Art.

1828 and then re-assembling the said assets or most of them and opening a
new business enterprise.
1.
(2) W/N Benjamin could assert his rights under his
G.R. No. 97212 employment contract as against the new partnership - YES
Yu vs NLRC
June 30, 1993 When the business of a partnership after dissolution is
BENJAMIN YU, petitioner, vs. NLRC and JADE MOUNTAIN continued under any conditions set forth in Article 1840, the
PRODUCTS COMPANY LIMITED, WILLY CO, RHODORA D. creditors of the retiring or deceased partner or the
BENDAL, LEA BENDAL, CHIU SHIAN JENG and CHEN HO- representative of the deceased partner, have a prior right to
FU, respondents. any claim of the retired partner or the representative of the
deceased partner against the person or partnership
FACTS continuing the business on account of the retired or deceased
partner's interest in the dissolved partnership or on account
1. Petitioner Benjamin Yu was formerly the Assistant General of any consideration promised for such interest or for his
Manager of a registered partnership Jade Mountain Products right in partnership property.
Company Limited (marble quarrying and export business)
Under Article 1840, creditors of the old Jade Mountain are also
2. Sometime in 1988, without the knowledge of Benjamin Yu, creditors of the new Jade Mountain which continued the business of
the general and limited partners sold and transferred their the old one without liquidation of the partnership affairs. Indeed, a
interests in the partnership to private respondent Willy Co creditor of the old Jade Mountain, like petitioner Benjamin in respect
and Emmanuel Zapanta. (Willy Co acquired the great bulk of of his claim for unpaid wages, is entitled to priority vis-a-vis any claim
the partnership interest) of any retired or previous partner insofar as such retired partner's
interest in the dissolved partnership is concerned.
3. The “new” partnership continued to use the old firm name of
Jade Mountain, as well as the actual operations of the The liability of a third person becoming a partner in the partnership
business enterprise, though they moved the firm's main continuing the business to the creditors of the dissolved partnership
office from Makati to Mandaluyong. All the employees of the shall be satisfied out of the partnership property only, unless there is a
partnership continued working in the business, all, save stipulation to the contrary.
Benjamin
However, the new partnership was entitled to appoint and hire a new
4. Upon learning of the operations in Mandaluyong, Benjamin general or assistant general manager. The non-retention of Benjamin
reported office for work and there he was informed by Willy Yu as Assistant General Manager did not therefore constitute unlawful
Co that the latter had bought the business from the original termination, or termination without just or authorized cause. We think
partners and that it was for him to decide whether or not he that the precise authorized cause for termination in the case at bar
was responsible for the obligations of the old partnership, was redundancy. It follows that petitioner Benjamin Yu is entitled to
including petitioner's unpaid salaries. Benjamin was not separation pay. Nevertheless, while the new Jade Mountain was
allowed to work anymore and his salaries were unpaid entitled to decline to retain Benjamin, it did not try to suggest that
there was any cause consisting of some blameworthy act or omission
5. Hence, he filed a complaint for illegal dismissal and recovery on the part of Mr. Yu which compelled the new partnership to
of unpaid salaries against Jade Mountain, Mr. Willy Co and terminate his services. Nonetheless, the new Jade Mountain did not
the other private respondents. notify him of the change in ownership of the business, the relocation of
the main office of Jade and the assumption by Mr. Willy Co of control
6. The partnership and Willy Co denied petitioner's charges,
of operations. The treatment (including the refusal to honor his claim
contending in the main that Benjamin Yu was never hired as
for unpaid wages) accorded Benjamin Yu was so summary and cavalier
an employee by the present or new partnership.
as to amount to arbitrary, bad faith treatment, for which the new Jade
7. Labor Arbiter rendered a decision holding that petitioner Mountain may legitimately be required to respond by paying moral
had been illegally dismissed. damages.

8. NLRC reversed the decision of the Labor Arbiter and held

that a new partnership consisting had bought the Jade
2.
Mountain business and it had not retained petitioner Yu in
his original position (no law requiring the new partnership to G.R. No. L-27343
absorb the employees of the old partnership). Singsong [Link] vs Isabela Sawmill
February 28, 1979
9. Petitioner Benjamin Yu is now before the Court
MANUEL G. SINGSONG, JOSE BELZUNCE, AGUSTIN E.
His contention: Partnership has a juridical personality TONSAY, JOSE L. ESPINOS, BACOLOD SOUTHERN
separate and distinct from that of each of its members. Such LUMBER YARD, and OPPEN, ESTEBAN, INC., plaintiffs-
independent legal personality subsists, notwithstanding appellees, vs.
changes in the identities of the partners. Consequently, the ISABELA SAWMILL, MARGARITA G. SALDAJENO and her
employment contract between Benjamin Yu and the husband CECILIO SALDAJENO LEON GARIBAY, TIMOTEO
partnership Jade Mountain could not have been affected by TUBUNGBANUA, and THE PROVINCIAL SHERIFF OF
changes in the latter's membership. NEGROS OCCIDENTAL, defendants, MARGARITA G.
SALDAJENO and her husband CECILIO
ISSUE with HOLDING SALDAJENO, defendants-appellants.

