RAMNANI v. CA
G.R. No. 85494 | 1991-05-07
FACTS:
1. Ishwar, Choithram and Navalrai, all surnamed Jethmal Ramnani, are brothers of the full
blood. Ishwar and his spouse Sonya had their main business in New York. Realizing the
difficulty of managing their investments in the Philippines, they executed a general power
of attorney appointing Navalrai and Choithram as attorneys-in-fact, empowering them to
manage and conduct their business concerns.
2. Choithram, in his capacity as aforesaid attorney-in-fact of Ishwar, entered into two
agreements for the purchase of two parcels of land located in Rizal form Ortigas&
Company Ltd. Partnership. Choithram paid the downpayment and installments on the lot
with his personal checks. A building was constructed thereon by Choithram in 1966 and
this was occupied and rented by Jethmal Industries and a wardrobe shop called Eppie's
Creation.
3. Three other buildings were built by Choithram through a loan of P100,000 obtained from
the Merchants Bank and from the income derived from the first building. Then, the
buildings were leased out by Choithram as attorney-in-fact of Ishwar. But, two of these
buildings were later burned.
4. In 1970, Ishwar asked Choithram to account for the income and expenses relative to
these properties during the period 1967 to 1970, but the latter failed and refused to render
accounting. Thus, Ishwar revoked the general power of attorney on February 4, 1971, and
Choithram and Ortigas were notified of such revocation and said revocation was also
registered with the SEC.
5. Despite such revocation, Choithram as attorney-in-fact of Ishwar, transferred all rights and
interests of Ishwar and Sonya in favor of his daughter-in-law, Nirmla Ramnani. Thus,
Ishwar and Sonya filed a complaint in the CFI of Rizal against Choithram and/or spouses
Nirmla and Moti, and Ortigas for reconveyance of said properties or payment of its value
and damages.
CFI’s Ruling:
The trial court dismissed the complaint.
CA’s Ruling:
The CA reversed and set aside the decision of the lower court. It ordered Choithram, Jethmal
Ramnani et.al., and Ortigas and Company Limited Partnership to pay jointly and severally
plaintiffs-appellants the following:
o Actual or compensatory damages to the extent of the fair market value of the
properties in question and all improvements thereon.
o All rental incomes paid or ought to be paid for the use and occupancy of the
properties in question and all improvements thereon consisting of buildings.
ISSUE: WON a partnership exists between brothers Choithram and Ishwar.
HELD:
Yes. There exists a partnership between them.
Verily, the acts of Choithram, et al. of disposing the properties subject of the litigation disclose a
scheme to defraud spouses Ishwar so they may not be able to recover at all, given a judgment in
their favor, thus requiring the issuance of the writ of attachment in this instance. Nevertheless, under
the peculiar circumstances of this case and despite the fact that Choithram, et al., have committed
acts which demonstrate their bad faith and scheme to defraud spouses Ishwar and Sonya of their
rightful share in the properties in litigation, the Court cannot ignore the fact that Choithram must
have been motivated by a strong conviction that as the industrial partner in the acquisition of said
assets he has as much claim to said properties as Ishwar, the capitalist partner in the joint venture.
The scenario is clear. Spouses Ishwar supplied the capital of $150,000.00 for the business. They
entrusted the money to Choithram to invest in a profitable business venture in the Philippines. For
this purpose they appointed Choithram as their attorney-in-fact. Choithram in turn decided to invest
in the real estate business. He bought the two (2) parcels of land in question from Ortigas as
attorney-in-fact of Ishwar. Instead of paying for the lots in cash, he paid in installments and used the
balance of the capita entrusted to him, plus a loan, to build two buildings.
Although the buildings were burned later, Choithram was able to build two other buildings on the
property. He rented them out and collected the rentals. Through the industry and genius of
Choithram, Ishwar's property was developed and improved into what it is now - a valuable asset
worth millions of pesos. As of the last estimate in 1985, while the case was pending before the trial
court, the market value of the properties is no less than P22,304,000.00. 39 It should be worth much
more today.
We have a situation where two brothers engaged in a business venture. One furnished the capital,
the other contributed his industry and talent. Justice and equity dictate that the two share equally the
fruit of their joint investment and efforts. Perhaps this Solomonic solution may pave the way towards
their reconciliation. Both would stand to gain. No one would end up the loser. After all, blood is
thicker than water.
