Special Administrator Ferrer adopted the theory of (2) WON the appointment of a receivership
Keng Sian that the assets of the partnership belong committee is valid.
to Keng Sian and Sy Yong Hu (now represented by
the Estate of Sy Yong Hu) in co-ownership, which HELD: (1) NO, Petitioners fail to recognize the
assets were wrongfully diverted in favor of the basic distinctions underlying the principles of
defendants. dissolution, winding up and partition or
distribution. The dissolution of a partnership is the
The motion to intervene in was denied by Hearing change in the relation of the parties caused by any
Officer Sison. Private respondent Intestate Estate partner ceasing to be associated in the carrying on,
of Sy Yong Hu appealed to the Commission en as might be distinguished from the winding up, of
banc. its business. Upon its dissolution, the partnership
continues and its legal personality is retained until
In its decision (Sulit decision) the SEC en the complete winding up of its business
banc18 ruled: Reversing the decision in SEC Case culminating in its termination.46
No. 1648. instant case is hereby remanded to the
hearing officer below for further proceeding on the The dissolution of the partnership did not mean
aspect of partition and/or distribution of that the juridical entity was immediately
partnership assets. terminated and that the distribution of the assets
to its partners should perfunctorily follow. On the
During the continuation of the proceedings in SEC contrary, the dissolution simply effected a change
Case No. 1648, now presided over by Hearing in the relationship among the partners. The
Officer Felipe S. Tongco who had substituted partnership, although dissolved, continues to exist
Hearing Officer Sison, the propriety of placing the until its termination, at which time the winding up
Partnership under receivership was taken up. The of its affairs should have been completed and the
parties brought to the attention of the Hearing net partnership assets are partitioned and
Officer the fact of existence of Civil Case No. 13388 distributed to the partners.
pending before the Regional Trial Court of Negros
Occidental. They also agreed that during the The Abello Decision though, indeed, final and
pendency of the aforesaid court case, there will be executory, did not pose any obstacle to the Hearing
no disposition of the partnership assets. Hearing Officer to issue orders not inconsistent therewith.
Officer Tongco came out with an Order From the time a dissolution is ordered until the
incorporating the above submissions of the parties actual termination of the partnership, the SEC
and placing the partnership under a receivership retained jurisdiction to adjudicate all incidents
committee, explaining that "it is the most equitable relative thereto. Thus, the disputed order placing
fair and just manner to preserve the assets of the the partnership under a receivership committee
partnership during the pendency of the civil case cannot be said to have varied the final order of
in the Regional Trial Court of Bacolod City." dissolution. Neither did it suspend the dissolution
of the partnership. If at all, it only suspended the
On October 22, 1988, a joint Notice of Appeal to partition and distribution of the partnership
the SEC en banc was filed by herein by the assets
children of Sy Yong Hu against the Intervenor. In
an order, the SEC en banc24 affirmed the Tongco Furthermore, having agreed with the respondents
Order. not to dispose of the partnership assets, petitioners
effectively consented to the suspension of the
On January 15, 1990, the Court of Appeals winding up or, more specifically, the partition and
granted the petition and set aside the Tongco and distribution of subject assets. Petitioners are now
Lopez Orders but later on reversing its Decision estopped from questioning the order of the Hearing
remanding the case to the SEC for the formation of Officer issued in accordance with the said
a receivership committee, as envisioned in the agreement
Tongco Order.
ISSUE:
(2) YES, Petitioners also assail the propriety of the FACTS: Primelink Properties and Development
receivership theorizing that there was no necessity Corporation (Primelink for brevity) is a domestic
therefor, and that such remedy should be granted corporation engaged in real estate development. In
only in extreme cases, with respondent being duty- 1994, Primelink Properties and the Lazatin siblings
bound to adduce evidence of the grave and entered into a joint venture agreement for the
irremediable loss or damage which it would suffer development of a property into a residential
if the same was not granted. It is further theorized subdivision to be known as "Tagaytay Garden
that, at any rate, the rights of respondent Intestate Villas." Under the JVA, the Lazatin siblings obliged
Estate are adequately protected since notices of lis themselves to contribute two parcels of land as
pendens of the aforesaid civil case have been their share in the joint venture. For its part,
annotated on the real properties of the partnership Primelink undertook to contribute money, labor,
personnel, machineries, equipment, contractor’s
A review of the records reveal that certain pool, marketing activities, managerial expertise
properties in question have already been sold and other needed resources to develop the property
executed by Jesus. To ensure that no further and construct therein the units for sale to the
disposition shall be made of the questioned assets public. The Lazatins agreed to subject the title over
and in view of the pending civil case in the lower the subject property to an escrow agreement.