(1) W/N old partnership had been extinguished and replaced FACTS
by a new partnerships composed of Willy Co and Emmanuel
Zapanta - NO 1. The defendants Leon Garibay, Margarita G. Saldejeno, and
Timoteo Tubungbanua entered into a Contract of
Legal effect of the changes in the membership of the partnership was Partnership under the firm name "Isabela Sawmill"
the dissolution of the old partnership which had hired petitioner and
the emergence of a new firm composed of Willy Co and Emmanuel 2. Plaintiffs are creditors of the partnership
Zapanta as provided in Article 1828 and 1830 (1b) of the Civil Code
3. Later on, Spouses Cecilio Saldajeno and Margarita G.
In the case at bar, just about all of the partners had sold their Saldajeno filed a dissolution case against the Isabela
partnership interests (amounting to 82% of the total partnership Sawmill, Leon Garibay, and Timoteo Tubungbanua
interest) to Mr. Willy Co and Emmanuel Zapanta. This acquisition by
4. The partners entered into a Memorandum Agreement
new partners, coupled with the retirement or withdrawal of the
allowing the remaining partners to continue the business of
partners who had originally owned such interest, was enough to
the said partnership under the firm name “Isabella Sawmill”
constitute a new partnership.
and mortgage some of the properties in favor of Margarita
However, the occurrence of events which precipitate the for payment of her share in the partnership
legal consequence of dissolution of a partnership do not
5. Thereafter, some properties of the partnership were sold in a
automatically result in the termination of the legal
public auction
personality of the old partnership as provided by Article 1829
(o) of the Civil Code 6. Margarita G. Saldajeno purchased some of these things at
the public auction and executed a deed of sale in favor of the
The legal personality of the expiring partnership persists for the limited
Pan Oriental Lumber Company
purpose of winding up and closing of the affairs of the partnership. In
the case at bar, the business of the old partnership was simply 7. Hence, the creditors of the partnership interposed an appeal
continued by the new partners, without the old partnership undergoing to the CA contending that the creditors have a preferred right
the procedures relating to dissolution and winding up of its business over the assets of the said partnership sold and over the
affairs, paying off its debts, liquidating and distributing its net assets, proceeds of their sale at public auction, superior to the right
 of the defendant Margarita G. Saldajeno, as creditor of the person who gave occasion for the damages to be caused must bear the
partners Leon Garibay and Timoteo Tubungbanua consequences. Had Margarita G. Saldajeno not entered into the
memorandum-agreement allowing Leon Garibay and Timoteo
8. Defendants Margarita G. Saldajeno and her husband Tubungbanua to continue doing the business of the aprtnership, the
answered that Isabela Sawmill has been judicially dissolved appellees would not have been misled into thinking that they were still
and defendants Messrs. Leon Garibay and Timoteo dealing with the partnership "Isabela Sawmill". Under the facts, it is of
Tubungbanua became the successors-in-interest to the said no moment that technically speaking the partnership "Isabela Sawmill"
defunct partnership bound to answer for any and all was dissolved by the withdrawal therefrom of Margarita G. Saldajeno.
obligations of the defunct partnership to its creditors and The partnership was not terminated and it continued doping business
third persons through the two remaining partners.
9. After trial, judgment was rendered in favor of the plaintiffs As a rule, a contract cannot be assailed by one who is not a party
and against the defendants. thereto. However, when a contract prejudices the rights of a third
person, he may file an action to annul the contract.
10. Margarita and her husband appealed to the Court of Appeals
but CA certified the records of the case to the Supreme Court The defendants-appellants have a right to be reimbursed whatever
considering that the resolution involves purely questions of amounts they shall pay the appellees by their co-defendants Leon
law Garibay and Timoteo Tubungbanua. In the memorandum-agreement,
Leon Garibay and Timoteo Tubungbaun undertook to release
ISSUE with HOLDING Margarita G. Saldajeno from any obligation of "Isabela Sawmill" to
third persons.
W/N the judicial dissolution of the partnership relieved
Margarita Saldajeno from her liability to the creditors - NO

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 to the business.

In the case at bar, 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 as expressly stipulated in their
memorandum-agreement. There was no liquidation of the assets of the
partnership. The remaining partners, Leon Garibay and Timoteo
Tubungbanua, continued doing the business of the partnership in the
name of "Isabela Sawmill". They used the properties of said
partnership.

The properties mortgaged to Margarita G. Saldajeno by the remaining

partners, Leon Garibay and Timoteo Tubungbanua, belonged to the
partnership "Isabela Sawmill." The appellant, Margarita G. Saldajeno,
was correctly held liable by the trial court because she purchased at
public auction the properties of the partnership which were mortgaged
to her.

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 Timoteo Tubungbanua doing the
business in the name of the partnership "Isabela Sawmill" could be
enforced against the properties of said partnership. The judicial
foreclosure of the chattel mortgage executed in favor of Margarita G.
Saldajeno did not relieve her from liability to the creditors of the
partnership.

Margrita G. Saldajeno is partly to blame for not insisting on the

liquidaiton of the assets of the partnership. She even agreed to let Leon
Garibay and Timoteo Tubungbanua 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 action in

good faith, the appellees aslo acted in good faith in extending credit to
the partnership. Where one of two innocent persons must suffer, that
Art. 1829 6. Pablo changed the name from the Leyte-Samar Press to
Tañega Press, but never rendered any accounting of the
1. business operations, or paid the share of the Vicente in the
profits
G.R. No. L-23232
Dira vs Tanega 7. After 9 years, Vicente filed a case for partnership accounting
June 17, 1970 and sum of money

