Evangelista & Co. v. Abad Santos

Facts:

A co-partnership was formed under the name of "Evangelista & Co." On June 7, 1955 the Articles of Co-partnership were amended so as to include herein respondent, Estrella Abad Santos, as industrial partner, with herein petitioners Domingo C. Evangelista, Jr., Leonarda Atienza Abad Santos and Conchita P. Navarro, the original capitalist partners, remaining in that capacity, with a contribution of P17,500 each. "The contribution of Estrella Abad Santos consists of her industry being an industrial partner;" and that the profits and losses "shall be divided and distributed among the partners... in the proportion of 70% for the first three partners, Domingo C. Evangelista, Jr., Conchita P. Navarro and Leonarda Atienza Abad Santos to be divided among them equally; and 30% for the fourth partner, Estrella Abad Santos."

Respondent filed suit against the three other partners in the CFI of Manila, alleging that the partnership, which was also made a party-defendant, had been paying dividends to the partners except to her; and that notwithstanding her demands the defendants had refused and continued to refuse to let her examine the partnership books or to give her information regarding the partnership affairs or to pay her any share in the dividends declared by the partnership. The denied ever having declared dividends or distributed profits of the partnership; denied likewise that the plaintiff ever demanded that she be allowed to examine the partnership books; and by way of affirmative defense alleged that the amended Articles of Co-partnership did not express the true agreement of the parties, which was that the plaintiff was not an industrial partner; that she did not in fact contribute industry to the partnership; and that her share of 30% was to be based on the profits which might be realized by the partnership only until full payment of the loan which it had obtained in December, 1955 from the Rehabilitation Finance Corporation in the sum of P30,000, for which the plaintiff had signed a promissory note as co-maker and mortgaged her property as security.

Issue:

Whether or not the CA erred in finding that the respondent is an industrial partner of Evangelista & Co., notwithstanding the admitted fact that since 1954 and until after the promulgation of the decision of the CA the said respondent was one of the judges of the City Court of Manila, and despite its finding that respondent has been paid for services allegedly contributed by her to the partnership.

Held:

CA did not hold that the Articles of Co-partnership, identified in the record as Exhibit "A", was conclusive evidence that the respondent was an industrial partner of the said company, but considered it together with other factors, consisting of both testimonial and documentary evidences, in arriving at the factual conclusion expressed in the decision.

“At pages 32-33 of appellants' brief, they also make much of the argument that 'there is an overriding fact which proves that the parties to the Amended Articles of Partnership, Exhibit 'A', did not contemplate to make the appellee Estrella Abad Santos, an industrial partner of Evangelista & Co. It is an admitted fact that since before the execution of the amended articles of partnership, Exhibit 'A', the appellee Estrella Abad Santos has been, and up to the present time still is, one of the judges of the City Court of Manila, devoting all her time to the performance of the duties of her public office. This fact proves beyond peradventure that it was never contemplated between the parties, for she could not lawfully contribute her full time and industry which is the obligation of an industrial partner pursuant to Art. 1789 of the Civil Code.

“It is not disputed that the prohibition against an industrial partner engaging in business for himself seeks to prevent any conflict of interest between the industrial partner and the partnership, and to insure faithful compliance by said partner with his prestation. There is no pretense, however, even on the part of appellants that appellee is engaged in any business antagonistic to that of appellant company, since being a Judge of one of the branches of the City Court of Manila can hardly be characterized as a business. That appellee has faithfully complied with her prestation with respect to appellants is clearly shown by the fact that it was only after the filing of the complaint in this case and the answer thereto that appellants exercised their right of exclusion under the codal article just mentioned by alleging in their Supplemental Answer dated July 29, 1964 — or after around nine (9) years from June 7, 1955 — 'That subsequent to the filing of defendants' answer to the complaint, the defendants reached an agreement whereby the herein plaintiff has been excluded from, and deprived of, her alleged share, interest or participation, as an alleged industrial partner, in the defendant partnership and/or in its net profits or income, on the ground that plaintiff has never contributed her industry to the partnership, and instead she has been and still is a judge of the City Court (formerly Municipal Court) of the City of Manila, devoting her time to the performance of her duties as such judge and enjoying the privileges and emoluments appertaining to the said office, aside from teaching in law school in Manila, without the express consent of the herein defendants' (Record On Appeal, pp. 24-25).”