However, the Court cannot just close its eyes to the devious machinations and schemes that
Choithram employed in attempting to dispose of, if not dissipate, the properties to deprive spouses
Ishwar of any possible means to recover any award the Court may grant in their favor. Since
Choithram, et al. acted with evident bad faith and malice, they should pay moral and exemplary
damages as well as attorney's fees to spouses Ishwar.
MORAN v. CA and Mariano Pecson
G.R. No. L-59956 | 1984-10-31
FACTS:
1. On February 22, 1971, Private respondent Pecson and Petitioner Moran entered into an
agreement whereby both would contribute P15,000 each for the purpose of printing
95,000 posters (featuring the delegates to the 1971 Constitutional Convention), with
Moran actually supervising the work; that Pecson would receive a commission of P1,000 a
month.
 2. That on December 15, 1971, a liquidation of the accounts in the distribution and printing of
the posters would be made. Pecson gave Moran P10,000 for which the latter issued a
receipt, but only a few posters were printed. Moran executed in favor of Pecson a
promissory note, the whole sum of P20,000 becoming due upon default in the payment of
the first installment on the date due.
3. Pecson filed with the CFI of Manila an action for the recovery of sum of money on the
following grounds: (1) on the alleged partnership agreement, the return of his contribution
of P10,000.00, payment of his share in the profits that the partnership would have earned,
and, payment of unpaid commission; (2) on the alleged promissory note, payment of the
sum of P20,000.00; and, (3) moral and exemplary damages and attorney's fees.
CFI’s Ruling:
It ordered herein petitioner Moran to return to private respondent Pecson the sum of P17,000
with interest.
o It ruled that by virtue of the partnership agreement entered by the parties, 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 all of which, however, were sold at
P5.00 each. On the other hand, the plaintiff failed to give his full contribution of
P15,000.00.
o Thus, each party is entitled to rescind the contract which right is implied in reciprocal
obligations under Article 1385 of the Civil Code where under 'rescission creates the
obligation to return the things which were the object of the contract.
CA’s Ruling:
It ordered petitioner Moran to pay private respondent Pecson the following:
o P47,500 – the amount that could have accrued to Pecson under the agreement.
o P8,000 – commission for 8 months.
o P7,000 – return of Pecson’s investment for the Veteran’s Project.
o Legal interest
Petitioner’s contentions:
o The CA erred in holding him liable to Pecson in the sum of P47,500 as the expected
profits due the latter.
o It likewise erred in holding him liable for the sum of P8,000 as supposed commission in
the partnership and holding him liable for the sum of P7,000 as supposed return of
investment in a magazine venture.
ISSUE: WON Moran should be liable for the expected profits of Pecson and for holding him liable for
supposed commission in the partnership as well as for supposed return of investment in the
magazine venture by virtue of their partnership agreement.
HELD:
No. Moran should not be liable for the speculative profits.
As to expected profits
We agree with the petitioner that the award of speculative damages has no basis in fact and law.
There is no dispute over the nature of the agreement between the petitioner and the private
respondent. The rule is, when a partner who has undertaken to contribute a sum of money fails to
do so, he becomes a debtor of the partnership for whatever he may have promised to contribute
(Art. 1786, Civil Code) and for interests and damages from the time he should have complied with
his obligation (Art. 1788, Civil Code).
Thus in Uy v. Puzon (19 SCRA 598), which interpreted Art. 2200 of the Civil Code of the Philippines,
we allowed a total of P200,000.00 compensatory damages in favor of the appellee because the
appellant therein was remiss in his obligations as a partner and as prime contractor of the
construction projects in question. This case was decided on a particular set of facts. We awarded
compensatory damages in the Uy case because there was a finding that the "constructing business
is a profitable one and that the UP construction company derived some profits from its contractors in
the construction of roads and bridges despite its deficient capital." Besides, there was evidence to
show that the partnership made some profits during the periods from July 2, 1956 to December 31,
1957 and from January 1, 1958 up to September 30, 1959. The profits on two government contracts
worth P2,327,335.76 were not speculative.
