DAN FUE LEUNG, PETITIONER, VS. HON. INTERMEDIATE APPELLATE COURT AND LEUNG YIU RESPONDENTS.

The petitioner asks for the reversal of the decision of the then
Intermediate Appellate Court in AC-­G.R. No. CV-00881 which affirmed the
decision of the then Court of First Instance of Manila, Branch II in Civil Case
No. 116725 declaring private respondent Leung Yiu a
partner of petitioner Dan Fue Leung in the business
of Sun Wah Panciteria and
ordering the petitioner to pay to the private respondent his share in the
annual profits of the said restaurant.

This case originated from a complaint filed by respondent Leung Yiu with the then Court of First Instance of Manila, Branch
II to recover the sum equivalent to twenty-two percent (22%) of the annual
profits derived from the operation of
Sun Wah Panciteria since October, 1955 from petitioner Dan Fue Leung.

The Sun Wah Panciteria, a restaurant,
located at Florentino Torres Street, Sta. Cruz, Manila, was established sometime in October,
1955.  It was registered
as a single proprietorship and its licenses and permits were issued to and in
favor of petitioner Dan Fue Leung as the sole proprietor.  Respondent Leung Yiu
adduced evidence during the trial of the case to show that Sun Wah Panciteria was
actually a partnership and that he was one of the partners having contributed
P4,000.00 to its initial establishment.

The private respondent’s
evidence is summarized as follows:

About the time the Sun Wah Panciteria started
to become operational, the private respondent gave P4,000.00
as his contribution to the partnership. 
This is evidenced by a receipt identified as Exhibit “A” wherein the petitioner
acknowledged his acceptance of the P4,000.00 by
affixing his signature thereto.  The
receipt was written in Chinese characters so that the trial court commissioned
an interpreter in the person of Ms. Florence Yap to translate its contents into
English.  Florence Yap issued a
certification and testified that the translation to the best of her knowledge
and belief was correct.  The private
respondent identified the signature on the receipt as that of the petitioner (Exhibit A-3) because
it was affixed by the latter in his (private respondent’s) presence.  Witnesses So Sia and Antonio Ah Heng
corroborated the private respondent’s testimony to the effect that they
were both present when the receipt (Exhibit
“A”) was signed by the petitioner. 
So Sia further testified that he himself
received from the petitioner a similar receipt (Exhibit D) evidencing delivery
of his own investment in another amount of P4,000.00.  An examination was conducted by the PC Crime
Laboratory on orders of the trial court granting the private respondent’s
motion for examination of certain documentary exhibits.  The signatures in Exhibits “A” and “D” when
compared to the signature of the petitioner appearing in the pay envelopes of
employees of the restaurant, namely Ah Heng and Maria
Wong (Exhibits H, H-1 to H-24) showed that the signatures in the two receipts were indeed the signatures of the petitioner.

Furthermore, the private
respondent received from the petitioner the amount of P12,000.00 covered by
the latter’s Equitable Banking Corporation Check No. 13389470-B from the profits of the operation of the restaurant for
the year 1974.  Witness Teodulo Diaz, Chief of the Savings
Department of the China Banking Corporation testified that said check (Exhibit
B) was deposited by and duly credited to the private respondent’s
savings account with the bank after it was cleared by the drawee
bank, the Equitable Banking Corporation. 
Another witness Elvira Rana of the Equitable
Banking Corporation testified that the check in question was in fact and in
truth drawn by the petitioner and debited against his own account in said
bank.  This fact was clearly shown and
indicated in the petitioner’s statement of account after the check (Exhibit B)
was duly cleared.  Rana
further testified that upon clearance of the check and pursuant to normal
banking procedure, said check was returned to the petitioner as the maker thereof.

The petitioner denied having received from the private respondent
the amount of P4,000.00.  He contested and impugned the genuineness of
the receipt (Exhibit D).  His evidence is
summarized as follows:

The petitioner did not receive any contribution at the time he
started the Sun Wah Panciteria.  He used his savings from his salaries as an
employee at Camp Stotsenberg in Clark Field
and later as waiter at the Toho Restaurant amounting to a little more than P2,000.00 as capital in establishing Sun Wah
Panciteria.  To
bolster his contention that he was the sole owner of the restaurant, the
petitioner presented various government licenses and permits showing the Sun Wah Panciteria was and still is a
single proprietorship solely owned and operated by himself
alone.  Fue
Leung also flatly denied having issued to the private respondent the receipt
(Exhibit G) and the Equitable Banking Corporation’s Check No. 13389470 B in the
amount of P12,000.00 (Exhibit B).

As between the conflicting evidence of the parties, the trial
court gave credence to that of the plaintiff’s. 
Hence, the court ruled in favor of the private respondent.  The dispositive portion of the decision reads:

“WHEREFORE, judgment
is hereby rendered in favor of the plaintiff and against the defendant,
ordering the latter to deliver and pay to the former, the sum equivalent to 22%
of the annual profit derived from the operation of Sun Wah
Panciteria from October, 1955, until fully paid, and
attorney’s fees in the amount of
P5,000.00 and cost of suit.” (p. 125, Rollo)

The private respondent
filed a
verified motion for
reconsideration in the nature of a motion for new trial and, as supplement to
the said motion, he requested that the decision rendered should include the net
profit of the Sun Wah Panciteria
which was not specified in the decision, and allow private respondent to adduce
evidence so that the said
decision will be comprehensively adequate and
thus put an end to further litigation.

The motion was granted
over the objections of the petitioner.  After hearing, the trial court rendered an
amended decision, the dispositive portion of which
reads:

“FOR ALL THE FOREGOING CONSIDERATIONS, the motion for
reconsideration filed by the plaintiff, which was
granted earlier by the Court, is hereby reiterated and the decision rendered by
this Court on September 30, 1980,
is hereby amended.  The dispositive portion of said decision should read now as
follows:

“WHEREFORE, judgment
is hereby rendered, ordering the plaintiff (sic) and against the
defendant, ordering the latter to pay the former the sum equivalent to 22% of the net profit of P8,000.00
per day from the time of judicial demand, until fully paid, plus the sum of
P5,000.00 as and for attorney’s fees and costs of suit.” (p. 150, Rollo)

The petitioner appealed the trial court’s amended decision to the
then Intermediate Appellate Court.  The
questioned decision was further modified by the appellate court.  The dispositive
portion of the appellate court’s decision reads:

“WHEREFORE, the decision appealed from is modified, the dispositive portion thereof reading as follows:

“1.     Ordering the
defendant to pay the plaintiff by way of temperate damages 22% of the net
profit of P2,000.00 a day from judicial demand to May 15, 1971;

“2.     Similarly, the
sum equivalent to 22% of the net profit of
P8,000.00 a day from May 16, 1971 to August 30, 1975;

“3.     And thereafter
until fully paid the sum equivalent to 22% of the net profit of P8,000.00 a day.

“Except as modified, the decision of the court a quo is affirmed in all
other respects.” (p. 102, Rollo)

Later, the appellate court, in a resolution, modified its
decision and affirmed the lower court’s decision.  The dispositive
portion of the resolution reads:

“WHEREFORE, the dispositive portion
of the amended judgment of the
court a quo reading
as follows:

“WHEREFORE, judgment is rendered in favor of the plaintiff and against the
defendant, ordering the latter to pay to the former the sum equivalent to 22% of the net profit of P8,000.00 per
day from the time of judicial demand, until fully ‘paid, plus the sum of
P5,000.00 as and for attorney’s fees and costs of suit’.

is hereby retained
in full and affirmed in toto it
being understood that the date of judicial demand is July 13, 1978.” (pp.
105-106, Rollo).

In the same resolution,
the motion for reconsideration filed by petitioner was denied.

Both the trial court and
the appellate court found that the private respondent is a partner of the petitioner in the setting up and operations of
the panciteria.  While
the dispositive portions merely ordered the payment
of the respondent’s share, there is no question from the factual findings that
the respondent invested in the
business as a partner.  Hence, the two courts declared that the
private petitioner is entitled to a share of the annual profits of the
restaurant.  The petitioner, however,
claims that this factual finding is erroneous. 
Thus, the petitioner argues:  “The
complaint avers that private respondent extended ‘financial assistance’ to
herein petitioner at the time of the establishment of the Sun Wah Panciteria, in
return of which private respondent allegedly will receive a share in the profits of the restaurant.  The same complaint did not claim that private respondent is a partner of the
business.  It was, therefore, a serious error for the lower court and the Hon.
Intermediate Appellate Court to
grant a relief not called for by the complaint. 
It was also error for the Hon. Intermediate Appellate Court to interpret
or construe ‘financial assistance’ to mean the contribution of capital by a
partner to partnership;” (p. 75, Rollo)

The pertinent portions of
the complaint state:

“2.     That on or about
the latter (sic) of September, 1955, defendant sought the financial
assistance of plaintiff in operating the defendant’s eatery known as Sun
Wah Panciteria, located in
the given address of defendant; as a return
for such financial assistance, plaintiff would be entitled to twenty-two
percentum (22%)
of the annual profit derived from the operation
of the said panciteria;

“3.     That on October
1, 1955, plaintiff delivered to the defendant the sum of four thousand pesos
(P4,000.00), Philippine Currency, of which copy for the receipt of such amount,
duly acknowledged by the defendant is attached hereto as Annex “A”,
and form an integral part hereof;” (p. 11, Rollo)

In essence, the private
respondent alleged that when Sun Wah Panciteria was established, he gave P4,000.00
to the petitioner with the understanding that he would be entitled to twenty-two percent (22%) of the annual profit
derived from the operation of the said panciteria.  These allegations, which were proved, make
the private respondent and the petitioner partners in the establishment of Sun Wah Panciteria because Article
1767 of the Civil Code provides that “By the contract of partnership two
or more persons bind themselves to contribute money, property or industry
to a common fund, with the intention of dividing the profits among
themselves”.

Therefore, the lower
courts did not err in construing the complaint as one wherein the private respondent
asserted his rights as partner of the petitioner in the establishment of the
Sun Wah Panciteria,
notwithstanding the use of the term financial
assistance therein.  We agree with the appellate court’s
observation to the effect that “x x x given its ordinary meaning, financial assistance ‘is
the giving out of money
to another without the expectation of any returns therefrom‘.  It connotes an ex gratia
dole out in favor of someone
driven into a state of destitution.  But
this circumstance under which the P4,000.00 was given
to the petitioner does not obtain in this
Case.” (p. 99, Rollo) The complaint explicitly stated
that “as a return for such financial assistance, plaintiff
(private respondent) would be entitled to twenty-two percentum
(22%) of the annual profit derived from the operation of the said panciteria.” (p. 107, Rollo)
The well-settled doctrine is that the “x x x nature of the action filed in
court is determined by the facts alleged in the complaint as constituting the cause of
action.” (De Tavera v.
Philippine Tuberculosis Society, Inc., 113 SCRA 243; Alger Electric, Inc. v.
Court of Appeals, 135 SCRA 37).

The appellate
court did not err in declaring that the main issue in the instant case was
whether or not the private respondent is a partner of the petitioner in the
establishment of Sun Wah Panciteria.

The petitioner also contends that the respondent court gravely
erred in giving probative value to the PC Crime Laboratory Report (Exhibit
“J”) on the ground that the alleged standards or specimens
used by the PC Crime Laboratory in arriving at the conclusion were never
testified to by any
witness nor has any witness identified
the handwriting in the standards or specimens belonging to the petitioner.  The supposed standards or specimens of
handwriting were marked as
Exhibits “H”, “H-1” to “H-24” and admitted as
evidence for the private
respondent over the vigorous objection of the petitioner’s counsel.

The records show that the PC Crime Laboratory upon orders of the
lower court examined the signatures in the two receipts issued separately by
the petitioner to the private respondent and So Sia
(Exhibits “A” and “D”) and compared the signatures on them
with the signatures of the petitioner on the various pay envelopes (Exhibits
“H”, “H-1” to “H-24”) of Antonio Ah Heng and Maria Wong, employees of the restaurant.  After the usual examination conducted on the
questioned documents, the PC Crime Laboratory submitted its findings (Exhibit
J) attesting that the signatures appearing in both receipts (Exhibits
“A” and “D”) were the signatures of the petitioner.

The records also show that when the pay envelopes (Exhibits
“H”, “H-1” to “H-24”) were presented by the
private respondent for marking as exhibits, the petitioner did not interpose
any objection.  Neither did the
petitioner file an opposition to the motion of the private respondent to have
these exhibits together with the two receipts examined by the PC Crime
Laboratory despite due notice to him. 
Likewise, no explanation has been offered for his silence nor was any hint
of objection registered for that purpose.

Under these circumstances, we find no reason why Exhibit
“J” should be rejected or ignored. 
The records sufficiently establish that there was a partnership.

The petitioner raises the issue of prescription.  He
argues:  The Hon. Respondent Intermediate
Appellate Court gravely erred in not resolving the issue of prescription in
favor of petitioner.  The alleged receipt
is dated October 1, 1955 and the complaint was filed only on July 13,
1978 or after the
lapse of twenty-two (22) years, nine (9) months and twelve (12) days.  From October 1, 1955 to July 13, 1978, no written demands were ever made by private respondent.

The petitioner’s argument
is based on Article 1144 of the Civil
Code which provides:

“Art. 1144.  The
following actions must be brought within ten years from the time the right of
action accrues:

“(1)   Upon a written
contract;
(2)    Upon
an obligation created by law;
(3)    Upon a judgment.”

in relation to
Article 1155 thereof which provides:

“Art. 1155. 
The prescription of actions is interrupted when they are filed
before the court, when there is a written extra-judicial demand by the creditor, and when there
is any written acknowledgment of the debt by the debtor.”

The argument is not
well-taken.

The private respondent is
a partner of the petitioner in Sun Wah Panciteria.  The requisites of a partnership which are –
1) two or more persons bind
themselves to contribute money, property, or industry to a common fund; and 2)
intention on the part of the
partners to divide the profits among themselves (Article 1767, Civil Code; Yulo v. Yang Chiao Cheng, 106
Phil. 110) – have been established.  As
stated by the respondent, a partner
shares not only in profits but also
in the losses of the firm.  If excellent
relations exist among the partners at the start of a business and all the partners are more interested in seeing the firm grow rather than
get immediate returns, a deferment of sharing in the profits is perfectly
plausible.  It would be incorrect to
state that if a partner does not assert his rights anytime within ten years from the start of operations, such rights are
irretrievably
lost.  The private respondent’s cause of action is premised upon
the failure of the petitioner to give him the agreed profits in the operation
of Sun Wah Panciteria.  In effect the private respondent was asking
for an accounting of his interests in the partnership.

It is Article 1842 of the
Civil Code in conjunction with Articles 1144 and 1155 which is applicable.  Article 1842 states:

“The right to an account of his interest shall accrue to any
partner, or his legal representative as against the winding up partners or the
surviving partners or the person or
partnership continuing the business, at the date of dissolution, in the absence
of any agreement to the contrary.”

Regarding the
prescriptive period within which the private respondent may demand an
accounting, Articles 1806, 1807, and 1809 show that the right to demand an
accounting exists as long as the partnership exists.  Prescription begins to run only upon the dissolution
of the partnership when the final accounting is done.

Finally, the petitioner assails the appellate court’s monetary
awards in favor of the private respondent for being excessive and
unconscionable and above the claim of private respondent as embodied in his
complaint and testimonial evidence presented by said private respondent to
support his claim in the complaint.

Apart from his own testimony and allegations, the private respondent
presented the cashier of Sun Wah Panciteria,
a certain Mrs. Sarah L. Licup, to testify on the
income of the restaurant.

Mrs. Licup
stated:

“ATTY. HIPOLITO (direct examination
to Mrs. Licup).

“Q – Mrs. Witness, you stated that among your duties was that you were in
charge of the custody of the cashier’s box, of the money, being the cashier, is
that correct?

“A –  Yes, sir.

“Q – So that every time there is a customer who pays, you were the one
who accepted the money and you gave the change, if any, is that correct?

“A –  Yes.

“Q – Now, after 11:30 (P.M.)
which is the closing time as you said, what do you do with the money?

“A –  We balance it with the manager, Mr. Dan Fue
Leung.

“ATTY. HIPOLITO:

I see.

“Q – So, in other words, after your job, you huddle or confer together?

“A –  Yes, count it all.  I total
it.  We sum it up.

“Q – Now, Mrs. Witness, in an average day, more or less, will you please tell us, how much
is the gross income of the restaurant?

 “A –  For
regular days, I received
around P7,000.00 a
day during my shift alone and during pay
days I receive more than P10,000.00.  That
is excluding
the catering outside the place.

“Q
– What about the catering service,
will you please tell the Honorable Court how many times a week were there catering
services?

“A –  Sometimes three times a month; sometimes two
times a month or more.

xxx                        xxx                               xxx

“Q – Now more or less, do you know the cost of the catering service?

“A –  Yes, because I am the one who receives the payment also of the
catering.

“Q – How much is that?

“A –  That ranges from two thousand to six thousand pesos, sir.

“Q – Per service?

“A –  Per service, Per catering.

“Q – So in other words, Mrs. witness, for your shift alone in a single
day from 3:30 P.M. to 11:30 P.M. in the evening the restaurant
grosses an income of P7,000.00 in a regular day?

“A –  Yes.

“Q – And ten thousand pesos during pay day?

“A –  Yes.

(TSN, pp. 53 to 59,
inclusive, November 15, 1978)

xxx                        xxx                               xxx

“COURT:

Any cross?

“ATTY. UY (counsel for defendant):

No cross-examination,
Your Honor.  (TSN. p.
65, November 15, 1978).” (Rollo. pp.
127-128)

The statements of the cashier were not rebutted.  Not only did the petitioner’s counsel waive
the cross-examination
on the matter of income but he failed to comply with his promise to
produce pertinent records.  When a
subpoena duces tecum was
issued to the petitioner for the production of their records of sale, his
counsel voluntarily offered to bring them to court.  He asked for sufficient time prompting the
court to cancel all hearings for January, 1981 and reset them to the later part
of the following month.  The petitioner’s counsel never produced any
books, prompting the trial court to state:

“Counsel for the defendant admitted that the sales of Sun Wah were registered or recorded in the daily sales book,
ledgers, journals and for this purpose, employed a
bookkeeper.  This inspired the Court to
ask counsel for the defendant to bring said records and counsel for the
defendant promised to bring those that were available.  Seemingly, that was the reason why this case
dragged for quite sometime.  To bemuddle the issue, defendant instead of presenting the
books where the same, etc. were recorded, presented witnesses who claimed to
have supplied chicken, meat, shrimps, egg and other poultry products which,
however, did not show the gross sales nor does it prove that the same is the
best evidence.  This Court gave warning
to the defendant’s counsel that if he failed to produce the books, the same
will be considered a waiver on the part of the defendant to produce the said
books inimitably showing decisive records
on the income of the eatery pursuant to the Rules of Court (Sec. 5(e)
Rule 131).  ‘Evidence willfully
suppressed would be adverse if produced.'” (Rollo,
p. 145)

The records show that the
trial court went out of its way to accord due process to the petitioner.

