1

Compiled Partnership Digests #5 AJ | Amin | Cha | Janz | Krizel | Paco | Vien | Yen

DAN FUE LEUNG v. IAC and LEUNG YIU Gutierrez, Jr., J. (1989)
Leung YIU filed a complaint with the CFI Manila to recover the sum of money equivalent to 22% of the annual profits derived from the operation of Sun Wah Panciteria since October, 1955 from petitioner DAN Fue Leung Sun Wah Panciteria is a restaurant located at Sta. Cruz, Manila. It was established sometime in October, 1955 and was registered as a single proprietorship. Its licenses and permits were issued to and in favor of DAN as the sole proprietor Respondent Leung YIU however contends that Sun Wah Panciteria was actually a partnership and that he was one of the partners having contributed P4,000.00 to its initial establishment This is evidenced by a receipt wherein DAN acknowledged his acceptance of the P4,000 by affixing his signature thereto. Said receipt was written in Chinese characters so the trial court commissioned an interpreter to translate its contents into English. The translator issued a certification and testified that the translation to the best of her knowledge and belief was correct, and such translation corroborates YIUs claim Aside from the translator, other witnesses corroborated YIUs testimony saying that they were present when the receipt was signed by DAN. Furthermore, an examination was conducted by the Crime Lab of certain documentary exhibits to determine whether the signatures therein when compared to the signature of DAN appearing in the pay envelopes of employees of the restaurant were the same Also, YIU allegedly received from DAN the amount of P12,000 from the profits of the operation of the restaurant for the year 1974. This was corroborated by both issuing and drawee Banks On the other hand, DAN interposed a general denial of YIUs claims. He denied having received from YIU the amount of P4,000 and he contested and impugned the genuineness of the receipt. DAN also denied having issued a check in favor of YIU representing profits of the restaurant for the year 1974 DAN avers that he started the Sun Wah Panciteria using his own savings. To bolster his contention that he was the sole owner of the restaurant, DAN presented various government licenses and permits showing the Sun Wah Panciteria was and still is a single proprietorship solely owned and operated by himself alone The trial court gave credence to YIUs complaint and entered judgment in favor of YIU. The trial court ordered DAN to deliver and pay to YIU the sum equivalent to 22% of the annual profit derived from the operation of Sun Wah Panciteria from October, 1955, until fully paid, and attorney's fees YIU later filed a verified MR to request that the decision rendered by the trial court should include the net profit of the Sun Wah Panciteria which was not specified in the decision, and prayer for a new trial to allow YIU to adduce evidence so that the said decision will be comprehensively adequate and thus put an end to further litigation Trial court granted YIUs motion over the objections of DAN. Ultimately, the trial court issued an amended decision, ordering DAN to pay YIU the sum equivalent to 22% of the net profit of P8,000 per day from the time of judicial demand, until fully paid, plus attorney's fees and costs DAN appealed the trial court's amended decision to the then Intermediate Appellate Court. IAC rendered judgment first modifying the trial courts decision. Later, the appellate court, modified its own decision and affirmed the lower court's decision in toto DAN filed his MR but the IAC denied the dame hence, this petition

ISSUE: WON YIU and DAN are partners thus meriting the award to YIU of shares in the restaurants profits HELD: YES! RATIO:

DAN first faults both lower courts factual finding that YIU is a partner of DAN in the setting up and operations of the panciteria on the ground that YIUs complaint avers that YIU merely extended financial assistance to DAN at the time of the establishment of the Panciteria. DAN avers that YIUs complaint did not claim that he is a partner of the business entitled to shares in the profits this is UNTENBALE! Looking at YIUs material allegations in his complaint, what he established was that he gave P4,000 to DAN with the understanding that he would be entitled to 22% of the annual profit derived from the operation of the said panciteria. These allegations, which were proved, irresistibly make YIU and DAN partners in the establishment of Sun Wah Panciteria, pursuant to Art 1767, CC which provides that: "By the contract of partnership two or more persons bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves" DAN next faults the respondent court for giving probative value to the Crime Lab Report on the ground that the alleged standards or specimens used at the conclusion were never testified to by any witness nor has any witness identified the handwriting in the standards or specimens belonging to DAN this argument DOES NOT HOLD WATER The records also show that when the pay envelopes were presented by YIU for marking as exhibits, DAN did not interpose any objection. Neither did DAN file an opposition to the motion of YIU to have these exhibits examined by the Crime Lab despite due notice to him. Likewise, no explanation has been offered for his silence nor was any hint of objection registered for that purpose. DAN is therefor estopped from questioning the validity of the Crime Lab report DAN next raises the issue of prescription. He argues that the alleged receipt is dated Oct 1955 and the complaint was filed only on July 1978 or after the lapse of 22 years. As such, pursuant to Art 1144, CC, YIUs action has prescribed for having been filed well beyond the 10yr period this argument is NOT well-taken AS already held above, YIU is a partner of DAN in Sun Wah Panciteria. The requisites of a partnership which are: (1) two or more persons bind themselves to contribute money, property, or industry to a common fund; and (2) intention on the part of the partners to divide the profits among themselves. A partner shares not only in profits but also in the losses of the firm. If excellent relations exist among the partners at the start of business and all the partners are more interested in seeing the firm grow rather than get immediate returns, a deferment of sharing in the profits is perfectly plausible. It would be incorrect to state that if a partner does not assert his rights anytime within ten years from the start of operations, such rights are irretrievably lost. IN THE CASE AT BAR, YIU's cause of action is premised upon the failure of DAN to give him the agreed profits in the operation of Sun Wah Panciteria. In effect YIU was asking for an accounting of his interests in the partnership! It is Art 1842 in conjunction with Arts 1144 and 1155 which is applicable. Regarding the prescriptive period within which a partner may demand an accounting, Arts 1806, 1807, and 1809 show that the right to demand an accounting exists as long as the partnership exists. Prescription begins to run only upon the dissolution of the partnership when the final accounting is done Finally, DAN assails the monetary awards for being excessive and unconscionable and above the claim of YIU as embodied in his complaint this contention, too, MUST FAIL The cashier of Sun Wah Panciteria established the true and correct income of the restaurant. For a regular day, the restaurant earns P7,000 to more than P10,000 (not including the restaurants income from catering services). These statements of the cashier were never rebutted and DAN never presented contrary proof There is more than substantial evidence to support the factual findings of the trial court and the appellate court. There is no basis in the records to sustain the petitioners contention that the damages awarded are excessive

2
Compiled Partnership Digests #5 AJ | Amin | Cha | Janz | Krizel | Paco | Vien | Yen
AS A FINAL POINT, it would be absurd to order DAN to pay his obligation into the future with no fixed ending date. Thus, the Court decrees the dissolution of the partnership pursuant to Art 18311 Moreover, an action based on a written contract prescribes in ten years from the time the right of action accrues. Emnace filed a petition for certiorari before the CA, CA dismissed the petition. Failure to pay the proper docket fee The trial court does not have to employ guesswork in ascertaining the estimated value of the partnership's assets, for the heirs themselves voluntarily pegged the worth thereof at P30M. Hence, this case is one which is really not beyond pecuniary estimation, but rather partakes of the nature of a simple collection case where the value of the subject assets or amount demanded is pecuniarily determinable. While it is true that the exact value of the partnership's total assets cannot be shown with certainty at the time of filing, respondents can and must ascertain, through informed and practical estimation, the amount they expect to collect from the partnership, particularly from petitioner, in order to determine the proper amount of docket and other fees. It is thus imperative for respondents to pay the corresponding docket fees in order that the trial court may acquire jurisdiction over the action. The rule applicable to the case at bar is Section 5(a) of Rule 141 of the Rules of Court, which defines the two kinds of claims as: (1) those which are immediately ascertainable; and (2) those which cannot be immediately ascertained as to the exact amount. This second class of claims, where the exact amount still has to be finally determined by the courts based on evidence presented, falls squarely under the third paragraph of said Section 5(a), which provides: In case the value of the property or estate or the sum claimed is less or more in accordance with the appraisal of the court, the difference of fee shall be refunded or paid as the case may be. The heirs have a specific claim - 1/3 of the value of all the partnership assets - but they did not allege a specific amount. They did, however, estimate the partnership's total assets to be worth P30M in a letter addressed. They cannot now say that they are unable to make an estimate, for the said letter and the admissions therein form part of the records of this case. They cannot avoid paying the initial docket fees by conveniently omitting the said amount in their amended complaint. This estimate can be made the basis for the initial docket fees that respondents should pay. Although the payment of the proper docket fees is a jurisdictional requirement, the trial court may allow the plaintiff in an action to pay the same within a reasonable time before the expiration of the applicable prescriptive or reglementary period. The TC should determine the proper docket fee based on the estimated amount that the heirs seek to collect from petitioner, and direct them to pay the same within a reasonable time, provided the applicable prescriptive or reglementary period has not yet expired, Failure to comply therewith, and upon motion by petitioner, the immediate dismissal of the complaint shall issue on jurisdictional grounds. Improper Venue The records indubitably show that respondents are asking that the assets of the partnership be accounted for, sold and distributed according to the agreement of the partners. The fact that two of the assets of the partnership are parcels of land does not materially change the nature of the action. It is an action in personam because it is an action against a person, namely, petitioner, on the basis of his personal liability. It is not an action in rem where the action is against the thing itself instead of against the person. Furthermore, there is no showing that the parcels of land involved in this case are being disputed. In fact, it is only incidental that part of the assets of the partnership under liquidation happen to be parcels of land. The action filed by respondents not only seeks redress against petitioner. It also seeks the enforcement of, and petitioner's compliance with, the contract that the partners executed to formalize the partnership's dissolution, as well as to implement the liquidation and partition of the partnership's assets. Clearly, it is a personal action that, in effect, claims a debt from petitioner and seeks the performance of a personal duty on his part. In fine, respondents' complaint seeking the liquidation and partition of the assets of the partnership with damages is a personal action which

