DAN FUE LEUNG v IAC and Leung Yiu
31 Jan 1989 | Gutierrez, Jr.
Leung Yiu filed a complaint
To recover sum of money
equivalent to 22% of the annual
profits from the operation of Sun
Wah Panciteria from petitioner Dan
The Panciteria was registered as a single
proprietorship and its licenses and permits
were issued to and in favor of petitioner Dan
as the sole proprietor. Leung Yiu adduced
evidence to show that the restaurant was
actually a partnership and that he was one of
the partners
He had contributed Php4,000 to its
initial establishment.
Private respondent alleged that
By the time the resto became
operational, PR have Php4k as
contribution evidenced by a receipt
signed by petitioner
Receipt was in Chinese but an
interpreter was commissioned. Two
other people corroborated the
testimony to the effect that they were
both present when the receipt was
signed by the petitioner.
PR received from Dan the amount of
Php12,000 covered by a check from
the profits of the resto for year 1974.
Witness Teodulo Diaz of ChinaBank
testified that the check was deposited
and duly credited to PRs savings
account
Another witness testified that the
check was drawn by the petitioner and
debited against his own account.
Petitioner denied having received from PR
Php4k.
His savings and salaries from his
former employment a little more than
Php2k as capital in establishing the
restaurant.
Various government licenses and
permits showing that it was a single
proprietorship solely owned and
operated by Dan alone were
submitted.
TC ruled in favor of PR. Dan Fue Leung
ordered to pay.
PR filed an MR.
To include the net profit of the
restaurant which as not specified in
the decision. TC granted.
Both the trial court and the appellate court
found that the PR is a partner of the
petitioner in the setting up and operations of
the panciteria. There is no question from the
factual findings that the respondent invested
in the business as a partner. Hence, the two
courts declared that the private petitioner is
entitled to a share of the annual profits of the
resto.
Petitioner argues:
Complaint avers that the PR extended
financial assistance at the time of
the establishment of the resto, in turn
of which, PR allegedly will receive a
share in the profits of the resto.1
Complaint did not claim that PR is a
partner of the business so it was
serious error for the courts to grant a
relief not called for by the complaint.
Financial assistance (FA) should not
mean the contribution of capital by a
partner to a partnership.
W/N there exists a partnership YES
Lower courts did not err in construing the
complaint as one wherein the PR asserted his
rights as partner of the petitioner in the
1 2. That on or about the latter (sic) of September,
1955, defendant sought the financial assistance of
plaintiff in operating the defendant's eatery known as
Sun Wah Panciteria, located in the given address of
defendant; as a return for such financial assistance.
plaintiff would be entitled to twenty-two percentum
(22%) of the annual profit derived from the operation
of the said panciteria;3. That on October 1, 1955,
plaintiff delivered to the defendant the sum of four
thousand pesos (P4,000.00), Philippine Currency, of
which copy for the receipt of such amount, duly
acknowledged by the defendant is attached hereto
as Annex "A", and form an integral part hereof; (p. 11,
Rollo)
establishment of the resto notwithstanding
the use of the term financial assistance.
Ordinarily, FA is the giving out of
money to another without the
expectation of any returns
therefrom.
Under the circumstances, the
return for such FA is a percentage
of the annual profit from the
operation of the resto.
The requisites of a partnership are
1. 2 or more persons binding themselves to
contribute money, property or industry to a
common fund
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. The private
respondent's cause of action is premised
upon the failure of the petitioner to give him
the agreed profits in the operation of Sun
Wah Panciteria. In effect the private
respondent was asking for an accounting of
his interests in the partnership.
Yius 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.
Article 1842 applies. 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 or any agreement to the contrary.
The right to demand an accounting exists as
long as the partnership exists. Prescription
beings to run only upon the dissolution of the
partnership when the final accounting is
done.
The resolution of the IAC ordering the
payment of the petitioners obligation shows
that the same continues until fully paid.
The Court may decree a dissolution of the
partnership under Art 1831 of the Civil Code:
Art 1831. On application by or for a partner
the court shall decree a dissolution
whenever:
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
(6) Other circumstances render a dissolution
equitable.
There shall be a liquidation and winding up of
partnership affairs, return of capital, and
other incidents of dissolution because the
continuation of the partnership has become
inequitable.
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
1831.
PETITION DISMISSED.