Isabelo Moran Jr. vs.

CA and Mariano Pecson

Business Organization – Partnership, Agency, Trust – Profit and Loss Sharing –

Speculative Damages
In February 1971, Isabelo Moran and Mariano Pecson entered into a partnership
agreement where they agreed to contribute P15k each for the purpose of printing 95k
posters of the delegates to the then 1971 Constitutional Commission. Moran shall be in
charge in managing the printing of the posters. It was further agreed that Pecson will
receive a commission of P1k a month starting from April 1971 to December 1971; that the
partnership is to be liquidated on December 15, 1971.
Pecson partially fulfilled his obligation to the partnership when he issued P10k in favor of
the partnership. He gave the P10k to Moran as the managing partner. Moran however did
not add anything and, instead, he only used P4k out of the P10k in printing 2,000 posters.
He only printed 2,000 posters because he felt that printing all 95k posters is a losing
venture because of the delay by the COMELEC in announcing the full delegates. All the
posters were sold for a total of P10k.
Pecson sued Moran. The trial court ordered Moran to pay Pecson damages. The Court of
Appeals affirmed the decision of the trial court but modified the same as it ordered Moran
to pay P47.5k for unrealized profit; P8k for Pecson’s monthly commissions; P7k as return
of investment because the venture never took off; plus interest.
ISSUE: Whether or not the CA judgment is correct.
HELD: No. The award of P47.5k for unrealized profit is speculative. There is no evidence
whatsoever that the partnership between the Moran and Pecson would have been a
profitable venture (because base on the circumstances then i.e. the delay of the
COMELEC in proclaiming the candidates, profit is highly unlikely). In fact, it was a failure
doomed from the start. There is therefore no basis for the award of speculative damages
in favor of Pecson. Further, there is mutual breach in this case, Pecson only gave P10k
instead of P15k while Moran gave nothing at all.
As for the P8k monthly commission, this is without basis. The agreement does not state
the basis of the commission. The payment of the commission could only have been
predicated on relatively extravagant profits. The parties could not have intended the giving
of a commission inspite of loss or failure of the venture. Since the venture was a failure,
Pecson is not entitled to the P8k commission.
As for the P7k award as return for Pecson’s investment, the CA erred in his ruling too.
Though the venture failed, it did took off the ground as evidenced by the 2,000 posters
printed. Hence, return of investment is not proper in this case. There are risks in any
business venture and the failure of the undertaking cannot entirely be blamed on the
managing partner alone, specially if the latter exercised his best business judgment, which
seems to be true in this case.
Moran must however return the unused P6k of Pecson’s contribution to the partnership
plus P3k representing Pecson’s profit share in the sale of the printed posters. Computation
of P3k profit share is as follows: (P10k profit from the sale of the 2,000 posters printed) –
(P4k expense in printing the 2k posters) = (P6k profit); Profit ÷ 2 = P3k each.