66. IRMA IDOS vs. COURT OF APPEALS, 296 SCRA 194 June 30, 1993

The dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business. On dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is completed. 

FACTS: Idos and Alarilla had a pship, “Tagumpay Manufacturing”. After one year from the commencement of the pship, they decided to terminate the it. The Pship had receivables and stocks worth P1.8M. Alarilla’s share was P900K. Idos then issued 4 checks which Alarilla was able to encash 3 of them. The remaining check was dishonored for insufficiency of funds. Alarilla made 2 demands but Idos refused to pay claiming that the check had been given only as “assurance” of his share xx and that it was not supposed to be deposited until the stocks had been sold.

Alarilla filed an Information against Idos for violation of BP 22

TC – in favor of Alarilla. CA – in favor of Alarilla

ISSUE: WONIdos is guilty for violation of B.P. 22

HELD: Negative.

X the elements of the offense penalized under B.P. 22, are as follows:

(1) the making, drawing and issuance of any check to apply to account or for value;(2) the knowledge of the maker, drawer or issuer that at the time of issue he does not have sufficient funds in

or credit with the drawee bank for the payment of such check in full upon its presentment; and (3) subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the

same reason had not the drawer, without any valid cause, ordered the bank to stop payment. 

X evidence on record would show that the subject check was to be funded from receivables to be collected and goods to be sold by the partnership, and only when such collection and sale were realized. Thus, there is sufficient basis for the assertion that the petitioner issued the subject check to evidence only complainant's share or interest in the partnership, or at best, to show her commitment that when receivables are collected and goods are sold, she would give to private complainant the net amount due him representing his interest in the partnership. It did not involve a debt of or any account due and payable by the petitioner.

x though the parties — petitioner and complainant — had agreed to dissolve the partnership, such agreement did not automatically put an end to the partnership, since they still had to sell the goods on hand and collect the receivables from debtors. In short, they were still in the process of "winding up" the affairs of the partnership, when the check in question was issued.

The best evidence of the existence of the partnership, which was not yet terminated (though in the winding up stage), were the unsold goods and uncollected receivables, which were presented to the trial court. Since the partnership has not been terminated, Idos and Alarilla remained as co-partners. The check was thus issued by the Idos to Alarilla, as would a partner to another, and not as payment from a debtor to a creditor.

For there is nothing on record, the Court continues, which even slightly suggest that petitioner ever became interested in acquiring, much less keeping, the shares of the complainant. What is very clear therefrom is that the petitioner exerted her best efforts to sell the remaining goods and to collect the receivables of the partnership, in order to come up with the amount necessary to satisfy the value of complainant's interest in the partnership at the dissolution thereof. To go by accepted custom of the trade, the Court is more inclined to the view that the subject check was issued merely to evidence complainant's interest in the partnership. Thus, the Court is persuaded that the check was not intended to apply on account or for value; rather it should be deemed as having been drawn without consideration at the time of issue.

Absent the first element x, which is "the making, drawing and issuance of any check to apply on account or for value", petitioner's issuance of the subject check was not an act contemplated in nor made punishable by said statute.

67 TESTATE ESTATE OF MOTA, et al.v. SERRAG.R. No. L-22825, 14 February 1925

FACTS: Plaintiffs and defendant entered into a contract of partnership (February 1, 1919) for the construction and exploitation of a railroad line from the "San Isidro" and "Palma" centrals to the place known as "Nandong."

Serra entered into a contract of sale with Venancio Concepcion, Phil. Whitaker, and Eusebio de Luzuriaga, whereby he sold to the latter the estate and central known as "Palma".

Concepcion and Whitaker bought from Mota 1/2 of the railroad line. In the deed, Motaand Concepcion and Whitaker agreed, among other things, that the partnership "Palma" and "San Isidro," formed between Serra, Mota, now deceased, and 3 others, should be dissolved upon the execution of this contract, and that the said partnership agreement should be totally cancelled and of no force and effect whatever.

"Hacienda Palma," with the entire railroad, the subject-matter of the contract of partnership between Mota, et al. and Serra, became the property of Whitaker and Concepcion. Whitaker and Concepcion having failed to pay a part of the purchase price, Serra foreclosed the mortgage upon the said hacienda, which was adjudicated to him at the public sale and Serra was put in possession thereof, including what was planted at the time, together with all the improvements made by Whitaker and Concepcion.

ISSUE: WON the contract of partnership is extinguished and so, can Serra still be held liable for costs against Mota

HELD: Affirmative.

The Court held that there was no way of reviving the contract which the parties themselves in interest had spontaneously and voluntarily extinguished.

By virtue of the contract, Mota, and Whitaker and Concepcion, by common consent, decided to dissolve the partnership between the "Hacienda Palma" and "Hacienda San Isidro," thus cancelling the contract of partnership.

Serra's contention signifies that any person, who has contracted a valid obligation with a partnership, is exempt from complying with his obligation by the mere fact of the dissolution of the partnership. Defendant's contention is untenable. The dissolution of a partnership must not be understood in the absolute and strict sense so that at the termination of the object for which it was created the partnership is extinguished, pending the winding up of some incidents and obligations of the partnership, but in such case, the partnership will be reputed as existing until the juridical relations arising out of the contract are dissolved.

The dissolution of a firm does not relieve any of its members from liability for existing obligations, although it does save them from new obligations to which they have not expressly or impliedly assented, and any of them may be discharged from old obligations by novation of other form of release. It is often said that a partnership continues, even after dissolution, for the purpose of winding up its affairs. (30 Cyc., page 659.)

This Court, therefore, holds that the Serra is indebted to the Testate Estate of Mota, et al., in the amount of P113,046.46, and is hereby sentenced to pay the plaintiffs the said amount, together with the agreed interest x

68. SY v. CA and SY

69. BEARNEZA v. DEQUILLAG.R. No. 17024, 24 March 1922,

FACTS: Def. BalbinoDequilla, and Perpetua Bearnezaformed a partnership for the purpose of exploiting a fish pond. Perpetua obligating herself to contribute to the payment of the expenses of the business, which obligation she made good, and both agreeing to divide the profits between themselves, which they had been doing until the death of Perpetua.

Perpetua left a will. One of the clauses of which she appointed Domingo Bearnez, the plaintiff, as her heir to succeed to all her rights and interests in the fish pond in question.

Demand having been made upon Dequilla by Domingo for the delivery of the part of the fish pond belonging to his decedent, Perpetua, and delivery having been refused, Domingo brought this action to recover said part of the fish pond and one-half of the profits received by the defendant from the fish pond, as damages.

ISSUE: WON Domingo Bearnezhas any right to maintain an action for the recovery of one-half of the said fish pond

HELD

The partnership formed was a particular partnership, as defined in Article 1678 of the Civil Code, it having had for its subject-matter a specified thing, to wit, the exploitation of the aforementioned fish pond. It has not been proven that Perpetua participated in the ownership of said land, and the defendant shows that he has been paying, as exclusive owner of the fish pond, the land tax thereon, although he says that the said land belongs to the State. The conclusion, therefore, from the evidence is that the land on which the fish pond was constructed did not constitute a part of the subject- matter of the partnership.

