DAN FUE LEING VS IAC AND LEING YIU

G.R. No. 70926 January 31, 1989

DAN FUE LEUNG, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT and LEUNG YIU, respondents.

John L. Uy for petitioner.

Edgardo F. Sundiam for private respondent.

GUTIERREZ, JR., J.:

The petitioner asks for the reversal of the decision of the then Intermediate Appellate Court in AC-G.R. No. CV-00881 which affirmed the decision of the then Court of First Instance of Manila, Branch II in Civil Case No. 116725 declaring private respondent Leung Yiu a partner of petitioner Dan Fue Leung in the business of Sun Wah Panciteria and ordering the petitioner to pay to the private respondent his share in the annual profits of the said restaurant.

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.

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 the partners having contributed P4,000.00 to its initial establishment.

The private respondents evidence is summarized as follows:

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. The receipt was written in Chinese characters so that the trial court commissioned an interpreter in the person of Ms. Florence Yap to translate its contents into English. Florence Yap issued a certification and testified that the translation to the best of her knowledge and belief was correct. The private respondent identified the signature on the receipt as that of the petitioner (Exhibit A-3) because it was affixed by the latter in his (private respondents') presence. Witnesses So Sia and Antonio Ah Heng corroborated the private respondents testimony to the effect that they were both present when the receipt (Exhibit "A") was signed by the petitioner. So Sia further testified that he himself received from the petitioner a similar receipt (Exhibit D) evidencing delivery of his own investment in another amount of P4,000.00 An examination was conducted by the PC Crime Laboratory on orders of the trial court granting the private respondents motion for examination of certain documentary exhibits. The signatures in Exhibits "A" and 'D' when compared to the signature of the petitioner appearing in the pay envelopes of employees of the restaurant, namely Ah Heng and Maria Wong (Exhibits H, H-1 to H-24) showed that the signatures in the two receipts were indeed the signatures of the petitioner.

Furthermore, the private respondent received from the petitioner the amount of P12,000.00 covered by the latter's Equitable Banking Corporation Check No. 13389470-B from the profits of the operation of the restaurant for the year 1974. Witness Teodulo Diaz, Chief of the Savings Department of the China Banking Corporation testified that said check (Exhibit B) was deposited by and duly credited to the private respondents savings account with the bank after it was cleared by the drawee bank, the Equitable Banking Corporation. Another witness Elvira Rana of the Equitable Banking Corporation testified that the check in question was in fact and in truth drawn by the petitioner and debited against his own account in said bank. This fact was clearly shown and indicated in the petitioner's statement of account after the check (Exhibit B) was duly cleared. Rana further testified that upon clearance of the check and pursuant to normal banking procedure, said check was returned to the petitioner as the maker thereof.

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). His evidence is summarized as follows:

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).

As between the conflicting evidence of the parties, the trial court gave credence to that of the plaintiffs. Hence, the court ruled in favor of the private respondent. The dispositive portion of the decision reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering the latter to deliver and pay to the former, the sum equivalent to 22% of the annual profit derived from the operation of Sun Wah Panciteria from October, 1955, until fully paid, and attorney's fees in the amount of P5,000.00 and cost of suit. (p. 125, Rollo)

The private respondent filed a verified motion for reconsideration in the nature of a motion for new trial and, as supplement to the said motion, he requested that the decision rendered should include the net profit of the Sun Wah Panciteria which was not specified in the decision, and allow private respondent to adduce evidence so that the said decision will be comprehensively adequate and thus put an end to further litigation.

The motion was granted over the objections of the petitioner. After hearing the trial court rendered an amended decision, the dispositive portion of which reads:

FOR ALL THE FOREGOING CONSIDERATIONS, the motion for reconsideration filed by the plaintiff, which was granted earlier by the Court, is hereby reiterated and the decision rendered by this Court on September 30, 1980, is hereby amended. The dispositive portion of said decision should read now as follows:

WHEREFORE, judgment is hereby rendered, ordering the plaintiff (sic) and against the defendant, ordering the latter to pay the former the sum equivalent to 22% of the net profit of P8,000.00 per day from the time of judicial demand, until fully paid, plus the sum of P5,000.00 as and for attorney's fees and costs of suit. (p. 150, Rollo)

The petitioner appealed the trial court's amended decision to the then Intermediate Appellate Court. The questioned decision was further modified by the appellate court. The dispositive portion of the appellate court's decision reads:

WHEREFORE, the decision appealed from is modified, the dispositive portion thereof reading as follows:

1. Ordering the defendant to pay the plaintiff by way of temperate damages 22% of the net profit of P2,000.00 a day from judicial demand to May 15, 1971;

2. Similarly, the sum equivalent to 22% of the net profit of P8,000.00 a day from May 16, 1971 to August 30, 1975;

3. And thereafter until fully paid the sum equivalent to 22% of the net profit of P8,000.00 a day.

Except as modified, the decision of the court a quo is affirmed in all other respects. (p. 102, Rollo)

Later, the appellate court, in a resolution, modified its decision and affirmed the lower court's decision. The dispositive portion of the resolution reads:

WHEREFORE, the dispositive portion of the amended judgment of the court a quo reading as follows:

WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendant, ordering the latter to pay to the former the sum equivalent to 22% of the net profit of P8,000.00 per day from the time of judicial demand, until fully paid, plus the sum of P5,000.00 as and for attorney's fees and costs of suit.

is hereby retained in full and affirmed in toto it being understood that the date of judicial demand is July 13, 1978. (pp. 105-106, Rollo).

In the same resolution, the motion for reconsideration filed by petitioner was denied.

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 respondents 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 private petitioner is entitled to a share of the annual profits of the restaurant. The petitioner, however, claims that this factual finding is erroneous. Thus, the petitioner argues: "The complaint avers that private respondent extended 'financial assistance' to herein petitioner at the time of the establishment of the Sun Wah Panciteria, in return of which private respondent allegedly will receive a share in the profits of the restaurant. The same complaint did not claim that private respondent is a partner of the business. It was, therefore, a serious error for the lower court and the Hon. Intermediate Appellate Court to grant a relief not called for by the complaint. It was also error for the Hon. Intermediate Appellate Court to interpret or construe 'financial assistance' to mean the contribution of capital by a partner to a partnership;" (p. 75, Rollo)

The pertinent portions of the complaint state:

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2. That on or about the latter (sic) of September, 1955, defendant sought the financial assistance of plaintiff in operating the defendant's eatery known as Sun Wah Panciteria, located in the given address of defendant; as a return for such financial assistance. plaintiff would be entitled to twenty-two percentum (22%) of the annual profit derived from the operation of the said panciteria;

3. That on October 1, 1955, plaintiff delivered to the defendant the sum of four thousand pesos (P4,000.00), Philippine Currency, of which copy for the receipt of such amount, duly acknowledged by the defendant is attached hereto as Annex "A", and form an integral part hereof; (p. 11, Rollo)

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. We agree with the appellate court's observation to the effect that "... given its ordinary meaning, financial assistance is the giving out of money to another without the expectation of any returns therefrom'. It connotes an ex gratia dole out in favor of someone driven into a state of destitution. But this circumstance under which the P4,000.00 was given to the petitioner does not obtain in this case.' (p. 99, Rollo) The complaint explicitly stated that "as a return for such financial assistance, plaintiff (private respondent) would be entitled to twenty-two percentum (22%) of the annual profit derived from the operation of the said panciteria.' (p. 107, Rollo) The well-settled doctrine is that the '"... nature of the action filed in court is determined by the facts alleged in the complaint as constituting the cause of action." (De Tavera v. Philippine Tuberculosis Society, Inc., 113 SCRA 243; Alger Electric, Inc. v. Court of Appeals, 135 SCRA 37).

