G.R. No. L-5236

PEDRO MARTINEZ, plaintiff-appellee, vs. ONG PONG CO and ONG LAY, defendants. ONG PONG CO., appellant.

January 10, 1910

FACTS:
On December 12, 1900, Pedro Martinez (plaintiff-appellee) delivered P1,500 to Ong Pong Co and Ong Lay (defendants) for the purpose of investing the amount in a store, with the agreement that “the profits or losses of which we are to divide with the former, in equal shares.”

On April 25, 1907, Martinez filed a complaint seeking an accounting of the partnership or the refund of the P1,500. Ong Pong Co, who alone answered the complaint (Ong Lay being deceased), admitted the agreement and receipt of the money but alleged that Ong Lay managed the business, which resulted in the loss of the entire capital, to which Martinez allegedly agreed. Ong Pong Co did not render an accounting nor present proof of losses.

The Court of First Instance (CFI) ordered Ong Pong Co to return to Martinez P750 (one-half of the capital), plus P90 (one-half of estimated profits at 12% per annum for six months), totaling P840, with legal interest at 6% per annum from June 12, 1901 (when the business terminated). Ong Pong Co appealed, alleging errors including the failure to consider losses, the finding of profits, and the application of certain Civil Code articles.

ISSUE:
1. Is Ong Pong Co liable for the invested capital, and if so, what is the nature and extent of his liability (joint or solidary)?
2. Is he liable for estimated profits and legal interest, and from what date?

RULING:
The Supreme Court AFFIRMED with MODIFICATION the CFI judgment.

1. Liability for Capital and Nature of Liability: The Court held that Ong Pong Co, along with Ong Lay, acted as administrators/agents of the partnership. As such, they incurred the liability to render an account of their transactions and refund the money received. Ong Pong Co failed to render an accounting or prove the alleged losses. Therefore, he is obliged to refund the money. However, in the absence of a special agreement for solidary liability, the liability of two or more agents/administrators for funds received from their principal is joint, not solidary (Arts. 1138 and 1723 of the Civil Code). Thus, Ong Pong Co is only liable for his half of the capital, which is P750.
2. Liability for Profits and Interest:
Profits: The Court found no sufficient evidence to prove the amount of profits, thus rejecting the CFI’s estimate of 12% per annum. While Ong Pong Co stated “there were some profits, but not large ones,” no specific amount was proven.
Interest: As this is an obligation to pay in cash where no other losses were proven, the only loss is the legal interest. This interest is due only from the time of judicial demand, which is the filing of the complaint, not from the date the business terminated. The legal interest rate is 6% per annum (Arts. 1100 and 1108 of the Civil Code). Article 1688 (regarding a partner’s disbursements) was deemed inapplicable to the original capital contribution.

Therefore, Ong Pong Co was ordered to pay the plaintiff P750 with legal interest thereon at the rate of 6% per annum from the time of the filing of the complaint, plus costs.