' explanation that the documents werepro formaand that she signed them not to signify that she collected the amounts but that she received the documents themselves is more believable than [petitioner's] assertion that she actually handled the amounts."Contrary to [petitioner's] assertion, Exhibit 'H' does not unequivocally establish that x x x Nieves received P200,000.00 as commission for Gragera. As correctly stated by the courta quo, the document showed a liquidation ofP240.000 00and not P200,000.00."Accordingly, we find Nieves' testimony that after August 20, 1986, all collections were made by Gragera believable and worthy of credence. Since Gragera guaranteed a daily 100% payment of the loans, he took charge of the collections. As [petitioner's] representative,Nieves merely prepared the daily cash flow reports (Exh. '15' to '15 DDDDDDDDDD') to enable [petitioner] to keep track of Gragera's operations. Gragera on the other hand devised the schedule of daily payment (Exhs. 'B' and 'F') to record the projected gross daily collections."As aptly observed by the courta quo:'26.1. As between the versions of SANTOS and NIEVES on how the commissions of GRAGERA [were] paid to him[,] that of NIEVES is more logical and practical and therefore, more believable. SANTOS' version would have given rise to this improbable situation: GRAGERA would collect the daily amortizations and then give them to NIEVES; NIEVES would get GRAGERA's commissions from the amortizations and then give such commission to GRAGERA."'17These findings are in harmony with the trial court's ruling, which we quote below:"21. Exh. H does not prove that SANTOS gave to NIEVES and the latter received P200,000.00 for delivery to GRAGERA. Exh. H shows under its sixth column 'ADDITIONAL CASH' that the additional cash was P240,000.00. If Exh. H were the liquidation of the P200,000.00 as alleged by SANTOS, then his claim is not true. This is so because it is a liquidation of the sum of P240,000.00."21.1. SANTOS claimed that he learned of NIEVES' failure to give the P200,000.00 to GRAGERA when he received the latter's letter complaining of its delayed release. Assuming as true SANTOS' claim that he gave P200,000.00 to GRAGERA, there is no competent evidence that NIEVES did not give it to GRAGERA. The only proof that NIEVES did not give it is the letter. But SANTOS did not even present the letter in evidence. He did not explain why he did not."21.2. The evidence shows that all money transactions of the money-lending business of SANTOS were covered by petty cash vouchers. It is therefore strange why SANTOS did not present any voucher or receipt covering the P200,000.00."18In sum, the lower courts found it unbelievable that Nieves had embezzled P1,555,068.70 from the partnership. She did not remit P1,214,296.10 to Gragera, because he had deducted his commissions before remitting his collections. Exhibits "B" and "F" are merely computations of what Gragera should collect for the day; they do not show that Nieves received the amounts stated therein. Neither is there sufficient proof that she misappropriated P200,000, because Exhibit "H." does not indicate that such amount was received by her; in fact, it shows a different figure.Petitioner has utterly failed to demonstrate why a review of these factual findings is warranted. Well-entrenched is the basic rule that factual findings of the Court of Appeals affirming those of the trial court are binding and conclusive on the Supreme Court.19Although there are exceptions to this rule, petitioner has not satisfactorily shown that any of them is applicable to this issue.Third Issue:Accounting of PartnershipPetitioner refuses any liability for respondents' claims on the profits of the partnership. He maintains that "both business propositions were flops," as his investments were "consumed and eaten up by the commissions orchestrated to be due Gragera" a situation that "could not have been rendered possible without complicity between Nieves and Gragera."Respondent spouses, on the other hand, postulate that petitioner instituted the action below to avoid payment of the demands of Nieves, because sometime in March 1987, she "signified to petitioner that it was about time to get her share of the profits which had already accumulated to some P3 million." Respondents add that while the partnership has not declared dividends or liquidated its earnings, the profits are already reflected on paper. To prove the counterclaim of Nieves, the spouses show that from June 13, 1986 up to April 19, 1987, the profit totaled P20,429,520 (Exhs. "10" et seq. and "15" et seq.). Based on that income, her 15 percent share under the joint venture amounts to P3,064,428 (Exh. "10-I-3"); and Arsenio's, P2,026,000 minus the P30,000 which was already advanced to him (Petty Cash Vouchers, Exhs. "6, 6-A to 6-B").The CA originally held that respondents' counterclaim was premature, pending an accounting of the partnership. However, in its assailed Resolution of August 17, 1998, it turnedvolte face. Affirming the trial court's ruling on the counterclaim, it held as follows:"We earlier ruled that there is still need for an accounting of the profits and losses of the partnership before we can rule with certainty as to the respective shares of the partners. Upon a further review of the records of this case, however, there appears to be sufficient basis to determine the amount of shares of the parties and damages incurred by [respondents]. The fact is that the courta quoalready made such a determination [in its] decision dated August 13, 1991 on the basis of the facts on record."20The trial court's ruling alluded to