In the instant case, there is no evidence whatsoever that the partnership between the petitioner and
the private respondent would have been a profitable venture. In fact, it was a failure doomed from
the start. There is therefore no basis for the award of speculative damages in favor of the private
respondent.
Furthermore, in the Uy case, only Puzon failed to give his full contribution while Uy contributed much
more than what was expected of him. In this case, however, there was mutual breach. Private
respondent failed to give his entire contribution in the amount of P15,000.00. He contributed only
P10,000.00. The petitioner likewise failed to give any of the amount expected of him. He further
failed to comply with the agreement to print 95,000 copies of the posters. Instead, he printed only
2,000 copies.
Article 1797 of the Civil Code provides:
"The losses and profits shall be distributed in conformity with the agreement. If only the share of
each partner in the profits has been agreed upon, the share of each in the losses shall be in the
same proportion."
Being a contract of partnership, each partner must share in the profits and losses of the venture.
That is the essence of a partnership. And even with an assurance made by one of the partners that
they would earn a huge amount of profits, in the absence of fraud, the other partner cannot claim a
right to recover the highly speculative profits. It is a rare business venture guaranteed to give 100%
profits.
In this case, on an investment of P15,000.00, the respondent was supposed to earn a guaranteed
P1,000.00 a month for eight months and around P142,500.00 on 95,000 posters costing P2.00 each
but 2,000 of which were sold at P5.00 each. The fantastic nature of expected profits is obvious.
It does not follow however that the private respondent is not entitled to recover any amount from the
petitioner. The records show that the private respondent gave P10,000.00 to the petitioner. The
latter used this amount for the printing of 2,000 posters at a cost of P2.00 per poster or a total
printing cost of P4,000.00. The records further show that the 2,000 copies were sold at P5.00 each.
The gross income therefore was P10,000.00. Deducting the printing costs of P4,000.00 from the
gross income of P10,000.00 and with no evidence on the cost of distribution, the net profits amount
to only P6,000.00.
This net profit of P6,000.00 should be divided between the petitioner and the private respondent.
And since only P4,000.00 was used by the petitioner in printing the 2,000 copies, the remaining
P6,000.00 should therefore be returned to the private respondent.
As to supposed commission
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, the
private respondent is not entitled to the P8,000.00 commission.
As to the return of investment
As a rule, the findings of facts of the Court of Appeals are final and conclusive and cannot be
reviewed on appeal to this Court provided they are borne out by the record or are based on
substantial evidence. However, this rule admits of certain exceptions. The Court retains the power to
review and rectify the findings of fact of the Court of Appeals when (1) the conclusion is a finding
grounded entirely on speculation, surmises and conjectures; (2) when the inference made is
manifestly mistaken, absurd and impossible; (3) where there is grave abuse of discretion; (4) when
the judgment is based on a misapprehension of facts; and (5) when the court, in making its findings,
went beyond the issues of the case and the same are contrary to the admissions of both the
appellant and the appellee.
In this case, there is misapprehension of facts. The evidence of the private respondent himself
shows that his investment in the "Voice of Veterans" project amounted to only P3,000.00. The
remaining P4,000.00 was the amount of profit that the private respondent expected to receive.
The respondent court erred when it concluded that the project never left the ground because the
project did take place. Only it failed. It was the private respondent himself who presented a copy of
the book entitled "Voice of the Veterans" in the lower court as Exhibit "L". Therefore, it would be
error to state that the project never took place and on this basis decree the return of the private
respondent's investment.
As already mentioned, there are risks in any business venture and the failure of the undertaking
cannot entirely be blamed on the managing partner alone, especially if the latter exercised his best
business judgment, which seems to be true in this case. In view of the foregoing, there is no reason
to pass upon the fourth and fifth assignments of errors raised by the petitioner. We likewise find no
valid basis for the grant of the counterclaim.
NG YA v. SUGBU COMMERCIAL CO. v. POW SUN GEE
No. 1318-R | 1954-04-23
FACTS:
1. Ng Ya was a Chinese merchant who owned the Sio Eng Store in Surigao, Surigao, while
the Sugbu Commercial Company was a partnership doing business in Cebu City. Ng Ya
ordered from said company a total of 1,000 galvanized iron and aluminum Sheets
(Exhibits A & D). It-was agreed that the goods were to be shipped in a week’s time, or on
or before January 5, 1950.As Ng Ya failed to receive the good on said date, she
personally inquired about the same from Sugbu Commercial Co., and Pow Sun Gee, the
managing partner told her that delivery of the goods would be made by the end of
January.