“The defendant was given all the chance to present all
conceivable witnesses, after the plaintiff has rested his case on February 25, 1981, however, after
presenting several witnesses, counsel for defendant promised that he will
present the defendant as his last witness. 
Notably there were several postponements asked by counsel for the
defendant and the last one was on October 1, 1981 when he asked that this case
be postponed for 45 days because said defendant was then in Hongkong
and he (defendant) will be back after said period.  The Court acting with great concern and
understanding reset the hearing to November
17, 1981.  On said date, the
counsel for the defendant who again
failed to present the defendant asked for another postponement, this
time to November 24, 1981
in order to give said defendant another judicial magnanimity and substantial
due process.  It was however a condition in the
order granting the postponement to said date that if the defendant can not be
presented, counsel is deemed to have waived the presentation of said witness
and will submit his case for decision.

“On November 24, 1981, there being a typhoon prevailing in
Manila said date was declared a partial non-working holiday, so much so, the
hearing was reset to December 7 and 22, 1981. 
On December 7, 1981,
on motion of defendant’s counsel, the same was again reset to December
22, 1981 as previously scheduled which hearing was understood as in
transferable in character.  Again on December 22, 1981, the defendant’s
counsel asked for postponement on the ground that the defendant was sick.  The Court, after much tolerance and judicial
magnanimity, denied said motion and ordered that the case be submitted for
resolution based on the evidence on record and gave the parties 30 days from December 23, 1981, within which to
file their simultaneous memoranda.” (Rollo, pp.
148-150)

The restaurant is located
at No. 747 Florentino Torres, Sta. Cruz, Manila in front of the Republic Supermarket. 
It is near the corner of Claro M. Recto Street.  According to the trial court, it is in the heart of Chinatown
where people who buy and sell jewelries, businessmen, brokers, managers, bank
employees, and people from all walks of life converge and patronize Sun Wah.

There is more than
substantial evidence to support the factual findings of the trial court
and the appellate court.  If the respondent court awarded damages only
from judicial demand in 1978 and not from the opening of the restaurant in
1955, it is because of the petitioner’s contentions that all profits were being
plowed back into the expansion of the business. 
There is no basis in the
records to sustain the petitioner’s contention that the damages awarded are excessive.  Even if the Court is minded to modify the
factual findings of both the trial court and the appellate court, it cannot
refer to any portion of the records for such modification.  There is no basis in the records for this
Court to change or set aside the factual findings of the trial court and the
appellate court.  The petitioner was given
every opportunity to refute or rebut the respondent’s
submissions but, after promising to do so, it deliberately failed to present its books and other evidence.

The resolution of the
Intermediate Appellate Court ordering the payment of the petitioner’s
obligation shows that the same continues until fully paid.  The question now arises as to whether or not
the payment of a share of profits shall continue into the future with no fixed
ending date.

Considering the facts of
this case, the Court may decree a dissolution of the partnership under Article 1831 of the Civil Code which, in part, provides:

“ART. 1831.  On
application by or for a partner the court shall decree a
dissolution whenever:

xxx                            xxx                               xxx

“(3)    A partner has
been guilty of such conduct as tends to affect prejudicially the carrying on of the business;

“(4)    A partner willfully or persistently
commits a breach of the partnership agreement, or otherwise so conducts himself
in matters relating to the partnership business that it is not reasonably
practicable to carry on the business in partnership with him;

xxx                            xxx                               xxx

“(6)    Other circumstances render a dissolution equitable.”

There shall be a liquidation and winding up of partnership affairs, return of capital, and
other incidents of dissolution because
the continuation of the
partnership has become inequitable.

WHEREFORE, the petition for review is hereby DISMISSED for lack of merit. 
The decision of the respondent court is AFFIRMED with a
MODIFICATION that as indicated above, the partnership of the parties is ordered dissolved.

SO ORDERED.

Fernan, C.J., (Chairman), Feliciano, Bidin, and Cortes, JJ., concur.