court, there is a compelling necessity to place all Conformably with the escrow agreement, the
these properties and assets under the management owner’s duplicate of the title was deposited with
of a receivership committee. the China Banking Corporation.11 However,
Receivership, which is admittedly a harsh remedy, Primelink failed to immediately secure a
should be granted with extreme caution.52 Sound Development Permit from Tagaytay City, and
bases therefor must appear on record, and there applied the permit only on August 30, 1995. On
should be a clear showing of its necessity. 53 The October 12, 1995, the City issued a Development
need for a receivership in the case under Permit to Primelink. For 4 years however,
consideration can be gleaned from the aforecited Primelink failed to develop the said land. So in
disquisition by the Court of Appeals finding that 1998, the Lazatins filed a complaint to rescind the
the properties of the partnership were in danger of joint venture agreement with prayer for preliminary
being damaged or lost on account of certain acts of injunction. In said case, Primelink was declared in
the appointed manager in liquidation. default or failing to file an answer and for asking
multiple motions for extension. The trial court
The dispositions of certain properties by the said eventually ruled in favor of the Lazatins and it
manager, on the basis of an order of partial ordered Primelink to return the possession of said
partition, dated December 2, 1986, by Hearing land to the Lazatins as well as some improvements
Officer Sison, which was not yet final and which Primelink had so far over the property
executory, indicated that the feared irreparable without the Lazatins paying for said improvements.
injury to the properties of the partnership might This decision was affirmed by the Court of Appeals.
happen again. So also, the failure of the manager Primelink is now assailing the order; that turning
in liquidation to submit to the SEC an accounting over improvements to the Lazatins without
of all the partnership assets as required in its reimbursement is unjust; that the Lazatins did not
order of April 29, 1988, justified the SEC in placing ask the properties to be placed under their
the subject assets under receivership. possession but they merely asked for rescission.
Moreover, it has been held by this Court that an ISSUES: 1. whether respondents are entitled to the
order placing the partnership under receivership so possession of the parcels of land covered by the
as to wind up its affairs in an orderly manner and JVA and the improvements thereon introduced by
to protect the interest of the plaintiff (herein private petitioners as their contribution to the JVA;
respondent) was not tainted with grave abuse of
discretion. The allegation that respondents' rights 2. whether petitioners are entitled to
are adequately protected by the notices of lis reimbursement for the value of the improvements
pendens in Civil Case 903 is inaccurate. on the parcels of land.
HELD:
1. Yes.
Primelink Properties and Development Corp vs. We agree with petitioners that respondents did not
Lazatin-Magat specifically pray in their complaint below that
possession of the improvements on the parcels of affairs or to complete transactions begun but not
land which they contributed to the JVA be yet finished.55 On dissolution, the partnership is
transferred to them. Respondents made a specific not terminated but continues until the winding up
prayer in their complaint that, upon the rescission of partnership affairs is completed.56 Winding up
of the JVA, they be placed in possession of the means the administration of the assets of the
parcels of land subject of the agreement, and for partnership for the purpose of terminating the
other "reliefs and such other remedies as are just business and discharging the obligations of the
and equitable in the premises." However, the trial partnership.
court was not precluded from awarding possession
of the improvements on the parcels of land to The transfer of the possession of the parcels of
respondents in its decision. Section 2(c), Rule 7 of land and the improvements thereon to respondents
the Rules of Court provides that a pleading shall was only for a specific purpose: the winding up of
specify the relief sought but it may add as general partnership affairs, and the partition and
prayer for such further or other relief as may be distribution of the net partnership assets as
deemed just and equitable. Even without the provided by law.57 After all, Article 1836 of the New
prayer for a specific remedy, proper relief may be Civil Code provides that unless otherwise agreed by
granted by the court if the facts alleged in the the parties in their JVA, respondents have the
complaint and the evidence introduced so right to wind up the partnership affairs:
warrant.50 The court shall grant relief warranted by Art. 1836. Unless otherwise agreed, the partners
the allegations and the proof even if no such relief who have not wrongfully dissolved the partnership
is prayed for.51 The prayer in the complaint for or the legal representative of the last surviving
other reliefs equitable and just in the premises partner, not insolvent, has the right to wind up the
justifies the grant of a relief not otherwise partnership affairs, provided, however, that any
specifically prayed for.52 partner, his legal representative or his assignee,
The trial court was not proscribed from placing upon cause shown, may obtain winding up by the
respondents in possession of the parcels of land court.