above is quoted below:"27. The defendants' counterclaim for the payment of their share in the profits of their joint venture with SANTOS is supported by the evidence."27.1. NIEVES testified that: Her claim to a share in the profits is based on the agreement (Exhs. 5, 5-A and 5-B). The profits are shown in the working papers (Exhs. 10 to 10-I, inclusive) which she prepared. Exhs. 10 to 10-I (inclusive) were based on the daily cash flow reports of which Exh. 3 is a sample. The originals of the daily cash flow reports (Exhs. 3 and 15 to 15-D(10) were given to SANTOS. The joint venture had a net profit of P20,429,520.00 (Exh. 10-I-1), from its operations from June 13, 1986 to April 19, 1987 (Exh. 1-I-4). She had a share of P3,064,428.00 (Exh. 10-I-3) and ARSENIO, about P2,926,000.00, in the profits."27.1.1 SANTOS never denied NIEVES' testimony that the money-lending business he was engaged in netted a profit and that the originals of the daily case flow reports were furnished to him. SANTOS however alleged that the money-lending operation of his joint venture with NIEVES and ZABAT resulted in a loss of about half a million pesos to him. But such loss, even if true, does not negate NIEVES' claim that overall, the joint venture among them SANTOS, NIEVES and ARSENIO netted a profit. There is no reason for the Court to doubt the veracity of [the testimony of] NIEVES."27.2 The P26,260.50 which ARSENIO received as part of his share in the profits (Exhs. 6, 6-A and 6-B) should be deducted from his total share."21After a close examination of respondents' exhibits, we find reason to disagree with the CA. Exhibit "10-I"22shows that the partnership earned a "total income" of P20,429,520 for the period June 13, 1986 until April 19, 1987. This entry is derived from the sum of the amounts under the following column headings: "2-Day Advance Collection," "Service Fee," "Notarial Fee," "Application Fee," "Net Interest Income" and "Interest Income on Investment." Such entries represent the collections of the money-lending business or its gross income.The "total income" shown on Exhibit "10-I" did not consider the expenses sustained by the partnership. For instance, it did not factor in the "gross loan releases" representing the money loaned to clients. Since the business is money-lending, such releases are comparable with the inventory or supplies in other business enterprises.Noticeably missing from the computation of the "total income" is the deduction of the weekly allowance disbursed to respondents. Exhibits "I" et seq. and "J" et seq.23show that Arsenio received allowances from July 19, 1986 to March 27, 1987 in the aggregate amount of P25,500; and Nieves, from July 12, 1986 to March 27, 1987, in the total amount of P25,600. These allowances are different from the profit already received by Arsenio. They represent expenses that should have been deducted from the business profits. The point is that all expenses incurred by the money-lending enterprise of the parties must first be deducted from the "total income" in order to arrive at the "net profit" of the partnership. The share of each one of them should be based on this "net profit" and not from the "gross income" or "total income" reflected in Exhibit "10-I," which the two courts invariably referred to as "cash flow" sheets.Similarly, Exhibits "15" et seq.,24which are the "Daily Cashflow Reports," do not reflect the business expenses incurred by the parties, because they show only the daily cash collections. Contrary to the rulings of both the trial and the appellate courts, respondents' exhibits do not reflect thecompletefinancial condition of the money-lending business. The lower courts obviously labored over a mistaken notion that Exhibit " 10-I-1" represented the "net profits" earned by the partnership.For the purpose of determining the profit that should go to an industrial partner (who shares in the profits but is not liable for the losses), the gross income from all the transactions carried on by the firm must be added together, and from this sum must be subtracted the expenses or the losses sustained in the business. Only in the difference representing the net profits does the industrial partner share. But if, on the contrary, the losses exceed the income, the industrial partner does not share in the losses.25When the judgment of the CA is premised on a misapprehension of facts or a failure to notice certain relevant facts that would otherwise justify a different conclusion, as in this particular issue, a review of its factual findings may be conducted, as an exception to the general rule applied to the first two issues.26The trial court has the advantage of observing the witnesses while they are testifying, an opportunity not available to appellate courts. Thus, its assessment of the credibility of witnesses and their testimonies are accorded great weight, even finality, when supported by substantial evidence; more so when such assessment is affirmed by the CA. But when the issue involves the evaluation of exhibits or documents that are attached to the case records, as in the third issue, the rule may be relaxed. Under that situation, this Court has a similar opportunity to inspect, examine and evaluate those records, independently of the lower courts. Hence, we deem the award of the partnership share, as computed by the trial court and adopted by the CA, to be incomplete and not binding on this Court.WHEREFORE, the Petition is partly GRANTED. The assailed November 28, 1997 Decision is AFFIRMED, but the challenged Resolutions dated August 17, 1998 and October 9, 1998 are REVERSED and SET ASIDE. No costs.SO ORDERED.

