ISABELO MORAN, JR., petitioner, vs.THE HON. COURT OF APPEALS and MARIANO E.

PECSON, respondents.
G.R. No. L-59956
October 31, 1984

Facts:

On February 22, 1971 Pecson and Moran entered into an agreement whereby both would contribute
P15,000 each for the purpose of printing 95,000 posters (featuring the delegates to the 1971
Constitutional Convention), with Moran actually supervising the work; that Pecson would receive a
commission of P l,000 a month starting on April 15, 1971 up to December 15, 1971; that on December
15, 1971, a liquidation of the accounts in the distribution and printing of the 95,000 posters would be
made.

Pecson gave Moran P10,000 for his contribution (which should be 15,000) which the latter issued a
receipt. Only a few posters were printed. Moran, on the other hand, failed to comply to contribute the
P15,000 capital he promised. Moran was able to print 2,000 out of 95,000 promised, costing P2.00
each poster and were able to sell them for P5.00 each. One of the major reason for this was the failure
of the Commission on Elections to proclaim all the 320 candidates of the Constitutional Convention on
time. On or about May 28, 1971, Moran executed in favor of Pecson a promissory note in the amount of
P20,000 payable in two equal installments (P10,000 payable on or before June 15, 1971 and P10,000
payable on or before June 30, 1971), the whole sum becoming due upon default in the payment of the
first installment on the date due, complete with the costs of collection.

Private respondent Pecson filed with the Court of First Instance of Manila an action for the recovery of a
sum of money and alleged in his complaint three (3) causes of action, namely: (1) on the alleged
partnership agreement, the return of his contribution of P10,000.00, payment of his share in the profits
that the partnership would have earned, and, payment of unpaid commission; (2) on the alleged
promissory note, payment of the sum of P20,000.00; and, (3) moral and exemplary damages and
attorney's fees.

CFI ruled that plaintiff should return the 10,000 contribution of the defendant and another sum of
P7,000 contribution of defendant for the Voice of the Veteran or Delegate Magazine. (Voice of the
Veteran or Delegate Magazine, is a book which the plaintiff lured the defendant to invest and I dont
know why was it granted by the court nga wala man siya sa prayer/ causes of action)

Court of Appeals, likewise, rendered a decision against the petitioner, ordering the plaintiff to pay the
defendant the following:

(a) Forty-seven thousand five hundred (P47,500) (the amount that could have accrued to Pecson under
their agreement);

(b) Eight thousand (P8,000), (the commission for eight months);

(c) Seven thousand (P7,000) (as a return of Pecson's investment for the Veteran's Project);

(d) Legal interest on (a), (b) and (c) from the date the complaint was filed (up to the time payment is
made)

Issue:
1. Whether or not defendant is entitled of the highly speculative damages of P47,500 under their
agreement.
2. Whether or not defendant is entitled of the monthly commission
3. Whether or not defendant is entitled of the P7,000 as his supposed return of investment.
Ruling:

On the first issue;

No, he is not entitle for the fill P47,500.
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 (79 SCRA 598), we allowed a total of P200,000.00
compensatory damages in favor of the appellee 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. 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.
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 out of the P10,000 contribution of Defendant was used by the petitioner in
printing the 2,000 copies, the remaining P6,000.00 of defendants capital should therefore be returned
to the private respondent.
Thus, on this matter, defendant must receive the P6,000.00 return of capital and P3,000.00 share in
the net profit (half).

On the second issue;

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 in spite 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.

On the third issue;

The respondent court concluded that the project never left the ground and thus, plaintiff must return
the investment. The Supreme Court disagrees, the project did take place. Only it failed.
It was proven that the origin of the P7,000.00 is as follows;
Pecson, private respondent, issued P6,000.00 for investment in a printing of book entitled Voice of
the Veterans as evidenced by a PNB Managers check. And Moran assured a profit of P8,000.00.
Moran issued a P14,000 (investment + promised profits) promissory note. Later on, Moran returned
half of the capital to Pecson (P3,000) and thus, effectively decreasing the promised profits into half
(4,000) as well. So a new promissory note amounting to P7,000 (3000 capital + 4000 promised profit)
in favor of defendant (which is now his basis for the return of supposed to be investment). Then Moran,
paid P4,000 to Pecson out of P7,000. P3,000 for the return of capital and P1,000 profit out of the
P3,000 promised profit.
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. Therefore, plaintiff, Moran is not liable for the
P3,000 promised profit.