The appellate court did not err in declaring that the main issue in the instant case was whether or not the private respondent is a partner of the petitioner in the establishment of Sun Wah Panciteria.

The petitioner also contends that the respondent court gravely erred in giving probative value to the PC Crime Laboratory Report (Exhibit "J") on the ground that the alleged standards or specimens used by the PC Crime Laboratory in arriving at the conclusion were never testified to by any witness nor has any witness identified the handwriting in the standards or specimens belonging to the petitioner. The supposed standards or specimens of handwriting were marked as Exhibits "H" "H-1" to "H-24" and admitted as evidence for the private respondent over the vigorous objection of the petitioner's counsel.

The records show that the PC Crime Laboratory upon orders of the lower court examined the signatures in the two receipts issued separately by the petitioner to the private respondent and So Sia (Exhibits "A" and "D") and compared the signatures on them with the signatures of the petitioner on the various pay envelopes (Exhibits "H", "H-1" to 'H-24") of Antonio Ah Heng and Maria Wong, employees of the restaurant. After the usual examination conducted on the questioned documents, the PC Crime Laboratory submitted its findings (Exhibit J) attesting that the signatures appearing in both receipts (Exhibits "A" and "D") were the signatures of the petitioner.

The records also show that when the pay envelopes (Exhibits "H", "H-1" to "H-24") were presented by the private respondent for marking as exhibits, the petitioner did not interpose any objection. Neither did the petitioner file an opposition to the motion of the private respondent to have these exhibits together with the two receipts examined by the PC Crime Laboratory despite due notice to him. Likewise, no explanation has been offered for his silence nor was any hint of objection registered for that purpose.

Under these circumstances, we find no reason why Exhibit "J" should be rejected or ignored. The records sufficiently establish that there was a partnership.

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 July 13, 1978, no written demands were ever made by private respondent.

The petitioner's argument is based on Article 1144 of the Civil Code which provides:

Art. 1144. The following actions must be brought within ten years from the time the right of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

in relation to Article 1155 thereof which provides:

Art. 1155. The prescription of actions is interrupted when they are filed before the court, when there is a written extra-judicial demand by the creditor, and when there is any written acknowledgment of the debt by the debtor.'

The argument is not well-taken.

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 lost. The private respondent's cause of action is premised upon the failure of the petitioner to give him the agreed profits in the operation of Sun Wah Panciteria. In effect the private respondent was asking for an accounting of his interests in the partnership.

It is Article 1842 of the Civil Code in conjunction with Articles 1144 and 1155 which is applicable. Article 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.

Finally, the petitioner assails the appellate court's monetary awards in favor of the private respondent for being excessive and unconscionable and above the claim of private respondent as embodied in his complaint and testimonial evidence presented by said private respondent to support his claim in the complaint.

Apart from his own testimony and allegations, the private respondent presented the cashier of Sun Wah Panciteria, a certain Mrs. Sarah L. Licup, to testify on the income of the restaurant.

Mrs. Licup stated:

ATTY. HIPOLITO (direct examination to Mrs. Licup).

Q Mrs. Witness, you stated that among your duties was that you were in charge of the custody of the cashier's box, of the money, being the cashier, is that correct?

A Yes, sir.

Q So that every time there is a customer who pays, you were the one who accepted the money and you gave the change, if any, is that correct?

A Yes.

Q Now, after 11:30 (P.M.) which is the closing time as you said, what do you do with the money?

A We balance it with the manager, Mr. Dan Fue Leung.

ATTY. HIPOLITO:

I see.

Q So, in other words, after your job, you huddle or confer together?

A Yes, count it all. I total it. We sum it up.

Q Now, Mrs. Witness, in an average day, more or less, will you please tell us, how much is the gross income of the restaurant?

A For regular days, I received around P7,000.00 a day during my shift alone and during pay days I receive more than P10,000.00. That is excluding the catering outside the place.

Q What about the catering service, will you please tell the Honorable Court how many times a week were there catering services?

A Sometimes three times a month; sometimes two times a month or more.

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Q Now more or less, do you know the cost of the catering service?

A Yes, because I am the one who receives the payment also of the catering.

Q How much is that?

A That ranges from two thousand to six thousand pesos, sir.

Q Per service?

A Per service, Per catering.

Q So in other words, Mrs. witness, for your shift alone in a single day from 3:30 P.M. to 11:30 P.M. in the evening the restaurant grosses an income of P7,000.00 in a regular day?

A Yes.

Q And ten thousand pesos during pay day.?

A Yes.

(TSN, pp. 53 to 59, inclusive, November 15,1978)

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COURT:

Any cross?

ATTY. UY (counsel for defendant):

No cross-examination, Your Honor. (T.S.N. p. 65, November 15, 1978). (Rollo, pp. 127-128)

The statements of the cashier were not rebutted. Not only did the petitioner's counsel waive the cross-examination on the matter of income but he failed to comply with his promise to produce pertinent records. When a subpoena duces tecum was issued to the petitioner for the production of their records of sale, his counsel voluntarily offered to bring them to court. He asked for sufficient time prompting the court to cancel all hearings for January, 1981 and reset them to the later part of the following month. The petitioner's counsel never produced any books, prompting the trial court to state:

Counsel for the defendant admitted that the sales of Sun Wah were registered or recorded in the daily sales book. ledgers, journals and for this purpose, employed a bookkeeper. This inspired the Court to ask counsel for the defendant to bring said records and counsel for the defendant promised to bring those that were available. Seemingly, that was the reason why this case dragged for quite sometime. To bemuddle the issue, defendant instead of presenting the books where the same, etc. were recorded, presented witnesses who claimed to have supplied chicken, meat, shrimps, egg and other poultry products which, however, did not show the gross sales nor does it prove that the same is the best evidence. This Court gave warning to the defendant's counsel that if he failed to produce the books, the same will be considered a waiver on the part of the defendant to produce the said books inimitably showing decisive records on the income of the eatery pursuant to the Rules of Court (Sec. 5(e) Rule 131). "Evidence willfully suppressed would be adverse if produced." (Rollo, p. 145)

The records show that the trial court went out of its way to accord due process to the petitioner.