2. But she failed to receive it again, thus she inquired again and was told it might arrive in
Feburary or March. On February 28, 1950 she inquired again to verify from the company
but for the third time, she was informed that it had not yet arrived. She likewise brought
with her P4,000 to buy cigarretes for resale.
3. Upon learning Ng Ya’s other purpose in coming to Cebu, Pow Sun Gee informed her that
the company had an order for cigarettes and that as soon as they arrive they would sell
the same at a low price provided payment therefor would be deposited. At the same time,
she was made to understand that the cigarettes were of “Virginia” and “Red Crown”
brands which were not then for sale in Cebu. Attracted by this proposition, and believing
that the delay of the arrival of the galvanized iron and aluminum sheet was not the
company’s fault, she yielded to Pow Sun Gee’s offer. Thus, she delivered to the company
the P4,000 which she had then with her as deposit for the payment of the cigarettes
(Exhibit E), and was promised that delivery of the cigarettes would be made on July of
1950.
4. The amount of P4,000 was secured by Ng Ya from one Tan Chun Pia, owner of Lana
Bakery in Surigao, with whom, before going to Cebu she had an understanding of splitting
the profits she hoped to realize from the buy and sell of cigarettes. Thus, in making the
deposit with the Sugbu Commercial Company, the receipt for the deposit was issued in
the name of Lana Bakery. Months passed, but neither the galvanized and aliuminum
sheets nor the cigarettes reached Ng Ya.
5. Due to this, Tan Chun Pia of Lana Bakery got angry, which prompted Ng Ya to reimburse
P4,000 and then the latter demanded from Sugbu Commercial Co. the delivery of the
galvanized iron and aluminum sheets and the cigarettes or to return to her P9,400.
6. Ng Ya filed a complaint with the CFI of Cebu against Sugbu Commercial Co., praying to
be paid a total of P10,400 plus damages. The defendant Sugbu Commercial Co., alleged
that due to unjust and illegal representation of complainant, it suffered damages of
P2,000.
7. Then, it filed a third party complaint against Pow Sun Gee contending that the company
was dissolved on January 19, 1951, by the agreement of the partners, Pow Sun Gee and
Shih Tiong Chu; that it continued to exist only insofar as it was necessary and for the sole
purposes of making a liquidation and settlement of its business; and we Pow Sun Gee
assumed the responsibility of settling the accounts with Ng Ya and also of dropping this
case of Ng Ya against the Sugbu Commercial Company.

CFI’s Ruling:
It ordered Defendant Sugbu Commercial Co. to pay Ng Ya the sum of 9,400 with legal interest from
the filing of the complaint and to pay the costs, and condemning Pow Sun Gee to reimburse the
Sugbu Commercial Company of any amount paid by the latter by virtue of this judgment.
Defendant’s contention:
The lower court erred in failing to consider facts and circumstances of weight and influence, and in
not finding that the transactions upon which plaintiff’s claim are based are simulated, fictitious and in
fraud of the defendant partnership.
ISSUE: WON Pow Sun Gee should reimburse Sugubu any amount paid by the latter as he assumed
responsibility of settling the accounts with Ng Ya, as a consequence of his power as a general
manager.
HELD:
Whether or not Pow Sun Gee had a bad reputation among some merchants in Cebu City is of no
importance at least insofar as the claim of Ne Ya against the Sugbu Commercial Company, which
had a different and distinct personality from Pow Sun Gee and from which Ng Ya ordered the
galvanized iron and aluminum sheets as well as the cigarettes, is concerned.
Pow Sun Gee receipted the aforementioned amounts of P5,400 and P4,000 in his capacity as
manager of the Sugbu Cgmmercial Company, and it is of no avail that the defendant company in its
desire to evade liability to Ne Ya would gratuitously allege nowthat its manager, Pow Sun Gee, was
not authorized to issue official receipts. Indeed, it would be quite queer that the manager of any
juridical entity would not be authorized to issue receipts for amounts delivered. to that entity through
said manager, and that only his co-partner Shih Tiong Chu, who was most of the time in Manila,
could do so.