Business Organization Partnership, Agency, Trust Shares in Liquidation Net Profit vs Gross Income

In June 1986, Fernando Santos (70%), Nieves Reyes (15%), and Melton Zabat (15%) orally instituted a partnership with them as partners. Their venture is to set up a lending business where it was agreed that Santos shall be financier and that Nieves and Zabat shall contribute their industry.**The percentages after their names denote their share in the profit.Later, Nieves introduced Cesar Gragera to Santos. Gragera was the chairman of a corporation. It was agreed that the partnership shall provide loans to the employees of Grageras corporation and Gragera shall earn commission from loan payments.In August 1986, the three partners put into writing their verbal agreement to form the partnership. As earlier agreed, Santos shall finance and Nieves shall do the daily cash flow more particularly from their dealings with Gragera, Zabat on the other hand shall be a loan investigator. But then later, Nieves and Santos found out that Zabat was engaged in another lending business which competes with their partnership hence Zabat was expelled.The two continued with the partnership and they took with them Nieves husband, Arsenio, who became their loan investigator.Later, Santos accused the spouses of not remitting Grageras commissions to the latter. He sued them for collection of sum of money. The spouses countered that Santos merely filed the complaint because he did not want the spouses to get their shares in the profits. Santos argued that the spouses, insofar as the dealing with Gragera is concerned, are merely his employees. Santos alleged that there is a distinct partnership between him and Gragera which is separate from the partnership formed between him, Zabat and Nieves.The trial court as well as the Court of Appeals ruled against Santos and ordered the latter to pay the shares of the spouses.

ISSUE:Whether or not the spouses are partners.

HELD:Yes. Though it is true that the original partnership between Zabat, Santos and Nieves was terminated when Zabat was expelled, the said partnership was however considered continued when Nieves and Santos continued engaging as usual in the lending business even getting Nieves husband, who resigned from the Asian Development Bank, to be their loan investigator who, in effect, substituted Zabat.There is no separate partnership between Santos and Gragera. The latter being merely a commission agent of the partnership. This is even though the partnership was formalized shortly after Gragera met with Santos (Note that Nieves was even the one who introduced Gragera to Santos exactly for the purpose of setting up a lending agreement between the corporation and the partnership).HOWEVER, the order of the Court of Appeals directing Santos to give the spouses their shares in the profit is premature. The accounting made by the trial court is based on the total income of the partnership. Such total income calculated by the trial court did not consider the expenses sustained by the partnership. All expenses incurred by the money-lending enterprise of the parties must first be deducted from the total income in order to arrive at the net profit of the partnership. The share of each one of them should be based on this net profit and not from the gross income or total income.

G.R. No. L-59956 October 31, 1984ISABELO MORAN, JR.,petitioner,vs.THE HON. COURT OF APPEALS and MARIANO E. PECSON,respondents.GUTIERREZ, JR.,J.:+.wph!1This is a petition for review on certiorari of the decision of the respondent Court of Appeals which ordered petitioner Isabelo Moran, Jr. to pay damages to respondent Mariano E, Pecson.As found by the respondent Court of Appeals, the undisputed facts indicate that:t.hqwxxx xxx xxx... 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 P l,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.Private respondent Pecson filed with the Court of First Instance of Manila an action for the recovery of a sum of money and alleged in his complaint three (3) causes of action, namely: (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.After the trial, the Court of First Instance held that:t.hqwFrom the evidence presented it is clear in the mind of the court that by virtue of the partnership agreement entered into by the parties-plaintiff and defendant the plaintiff did contribute P10,000.00, and another sum of P7,000.00 for the Voice of the Veteran or Delegate Magazine. Of the expected 95,000 copies of the posters, the defendant was able to print 2,000 copies only authorized of which, however, were sold at P5.00 each. Nothing more was done after this and it can be said that the venture did not really get off the ground. On the other hand, the plaintiff failed to give his full contribution of P15,000.00. Thus, each party is entitled to rescind the contract which right is implied in reciprocal obligations under Article 1385 of the Civil Code whereunder 'rescission creates the obligation to return the things which were the object of the contract ...WHEREFORE, the court hereby renders judgment ordering defendant Isabelo C. Mor