The partnership having been dissolved by the death of Perpetua, its subsequent legal status was that of a partnership in liquidation, and the only rights inherited by her testamentary heir, were those resulting from the said liquidation in favor of the deceased partner, and nothing more.

Neither can it be said that the partnership continued between the plaintiff and the defendant. It is true that the latter's act in requiring the heirs of Perpetua to contribute to the payment of the expenses of exploitation of the aforesaid fishing industry was an attempt to continue the partnership, but neither the said heirs collectively, nor the plaintiff individually, took any action in response to that requirement, nor made any promise to that effect, and therefore no new contract of partnership existed.

70. GOQUIOLAY, et al.v. SYCIP, et al.G.R. No. L-11840, 10 December 1963, EN BANC (Reyes, J.B.L., J.)

FACTS: Appellant Goquiolay, in his MR, insist that, Kong Chai Pin, widow of the deceased partner Tan Sin An, never became more than a limited partner, incapacitated by law to manage the affairs of partnership; that the testimony of her witness Young and Lim belies that she took over the administration of the partnership property; and that, in any event, the sale should be set aside because it was executed with the intent to defraud appellant of his share in the properties sold.

Three things must be always held in mind in the discussion of this motion to reconsider, being basic and beyond controversy:

(a) That we are dealing here with the transfer of partnership property by one partner, acting in behalf of the firm, to a stranger. There is no question between partners inter se, and this aspect to the case was expressly reserved in the main decision;

(b) That partnership was expressly organized: "to engage in real estate business, either by buying and selling real estate".

(c) That the properties sold were not part of the contributed capital (which was in cash) but land precisely acquired to be sold, although subject to a mortgage in favor of the original owners, from whom the partnership had acquired them.

ISSUES: 1. WON Kong Chai Pin was given authority 2. What kind of authority 3. WON Kong Chai Pin’s selling of the real estate exceeds her power; 4 WON there was attendace of fraud on the part of Kong Chai Pin (low price; rel. with the buyer)

HELD:

1. Affirmative;

2. As general partner, thus authority to alienate the properties, included. Not merely to manage. She become a partner upon her husband’s death as expressly provided by the AoP. [(In the event of the death of any of the partners at any time before the expiration of the partnership term, the co partnership shall not be dissolved but will have to be continued and the deceased partner shall be represented by his heirs or assigns in said co partnership) The Articls did not provide that the heirs would be limited partners; on the contrary, they expressly stipulated that in case of death. “thepshi… will have to be continued. It certainly could not be continued if it were to be converted from a general pship into a limited pship, since the difference bet these 2 kinds of associations is fundamental; and specially because the conversion would have the heirs x without a share in the mgmt. Hence the stipulationdoes actually contemplate that the heirs would become general partners. Xx It is immaterial that the heir’s name was not included in the Firm name, since no conversion of status is involved x

3. Negative. The pship business is to deal in real estate hence, one partner has ample power, as general agent of the firm to enter into a contract for the sale of real estate.

4. No direct evidence exists. It was a forced sale because the pship had no other means to pay its debts. Rel. is not a badge of fraud.

71. GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO, petitioners, vs. CA, SEC and JOAQUIN L. MISA, respondents. G.R. No. 109248 July 3, 1995

FACTS: Herein private respondent is a partner at the law firm BITO, MISA & LOZADA, named as of Dec 19, 1980. On 1988 private respondent Misa wrote a series of letters stating that he wants to withdraw and retire from the partnership and called upon a meeting for the mechanics of the liquidation. The reason for his withdrawal was that the partnership was no longer mutually satisfactory for his fellow partners who were verbally abusing the firm’s ees and failed to raise the salaries of said ees above subsistence level.

Thereafter, disagreements were encountered prompting Misa to file a petition for dissolution and liquidation of partnership to the Commission's Securities Investigation and Clearing Department (SICD) requesting, among other things, a formal declaration of the dissolution of the involved partnership and call for its immediate liquidation. The SICD ruled in the negative stating that the partnership was not a partnership at will for it was created for a specific undertaking which is to represent individuals in legal affairs and thus was not a partnership whose existence relies purely upon the desire of the partners to continue with the partnership, hence the partnership cannot be dissolved by the mere withdrawal of one partner.

The case was appealed to the SEC where it reversed the SICD ruling stating that it was a partnership at will and is dissolved by the withdrawal of a partner (Misa). CA affirmed the Decision. The case was again appealed this time to the Supreme Court. In 1991 the partners Bito and Lozada died during the pendency of this action and was replaced by herein petitioners.

ISSUES: 1. WON the involved partnership was a partnership at will and2.WON the partnership has been dissolved.

HELD: 1. Affirmative. 2. Affirmative.

The SC ruled that this was a partnership at will. A partnership at will is a partnership that does not fix its term. Its “birth and life is predicated on the mutual desire and consent of the partners . The right to choose with whom a person wishes to associate himself is the very foundation and essence of that partnership. Its continued existence is, in turn, dependent on the constancy of that mutual resolve, along with each partner's capability to give it, and the absence of a cause for dissolution provided by the law itself. Verily, any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will.He must, however, act in good faith, not that the attendance of bad faith can prevent the dissolution of the partnership but that it can result in a liability for damages.”In the case at hand although the partnership had a specific purpose, as evidenced by the articles of incorporation which is to represent individuals in their legal affairs, that will not remove the partnership from the classification of partnership at will for in this case a specific purpose is different from a specific undertaking referred to by law. A specific undertaking is a project whose duration of completion can be identified in this case the act of representing persons in their legal affairs is not a specific undertaking. Moreover,even if a partnership has a fixed duration and/or a specific purpose (not undertaking) each of the partners still has the right to dissolve the partnership under the doctrine delectus personae.

Furthermore, the “dissolution of a partnership is the change in the relation of the parties caused by any partner ceasing to be associated in the carrying on, as might be distinguished from the winding up of, the business.Upon its dissolution, the partnership continues and its legal personality is retained until the complete winding up of its business culminating in its termination.” The partnership then is dissolved by the mere withdrawal of one of the partners, which in this case is Misa, but the legal personality of the partnership is still intact until the accomplishment of its liquidation.

72. INOCENCIA DELUAO and FELIPE DELUAO plaintiffs-appellees, vs. NICANOR CASTEEL and JUAN DEPRA, defendants, NICANOR CASTEEL, defendant-appellant. G.R. No. L-21906 December 24, 1968

FACTS: Res. Casteel filed for a fishpond application with the Department of Agriculture and Natural Resources (DANR), now DENR, on the year 1940. Said application was not acted upon due to the coming of the Japanese Occupation and because of said occupation his second attempt at a fishpond application was again thwarted. In 1945 his third application was finally acted upon however in the negative whereby his application was denied for the area involved, located in Malalag, Davao, was needed for firewood production.

Casteel filed a MR wherein the Bureau of Forestry replied that he must file another application in which Casteel did. While his new application was pending the fishpond applications of Aradillos, Carpio, and Cacam was approved but their area of operation was within the area where Casteel wishes to operate his fishponds. Furthermore, his uncle Felipe Deluao also filed a fishpond application to operate fishponds within the sated area which was later on denied.

