LEOPOLDO CRIADO, PLAINTIFF AND APPELLANT, VS. GUTIERREZ HERMANOS, DEFENDANT AND APPELLANT.

In the ordinary proceedings prosecuted in the Court of First Instance of
Manila by counsel for Leopoldo Criado against the firm of Gutierrez Hermanos for
the recovery of a sum of money, on September 11, 1916, judgment was handed down
whereby said firm was ordered to pay, in addition to other amounts therein
specified, P54,296.62 with interest thereon at the rate of 6 per cent per annum
from May 25, 1912, and whereby it was held that plaintiff was entitled to a
share of .34064 per cent on P818,260.70, the total amount of the unpaid bills,
subject to the liability of 10 per cent contracted toward the defendant in
respect to said bills or to such part thereof as should be found to be
uncollectible, with the costs against the defendant. Both parties excepted from
this judgment and moved for a new trial, which motion was denied by an order of
September 25th of the same year, to which both parties excepted. Plaintiff and
defendant by mutual consent have filed but a single bill of exceptions and the
same was approved, certified and forwarded to the clerk of this court, together
with the oral and documentary evidence of record.

The original complaint was filed in the Court of First Instance on May 25,
1912, and after being twice amended was finally filed on January 15, 1913. Upon
answering it, defendant interposed a cross-complaint. After full trial, judgment
was rendered on July 8, 1913, by which, dismissing plaintiff’s first, second,
third, and fourth causes of action and the cross-complaint of the defendant the
court sentenced the defendant, the firm of Gutierrez Hermanos, to pay the
several sums specified in the fifth, sixth, seventh, eighth, ninth, and tenth
causes of action, with legal interest thereon from May 25, 1912, and ordered
same further to render accounts to the plaintiff for the reason therein stated,
and to pay the costs. From this judgment defendant appealed arid moved for a new
trial. The motion was denied and defendant excepted and filed the proper bill of
exceptions which was forwarded to this court. Upon hearing, a decision was
rendered on March 24, 1915, whereby, for the reasons therein given, the judgment
appealed from was set aside and the record remanded to the court of origin for
the proper proceedings.

The proceedings in the Court of First Instance having been reopened upon
petition by plaintiff, on May 24, 1915, the judge ordered the defendant
Gutierrez Hermanos to render within a period of twenty days a detailed account,
supported by vouchers, of the share which the plaintiff might have in the
capital stock of said firm up to that date. In compliance with this order, the
defendant presented an account (record, pp. 103-124) certified by the bookkeeper
of the firm of Gutierrez Hermanos on June 3 of the same year.

In view of the fact that the defendant firm had not complied with the order
of the court in respect to the account presented, counsel for plaintiff moved in
writing that the clerk of court, McMicking, be appointed so that, in his
presence and in that of the parties, G. B. Wicks might proceed to make a true
liquidation of plaintiff’s said share of the capital stock of the firm of
Gutierrez Hermanos, since he began his connection therewith, on January 1, 1900,
until his separation therefrom, on December 31, 1911. Said motion was
accompanied by an affidavit in which the plaintiff Leopoldo Criado declared
under oath that he had examined the accounts presented by the defendant
referring to his capital in that firm and that said accounts 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, others fraudulent, and still others
false. Therefore plaintiff’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 within a period of 30 days. Despite the motion made by
defendant’s counsel, by an order of September 2, 1915, the court ruled in
conformity therewith, authorizing defendant to appoint another expert accountant
who, together with the one already designated, Wicks, might examine the books
and documents aforementioned. On motion by plaintiff, and notwithstanding the
arguments made by the defendant firm, it was provided by another order of the
court that said firm should comply with what the court had previously ordered,
to wit, to place said books and documents at the disposal of the commissioner
for his examination in the office of the clerk of court, on the three specified
days of the week, from 2.30 o’clock up every afternoon.

After a rehearing of the case and an examination of George B. Wicks was made
regarding the contents of the report that he had submitted after studying for
that purpose the books and other documents placed at his disposal by the
defendant—to which report he attached several documents in proof or
substantiation of the different items mentioned in said report (Exhibit Z-3)—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. To this both parties excepted
and moved for a new trial. This motion was denied, exception was taken, and,
upon receipt of the proper bill of exceptions, both appeals were forwarded in
the usual manner.

Counsel for the defendant-appellant 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; and inasmuch as in the judgment the
contrary appears with the exception of the first cause of action, the court will
now proceed to examine each of the causes of action referred to in the complaint
and assailed by the defendant and also the cross-complaint filed by the latter
in its answer.

The first cause of action consists in the obligation assumed by Miguel
Alonso, formerly one of the general partners and the manager of the firm of
Gutierrez Hermanos, to pay to the plaintiff Leopoldo Criado the sum of P1,100 by
reason of the contract of loan of said sum executed by Alonso in behalf of
Criado, and to prevent plaintiff from suing for the recovery of that debt an
action against the testate or intestate estate of the debtor who died without
having paid his debt; the other partner Miguel Gutierrez de Celis, manager of
the firm, succeeded in persuading the plaintiff Criado to refrain from suing for
the recovery of his credit by promising to return said sum to Criado—this not
being a strange obligation, for at the time of his death the deceased debtor
Miguel Alonso, was a partner in the firm of Gutierrez Hermanos and had a share
in the firm’s assets. But the fact is that from 1898, when Alonso died, until
1912, the date the complaint was filed, such settlement had already been made of
the decedent’s said share and in spite of the attempts to collect made by the
creditor he was unable to recover the loan.

Even on the supposition that at the time of his death the debtor Miguel
Alonso certainly and positively left this debt and that in order to avoid
judicial proceedings on the part of the creditor, Miguel Gutierrez de Celis
subrogated and put himself in the place of the debtor, binding himself to pay
said amount to plaintiff, yet, in view of the fact that said loan was made as an
independent private act, unconnected with the mercantile operations of the firm
of Gutierrez Hermanos, and that the record does not duly show that this firm,
through its manager assumed the obligation to reimburse the sum, there is no
provision of law to warrant us in holding that the firm of Gutierrez Hermanos is
obliged to pay the amount claimed by plaintiff as the subject-matter of his
first cause of action.

