Lorevill S. Pinoon Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

L-12371 March 23, 1918

LEOPOLDO CRIADO, plaintiff-appellant, vs. GUTIERREZ HERMANOS, defendant-appellant. TORRES, J.: Background: Leopoldo Criado filed a complaint against the firm of Gutierrez Hermanos for the recovery of a sum of money. Criado wanted to recover his share of the capital stock of the firm of Gutierrez Hermanos, since he began his connection therewith, on January 1, 1900, until his separation on December 31, 1911. Leopoldo Criado alleged that accounts presented by the defendant referring to his capital in that firm were based upon a false debit balance of P26,349.13 — a balance which had been previously impeached by the affiant as well as the accounts from which said sum is sought to be derived. Wherefore he again assailed them in their totality on the grounds that some of the entries thereof were improper, other fraudulent, and still other false. Therefore Criado’s counsel moved that defendant be ordered to place immediately at the disposal of Commissioner Wicks all the books, accounts, bills, vouchers, and other documents that might be necessary, in order that said liquidation might be made by defendants counsel, by an order of September 2, 1915, the court ruled in conformity therewith, authorizing the firm of Gutierrez Hermanos to appoint another expert accountant who, together with the one already designated. After a rehearing of the case and an examination of George B. Wicks was made regarding the contents of the report that he submitted after studying for that purpose the books and other documents placed at his disposal by the defendant. In view of the result and the evidence adduced by the parties, and by the said commissioner's report duly supported by vouchers, the court rendered the judgment aforementioned, on September 11, 1916. Counsel for the firm of Gutierrez Hermanos assails in general the judgment appealed from because the trial court did not determine the issues raised in the first, second, third, fourth, sixth, seventh, eighth, ninth, and tenth causes of action, and in defendant's cross-complaint. Second Cause of Action: Facts: In the second cause of action Criado demands the payment of P43,410.86, and alleges that, pursuant to a notarial instrument of March 29, 1900, he became a partner of the firm of Gutierrez Hermanos; and that said document stipulated that the partnership should last
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129. In special defense it alleged that on December 31. inasmuch as the sum shown by said liquidation and balance of the business of the firm at the end of December. he gave his assent thereto and without reserve whatsoever he executed a new partnership contract.605.09 which were in force during the second period from January. Don Miguel Gutierrez de Celis. or P12. Eighth. which was signed by Leopoldo Criado. 5 per cent of which.26. inasmuch as. of which the sum of P25. Therefore the partnership is organized among the parties to this instrument.497. 1900. and Don Leopoldo Criado y Garcia.86. it contained the following: Second. Don Miguel Alonso y Gutierrez. but denied all the other averments of the complaint. 5 per cent.796. 1903. plaintiff Criado's capital on that date was only P25. All earnings or profits that may be obtained shall be distributed among the partners in the following proportion: 37 per cent shall go to Don Placido Gutierrez de Celis. although the manager Miguel Gutierrez de Celis. Miguel Gutierrez de Celis and Daniel Perez de Celis.25 in 1902 and.410. thereby injuring him in said amount of P43. 16 per cent to Don Miguel Alfonso y Gutierrez. 1904.09 belonged to Leopoldo Criado. and 5 per cent to Don Leopoldo Criado y Garcia. there was made a liquidation and balance of the business of the firm — operations which were approved by all the partners with no protest made by the plaintiff before or after said liquidation. and the last two as industrial partners. In order to determine whether plaintiff still has a right to demand the sum that is the subject of his complaint in the second cause of action. to Don Daniel Perez y Alberto. but contrary. Don Placido Gutierrez de Celis. 1903. 37 per cent to Don Miguel Gutierrez de Celis.31. and according to said inventory of December 31.801.129. From clause 7 of said contract. he at once protested. Document1 Page 2 . according to the balance had on December 31. 1903.Lorevill S. made on December 31. Don Daniel Perez y Alberto. Plaintiff also alleged that his capital was P56. it appears that the firm's capital stock amounted to P1.025. according to the inventory of the firm's business. but that said manager assured him that as soon as the probate proceedings concerning the estate of the decedent Miguel Alfonso should be determined said amount would be refunded although in spite of his efforts said promise has not been fulfilled. the profits obtained amounted to P256. In its answer the defendant firm admitted that plaintiff Criado was an industrial partner entitled to 5 per cent of the profits. 1903. the first three as capitalist partners. In the same proportion above established for the profits the capitalist partners shall be liable for all losses or damages that may be sustained. Plaintiff testified that as soon as he learned of such entries. 1904. Pinoon for four years from January 1. it becomes necessary first too decide whether in fact the plaintiff is in estoppel and unable to oppose any valid objection against said liquidation and balance. 1903. formed the basis of the capital mentioned in the articles of partnership executed before a notary on May 9. and.30. by means of false and erroneous entries in the books. succeeded in concealing such profits. among other conditions. belonged to him.