VICENTE DIRA, plaintiff-appellant, vs. PABLO D. 8. In his complaint, Vicente prayed for payment of his salaries
TAÑEGA, defendant-appellee. and for accounting of the partnership affairs, for payment of
his alleged share in the rental value of the printing equipment
FACTS and accessories used by the partnership
1. Vicente and Pablo, together with Francisco Pagulayan entered 9. In his defense, Pablo alleged that the whole business of the
into a partnership for the purpose of engaging in the printing partnership became his alone after he had acquired by
business for a period of five (5) years (Vicente was designated purchase the share of Francisco Pagulayan and had taken over
as President, Pablo as manager-treasurer of the partnership) the share of appellant for the latter’s failure to pay the
requested settlement of account. He also added that he had
2. During the term of Vicente as President, Pablo never paid him always been operating openly and publicly the said printing
his salary business from 1947 without any intervention or participation
of Vicente and without him making any claim of any kind in
3. As a result thereto, Vicente obtained a personal loan from connection therewith until the filing of the complaint on
Francisco Pagulayan pledging his share in the printing February 10, 1961, hence, all the claims and causes of action of
equipment to pay the same the appellant had already prescribed
4. Later on, Francisco Pagulayan sold his share of the 10. Judgment was rendered against Vicente. Hence, this appeal
partnership to Pablo and who by virtue thereof became 2/3
owner of the business 11. Vincente is contending that his claim is not barred by
prescription since Pablo ignored him and did not give him any
5. Pablo presented a letter of demand to Vicente asking him to participation in the business since 1947. He is also alleging
settle his account that was due to Francisco, but because of his
failure to do so, Pablo assumed full ownership of the business
 that the partnership has not been dissolved, hence, he could properties of the business establishment. Despite such commitment,
still claim his share as partner as provided under Art 1829 petitioners allegedly failed to comply with their duty to account, and
continued to benefit from the assets and income of Shellite to the damage
ISSUE with HOLDING
and prejudice of respondent.
W/N Vicente’s claim is barred by prescription - YES
4. Petitioners, on their part, are contending that they are not liable for
It is undisputed that Pablo had been in the exclusive possession of all the partnership shares, unreceived income/profits, interests, damages and
printing equipment since 1946 with Vicente admitting such fact. attorney’s fees as the claims must be proceeded against the estate of
deceased Jacinto in a probate or intestate proceeding.
Vicente alleged that Pablo ignored him and did not give him any
participation, since 1947, in the business, yet he did not demand an 5. Trial court rendered its Decision ruling for Lamberto.
immediate accounting of the business. For his failure to demand
accounting from Vicente, he had forfeited his right by prescription (Art 6. Petitioners interposed an appeal to the CA but it was denied
1153 provides that prescription of actions to demand accounting runs
from the day the persons who should render same cease in their 7. Hence, this petition. Petitioners are contending, among others, that
functions) laches and/or prescription is applicable in this case (case was filed 3
years after Jacinto’s death)
It is an incontrovertible fact that the plaintiff had filed this action against
the defendant on February 10, 1961, nearly ten years after the expiration ISSUE with HOLDING
of the contract of partnership between them on March, 1951.
W/N Chua’s claim is barred by prescription. - NO
Appellee took exclusive control of the partnership affairs since 1947,
publicly and openly and after having notified appellant that he would do The Civil Code provides that an action to enforce an oral contract
so should the latter fail to comply with his letter of demand. Nowhere in
prescribes in six (6) years while the right to demand an accounting for a
the facts does it appear that Vicente did anything about said demand or
that he ever contested the action of the Pablo of transferring the place of partner’s interest as against the person continuing the business accrues at
business and changing its name to Tañega Press. There is nothing to the date of dissolution, in the absence of any contrary agreement.
show that he had taken any move for the payment to him of his unpaid Considering that the death of a partner results in the dissolution of the
salaries both as President of the business and as editor of the Leyte- partnership, in this case, it was after Jacinto’s death that Chua as the
Samar Tribune. surviving partner had the right to an account of his interest as against
Under Article 1140 of same Code, "Actions to recover movables shall Lilibeth. It bears stressing that while Jacinto’s death dissolved the
prescribe eight years from the time the possession thereof is lost, unless partnership, the dissolution did not immediately terminate the
the possessor has acquired the ownership by prescription for a less partnership. The Civil Code expressly provides that upon dissolution, the
period" or for an equal period, in which latter case, the right to sue partnership continues and its legal personality is retained until the
prescribes together with the title. complete winding up of its business, culminating in its termination.
W/N partnership has not yet been dissolved – NO

When a partnership for a fixed term or particular undertaking is

3. Sy vs CA
continued after the termination of such term or particular undertaking
without any express agreement, the rights and duties of the partners G.R. No. 94285 August 31, 1999
remain the same as they were at such termination, so far as is consistent
with a partnership at will. JESUS SY, JAIME SY, ESTATE OF JOSE SY, ESTATE OF
VICENTE SY, HEIR OF MARCIANO SY represented by
A continuation of the business by the partners or such of them as JUSTINA VDA. DE SY and WILLIE SY, petitioners, vs. THE
habitually acted therein during the term, without any settlement or COURT OF APPEALS, INTESTATE ESTATE OF SY YONG HU,
liquidation of the partnership affairs, is prima facie evidence of a SEC. HEARING OFFICER FELIPE TONGCO, SECURITIES AND
continuation of the partnership as provided under Article 1829. EXCHANGE COMMISSION, respondents.
However, this article is clearly inapplicable here, for the simple reason -----------------------------
that those articles are premised on a continuation of the partnership. In
the case at bar, Pablo repudiated the partnership as early as 1947 with G.R. No. 100313 August 31, 1999
either actual or presumed knowledge of Vicente. By analogy, at least,
with the rule as to a co-ownership, which a partnership essentially is, SY YONG HU & SONS, JOHN TAN, BACOLOD CANVAS AND
prescription does not run in favor of any of the co-owners only as long as UPHOLSTERY SUPPLY CO., AND NEGROS ISUZU
the co-owner claiming against the others "expressly or impliedly SALES, petitioners, vs. HONORABLE COURT OF APPEALS (11th
recognizes the co-ownership," a circumstance irreconcilably inconsistent Division), INTESTATE ESTATE OF THE LATE SY YONG HU,
with Pablo's conduct of transferring the place of business, changing its JOSE FALSIS, JR., AND HON. BETHEL KATALBAS-
name and not paying Vicente any of the salaries agreed upon in the MOSCARDON, RTC OF NEGROS OCCIDENTAL, Branch
articles of partnership. 51, respondents.

2. FACTS

G.R. No. 143340 1. Sy Yong Hu & Sons is a partnership of Sy Yong Hu and his
Sunga-Chan vs Chua sons, Jose Sy, Jayme Sy, Marciano Sy, Willie Sy, Vicente Sy,
August 15, 2001 and Jesus Sy, registered with the SEC with Jose Sy as
managing partner (had the most shares).
LILIBETH SUNGA-CHAN and CECILIA SUNGA, petitioners,
vs. LAMBERTO T. CHUA, respondent. 2. Keng Sian brought an action against the partnership as well as
against the individual partners for accounting of all the
FACTS properties allegedly owned in common by Sy Yong Hu and the
Keng Sian, and for the delivery or reconveyance of her one-half
1. On June 22, 1992, Lamberto T. Chua filed a complaint against Lilibeth (1/2) share in said properties and in the fruits thereof.
Sunga Chan and Cecilia Sunga, daughter and wife, respectively of the
deceased Jacinto L. Sunga, for Winding Up of Partnership Affairs, 3. Keng Sian averred that she was the common law wife of
Accounting, Appraisal and Recovery of Shares and Damages with Writ of partner Sy Yong Hu, that Sy Yong Hu, together with his
children, who were partners in the partnership, connived to
Preliminary Attachment
deprive her of her share in the properties acquired during her
cohabitation with Sy Yong Hu, by diverting such properties to
2. Lamberto alleged that in 1977, he verbally entered into a partnership
the partnership.
with Jacinto in the distribution of Shellane Liquefied Petroleum Gas
(LPG). For business convenience, Lamberto and Jacinto allegedly agreed 4. Defendants, including Sy Yong Hu himself, countered that
to register the business name of their partnership, SHELLITE GAS Keng Sian is only a house helper of Sy Yong Hu and his wife
APPLIANCE CENTER, under the name of Jacinto as a sole proprietorship. and the subject properties "are exclusively owned by defendant
partnership, and plaintiff has absolutely no right to or interest
3. Lamberto further stated that upon Jacintos death in the later part of therein."
1989, his surviving wife, petitioner Cecilia and particularly his daughter, 5. On the other hand, Marciano Sy filed a petition for declaratory
petitioner Lilibeth, took over the operations, control, custody, disposition relief against partners Vicente Sy, Jesus Sy and Jayme Sy
and management of Shellite without Lamberto’s consent. Lamberto praying that he be appointed managing partner of the
claimed that Lilibeth only disbursed out of the partnership funds the partnership, to replace Jose Sy who died on August 12, 1978.
amount of P200,000.00 and partially paid the same to him with a promise
that the latter would make the complete inventory and winding up of the 6. However, Vicente Sy, Jesus Sy and Jaime Sy, who claim to
represent the majority interest in the partnership, sought the
 dissolution of the partnership and the appointment of Vicente Furthermore, having agreed with the respondents not to dispose of the
Sy as managing partner. partnership assets, petitioners effectively consented to the suspension of
the winding up or, more specifically, the partition and distribution of
7. Hearing Officer dismissed the petition, dissolving the subject assets. Petitioners are now estopped from questioning the order
partnership and naming Jesus Sy as the managing partner in of the Hearing Officer issued in accordance with the said agreement.48
charge of winding the affairs of the partnership.

8. SEC en banc affirmed this decision but clarified that the

partnership was dissolved by express will of the majority and Art 1831
not ipso facto because of the death of any partner in view of
the stipulation of Articles of Partnership and the provisions of 1. Fue Leung vs IAC
the New Civil Code particularly Art. 1837 [2] and Art. 1841.

9. In 1982, the children of Keng Sian with Sy Yong Hu filed a

petition, to revoke the certificate of registration of Sy Yong Hu 1. The Sun Wah Panciteria, a restaurant, at Sta. Cruz, Manila, was
& Sons, and to have its assets reverted to the estate of the late established and registered as a single proprietorship and its
Sy Yong Hu. licenses and permits were issued to petitioner Dan Fue Leung
as the sole proprietor.
10. After hearings, the petition was dismissed by Hearing Officer
which order became final since no appeal was taken 2. Respondent Leung Yiu filed a case against Dan for accounting
therefrom. and recovery of 22% of the annual profits derived from the
operation of Sun Wah Panciteria alleging that Sun Wah
11. In the meantime, Felix Ferrer was appointed as a Special Panciteria was actually a partnership and that he was one of the
Administrator for the Intestate Estate of Sy Yong Hu and later partners having contributed P4,000.00 to its initial
on joined Keng Sian in contending that the assets of the establishment [as evidenced by a receipt issued by Dan in favor
partnership belong to Keng Sian and Sy Yong Hu (now
represented by the Estate of Sy Yong Hu) in co-ownership, of Leung Yu]
which assets were wrongfully diverted in favor of the 3. Dan denied having received from Leung Yu the amount of
defendants. P4,000.00. He contends that he used his savings from his
salaries amounting to a little more than P2,000.00 as capital in
12. The motion to intervene was denied establishing Sun Wah Panciteria. Dan also presented various
13. Private respondent Intestate Estate of Sy Yong Hu appealed to government licenses and permits showing the Sun Wah
the Commission en banc but the case was remanded to the Panciteria was and still is a single proprietorship solely owned
hearing officer on the aspect of partition and/or distribution of and operated by himself alone
partnership assets. It reiterated that dissolution of the 4. Trial court ruled in favor of Leung Yu
partnership, had long become final and executory. 5. Dan appealed the trial court's decision to the then Intermediate
Appellate Court.
14. On the other hand, petitioners Jayme Sy, Jesus Sy, Estate of
Jose Sy, Estate of Vicente Sy, Heirs of Marciano Sy 6. IAC affirmed the lower court's decision
(represented by Justina Vda. de Sy), and Willie Sy, interposed 7. In the same resolution, the motion for reconsideration filed by
an appeal against the Intervenor Dan was denied.
8. Hence, this appeal. Dan raises the issue of prescription because
15. Court of Appeals granted the petition and remanded the case the alleged receipt is dated October 1, 1955 and the complaint
for further execution, ordering the partition and distribution
was filed only on July 13, 1978 or after the lapse of twenty-two
of the partnership properties.
(22) years, nine (9) months and twelve (12) days – action
16. Private respondent seasonably interposed a motion for prescribes in 10 years
reconsideration of such decision of the Court of Appeals.
ISSUE with HOLDING
17. Court of Appeals reversed its Decision and remanded the case
to the SEC for the formation of a receivership committee
W/N there was partnership - YES
18. G.R. No. 100313 came about in view of the dismissal by the
Court of Appeals, seeking to annul and set aside the orders, The allegations of Leung Yu were proved. The requisites of a partnership
dated January 24, 1991 and April 19, 1989, respectively, in
which are — 1) two or more persons bind themselves to contribute money,
Civil Case No. 5326 before the Regional Trial Court of Bacolod
property, or industry to a common fund; and 2) intention on the part of
City
the partners to divide the profits among themselves have been established.
19. Petitioners (sons of Sy Yong Hu) are now interposing the
appeal with SC contending that the formation of a receivership W/N the right of action of Leung Yu has prescribed – NO
committee is improper following the dissolution of partnership
It would be incorrect to state that if a partner does not assert his rights
ISSUE with HOLDING anytime within ten years from the start of operations, such rights are
irretrievably lost. Leung Yu’s cause of action is premised upon the failure
W/N receivership committee was proper - YES of Dan to give him the agreed profits in the operation of Sun Wah
Panciteria. In effect Leung Yu was asking for an accounting of his interests
Petitioners fail to recognize the basic distinctions underlying the in the partnership.
principles of dissolution, winding up and partition or distribution. The
dissolution of a partnership is the change in the relation of the parties Regarding the presriptive period within which the private respondent may
caused by any partner ceasing to be associated in the carrying on, as demand an accounting, Articles 1806, 1807, and 1809 show that the right
might be distinguished from the winding up, of its business. Upon its
to demand an accounting exists as long as the partnership exists.
dissolution, the partnership continues and its legal personality is
retained until the complete winding up of its business culminating in its Prescription begins to run only upon the dissolution of the partnership
termination. when the final accounting is done