The defendant was given all the chance to present all conceivable witnesses, after the plaintiff has rested his case on February 25, 1981, however, after presenting several witnesses, counsel for defendant promised that he will present the defendant as his last witness. Notably there were several postponement asked by counsel for the defendant and the last one was on October 1, 1981 when he asked that this case be postponed for 45 days because said defendant was then in Hongkong and he (defendant) will be back after said period. The Court acting with great concern and understanding reset the hearing to November 17, 1981. On said date, the counsel for the defendant who again failed to present the defendant asked for another postponement, this time to November 24, 1981 in order to give said defendant another judicial magnanimity and substantial due process. It was however a condition in the order granting the postponement to said date that if the defendant cannot be presented, counsel is deemed to have waived the presentation of said witness and will submit his case for decision.

On November 24, 1981, there being a typhoon prevailing in Manila said date was declared a partial non-working holiday, so much so, the hearing was reset to December 7 and 22, 1981. On December 7, 1981, on motion of defendant's counsel, the same was again reset to December 22, 1981 as previously scheduled which hearing was understood as intransferable in character. Again on December 22, 1981, the defendant's counsel asked for postponement on the ground that the defendant was sick. the Court, after much tolerance and judicial magnanimity, denied said motion and ordered that the case be submitted for resolution based on the evidence on record and gave the parties 30 days from December 23, 1981, within which to file their simultaneous memoranda. (Rollo, pp. 148-150)

The restaurant is located at No. 747 Florentino Torres, Sta. Cruz, Manila in front of the Republic Supermarket. It is near the corner of Claro M. Recto Street. According to the trial court, it is in the heart of Chinatown where people who buy and sell jewelries, businessmen, brokers, manager, bank employees, and people from all walks of life converge and patronize Sun Wah.

There is more than substantial evidence to support the factual findings of the trial court and the appellate court. If the respondent court awarded damages only from judicial demand in 1978 and not from the opening of the restaurant in 1955, it is because of the petitioner's contentions that all profits were being plowed back into the expansion of the business. There is no basis in the records to sustain the petitioners contention that the damages awarded are excessive. Even if the Court is minded to modify the factual findings of both the trial court and the appellate court, it cannot refer to any portion of the records for such modification. There is no basis in the records for this Court to change or set aside the factual findings of the trial court and the appellate court. The petitioner was given every opportunity to refute or rebut the respondent's submissions but, after promising to do so, it deliberately failed to present its books and other evidence.

The resolution of the Intermediate Appellate Court ordering the payment of the petitioner's obligation shows that the same continues until fully paid. The question now arises as to whether or not the payment of a share of profits shall continue into the future with no fixed ending date.

Considering the facts of this case, the Court may decree a dissolution of the partnership under Article 1831 of the Civil Code which, in part, provides:

Art. 1831. On application by or for a partner the court shall decree a dissolution whenever:

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(3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business;

(4) A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him;

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(6) Other circumstances render a dissolution equitable.

There shall be a liquidation and winding up of partnership affairs, return of capital, and other incidents of dissolution because the continuation of the partnership has become inequitable.

WHEREFORE, the petition for review is hereby DISMISSED for lack of merit. The decision of the respondent court is AFFIRMED with a MODIFICATION that as indicated above, the partnership of the parties is ordered dissolved.

SO ORDERED.

Fernan, C.J., (Chairman), Feliciano, Bidin and Cortes, JJ., concur.

De la Rosa v. Go-Cotay, G.R. No. 24243

EN BANC

[G.R. No. 24243. January 15, 1926.]

ILDEFONSO DE LA ROSA, administrator of the intestate estate of the deceased Go-Lio, plaintiff-appellant, vs. ENRIQUE ORTEGA GO-COTAY, defendant-appellant.

Crispin Oben for plaintiff-appellant.

Paredes, Buencamino & Yulo for defendant-appellant.

SYLLABUS

1. PARTNERSHIPS; LIQUIDATION OF THEIR BUSINESS; DETERMINING PROFITS. — When in liquidating a partnership the profits for a given period of time cannot be exactly determined for lack of evidence, but the profits for certain periods prior and subsequent thereto are known, the profits corresponding to the said given time may be determined by finding the average of those profits already known and multiplying it by the length of the time included between said periods.

2. ID.; ID.; MANAGING PARTNER; HIS AUTHORITY; RECEIVER. — When to prevent a receiver from taking charge of a business in dissolution, the managing partner gives a bond and continues the business, he ceases to be managing partner from that time in order to become receiver; and while before that date the property was liable for his acts, yet that is not the case with his subsequent acts, which are regulated by the provisions of section 175 of the Code of Civil Procedure, and without express judicial authority he cannot continue the business of the partnership, being personally liable for the losses should he do so. (34 Cyc., 296.)

D E C I S I O N

VILLA-REAL, J p:

During the Spanish regime the Chinamen Go-Lio and Vicente Go-Sengco formed a society for the Purchase and sale of articles of commerce, and for this purpose they opened a store in the town of San Isidro, Nueva Ecija. Later Go-Lio went to China. Vicente Go-Sengco died and his son Enrique Ortega Go-Cotay took charge of the business. Go-Lio died in China in October, 1916, leaving a widow and three children, one of whom came to the Philippines and filed a petition for the appointment of Ildefonso de la Rosa as administrator of the intestate estate of his deceased father, which petition was granted by the Court of First Instance of Nueva Ecija. Ildefonso de la Rosa, in his capacity as administrator of the intestate estate of the deceased Go-Lio, requested Enrique Ortega Go-Cotay to wind up the business and to deliver to him the portion corresponding to the deceased Go-Lio. Enrique Ortega Go-Cotay denied the petition, alleging that the business was his exclusively. In view of this denial, Ildefonso de la Rosa, as administrator, on July 2, 1918, filed with the Court of First Instance of Nueva Ecija a complaint against Enrique Ortega Go-Cotay in which he prayed that the defendant be sentenced to deliver to the plaintiff one-half of all the property of the partnership formed by Go-Lio and Vicente Go-Sengco, with costs against the defendant, and that the said plaintiff be appointed receiver for the property of the said partnership.

Defendant, in answering the complaint, denied each and every allegation thereof, and as a special defense alleged that more than ten years had elapsed before the filing of the complaint, and prayed that he be absolved therefrom, with costs against the plaintiff.

On August 3, 1918, the Court of First Instance of Nueva Ecija appointed Justo Cabo-Chan, Francisco T. Tantengco and Go-Tiao, as commissioners to make an inventory, liquidate and determine the one-half belonging to the plaintiff of all of the property of the store in question.

On August 9, 1918, in order to prevent Justo Cabo-Chan from assuming the office of receiver, pursuant to the order of the court dated August 3, 1918, the defendant filed a bond in the sum of P10,000.

Under the date of November 15, 1920, the said commissioners submitted to the court their report, showing the net profits of the business between the period from 1913 to 1917, which amounted to the total sum of P25,038.70 and consisted of the following items:

Profits for the year 1913 2,979.00

Profits for the year 1914 3,046.94

Profits for the year 1915 4,103.07

Profits for the year 1916 4,736.00

Profits for the year 1917 10,174.69

 ————

Total 25,038.70

In view of the appeal taken by defendant the parties on December 7, 1921, entered into an agreement whereby they agreed to suspend the liquidation ordered by the court until the appeal to the Supreme Court was decided, and whereby the defendant was authorized to continue in the possession of the property in litigation, upon the giving of a bond in the amount of P25,000, and cancelling the former bond for P10,000.