In the second cause of action plaintiff 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 for four years from January 1, 1900, and, among
other conditions, it contained the following:

“Second. Therefore the partnership is organized among the parties to this
instrument, Don Placido Gutierrez de Celis, Don Miguel Gutierrez de Celis, Don
Miguel Alonso y Gutierrez, Don Daniel Perez y Alberto, and Don Leopoldo Criado y
Garcia, the first three as capitalist partners, and the last two as industrial
partners.”

“Eighth. 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; 37 per cent to Don Miguel Gutierrez de Celis; 16 per
cent to Don Miguel Alonso y Gutierrez; 5 per cent, to Don Daniel Perez y
Alberto; and 5 per cent to Don Leopoldo Criado y Garcia. In the same proportion
above established for the profits the capitalist partners shall be liable for
all losses or damages that may be sustained.”

A copy of said instrument was presented as Exhibit A and made an integral
part of the complaint.

Plaintiff also alleged that, according to the books of the defendant firm,
his capital was P56,796.25 in 1902, and, according to the balance had on
December 31, 1903, the profits obtained amounted to P256,025.31, 5 per cent of
which, or P12,801.26, belonged to him, according to the eighth clause of the
articles of partnership, although the manager Miguel Gutierrez de Celis, by
means of false and erroneous entries in the books, succeeded in concealing such
profits, thereby injuring him in said amount of P43,410.86. Plaintiff testified
that as soon as he learned of such entries, he at once protested, but that said
manager assured him that as soon as the probate proceedings concerning the
estate of the decedent Miguel Alonso should be determinated said amount would be
refunded although in spite of his efforts said promise has not been
fulfilled.

In its answer the defendant firm admitted that plaintiff Criado was an
industrial partner entitled to 5 per cent of the profits, but denied all the
other averments of the complaint. In special defense it alleged that on December
31, 1903, 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
plaintiff before or after said liquidation, but on the contrary, he gave his
assent thereto and without reserve whatsoever he executed a new partnership
contract, inasmuch as the sum shown by said liquidation and balance of the
business of the firm at the end of December, 1903, formed «the basis of the
capital mentioned in the articles of partnership executed before a notary on May
9,1904. Finally, the defendant alleged that, in accordance with the provisions
of section 43 of the Code of Civil Procedure, this second cause of action had
already prescribed, inasmuch as its object, the recovery of personal property,
prescribed after four years, just as an action for damages by reason of
fraud.

The purpose of the second cause of action exercised by plaintiff’s counsel is
to obtain from the defendant the share of the profits earned by the firm from
1900 to December 31, 1903, belonging to plaintiff, by reason of the partnership
contract—a contract that produced reciprocal rights and obligation between the
partners—and if the record shows as duly proven that there were profits, the
obligation on the part of the defendant firm to pay to plaintiff his share of
said profits at the rate of 5 per cent is inevitable, there appearing no just
and legal reason in the record for exempting the defendant from the fulfillment
of said obligation. It is therefore not proper to assert that the action brought
by plaintiff has for its object the recovery of personal property, or to demand
damages for fraud, and therefore the period for prescription is not the four
years fixed by section 43, paragraph 3, of the Code of Civil Procedure, but that
of ten years, as provided in paragraph 1 of said section, inasmuch as the action
brought is founded on a contract in writing and demand is thereby made for the
payment of a certain net sum, entered in the books of the firm of Gutierrez
Hermanos, for the prescription of which the lapse of ten years is required—a
period which certainly has not elapsed since the last balance was made of the
business of the firm of which Leopoldo Criado was a partner.

In order to determine whether—besides the sum of P25,129.09 which constituted
the capital brought by the plaintiff Leopoldo Criado, as capitalist, during the
second period of the firm newly organized in 1904—plaintiff still has a right to
demand the sum that is the subject, of his complaint in the second cause of
action, or any other sum that might be found to be a remainder of the salary
owing him in his capacity of industrial partner during the first period of the
firm organized for four years from January, 1900, it becomes necessary first to
decide whether in fact the plaintiff is in estoppel and unable to oppose any
valid objection against said liquidation and balance; inasmuch as, according to
the inventory of the firm’s business, made on December 31, 1903, which was
signed by Leopoldo Criado, Miguel Gutierrez de Celis and Daniel Perez de Celis,
plaintiff Criado’s capital on that date was only P25,129.09, the sum recorded as
his capital in the articles of partnership, Exhibit O, which were in force
during the second period from January, 1904, although this contract was executed
on May 9 of that year. From clause 7 of said contract, and according to said
inventory of December 31, 1903, it appears that the firm’s capital stock
amounted to P1,605,479.30, of which the sum of P25,129.09 belonged to Leopoldo
Criado. as the capital brought by him into the new firm.

In an affidavit plaintiff stated that when he learned of the contents of the
firm’s books, he protested against the entries therein, but that the manager
Gutierrez de Celis assured him that he would lose nothing by those entries made
in connection with a serious matter then pending; that afterwards he learned
that said entries had been made in the books through fear that Jose Fortiz, a
creditor of 5 per cent of the profits, should claim his share of the profits
pertaining to the years 1902 and 1903; that in fact Fortiz did bring suit
against Gutierrez Hermanos and obtained a favorable judgment not only in the
Court of First Instance but also in the Supreme Court which affirmed the
judgment of the lower court (record, p. 381) ; that another 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 reported in
his letter received during his lifetime from Gutierrez de Celis were due to his
poor management of the firm’s business (record, pp. 381 and 382) ; that as, in
spite of the repeated steps taken by plaintiff, said Gutierrez de Celis did not
fulfill his promise to pay the sums which had been unduly withheld by means of
those improper entries, plaintiff therefore finally refused to sign the, balance
sheet for the business of 1909, but did sign the previous one containing the
record of a loss of Pll0.000 and also the partnership contract of 1904, showing
his capital to be P25,129.09 as he believed that Miguel Gutierrez de Celis would
reimburse him, as he had promised, his share of the sums which had been entered
as losses in the firm’s books.