The dissolution of the partnership did not mean that the juridical entity The Court may decree a dissolution of the partnership under Article 1831
was immediately terminated and that the distribution of the assets to its of the Civil Code which, in part, provides:
partners should perfunctorily follow. On the contrary, the dissolution
simply effected a change in the relationship among the partners. The Art. 1831. On application by or for a partner the court shall decree a
partnership, although dissolved, continues to exist until its termination, dissolution whenever:
at which time the winding up of its affairs should have been completed
and the net partnership assets are partitioned and distributed to the xxx xxx xxx
partners.
(3) A partner has been guilty of such conduct as tends to affect
Thus, the disputed order placing the partnership under a receivership prejudicially the carrying on of the business;
committee cannot be said to have varied the final order of dissolution.
Neither did it suspend the dissolution of the partnership. If at all, it only (4) A partner willfully or persistently commits a breach of the partnership
suspended the partition and distribution of the partnership assets agreement, or otherwise so conducts himself in matters relating to the
pending disposition of Civil Case No. 903 on the basis of the agreement partnership business that it is not reasonably practicable to carry on the
by the parties and under the circumstances of the case. It bears stressing business in partnership with him;
that, like the appointment of a manager in charge of the winding up of
the affairs of the partnership, said appointment of a receiver during the xxx xxx xxx
pendency of the dissolution is interlocutory in nature, well within the
jurisdiction of the SEC. (6) Other circumstances render a dissolution equitable.
There shall be a liquidation and winding up of partnership affairs, return having legally acquired authority to hear and decide the case, it can not
of capital, and other incidents of dissolution because the continuation of be divested of that authority by said intervenors. "An intervention cannot
the partnership has become inequitable. alter the nature of the action and the issues joined by the original parties
thereto."

2.
Art 1839
GR. No. 109248
1. Ortega vs CA
July 3, 1995
G.R. No. L-20341
Claridades vs Mercader GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and
May 14, 1966 BENJAMIN T. BACORRO, petitioners, vs. HON. COURT OF
DR. SIMEON S. CLARIDADES, plaintiff and appellant, vs. APPEALS, SECURITIES AND EXCHANGE COMMISSION and
VICENTE C. MERCADER and PERFECTO FERNANDEZ, JOAQUIN L. MISA, respondents.
defendants and appellees,
GUILLERMO REYES, intervenor and appellant, ARMANDO H. FACTS
ASUNCION, intervenor and appellee, ALFREDO J. ZULUETA and 1. Joaquin L. Misa, respondent, and Jesus B. Bito and Mariano
YAP LEDING, intervenors and appellees. M. Lozada associated themselves together, as senior partners
with petitioners Gregorio F. Ortega, Tomas O. del Castillo, Jr.,
FACTS and Benjamin Bacorro, as junior partners (Bito, Misa and
Lozada law firm)
1. Petitioner, Dr. Simeon S. Claridades brought this action
against Vicente C. Mercader and Perfecto Fernandez for the 2. On February 17, 1988, Joaquin Misa wrote letter to the
dissolution of a partnership allegedly existing between them petitioners stating his desire to withdraw and retire from the
and an accounting of the operation of the partnership, firm.
particularly a fishpond located in Sta. Cruz, Marinduque,
which was the main asset of the partnership 3. Thereafter, Joaquin filed with Securities Investigation and
Clearing Department (SICD) a petition for dissolution and
2. Vicente and Perfecto admitted the existence of the liquidation of partnership
partnership, but they alleged that there is an impending
auction sale of said fishpond due to delinquency in the 4. Petitioners filed their opposition
payment of taxes
5. Hearing officer rendered a decision ruling that the Joaquin’s
3. Subsequently, Guillermo Reyes was allowed to intervene for withdrawal from the law firm Bito, Misa & Lozada did not
the purpose of recovering a sum of money allegedly due him dissolve the said law partnership
for services rendered as foreman of said fishpond, plus
damages. 6. On appeal, the SEC en banc reversed the decision of the
Hearing Officer and held that the withdrawal of Attorney
4. Later, one Armando Asuncion succeeded in intervening as the Joaquin L. Misa had dissolved the partnership of "Bito, Misa &
alleged assignee of the interest of defendant Mercader in said Lozada." The Commission ruled that, being a partnership at
partnership and fishpond. will, the law firm could be dissolved by any partner at anytime,
such as by his withdrawal therefrom, regardless of good faith
5. Alfredo Zulueta and his wife Yap Leding sought permission to or bad faith, since no partner can be forced to continue in the
intervene, still later, alleging that they are the owners of said partnership against his will.
fishpond, having bought one-half (½)of it from Benito
Regencia, who, in turn, had acquired it from Asuncion, who 7. The parties sought a reconsideration of the above decision.
had purchased the fishpond from defendant Mercader, and the SEC issued an order denying reconsideration
other half having been assigned to him directly by Asuncion.
8. The parties filed with the appellate court separate appeals.
6. Soon thereafter, the Zuluetas filed a motion to dismiss upon
the ground that the complaint states no cause of action; that 9. During the pendency of the case with the Court of Appeals,
venue has been improperly laid; and that plaintiff’s complaint Attorney Jesus Bito and Attorney Mariano Lozada both died.
is moot and academic. The death of the two partners, as well as the admission of new
partners, in the law firm prompted Attorney Misa to renew his
7. Lower court granted the same upon the ground of improper application for receivership.
venue (complaint must be filed in the place where the fishpond
is located – subject matter of the case is the possessor of the 10. The Court of Appeals AFFIRMED in toto the SEC decision and
fishpond: plaintiff prays that assets of partnership be sold and order appealed from.
proceeds of the sale be applied to the payment of debts of
partnership and residue be distributed equally among 11. Hence, this petition
partners)
ISSUE with HOLDING
8. A reconsideration of this order having been denied, plaintiff
and intervenor Reyes have interposed the present appeal. W/N the partnership between the lawyers is considered as a
partnership at will – YES
ISSUE with HOLDING
A partnership that does not fix its term is a partnership at will. The birth
W/N the complaint was filed in an improper venue - NO and life of a partnership at will is predicated on the mutual desire and
consent of the partners. The right to choose with whom a person wishes
Plaintiff's complaint merely seeks the liquidation of his partnership with to associate himself is the very foundation and essence of that
defendants Fernandez and Mercader. This is obviously a personal action, partnership. Its continued existence is, in turn, dependent on the
which may be brought in the place of residence of either the plaintiff or constancy of that mutual resolve, along with each partner's capability to
the defendants. Since plaintiff is a resident of Bulacan, he had the right give it, and the absence of a cause for dissolution provided by the law
to bring the action in the court of first instance of that province. What is itself. Verily, any one of the partners may, at his sole pleasure, dictate a
more, although defendants Fernandez and Mercader reside in dissolution of the partnership at will. He must, however, act in good
Marinduque, they did not object to the venue. In other words, they faith, not that the attendance of bad faith can prevent the dissolution of
waived whatever rights they had, if any, to question it.2 the partnership4 but that it can result in a liability for damages.