inasmuch as he. in the sum total of the profits. for the purpose of determining the profits that correspond to an industrial partner who shares in the profits from the different transactions carried on by the firm must be added together from which sum must be subtracted that of the losses sustained in its business. as one of the industrial partners is not liable for the losses which the firm may have sustained according to the eighth clause of the notarial instrument of May 29. . and 5 per cent against each of the industrial partners.68 as losses suffered by the firm in its business during the years 1900 to 1903 was notoriously illegal. former manger of the partnership. For the practical application and the fulfillment of the stipulations made by the partners.793.56. at the termination of the partnership in 1903. as capital brought into the new company. But if. 1904. on the contrary. for this constitutes a real loss to the firm.Lorevill S. according to the contract that plaintiff Criado. plaintiff's assets were P56.080.68. in the second and eighth clauses of said articles of partnership of March 29. Wherefore. and his liabilities P1. the losses are greater and exceed the profits in said difference the industrial partner should not be liable. in view of the fact that the author of these irregularities is not living so that compliance with the contract may be demanded of him.. and in the difference which represents the net profits — if these are greater than the losses — the industrial partner shares. Ruling: No. The allotment to the industrial partner Leopoldo Criado of the amount of P25. but. i. Issue: WON the losses of the firm of Gutierrez Hermanos was duly deducted from the share of Criado. Leopoldo Criado's share of the losses being P25. .57. 1900. being merely an industrial partner. e.080.738. without doubt this entry was made for the purpose of showing that Miguel Alonso. we have distributed the losses equally among the three principal partners .25. there being in his favor consequently a balance of P55.09. it follows that.513.129. according to the articles of partnership.69. but as in the instrument of May. 1900. it should be understood that. amount of the bills cancelled in the books in this date which should have been cancelled in previous years on account of difficulty in their collection. Criado alleged that the reason why said false and erroneous entries were made in the firm's books by Gutierrez de Celis was to show the family of the deceased Miguel Alonso that the losses of the firm of Gutierrez Hermanos were due to his poor management of the firm's business Where there appears an entry which reads thus: P501. some of these bills being of such a nature that they should be charged to the account of the management as they are contrary to the provisions of the 5th and 10th clauses of the partnership contract . he protested against the entries therein. It is to be noted that. but that the manager Guiterrez de Celis assured him that he would lose nothing by those entries made in connection with a serious matter then pending. he was credited with only P25.054. Pinoon In an affidavit plaintiff stated that when he learned of the contents of the firm's books. the Document1 Page 3 . was to blame for these losses. . was not liable for any loss whatever. .

Placido Gutierrez de Celis. plaintiff's capital was the amount stated. By a notarial instrument of January 2. Fifth Cause of Action: Facts: According to the document presented by the defendant. Pinoon plaintiff is entitled to demand that the firm of Gutierrez Hermanos pay him in the sum of P30. 1904. each capitalist partner bearing such loss in a pro rata proportion to the capital he represents. The earnings or profits which may be obtained shall be distributed among the partners in the following proportion: Forty per cent to D. upon the same bases and conditions (Exh. In the same proportion provided for the profits. Miguel Gutierrez de Celis. 1908. the partners shall be liable for the losses that may be incurred. Notwithstanding these provisions the partners Don Placido and Don Miguel as principal capitalist partners may liquidate the partnership or alienate its rights whenever they deem proper so to do. before the annotation of the entries assailed as false and fraudulent by plaintiff. Sixteenth. certified as authentic by the defendant's bookkeeper. the expenses necessary for the prosecution of the business being chargeable to the firm as a whole. The eighth and sixteenth clauses of the articles of partnership executed in May. but that.147. the life of the partnership was extended to another term of four years. or to make advisable the dissolution of the partnership. Ruling: Yes. then due action should be taken in conformity with the provisions of said Document1 Page 4 . p. the capital stock of the plaintiff Leopoldo Criado.Lorevill S. which ratified and approved the transactions of the firm of Gutierrez Hermanos from January of that year state the following: Eighth. was P73.60. prior to December 29. Daniel Perez Albertos.87. X. Ten per cent to D. 100). an amount which also appears in the document and tends to prove that on December 31. in case such losses should be of so great importance as to prevent a continuation of the partnership business. which appears to be a copy of plaintiff's stock account. and Ten per cent to D. Issue: WON Criado having a capital stock with the firm of Hermanos Gutierrez should be liable for the losses. 1911. Forty per cent to D. same shall be liquidated. from the two preinstated clauses of the partnership contract it is deduced that the partners should be liable for all the losses incurred by the partnership in the proportion fixed in the 8th clause. 1911. In case the partnership business should incur such losses as to prevent a continuance of the business or to make a dissolution of the partnership advisable.609. Leopoldo Criado Garcia.

Consequently. Document1 Page 5 .671. there should be deducted from plaintiff's capital 10 per cent of this sum or P5.Lorevill S. Pinoon clause 16.716.64 as his share of the loss. The firm of Hermanos Gutierrez shows a loss of P56. and the partners should be liable from the losses in a proportion pro rata to their share in the partnership assets.57.

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