This is not in keeping with present day business dealings, for it is slow and highly inconvenient to
those who transact business with the company. As manager, Pow Sun Gee, can be presumed to
have all the incidental powers to carry out the object of the partnership in the transaction of
business. Of course we are not unaware of the exception to this general rule, that is, when the
powers of a manager are specifically restricted he could not exercise the powers expressly limited
from him. But when the articles of association do not specify the powers of the manager, it is
admitted on principle that a manager has the power of a general agent, and even more. When the
object of the company is determined, the manager has all the powers necessary for the attainment
of such object Appellant did not even dare to present the articles of co-partnership that would show
any limitation upon the powers of its manager—an indication that there was none. For this reason,
we hold and declare that the minor power of issuing official receipts is included in the general
powers of the manager.
BACHRACH v. LA PROTECTORA
G.R. No. L-11624 | 1918-01-21
FACTS:
In 1913, the defendants formed a civil partnership called "La Protectora," for the purpose of
engaging in the business of transporting passenger and freight at Laoag, Ilocos Norte. To provide
with means of transportation Marcelo Barba, acting a manager, came to Manila and upon June 23,
1913, negotiated the purchase of two automobile trucks from the plaintiff, E. M. Bachrach, for the
agreed price of P16,500. He paid the sum of 3,000 in cash, and for the balance executed
promissory notes representing the deferred payments.
These notes provided for the payment of interest from June 23, 1913, the date of the notes, at the
rate of 10 per cent per annum. Provision was also made in the notes for the payment of 25 per cent
of the amount due if it should be necessary to place the notes in the hands of an attorney collection.
Three of these notes, for the sum of P3,375 each, have been made the subject of the present
action, and are exhibited with the complaint in the cause.
As preliminary to the purchase of these trucks, the defendants Nicolas Segundo, Antonio Adiarte,
Ignacio Flores and Modesto Serrano, upon June 12, 1913, executed in due form a document in
which they declared that they were members of the firm "La Protectora" and that they had granted to
its president full authority "in the name and representation of said partnership to contract for the
purchase of two automobiles".
This document was apparently executed in obedience to the requirements of subsection 2 article
1697 of the Civil Code, for the purpose of evidencing the authority of Marcelo Barba to bind the
partnership by the purchase. The document in question was delivered by him to Bachrach at the
time the automobiles were purchased. From time to time after this purchase was made, Marcelo
Barba purchased of the plaintiff various automobile effects and accessories to be used in the
business of "La Protectora". Upon May 21, 1914, the indebtedness resulting from these additional
purchases amounted to the sum of P2,916.57
In May 1914, plaintiff foreclosed a chattel mortgage which he retained on the trucks in order to
secure the purchase price. The amount realized was credited upon the notes but there is still a
balance unpaid. Thus, plaintiff filed an action with the CFI of Manila against herein respondent La
Protectora and 5 individuals, Marcelo Barba, Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and
Modesto Serrano.
CFI’s Ruling:
The lower court ruled against defendant La Protectora.
ISSUE: WON the four individuals who signed the document authorizing Barba to purchase the two
trucks, are liable to the firm debts.
HELD:
No. They should not be liable.
The business conducted under the name of "La Protectora" was evidently that of a civil partnership;
and the liability of the partners to this association must be determined under the provisions of the
Civil Code. The authority of Marcelo Barba to bind the partnership, in the purchase of the trucks, is
fully established by the document executed by the four appellants upon June 12, 1913. The
transactions by which Barba secured these trucks was in conformity with the tenor of this document.
The promissory notes constitute the obligation exclusively of "La Protectora" and of Marcelo Barba;
and they do not in any sense constitute an obligation directly binding on the four appellants. Their
liability is based on the fact that they are members of the civil partnership and as such are liable for
its debts. It is true that article 1698 of the Civil Code declares that a member of a civil partnership is
not liable in solidum (solidariamente) with his fellow for its entire indebtedness; but it results from
this article, in connection with article 1137 of the Civil Code, that each is liable with the others
(mancomunadamente) for his aliquot part of such indebtedness.