FACTS: Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a business concern known as Ma. Nelma Fishing Industry. Sometime in 1986, they decided to dissolve their partnership and executed an agreement of partition and distribution of the partnership properties among them, consequent to Jacinto Divinagracia's 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 Tabanao's untimely demise in 1994, Emnace failed to submit to Tabanao's heirs any statement of assets and liabilities of the partnership, and to render an accounting of the partnership's finances. Emnace also reneged on his promise to turn over to Tabanao's heirs the deceased's 1/3 share in the total assets of the partnership or the sum of P10M despite formal demand for payment thereof. Tabanao' s heirs filed against Emnace an action for accounting, payment of shares, division of assets and damages. Emnace filed a motion to dismiss the complaint on the grounds of improper venue, lack of jurisdiction over the nature of the action or suit, and lack of capacity of the estate of Tabanao to sue. TC denied the motion to dismiss. It held that venue was properly laid because, while realties were involved, the action was directed against a particular person on the basis of his personal liability; hence, the action is not only a personal action but also an action in personam. As regards to the argument of lack of jurisdiction over the action because the prescribed docket fee was not paid considering the huge amount involved in the claim, the trial court noted that a request for accounting was made in order that the exact value of the partnership may be ascertained and, thus, the correct docket fee may be paid. The heirs of Tabanao had a right to sue in their own names, in view of the provision of Article 777 of the Civil Code, which states that the rights to the succession are transmitted from the moment of the death of the decedent. Tabanaos heirs filed an amended complaint, incorporating the additional prayer that petitioner be ordered to "sell all (the partnership's) assets and thereafter pay/remit/deliver/surrender/yield to the plaintiffs" their corresponding share in the proceeds thereof. Emnace filed a manifestation and motion to dismiss, arguing that the trial court did not acquire jurisdiction over the case due to the plaintiffs' failure to pay the proper docket fees. In a supplement to his motion to dismiss, he also raised prescription as an additional ground warranting the outright dismissal of the complaint. TC denied the motion to dismiss as the grounds raised therein were basically the same as the earlier motion which has been denied. Anent the issue of prescription, trescription begins to run only upon the dissolution of the partnership when the final accounting is done. Hence, prescription has not set in the absence of a final accounting.

