G.R. No. 70926 - Dan Fue Leung vs. Intermediate Appellate Court

Case Summary (G.R. No. 70926)

Procedural History

Respondent filed suit in the Court of First Instance of Manila (Civil Case No. 116725) on July 13, 1978 seeking 22% of annual profits from October 1955. Trial court rendered judgment for respondent ordering payment of 22% of annual profits, attorney’s fees and costs. After a granted motion for reconsideration and further proceedings, the trial court amended its judgment to specify 22% of a stated net profit amount (P8,000 per day) from time of judicial demand, plus P5,000 attorney’s fees and costs. The Intermediate Appellate Court modified and then ultimately affirmed aspects of the lower court’s judgment (including fixing judicial demand as July 13, 1978). Petitioner sought review in the Supreme Court.

Core Factual Findings by Lower Courts

The trial court and the Intermediate Appellate Court found that respondent gave P4,000 at the outset of the business in exchange for entitlement to 22% of profits, supported by: (a) a Chinese-language receipt (Exhibit A) acknowledged by petitioner and translated by an interpreter; (b) eyewitness testimony (So Sia, Antonio Ah Heng) seeing petitioner sign the receipt; (c) comparison of the signatures on the receipts with signatures on pay envelopes and a PC Crime Laboratory report (Exhibit J) concluding the receipts bore petitioner’s signature; and (d) banking evidence showing a P12,000 check drawn by petitioner and credited to respondent’s account (Exhibit B). Petitioner’s documentary licenses showed the business registered as a single proprietorship and he denied having issued the receipt or the check.

Issue Presented: Nature of the Action (Partnership vs. Financial Assistance)

Petitioner argued the complaint only alleged “financial assistance” and did not plead a partnership; therefore relief granting a share of profits was beyond the complaint. The courts examined the complaint’s allegations, which explicitly stated that in return for the financial assistance respondent would be entitled to 22% of annual profits, and held that the factual allegations properly supported a partnership claim. The courts applied Article 1767 (definition of partnership: contribution to a common fund with intention to divide profits) and concluded the proven facts satisfied partnership requisites.

Evidentiary Weight: Receipts, Witnesses, and PC Crime Laboratory Report

Respondent produced the Chinese receipts, had them translated and certified by an interpreter, and presented witnesses who identified petitioner’s signature on the receipts. The PC Crime Laboratory compared the signatures on the receipts with handwriting specimens (pay envelopes, Exhibits H, H-1 to H-24) and reported the signatures matched petitioner’s. Petitioner failed to object contemporaneously to the production of the pay envelopes or to oppose the laboratory examination, and no explanation for his silence or failure to contest the specimens was offered. Based on the chain of evidence and petitioner’s procedural omissions, the courts found no reason to reject Exhibit J and credited the documentary and testimonial proof that respondent’s contributions originated from petitioner.

Prescription (Statute of Limitations) Argument and Ruling

Petitioner asserted the claim was time-barred under Art. 1144 (actions upon a written contract must be brought within ten years), noting the receipt was dated October 1, 1955 while suit was filed in 1978. The courts rejected that view, treating the action as one for an accounting of partnership interests rather than a simple enforcement of a written obligation. The courts relied on Article 1842 (right to an account accrues at dissolution unless agreed otherwise) and partnership provisions (Arts. 1806, 1807, 1809) which indicate the partner’s right to account exists while partnership endures and prescription for final accounting runs from dissolution. Thus, prescription did not bar respondent’s demand for accounting and share of profits while the partnership subsisted and until dissolution or written acknowledgment interrupting prescription.

Assessment of Damages and Income Evidence

Respondent presented the restaurant’s cashier (Mrs. Sarah L. Licup), who testified, unrebutted, regarding average gross receipts (about P7,000 per regular day, P10,000 on paydays, plus catering revenue). Petitioner’s counsel waived cross-examination on income issues and repeatedly failed to produce accounting books and records despite court orders and opportunities; the trial court treated those failures as waiver and adverse to petitioner under the Rules of Court. Given the uncontradicted cashier testimony and petitioner’s failure to produce sales records, the courts found substantial evidence to support the profit figures used in computing respondent’s share and held the monetary awards were not excessiv

Case Syllabus (G.R. No. 70926)

Procedural History

Petition for review to the Supreme Court from the decision of the then Intermediate Appellate Court in AC-G.R. No. CV-00881.
Intermediate Appellate Court had affirmed the decision of the then Court of First Instance of Manila, Branch II in Civil Case No. 116725.
Case originated from a complaint filed by private respondent Leung Yiu in the Court of First Instance of Manila, Branch II to recover an amount equivalent to 22% of annual profits of Sun Wah Panciteria since October 1955.
Trial court rendered judgment in favor of private respondent; petitioner filed a verified motion for reconsideration in the nature of a motion for new trial which was granted and led to an amended decision by the trial court.
Petitioner appealed the amended decision to the Intermediate Appellate Court, which modified the dispositive portion in its decision, then later issued a resolution retaining and affirming the trial court’s amended dispositive portion and denying petitioner’s motion for reconsideration.
Petition for review before the Supreme Court resulted in dismissal for lack of merit, affirmance of the respondent court’s decision with modification ordering dissolution of the partnership.

