G. R. No. 33580.
February 06, 1931 (Case Brief / Digest)
### Title: Maximiliano Sancho vs. Severiano Lizarraga, 55 Phil. 601 (1931)
#### Facts:
On October 15, 1920, Maximiliano Sancho and Severiano Lizarraga entered into a
partnership agreement. Sancho invested P50,000 into it. However, the partnership faced
difficulties due to Lizarraga’s failure to contribute the agreed capital. Sancho, therefore,
sought rescission of the partnership contract, reimbursement of his P50,000 investment with
12% interest per annum from October 15, 1920, and costs.
Lizarraga denied all allegations incompatible with his special defenses, cross-complaint, and
counterclaim. Lizarraga asked for the dissolution of the partnership and payment of P500
monthly as compensation for his role as manager and administrator from October 15, 1920,
until the final dissolution, with interest. He also sought other just and equitable remedies.
The Court of First Instance of Manila found that Lizarraga had not contributed all the capital
he had agreed to invest. Sancho demanded that Lizarraga liquidate the partnership. The
court, noting the partnership period had expired, declared the partnership dissolved. The
court ordered Lizarraga, as managing partner, to liquidate the partnership and submit the
accounts and vouchers within 30 days. There were no costs imposed.
Sancho appealed, presenting three assignments of error:
1. That the plaintiff was not entitled to rescission of the partnership contract and that Article
1124 of the Civil Code was not applicable.
2. That the defendant should return the P50,000 investment to the plaintiff with interest from
October 15, 1920, until fully paid.
3. The denial of the motion for a new trial.
#### Issues:
1. Whether the appeal was premature due to the failure of liquidation and account
submission ordered by the trial court.
2. Whether Sancho was entitled to the rescission of the partnership contract under Article
1124 of the Civil Code.
3. Whether the defendant should return the investment with interest from October 15, 1920.
4. The correctness of the trial court’s denial of the motion for a new trial.
#### Court’s Decision:
1. **Premature Appeal:** The Supreme Court held that the appeal was premature, citing
Section 123 of the Code of Civil Procedure and the precedent set in Natividad vs. Villarica (31
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Phil., 172). The court noted that until the accounts ordered by the trial court are rendered
and approved or disapproved, litigation cannot be deemed completely adjudicated. Therefore,
the appeal was dismissed as premature.
2. **Rescission of the Partnership Contract (Article 1124):** Even if an appeal were
considered, the court found no basis under Article 1124 for rescinding the partnership
contract. Article 1124 pertains to the resolution of general obligations, whereas Articles 1681
and 1682 of the Civil Code specifically govern partnership obligations. Since special
provisions take precedence over general provisions, the appropriate articles were 1681 and
1682. Hence, Sancho did not have grounds for rescission under Article 1124.
3. **Return of Investment:** The Supreme Court upheld the trial court’s mandate for
liquidation as the proper procedure under Articles 1681 and 1682, which would determine
the financial obligations and resolution of the defendant’s failure to provide promised capital.
Consequently, the court declined to directly order the repayment of the P50,000 with interest
under a premature appeal.
4. **Denial of Motion for a New Trial:** As the appeal was dismissed and the merits favored
the trial court’s approach, the denial of the motion for a new trial was upheld by default.
#### Doctrine:
1. **Premature Appeal (Section 123, Code of Civil Procedure):** Orders requiring account
submission in partnership disputes must be completed before an appeal is valid.
2. **Special Provisions Over General Provisions:** In conflicts involving partnership
contracts, relevant specific articles of the Civil Code (Articles 1681 and 1682) override
general obligations (Article 1124).
#### Class Notes:
– **Key Elements or Concepts:**
– **Article 1124, Civil Code:** Resolution of general obligations.
– **Articles 1681 and 1682, Civil Code:** Specific rules governing partnership obligations.
– **Section 123, Code of Civil Procedure:** Appeals must await complete decisions including
post-judgment orders such as account submission.
– **Statutory Interpretation:** Special statutes (specific to partnerships) override general
statutes when directly applicable.
#### Historical Background:
This case illustrates early 20th-century legal principles governing partnership dissolution in
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G. R. No. 33580. February 06, 1931 (Case Brief / Digest)
the Philippines. It highlights judicial adherence to procedural propriety (completed
liquidation before appeal) and the statutory hierarchy (specific over general provisions),
reflecting the judiciary’s intention to ensure thorough adjudication before appellate review.
This ruling reaffirmed procedural discipline in liquidation processes, critical in partnership
disputes.
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