In Exhibit 10 (record, p. 205) there appears an entry which reads thus:

“P501,513.57, 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, 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 * * * but, 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, we have distributed the
losses equally among the three principal partners * * * and 5 per cent against
each of the industrial partners, Leopoldo Criado’s share of the losses being
P25,080.68.”

Without doubt this entry was made for the purpose of showing that Miguel
Alonso, former manager of the partnership, was to blame for these losses. It is
to be noted that, according to the contract, plaintiff as an industrial partner
is not liable for said losses; therefore in this distribution said sum was
unduly deducted from his share of the assets.

In order to prove the certainty of the protest made by plaintiff and the
repeated promises of payment by Miguel Gutierrez de Celis, Attorney Eduardo
Gutierrez Repide was called as a witness and testified that, as a consequence to
the complaint made by the plaintiff to the attorney Marple, one of the members
of the Hartigan law firm, against the acts of the manager of the firm of
Gutierrez Hermanos—a proceeding which, as plaintiff stated produced the effect
of continually reducing his assets in the firm by order of the said Marple—he,
witness, went to confer with said manager Gutierrez de Celis who after learning
of plaintiff’s complaint stated to witness that there was .then good and
sufficient reason for making it appear in the firm’s books that the industrial
partner Leopoldo Criado had less assets in the firm than in reality he had, but
that he should not worry further as later on the firm would pay him the reduced
amount of the forty-three thousand and odd pesos which made up the reduction,
and that, sometime afterwards, witness having been called as a friend, and not
as an attorney, by said manager of the firm, on meeting the latter, he learned
that just then Leopoldo Criado was refusing to sign the instrument setting forth
the new articles of partnership for a new period because said manager had not
fulfilled his promise to return to plaintiff the aforesaid sum deducted from his
capital stock, on which occasion the notary Barrera was there waiting; that then
Gutierrez de Celis directed the witness to tell plaintiff not to worry, and that
said sum would be returned to him; that therefore witness, trusting in these
words of the manager, advised plaintiff to sign the instrument, just as he did;
and that witness afterwards learned that these promises had not been
fulfilled.

In view of the evidence adduced by plaintiff, not rebutted by counsel for the
defendant, it cannot be held that plaintiff was in estoppel immediately after
having signed the partnership contract of May 9, 1904, in which it appears that
he brought into the new firm, as capital of his own, P25,129.09, nor may it be
said that he was not entitled to claim the rest of his assets in the firm during
the first period from 1900 to 1903, to wit, the difference between the sum of
P56,793.25, plaintiff Criado’s capital as an industrial partner and said
P25,129.09, the capital brought into the new firm, inasmuch as it was not the
plaintiff, but the manager of the firm, Miguel Gutierrez de Celis, who
intentionally and deliberately induced Leopoldo Criado to sign said partnership
contract of May, 1904, in which plaintiff appeared as a capitalist partner for
the last mentioned sum brought into the general assets of the firm under the
repeated promise that he would afterwards be paid the rest of the assets due him
up to the aforestated sum of P56,793.25, the amount of capital standing to his
credit at the time of the termination of the previous partnership on December
31, 1903.

As aforesaid, plaintiff signed the instrument of 1904 in the belief that the
manager of the firm of Gutierrez Hermanos would fulfill the promise he had made
not only to the plaintiff but also to attorney Gutierrez Repide; wherefore, it
is evident that the defendant cannot set up estoppel against the plaintiff, who
relied upon said repeated promise (Act No. 190, sec. 333), inasmuch as the
defendant was aware that plaintiff, as an industrial partner, was entitled to
collect a greater sum as a part of his capital than that brought into the new
partnership and he had an indisputable right to contradict and adduce oral
evidence against the contents of said instrument of May 9, 1904 (Act No. 190,
sec. 285), in case the exception of the plaintiff which the defendant denied
were based on the contents of that instrument, and likewise against the
liquidation and balance made at the expiration of the term of the first
partnership, causing to appear in said balance and in the books of the firm,
among other entries, that aforementioned sum of P501,513.57, certified to in the
document Exhibit 10, this amount is sufficiently large when distributed among
the partners, as losses when plaintiff Criado, 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, 1900. The allotment to the
industrial partner Leopoldo Criado of the amount of P25,080.68 as losses
suffered by the firm in its business during the years 1900 to 1903 was
notoriously illegal, inasmuch as he, being merely an industrial partner, was not
liable for any loss whatever.

Plaintiff assails several entries made in the books of the firm consisting of
losses in hemp, merchandise, depreciation of steamers, and reductions in the
capital stock belonging to the partners, all amounting to P793,199.24, as well
as the net loss estimated at P110,578.38. But it suffices our purpose to mention
the reduction as losses, distributed among the partners, of P501,613.57,
P25,080.68 of which was charged against the plaintiff as his proportionate loss
of the capital, in order to show the propriety of plaintiff’s averments that
without any good reason or ground whatever he sustained a loss by the decrease
of his capital.

For the practical application and the fulfillment of the stipulations made by
the partners, in the second and eighth clauses of said articles of partnership
of March 29, 1900, it should be understood that, for the purpose of determining
the profits that correspond to an industrial partner who shares in the profits,
but is not liable for the losses, all the various 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, and in the
difference which represents the net profits—if these are greater than the
losses—the industrial partner shares, i. e., in the sum total of the profits.
But if, on the contrary, the losses are greater and exceed the* profits in said
difference the industrial partner should not be liable, for this constitutes a
real loss to the firm.

Wherefore, having examined the documents presented at the trial, among them
Exhibits C, F, H, P, 2 and 8 as well as the report of the commissioner, Wicks,
Exhibit Z-3, together with the documents attached by him to his report, and
taking into account that only sixty-seven thousand and odd pesos could be
collected from the credits considered as uncollectible, and that the plaintiff,
as an industrial partner, should not be liable for the losses, according to the
articles of partnership, it follows that, at the termination of the partnership
in 1903, plaintiff’s assets were P56,793.25, and his liabilities P1,054.56,
there being in his favor consequently a balance of P55,738.69; but as in the
instrument of May, 1904, he was credited with only P25,129.09, as capital
brought into the new company, the plaintiff is entitled to demand that the firm
of Gutierrez Hermanos pay him in the sum of P30,609.60.

Furthermore, in the instrument of May 9, 1904, it is not stated that the
amount brought in by plaintiff was the balance and sole asset that he had as an
industrial partner in the extinct firm in 1903, nor that he condoned and
renounced any other assets he might have therein; consequently, he has not lost
his right to collect the rest of his capital by having signed said, instrument,
and it is not fair that his copartners should benefit with no just reason and to
his prejudice.

The commissioner, Wicks, awarded plaintiff P32,875.46, as a part of his
capital which he was entitled to collect (Exhibit Z-3). Plaintiff accepts this
sum, though he demanded more in his complaint; but this court can not accept the
commissioner’s conclusion in this particular, inasmuch as plaintiff admitted
that his capital, on December 31, 1902, was the sum aforementioned which appears
in the defendant’s books, and in 1903 the firm of Gutierrez Hermanos netted no
profits from its business; because, as a result of the commissioner’s
examination of the books and papers of the defendant firm, he unduly awarded
plaintiff P6,205.25, as a part of his capital, which the defendant had failed to
pay him in the years 1900 to 1902, and P1,660.91, as a part of his assets unduly
excluded by the defendant firm from his account of invested capital in 1903,
both amount aggregating P7,866.17. It is to be observed that plaintiff agrees
that his capital in 1903, according to the defendant firm’s books, amounts to
P56,793.25, without the debt of P1,054.56.

On pages 8 to 12 of Exhibit Z-3 the commissioner Wicks also unduly charged
plaintiff 5 per cent of the interests on certain personal accounts that were
canceled in the books, and on certain sums which appeared on the firm’s books as
losses pertaining to the years 1904 to 1911, as being related to certain other
accounts that originated during the period 1900 to 1903. These charges were
improper because the interests on the accounts stricken from the books are, like
the principal debts, also losses for which, according to the articles of
partnership, the industrial partner should not be held liable. The amount thus
unduly charged against plaintiff on account of the said 5 per cent interest
aggregates P5,600.32, which sum, subtracted from said P7,866.17, an amount also
unduly paid, leaves a difference of P2,265.85 likewise unduly credited to
plaintiff and which apparently increases his assets. This latter sum, subtracted
from that awarded by the commissioner, shows that plaintiff is entitled only to
the sum of P30,609.60, a sum which, with the sole difference of one centavo
through inaccuracy in the calculations, we deem to be mathematically correct,
lawful, just, and in conformity with the stipulations made by and among the
partners in said instrument; and therefore the defendant should be ordered to
pay the same, together with the legal interest thereon from the date of the
filing of the complaint.

As regards the third cause of action in the previous judgment which was set
aside, the complaint, in so far as this cause of action was concerned, was
dismissed and upon a reopening of the case, in the subsequent judgment rendered
therein on September 11, 1916, the court abstained from granting the petition
made in connection with said third cause of action; notwithstanding, the
plaintiff-appellant in his brief made no assignment of error with respect to
this matter, nor did he request the court to make any ruling on the petition
submitted in connection with said cause of action. Therefore, notwithstanding
the agreement contained in the document Exhibit 50, and in view of the fact that
plaintiff tacitly waived any right he might have had to enforce this claim,
judging from his conduct in the matter of the collection of the sum of P406.99,
also mentioned by the commissioner in his report Exhibit Z-3, this court
dismisses the complaint in so far as said third cause of action is
concerned.

In the judgment appealed from, the trial court holds that the item relative
to the shares of stock in the Bataan mines pertained to the losses suffered in
1906 and should have been charged to the account of profits and losses as,
according to the 8th clause of the articles of partnership, plaintiff had
suffered a loss not only of 5 but 10 per cent. The plaintiff-appellant, likewise
makes no assignment of error against this judicial declaration. Therefore the
complaint is also dismissed with respect to the fourth cause of action. By the
fifth cause of action counsel for plaintiff demands payment of the sum of
P88,245.93, and the trial court, for the reasons stated in the judgment, held
that the defendant firm was obliged to pay to plaintiff the sum of P51,296.62,
with legal interest thereon from May 25, 1912, the date of the filing of the
complaint. This finding has not been assailed, nor has any error been assigned
against it by the plaintiff-appellant in his brief, but the defendant-appellant,
ordered in the judgment to pay that sum, made an assignment of errors based on
the reasons set forth in its brief.

The plaintiff having impliedly acquiesced in the finding of the trial court
with respect to the fifth cause of action, we shall now proceed merely to
inquire whether that court actually committed the errors assigned to the
judgment by the defendant-appellant.

According to the document Exhibit 7, presented by the defendant, which
appears to be a copy of plaintiff’s stock account, certified as authentic by the
defendant’s bookkeeper, the capital stock of the plaintiff Leopoldo Criado,
prior to December 29, 1911, was P73,147.87, an amount which also appears in the
document (Exhibit P) and tends to prove that on December 31, 1911, plaintiff’s
capital was the amount stated, before the annotation of the entries assailed as
false and fraudulent by plaintiff.

The eighth and sixteenth clauses of the articles of partnership, Exhibit O
(record, p. 82), executed in May, 1904, which ratiffed and approved the
transactions of the firm of Gutierrez Hermanos from January of that year state
the following:

“Eighth. The earnings or profits which may be obtained shall be distributed
among the partners in the following proportion:

“Forty per cent to D. Placido Gutierrez de Celis;

“Forty per cent tp D. Miguel Gutierrez de Celis;

“Ten per cent to D. Daniel Perez Albertos; and

“Ten per “cent to D. Leopoldo Criado Garcia.

“In the same proportion provided for the profits, the partners shall be
liable for the losses that may be incurred.”

“Sixteenth. 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, same shall be liquidated, each capitalist partner bearing
such loss in a pro rata proportion to the capital he represents, the expenses
necessary for the prosecution of the business being chargeable to the firm as a
whole. 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.”

By a notarial instrument of January 2, 1908, the life of the partnership was
extended to another term of four years, upon the same bases and conditions (Exh.
X, p. 100).

From the two preinserted 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; but that, in case such
losses should be of so great importance as to prevent a continuation of the
partnership business, or to make advisable the dissolution of the partnership,
then due action should be taken in conformity with the provisions of said clause
16, and the partners should be liable from the losses in a proportion pro rata
to their share in the partnership assets; in consequence whereof, plaintiff
should be liable at the rate of 10 per cent of the losses sustained.

The trial judge held that, according to the balance sheet (Exhibit P)
admitted by the defendant (sten. notes, p. 45), the profits in 1911 were
P120,986.34; but a mere reading of this balance sheet shows that the profits
were not so much as the plaintiff claims, even by adding thereto the sum of
P30,000, nor did they amount to the sum fixed by the court, for the reason that
that same document shows losses of P21,963.38 for general expenses and of
P22,569.41 for the account on its face, which accounts bear debit balances.

In order to determine the exact amount of the profits and losses during the
year 1911, it becomes necessary to examine the 1910 inventory, not discussed by
the litigants, and to make a comparison between its contents and those of the
1911 inventory. Having examined various documents stating accounts of several
kinds relating to the business of the firm of Gutierrez Hermanos, as those of
merchandise, various debtors, furnitures, shares, consignments, vessels, cash
operations of provincial business, and rural and urban properties, it appears
that the active capital of the partnership was, on December 31, 1911,
P2,685,096.40.

According to the inventory Exhibit 51 (record, p. 172), the liabilities of
the partnership were P789,228.65 in 1911.

The unpaid accounts aggregate a total of P148,965.66. In his report (Exhibit
Z-3) the commissioner classified these credits as uncollectible, doubtful and of
slow collection, a classification we find very just, since the entry No. 1657,
Exhibit T, admits that a part of such credits, without being uncollectible or
doubtful, is of slow collection. According to said commissioner’s report, the
uncollectible credits amount to P33,746.58, an amount which may, in justice, be
considered as lost; those doubtful amount to P39,864.49, and those of slow
collection to P75,354.59, making a total of P118,219.08.

We cannot consider as lost the credits of slow collection nor even the
doubtful ones, as there is the hope that they may be collected in the future;
therefore the sum of the doubtful credits and those of slow collection should be
deducted, as unpaid accounts from the liabilities which, consequently, are
reduced to P671,019.57, an amount that still must be reduced to P662,337,
because in 1912 the balance of P8,682.57, Ramon Madarieta’s debt, was collected
as the commissioner states in his report. According to the entry No. 1658,
Exhibit U, the active capital was reduced on account of the difference in the
price of hemp, by the sum of P110,091.19. Therefore, deducting from the
liabilities the excess of P102,534.27, it appears that, on, December 31, 1911,
the liabilities were only P559,802.73, which amount, subtracted from the active
capital, shows that the firm’s net capital stock on that date was P2,125,293.67,
and this sum, compared with the capital that the defendant firm had on December
31, 1910, which, according to Exhibit Z (record, p. 120) was P2,182,010.04,
shows a loss of P56,716.57. Consequently, there should be deducted from
plaintiff’s capital 10 per cent of this sum or P5,671.64 as his share of the
loss.

The capital which plaintiff had in the firm in 1911, according to Exhibit 7
(record, p. 197), amounts to P76,141.08, a balance which constituted his capital
on December 31, 1910, and adding thereto the sum of the amounts collected,
P605.50, the result is that plaintiff’s true assets, in his account of capital
stock, must be P76,746.58. Deducting from this sum that of P2,570.98 which is
charged as a debit against plaintiff, there appears a net balance in his favor
of P74,175.60 and, deducting from this sum 10 per cent of the P56,716.37, or
P5,671.64 as losses, there results the difference of P68,503.97, the sum which
he was entitled to collect from the defendant by this fifth cause of action—
although the amount was reduced to P51,296.62 as fixed in the judgment—the
payment of which the defendant is obliged in the manner stipulated in the 19th
clause of the articles of partnership, in proportion to the total net capital,
that is, at the rate of 3.22 per cent with legal interest from the date of the
filing of the complaint.

By the sixth cause of action plaintiff claims the sum of P2,000, alleging
that same was unduly charged against his private account when, in truth and in
fact, in consequence of a compromise made by advice of the attorneys of the
defendant, the former firm of Del Pan and Ortigas, he, as manager of the
defendant firm, paid said sum to Leopoldo who for this reason, in spite of his
better right, desisted from claiming P8,000 from Tirso Nery against whom the
defendant then had an action pending.

The trial court rendered judgment in favor of the plaintiff for P2,000, with
legal interest thereon, at the first hearing of this case, and at the second
hearing held that plaintiff should be paid P1,800, considering the remaining
P200 as plaintiff’s share in the loss suffered by the firm on account of said
compromise.

The defendant alleged that its manager’s statement shows that this sum of
P2,000 was paid by Gutierrez Hermanos on the account of Leopoldo Criado, as
there was no need of buying this credit of Leopoldo. Ferrer against Tirso Nery,
and that while acting as manager plaintiff took advantage of the opportunity to
buy said credit for 25 per cent of its nominal value.

Plaintiff testified that Miguel Gutierrez de Celis read the complaint of
Leopoldo Ferrer and believed that it was advisable to pay this creditor’s claim;
that therefore De Celis himself drew the check for the payment of Ferrer’s claim
and ordered plaintiff to go to court in company with the attorney to stipulate a
compromise about the matter.