Emnace v. CA Ynares-Santiago (2001)

1 Art 1831: On application by or for a partner the court shall decree a dissolution whenever: xxx xxx xxx (3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business; (4) A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him; xxx xxx xxx (6) Other circumstances render a dissolution equitable xxx xxx xxx

3
Compiled Partnership Digests #5 AJ | Amin | Cha | Janz | Krizel | Paco | Vien | Yen
may be filed in the proper court where any of the parties reside.30 Besides, venue has nothing to do with jurisdiction for venue touches more upon the substance or merits of the case.31 As it is, venue in this case was properly laid and the trial court correctly ruled so. Lack of capacity to sue on the part of plaintiff heirs of Vicente Tabanao Whatever claims and rights Vicente Tabanao had against the partnership and petitioner were transmitted to respondents by operation of law, more particularly by succession, which is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance of a person are transmitted. Moreover, respondents became owners of their respective hereditary shares from the moment Vicente Tabanao died. A prior settlement of the estate, or even the appointment of Salvacion Tabanao as executrix or administratrix, is not necessary for any of the heirs to acquire legal capacity to sue. As successors who stepped into the shoes of their decedent upon his death, they can commence any action originally pertaining to the decedent. From the moment of his death, his rights as a partner and to demand fulfillment of petitioner's obligations as outlined in their dissolution agreement were transmitted to respondents. They, therefore, had the capacity to sue and seek the court's intervention to compel petitioner to fulfill his obligations. Prescription of the plaintiff heirs' cause of action. The 3 final stages of a partnership are: (1) dissolution; (2) windingup; 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 partnership's 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 partnership's business and assets. Hence, the said action is not barred by prescription. MARTINEZ delivered to Ong Pong Co and Ong Lay (ONGS) the sum of P1,500. The ONGS, in a private document, acknowledged that they had received the money with the agreement that they will invest it in a store, and the profits or losses therefrom was to be divided with MARTINEZ in equal shares Later, MARTINEZ filed a complaint in order to compel the ONGS to render him an accounting of the partnership, or else to refund him the P1,500 that he had given them Ong Pong Co alone appeared to answer the complaint. He admitted the fact of the agreement, but he alleged that Ong Lay (deceased) was the one who had managed the business, and that nothing had resulted therefrom except the loss of the capital of P1,500, to which loss MARTINEZ agreed to bear CFI rendered decision ordering Ong Pong Co to return to MARTINEZ onehalf of the capital of P1,500 (P750) plus P90 as one-half of the profits, calculated at the rate of 12% per annum for the six months that the store was supposed to have been open (total of P840) with legal interest of 6% until the full payment, with costs hence, this appeal by Ong Pong Co ISSUE: WON MARTINEZ is entitled to the capital he contributed to the partnership HELD: YES. The ONGS failed to fulfill their obligation as partners who, acting as MARTINEZs agents in receiving money, did not render proper accounting therefor. Such renders them jointly liable for the losses, solidarity not having been established. CFI decision is AFFRIMED in this regard but REVERSED inasmuch as it found that the capital invested earned profits. Thus, the CFI ruling awarding MARTINEZ another P840 is DELETED. Ong Pong Co is only liable to pay MARTINEZ half of the capital, or P750, representing half of the loss which both ONGS should jointly bear due to their omission, to earn legal interest of 6% from time of filing this complaint, and costs RATIO: In his defense, Ong Pong Co raised the issue of the closure/failure of the store by virtue of ejectment proceedings instituted against them. THIS, however, has no real significance in the determination of the merits of this case To be sure, the whole action is based upon the fact that the ONGS received capital from MARTINEZ for the purpose of organizing a store. The ONGS, according to the agreement, were to handle the said money and invest it in a store which was the object of the association The ONGS had no special agreement vesting in one sole person the management of the business. Thus, both ONGS were the actual administrators thereof; and as such administrators, they were the agents of the company and incurred the liabilities peculiar to every agent, among which is that of rendering account to the principal of their transactions, and paying him everything they may have received by virtue of the mandatum Since neither of them has rendered such account nor proven the losses, they are therefore obliged to refund the money that they received for the purpose of establishing the said store There is no evidence presented that the entire capital or any part thereof was lost. Without proof, the allegation that the effects of the store were ejected is, as earlier mentioned, of no moment. Even if we assume this to be true, it could still not be inferred that the ejectment was due to the fact that no rents were paid, and that the rent was not paid on account of the loss of the capital belonging to the partnership With regard to the CFIs finding of profits, it appears that the same was based on the statements of Ong Pong Co, to the effect that "there were some profits, but not large ones." this, however, was never proven. And even we admit the same, such statement still does not make it possible to estimate the alleged profits. As such, the CFI ruling on this point is REVERSED Inasmuch as in this case nothing appears other than the failure to fulfill an obligation on the part of a partner who acted as agent in receiving money for a given purpose, for which he has rendered no accounting, such agent is responsible only for the losses which, by a violation of the provisions of the law, he incurred. This being an obligation to pay in cash, there are no other losses than the legal interest, which interest is not due