This court in deciding case R. G. No. 18919, on October 5, 1922, held that the appeal was premature and ordered that the record be remanded to the court of origin with instruction to enter a final order in accordance with the liquidation made by the commissioners.

The record having been remanded and two of the commissioners having filed their resignations, the court below appointed again Justo Cabo-Chan suggested by the defendant and Cua Poco suggested by the plaintiff, as commissioners, who submitted two reports, one prepared by commissioners Tantengco and Cua Poco, and the other by commissioner Justo Cabo-Chan. The former stated in their report that they had examined the books for the years 1919 to 1922, for the reason, they said, that they appeared "to have been prepared by some person in a careful way at a certain time." The latter commissioner examined all the books and stated in his report that the business had suffered a net loss amounting to the sum of P89,099.22.

After trial and the parties having introduced all their evidence, the lower court, by order of December 13, 1924, disapproved the report of the commissioners Tantengco and Cua Poco, but approved, with slight modifications, the report of commissioner Cabo-Chan, holding that the result of the liquidation showed liabilities to the amount of P89,690.45 in view of which plaintiff had nothing to recover from defendant, as there was no profit to divide.

From this decision the plaintiff has appealed in due time and form making the following assignment of errors: (1) The lower court erred in holding that the books were authentic, and in not holding that they were false books exhibited by the defendant about alleged operations in the years 1918 et seq. which show enormous debts and imaginary losses of the business; (2) the lower court erred in giving full credit to the testimony of commissioner Justo Cabo-Chan; (3) the lower court erred in holding that the partnership had incurred debts and suffered losses, as shown in the report of Justo Cabo-Chan from 1518 on; (4) the lower court erred in not holding that the share of the plaintiff, as his capital and profits until the end of 1917, is equivalent to the sum of twenty-seven thousand seven hundred fifty-five pesos and forty-seven centavos (P27,755.47), Philippine currency, plus an annual quota of at least two thousand five hundred three pesos and eighty-seven centavos (P2,503.87), Philippine currency, as his portion of the profits since the beginning of 1918 until the delivery to the plaintiff of his share in the partnership; (5) the court below erred in not ordering the prosecuting attorney to commence an investigation as to the falsified books of accounts that the defendant had exhibited for proper criminal proceeding.

From the evidence it appears that the partnership capital was P4,779.39, and the net profits until the year 1915 amounted to P5,551.40. Because some books of account had been destroyed by white ants (anay), the liquidation of the business of the partnership for the period from 1906 to 1912 could not be made. But knowing the net profit for the period between 1904 and 1905, which is P5,551.40, and finding the average of the profits for each of these years, which is P2,775.70; and knowing the net profit for the year 1913, which is P2,979, we can find the average between the net profit for 1905, namely, P2,275.70, and the net profit for the said year 1913, namely, P2,979. Said average is the sum of P2,877.35, which may be considered as the average of the net annual profits for the period between 1906 and 1912, which in seven years make a total of P20,141.45. The assets of the partnership, as well as the value of its property, could not be determined when making the liquidation because there was no inventory and for this reason it was not possible to determine the capital of the partnership. The plaintiff, however, seems to be agreeable to considering the initial partnership capital as the capital at the time of the winding up of the business.

August 3, 1918, defendant assumed complete responsibility for the business by objecting to the appointment of a receiver as prayed for by the plaintiff, and giving a bond therefor. Until that date his acts were those of a managing partner, binding against the partnership; but thereafter his acts were those of a receiver whose authority is contained in section 175 of the Code of Civil Procedure.

A receiver has no right to carry on and conduct a business unless he is authorized or directed by the court to do so, and such authority is not derived from an order of appointment to take and preserve the property (34 Cyc., 283; 23 R. C. L., 73). It does not appear that the defendant as a receiver was authorized by the court to continue the business of the partnership in liquidation. This being so, he is personally liable for the losses that the business may have sustained. (34 Cyc., 296.) The partnership must not, therefore, be liable for the acts of the defendant in connection with the management of the business until August 3, 1918, the date when he ceased to be a member and manager in order to become receiver.

As to the first semester of 1918, during which time the defendant had been managing the business of the partnership as a member and manager, taking into account that the profits had been on the increase, said profits having reached the amount of P10,174.69 in the year 1917, it would not be an exaggeration to estimate that the profits for 1918 would have been at least the same as the profits of 1917; so that for the first half of 1918, the profit would be P5,087.34.

In conclusion we have the following profits of the business of this partnership now in liquidation, to wit:

Capital of partnership 4,779.39

Profits until 190 5,651.40

Profits 1906-1912 20,141.4

Profits 1913-1917 25,038.70

Profits first semester 1918 6,087.34

 ————

Total 60,598.28

One-half of this total, that is, P30,299.14 pertains to the plaintiff as administrator of the intestate estate of Go-Lio.

In view of the foregoing, we are of the opinion that the case must be, as is hereby, decided by reversing the judgment appealed from, and sentencing the defendant to pay the plaintiff the sum of P30,299.14 with legal interest at the rate of 6 per cent per annum from July 1, 1918, until fully paid, with the costs. So ordered.

Avanceña, C.J., Johnson, Street, Malcolm, Villamor, Ostrand, Johns and Romualdez, JJ., concur.

Island Sales, Inc. v. Daco, G.R. No. L-22493

[G.R. No. L-22493. July 31, 1975.]

ISLAND SALES, INC., plaintiff-appellee, vs. UNITED PIONEERS GENERAL CONSTRUCTION COMPANY, ET AL, defendants. BENJAMIN C. DACO, defendant-appellant.

Grey, Buenaventura & Santiago for plaintiff-appellee.

Anacleto D. Badoy, Jr. for defendant-appellant.

SYNOPSIS

The defendant company, a general partnership, purchased from Island Sales, Inc. a motor vehicle, executing for that purpose a promissory note for the entire price, payable in twelve monthly installments. Having failed to receive the third installment, Island Sales sued the company, including its general partners as co-defendants. On motion of plaintiff, the complaint was later dismissed insofar as one of the partners was concerned. After trial, judgment was entered sentencing the defendant to pay the sum due, with interest, and expressly stating that the four of the five partners would pay in case the company has no properties with which to satisfy judgment. One of the partners appealed claiming that the liability of each partner should not exceed 1/5 of the obligation due inasmuch as there are five partners in the company.

The Supreme Court ruled that under Art. 1816 of the Civil Code, the liability of partners shall be pro-rata; that the dismissal of the complaint to favor one of the general partners results in the condonation of the debt of that partner's individual share and that appellant's share in the obligation shall not be increased thereby but shall be limited to 1/5 of the obligation of defendant company.

Decision affirmed as clarified.