The manager, Miguel Gutierrez de Celis, testified that he had no knowledge of
that complaint and of that compromise ; but the court, who saw and observed
these witnesses while they were testifying, gave credence to plaintiff’s
testimony, and we see no reason whatever for modifying his judgment in this
matter, for the evidence as a whole tends to prove that plaintiff told the
truth.

So therefore plaintiff is entitled to recover from the defendant the sum of
P1,800 but must suffer the loss of the remaining P200 as his share of the loss
of the credit.

In the seventh cause of action plaintiff claims compensation for the services
rendered the defendant firm at the instance of Miguel Gutierrez de Celis, and
alleged that a just and reasonable compensation from December 31, 1911, when he
left the firm, until March 30, 1912, is P1,000 per month, such services being
rendered at the request of Miguel Gutierrez de Celis, with the promise that
compensation; would be in accordance with the profits obtained; that this value
of services, P1,000 per month, was estimated on the basis of the work done by
him and the profits obtained; that he therefore demanded of Miguel Gutierrez de
Celis the payment of said compensation, but that the latter refused. to pay
anything (record, p. 427).

The manager Miguel Gutierrez de Celis testified that Leopoldo Criado lodged
and boarded in the house of Gutierrez Hermanos during the months of January,
February, and March, 1912; that his work consisted solely in being there and
seeing that the things were accomplished; that he intervened in the preparation
of the balance sheets; and that consequently his services were of no value.

Upon the foregoing evidence the lower court rendered judgment in favor of the
plaintiff for the amount claimed and fixed by himself, and basing judgment on
the nature of his work and on what he had earned previously as a partner.

In trying to prove that the trial court erred in its award in favor of
plaintiff for this cause of action, counsel for the defendant says, on page 33
of the Spanish brief, No. 9300, that plaintiff could not establish his right
under this cause of action; that, according to the testimony of the defendant’s
manager, the sole reason why plaintiff continued in the firm after December 31,
1911, was to make the final balance sheets; and that therefore he can recover
nothing for his services because the rule established in various American cases
cited is that a liquidator-partner is not entitled to any compensation for his
services as such, unless there are special stipulations in the matter of
circumstances from which such contractual stipulations may be deduced.

Assuming that the rule cited were applicable in this country, the same rule
favors the plaintiff for, in the present case, there was not only an implied but
an express contract that defendant should pay plaintiff a compensation
proportionate to the profits that might be obtained from the business of the
firm.

With respect to the amount of that compensation, counsel for the defendant
say on the aforecited page of their brief, that plaintiff testified that his
salary ought to be in accordance with the profits that might be obtained but
that he did not prove how much he could have earned elsewhere.

It is undeniable that plaintiff did render services to the defendant firm
when he was not obliged to do so gratuitously, for, neither in the partnership
contract (Exhibit 0), nor in the law, is there any provision whatever to the
effect that plaintiff as a partner was obliged to liquidate the business without
compensation, since among the partner’s obligations as prescribed by articles
170 to 174 of the Code of Commerce, such an obligation does not appear, but on
the contrary, articles 228 and 229 of the said Code provide that in general or
limited partnerships, should there be no objection on the part of any of the
partners, the persons who managed the common funds shall continue in charge of
the liquidation. Plaintiff, without being obliged, rendered service to the
defendant at the manager’s request, with the understanding that his compensation
should be in proportion to the profits that might be obtained, and, therefore,
it is just and reasonable that such services should be remunerated.

As regards the amount of the compensation we do not find satisfactory
rebuttal of plaintiff’s testimony in this matter, as the manager merely said
that plaintiff’s services were worth nothing, a statement that falls by its own
weight, for, however insignificant may be the work one person does on behalf of
another, it is always worth something. There is no evidence that the benefits on
which plaintiff bases the estimate of his compensation were not received nor do
we find his estimate exaggerated. Nor does there appear any reason whatever for
modifying the judgment of the trial court in respect to this point.

Therefore the defendant ought in justice pay to the plaintiff the amount
claimed in this seventh cause of action.

In the eighth cause of action plaintiff claims the sum of P52 as his 10 per
cent share of the P520 which La Germinal paid the defendant as dividend
obtained in 1911 and corresponding to the shares of stock the defendant held in
that company, alleging that, notwithstanding the fact that the defendant
collected said amount, it failed to credit him with P52, the sum to which he was
entitled.

In its answer defendant admitted that it collected the dividend mentioned,
and that plaintiff was entitled to the payment of the P52.

Plaintiff testified (record, p. 429) that the books do not show that the sum
of P520 was divided among the partners. Counsel for the defendant admitted that
they had no evidence to present in respect to this cause of action.

Therefore plaintiff has an unquestionable right to collect from the defendant
the sum of P52, as held by the trial court.

By the ninth cause of action plaintiff claims the payment of P1,171.11 as his
10 per cent share of the P11,711.16 which the insurers of several of the
defendant’s steamers paid on account of certain damages suffered by these
vessels—said repairs were paid proportionately by all the partners—and that,
notwithstanding the collection of this sum, defendant did not pay him his share
thereof.

Defendant denied that it received P11,711.16, but admitted that it did
receive P9,032.92, and that of this sum plaintiff should be credited with
P953.90.

The court below rendered in favor of plaintiff judgment for P953.90, from
which judgment he did not appeal, nor did the defendant make any assignment of
error in respect thereto. We see no reason whatever for changing or modifying
this finding, for the defendant admitted, as aforesaid, that plaintiff was
entitled to the amount awarded him in the judgment. We therefore affirm this
part of the judgment.

By the tenth cause of action plaintiff asks judgment for P3,000, alleging
that in 1911, after he had ceased to be a partner of Gutierrez Hermanos, the
defendant firm charged to the account of “Items pending collection” and credited
in favor of Movellan and Angulo, of Paris, insurers of the defendant’s steamers,
P35,334.09 for the premiums on the insurance of said steamers for the year 1912,
thereby diminishing the partners’ capital; and that of said P35,334.09, he is
entitled to P3,000 which the defendant’s manager failed to pay plaintiff,
notwithstanding the demand made upon him so to do.

The defendant alleges that the premiums pertaining to the year 1912 amount to
only, P958.97, of which P95.89 belongs to plaintiff, and admits that said sum
should be credited to plaintiff’s account.

The lower court rendered judgment in favor of plaintiff for P1,001.22, from
which judgment he did not appeal, and although the defendant appealed from this
award of the judgment, it was not included in its assignment of errors. Nor do
we find anything in the record to show that the trial court erred; on the
contrary, we see that the dates and premiums of the insurance policies mentioned
in the judgment, for which plaintiff should not be held liable, agree with those
given in Exhibit 45 (record, p. 297) which is a copy of the insurance policies
of the steamers Montañez, Dos Hermanos, and
Magallanes, certified to by the bookkeeper of the defendant firm, no
policies of other steamers having been presented, while the report of the
commissioner (record, p. 77), schedule 28 of Exhibit Z-3, differs very much from
Exhibit 45. Therefore said award of the trial court should likewise be
affirmed.

DEFENDANT’S CROSS-COMPLAINT.

The defendant asks therein that plaintiff be ordered to pay any amount proved
due the partnership, and alleges that during the time that plaintiff acted as
the official in charge and the manager of the defendant firm’s business, to wit,
during the period between May 1 and December 10, 1903, he, knowingly and in
contravention of the stipulations contained in the articles of partnership, sold
and delivered various merchandise and other effects to several debtors, such as
Antonio de la Riva, whose debt had then reached the amount of P88,617.96, and
Gerena & Co. whose account showed a debit balance of P39,417.16, without
having the security required by the articles of partnership; that therefore
plaintiff alone is responsible for the losses occasioned through such procedure;
and that, upon making the balance sheet on December 31, 1911, a loss was found
whereby plaintiff owed the defendant more than P26,000.

The clause to which this cross-complaint refers and which was violated by
plaintiff is the fifth of the instrument of March 16, 1900, presented as Exhibit
A (record, p. 58), and is of the following tenor:

“The purpose of the partnership shall be the transaction of business in the
purchase and sale of groceries and beverages from Europe and America, and
domestic merchandise; and in the advancement of funds on goods under security to
companies or to private parties, the credit allowed thereon not to exceed thirty
thousand pesos and granted only on the approval of the principal capitalist
partners.”

The trial court dismissed this cross-complaint, for the reason that the
transactions, the responsibility for which the defendant claims to hold
plaintiff liable, were ratified by Miguel Gutierrez de Celis upon his arrival in
the Philippines.

The cross-complaint raises two questions, to wit: (First.) Is plaintiff
liable for the debts of Antonio de la Riva and of Gerena & Co.? (Second.) Is
plaintiff in debt to the defendant in the sum of twenty-six thousand and odd
pesos ?

With respect to the second question we have already shown in discussing the
fifth cause of action, that, as disclosed by the record, the defendant is
indebted to plaintiff. This question should therefore be determined in the
negative.

As regards the first question, even supposing that plaintiff has violated the
stipulations of the articles of partnership by giving credit to various persons
without taking the security required in the fifth clause of said articles, yet
in the cross-complaint no other reasons are alleged by virtue of which he should
be held liable for said breach of contract.

Article 144 of the Code of Commerce makes a partner liable for the damages
suffered by the partnership by reason of his malice, abuse of powers, or serious
negligence, and requires him to indemnify the partnership, should the other
partners so require, provided an express or verbal approval or ratification of
the act on which the claim is based can not be deduced in any manner whatsoever.
According to this legal provision, in order that the partner at fault may be
compelled to pay an indemnity, it is indispensable, in the first place, that his
conduct shall have caused some damage to the partnership, and, in the second
place, that his conduct should not have been expressly or impliedly ratified by
the other partners or by the manager of the partnership.

In the cross-complaint the allegation is made that plaintiff, violating said
fifth clause of the articles of partnership, sold and delivered merchandise and
other effects to various debtors, such as Antonio de la Riva and Gerena &
Co., without the security required in said articles; and that, because of the
large sums which said debtors owe to the partnership, plaintiff is liable for
all the damage and harm caused, amounting to P128,035.12.

Plaintiff Leopoldo Criado testified, with respect to Gerena & Co., that
subsequent to his arrival in this country, Miguel Gutierrez de Celis continued
to maintain commercial relations with said debtor firm, whose debt would have
been collected had Gutierrez de Celis followed his (plaintiff’s) advice and that
of the attorneys of the firm of Gutierrez Hermanos—aside from the fact that the
firm of Gerena & Co. was solvent and could pay its debt; so it is that the
manager Miguel Gutierrez de Celis continuing said business ratified plaintiff’s
procedure during the three months and several days that he acted temporarily, in
1903, as manager of the partnership; and for said reason there is no ground upon
which plaintiff may be held liable for the harm occasioned by the non-payment of
the debt of Gerena & Co.; and that rather did the liability for such harm
fall upon the manager Gutierrez de Celis who conscientiously never believed that
plaintiff was solely liable for the loss, for the Entry No. 1889 (Exhibit 10,
aforecited) contains the statement that the author of such losses no longer
exists, the fault being attributed to the deceased Miguel Alonso, although
Miguel Gutierrez de Celis testified (record, p. 557) that he gave his approval
to what had been done, without knowing what it was, and that he afterwards saw
that it was an error, for it was plaintiff who gave the money to Gerena &
Co. This testimony is in direct contradiction to the evidence contained in the
entry aforementioned, written on December 31, 1903, and notwithstanding that
error was discovered by Gutierrez de Celis, as he stated, the truth is that the
amount of the loss was not charged to Leopoldo Criado, neither was a similar
charge made in respect to the amount paid to Leopoldo Ferrer of which mention
has previously been made herein above. So said Entry No. 1889 of the document
Exhibit 10 remained intact.

