Facts:

The case involves Isabelo Moran, Jr. as the petitioner and Mariano E. Pecson as the respondent. The key events occurred on February 22, 1971, when Pecson and Moran entered into a partnership agreement wherein both would invest P15,000 each for the purpose of printing 95,000 posters featuring delegates to the 1971 Constitutional Convention. Moran supervised the work while Pecson was entitled to receive a commission of P1,000 per month from April 15, 1971, until December 15, 1971. Additionally, they agreed to liquidate their accounts on December 15, 1971. Pecson provided Moran with P10,000, for which Moran issued a receipt. However, only a few posters were printed, with approximately 2,000 copies being produced by May 28, 1971.

Subsequently, Moran executed a promissory note in favor of Pecson for P20,000, to be paid in two equal installments of P10,000 by mid-June and June 30, 1971. Pecson filed a complaint in the Court of First Instance of Manila, presenting three causes of actio

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Facts:

Background of the Partnership Agreement

• On February 22, 1971, petitioner Isabelo Moran, Jr. and respondent Mariano E. Pecson entered into a partnership agreement.
• Each party was to contribute P15,000.00 for the purpose of printing 95,000 posters featuring the delegates to the 1971 Constitutional Convention.
• The partnership agreement included the following terms:
• Pecson was to receive a monthly commission of P1,000.00 starting from April 15, 1971 up to December 15, 1971, covering eight months.
• A liquidation of the accounts in the distribution and printing of the posters was to be made on December 15, 1971.
• Pecson advanced Moran P10,000.00 for which a receipt was issued.
• Despite the agreement, only a few posters were printed; specifically, only 2,000 copies were produced instead of the contemplated 95,000 copies.
• On or about May 28, 1971, Moran executed a promissory note in favor of Pecson for P20,000.00 payable in two equal installments:
• P10,000.00 due on or before June 15, 1971.
• P10,000.00 due on or before June 30, 1971.
• The note provided that the entire amount would become due upon default in the payment of the first installment, including costs of collection.

Proceedings in the Lower Courts

• Respondent Pecson filed an action with the Court of First Instance of Manila seeking:
• The return of his P10,000.00 contribution.
• Payment of his share in the expected profits from the partnership.
• Payment of unpaid commission.
• The Court of First Instance ruled as follows:
• It found that the partnership, by its nature, permitted rescission under Article 1385 of the Civil Code where reciprocal obligations created the right to return the original contributions.
• It determined that Pecson contributed P10,000.00 (with an additional P7,000.00 for another project – the "Voice of the Veterans" magazine venture) versus the expected P15,000.00.
• Given that only 2,000 posters were printed and sold at P5.00 each, the venture failed to take off.
• The judgment ordered Moran to return to Pecson the sum of P17,000.00, with legal interest from the filing date of the complaint on June 19, 1972, plus costs; the counterclaim was dismissed for insufficiency of evidence.
• Both parties subsequently appealed:
• The respondent Court of Appeals modified the decision and ordered Moran to pay higher amounts:
• P47,500.00 as the accrual of expected profits.
• P8,000.00 as commission for eight months.
• P7,000.00 as a return of Pecson’s investment in the magazine venture.
• Legal interest on all amounts from the filing date of the complaint.

Petitioner’s Contentions on Errors Committed by the Court of Appeals

• The petitioner argued that the award of P47,500.00 as the respondent’s share of unrealized profits was highly speculative.
• He contended that awarding P8,000.00 for commission was baseless because the venture itself failed, making any commission unjustifiable.
• The petitioner further maintained that awarding P7,000.00 as a return on investment for the “Voice of the Veterans” magazine venture was erroneous.
• Additional errors alleged included:
• Failure to offset payments already received from Pecson.
• Denial of the petitioner’s compulsory counterclaim for damages.

Evidence and Transactions Presented at Trial

• Documentary evidence included:
• Promissory notes (for P20,000.00, P14,000.00, and P7,000.00) indicating allocation for various aspects of the venture.
• A receipt confirming Pecson’s P10,000.00 contribution.
• Exhibits such as copies of PNB manager’s checks and a copy of the book “Voice of the Veterans” to testify to the magazine venture.
• Testimonies and documentary evidence established:
• Pecson’s partial contribution: P10,000.00 instead of the full P15,000.00.
• Moran’s failure to print the full order of posters, resulting in a limited actual income.
• That the net profits from the venture amounted only to P6,000.00, which should be shared by the partners.

Issue:

• Whether the award of P47,500.00 as the private respondent’s share in the unrealized profits of the partnership is justified given the speculative nature of such an award.
• Whether the award of P8,000.00 as commission is legally supportable in light of the failed nature of the venture and the absence of evidence of actual profit generation.
• Whether awarding P7,000.00 for the return on Pecson’s investment in the “Voice of the Veterans” magazine venture is correct, particularly when the evidence shows that the project was executed but ultimately failed.
• Whether the Court of Appeals erred in not offsetting payments that Pecson had admitted to receiving from Moran.
• Whether the denial of the petitioner’s compulsory counterclaim for damages constitutes a reversible error.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)