Facts of the Case

Sun Wah Panciteria, a restaurant, was established sometime in October 1955, located at No. 747 Florentino Torres Street, Sta. Cruz, Manila (in front of the Republic Supermarket, near the corner of Claro M. Recto Street), in the heart of Chinatown.
Restaurant was registered as a single proprietorship; licenses and permits were issued to and in favor of petitioner Dan Fue Leung as sole proprietor.
Private respondent alleged that he contributed P4,000.00 to the establishment of Sun Wah Panciteria on October 1, 1955, for which he was to receive 22% of annual profits.
Private respondent claimed he received from petitioner P12,000.00 by Equitable Banking Corporation Check No. 13389470-B representing profits for the year 1974.
Petitioner denied receiving any contribution of P4,000.00 from private respondent, denied issuing the receipt(s) and denied issuing Check No. 13389470-B.

Claims and Relief Sought

Private respondent sought recovery of the sum equivalent to 22% of the annual profits derived from the operation of Sun Wah Panciteria from October 1955 until fully paid, based on his alleged P4,000.00 contribution.
Trial court awarded 22% of net profit of P8,000.00 per day from time of judicial demand, attorney’s fees of P5,000.00, and costs of suit (as amended).
Appellate modifications addressed varying net profit amounts for different periods and temporate damages; final appellate resolution retained the amended trial court dispositive with the date of judicial demand fixed as July 13, 1978.
Supreme Court ultimately affirmed with modification ordering dissolution of the partnership and liquidation incidents.

Evidence Presented by Private Respondent (Plaintiff)

Receipt identified as Exhibit A (written in Chinese characters) acknowledged by petitioner as evidencing acceptance of P4,000.00; translated into English by court-appointed interpreter Ms. Florence Yap, who certified translation correctness and testified.
Private respondent identified petitioner’s signature on Exhibit A (also marked Exhibit A-3) as affixed in private respondent’s presence.
Witnesses So Sia and Antonio Ah Heng corroborated that they were present when Exhibit A was signed by petitioner; So Sia testified he received a similar receipt (Exhibit D) for his P4,000.00 investment.
PC Crime Laboratory examination (ordered by trial court) compared signatures in Exhibits A and D with petitioner’s signatures on pay envelopes of employees (Exhibits H, H-1 to H-24); PC Crime Laboratory Report marked Exhibit J concluded that signatures in Exhibits A and D were those of the petitioner.
Evidence of a deposit of Equitable Banking Corporation Check No. 13389470-B (Exhibit B) in the amount of P12,000.00: Teodulo Diaz, Chief of the Savings Department of China Banking Corporation, testified that check (Exhibit B) was deposited and credited to private respondent’s savings account after clearance; Elvira Rana of Equitable Banking Corporation testified the check was drawn by petitioner and debited against his account, and was returned to petitioner after clearance.
Testimony of Mrs. Sarah L. Licup, cashier of Sun Wah Panciteria, on gross daily receipts: about P7,000.00 on regular days during her shift (3:30 P.M. to 11:30 P.M.), more than P10,000.00 on pay days; catering income ranged from P2,000.00 to P6,000.00 per service; her statements were not rebutted and petitioner’s counsel waived cross-examination.

Evidence Presented by Petitioner (Defendant)

Petitioner’s testimony: denied receipt of P4,000.00; averred he used his savings from prior employments (Camp Stotsenberg, Toho Restaurant) amounting to a little more than P2,000.00 as capital to establish Sun Wah Panciteria.
Presented government licenses and permits showing the restaurant was registered as a single proprietorship in petitioner’s name.
Denied issuance of the receipt marked Exhibit G (note: source also refers to Exhibit D and Exhibit A; petitioner impugned genuineness of Exhibit D and denied issuance of Exhibit B check).
Did not produce business books and records despite subpoenas and promises by counsel; instead presented witnesses claiming supply of goods but not sales records.
Counsel admitted sales were recorded in daily sales books, ledgers, journals and promised to bring such records but failed to produce them despite court continuances and warnings.

Trial Court Findings and Decision

Trial court credited plaintiff’s (private respondent’s) evidence over petitioner’s denials and impugnations.
Trial court found that private respondent contributed P4,000.00 at the time of establishment and that the parties were partners, entitling private respondent to 22% of profits.
Original dispositive portion: ordered defendant to pay plaintiff sum equivalent to 22% of annual profit from October 1955 until fully paid, attorney’s fees P5,000.00 and costs of suit.
Upon motion for reconsideration and supplementation requesting specification of net profit and allowance to adduce evidence, trial court granted motion and rendered amended decision specifying 22% of net profit of P8,000.00 per day from time of judicial demand until fully paid, plus P5,000.00 attorney’s fees and costs.

Motion for Reconsideration; Amended Decision

Private respondent filed verified motion for reconsideration in the nature of a motion for new trial and requested specification of net profit and permission to adduce evidence to make the decision comprehensive.
Trial court granted the motion and issued an amended decision with the dispositive reading: ordering payment of 22% of the net profit of P8,000.00 per day from time of judicial demand, until ful