MENDIOLA, ROSSEANNE GAYLE THERESE

U.S. v. Clarin
17 Phil. 84 (1910)

Area of Law on Partnerships Covered: When partnership contract is rescinded on

the ground of fraud or misrepresentation of one of the parties

SALIENT FACTS:

1. Larin gave Tarug P172 so that Tarug with Clarin and De Guzman can buy and
sell mangoes.

2. Larin believed that he could make money in this business, so he made an

agreement with Tarug, Clarin, and De Guzman to divide the profits equally
between him and them.

3. Tarug, Clarin, and De Guzman did buy and sell mangoes and they obtained
P203 from the business but they did not deliver to Larin his half of the profits;
neither did they render him any account of the capital.

4. Larin charged the three with the crime of estafa but the provincial fiscal filed an
information only against Clarin in which he accused him of appropriating to
himself not only the P172 but also the share of the profits that belonged to
Larin, amounting to P15.50

5. Clarin was sentenced to six months’ arresto mayor, to suffer the accessory
penalties, and to return to Larin P172, and his share of the profits.

ISSUES: Whether or not a criminal action for estafa is the proper action to be taken
by a capitalist partner to recover his money in case of fraud by the other partners?

SUPREME COURT HELD:

Resolution of the Issue: No, a criminal action for estafa is not the proper
action to be taken in case of fraud of the other partners.
Law Applicable to the ISSUE and FACTS: Article 1838 of the Civil Code
provides the remedies of a partner in case a partnership contract is rescinded on the
ground of the fraud of any or misrepresentation of one of the parties thereto. No. 5,
Article 535 of the Old Penal Code provides for the elements of the crime of estafa
through misappropriation.

Application of the Law Cited to the Facts of the Problem: The provision in
the Old Penal Code providing for estafa does not include money received for a
partnership as in this case because if that is so, if the partnership would suffer
losses, the partnership would have to answer for the charge of estafa because it
cannot be held civilly liable. Then it would be assumed that the partnership received
the money from the capitalist partner under obligation to return it to the same
partner. Larin invested the P172 in the risks and benefits of the business of the
purchase and sale of mangoes, it would not devolve upon any one of the partners to
return his invested capital to him, but upon the partnership of which he himself
formed part.

Doctrine of the Case: A criminal action for estafa against one of the partners
is not the proper remedy of a capitalist partner who was defrauded by the other
partners of his share in the profits; rather, it is a civil action arising from the
partnership contract for the liquidation of the partnership and the levy on its assets, if
any.

MY CRITIQUE AND ANALYSIS:

The elements of estafa by misappropriation and conversion are: (1) money,

goods, or other personal property is received by the offender in trust, or in
commission, or for administration, or under any other obligation involving the duty to
make delivery of, or to return, the same; (2) there is a misappropriation or conversion
of such money or property by the offender, or denial on his part of such receipt; (3)
such misappropriation of conversion or denial is to the prejudice of another; and (4)
there is a demand made by the offended party to the offender unless there is already
evidence of misappropriation.

The money contributed by partners does not fall under the first element,
“money, goods, or other personal property received by the offender in trust, or in
commission, or for administration, or under any other obligation involving the duty to
make delivery of, or to return the same”. The partnership has no obligation to return
the contribution. The return expected in a partnership is in the form of a share profits
from the business enterprise. If a partner does not receive what is due them, the
action of the aggrieved partner is not estafa because the element of the crime is not
fulfilled. The breach of the partnership agreement by one partner will not give rise to
estafa but will give rise to the civil action arising from the agreement and the
dissolution of the partnership.

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