SYLLABUS

1. OBLIGATIONS AND CONTRACTS; LIABILITY OF GENERAL PARTNERS, PRO-RATA; CONDONATION OF INDIVIDUAL LIABILITY DOES NOT AFFECT THE OTHER'S SHARE IN THE OBLIGATION. — Where there was five general partners when the promissory note in question executed for and in behalf of the partnership, and the complaint against one of them was dismissed upon motion of the plaintiff, the general partner's share in the obligation remains limited to only 1/5 of the amount due and demandable, their liability being pro-rata.

D E C I S I O N

CONCEPCION, JR., J p:

This is an appeal interposed by the defendant Benjamin C. Daco from the decision of the Court of First Instance of Manila, Branch XVI, in Civil Case No. 50682, the dispositive portion of which reads:

"WHEREFORE, the Court sentences defendant United Pioneer General Construction Company to pay plaintiff the sum of P7,119.07 with interest at the rate of 12% per annum until it is fully paid, plus attorney's fees which the Court fixes in the sum of Eight Hundred Pesos (P800.00) and costs.

"The defendants Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim and Augusto Palisoc are sentenced to pay the plaintiff in this case with the understanding that the judgment against these individual defendants shall be enforced only if the defendant company has no more leviable properties with which to satisfy the judgment against it.

"The individual defendants shall also pay the costs."

On April 22, 1961, the defendant company a general partnership duly registered under the laws of the Philippines, purchased from the plaintiff a motor vehicle on the installment basis and for this purpose executed a promissory note for P9,440.00, payable in twelve (12) equal monthly installments of P786.63, the first installment payable on or before May 22, 1961 and the subsequent installments on the 22nd day of every month thereafter, until fully paid, with the condition that failure to pay any of said installments as they fall due would render the whole unpaid balance immediately due and demandable.

Having failed to receive the installment due on July 22, 1961, the plaintiff sued the defendant company for the unpaid balance amounting to P7,119.07. Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc were included as co-defendants in their capacity as general partners of the defendant company.

Daniel A. Guizona failed to file an answer and was consequently declared in default. 1

Subsequently, on motion of the plaintiff, the complaint was dismissed insofar as the defendant Romulo B. Lumauig is concerned. 2

When the case was called for hearing, the defendants and their counsels failed to appear notwithstanding the notices sent to them. Consequently, the trial court authorized the plaintiff to present its evidence ex-parte 3 , after which the trial court rendered the decision appealed from.

The defendants Benjamin C. Daco and Noel C. Sim moved to reconsider the decision claiming that since there are five (5) general partners, the joint and subsidiary liability of each partner should not exceed one-fifth (1/5) of the obligations of the defendant company. But the trial court denied the said motion notwithstanding the conformity of the plaintiff to limit the liability of the defendants Daco and Sim to only one-fifth (1/5) of the obligations of the defendant company 4 . Hence, this appeal.

The only issue for resolution is whether or not the dismissal of the complaint to favor one of the general partners of a partnership increases the joint and subsidiary liability of each of the remaining partners for the obligations of the partnership.

Article 1816 of the Civil Code provides:

"Art. 1816. All partners including industrial ones, shall be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts which may be entered into in the name and for the account of the partnership. under its signature and by a person authorized to act for the partnership. However, any partner may enter into a separate obligation to perform a partnership contract."

In the case of Co-Pitco vs. Yulo (8 Phil. 544) this Court held:

"The partnership of Yulo and Palacios was engaged in the operation of a sugar estate in Negros. It was, therefore, a civil partnership as distinguished from a mercantile partnership. Being a civil partnership, by the express provisions of articles 1698 and 1137 of the Civil Code, the partners are not liable each for the whole debt of the partnership. The liability is pro rata and in this case Pedro Yulo is responsible to plaintiff for only one-half of the debt. The fact that the other partner, Jaime Palacios, had left the country cannot increase the liability of Pedro Yulo."

In the instant case, there were five (5) general partners when the promissory note in question was executed for and in behalf of the partnership. Since the liability of the partners is pro rata, the liability of the appellant Benjamin C. Daco shall be limited to only one-fifth (1/5) of the obligations of the defendant company. The fact that the complaint against the defendant Romulo B. Lumauig was dismissed, upon motion of the plaintiff, does not unmake the said Lumauig as a general partner in the defendant company. In so moving to dismiss the complaint, the plaintiff merely condoned Lumauig's individual liability to the plaintiff.

WHEREFORE, the appealed decision as thus clarified is hereby AFFIRMED, without pronouncement as to costs.

SO ORDERED.

Makalintal, C.J., Fernando (Chairman), Barredo and Aquino, JJ., concur.

Sharruf & Co. v. Baloise Fire Insurance Co., G.R. No. 44119,

FIRST DIVISION

[G.R. No. 44119. March 30, 1937.]

SHARRUF & CO., known also as SHARRUF & ESKANAZI, SALOMON SHARRUF and ELIAS ESKENAZI, plaintiffs-appellees, vs. BALOISE FIRE INSURANCE CO., SUN INSURANCE OFFICE, LTD., and SPRINGFIELD INSURANCE CO., SUN INSURANCE CO., represented by KUENZLE & STREIFF, INC., defendants-appellants.

Carlos A. Sobral for appellants.

Ramon Diokno for appellees.

SYLLABUS

1. FIRE INSURANCE; RIGHTS TO INSURANCE POLICIES OF A FIRM TRANSMITTED TO A NEW ONE SUBSTITUTING IT. — When the partners of a general partnership doing business under the firm name of "Sharruf & Co." obtain insurance policies issued to said firm and the latter is afterwards changed to "Sharruf & Eskenazi", which are the names of the same and only partners of said firm "Sharruf & Co.", continuing the same business, the new firm acquires the rights of the former under the same policies.

2. ID.; PROOF OF THE CAUSE OF THE FIRE. — When the evidence relative to the cause of a fire and the author thereof is so vague and doubtful, the insured cannot be attributed incendiary intervention therein for the mere fact that he had the keys to the unoccupied building in his possession.

3. ID.; FRAUDULENT CLAIMS. — A person, who presents a claim for damages caused by fire to articles and goods not existing at the time of the fire, does so fraudulently, and his claim is fraudulent.

4. ID.; ID. — When, immediately after a fire that broke out inside a completely locked building, lasting scarcely 27 minutes, only about ten or eleven partly burned and scorched cases, some containing textiles and wrapping paper and others, statues of saints, have been found without any trace of the destruction of other cases by said fire, it can neither logically nor reasonably be inferred that 40 of said cases were inside the building when the fire broke out.

D E C I S I O N

VILLA-REAL, J p:

This is an appeal taken by the defendant companies Baloise Fire Insurance Co., Sun Insurance Office Ltd., and Springfield Insurance Co., represented by Kuenzle & Streiff, Inc., from the judgment of the Court of First Instance of Manila, the dispositive part of which reads as follows:

"Wherefore, judgment is rendered ordering the defendant insurance companies to pay to the plaintiffs Salomon Sharruf and Elias Eskenazi the total amount of P40,000 plus interest thereon at 8 per cent annum from the date of the filing of the complaint, with the costs of the trial. The defendants shall pay this judgment jointly in proportion to the respective policies issued by them. The plaintiffs Salomon Sharruf and Elias Eskenazi shall recover the judgment share and share alike, deducting from the portion of the plaintiff Elias Eskenazi the sum of P3,000 which belongs and shall be turned over to the intervenor E. Awad & Co., Inc. It is so ordered."