The Court of First Instance seems to have founded its judgment against the appellants in part upon
the idea that the document executed by them constituted an authority for Marcelo Barba to bind
them personally, as contemplated in the second clause of article 1698 of the Civil Code. That clause
says that no member of the partnership can bind the others by a personal act if they have not given
him authority to do so. We think that the document referred to was intended merely as an authority
to enable Barba to bind the partnership and that the parties to that instrument did not intend thereby
to confer upon Barba an authority to bind them personally. It is obvious that the contract which
Barba in fact executed in pursuance of that authority did not by its terms profess to bind the
appellants personally at all, but only the partnership and himself. It follows that the four appellants
cannot be held to have been personally obligated by that instrument; but, to have already seen, their
liability rests upon the general principles underlying partnership liability.
As to so much of the indebtedness as is based upon the claim for automobiles supplies and
accessories, it is obvious that the document of June 12, 1913, affords no authority for holding the
appellants liable. Their liability upon this account is, however, no less obvious than upon the debt
incurred by the purchase of the trucks; and such liability is derived from the fact that the debt was
lawfully incurred in the prosecution of the partnership enterprise.
There is not proof in the record showing what agreement, if any, was made with regard to the form
of management. Under these circumstances it is declared in article 1695 of the Civil Code that all
the partners are considered agents of the partnership. Barba therefore must be held to have had
authority to incur these expense. But in addition to this he is shown to have been in fact the
president or manager, and there can be no doubt that he had actual authority to incur this obligation.
From what has been said it results that the appellants are severally liable for their respective shares
of the entire indebtedness found to be due; and the Court of First Instance committed no error in
giving judgment against them. The amount for which judgment should be entered is P7,037, to
which shall be added (1) interest at 10 per cent per annum from June 23, 1913, to be calculated
upon the sum of P4.121; (2) interest at 6 per cent per annum from July 21, 1915, to be calculated
upon the sum of P2,961; (3) the further sum of P1,030.25, this being the amount stipulated to be
paid by way of attorney's fees.
However, it should be noted that any property pertaining to "La Protectora" should first be applied to
this indebtedness pursuant to the judgment already entered in this case in the court below; and each
of the four appellants shall be liable only for the one-fifth part of the remainder unpaid.
FUE LEUNG v. IAC
G.R. No. 70926 | 1989-01-31
FACTS:
1. This case originated from a complaint filed by respondent Leung Yiu with the then Court of
First Instance of Manila, Branch II to recover the sum equivalent to twenty-two percent
(22%) of the annual profits derived from the operation of Sun Wah Panciteria since
October, 1955 from petitioner Dan Fue Leung.
2. The Sun Wah Panciteria, a restaurant, located at Florentino Torres Street, Sta. Cruz,
Manila, was established sometime in October, 1955. It was registered as a single
proprietorship and its licenses and permits were issued to and in favor of petitioner Dan
Fue Leung as the sole proprietor. Respondent Leung Yiu adduced evidence during the
trial of the case to show that Sun Wah Panciteria was actually a partnership and that he
was one of tile partners having contributed P4,000.00 to its initial establishment.
3. About the time the Sun Wah Panciteria started to become operational, the private
respondent gave P4,000.00 as his contribution to the partnership. This is evidenced by a
receipt identified as Exhibit "A" wherein the petitioner acknowledged his acceptance of the
P4,000.00 by affixing his signature thereto.
4. The petitioner denied having received from the private respondent the amount of
P4,000.00. He contested and impugned the genuineness of the receipt (Exhibit D). The
petitioner did not receive any contribution at the time he started the Sun Wah Panciteria.
He used his savings from his salaries as an employee at Camp Stotsenberg in Clark Field
and later as waiter at the Toho Restaurant amounting to a little more than P2,000.00 as
capital in establishing Sun Wah Panciteria. To bolster his contention that he was the sole
owner of the restaurant, the petitioner presented various government licenses and permits
showing the Sun Wah Panciteria was and still is a single proprietorship solely owned and
operated by himself alone. Fue Leung also flatly denied having issued to the private
respondent the receipt (Exhibit G) and the Equitable Banking Corporation's Check No.