WHEREFORE, in view of all the foregoing, the instant petition is DENIED for lack of merit, and the case is REMANDED to the Regional Trial Court of Cadiz City, Branch 60, which is ORDERED to determine the proper docket fee based on the estimated amount that plaintiffs therein seek to collect, and direct said plaintiffs to pay the same within a reasonable time, provided the applicable prescriptive or reglementary period has not yet expired. Thereafter, the trial court is ORDERED to conduct the appropriate proceedings in Civil Case No. 416-C.

MARTINEZ v. ONG PONG CO Arellano, CJ (1910)

4
Compiled Partnership Digests #5 AJ | Amin | Cha | Janz | Krizel | Paco | Vien | Yen
except from the time of the judicial demand, or, in the present case, from the filing of the complaint Art. 1688 is NOT applicable in this case, in so far as it provides "that the partnership is liable to every partner for the amounts he may have disbursed on account of the same and for the proper interest," for the reason that no other money than that contributed as is involved Art. 1138, CC is also NOT applicable here as this deals with debts of a partnership where the obligation is NOT joint. Likewise, Art 1723 regarding the liability of two or more agents with respect to the return of the money that they received from their principal is NOT applicable. No showing of solidarity having been established, their liability is JOINT!

Agustin v. Inocencio
FACTS: The parties, who had been conducting a partnership as industrial partners without capital, contributed from its profits the sum of P807.28 as a fund toward the construction of a casco for use in their business, to which they added P3,500, borrowed from Maria del Rosario, the wife of Inocencio, he being the managing partner. It is admitted that this total (a little over P4,300), was the estimated cost of the casco but in the progress of the work Inocencio found that it called for additional funds, which he advanced to the amount of P2,024.49. This amount is necessary in order to complete the work undertaken. Although it would seem that he failed to notify his partners of the various items from time to time going to make up this sum, it is shown that the books were at all times open to their inspection, and that, being asked to examine them, they omitted to do so, and that the Agustin, representing all the partners, was also present at the construction of the casco, in charge of the practical work and cognizant of its needs and its progress. ISSUE/HELD: WON Inocencio, in borrowing money and advancing funds, was acting within the scope of his authority as a managing partner. YES RATIO: The work done in the casco having been within the scope of the association and necessary to carry out its express object, the borrowing of the money required to carry it on, with the acquiescence if not with the affirmative consent of his associates, was not outside the powers of the managing partner and constitutes a debt for which all the associates are liable. The note passed into the hands of Inocencio by reason of the successive deaths of his wife and of their only child, each without debts, and for the amount thereof he became a creditor, subject, however, to the deduction therefrom of his proportionate part of the indebtedness. The trial court treated his claim as an addition to his capital in the firm, rather than as a loan, and this constitutes one of the grounds of error stated by the appellant. We do not deem it necessary to pass upon this objection, for the reason that, considered as a loan, this sum would place the defendant as a creditor in a stronger position as against his associates than if regarded as a mere contribution to capital. The error, if it be an error, is not, therefore, prejudicial to the plaintiff, but is rather beneficial to him. The respondent did not except to it. Various small sums have been paid out of the profits to some of the partners and these were properly allowed him in the judgment. On the theory on which the action was disposed of, the trial court committed no error in the computation of the various shares. Of the four parties plaintiff, but one, Victor del Rosario, is interested in this appeal, which has been dismissed as to the others, and as to him the judgment of the trial court must be affirmed, with costs of this instance.