In support of their appeal the appellants assign the following alleged errors as committed by the court a quo in its decision in question, to wit:

"1. The lower court erred in holding, that Salomon Sharruf and Elias Eskenazi had personality to sue, either as a partnership or individually, and therefore, an insurable interests.

"2. The lower court erred in holding, that the fire that broke out in the premises at Nos. 299-301 Muelle de la Industria of this city, occupied by the alleged plaintiffs, was not of incendiary origin.

"3. The lower court erred in holding, that the 'idea of using petroleum in the fire in question, surged after the fire for the purpose of making it appear as a part of the evidence.'

"4. The lower court erred in holding, that the claim of loss filed by the alleged plaintiffs was not fraudulent, but merely inaccurate, due to the peculiar circumstances of the case, such as the loss of invoices and sales-slips.

"5. The lower court erred in sentencing the defendants to pay jointly to the alleged plaintiffs the sum of P40,000, with interest thereon at the rate of 8 per cent per year and costs.

"6. The lower court erred in overruling defendants' motion for new trial and in failing to dismiss the case altogether, with costs against the alleged plaintiffs."

The preponderance of the evidence shows the existence of the following facts:

In the months of June and July, 1933, the plaintiffs Salomon Sharruf and Elias Eskenazi were doing business under the firm name of Sharruf & Co. As they had applied to the defendant companies for insurance of the merchandise they had in stock, the latter sent their representative P. E. Schiess to examine and assess it. On July 25, 1933, the defendant insurance companies issued insurance policies Exhibits D, E, and F in the total amount of P25,000 in the name of Sharruf & Co. On August 15, 1933, the defendant Springfield Insurance Co. issued an additional policy (Exhibit G) in the sum of P15,000 in favor of said firm Sharruf & Co., raising the total amount of the insurance on said merchandise to P40,000. On August 26, 1933, the plaintiffs executed a contract of partnership between themselves (Exhibit A) wherein they substituted the name of Sharruf & Co. with that of Sharruf & Eskenazi, stating that Elias Eskenazi contributed to the partnership, as his capital, goods valued at P26,299.94 listed in an inventory Exhibit B. It was likewise stated in said contract that Salomon Sharruf brought to said partnership, as his capital, goods valued at P24,205.10, appearing in the inventories Exhibits C and C-1. The total value of the merchandise contributed by both partners amounted to P50,505.04. Part of said merchandise, most of which were textiles, was sold for P8,000, leaving goods worth P43,000. In all there were from 60 to 70 bolts of silk. All the goods, most of which were aluminum kitchen utensils, various porcelain and glass wares, and other articles, of stucco, were contained in about 39 or 40 cases. The last time the plaintiffs were in the building was on September 19, 1933, at 4 o'clock in the afternoon. Up to the month of September 1933, about 30 or 40 cases of merchandise belonging to the plaintiffs were in Robles' garage at No. 1012 Mabini Street.

At about 12.41 o'clock on the morning of September 22, 1933, the fire alarm bell rang in the different fire stations of the city. The firemen of the San Nicolas Fire Station, headed by Captain Charles A. Baker, were the first to arrive at the scene of the fire, followed by Captain Thomas F. McIntyre of the Santa Cruz Fire Station, who arrived at 12.44 o'clock. Having found the door at No. 301, Muelle de la Industria Street, where the building was in flames, locked, the firemen pumped water on the upper part of the building and later broke open the door through which they entered the premises. They then saw an inflamed liquid flowing towards the sidewalk, the flames thereon blazing more intensely every time water fell on them. The liquid apparently came from under the staircase of said floor. They likewise noted that the entire spice occupied by the staircase was in flames except the adjoining room. After the fire had been extinguished, an earthen pot (Exhibit 15) containing ashes and the residue of a certain substance, all of which smelled of petroleum, was found by detective Manalo near the railing of the stairway of the second floor. At about 8.30 o'clock that same morning, detective Irada found another earthen pot (Exhibit 16), one-fourth full of water that smelled of petroleum, under the staircase of the first floor; straw and excelsior, that also smelled of petroleum, around said pot, a red rag (Exhibit 18) in front of the toilet, and a towel which also smelled of petroleum on the garbage, rages and other things stuffed into the petroleum can, Exhibit 21. On the following day, September 23, 1933, photographs were taken of the condition of the different parts of the building and of the goods found therein. Said photographs are: Exhibit 1, showing the interior of the first floor partially burned, with the staircase, the doorway, the wooden partition wall and pieces of wood scattered on the floor supposed to be from the door that was demolished; Exhibit 2, showing about 8 or 9 scorched cases some closed and others open; Exhibit 3, showing the space or hall of the upper floor partially damaged by the fire at the place occupied by the staircase, with chairs piled up and unburnt, pieces of wood and debris apparently from the cement partition wall beside the staircase and the attic; Exhibit 4, showing the same space taken from another angle, with the partition wall beside the staircase and the attic; Exhibit 4, showing the same space taken from another angle, with the partition wall of cement and stone and some broken railings of the stairway; Exhibit 5, showing a room with partially burnt partition wall, with a wardrobe and a table in the background, another table in the center, a showcase near the wall with porcelain and iron articles on top thereof and fallen and burnt window shutters on the floor; Exhibit 6, showing an open unburnt showcase containing necklaces with imitation stones and other jewelry; Exhibit 7, showing piled up chairs and boxes and the burned and destroyed upper part of the partition wall and attic; Exhibit 8, presenting a showcase with a burnt top, containing kitchen utensils, tableware, dinner pails and other articles; Exhibit 9, presenting a half-open trunk with protruding ends of cloth, other pieces of cloth scattered on the floor, a step of the staircase and a bench; Exhibit 10, showing the partially destroyed attic and wires wound around the beams; Exhibit 11, presenting another view of the same attic from another angle. On the 27th of said month and year, the following photographs were taken: Exhibit 12, presenting a close-up of the beams and electric wires in the same attic shown in Exhibit 10; Exhibit 13, presenting a close-up of the wires found in the attic, with an electric bulb hanging from a beam, and the burnt beams; and Exhibit 14, showing Nos. 14 and 18 wire entwined with one another on the first floor, with the burnt posts and partition walls. Electrical Engineer Joseph Mora, who inspected the electric wiring on September 25, 1933, was of the opinion that the wires wound around the beam and a nail might have caused the fire, but he could not assure whether any of the wires was burned due to an electrical discharge that passed through it, or whether or not the fire started from the lighting system. In the burned building the plaintiffs kept petroleum used for cleaning the floor.

The first question to be decided in the present appeal, which is raised in the first assignment of alleged error, is whether or not Salomon Sharruf and Elias Eskenazi had juridical personality to bring this action, either individually or collectively, and whether or not they had insurable interest.

As already seen, Salomon Sharruf and Elias Eskenazi were doing business under the firm name of Sharruf & Co. in whose name the insurance policies were issued, Elias Eskenazi having paid the corresponding premiums.

In the case of Lim Cuan Sy vs. Northern Assurance Co. (55 Phil., 248), this court said:

"A policy insuring merchandise against fire is not invalidated by the fact that the name of the insured in the policy is incorrectly written 'Lim Cuan Sy' instead of 'Lim Cuan Sy & Co.', the latter being the proper legal designation of the firm, where it appears that the designation of the firm, where it appears that the designation 'Lim Cuan Sy' was commonly used as the name of the firm in its business dealings and that the error in the designation of the insured in the policy was not due to any fraudulent intent on the part of the latter and did not mislead the insurer as to the extent of the liability assumed."

In the present case, while it is true that at the beginning the plaintiffs had been doing business under the firm name of "Sharruf & Co.", insuring their business in said name, and upon executing the contract of partnership (Exhibit A) on August 26, 1933, they changed he title thereof to "Sharruf & Eskenazi," the membership of the partnership in question remained unchanged, the same and only members of the former, Salomon Sharruf and Elias Eskenazi, being the ones composing the latter, and it does not appear that in changing the title of the partnership they had the intention of defrauding the herein defendant insurance companies. Therefore, under the above-cited doctrine the responsibility of said defendants to the plaintiffs by virtue of the respective insurance policies has not been altered. If this is true, the plaintiffs have juridical personality to bring this action.

The second question to be decided is that raised in the second assignment of alleged error, which consists in whether or not the fire which broke out in the building at Nos. 299-301 Muelle de la Industria, occupied by the plaintiffs, is of incendiary origin.

In maintaining the affirmative, the appellants call attention to the earthen pots Exhibits 15 and 15, the first found by detective Manalo beside the railing of the stairway of the upper floor and the second fund by detective Irada on the first floor, both containing liquid, ashes and other residues which smelled of petroleum; a red rag (Exhibit 18) found by detective Irada on first floor, both containing liquid, ashes and other residues which smelled of petroleum; a red rag (Exhibit 18) found by detective Irada in front of the toilet; the partially burnt box (Exhibit 20); and the old can (Exhibit 21) containing garbage. The fact that the liquid found by the detective in the earthen jars smelled of petroleum, does not constitute conclusive evidence that they had been used as containers for petroleum to burn the house. Said smell could have very well come from the strips of China wood of which boxes from abroad are made, the resin of which smells of petroleum, or from the rages found therein which might have been sued to clean the floor by saturating them with petroleum. There being petroleum for cleaning the floor in the building, it is not strange that when the house caught fire the petroleum also caught fire, the flames floating on the water coming out from under the door from the pumps. There is neither direct nor strong circumstantial evidence that the plaintiffs personally or through their agents placed petroleum in the building in order to burn it, because it was locked on the outside and nobody was staying therein. As it cannot be assumed that the petroleum might have burned by itself, it is probable that the fire might have originated from the electric wiring, although electrical engineer Mora stated that he could not assure whether any of the wires was burned due to an electric discharge passing through it, or whether or not the fire was cause by the lighting system.

Upon consideration of all the evidence and circumstances surrounding the fire, this court finds no evidence sufficient to warrant a finding that the plaintiffs are responsible for the fire.

With respect to the question whether or not the claim of loss filed by the plaintiffs is fraudulent, it is alleged by them that the total value of the textiles contained in cases deposited inside the building when the partnership Sharruf & Eskenazi was formed was P12,000; that of the fancy jewelry with imitation stones from P15,000 to P17,000, and that of the kitchen utensils and tableware made of aluminum, bronze and glass P10,676 (Exhibits B, C, and C-1). If, as said plaintiffs claim, they had already sold articles, mostly textiles, valued at P8,000, a small quantity of cloth must have been left at the time the fire occurred. In their claim, however, the textiles allegedly consumed by fire and damaged by water are assessed by them at P12,000. The claim of P12,000 is certainly not attributable to a mere mistake in estimate and counting because if they had textiles worth only P12,000 before the fire and they sold goods, mostly textiles, worth P8,000, surely textiles in the same amount of P12,000 could not have been burned and damaged after the fire. Of the kitchen utensils and tableware made of aluminum, bronze and glass, of which, according to the evidence for the plaintiffs, they had a stock valued at P10,676 (Exhibit B), there were found after the fire articles worth only P1,248.80 (Exhibit K). Therefore, utensils valued at P9,427.20 were lacking. A considerable amount of kitchen utensils made of noninflammable and fireproof material could not, by the very nature of things have been totally consumer by the fire. At most, said articles would have been damaged, as the rest, and would have left traces of their existence. The same may be said of the fancy jewels with imitation stones, and others of which the plaintiffs claim to have had a stock worth from P15,000 to P17,000 at the time of the fire, of which only a few value at P3,471.16, were left after the fire (Exhibit K). According to said plaintiffs, all the articles, for the alleged loss of which indemnity is sought, were contained in about 40 cases kept on the upper and lower floors of the building, in show cases and wardrobes. According to the testimony of the fire station chiefs, corroborated by the photographs of record, the flames cause more damage in the upper part of the rooms than in the lower part thereof; since, of the ten or eleven cases found inside the building after the fire only a few were partially burned and others scorched. Judging from their appearance, the goods were damaged more by wart than by fire. According to the inventory made by White & Page, adjusters of the insurance companies, in the presence of the plaintiffs themselves and according to data supplied by the latter, the total value thereof, aside from the articles not included in the inventories Exhibits B, C, and C-1, assessed at P744.50, amounts to only P8,077.35. If the plaintiffs' claim that at the time of the fire there were about 40 cases inside the burnt building were true, as ten or eleven of them were found after the fire, traces of the thirty or twenty-nine cases allegedly burnt would be found, since experience has shown that during the burning of a building all the cases deposited therein are not so reduced to ashes that the least vestige thereof cannot be found. In the case of Go Lu vs. Yorkshire Insurance Co. (43 Phil., 633), this court laid down the following doctrine:

"This court will legally presume that in an ordinary fire fifty bales of boxes of bolt goods of cloth cannot be wholly consumed or totally destroyed, and that in the very nature of things some trace or evidence will be left remaining of their loss or destruction."

The plaintiffs, upon whom devolve the legal obligation to prove the existence, at the time of the fire, of the articles and merchandise for the destruction of which they claim indemnity from the defendant companies, have not complied with their duty because they have failed to proved by a preponderance of evidence that when the fire took place in the total amount of the insurance policies or that the textiles and other damaged and undamaged goods found contrary, their own witness, Robles, testified that up to the month of September, 1933, there were about 39 or 40 cases belonging to the plaintiffs in his garage on Mabini Street, indicating thereby that the cases of merchandise examined by the agent of the insurance companies on July 25 and August 15, 1933, and for which the insurance policies were issued, were taken from the burned building where they were found. So great is the difference between the amount of articles insured, which the plaintiffs claim to have been in the building before the fire, and the amount thereof shown by the vestige of the fire to have been therein, that the most liberal human judgment can not attribute such difference to a mere innocent error in estimate or counting but to a deliberate intent to demand of the insurance companies payment of an indemnity for goods not existing at the time of the fire, thereby constituting the so-called "fraudulent claim" which, by express agreement between the insurers and the insured, is a ground for exemption of the insurers from civil liability.