Casteel Being desperate secured a 27,000.00 peso loan from his uncle Felipe, herein petitioner’ in order for him to construct dikes and cultivate marketable fishes in an attempt to prevent anymore intrusion by other fish farmers into his area of operation. Also in an effort to protect his interest Casteel filed several administrative complaints with the Office of the Director of Fisheries contesting the aforementioned approved applications. All of these complaints and their corresponding motions for reconsideration however were denied. Casteel appealed to the Secretary of DANR.

While these cases were pending Casteel entered into a Contract of Service with herein petitioners whereby he obligated himself to construct and manage fishponds in exchange for the loan Casteel already has received. After entering into said contract the involved secretary finally ruled in favor of Casteel and awarding him the privilege to erect his fishponds within the area and revoking all of the aforementioned approved fishpond applications. After receiving this favorable judgment Casteel did not honor the terms of the contact of service prompting the petitioners to file an action for specific performance which eventually reached the Supreme Court.

ISSUES: WON an action for specific performance is proper.

HELD: Negative.

Xx case what was created was not an ordinary contract but a partnership. The Capitalist partner being the petitioners whom contributed money and the industrial partner being Casteel whom contributed industry, the

object of their overall agreement was revealed not in the contract of service but by a series of correspondence between the parties disclosing their intent to divide the fishponds between themselves constituting a division of the profits.

This partnership however was dissolved when Casteel’s fishpond application was finally granted. Under Art. 1808 of the Civil Code it states that a partnership is dissolved if “any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership" is present. In this case the Fisheries Act, Public Land Act, and Administrative Order No. 14 prohibit the transfer or sublease of fishponds without the prior consent or approval of the Secretary of DANR or in the case of the stated A.O. No. 14 the Director of Lands.

x partnership is dissolved and it remanded the case back to the lower court for further adjudication concerning the partnership and its liquidation.

73. MAXIMO GUIDOTE, plaintiff-appellant, vs. ROMANA BORJA, as administratrix of the estate of Narciso Santos, deceased, defendant-appellee.G.R. No. L-28920             October 24, 1928

FACTS:Maximo is the industrial partner and Narciso Santos is the Capitalist partner of "Taller Sinukuan". Upon the death of Santos Maximo filed a money claim against Santos’ estate for the sum of ₱9,534.14 stating that it was his share of the net profits. The lower court however was not convinced by the evidence submitted by him and disapproved the account submitted by his accountant one Tomas Alfonso CPA .The defendant’s accountant Santiago LindayaCPA submitted his own findings in which revealed that Maximo actually owed Narciso ₱29,088.95. The court ordered the set down of Santiago’s account for hearing for the approval or disapproval of said account. In said hearing defendant offered Jose TurianoSantiagoCPA to testify. The testimony revealed that Maximo did owe the Narciso money relatively the same figure stated in Lindaya’s account.

Eventually, the lower court approved Lindaya’s account with Santiago’s modification, dismissed Guidote’s complaint and ordered the plaintiff to pay to the defendant the sum “P26,020.89, Philippine currency, with legal interest thereon from April 2, 1921.” Petitioner of course appealed until the case reached the Supreme Court.

ISSUE: WON the petitioner owes the defendant the aforesaid amount of money.

HELD:Affitmative.

Maximo has failed to rebut the evidence and in fact further strengthened it by presenting unreliable and confusing evidence. He also forgot the principle in “the case of Wahl vs. Donaldson Sim & Co. (5 Phil., 11, 14), it was held that the death of one of the partners dissolves the partnership, but that the liquidation of its affairs is by law intrusted, not to the executors of the deceased partner, but to the surviving partners or the liquidators appointed by them.”

Furthermore, in the liquidation the surviving partners are treated as the trustees of the deceased and are obligated “to give the render an account of the performance of their trust to the personal representatives of the deceased partner, and to pay over to them the share of such deceased member in the surplus of firm property, whether it consists of real or personal assets.” Hence the decision of the lower court was affirmed.

74. URBANO LOTA (Substituted by SOLOMON LOTA in his capacity as Administrator of the Estate of URBANO LOTA), plaintiff-appellant, vs. BENIGNO TOLENTINO, def-appellee. G.R. No. L-3518 Feb 29, 1952

FACTS:On the year 1918,Urbano Lota and Benigno Tolentino entered into a partnership. Lota alleges that Benigno has refused to render his account of the partnership from 1929 to 1937 hence Lota’s complaint for accounting and liquidation. Benigno stated that the partnership has been dissolved since 1932 hence Benigno prays for the dismissal.

On the year 1938 Solomon Lota died and was substituted by his heir Urbano Lota on 1939. On the same year defendant Benigno died. The plaintiff remained inactive thus the lower court dismissed the case on 1941 but later set aside such decision “upon a showing by plaintiff that on March 28, 1941, he had filed a petition for the issuance of letters of administration to deceased defendant's surviving spouse, Marta Sadiasa, for the purpose of substituting her for the deceased defendant.” The lower court however dismissed the case for failure of defendant’s heir to file the appropriate bond and to take her oath on 1949. Another attempt was made to substitute the defendant with his heirs on the same year 1949 with the prayer to procure property belonging to the partnership which is found to be in the possession of the late Tolentino’s estate. This case reached the Supreme Court.

ISSUE: WON the substitution will prosper.

HELD: Negative.

As embodied inWahl vs. Donaldson Sim and Co. ( 5 Phil., 11, 14 ) “In the first place, it is well settled that when a member of a mercantile partnership dies, the duty of liquidating its affairs devolves upon the surviving member, or members, of the firm, not upon the legal representatives of the deceased partner.”

In the case of Po YengCheovs. Lim Ka Yam (44 Phil. 172), the surviving partners should petition the court charged with the administration of the property of the deceased to surrender the property belonging to the partnership which is found to be in possession of the estate of the deceased partner. What the aforementioned means is that this petition should have been made in the court charged with the administration of the estate of the deceased and not in a proceeding of accounting and liquidation of a partnership.

75. SONCUYA VS LUNA April 28, 1939

Doctrine: In claims of partners against each other, a previous liquidation of said partnership is necessary.

FACTS: Plaintiff Josue Soncuya filed a complaint against defendant Carmen de Luna and prayed that Carmen be sentenced to pay Josue damages as a result of the administration, said to be fraudulent, of the partnership, "Centro Escolar deSeñoritas", of which plaintiff, defendant and the deceased LibradaAvelino were members.

Defendant meanwhile interposed a demurrer based on the following grounds: (1) That the complaint does not contain facts sufficient to constitute a cause of action; and (2) that the complaint is ambiguous, unintelligible and vague.

ISSUE: WON the plaintiff has cause of against the defendant

HELD: Negative.

XX, it is first necessary that a liquidation of the business be made to the end that the profits and losses may be known and the causes of the latter and the responsibility of the defendant as well as the damages which each partner may have suffered, may be determined.

It is not alleged in the complaint that such a liquidation has been effected nor is it prayed that it be made. Consequently, there is no cause for plaintiff to institute the action for damages which he claims from the managing partner Carmen de Luna. Consequently, there is no necessity to discuss the remaining question of whether or not the complaint is ambiguous, unintelligible and vague.