The fact that plaintiff prays for the sale of the assets of the partnership, That the law firm "Bito, Misa & Lozada," and now "Bito, Lozada, Ortega
including the fishpond in question, did not change the nature or and Castillo," is indeed such a partnership as provided under the
character of action, such sale being merely a necessary incident of the Duration clause of their partnership agreement (duration depends on the
liquidation of the partnership, which should precede and/or is part of its mutual satisfaction of partners).
process of dissolution. Neither plaintiff's complaint nor the answer filed
by defendants Fernandez and Mercader questioned the title to said W/N the withdrawal of Atty Joaquin dissolved the partnership
property or the possession thereof. - YES

Again, the situation was not changed materially by the Intervention The dissolution of a partnership is the change in the relation of the
either of Asuncion or of the Zuluetas, for, as alleged successors to the parties caused by any partner ceasing to be associated in the carrying on,
interest Mercader in the fishpond, they, at best, stepped into his shoes. as might be distinguished from the winding up of, the business. Upon its
Again, the nature of an action is determined by the allegations of the dissolution, the partnership continues and its legal personality is
complaint.3 At any rate, since the venue was properly laid when the retained until the complete winding up of its business culminating in its
complaint was filed, said venue cannot, subsequently, become improper termination.
in consequence of issues later raised by any of the intervenors. The court
Neither would the presence of a period for its specific duration or the both parties, and the scheduled regular meetings were seldom
statement of a particular purpose for its creation prevent the dissolution held to the detriment and disadvantage of plaintiffs.
of any partnership by an act or will of a partner. Among partners, mutual
agency arises and the doctrine of delectus personae allows them to have 10. RTC rendered a Decision in favor of Lazatins
the power, although not necessarily the right, to dissolve the
partnership. An unjustified dissolution by the partner can subject him to 11. Primelink appealed the decision to the CA alleging, among
a possible action for damages. others, that rescission is improper as it substantially developed
the projects and has spent more or less forty million pesos.
The birth and life of a partnership at will is predicated on the mutual Primelink further avers that the Lazatins have no right to take
desire and consent of the partners. The right to choose with whom a over the subdivision and appropriate for themselves all the
person wishes to associate himself is the very foundation and essence of existing improvements introduced by Primelink.
that partnership. Its continued existence is, in turn, dependent on the
constancy of that mutual resolve, along with each partner's capability to 12. The appellate court rendered a decision affirming, with
give it, and the absence of a cause for dissolution provided by the law modification, the appealed decision, awarding to Lazatins "all
itself. Verily, any one of the partners may, at his sole pleasure, dictate a improvements" on the project without requiring them to pay
dissolution of the partnership at will. He must, however, act in good the value thereof or to reimburse Primelink for all expenses
faith, not that the attendance of bad faith can prevent the dissolution of incurred
the partnership4 but that it can result in a liability for damages 13. Primelink thus filed the instant petition
ISSUE with HOLDING
The liquidation of the assets of the partnership following its dissolution
is governed by various provisions of the Civil Code; however, an W/N rescission is proper – YES
agreement of the partners, like any other contract, is binding among
them and normally takes precedence to the extent applicable over the As a general rule, the relation of the parties in joint ventures is governed
Code's general provisions. In the case at bar, paragraph 8 of the by their agreement. When the agreement is silent on any particular issue,
"Amendment to Articles of Partnership" provides that in the event of the the general principles of partnership may be resorted to
death or retirement of any partner, his interest in the partnership shall
The LAZATINs were able to establish fraud on the part of PRIMELINK
be liquidated and paid in accordance with the existing agreements and
which was a pattern of what appears to be a scheme or plot to reduce and
his partnership participation shall revert to the Senior
eventually blot out the net incomes generated from sales of housing units
by the defendants. Under Article 1838 of the Civil Code, where the
The term "retirement" must have been used in the articles, as we so hold,
partnership contract is rescinded on the ground of the fraud or
in a generic sense to mean the dissociation by a partner, inclusive of
misrepresentation of one of the parties thereto, the party entitled to
resignation or withdrawal, from the partnership that thereby dissolves it.
rescind is, without prejudice to any other right is entitled to a lien on, or
right of retention of, the surplus of the partnership property after
satisfying the partnership liabilities to third persons for any sum of
3. money paid by him for the purchase of an interest in the partnership and
for any capital or advance contributed by him. In the instant case, the
G.R. No. 167379 joint venture still has outstanding liabilities to third parties or the buyers
Primelink Properties vs Lazatin-Magat of the property.
June 27, 2006
It is not amiss to state that title to the land or TCT No. T-10848 which is
PRIMELINK PROPERTIES AND DEVELOPMENT now held by Chinabank for safekeeping pursuant to the Escrow
CORPORATION and RAFAELITO W. LOPEZ, Petitioners, vs. MA. Agreement executed between Primelink Properties and Development
CLARITA T. LAZATIN-MAGAT, JOSE SERAFIN T. LAZATIN, Corporation and Ma. Clara T. Lazatin-Magat should also be returned to
JAIME TEODORO T. LAZATIN and JOSE MARCOS T. the LAZATINs as a necessary consequence of the order of rescission of
LAZATIN, Respondents. contract. The reason for the existence of the Escrow Agreement has
ceased to exist when the joint venture agreement was rescinded.
FACTS
W/N Lazatins are entitled to the possession of the parcels of