and the improvements on the said parcels of land. It must be stressed, too, that although respondents
It bears stressing that the parcels of land, as well acquired possession of the lands and the
as the improvements made thereon, were improvements thereon, the said lands and
contributed by the parties to the joint venture improvements remained partnership property,
under the JVA, hence, formed part of the assets of subject to the rights and obligations of the parties,
the joint venture.53 The trial court declared that inter se, of the creditors and of third parties under
respondents were entitled to the possession not Articles 1837 and 1838 of the New Civil Code, and
only of the parcels of land but also of the subject to the outcome of the settlement of the
improvements thereon as a consequence of its accounts between the parties as provided in Article
finding that petitioners breached their agreement 1839 of the New Civil Code, absent any agreement
and defrauded respondents of the net income of the parties in their JVA to the contrary.58 Until
under the JVA. the partnership accounts are determined, it cannot
2. No. be ascertained how much any of the parties is
entitled to, if at all.
We agree with the CA ruling that petitioner
Primelink and respondents entered into a joint It was thus premature for petitioner Primelink to
venture as evidenced by their JVA which, under be demanding that it be indemnified for the value
the Court’s ruling in Aurbach, is a form of of the improvements on the parcels of land owned
partnership, and as such is to be governed by the by the joint venture/partnership. Notably, the JVA
laws on partnership. of the parties does not contain any provision
designating any party to wind up the affairs of the
When the RTC rescinded the JVA on complaint of partnership.
respondents based on the evidence on record that
petitioners willfully and persistently committed a Guidote vs Borja
breach of the JVA, the court thereby
FACTS
dissolved/cancelled the partnership.54With the
rescission of the JVA on account of petitioners’ Maximo Guidote and Narciso Santos formed in
fraudulent acts, all authority of any partner to act 1918 a partnership business under the name
for the partnership is terminated except so far as of “Taller Sinukuan,” in which Santos was the
may be necessary to wind up the partnership
capitalist partner and Guidote was the In order to contradict the conclusions of the
industrial partner. Santos died in 1920. two public accountants, Guidote presented
Guidote failed to liquidate the affairs of the Tomas Alfonso and the bookkeeper, Pio
partnership and to render an account thereof Gaudier, as witnesses. The trial court judge
to Borja, the administratrix of Santos’ estate. said that the testimonies of these witnesses
are unreliable.
Guidote brought an action against Borja to
recover a sum of money [9k~], a part of which Tomas Alfonso is the same public accountant
was alleged to be the net profits from the who filed the liquidation Exhibit O on behalf of
business due Guidote, and the rest of the sum Guidote, in relation to the partnership
consisting of advances allegedly made by business, which liquidation was disapproved
Guidote. Borja admitted the partnership’s by this court in a decision. The judge did not
existence and prayed that Guidote be ordered believe Alfonso’s proposition that Guidote, a
to render an accounting and to pay the estate mere industrial partner, notwithstanding his
25k as net profits, credits, and property having received 21k on the various jobs and
pertaining to Santos. contracts of the business had actually
expended and paid out 63k, of 44k in excess
Guidote called several witnesses and
of the gross receipts of the business. It
introduced a so-called accounting and a mass
materially contradicts Guidote’s allegations to
of documentary evidence, which was so
the effect that the advances that he [Guidote]
hopelessly and inextricably confused that the
made amounted only to 2k.
court could not consider it of much probative
value. The court dismissed Guidote’s Pio Gaudier is the same bookkeeper who
complaint and absolved Borja. Guidote was prepared three entirely separate and distinct
ordered to render a full and complete liquidation for the same partnership business,
accounting, verified by vouchers, of the and the court found that the testimony given
partnership business. by him at the last hearing is confusing,
contradictory and unreliable.