Therefore, as the herein plaintiffs-appellees have acted in bad faith in presenting a fraudulent claim, they are not entitled to the indemnity claimed by them by virtue of the insurance policies issued by the defendant-appellant companies in their favor.

For the foregoing considerations, this court is of the opinion and so holds: (1) that when the partners of a general partnership doing business under the firm names of "Sharruf & Co." obtain insurance policies issued to said firm and the latter is afterwards changed to "Sharruf & Eskenazi", which are the names of the same and only partners of said firm "Sharruf & Co.", continuing the same business, the new firm acquires the rights of the former under the same policies; (2) that when the evidence relative to the cause of a fire and the author thereof is so vague and doubtful, the insured cannot be attributed incendiary intervention therein for the mere fact that he had the keys to the unoccupied building in his possession; (3) that a person who presents a claim for damages caused by fire to articles and goods not existing at the time of the fire does so fraudulently and his claim is fraudulent, and (4) that when, immediately after a fire that broke out inside a completely locked building, lasting scarcely 27 minutes, only about ten or eleven party burned and wrapping paper and others, statues of saints, have been found without any trace of the destruction of other cases by said fire, it can neither logically nor reasonably be inferred that 40 of said cases were inside the building when the fire broke out.

Wherefore, the appealed judgment is reversed, and the defendant companies are absolved from the complaint which is dismissed, with costs to the appellees. So ordered.

Avaneña, C. J., Abad Santos, Imperial, Diaz, Laurel and Concepcion, JJ., concur.

Garrido v. Asencio, G.R. No. L-4281

FIRST DIVISION

[G.R. No. L-4281. March 30, 1908.]

JOSE GARRIDO, plaintiff-appellant, vs. AGUSTIN ASENCIO, defendant-appellee.

Gregorio Yulo, for appellant.

P. Q. Rothrock, for appellee.

SYLLABUS

1. BOOKS OF ACCOUNT; ADMISSIBILITY. — Books of account, although not kept in accordance with the provisions of the Code of Commerce, if not objected to, are admissible in evidence, and, in any event, they may be admitted under section 338 of the Code of Civil Procedure, as a memorandum to refresh the memory of the witness. (Tan Machan vs. Gan Aya, 3 Phil. Rep., 684.)

2. ID.; ID.; ADMISSION. — Behn Meyer & Co. vs. Rosatzin (5 Phil. Rep., 660) followed to the point that books of account kept by a person (or by him jointly with another) constitute an admission of the facts stated therein and are admissible to show such admission.

D E C I S I O N

CARSON, J p:

Plaintiff and defendant were members of a partnership doing business under the firm name of Asencio y Cia. The business of the partnership did not prosper and it was dissolved by mutual agreement of the members. The plaintiff brings this action to recover from the defendant, who appears to have been left in charge of the books and the funds of the firm, the amount of the capital which he had invested in the business. The defendant, alleging that there had been considerable losses in the conduct of the business of the partnership, denied that there was anything due the plaintiff as claimed, and filed a cross complaint wherein he prayed for a judgment against the plaintiff for a certain amount which he alleged to be due by the plaintiff under the articles of partnership on account of plaintiff's share of these losses.

The trial court found that the evidence substantially sustains the claim of the defendant as to the alleged losses in the business of the partnership and gave judgment in his favor.

The only question submitted on appeal is the competency and sufficiently of the evidence on which the trial court based its findings as to the status of the accounts of the company.

Plaintiff and appellant makes the following assignment of errors:

First. The trial court erred in holding the estado de cuentas (statement of account) of the partnership of Asencio y Cia. submitted by the defendant as competent and sufficient evidence in this case.

Second. The trial court erred in holding that evidence of record proved the existence of losses in the business of the said partnership.

Third. The trial court erred in refusing to give judgment in favor of the plaintiff.

It appears from the record that by mutual agreement the defendant had general charge and supervision of the books and funds of the firm, but it appears that these books were at all times open to the inspection of the plaintiff, and there is evidence which tends to show that the plaintiff himself made entries in these books touching particular transactions in which he happened to be interested; so that while it is clear that the defendant was more especially burdened with the care of the books and accounts of the partnership, it would appear that the plaintiff had equal rights with the defendant in this regard, and that during the existence of the partnership they were equally responsible for the mode in which the books were kept and that the entries made by one had the same effect as if they had been made by the other.

At the trial the principal question at issue was the amount of the profits or losses of the business of the partnership during the period of its operation. The plaintiff made no allegation as to profits, but denied defendant's allegation as to the losses. The defendant in support of his allegations offered in evidence the estado de cuentas (general statement of accounts) of the partnership, supported by a number of vouchers, and by his own testimony under oath as to the accuracy and correctness of the items set out therein. The plaintiff assigns as error the admission of this account on the ground that the books of the partnership were not kept in accordance with the provisions of Title III, Book I, of the Code of Commerce.

It is not necessary for us to consider this assignment of error as to the inadmissibility of this account on the ground that the books were not kept in accordance with the provisions of the Commercial Code, because no objection was made to its admission in the court below; and further, because in any event it was admissible under the provisions of section 338 of the Code of Civil Procedure as memorandum used to refresh the memory of the witness. (Tan Machan vs. Gan Aya, 3 Phil. Rep., 684.) We think further that in view of the testimony of record that the plaintiff jointly with the defendant kept these books, made entries therein, and was responsible with him therefor, the doctrine laid down in Behn, Meyer & Co., vs. Rosatzin (5 Phil. Rep., 660) is applicable in this case, and the correctness of the entries in these books must be taken to be admitted by him, except so far as it is made to appear that they are erroneous as a result of fraud or mistake.

It appears from the record that the statement of account, the vouchers, and the books of the company were placed at the disposition of the plaintiff for more than six weeks prior to the trial, and that during the trial he was given every opportunity to indicate any erroneous or fraudulent items appearing in the account, yet he was unable, or in any event he declined to specify such items, contenting himself with a general statement to the effect that there must be some mistake, as he did not and could not believe that the business had been conducted at a loss.

The court below seems to have scrutinized the account with painstaking care, and to have been satisfied as to its accuracy, except as to some unimportant items, which he corrected, but counsel for the appellant reiterates in this court his general allegations as to the inaccuracy of the account, and points out some instances wherein he alleges that items of expenditure appear to have been charged against the partnership more than once.

Upon the whole record as brought here by the appellant we are not able to say that the weight of the evidence does not sustain the findings of the trial court, and the judgment entered in that court should be, and is hereby, affirmed with the costs of this instance against the appellant. So ordered.

Arellano, C.J., Torres, Mapa Johnson, Willard and Tracey, JJ., concur.