1. Primelink Properties and Development Corporation is a land covered by the JVA and the improvements thereon
domestic corporation engaged in real estate development. introduced by petitioners as their contribution to the JVA –
YES
2. Ma. Clara T. Lazatin-Magat and her brothers, Jose Serafin T.
Lazatin, Jaime T. Lazatin and Jose Marcos T. Lazatin, are co- The parcels of land, as well as the improvements made thereon, were
owners of two (2) adjoining parcels of land in Tagaytay City contributed by the parties to the joint venture under the JVA, hence,
formed part of the assets of the joint venture. The Lazatins, however, are
3. On March 10, 1994, the Lazatins and Primelink, represented entitled to the possession not only of the parcels of land but also of the
by Lopez, in his capacity as President, entered into a Joint improvements thereon as a consequence of the finding that Primelink
Venture Agreement5 (JVA) for the development of the breached their agreement and defrauded Lazatins of the net income
aforementioned property into a residential subdivision to be under the JVA. .
known as "Tagaytay Garden Villas."
W/N Primelink is entitled to reimbursement for the value of
4. Under the JVA, the Lazatin siblings obliged themselves to the improvements on the parcels of land.
contribute the two parcels of land as their share in the joint
venture. For its part, Primelink undertook to contribute When the RTC rescinded the JVA on complaint of respondents based on
money, labor, personnel, machineries, equipment, contractor’s the evidence on record that petitioners willfully and persistently
pool, marketing activities, managerial expertise and other committed a breach of the JVA, the court thereby dissolved/cancelled
needed resources to develop the property and construct the partnership. With the rescission of the JVA on account of petitioners’
therein the units for sale to the public. fraudulent acts, all authority of any partner to act for the partnership is
terminated except so far as may be necessary to wind up the partnership
5. The Lazatins agreed to subject the title over the subject affairs or to complete transactions begun but not yet finished. On
property to an escrow agreement with the owner’s duplicate of dissolution, the partnership is not terminated but continues until the
the title deposited with the China Banking Corporation. winding up of partnership affairs is completed. Winding up means the
administration of the assets of the partnership for the purpose of
6. However, Primelink failed to immediately secure a terminating the business and discharging the obligations of the
Development Permit from Tagaytay City, and applied the partnership
permit only on August 30, 1995.
As a result thereto, although Lazatins acquired possession of the lands
7. Lazatins demanded that Primelink comply with its obligations and the improvements thereon, the said lands and improvements
under the JVA, otherwise the appropriate action would be filed remained partnership property, subject to the rights and obligations of
against it to protect their rights and interests. the parties, inter se, of the creditors and of third parties under Articles
1837 and 1838 of the New Civil Code, and subject to the outcome of the
8. For Primelink’s failure to comply with its obligations, Lazatins settlement of the accounts between the parties as provided in Article
filed a complaint for rescission accounting and damages, with 1839 of the New Civil Code, absent any agreement of the parties in their
prayer for temporary restraining order and/or preliminary JVA to the contrary.58 Until the partnership accounts are determined, it
injunction against Primelink and Lopez. cannot be ascertained how much any of the parties is entitled to, if at all.
9. Plaintiffs alleged, among others, that, despite the lapse of It was thus premature for petitioner Primelink to be demanding that it
almost four (4) years from the execution of the JVA and the be indemnified for the value of the improvements on the parcels of land
delivery of the title and possession of the land to defendants, owned by the joint venture/partnership. Notably, the JVA of the parties
the land development aspect of the project had not yet been does not contain any provision designating any party to wind up the
completed, and the construction of the housing units had not affairs of the partnership.
yet made any headway. Plaintiffs also alleged that defendants
had, without justifiable reason, completely disregarded Thus, under Article 1837 of the New Civil Code, the rights of the parties
previously agreed accounting and auditing procedures, checks when dissolution is caused in contravention of the partnership
and balances system installed for the mutual protection of agreement are as follows:
 (1) Each partner who has not caused dissolution wrongfully (7) The individual property of a deceased partner shall be
shall have: liable for the contributions specified in No. 4.

(a) All the rights specified in the first paragraph of this article, (8) When partnership property and the individual properties
and of the partners are in possession of a court for distribution,
partnership creditors shall have priority on partnership
(b) The right, as against each partner who has caused the property and separate creditors on individual property, saving
dissolution wrongfully, to damages for breach of the the rights of lien or secured creditors.
agreement.
(9) Where a partner has become insolvent or his estate is
(2) The partners who have not caused the dissolution insolvent, the claims against his separate property shall rank
wrongfully, if they all desire to continue the business in the same name in the following order:
either by themselves or jointly with others, may do so, during the agreed
term for the partnership and for that purpose may possess the (a) Those owing to separate creditors;
partnership property, provided they secure the payment by bond
approved by the court, or pay to any partner who has caused the (b) Those owing to partnership creditors;
dissolution wrongfully, the value of his interest in the partnership at the
dissolution, less any damages recoverable under the second paragraph, (c) Those owing to partners by way of contribution.
No. 1(b) of this article, and in like manner indemnify him against all
present or future partnership liabilities.

