Civil Law,  Legally Yours

Moran v. Court of Appeals

Moran v. Court of Appeals

G.R. No. L-59956; October 31, 1984

FACTS:

Moran Jr. and Pecson entered into a partnership agreement for the distribution of colored posters of the Constitutional Commission wherein each would contribute P15,000.00 as capital, and that Moran Jr. will print colored posters in the amount of 95,000. Moreover, Pecson will receive a commission of P1,000 a month starting April 15, 1971, up to December 15, 1971 (8 months). Ultimately, Pecson contributed only P10,000.00 of the P15,000.00 promised, with Moran Jr. failing to contribute any amount at all and only printing 2,000 copies of the 95,000.

After the liquidation of accounts, Pecson filed for an action to recover the payment of his share in the profits that the partnership would have earned and payment of unpaid commission. The CA awarded P47,500.00 to Pecson for his share in unrealized profits and P8,000.00 commission. Thus, Moran Jr. appealed that the award his highly speculative and should be avoided and that the award of the commission has no basis in law.

ISSUES:

  1. Is the amount of the award for unrealized profits proper?
  2. Is the amount of Pecson’s commission proper?

HELD:

1. No. The Court held that while Pecson does indeed deserve an award for unrealized profits, the Court agreed that the amount is highly speculative. In applying Art. 1786 and Art. 2200, the Court held that an assessment should be made on how profitable the business venture would be. In the case at hand, there is no evidence that the partnership would have been a profitable venture – as in fact it was considered “doomed from the start”. 

Furthermore, the Court made notice of the fact that: 1) There was a mutual breach of the agreement since Pecson merely paid P10,000.00 of the P15,000; 2) The COMELEC failed to proclaim all 320 Constitutional Commission candidates on time and 3) The existence of hidden risks as with any business venture. 

Thus, the Court further applied Art. 1797 and that each partner must share in the profits and the losses of the venture. Moreover, even with the assurance made by one of the partners that they would earn a huge amount of profits, in the absence of fraud, a partner cannot recover highly speculative profits.

Nevertheless, the partnership earned P6,000.00 as net profit should be divided between Pecson and Moran, Jr. And since opnly P4,000.00 was undesirable by the petitioner in printing the 2,000 copies, the remaining P6,000.00 should be returned to Pecson

2. No. The Court held that while the agreement did indeed stipulate a P1, 000.00 commission every month, which would make the P8,000.00 award proper in theory, the agreement does not state the basis of commission. Thus, the payment of the commission could only have been predicated on extravagant profits. The partnership could not have intended the giving of commission despite loss or failure of the venture. Thus, since the partnership was a failure, Pecson is not entitled to the said commission.

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