Evangelista v.

Abad Santos
G.R. L-31684 – June 28, 1973
J. Makalintal

Digest Author: SDC

Topic: Partners obligations inter se

Case Summary: Respondent was made an industrial partner of Evangelista & Co., a co-partnership
founded in 1954 with Petitioners as the original capitalist partners. The Amended Articles of Co-
Partnership stipulated that profits and losses would be divided among them 70-30, the latter being the
industrial partner’s full share. In 1963, Respondent sued Petitioners for failure to remit her share in the
profits. As defense, Petitioners alleged that the Articles did not reflect their true intent and invoked Art.
1789, that being a judge in the CFI, respondent was engaged in business which the partnership did not
consent to. The Court, affirming both lower court and appellate decision, found for Respondent and
ordered Petitioners to render an accounting of the partnership’s affairs and pay Respondent. It found that
Respondent was an industrial partner. As to Art. 1789, it held that respondent was not engaged in
business antagonistic to the interest of the partnership since being a judge is no business at all. Besides,
Respodnent was already a judge at the time she was made an industrial partner and so Petitioners could
not have expected that she render full industry to the partnership.

Petitioners: Evangelista & Co., Domingo Evangelista Jr., Conchita B. Navarro and Leonarda Abad
Santos
Respondents: Estrella Abad Santos

Doctrines Involved: Art. 17891 seeks to prevent any conflict of interest between the industrial partner
and the partnership, and to insure faithful compliance by said partner with this prestation. Being a judge is
not a business antagonistic to the partnership as contemplated by the law

FACTS:
1. October 9, 1954 – Co-partnership was formed under the name of “Evangelista & Co.” which later
included Estrella Abad Santos, respondent, as an industrial partner.
a. The original capitalist members were petitioners Domigno, Leonardo and Conchita.
b. At the time she was made an industrial partner, Estrella Abad Santos was a judge of the
City Court of Manila.
2. The amended Articles of Co-Partnership indicated that Estrella Abad Santos’ contribution would
be her “industry” and that the profits and losses would be divided among the partners in the
proportion of 70% for the original 3 partners and 30% for Estrella.
3. CASE TRAIL:
4. CFI Petition – decided in favor of Respondent, later affirmed by CA, and SC
a. December 17, 1963 – Estrella sued Petitioners in the CFI of Manila alleging she wasn’t
being paid her dividends. She prayed Petitioners be ordered to render accounting to her of
the partnership business and to pay her corresponding share in the profits.

1
ART. 1789. An industrial partner cannot engage in business for himself, unless the partnership expressly permits
him to do so; and if he should do so, the capitalist partners may either exclude him from the firm or avail
themselves of the benefits which he may have obtained in violation of this provision, with a right to damages in
either case
 b. Petitioners as defense alleged that the Article of Co-partnership did not express the true
agreement of the parties, which was that plaintiff was not an industrial partner and that she
did not in fact contribute industry to the partnership and that her share of 30% was to be
based on profits which might be realized by the partnership only until full payment of the
loan which the partnership obtained from RFC for Php 30,000.
i. They alleged Estrella signed a promisory note as co-maker and mortgaged her
property as security.
c. Decision: CFI found for Estrella and held she was an industrial partner and ordered
defendants to render an accounting of business operations and to pay Estrella amounts due
to her.
5. CA Decision
a. Petitioner: Petitioners (Original Capitalists)
b. Decision: affirmed CFI decision.
o SC – Appeal by Petitioenrs

ARGUMENTS BEFORE THE SUPREME COURT:

● Petitioner’s Argument related to Doctrine:
o Estrella was not an industrial partner:
▪ Articles of Co-partnership did not reflect their true intention
▪ She was to be paid 30% after full payment of the loan which the partnership
obtained from RFC
▪ Estrella did not contribute her full time and industry to the partnership since she
was working as a full time judge. à violates Art. 1789
● Respondent’s Argument related to Doctrine:
o She was an industrial partner and should be paid her shares as stipulated in the Articles of
Co-Partnership.

ISSUES + HELD:
1. W/N CA correctly found that Estrella was an industrial partner of Evangelista & Co – Yes, and
she has the right to demand for a formal accounting and to receive her share in the net profit
resulting from such accounting based on Art. 1899 of the NCC2
o SC is not a trier of facts.
o However, the CA did not merely hold that the Article of Co-Partnership was on its own
conclusive evidence that Estrella was an industrial partner. It was considered along with
other testimonial and documentary evidences which supported the factual conclusion.
o As found by CFI, Petitioners are estopped from challenging the probative value of the
evidence since they admitted their genuineness and due execution.
o Facts as applied to prove that Respondent was an industrial partner:
▪ That the Articles did not reflect the true intent was an afterthought.
● Petitioners argued: AoP did not reflect true intent of parties.
● from June 7, 1955 up to the filing of their answer to the complaint on
February 8, 1964 (8 year period), appellants did nothing to correct the

2
ART. 1899. Any partner shall have the right to a formal account as to partnership affairs:
(1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners;
(2) If the right exists under the terms of any agreement;
(3) As provided by article 1807;
(4) Whenever other circumstance render it just and reasonable
 alleged false agreement of the parties contained in the Articles of Co-
Partnership.
▪ It was never contemplated by the parties that Estrella render full services to the
Partnership.
● P argued: Estrella violated Art. 1789 since she was a judge at the CFI at
the time and failed to devote her full time and industry.
● It was never contemplated by the parties since at the time of the
execution of the Articles of Partnerhip, she was already a judge who
devoted all er time to the performance of the duties of her public office.
● She could not lawfully contribute her full time and industry which is the
obligation of an industrial partner pursuant to Art. 1789 of the Civil
Code.
● Even though Estrella, being a Judge of the City Court of Manila, did not
contribute her “full” time and industry as mentioned in Art. 1789, she
still rendered services for appellants without which they would not have
had the wherewithal to operate the business.
● Art.1 767 does not specify the kind of industry that a pertner may
contribute, hence the said services may legitimately be considered as
appellee’s contribution to the common funnd.
▪ Appellants reliance on Art. 1789 does not stand.
● Art. 17893 seeks to prevent any conflict of interest between the industrial
partner and the partnership, and to insure faithful compliance by said
partner with this prestation.
● In any event, being a Judge cannot be considered as a business, much
less one antagonistic to the partnership.
● That appellee has faithfully complied with her prestation with respect to
appellants is clearly shown by the fact that it was only after filing of the
complaint in this case and the answer thereto appellants exercised their
right of exclusion under the codal art just mentioned by alleging in their
Supplemental Answer after around nine (9) years that plaintiff has never
contributed her industry to the partnership, instead she has been and still
is a judge of the City Court (formerly Municipal Court) of the City of
Manila, devoting her time to performance of her duties as such judge and
enjoying the privilege and emoluments appertaining to the said office,
aside from teaching in law school in Manila, without the express consent
of the herein defendants
▪ For the foregoing, under Art. 1899, Estrella, as an industrial partner, has a right
to demand accounting of the business.

RULING: Judgment appealed from is affirmed.

3
ART. 1789. An industrial partner cannot engage in business for himself, unless the partnership expressly permits
him to do so; and if he should do so, the capitalist partners may either exclude him from the firm or avail
themselves of the benefits which he may have obtained in violation of this provision, with a right to damages in
either case