With respect to the account of Antonio de la Riva which shows, as of December
31, 1903, a debit balance of P91,000 and odd pesos, plaintiff testified (record,
p. 590) that as security for this debt De la Riva had delivered to the firm of
Gutierrez Hermanos a lot of hemp worth P33,218.06, a power of attorney to
collect P26,000 from the store “Isla de Cuba” in monthly installments of P2,000,
and the insurance policy of the launch Concha, which represented P34,000;
whereby the debt was reduced to P12,000, on December 31, 1903.

This testimony appears corroborated by the documents and other evidence of
record for, with respect to the power of attorney to collect the sum mentioned
from the “Isla de Cuba,” the same exhibit, No. 5, which is the account of
Antonio de la Riva, certified to by the defendant’s bookkeeper, shows that on
July 3, August 5, and September 5, 1903, the account of Antonio de la Riva’s
indebtedness to the partnership was credited with various sums collected from
the “Isla de Cuba.” With respect to the hemp referred to by witness, the manager
himself Miguel Gutierrez de Celis testified (record, p. 565) that upon his
arrival in the Philippines, he allowed an increase in De la Riva’s debt, by
reason of the security of the hemp which this debtor was sending to the firm.
With reference to the insurance of the launch Concha,, there is no
evidence of record in contradiction of the facts, except the testimony of Miguel
Gutierrez de Celis in which the latter claims that the launch was purchased by
plaintiff in his own name with money belonging to the firm, in order afterwards
to sell it to Antonio de la Riva (record, p. 567). The manager De Celis does not
deny that the partnership held said insurance policy on the launch as security,
nor that De la Riva was the owner of the boat, for, if the launch were sold to
De la Riva and the proceeds from the sale were charged to the latter’s account,
together with the expenses occasioned by the trips made by that boat (Exhibit
5), it is obvious that Antonio de la Riva was the owner of the launch, although
he was a debtor to the firm of Gutierrez Hermanos for its price and the expenses
incurred.

Consequently it is indisputable and beyond all doubt that when plaintiff
turned over to Miguel Gutierrez de Celis the management and administration of
the business of the firm, this business was in very good condition, and if
afterwards losses had been sustained same were due to the fault of Gutierrez de
Celis himself; so it is that, in canceling in the books the account of Antonio
de la Riva, he divided the amount thereof among all the partners, in the belief
that it was a loss that affected them all.

Starting from the fact that the record shows that the defendant owes
plaintiff various sums of greater or lesser importance, as stated in the
findings on the majority of the causes of action prosecuted by plaintiff, it is
logical that this court should not find any well-founded or legal reason by
virtue of which judgment may be rendered against plaintiff for whatever amount
he may be owing the defendant firm, inasmuch as the latter is shown to be his
debtor. Therefore plaintiff should be absolved from the cross-complaint filed by
the defendant.

As regards the amount of the collectible accounts and of unpaid credits which
total sum is stated in the part of this decision relative to the fifth cause of
action, it is undeniable that the plaintiff Leopoldo Criado, as a capitalist
partner of the partnership organized in May, 1904, is entitled to receive 10 per
cent of every sum collected from the date on which he ceased to belong to the
firm, January, 1912, and of whatever sum that in the future may be collected
from said collectible accounts or unpaid credits, and it is so held, without any
liability on his part in relation to the bad or uncollectible credits.
Therefore, in view of section 126 of Act No. 190, we reverse that part of the
judgment of the court below whereby such liability for 10 per cent is imposed
upon the plaintiff.

The last error assigned by the defendant to the judgment of the court below
relates to the order of September 2, 1915, in which it is held that the accounts
presented by the defendant are not in accord with the orders given by the
Supreme Court in its previous decision, in so far as it was directed that the
firm of Gutierrez Hermanos should render a new account supported by vouchers to
determine exactly plaintiff’s share in the firm’s assets. In fact the defendant
was ordered immediately to present to the court all its books, vouchers and
other documents that might be necessary for the settlement of the assets
pertaining’ to plaintiff during the years 1900 to 1911, and to place the same at
the disposal of the expert, G. B. Wicks, and was authorized to appoint another
expert who, with said Wicks, might examine the books and papers of the firm of
Gutierrez Hermanos. This order is perfectly legal and just. It is an
interlocutory order of mere procedure, issued in compliance with and in
consequence of the decision of this court, to the end that, with the result of
the liquidation of the accounts made by the expert appointed, without the
defendant having wished to appoint another in use of its right so to do, this
court may decide this suit equitably, in accordance with its true merits and in
conformity with the law.

For the foregoing reasons, whereby the errors assigned to the judgment
appealed from with respect to the parts thereof discussed in this decision have
been refuted, the defendant should be, as it hereby is absolved from the
complaint by the first cause of action. By the second cause of action the firm
of Gutierrez Hermanos, the defendant, should be, as it hereby is ordered to pay
to the plaintiff Leopoldo Griado the sum of P30,609.60, with legal interest
thereon from May 25, 1912, the date of the filing of the complaint. In so far as
it is based on the third and the fourth causes of action, said complaint is
dismissed. In accordance with the fifth cause of action, the defendant should
be. as it hereby is, ordered to pay to plaintiff the sum of P51,296.62 fixed in
the judgment appealed from, with legal interest thereon from the date when the
original complaint was filed, May, 1912, and the plaintiff must pay said sum in
the manner prescribed in the 19th clause of the articles of partnership of 1904.
By the sixth cause of action, the defendant is likewise ordered to pay P1,800;
by the seventh, P3,000; by the eighth, P52; by the ninth, P953.90; and by the
tenth, P1,001.22. That part of the judgment relating to plaintiff’s liability
for 10 per cent of the outstanding and the uncollectible bills is reversed, and
he is reserved his right in the sums collected or which may be collected from
same. The plaintiff Leopoldo Criado is absolved from the cross-complaint filed
by the defendant Gutierrez Hermanos.

The plaintiff shall pay one-third, and the defendant, two-thirds, of the
costs of both instances. The judgment appealed from is thus affirmed in so far
as it is in accord with this decision, and is reversed in so far as it is not.
So ordered.

Arellano, C. J., Johnson, Araullo, Street, Malcolm, Avanceña, and
Fisher, JJ., concur.