Case Digest (G.R. No. 24243)
Facts:
The partnership of Go-Lio and Vicente Go-Sengco operated a store in San Isidro, Nueva Ecija; Go-Lio died in China in October, 1916. Ildefonso de la Rosa, appointed administrator of Go-Lio’s intestate estate, sued Enrique Ortega Go-Cotay on July 2, 1918 in the Court of First Instance of Nueva Ecija for one-half of the partnership assets and profits, prompting appointment of commissioners and competing liquidation reports; the lower court approved commissioner Justo Cabo-Chan’s report showing net liabilities and dismissed plaintiff’s recovery, prompting this appeal.
Issues:
- Is the plaintiff entitled to one-half of the partnership’s capital and profits as computed in the liquidation?
- Did the defendant’s plea of prescription bar the plaintiff’s action?
- Was Enrique Ortega Go-Cotay, after August 3, 1918, personally liable for losses when he continued the business as a receiver without court authorization?
- Did the lower court err in rejecting the plaintiff’s contention that the books exhibited by the defendant were falsified and in refusing criminal investigation?
Ruling:
The Supreme Court reversed the lower court. The Court ordered Enrique Ortega Go-Cotay to pay the plaintiff P30,299.14, with legal interest at six percent per annum from July 1, 1918, until fully paid, and costs. The Court held the partnership liable only for operations prior to August 3, 1918, and held the defendant personally liable for losses incurred thereafter as a receiver who continued the business without court authority.
Ratio:
The Court found that upon giving bond and preventing appointment of a receiver on August 3, 1918, the defendant thereafter acted as a receiver, and a receiver has no right to continue business operations unless authorized by the court; absent such authorization, the defendant incurred personal liability for subsequent losses (citing section 175 of the Code of Civil Procedure and authorities). Where original books were missing or destroyed, the Court reconstructed profits by reasonable averaging and by crediting the credible liquidation report, thereby computing total profits of P60,598.28 and awarding one-half to the plaintiff; interest was fixed from July 1, 1918.
Doctrine:
- A receiver may not lawfully carry on business without express court authorization.
- A receiver who continues business without such authorization is personally liable for losses thereby caused.
- A partnership is liable only for acts and results attributable to it while the partner remained a manager; liability for unauthorized acts after change in status falls on the actor.
- Courts may reconstruct accounts and estimate lost profits by reasonable averaging when books are destroyed or incomplete.
- A trial court may accept or reject commissioners’ reports based on credibility and evidentiary sufficiency.