13389470 B in the amount of P12,000.00 (Exhibit B).
CFI’s Ruling:
The trial court ruled in favor of private respondent. It ordered herein petitioner to pay private
respondent sum of equivalent to 22% of the annual profit derived from the operation of Sun Wah
Panciteria from October, 1955, until fully paid. It then amended its decision, ordering petitioner to lost. The private respondent's cause of action is premised upon the failure of the petitioner to give
pay the sum equivalent to 22% of the net profit of P8,000.00 per day from the time of judicial him the agreed profits in the operation of Sun Wah Panciteria. In effect the private respondent was
demand, until fully paid, plus the sum of P5,000.00 as and for attorney's fees and costs of suit. asking for an accounting of his interests in the partnership.

IAC’s Ruling: Prescription issue

It affirmed the lower court’s decision. The petitioner raises the issue of prescription. He argues: The Hon. Respondent Intermediate
Appellate Court gravely erred in not resolving the issue of prescription in favor of petitioner. The
alleged receipt is dated October 1, 1955 and the complaint was filed only on July 13, 1978 or after
the lapse of twenty-two (22) years, nine (9) months and twelve (12) days. From October 1, 1955 to
duly 13, 1978, no written demands were ever made by private respondent.
ISSUE: 1) WON private respondent is a partner of Sun Wah Panciteria. The petitioner's argument is based on Article 1144 of the Civil Code which provides:
2) WON the action filed by private respondent has already prescribed (in relation to Art. 1144. The following actions must be brought within ten years from the time the right of section
partnership).
accrues:

"(1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment."
HELD:
in relation to Article 1155 thereof which provides:
Existence of partnership
"Art. 1155. The prescription of actions is interrupted when they are filed before the court, when there
Yes. Partnership exists between petitioner and respondent. is a written extra-judicial demand by the creditor, and when there is any written acknowledgment of
the debt by the debtor."
Both the trial court and the appellate court found that the private respondent is a partner of the
petitioner in the setting up and operations of the panciteria. While the dispositive portions merely
ordered the payment of the respondent's share, there is no question from the factual findings that
the respondent invested in the business as a partner. Hence, the two courts declared that the The argument is not well-taken. It is Article 1842 of the Civil Code in conjunction with Articles 1144
private petitioner is entitled to a share of the annual profits of the restaurant. and 1155 which is applicable. Article

In essence, the private respondent alleged that when Sun Wah Panciteria was established, he gave
P4,000.00 to the petitioner with the understanding that he would be entitled to twenty-two percent
(22%) of the annual profit derived from the operation of the said panciteria. These allegations, which
were proved, make the private respondent and the petitioner partners in the establishment of Sun
Wah Panciteria because Article 1767 of the Civil Code provides that "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".
Therefore, the lower courts did not err in construing the complaint as one wherein the private
respondent asserted his rights as partner of the petitioner in the establishment of the Sun Wah
Panciteria, notwithstanding the use of the term financial assistance therein.
1842 states: "The right to an account of his interest shall accrue to any partner, or his legal
representative as against the winding up partners or the surviving partners or the person or
partnership continuing the business, at the date of dissolution, in the absence or any agreement to
the contrary."
Regarding the prescriptive period within which the private respondent may demand an accounting,
Articles 1806, 1807, and 1809 show that the right to demand an accounting exists as long as the
partnership exists. Prescription begins to run only upon the dissolution of the partnership when the
final accounting is done.

The private respondent is a partner of the petitioner in Sun Wah Panciteria. The requisites of a
partnership which are ---- 1) two or more persons bind themselves to contribute money, property, or
industry to a common fund; and 2) intention on the part of the partners to divide the profits among
themselves (Article 1767, Civil Code; Yulo v. Yang Chiao Cheng, 106 Phil. 110) ---- have been
established. As stated by the respondent, a partner shares not only in profits but also in the losses
of the firm. If excellent relations exist among the partners at the start of business and all the partners
are more interested in seeing the firm grow rather than get immediate returns, a deferment of
sharing in the profits is perfectly plausible. It would be incorrect to state that if a partner does not
assert his rights anytime within ten years from the start of operations, such rights are irretrievably