76. SINGSONG VS ISABELA SAWMILL February 28, 1979

Doctrine: When the partnership is dissolved, the partnership is not terminated but continues until winding up of business.

FACTS: Defendants Leon Garibay, Margarita G. Saldajeno, and TimoteoTubungbanua entered into a Contract of Partnership under the firm name ‘Isabela Sawmill on January 30, 1951.

The plaintiffs, as creditors of the defendant partnership, filed in the Court of First Instance of Negros Occidental, Branch I, against “Isabela Sawmill”, Margarita G. Saldajeno and her husband CecilioSaldajeno, Leon Garibay, TimoteoTubungbanua a complaint and prayed that the defendant be ordered to pay their credit to the plaintiffs with damages and interest.

In their amended answer, the defendants Margarita G. Saldajeno and her husband, CecilioSaldajeno, alleged that the defendant Isabela Sawmill has been dissolved and that defendants Leon Garibay and TimoteoTubungbanua did not divide the assets and properties of the “Isabela Sawmill” between them, but they continued the business of said partnership under the same firm name “Isabela Sawmill”. As a result of the said dissolution, defendants Leon Garibay and TimoteoTubungbanua became the successors-in-interest to the said defunct partnership and have bound themselves to answer for any and all obligations of the defunct partnership to its creditors and third persons.

ISSUE: WON Margarita Saldajeno is liable for the obligations of Garibay and Tabungbanua, incurred by the latter as partners in the new Isabela Sawmill after the dissolution of the old partnership in which Saldajeno was a partner

HELD: Affirmative.

It is true that the dissolution of a partnership is caused by any partner ceasing to be associated in the carrying on of the business. However, on dissolution, the partnership is not terminated but continuous until the winding up of the business.

The remaining partners did not terminate the business of the partnership “Isabela Sawmill”. Instead of winding up the business of the partnership, they continued the business still in the name of said partnership. It is expressly stipulated

in the memorandum-agreement that the remaining partners had constituted themselves as the partnership entity, the “Isabela Sawmill”.

It does not appear that the withdrawal of Margarita G. Saldajeno from the partnership was published in the newspapers. The appellees and the public in general had a right to expect that whatever, credit they extended to Leon Garibay and TimoteoTubungbanua doing the business in the name of the partnership “Isabela Sawmill” could be enforced against the properties of said partnership

The appellant, Margarita G. Saldajeno, cannot complain. She is partly to blame for not insisting on the liquidation of the assets of the partnership. She even agreed to let Leon Garibay and TimoteoTubungbanua continue doing the business of the partnership “Isabela Sawmill” by entering into the memorandum-agreement with them.

Although it may be presumed that Margarita G. Saldajeno had acted in good faith, the appellees also acted in good faith in extending credit to the partnership. Where one of two innocent persons must suffer, that person who gave occasion for the damages to be caused must bear the consequences. Had Margarita G. Saldajeno not entered into the memorandum-agreement allowing Leon Garibay and TimoteoTubungbanua to continue doing the business of the partnership, the appellees would not have been misled into thinking that they were still dealing with the partnership “Isabela Sawmill”. Under the facts, it is of no moment that technically speaking the partnership “Isabela Sawmill” was dissolved by the withdrawal therefrom ofMargarita G. Saldajeno. The partnership was not terminated and it continued doing business through the two remaining partners.

77. LOTA VS TOLENTINO February 29, 1952

(see no. 74.)

78. CLARIDADES VS MERCADER May 14, 1966

Doctrine: An action for the liquidation of a partnership is a personal one and a prayer for sale of real property does not make the action a real action.

FACTS: Petitioner, Dr. Simeon Claridades brought this action against Vicente Mercader and Perfecto Fernandez for the dissolution of a partnership allegedly existing between them and an accounting of the operation of the partnership, particularly a fishpond, which was the main asset of the partnership.

The defendants admitted the existence of the partnership and alleged that its operation had been so far unproductive. By way of special defense, they alleged, also, that there is an impending auction sale of said fishpond due to delinquency in the payment of taxes owing to lack of funds and plaintiff’s failure to contribute what is due from him.

ISSUE: WON this action should have been instituted, not in the CFI of Bulacan, but in that of Marinduque, where the aforementioned fishpond is located.

HELD: Negative.

An action for the liquidation of a partnership is a personal one, which may be brought in the place of residence of either the plaintiff or the defendant. The fact that plaintiff prays for the sale of the assets of the partnership, including a fishpond located in a province other than that where the action was brought, does not change the nature or character of the action, such sale being merely a necessary incident to the liquidation of the partnership, which should precede and/or is part of its proper dissolution.

79 Sergio Sison vs Helen Mcquaid

FACTS: Helen borrowed from Sergio, P2210 to pay her obligation to the Bureau of Forestry and to add to her capital in her lumber business. He failed to pay her debt to Sergio so she proposed to take him as a partner in her lumber business with Sergio to contribute to the partnership the sum of P2210 due to him from Helen and that they were to divide the profits equally.

The partnership sold 230k board feet lumber to the US army before WWII for P13,800. After payment, Helen refused to deliver ½ of the sale to Sergio despite repeated demands.

Sergio filed an action praying for the declaration of existence of the partnership and the delivery of half of P13800 proceeds of the sale.

Helen alleged that Sergio had no cause of action.

ISSUE: WON Sergio may recover half of the proceeds of the sale.

HELD: Negative.

Sergio’s complaint does not show why he should be entitled to the sum he claims. It does not allege that there has been a liquidation of the partnership business and the said sum has been found to be due him as his share of the profits.

The proceeds from the sale of a certain amount of lumber cannot be considered profits until costs and expenses have been deducted.

Moreover, the profits of a business cannot be determined by taking into account the result of one particular transaction instead of all the transactions had. Hence, there is a need for a general liquidation before a member of a partnership may claim a specific sum as his share of the profits.

80 Po YengCheo vs Lim Ka Yam

FACTS: Po YengCheo, heir of Po Gui Yao, inherited the interest left by Gui Yao in a business partnership in Manila named Kwong Cheong Tay.

When the partnership ceased its operations in 1910 (because the business stopped transmitting merchandise to Hongkong), Lim Ka Yam, manager of the business, did not submit any formal liquidation of the business to the surviving partners despite repeated demands from Po YengCheo.

Po YengCheo filed an action to recover from Lim Ka Yam the properties and assets of the business.

Trial court ruled in favor of YengCheo and ordered Lim Yock Tock, administrator of Lim Ka Yam (already dead of course), P60k constituting YengCheo’s interest in the capital of the partnership plus his other interests in the partnership assets.

ISSUE: WON YengCheo was entitled to recover the extent of his share in the capital of Kwong Cheong Tay.

HELD:

The managing partner of a mercantile enterprise is not a debtor to the shareholders for the capital embarked by them in the business; and he can only be made liable for the capital when, upon liquidation of the business, there are assets found in his hands.

The only property pertaining to Kwong Cheong Tay at the time this action was brought consisted of shares with total par value of P11,000. Of course, if these shares had been sold and converted into money, the proceeds, if not needed to pay debts, would have been distributable among the various shareholders, in their respective proportions. But under the circumstances revealed in this case, it was erroneous to give judgment in favor of YeongCheo for his aliquot part of the par value of said shares. It is elementary that one partner, suing alone, cannot recover of the managing partner the value of such partner's individual interest; and a liquidation of the business is an essential prerequisite.

Moreover, it is erroneous for the trial court to allow Po YeongCheo to proceed against the administrator of Lim Ka Yam.

It is well settled that when a member of a mercantile partnership dies, the duty of liquidating its affair devolves upon the surviving member, or members, of the firm, not upon the legal representative of the deceased partner.

Upon the death of Lim Ka Yam it therefore became the duty of his surviving associates to take the proper steps to settle the affairs of the firm, and any claim against him, or his estate, for a sum of money due to the partnership by reason of any misappropriation of its funds by him, or for damages resulting from his wrongful acts as manager, should be prosecuted against his estate in administration.

81 Roberta De Leon vs Jose Villanueva

FACTS: After Domingo Florentino died, Roberta de Leon filed a case against Jose Villanueva, executor, to deliver to her ½ of the property of Florentino.

She alleges that they martially live together and that they also formed a partnership with him to which they contributed P1000, to devote it to various businesses. Also, she contends that there has been no liquidation or partition of the property of such partnership.

Villanueva contends that Florentino engaged in business alone and never had De Leon as a partner; that all the property claimed in this suit belongs to Florentino who possessed it as owner to the exclusion of De Leon, who was a mere concubine of said deceased, and that they never lived together as husband and wife.

Trial court dismissed the complaint.

ISSUE: WON Roberta De Leon is entitled to ½ of Florentino’s property by virtue of the partnership =

HELD: Negative.

The evidence adduced by the plaintiff does not prove that a partnership was constituted by and between herself and the alleged partner.

The several letters of Domingo Florentino presented as evidence do not establish the existence of such a partnership. Of course, they show confidence in the plaintiff, and even familiarity in the ones addressed to her; but such confidence and familiarity are not strange seeing that they were lover and mistress, and they do not necessarily reveal the partnership for profit established for economic purposes as alleged in the complaint.

Although some phrases in the letter, as for example, "our carabaos” might indicate the existence of the alleged partnership or community; however, said phrases can signify nothing more than the manifestations of friendship, politeness and good will, nothing strange or singular in the case before us, taking into consideration the amorous relations between Domingo Florentino and Roberta De Leon. If there are some expressions in said letters which might convey the idea of a community of property between the two, such an idea is dispelled by Villanueva’s oral and documentary evidence.

As to the oral evidence, it does not prove the existence of such a partnership or of such community of business, property or interests. Thus, Roberta De Leon has not established her right of action.

Moreover, while it appears that there were illicit amorous relations between Roberta De Leon and Domingo Florentino, yet it was not proven that the property claimed by the former was acquired by the labor, industry or efforts of both of them, nor has it been established that the partnership alleged in the complaint to have been formed between them existed.

82 Benjamin Yu vs. NLRC and Jade Mountain Products Company, Ltd., Willy Co, Rhodora Bendal, Lea Bendal, Chiu ShianJeng and Chen Ho-fu June 30, 1993

FACTS: Yu was formerly the Assistant General Manager of the marble quarrying and export business operated by a registered partnership (respondent). The partnership was originally organized on June 28, 1984 with Lea Bendal and Rhodora Bendal as general partners and 3 others, all citizens of the Republic of China (Taiwan) as limited partners.

Yu was hired by virtue of a Partnership Memorandum with a monthly salary of P4,000. However, according to the Yu, he actually received only half of it since he had accepted the promise of the partners that the balance would be paid when the firm shall have secured additional operating funds from abroad.

In 1988, without his knowledge, the general partners sold and transferred their interests in the partnership to Willy Co and to Emmanuel Zapanta. Co acquired the great bulk of the partnership interest. It continued to use the old firm name (Jade Mountain) though they moved the firm’s main office from Makati to Mandaluyong. The actual operations of the business enterprise continued as before and all the employees of the partnership continued working in the business except Yu.

Yu reported to the Mandaluyong office for work but was not allowed to work by the respondents. His unpaid salaries remain unpaid.

Yu filed a complaint for illegal dismissal and recovery of unpaid salaries against respondents. Respondents countered that he was never hired as an ee by the present partnership.

LA ruled in favor of the Yu. NLRC ruled against Yu and held that a new partnership was formed and that there is no law requiring the new partnership to absorb the ees of the old partnership. That Yu has not been illegally dismissed by the new partnership which had simply declined to retain the petitioner in his former managerial position or any other position.

Yu contends that the NLRC overlooked the principle that a partnership has a juridical personality separate and distinct from that of each of its members. Such independent legal personality subsists, Yu claims, notwithstanding changes in the identities of the partners. Thus, the employment contract between him and the Jade Mountain could not have been affected by changes in the latter’s membership.

ISSUES: 1) WON the partnership which had hired Yu had been extinguished and replaced by a new partnership composed of Willy Co and Emmanuel Zapanta

2) If indeed a new partnership had come into existence, whether petitioner could nonetheless assert his rights under the employment contract as against the new partnership.

HELD:

The legal effect of the changes in the membership of the partnership was the dissolution of the old partnership which hired Yu and the emergence of a new firm composed of Willy Co and Emmanuel Zapanta.

Art. 1828 The dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business.

Art. 1830 Dissolution is cause:(1) without violation of the agreement between the partners;xxxx(b) by the express will of any partner, who must act in good faith, when no definite term or particular undertaking is specified;xxxx(2) in contravention of the agreement between the partners, where the circumstances do not permit a dissolution under any other provisions of this article, by the express will of any partner at any time;xxxx

The acquisition of 82% of the partnership interest by new partners, coupled with the retirement or withdrawal of the partners who had originally owed such 82% interest, was enough to constitute a new partnership. The occurrence of events which precipitate the legal consequence of dissolution of a partnership do not automatically result in the termination of the legal personality of the old partnership. Article 1829 states that the dissolution of the partnership is not terminated but continues until the winding up of partnership affairs is completed.

In the case at bar, it is important to underscore the fact that the business of the old partnership was simply continued by the new partners, without the old partnership undergoing the procedures relating to dissolution and winding up of its business affairs. In other words, the new partnership simply took over the business enterprise owned by the preceeding partnership, and continued using the old name of Jade Mountain, without winding up the business affairs of the old partnership, paying off its debts, liquidating and distributing its net assets, and then reassembling the said assets or most of them and opening a new business enterprise.

What is important for present purposes is that, under the above described situation, not only the retiring partners (RhodoraBendal, et al.) but also the new partnership itself which continued the business of the old, dissolved, one, are liable for the debts of the preceding partnership.

Under article 1840, creditors of the old Jade Mountain are also creditors of the new Jade Mountain which continued the business of the old one without liquidation of the partnership affairs. Indeed, a creditor of the old Jade Mountain, like Yu in respect of his claim for unpaid wages, is entitled priority vis-à-vis any claim of any retired or previous partner insofar as such retired partner’s interest in the dissolved partnership is concerned. Petition granted.

83. Laguna Transportation Co., Inc. vs. SSS April 28, 1960

FACTS: Laguna Transportation Co., Inc. (Laguna Transpo) is a domestic corporation with the principal place of business at Biñan, Laguna. Respondent is an agency with the principal place of business at the new GSIS Building, corner Arroceros and Concepcion Streets, Manila. SSS served notice upon Laguna Transpo requiring it to register as member of the System and to remit the premiums due from all its ees and the contribution of the petitioner to the System beginning the month of September 1957.

In 1949, the Biñan Transportation Co. sold part of the lines and equipment it operates to Gonzalo Mercado, Artemio Mercado, Florentino Mata and Dominador Vera Cruz. The said vendees formed an unregistered partnership (Laguna Transportation Company). They organized a corporation as the Laguna Transportation Company, Inc. which was registered with SEC on June 20, 1956.

Prior to November 11, 1957, Laguna Transpo requested for exemption from coverage by the System on the ground that it started only on June 20, 1956 but SSS notified it that it was covered. Laguna Transpo sent a letter to the SSS contesting the claim that it was covered. Carlos Sanchez, Manager of Production Department of SSS informed the Laguna Transpo that its business has been in actual operation for at least two years. Trial court ruled in favor of the SSS.

Laguna Transpo claims that the lower court erred in holding that it is an er engaged in business as a common carrier which had been in operation for at least 2 years prior to the enactment of SSS Act and therefore subject to compulsory coverage thereunder.

ISSUE: WON petitioner can be exempted from coverage by the respondent

HELD: Negative.

Laguna Transportation Company, an unregistered partnership commenced the operation of its business as a common carrier on April 1, 1949. The 4 original partners, with 2 others, later converted the partnership into a corporate entity. The firm name was not altered except with the addition of the word “Inc.” to indicate that petitioner

was duly incorporated under existing laws. The corporation continued the same transportation business of the unregistered partnership, using the same lines and equipment. There was, in effect, only a change in the form of the organization of the entity engaged in business. Hence, it was already in operation for at least 3 years prior to the enactment of the SSS Act on June 18, 1954.

Laguna Transpo argues that, since it was registered as a corporation with the SEC only on June 20, 1956, it must be considered to have been in operation only on said date. While it is true that a corporation once formed is conferred a juridical personality separate and district from the persons composing it, it is but a legal fiction introduced for purposes of convenience and to subserve the ends of justice.

Where a corporation was formed by, and consisted of members of a partnership whose business and property was conveyed and transferred to the corporation for the purpose of continuing its business, in payment for which corporate capital stock was issued, such corporation is presumed to have assumed partnership debts, and is prima facie liable therefor. The reason for the rule is that the members of the partnership may be said to have simply put on a new coat or taken on a corporate cloak and the corporation is a mere continuation of the partnership.

84. PAL vs. Antonio Balanguit et.al. and CIR June 30, 1956

FACTS: Before May 1947, PAL purchased and acquired a majority of the shares of Far Eastern Air Transport, Inc. (Feati). The purchase gave rise to the problem of what to do with Feati ees. Parties reached an agreement whereby PAL agreed to absorb some 70% of the ees and the said ees agreed to work for PAL under the same terms and conditions (CBA) as they worked for the Feati until such time as they come to a definite understanding.

The CBA granted the ees certain privileges which include vacation and sick leave which gives the ees 12 days vacation leave and 12 days sick leave with pay every year, which may be cumulative.

PAL reached a definite understanding with respondent whereby they entered into an agreement cancelling the agreement and declaring them void and of no further force and effect. It also provided for the laying off of all Feati ees as of June 15, 1947 and the payment to them of one and a half month’s separation pay.

Almost 6 years from the time they were laid off, respondent filed a petition with the Court of Industrial Relations praying that the PAL be ordered to pay them 12 days vacation leave and 12 days sick leave with pay, from August 1, 1946, which had already accrued at the time they were laid off on June 15, 1947.

PAL denied liability alleging that it was not a party to the Agreement. The said ees were absorbed by PAL only on May 21, 1947 and were laid off on June 15, 1947. CIR issued an order requiring the PAL to pay the said ees.

ISSUE: WON PAL is legally liable for the payment of the sick leave and vacation leave

HELD: Affirmative but the ees cannot demand anymore since they are guilty of laches

There is no question that this leave was earned by the ees from the FEATI for the services rendered to it by them from August 1, 1946 (the date of the industrial agreement between them and the FEATI, when they were accorded this right to 12 days vacation leave and 12 days sick leave for every year of service) up to May 21, 1947, when they ceased to render said service to the FEATI. For those ees who were absorbed and continued to render service to the PAL from May 21, 1947 to June 15, 1947 (a period of less than one month), when they were all laid‐off, they may be said to have earned the corresponding leave from PAL. Did the PAL assume this obligation of the FEATI to pay the equivalent of this leave which the ees earned from the FEATI ? Nothing is said in the agreement of July 9, 1947. The ees claim and also the CIR, though indirectly, that when the PAL bought out the FEATI the former assumed all the rights and obligations of the latter.

When one company buys out another and continues the business of the latter company, the buyer may be said to assume the obligations of the company bought out when said obligations are not of considerable amount or value, specially when incurred in the ordinary course of trade, and when the business of the latter company is continued. However, when said obligation is of extraordinary value, as in this case, amounting to about P100,000, and the FEATI was bought out not to continue its business but to stop its operation in order to eliminate competition, as shown by the fact that all the ees of the FEATI were laid‐off, we cannot say that the vendee assumed all the obligations of the rival airline.

What the ees should have done at the time of the negotiation among the PAL, the FEATI and themselves preparatory to the execution of the agreement of July 9, 1947, was to raise the question as to who would pay them the equivalent of the vacation and sick leave already earned by them under the FEATI. Had they insisted on its payment, the FEATI could perhaps have been made to pay unless, of course, the PAL agreed to assume the obligation. When they (ees) failed to raise that question or have it embodied in the agreement, said failure may be regarded as a waiver of their right. And when they received a separation pay equivalent to one and one half months and then kept quiet about their vacation and sick leave for a period of more than five years, there is every reason to believe that there was actually such renunciation and waiver.

Anyway, even assuming for a moment that the ees were entitled to the payment of said leave, they were guilty of laches. It would be unfair now to demand this payment from the PAL after more than five years when the papers and the records of the service of said ees from August 1, 1946 to May or June, 1947, may no longer exist; when the FEATI has long ceased operations and has long ceased to exist and when its officials who were in a position to determine which ees because of their faithful, efficient and continuous service were entitled to leave and for how many days, may no longer be available. Petition granted.

85. Lino Bernardo, petitioner, vs. Eufemia Pascual, et al., respondents October 31, 1960

FACTS: Pedro Pascual was, together with Rogelio Bacane and Martin Quinto, in the woods at San Miguel Bulacan. Bacane and Quinto, both loggers admittedly in the employ of Bernardo, were cutting timber. Pascual was 50 meters away from them. When the two heard the sound of a falling tree—and following the practice among loggers—they shouted to Pascual to find out if he was alright. As the latter did not answer, they rushed to where he was and there found him prostrate on the ground with blood tricking from his mouth. Shortly thereafter, he died from a fractured skull and his companions took his body home in Bernardo's truck.

Thereafter, the widow of the deceased on behalf of herself and their children filed a claim for compensation with the Workmen's Compensation Commission. Originally filed against the Bernardo Sawmill, the claim was amended to include herein petitioner Bernardo, the timber concessionaire and owner and operator of the sawmill, as party respondent. In his answer, the latter denied that he was a timber concessionaire before October 13, 1955, or that he had an er-ee relationship with the deceased.

The referee assigned to hear the case having denied the claim, the claimants petitioned for review. Subsequently, the reviewing commissioner reversed the referee's decision and ordered Bernardo to pay claimants P3,120.00 as compensation, to reimburse them P200.00 for burial expenses and to pay to the Workmen's Compensation Fund P32.00 as fees. MR denied.

ISSUE: WON Bernardo was a timber concessionaire at the time of Pascual's death

HELD: Affirmative.Xx he became a lumber concessionaire only on October 13, 1955, suffice it to say that prior to the date, he

was a partner to several persons owning the concession in San Miguel, Bulacan, and subsequent thereto, he acquired the interest of his partners and became the sole concessionaire. Under those circumstances he became liable to the creditors of the partnership. (Art. 1840, new Civil Code.)" [N.B. no mention was made in the case but it seems this is akin to the liability of a partner by way of estoppel]

86. Cristobal Bonnevie, et al., plaintiffs-appellants, vs. Jaime Hernandez, def-appellee. May 31, 1954

FACTS: Plaintiffs with several other associates, formed a syndicate or secret partnership for the purpose of acquiring the plants, franchises and other properties of MERALCO in the provinces of Camarines Sur, Albay, and Sorsogon, with the idea of continuing that company's business in that region. No formal articles were drawn for it was the purpose of the members to incorporate once the deal had been consummated.

Before the incorporation papers could be perfected, several partners, not satisfied with the way matters were being run and fearful that the venture might prove a failure, expressed their desire to withdraw from the partnership and get back the money they had invested therein. In accordance with this wish, one of them, Judge Reyes, in a meeting, presented a resolution to the effect that those partners who did not want to remain in the association should be allowed to withdraw and get back their contributions. The resolution was approved and on that same day plaintiffs and Judge Reyes withdrew from the partnership and the same was then dissolved. In accordance with the terms of the resolution, the withdrawing partners were, on the following day, reimbursed their respective contributions to the partnership fund. Following the dissolution of the partnership, the members who preferred to remain in the business went ahead with the formation of the corporation, taking in new associates as stockholders.

Two years from their withdrawal from the partnership, when the corporate business was already in a prosperous condition, plaintiffs brought the present suit against Jaime Hernandez, claiming a share in the profit the latter is supposed to have made from the assignment of the Meralco properties to the corporation, estimated by plaintiffs to be P225,000 and their share of it to be P115,312.50. Hernandez contended that after their withdrawal from the partnership, the plaintiffs ceased to have any further interest in the subsequent transactions of the remaining members. The trial court's dismissal of the complaint forced the plaintiffs to seek redress with the SC.

ISSUE: WON plaintiffs are entitled to a share in the profits made from the assignment of the MERALCO properties

HELD: Negative.

As a general rule, when a partner retires from the firm, he is entitled to the payment of what may be due him after a liquidation. But certainly no liquidation is necessary where there is already a settlement or an agreement as to what the retiring partner shall receive. In the instant case, it appears that a settlement was agreed upon on the very day the partnership was dissolved.

As testified to by Judge Reyes, one of the withdrawing partners, it was clearly understood that upon their withdrawal and return to them of their investment they would have nothing more to do with the association. It must, therefore, have been the intention or understanding of the parties that the withdrawing partners were relinquishing all their rights and interest in the partnership upon the return to them of their investment.

And, indeed, if the agreement was that the withdrawing partners were still to have participation in the subsequent transactions of the partnership so that they would have a share not only in the profits but also in the losses, it is not likely that their investment would have been returned to them.

XX the acceptance by the withdrawing partners of their investment was understood and intended by all the parties as a final settlement of whatever rights or claim the withdrawing partners might have in the dissolved partnership. Such being the case they are now precluded from claiming any share in the alleged profits, should there be any, at the time of the dissolution.

87. Emilio Emnace, petitioner, vs. CA, Estate of Vicente Tabanao, et al., respondents. November 23, 2001

FACTS: Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a business concern known as Ma. Nelma Fishing Industry. Sometime, they decided to dissolve their partnership and executed an agreement of partition and distribution of the partnership properties among them, consequent to Jacinto Divinagracias withdrawal from the partnership. Among the assets to be distributed were 5 fishing boats, 6 vehicles, 2 parcels of land and cash deposits in the local branches of the BPI and Prudential Bank.

Throughout the existence of the partnership, and even after Vicente Tabanaos untimely demise in 1994, Emnace failed to submit to Tabanaos heirs any statement of assets and liabilities of the partnership, and to render an accounting of the partnerships finances. Consequently, Tabanaos heirs, respondents herein, filed against petitioner an action for accounting, payment of shares, division of assets and damages.

Emnace filed a MTD the complaint on the grounds of improper venue, lack of jurisdiction over the nature of the action or suit, lack of capacity of the estate of Tabanao to sue, and, after an amendment to the original complaint, prescription. The trial court denied the motion which denial was affirmed by the CA.

ISSUE: WON the action of the heirs has prescribed

HELD: Negatove.

The 3 final stages of a partnership are: (1) dissolution; (2) winding-up; and (3) termination The partnership, although dissolved, continues to exist and its legal personality is retained, at which time it completes the winding up of its affairs, including the partitioning and distribution of the net partnership assets to the partners. For as long as the partnership exists, any of the partners may demand an accounting of the partnerships business. Prescription of the said right starts to run only upon the dissolution of the partnership when the final accounting is done.

Contrary to petitioner's protestations that respondents right to inquire into the business affairs of the partnership accrued in 1986, prescribing 4 years thereafter, prescription had not even begun to run in the absence of a final accounting.

Article 1842 of the Civil Code provides: "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."

Applied in relation to Articles 1807 and 1809, which also deal with the duty to account, the above-cited provision states that the right to demand an accounting accrues at the date of dissolution in the absence of any agreement to the contrary. When a final accounting is made, it is only then that prescription begins to run. In the case at bar, no final accounting has been made, and that is precisely what respondents are seeking in their action before the trial court, since petitioner has failed or refused to render an accounting of the partnerships business and assets. Hence, the said action is not barred by prescription.

88. Sunga-Chan vs. Chua August 15, 2001

The Civil Code provides that an action to enforce an oral contract prescribes in six (6) years  while the right to demand an accounting for a partner's interest as against the person continuing the business accrues at the date of dissolution

FACTS: In 1992, Lamberto Chua (respondent) filed a complaint against Lilibeth Sunga Chan (petitioner Lilibeth) and Cecilia Sunga (petitioner Cecilia), daughter and wife, respectively of the deceased Jacinto Sunga, for "Winding Up of Partnership Affairs, Accounting, Appraisal and Recovery of Shares and Damages with Writ of Preliminary Attachment" with the RTC.

Lamberto alleged that in 1977, he verbally entered into a partnership with Jacinto in the distribution of Shellane LPG.

Lamberto and Jacinto contributed P100K each as capital, with the intention that the profits would be equally divided between them.

Upon Jacinto’s death, petitioners took over the operations, control, custody, disposition and management of Shellite without Lamberto 's consent. Despite Lamberto's repeated demands upon petitioners for accounting, inventory, appraisal, winding up and restitution of his net shares in the partnership, petitioners failed to comply.

Petitioner Lilibeth disbursed out of the partnership funds the amount of P200K and partially paid the same to Lamberto. She informed respondent that the P200K represented partial payment of the latter's share in the partnership, with a promise that the former would make the complete inventory and winding up of the properties of the business establishment. However, petitioners allegedly failed to comply with their duty to account, and continued to benefit from the assets and income of Shellite to the damage and prejudice of respondent. Petitioners argued that Respondent’s action has already prescribed.

RTC ruled in favor of respondent. CA affirmed the decision of the RTC.

ISSUE: WON Lamberto’s claim is barred by prescription.

HELD: Negative.

With regard to petitioners' insistence that laches and/or prescription should have extinguished Lamberto's claim, we agree with the trial court and the CA that the action for accounting filed by respondents 3 years after Jacinto's death was well within the prescribed period.

The Civil Code provides that an action to enforce an oral contract prescribes in 6 years  while the right to demand an accounting for a partner's interest as against the person continuing the business accrues at the date of dissolution, in the absence of any contrary agreement. Considering that the death of a partner results in the dissolution of the partnership, in this case, it was Jacinto's death that respondent as the surviving partner had the right to an account of his interest as against petitioners.

It bears stressing that while Jacinto's death dissolved the partnership, the dissolution did not immediately terminate the partnership. The Civil Code expressly provides that upon dissolution, the partnership continues and its legal personality is retained until the complete winding up of its business, culminating in its termination.

89. Magdusa vs. Albaran, et.al June 30, 1962

A partner's share cannot be returned without first dissolving and liquidating the partnership for the return is dependent on the discharge of the creditors, whose claims enjoy preference over those of the partners; and it is self-evident that all members of the partnership are interested in his assets and business, and are entitled to be heard in the matter of the firm's liquidation and the distribution of its property.

FACTS: Magdusa (appellant) and Albaran (appellee) ,together with various other persons, had verbally formed a partnership de facto, for the sale of general merchandise, to which Magdusa contributed P2,000 as capital, and the others contributed their labor.

Sometime in 1953 and 1954, the appellees expressed their desire to withdraw from the partnership, and appellant thereupon made a computation to determine the value of the partners' shares to that date. The results of the computation were embodied in the document Exhibit "C", drawn in the handwriting of appellant.

Appellees thereafter made demands upon appellant for payment, but appellant having refused, they filed the initial complaint in the court below. Appellant defended by denying any partnership with appellees, whom he claimed to be mere employees of his.

The CFI dismissed the complaint on the ground that the other were indispensable parties but had not been impleaded. CA reversed the decision of the CFI. The CA held that the liability is personal to Gregorio Magdusa because the action is for the recovery of sum of money and not an action for dissolution of a partnership and winding up of its affairs or liquidation of its assets in which the interest of other partners who are not brought into the case may be affected. The judgment should be against Magdusa’s sole interest, not against the partnership's although the judgment creditors may satisfy the judgment against the interest of Gregorio Magdusa in the partnership.

ISSUE: WON appellees' action cannot be entertained, because in the distribution of all or part of a partnership's assets, all the partners have no interest and are indispensable parties without whose intervention no decree of distribution can be validly entered.

HELD: Affirmative.

A partner's share cannot be returned without first dissolving and liquidating the partnership (Po YengCheo vs. Lim Ka Yam, 44 Phil. 177), for the return is dependent on the discharge of the creditors, whose claims enjoy preference

over those of the partners; and it is self-evident that all members of the partnership are interested in his assets and business, and are entitled to be heard in the matter of the firm's liquidation and the distribution of its property.

The liquidation Exhibit "C" is not signed by the other members of the partnership besides appellees and appellant; it does not appear that they have approved, authorized, or ratified the same, and, therefore, it is not binding upon them. At the very least, they are entitled to be heard upon its correctness.

In addition, unless a proper accounting and liquidation of the partnership affairs is first had, the capital shares of the appellees, as retiring partners, cannot be repaid, for the firm's outside creditors have preference over the assets of the enterprise (Civ. Code, Art. 1839), and the firm's property can not be diminished to their prejudice.

Finally, the appellant cannot be held liable in his personal capacity for the payment of partners' shares for he does not hold them except as manager of, or trustee for, the partnership. It is the latter that must refund their shares to the retiring partners. Since not all the members of the partnership have been impleaded, no judgment for refund can be rendered, and the action should have been dismissed.

90. Ornum vs. Lasala July 26, 1943

FACTS: Pedro Lasala, father of the respondents, and Emerenciano Ornum formed a partnership.

When the assets of the partnership consisted of outstanding accounts and old stock of merchandise, Emerenciano Ornum, following the wishes of his wife, asked for the dissolution of the Lasala, Emerenciano Ornum looked for someone who could take his place and he suggested the names of the petitioners who accordingly became the new partners.

After the death of Pedro Lasala, his children (the respondents) succeeded to all his rights and interest in the partnership. The partners never knew each other personally. No formal partnership agreement was ever executed.

The respondents then had announced their desire to dissolve the partnership. The petitioners prepared the last and final statement of accounts which was not signed by respondents. Then, the petitioners remitted and paid to the respondents the total amount corresponding to them.

Complaint in this case was filed by the respondents, praying for an accounting and final liquidation of the assets of the partnership.

CFI held that the last and final statement of accounts prepared by the petitioners was tacitly approved and accepted by the respondents. They lost their right to a further accounting from the moment they received and accepted their shares as itemized in said statement.

CA reversed principally on the ground that as the final statement of accounts remains unsigned by the respondents, the same stands disapproved.

ISSUE: WON the last and final statement of accounts had been approved by the respondents.

HELD: Affirmatve.

X the last and final statement of accounts had been approved by the respondents. This approval resulted, by virtue of the letter of Father Mariano Lasala of July 19, 1932, quoted in part in the appealed decision from the failure of the respondents to object to the statement and from their promise to sign the same as soon as they received their shares as shown in said statement.

After such shares had been paid by the petitioners and accepted by the respondents without any reservation, the approval of the statement of accounts was virtually confirmed and its signing thereby became a mere formality to be complied with by the respondents exclusively. Their refusal to sign, after receiving their shares, amounted to a waiver to that formality in favor of the petitioners who has already performed their obligation.

This approval precludes any right on the part of the respondents to a further liquidation, unless the latter can show that there was fraud, deceit, error or mistake in said approval. CA did not make any findings that there was fraud.

We are reversing the appealed decision on the legal ground that the petitioners' final statement of accounts had been approved by the respondents and no justifiable reason (fraud, deceit, error or mistake) has been positively and unmistakably found by the CA so as to warrant the liquidations sought by the respondents.