(3) A partner who has caused the dissolution wrongfully shall 4.

have:
G.R. No. 144214
(a) If the business is not continued under the provisions of the Villlareal, [Link] vs Ramirez
second paragraph, No. 2, all the rights of a partner under the July 14, 2003
first paragraph, subject to liability for damages in the second
paragraph, No. 1(b), of this article. LUZVIMINDA J. VILLAREAL, DIOGENES VILLAREAL and
CARMELITO JOSE, petitioners, vs. DONALDO EFREN C.
(b) If the business is continued under the second paragraph, RAMIREZ and Spouses CESAR G. RAMIREZ JR. and
No. 2, of this article, the right as against his co-partners and all CARMELITA C. RAMIREZ,respondents.
claiming through them in respect of their interests in the
partnership, to have the value of his interest in the DOCTRINE
partnership, less any damage caused to his co-partners by the
dissolution, ascertained and paid to him in cash, or the A share in a partnership can be returned only after the completion of the
payment secured by a bond approved by the court, and to be latter's dissolution, liquidation and winding up of the business.
released from all existing liabilities of the partnership; but in
ascertaining the value of the partner’s interest the value of the
good-will of the business shall not be considered. FACTS

And under Article 1838 of the New Civil Code, the party entitled to A share in a partnership can be returned only after the completion of the
rescind is, without prejudice to any other right, entitled: latter's dissolution, liquidation and winding up of the business.

(1) To a lien on, or right of retention of, the surplus of the 1. Luzviminda J. Villareal, Carmelito Jose and Jesus Jose formed
partnership property after satisfying the partnership liabilities a partnership with a capital of P750,000 for a restaurant and
to third persons for any sum of money paid by him for the catering business under the name "Aquarius Food House and
purchase of an interest in the partnership and for any capital Catering Services." Villareal was appointed general manager
or advances contributed by him; and Carmelito Jose, operations manager.
(2) To stand, after all liabilities to third persons have been 2. Thereafter, Donaldo Efren C. Ramirez, respondent, joined as a
satisfied, in the place of the creditors of the partnership for any partner with a capital contribution of P250,000, paid by his
payments made by him in respect of the partnership liabilities; parents, Respondents Cesar and Carmelita Ramirez.
and 3. However, Jesus Jose withdrew from the partnership in January
1987 and his capital contribution of P250,000 was refunded to
(3) To be indemnified by the person guilty of the fraud or
him.
making the representation against all debts and liabilities of
the partnership. 4. In the same month, without prior knowledge of Ramirez’,
Villareals closed down the restaurant, allegedly because of
The accounts between the parties after dissolution have to be settled as increased rental. The restaurant furniture and equipment were
provided in Article 1839 of the New Civil Code: deposited in the respondents' house for storage.
5. Ramirez spouses wrote Villareal, saying that they were no
Art. 1839. In settling accounts between the partners after dissolution, the
following rules shall be observed, subject to any agreement to the longer interested in continuing their partnership or in
contrary: reopening the restaurant, and that they were accepting the
latter's offer to return their capital contribution.
(1) The assets of the partnership are: 6. Carmelita Ramirez wrote another letter informing petitioners of
the deterioration of the restaurant furniture and equipment
(a) The partnership property,
stored in their house. She also reiterated the request for the
(b) The contributions of the partners necessary for the return of their one-third share in the equity of the partnership.
payment of all the liabilities specified in No. 2. 7. These repeated oral and written requests were left unheeded.
8. Ramirez’ subsequently filed a Complaint for the collection of a
(2) The liabilities of the partnership shall rank in order of
sum of money from petitioners
payment, as follows:
9. Villareals, on their part, contended that respondents had
(a) Those owing to creditors other than partners, expressed a desire to withdraw from the partnership and had
called for its dissolution under Articles 1830 and 1831 of the
(b) Those owing to partners other than for capital and profits, Civil Code; that respondents had been paid, upon the turnover
(c) Those owing to partners in respect of capital, to them of furniture and equipment worth over P400,000; and
that the latter had no right to demand a return of their equity
(d) Those owing to partners in respect of profits. because their share, together with the rest of the capital of the
partnership, had been spent as a result of irreversible business
(3) The assets shall be applied in the order of their declaration
losses.
in No. 1 of this article to the satisfaction of the liabilities.
10. RTC ruled that the parties had voluntarily entered into a
(4) The partners shall contribute, as provided by article 1797, partnership, which could be dissolved at any time. Petitioners
the amount necessary to satisfy the liabilities. clearly intended to dissolve it when they stopped operating the
restaurant. Hence, petitioners must pay jointly and severally to
(5) An assignee for the benefit of creditors or any person respondents for the reimbursement of their share.
appointed by the court shall have the right to enforce the
contributions specified in the preceding number. 11. Petitioners appealed the case to CA
12. CA held that, although respondents had no right to demand the
(6) Any partner or his legal representative shall have the right return of their capital contribution, the partnership was
to enforce the contributions specified in No. 4, to the extent of nonetheless dissolved when petitioners lost interest in
the amount which he has paid in excess of his share of the continuing the restaurant business with them. Because
liability.
 petitioners never gave a proper accounting of the partnership
accounts for liquidation purposes, and because no sufficient
evidence was presented to show financial losses, the CA
computed their liability to the respondents
13. Petitioners filed this petition to the Supreme Court

ISSUE with HOLDING

First Issue: Share in Partnership

Both the trial and the appellate courts found that a partnership had
indeed existed, and that it was dissolved on March 1, 1987. They found
that the dissolution took place when respondents informed petitioners of
the intention to discontinue it because of the former's dissatisfaction
with, and loss of trust in, the latter's management of the partnership
affairs. These findings were amply supported by the evidence on record.
Respondents consequently demanded from petitioners the return of
their one-third equity in the partnership.

Respondents have no right to demand from petitioners the return of

their equity share. Except as managers of the partnership, petitioners did
not personally hold its equity or assets. "The partnership has a juridical
personality separate and distinct from that of each of the
partners."23 Since the capital was contributed to the partnership, not to
petitioners, it is the partnership that must refund the equity of the
retiring partners.24

Second Issue: What Must Be Returned?

Since it is the partnership, as a separate and distinct entity, that must

refund the shares of the partners, the amount to be refunded is
necessarily limited to its total resources. In other words, it can only pay
out what it has in its coffers, which consists of all its assets. However,
before the partners can be paid their shares, the creditors of the
partnership must first be compensated.25 After all the creditors have
been paid, whatever is left of the partnership assets becomes available
for the payment of the partners' shares.

Evidently, in the present case, the exact amount of refund equivalent to

respondents' one-third share in the partnership cannot be determined
until all the partnership assets will have been liquidated — in other
words, sold and converted to cash — and all partnership creditors, if any,
paid.