Guidote rendered an account prepared by one
Tomas Alfonso, a public accountant. Other witnesses were given scant
Numerous objections were presented by Borja. consideration—Chua Chak can neither read
The court disapproved the account and nor write English, Spanish, or Tagalog; Claro
ordered that Borja submit an accounting from Reyes was forced to admit that a certain
the date of the commencement of the exhibit was not the original.
partnership up to the time the business was
The court gave credence to the conclusions
closed.
reached by the public accountants presented
Borja presented an account and liquidation by Borja. Guidote was ordered to pay P26k to
prepared by a public accountant, Santiago A. Borja, with legal interest, plus costs.
Lindaya, showing a balance of P29k~ in
Borja’s [Santos’ estate] favor. At the hearing,
Borja introduced the public accountant Jose ISSUE : WON the trial court is correct in
Turiano Santiago to testify as to the results of ordering Guidote to pay P26k to Borja. YES
an audit made by him of the partnership
accounts. Santiago testified that he had
prepared a separate accounting or liquidation HELD:
similar in results to that prepared by Lindaya,
but with a few differences in the sums total. There may be some merit in Guidote’s
[Computation: Santos is a creditor of the contention that the dismissal of his complaint
Taller Sinukuan in the sum of P26k. Guidote was premature. The better practice would
is a debtor to the Taller Sinukuan in the sum been to let the complaint stand until the
of P20k.] result of the liquidation of the partnership
affairs was known. But under the
circumstances, no harm was done by the FACTS: Benjamin Yu was formerly the Assistant
dismissal of Guidote’s complaint. Gen. Manager of the marble quarrying and export
business operated by a registered partnership with
the firm name of "Jade Mountain Products
Company Limited. The partnership had its main
GUIDOTE’S ARGUMENT office in Makati.
Since Santos, up to the time of his death, According to petitioner Yu he actually received only
generally took care of the partnership’s half of his stipulated monthly salary, since he had
payments and collections, his legal accepted the promise of the partners that the
representatives were under the obligation to balance would be paid when the firm shall have
render accounts of the operations, secured additional operating funds from abroad.
notwithstanding the fact that Guidote was in Yu actually managed the operations and finances
charge of the business subsequent to the of the business.
death of Santos. Sometime without the knowledge of Yu, the general
partners sold and transferred their interests in the
GUIDOTE’S ARGUMENT IS UNAVAILING
partnership to private respondent Willy Co and to
Wahl v. Donaldson Sim & Co. one Emmanuel Zapanta. Mr. Yu Chang, a limited
partner, also sold and transferred his interest in
The death of one of the partners dissolves the the partnership to Willy Co. Between Mr.
partnership, but that the liquidation of its Emmanuel Zapanta and himself, private
affairs is by law entrusted, not to the respondent Willy Co acquired the great bulk of the
executors of the deceased partner, but to the partnership interest. The partnership now
constituted solely by Willy Co and Emmanuel
surviving partners or the liquidators
Zapanta continued to use the old firm name of
appointed by them.
Jade Mountain, though they moved the firm's main
The rule for the conduct of a surviving partner office from Makati to Mandaluyong. The actual
operations of the business enterprise continued as
In equity, surviving partners are treated as before. All the employees of the partnership
trustees of the representatives of the deceased continued working in the business, all, save
partner, with regard to the interest of the petitioner Benjamin Yu as it turned out.
deceased partner in the firm. As a Having learned of the transfer of the firm's main
consequence of this trusteeship, surviving office from Makati to Mandaluyong, Yu reported to
partners are held in their dealings with the the Mandaluyong office for work and there met
firm assets and the representatives of the private respondent Willy Co for the first time.
deceased to that nicety of dealing and that Petitioner was informed by Willy Co that the latter
strictness of accountability required of and had bought the business from the original partners
incident to the position of one occupying a and that it was for him to decide whether or not he
confidential relation. It is the duty of surviving was responsible for the obligations of the old
partnership, including petitioner's unpaid salaries.
partners to render an account of the
Petitioner was in fact not allowed to work anymore
performance of their trust to the personal
in the Jade Mountain business enterprise. His
representatives of the deceased partner, and unpaid salaries remained unpaid.3
to pay over to them the share of such
deceased member in the surplus of firm Benjamin Yu filed a complaint for illegal dismissal
property, whether it consists of real or and recovery of unpaid salaries against Jade
Mountain, Mr. Willy Co and the other private
personal assets.
respondents. The partnership and Willy Co denied
Guidote failed to observe this rule, and he is petitioner's charges, contending in the main that
not in position to complain if his testimony Benjamin Yu was never hired as an employee by
and that of his witnesses is discredited. the present or new partnership.
ISSUE: