ART.
1828
01. YU vs. NLRC
FACTS:
Petitioner Benjamin Yu used to be the Assistant General
Manager of the marble quarrying and export business
operated by a registered partnership named under Jade
Mountain. The partnership was originally organized with
Bendals as general manager and three (3) limited
partners (Chin Shian Jeng, Chen Ho-Fu and Yu Chang).
Petitioner Yu, as assistant general manager, received
monthly salary. However, he actually received only half
of his stipulated salary with the promise of the partners
that the balance would be paid when the firm shall have
secured additional operating funds from abroad. Yu
actually managed the operations and finances of the
business. The majority of the founding partners sold their
interests in said partnership to Willy Co and Emmanuel
Zapanta without Yu’s knowledge. A new partnership was
constituted solely by Co and Zapanta and it continued to
use the old firm name of Jade Mountain. Thus, Yu filed a
complaint for illegal dismissal, recovery of unpaid wages
and damages.
LABOR ARBITRER RULING:
 It held that petitioner had been illegally
dismissed. The Labor Arbiter decreed his
reinstatement and awarded him his claim for
unpaid salaries, backwages and attorney's fees.
NLRC RULING:
 It reversed the decision of the Labor Arbiter and
dismissed petitioner's complaint.
 It held that a new partnership consisting of Mr.
Willy Co and Mr. Emmanuel Zapanta had not
retained petitioner Yu in his original position as
Assistant General Manager, and that there was
no law requiring the new partnership to absorb
the employees of the old partnership. Benjamin
Yu, therefore, had not been illegally dismissed by
the new partnership which had simply declined
to retain him in his former managerial position
or any other position.
 Finally, the NLRC held that Benjamin Yu's claim
for unpaid wages should be asserted against the
original members of the preceding partnership.
YU’S CONTENTION:
 NLRC has overlooked the principle that a
partnership has a juridical personality separate
and distinct from that of each of its members.
Such independent legal personality subsists,
petitioner claims, notwithstanding changes in
the identities of the partners.
 Consequently, the employment contract
between Benjamin Yu and the partnership Jade
Mountain could not have been affected by
changes in the latter's membership.
ISSUES:
 whether the partnership which had hired
petitioner Yu as Assistant General Manager had
been extinguished and replaced by a new
partnerships composed of Willy Co and
Emmanuel Zapanta
 if indeed a new partnership had come into
existence, whether petitioner Yu could
nonetheless assert his rights under his
employment contract as against the new
partnership
SC RULING:
 SC agrees with the result reached by the
NLRC, that is, that the legal effect of the
changes in the membership of the
partnership was the dissolution of the old
partnership which had hired petitioner in
1984 and the emergence of a new firm
composed of Willy Co and Emmanuel
Zapanta in 1987
 In the case at bar, just about all of the
partners had sold their partnership interests
(amounting to 82% of the total partnership
interest) to Mr. Willy Co and Emmanuel
Zapanta. The acquisition of 82% of the
partnership interest by new partners,
coupled with the retirement or withdrawal
of the partners who had originally owned
such 82% interest, was enough to
constitute a new partnership.
 HOWEVER, the occurrence of events which
precipitate the legal consequence of
dissolution of a partnership do not, however,
automatically result in the termination of the
legal personality of the old partnership.
 The new partnership simply took over the
business enterprise owned by the
preceeding partnership, and continued using
the old name of Jade Mountain Products
Company Limited, without winding up the
1
 business affairs of the old partnership,
paying off its debts, liquidating and
distributing its net assets, and then re-
assembling the said assets or most of them
and opening a new business enterprise.
 Under the above described situation, not
only the retiring partners (Rhodora Bendal,
et al.) but also the new partnership itself
which continued the business of the old,
dissolved, one, are liable for the debts of the
preceding partnership.
 Under Article 1840 above, creditors of the
old Jade Mountain are also creditors of the
new Jade Mountain which continued the
business of the old one without liquidation
of the partnership affairs.
 It is, however, clear to the Court that under
Article 1840 above, Benjamin Yu is entitled
to enforce his claim for unpaid salaries, as
well as other claims relating to his
employment with the previous partnership,
against the new Jade Mountain.
 The non-retention of Benjamin Yu as
Assistant General Manager did not therefore
constitute unlawful termination, or
termination without just or authorized
cause. We think that the precise authorized
cause for termination in the case at bar was
redundancy. It follows that petitioner
Benjamin Yu is entitled to separation pay at
the rate of one month's pay for each year of
service that he had rendered to the old
partnership, a fraction of at least six (6)
months being considered as a whole year.
02. SINGSONG vs. SAWMILL
FACTS:
 That on January 30, 1951 the defendants Leon
Garibay, Margarita G. Saldejeno, and Timoteo
Tubungbanua entered into a Contract of
Partnership under the firm name "Isabela
Sawmill"
 That on February 3, 1956 the plaintiff Oppen,
Esteban, Inc. sold a Motor Truck and two
Tractors to the partnership Isabela Sawmill for
the sum of P20,500.00. In order to pay the said
purchase price, the said partnership agreed to
make arrangements with the International
Harvester Company at Bacolod City so that the
latter would sell farm machinery to Oppen,
Esteban, Inc. with the understanding that the
price was to be paid by the partnership.
 Through the method of payment stipulated in
the contract herein, the International Harvester
Company has been paid a total of P19,211.11,
leaving an unpaid balance of P1,288.89 as shown
in the statements hereto attached.
 That on April 25, 1958 Civil Case No. 4797 was
filed by the spouses Cecilio Saldajeno and
Margarita G. Saldajeno against the Isabela
Sawmill, Leon Garibay, and Timoteo
Tubungbanua.
 That on May 26, 1958 the defendants Leon
Garibay, Timoteo Tubungbanua and Margarita
G. Saldajeno executed a document entitled
"Assignment of Rights with Chattel Mortgage"
 That thereafter the defendants Leon Garibay and
Timoteo Tubungbanua did not divide the assets
and properties of the "Isabela Sawmill" between
them, but they continued the business of said
partnership under the same firm name "Isabela
Sawmill;
 That on May 18, 1959 the Provincial Sheriff of
Negros Occidental published two (2) notices that
he would sell at public auction on June 5, 1959 at
Isabela, Negros Occidental certain trucks,
tractors, machinery, office equipment and other
things that were involved herein;
 On October 15, 1969 the Provincial Sheriff of
Negros Occidental executed a Certificate of Sale
in favor of the defendant Margarita G. Saldajeno,
as a result of the sale conducted;
 On October 20, 1959 the defendant Margarita G.
Saldajeno executed a deed of sale in favor of the
Pan Oriental Lumber Company transferring to
the latter for the sum of P45,000.00 the trucks,
tractors, machinery, and other things that she
had purchased at the public auction;
 The fact that the defendant 'Isabela Sawmill' is
indebted to the plaintiff Oppen, Esteban, Inc. in
the amount of P1,288.89 as the unpaid balance
of an obligation of P20,500.00 contracted on
February 3, 10956 is expressly admitted;
ISSUE: WON the withdrawal of one of the partners
dissolved the partnership
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RULING:
 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.
 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.
 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.
 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.
 Margarita G. Saldajeno cannot complain.
She 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.
 Had Margarita G. Saldajeno not entered
into the memorandum-agreement allowing
Leon Garibay and Timoteo Tubungbanua to
continue doing the business of the
partnership, the appellees would not have
been misled into thinking that they were
still dealing with the partnership "Isabela
Sawmill".
ART. 1829
01. DIRA vs. TANEGA
FACTS:
That sometime in March 1946, plaintiff and
defendant together with Francisco Pagulayan
entered into a partnership for the purpose of
engaging in the printing business in the City of
Tacloban and that the terms of the said
partnership was for a period of five (5) years
from the organization thereof; that this fact was
admitted by the defendant in his answer; that, in
the articles of co-partnership, the plaintiff was
designated as President and his salary as such
was P150.00 a month, that, during his
incumbency as President until the expiration of
the period, the defendant who was the
manager-treasurer of the partnership never paid
him his salary; that at the time the plaintiff was
also the editor of the Leyte-Samar Tribune and in
accordance with their Articles of Partnership
established the said periodicals, the plaintiff as
editor was to receive a salary of P100.00 a
month; that this salary and the accrued amount
therein was not also paid by the defendant, who
was the business manager of the enterprise; that
the capital of the said partnership was P5,000.00
equally divided among the partners; that this
amount was used by the partnership to purchase
printing equipment and which printing
equipment are in the possession of the
defendant up to now; that, before the purchase
by the three of them of the printing equipment,
the plaintiff obtained a personal loan from
Francisco Pagulayan in the amount of P1,100.00
and he pledged his share in the said equipment
to pay the same; that upon the request of the
plaintiff, the defendant paid the said amount to
Francisco Pagulayan and this time plaintiff used
his share in the partnership as guarantee for the
defendant's payment; that on June 3, 1946,
Francisco Pagulayan sold his share of the
partnership to the defendant and who by virtue
thereof became 2/3 owner of the business; that
the defendant sent a letter of demand to plaintiff
3
 asking him to settle his account, but due to his
failure to do so, he (defendant) assumed full
ownership of the business, he changed the name
from the Leyte-Samar Press to Tañega Press; that
from the time the partnership was organized and
went into business, the defendant as Manager-
Treasurer never rendered any accounting of the
business operations, or paid the share of the
plaintiff in the profits; and that the present
action of partnership accounting and sum of
money was only filed in Court by the plaintiff
against the defendant on February 10, 1961, that
is after a lapse of 9 years, 10 months and 11 days
after the expiration of the contract of
partnership, on February 28, 1951.
CONTENTION OF PLAINTIFF (DIRA):
 Plaintiff himself admitted that the defendant
conducted himself as absolute owner of the
printing equipment. He testified that defendant
changed location of the printing press which
place he (Dira) did not know;
 Plaintiff stated that defendant ignored him and
did not give him any participation, since 1947, in
the business;
 Plaintiff-appellant prayed for payment of his
salaries not only as President of the partnership
but also as editor of the Leyte-Samar Tribune
which admittedly he had not been paid from the
start, for accounting of the partnership affairs,
for payment of his alleged share in the rental
value of the printing equipment and accessories
used by the partnership, of which he also
claimed part-ownership proportionally to his
share in the partnership, and for damages,
attorney's fees and costs.
 It is plaintiff’s contention is that both as his
partner and as pledgee of his share, the appellee
became his trustee, in legal contemplation, or
that, in the eyes of the law, a relationship of
trusteeship arose between him and appellee,
hence his actions against him are
imprescriptible.
CONTENTION OF DEFENDANT (PABLO):
 According to defendant himself, he believed in
good faith and acted accordingly since 1947 that
he was the sole owner of the printing press, after
the refusal of the plaintiff to pay his
indebtedness of P1,100.00 to him;
 That all the claims and causes of action of the
appellant had already prescribed.
ISSUE:
 WON THE PARTNERSHIP HAS BEEN DISSOLVED
 WON THE CLAIMS OF PLAINTIFF HAS NOT YET
PRESCRIBED
RULING:
 From the above facts, it can be deduced that
defendant had acquired ownership of the
printing equipment and accessories in question
as Article 1132 of the Civil Code provides that the
ownership of movables prescribes through
uninterrupted possession of eight years, without
need of any condition. Surely 1946 or 1947 to
1961, more than four and/or eight years had
elapsed.
 For his failure to demand accounting five years
before February 10, 1961, from the defendant,
he had forfeited his right by prescription.
 We agree in upholding appellee's defense of
prescription.
 Appellee took exclusive control of the
partnership affairs since 1947, publicly and
openly and after having notified appellant that
he would do so should the latter fail to comply
with his letter of demand.
 ON ISSUE OF TRUSTEESHIP: Appellant's pose is
without merit. In bad faith or in good faith, after
eight years of actual adverse possession,
appellee acquired clear ownership of appellant's
share by acquisitive prescription according to
Art. 1132. So, appellee became undisputed
owner of appellant's share since 1955 or six
years before this action was filed and since said
year the allegation of trusteeship had already
lost any basis whatsoever.
 Article 1785 and Article 1829 is clearly
inapplicable here, for the simple reason that
those articles are premised on a continuation of
the partnership as such, which is not our case,
because here appellee repudiated the
partnership as early as 1947 with either actual or
presumed knowledge of the appellant.
 Even if prescription were not properly
applicable, We could still hold that under the
4
 facts proven in the record and found by the
lower court, appellant has been guilty of laches
and his stale demands may not gain the ears of
the court.
02. Sunga-Chan vs Chua
SYNOPSIS:
On June 22, 1992, respondent led a complaint against
petitioner Lilibeth Sunga Chan and Cecilia Sunga,
daughter and wife, respectively of the deceased Jacinto
L. Sunga, for "Winding Up of Partnership Affairs,
Accounting, Appraisal and Recovery of Shares and
Damages with Writ of Preliminary Attachment" with the
Regional Trial Court of Sindangan, Zamboanga del Norte.
Respondent claimed that he verbally entered into a
partnership with Jacinto. The partnership allegedly had
Jacinto as manager, assisted by Josephine Sy, a sister of
the wife of the respondent. Upon Jacinto's death,
petitioners took over the operations of the business
without respondent's consent. Despite respondent's
repeated demands upon petitioners for accounting,
inventory, appraisal, winding up and restitution of his net
shares in the partnership, petitioners failed to comply.
Petitioners led a Motion to Dismiss on the ground of lack
of jurisdiction. The trial court denied the motion to
dismiss. Petitioners then led their Answer with
Compulsory Counterclaim denying any liability.
Petitioners' second Motion to Dismiss was likewise
denied. Petitioners' Petition for Certiorari, Prohibition
and Mandamus led with the Court of Appeals was also
denied by the appellate court.
Respondent presented documentary and testimonial
evidence to prove the partnership. He offered the
testimony of Josephine to establish the existence of a
partnership between him and Jacinto. The trial court
eventually rendered a judgment in favor of respondent.
Petitioners' appeal and motion for reconsideration were
dismissed by the Court of Appeals. Petitioners sought
recourse before the Supreme Court.
Invoking the "Dead Man's Statute" or "Survivorship
Rule", petitioners contended that the testimonies of
respondent and that of his witness, Josephine, were
inadmissible to prove certain claims against Jacinto, a
deceased person.
RULING: In denying the petition, the Court held that the
"Dead Man's Statute" was inapplicable to this case.
Petitioners' ling of a compulsory claim and counterclaim
effectively removed this case from the ambit of the
"Dead Man's Statute". Well entrenched is the rule that
when it is the executor or administrator or
representatives of the estate that sets up the
counterclaim, the plaintiff, herein respondent, may
testify to occurrences before the death of the deceased
to defeat the counterclaim. Moreover, as defendant in
the counterclaim, respondent was not disqualified from
testifying as to matters of fact occurring before the death
of the deceased, said action not having been brought
against but by the estate or representatives of the
deceased. Moreover, the testimony of Josephine was not
covered by the "Dead Man's Statute" because she was
not "a party or assignor of a party to a case or persons in
whose behalf a case is prosecuted." Josephine was
merely a witness of respondent, the latter being the
party plaintiff. Moreover, petitioners' reliance alone on
the "Dead Man's Statute" to defeat respondent's claim
cannot prevail over the factual findings of the trial court
and the Court of Appeals that a partnership was
established between respondent and Jacinto.
1. CIVIL LAW; PARTNERSHIP; MAY BE
CONSTITUTED IN ANY FORM; EXCEPTION; REQUISITES
TO PROVE EXISTENCE OF PARTNERSHIP. — A partnership
may be constituted in any form, except where
immovable property or real rights are contributed
thereto, in which case a public instrument shall be
necessary. Hence, based on the intention of the parties,
as gathered from the facts and ascertained from their
language and conduct, a verbal contract of partnership
may arise. The essential points that must be proven to
show that a partnership was agreed upon are (1) mutual
contribution to a common stock, and (2) a joint interest
in the profits. Understandably so, in view of the absence
of a written contract of partnership between respondent
and Jacinto, respondent resorted to the introduction of
documentary and testimonial evidence to prove said
partnership.
2. ID.; ID.; ACTION FOR ACCOUNTING;
PRESCRIPTION. — With regard to petitioners' insistence
that laches and/or prescription should have extinguished
respondent's claim, we agree with the trial court and the
Court of Appeals that the action for accounting led by
respondent three (3) years after Jacinto's death was well
within the prescribed period. The Civil Code provides
5
that an action to enforce an oral contract prescribes in
six (6) years while the right to demand an accounting for
a partner's interest as against the person continuing the
business accrues at the date of dissolution, in the
absence of any contrary agreement. Considering that the
death of a partner results in the dissolution of the
partnership, in this case, it was after Jacinto's death that
respondent as the surviving partner had the right to an
account of his interest as against petitioners. It bears
stressing that while Jacinto's death dissolved the
partnership, the dissolution did not immediately
terminate the partnership. The Civil Code expressly
provides that upon dissolution, the partnership
continues and its legal personality is retained until the
complete winding up of its business, culminating in its
termination.
3. ID.; ID.; REGISTRATION REQUIREMENT IS NOT
MANDATORY; NON-REGISTRATION
OF THE CONTRACT OF PARTNERSHIP DOES NOT
INVALIDATE THE PARTNERSHIP; CASE AT BAR. — In a
desperate bid to cast doubt on the validity of the oral
partnership between respondent and Jacinto,
petitioners maintain that said partnership that had an
initial capital of P200,000.00 should have been
registered with the Securities and Exchange Commission
(SEC) since registration is mandated by the Civil Code.
True, Article 1772 of the Civil Code requires that
partnerships with a capital of P3,000.00 or more must
register with the SEC, however, this registration
requirement is not mandatory. Article 1768 of the Civil
Code explicitly provides that the partnership retains its
juridical personality even if it fails to register. The failure
to register the contract of partnership does not
invalidate the same as among the partners, so long as the
contract has the essential requisites, because the main
purpose of registration is to give notice to third parties,
and it can be assumed that the members themselves
knew of the contents of their contract. In the case at bar,
non-compliance with this directory provision of the law
will not invalidate the partnership considering that the
totality of the evidence proves that respondent and
Jacinto indeed forged the partnership in question.
4. ID.; ID.; FACTUAL FINDINGS OF TRIAL COURT
AND COURT OF APPEALS OF THE EXISTENCE OF
PARTNERSHIP, CANNOT BE INQUIRED INTO BY THE
SUPREME COURT ON REVIEW. — Petitioners' reliance
alone on the "Dead Man's Statute" to defeat
respondent's claim cannot prevail over the factual
findings of the trial court and the Court of Appeals that a
partnership was established between respondent and
Jacinto. Based not only on the testimonial evidence, but
the documentary evidence as well, the trial court and the
Court of Appeals considered the evidence for respondent
as sufficient to prove the formation of a partnership,
albeit an informal one. Notably, petitioners did not
present any evidence in their favor during trial. By the
weight of judicial precedents, a factual matter like the
nding of the existence of a partnership between
respondent and Jacinto cannot be inquired into by this
Court on review. This Court can no longer be tasked to
go over the proofs presented by the parties and analyze,
assess and weigh them to ascertain if the trial court and
the appellate court were correct in according superior
credit to this or that piece of evidence of one party or the
other. It must be also pointed out that petitioners failed
to attend the presentation of evidence of respondent.
Petitioners cannot now turn to this Court to question the
admissibility and authenticity of the documentary
evidence of respondent when petitioners failed to object
to the admissibility of the evidence at the time that such
evidence was offered.
SUNGA-CHAN V. CHUA
FACTS
In 1977, Chua and Jacinto Sunga verbally agreed to form
a partnership for the sale and distribution of Shellane
LPGs. Their business was very profitable but in 1989
Jacinto died. Upon Jacinto’s death, his daughter Lilibeth
took over the business as well as the business assets.
Chua then demanded for an accounting but Lilibeth kept
on evading him. In 1992 however, Lilibeth gave Chua
P200k. She said that the same represents a partial
payment; that the rest will come after she finally made
an accounting. She never made an accounting so in 1992,
Chua filed a complaint for “Winding Up of Partnership
Affairs, Accounting, Appraisal and Recovery of Shares
and Damages with Writ of Preliminary Attachment”
against Lilibeth.
ISSUE
1 WON partnership exists between Jacinto and Chua in
the absence of a written contract
2 Whether or not Chua’s claim is barred by prescription.
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3 WON non-registration of the contract of partnership at
SEC made it void
RATIO:
1 YES. A partnership may be constituted in any form,
except where immovable property of real rights are
contributed thereto, in which case a public instrument
shall necessary. Hence, based on the intention of the
parties, as gathered from the facts and ascertained from
their language and conduct, a verbal contract of
partnership may arise.
2 NO. The action for accounting filed by Chua three (3)
years after Jacinto’s death was well within the prescribed
period. The Civil Code provides that an action to enforce
an oral contract prescribes in six (6) years while the right
to demand an accounting for a partner’s interest as
against the person continuing the business accrues at the
date of dissolution, in the absence of any contrary
agreement. Considering that the death of a partner
results in the dissolution of the partnership, in this case,
it was after Jacinto’s death that Chua as the surviving
partner had the right to an account of his interest as
against Lilibeth. It bears stressing that while Jacinto’s
death dissolved the partnership, the dissolution did not
immediately terminate the partnership. The Civil Code
expressly provides that upon dissolution, the partnership
continues and its legal personality is retained until the
complete winding up of its business, culminating in its
termination.
3 NO. True, Article 1772 of the Civil Code requires that
partnerships with a capital of P3,000.00 or more must
register with the SEC, however, this registration
requirement is not mandatory. Article 1768 of the Civil
Code explicitly provides that the partnership retains its
juridical personality even if it fails to register. The failure
to register the contract of partnership does not
invalidate the same as among the partners, so long as the
contract has the essential requisites, because the main
purpose of registration is to give notice to third parties,
and it can be assumed that the members themselves
knew of the contents of their contract.26 In the case at
bar, non-compliance with this directory provision of the
law will not invalidate the partnership considering that
the totality of the evidence proves that respondent and
Jacinto indeed forged the partnership in question.
03. SY vs. Court of Appeals
FACTS: Sy Yong Hu & Sons is a partnership of Sy Yung Hu
and his six (6) sons. The partnership has valuable assets
such as tracts of land planted with sugar cane and
commercial lots in the business district of Bacolod City.
Sometime in September 1977, a certain Keng Sian
brought an action before the then Court of First Instance
of Negros Occidental, docketed as Civil Case No. 13388,
against the partnership for accounting of all the
partnership properties and for the delivery or
reconveyance of her one-half (1/2) share in the
properties and in the fruits thereof. Keng Sian averred
that she is the common-law wife of Sy Yung Hu and that
the latter and his children connived to deprive her of her
share in the properties by diverting it to the partnership.
During the pendency of said civil case, partner Marciano
Sy filed a petition for declaratory relief against his co-
partners, praying that he be appointed managing partner
to replace Jose Sy who just died. Answering the petition,
his brothers, Vicente, Jesus and Jaime, who claimed to
represent the majority interest in the partnership,
sought the dissolution of the partnership and the
appointment of Vicente Sy as managing partner. The
Hearing Officer, in a decision (Sison Decision) dismissed
the petition, and dissolved the partnership. The Sison
Decision was affirmed by the SEC En Banc. In the
meantime the Regional Trial Court appointed one Alex
Ferrer as Special Administrator. Thereafter, Alex Ferrer
moved to intervene in the proceedings in for the
partition and distribution of the of the partnership assets
on behalf of the respondent intestate estate but was
denied. The Intestate Estate appealed to the SEC en
banc. In its decision, the SEC en banc reiterated that the
Abello decision, which upheld the order of dissolution of
the partnership, had long become final and executory.
No further appeal was taken from said decision. During
the continuation of SEC Case, the parties brought to the
attention of the Hearing Officer the fact of existence of a
Civil Case pending before the RTC. They also agreed that
during the pendency of said case, there would be no
disposition of partnership assets. Hearing Officer Tongco
in an order placed the partnership under a receivership
committee. Petitioners appealed to the SEC en banc. In
an order (Lopez Order), the SEC en banc affirmed the
Tongco order. Then they filed a special civil action for
certiorari with the Court of Appeals. The appellate court
granted the petition and remanded the case for further
7
execution of the Decisions, ordering partition and
distribution of partnership properties. On motion for
reconsideration by private respondents, the Court of
Appeals reversed its earlier decision and remanded the
case to the SEC for the formation of a receivership
committee as envisioned in the Tongco Order. Hence the
present petition.
ISSUE: What is there is a difference between winding up
and dissolution
HELD: Petitioners fail to recognize the basic distinctions
underlying the principles of dissolution, winding up and
partition or distribution. The dissolution of a partnership
is the change in the relation of the parties caused by any
partner ceasing to be associated in the carrying on, as
might be distinguished from the winding up, of its
business. Upon its dissolution, the partnership continues
and its legal personality is retained until the complete
winding up of its business culminating in its termination.
The dissolution of the partnership did not mean that the
juridical entity was immediately terminated and that the
distribution of the assets to its partners should
perfunctorily follow. On the contrary, the dissolution
simply effected a change in the relationship among the
partners. The partnership, although dissolved, continues
to exist until its termination, at which time the winding
up of its affairs should have been completed and the net
partnership assets are partitioned and distributed to the
partners.
It ruled that although the Abello Decision was, indeed,
final and executory, it did not pose any obstacle to the
hearing officer to issue orders not inconsistent therewith
because from the time a dissolution is ordered until the
actual termination of the partnership.
ART. 1831
FUE LEUNG vs. IAC
FACTS:
The petitioner asks for the reversal of the decision of the
then Intermediate Appellate Court in AC-G.R. No. CV-
00881 which affirmed the decision of the then Court of
First Instance of Manila, Branch II in Civil Case No.
116725 declaring private respondent Leung Yiu a partner
of petitioner Dan Fue Leung in the business of Sun Wah
Panciteria and ordering the petitioner to pay to the
private respondent his share in the annual profits of the
said restaurant.
This case originated from a complaint filed by
respondent Leung Yiu with the then Court of First
Instance of Manila, Branch II to recover the sum
equivalent to twenty-two percent (22%) of the annual
profits derived from the operation of Sun Wah Panciteria
since October, 1955 from petitioner Dan Fue Leung.
The Sun Wah Panciteria, a restaurant, located at
Florentino Torres Street, Sta. Cruz, Manila, was
established sometime in October, 1955. It was registered
as a single proprietorship and its licenses and permits
were issued to and in favor of petitioner Dan Fue Leung
as the sole proprietor. Respondent Leung Yiu adduced
evidence during the trial of the case to show 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.
The private respondents evidence is summarized as
follows:
About the time the Sun Wah Panciteria started to
become operational, the private respondent gave
P4,000.00 as his contribution to the partnership. This is
evidenced by a receipt wherein the petitioner
acknowledged his acceptance of the P4,000.00 by
affixing his signature thereto. Furthermore, the private
respondent received from the petitioner the amount of
P12,000.00 covered by the latter's Equitable Banking
Corporation Check from the profits of the operation of
the restaurant for the year 1974
The petitioner denied having received from the private
respondent the amount of P4,000.00. He contested and
impugned the genuineness of the receipt. His evidence is
summarized as follows:
The petitioner did not receive any contribution at the
time he started the Sun Wah Panciteria. He used his
savings from his salaries as an employee at Camp
Stotsenberg in Clark Field and later as waiter at the Toho
Restaurant amounting to a little more than P2,000.00 as
capital in establishing Sun Wah Panciteria. Petitioner
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. Fue Leung also flatly denied having issued to the
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private respondent the receipt (Exhibit G) and the
Equitable Banking Corporation's Check No. 13389470 B
in the amount of P12,000.00 (Exhibit B).
ISSUE: WON Private respondent is a partner of the
petitioner in Sun Wah Panciteria?
HELD:
The private respondent is a partner of the petitioner 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 (Article 1767, Civil
Code; Yulo v. Yang Chiao Cheng, 106 Phil. 110)-have been
established. As stated by the respondent, 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.
It is Article 1842 of the Civil Code in conjunction with
Articles 1144 and 1155 which is applicable. Article 1842
states:
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.
Regarding the prescriptive period within which the
private respondent may demand an accounting, Articles
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.
Considering the facts of this case, the Court may decree
a dissolution of the partnership under Article 1831 of
the Civil Code which, in part, provides:
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.
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.
ART. 1839
01. CLARIDADES vs. MERCADER
Doctrine: As plaintiff’s complaint merely seeks the
liquidation of his partnership with the defendants, it is to
be considered a personal action which may be brought in
the place of residence of either the plaintiff or the
defendant. The fact that the plaintiff prayed for the sale
of the assets of the partnership, did not change the
nature or character of action, such sale being merely a
necessary incident of the liquidation of the partnership,
which should precede and/or is part of its process of
dissolution.
Plaintiff-Appellant: Dr. Simeon S. Claridades
Defendants-Appellees: Vicente Mercader and Perfecto
Fernandez
Intervenors: Guillermo Reyes, Armando Asuncion, Alfredo
Zulueta, Yap Leding
Facts: Claridades brought the present action against
Mercader and Fernandez for the dissolution of a
partnership allegedly existing between them and an
accounting of the operation of the partnership,
particularly a fishpond located in Sta. Cruz, Marinduque,
which was the main asset of the partnership, from
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September 1954, as well as to recover moral and
exemplary damages, in addition to attorney's fees and
costs. On the other hand, defendants admit the
existence of the partnership and that it had been so far
unproductive, averring further that there is an
impending auction sale of said fishpond due to
delinquency in the payment of taxes owing to lack of
funds and plaintiff's failure to contribute what is due
from him.
Subsequently, Reyes was allowed to intervene for the
purpose of recovering a sum of money allegedly due him
for services rendered as foreman of said fishpond, plus
damages. Later, Asuncion succeeded in intervening as
the alleged assignee of the interest of Mercader in said
partnership and fishpond. Thereafter, the lower court
appointed a receiver of the fishpond. Upon the other
hand, Alfredo Zulueta and his wife Yap Leding sought
permission to intervene, still later, alleging that they are
the owners of said fishpond, having bought ½ of it from
Regencia, who, in turn, had acquired it from Asuncion,
who had purchased the fishpond from defendant
Mercader, and the other half having been assigned to
him directly by Asuncion. Despite plaintiff's opposition
thereto, said permission was granted in an order dated
Feb. 8, 1962, which, likewise gave the Zuluetas ten days
within which to file such pleading as they may deem
necessary for the protection of their rights. On Feb. 12,
1962, the Zuluetas filed a motion to dismiss upon the
ground that the complaint states no cause of action; that
venue has been improperly laid; and that plaintiff
complaint is moot and academic. Acting upon the
motion, on March 2, 1962, the lower court granted the
same upon the ground of improper venue ratiocinating
that that the subject matter of this case is the possession
of said fishpond, because plaintiff prays in the complaint
that the assets of the partnership, including said fishpond
be sold, that the proceeds of the sale be applied to the
payment of the debts of the partnership, and that the
residue be distributed equally among the partners and
since the fishpond is located in Marinduque, the
complaint should have been lodged there.
Issue: WON the present action should have been
instituted, not in the CFI of Bulacan, but in that of
Marinduque, where the disputed fishpond is located
Held/Ratio: No, the present action was correctly
instituted in the CFI of Bulacan. Plaintiff's complaint
merely seeks the liquidation of his partnership with
defendants Fernandez and Mercader. This is obviously a
personal action, which may be brought in the place of
residence of either the plaintiff or the defendants. Since
plaintiff is a resident of Bulacan, he had the right to bring
the action in the court of first instance of that province.
What is more, although defendants Fernandez and
Mercader reside in Marinduque, they did not object to
the venue. In other words, they waived whatever rights
they had, if any, to question it. The fact that plaintiff
prays for the sale of the assets of the partnership,
including the fishpond in question, did not change the
nature or character of action, such sale being merely a
necessary incident of the liquidation of the partnership,
which should precede and/or is part of its process of
dissolution. Neither plaintiff's complaint nor the answer
filed by defendants Fernandez and Mercader questioned
the title to said property or the possession thereof. The
situation was not changed materially by the Intervention
either of Asuncion or of the Zuluetas, for, as alleged
successors to the interest Mercader in the fishpond,
they, at best, stepped into his shoes.
02. ORTEGA vs. CA
FACTS:
The law firm of ROSS, LAWRENCE, SELPH and
CARRASCOSO was duly registered in the Mercantile
Registry on 4 January 1937 and reconstituted with the
Securities and Exchange Commission on 4 August
1948.On 30 June 1988, petitioner filed with this
Commission's Securities Investigation and Clearing
Department (SICD) a petition for dissolution and
liquidation of partnership, docketed as SEC Case No.
3384. the SEC en banc reversed the decision of the
Hearing Officer and held that the withdrawal of Attorney
Joaquin L. Misa had dissolved the partnership of "Bito,
Misa & Lozada." The Commission ruled that, being a
partnership at will, the law firm could be dissolved by any
partner at anytime, such as by his withdrawal therefrom,
regardless of good faith or bad faith, since no partner can
be forced to continue in the partnership against his will.
The Court of Appeals, finding no reversible error on the
part of respondent Commission, AFFIRMED in toto the
SEC decision and order appealed from. In fine, the
appellate court held, per its decision of 26 February
1993, (a) that Atty. Misa's withdrawal from the
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partnership had changed the relation of the parties and
inevitably caused the dissolution of the partnership; (b)
that such withdrawal was not in bad faith; (c) that the
liquidation should be to the extent of Attorney Misa's
interest or participation in the partnership which could
be computed and paid in the manner stipulated in the
partnership agreement; (d) that the case should be
remanded to the SEC Hearing Officer for the
corresponding determination of the value of Attorney
Misa's share in the partnership assets; and (e) that the
appointment of a receiver was unnecessary as no
sufficient proof had been shown to indicate that the
partnership assets were in any such danger of being lost,
removed or materially impaired.
ISSUES:
1. Whether or not the Court of Appeals has erred in
holding that the partnership of Bito, Misa & Lozada (now
Bito, Lozada, Ortega & Castillo) is a partnership at will;
2. Whether or not the Court of Appeals has erred in
holding that the withdrawal of private respondent
dissolved the partnership regardless of his good or bad
faith; and
3. Whether or not the Court of Appeals has erred in
holding that private respondent's demand for the
dissolution of the partnership so that he can get a
physical partition of partnership was not made in bad
faith;
HELD & RATIO:
1. Yes. The partnership agreement of the firm provides
that ”[t]he partnership shall continue so long as mutually
satisfactory and upon the death or legal incapacity of one
of the partners, shall be continued by the surviving
partners.” A partnership that does not fix its term is a
partnership at will. That the law firm "Bito, Misa &
Lozada," and now "Bito, Lozada, Ortega and Castillo," is
indeed such a partnership need not be unduly belabored.
The partnership agreement does not provide for a
specified period or undertaking.
2. Yes. Any one of the partners may, at his sole pleasure,
dictate a dissolution of thepartnership at will (e.g. by way
of withdrawal of a partner). He must, however, act in
goodfaith, not that the attendance of bad faith can
prevent the dissolution of the partnership butthat it can
result in a liability for damage.. The dissolution of a
partnership is the change in the relation of the parties
caused by any partner ceasing to be associated in the
carrying on, as might be distinguished from the winding
up of, the business. Upon its dissolution, the partnership
continues and its legal personality is retained until the
complete winding up of its business culminating in its
termination. The liquidation of the assets of the
partnership following its dissolution is governed by
various provisions of the Civil Code; however, an
agreement of the partners, like any other contract, is
binding among them and normally takes precedence to
the extent applicable over the Code's general provisions.
3. YES. Attorney Misa did not act in bad faith. Public
respondents viewed his withdrawal to have been
spurred by "interpersonal conflict" among the partners.
It would not be right, we agree, to let any of the partners
remain in the partnership under such an atmosphere of
animosity; certainly, not against their will. Indeed, for as
long as the reason for withdrawal of a partner is not
contrary to the dictates of justice and fairness, nor for
the purpose of unduly visiting harm and damage upon
the partnership, bad faith cannot be said to characterize
the act. Bad faith, in the context here used, is no different
from its normal concept of a conscious and intentional
design to do a wrongful act for a dishonest purpose or
moral obliquity.
03. PRIME LINK PROPERTIES AND DEVELOPMENT
CORP. vs. LAZATIN-MAGAT ET, AL.
FACTS:
In 1994, Primelink Properties and the Lazatin siblings
entered into a joint venture agreement whereby the
Lazatins shall contribute a huge parcel of land and
Primelink shall develop the same into a subdivision. For
4 years however, Primelink failed to develop the said
land. So in 1998, the Lazatins filed a complaint to rescind
the joint venture agreement with prayer for preliminary
injunction. In said case, Primelink was declared in default
or failing to file an answer and for asking multiple
motions for extension. The trial court eventually ruled in
favor of the Lazatins and it ordered Primelink to return
the possession of said land to the Lazatins as well as
some improvements which Primelink had so far over the
property without the Lazatins paying for said
improvements. This decision was affirmed by the Court
of Appeals. Primelink is now assailing the order; that
turning over improvements to the Lazatins without
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reimbursement is unjust; that the Lazatins did not ask
the properties to be placed under their possession but
they merely asked for rescission.
ISSUE: Whether or not the improvements made by
Primelink should also be turned over under the
possession of the Lazatins.
HELD:
Yes. In the first place, even though the Lazatins did
specifically pray for possession the same (placing of
improvements under their possession) is incidental in the
relief they prayed for. They are therefore entitled
possession over the parcel of land plus the
improvements made thereon made by Primelink.
In this jurisdiction, joint ventures are governed by the
laws of partnership. Under the laws of partnership, when
a partnership is dissolved, as in this case when the trial
court rescinded the joint venture agreement, the
innocent party has the right to wind up the partnership
affairs.
With the rescission of the JVA on account of petitioners’
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 affairs or to
complete transactions begun but not yet finished. On
dissolution, the partnership is not terminated but
continues until the winding up of partnership affairs is
completed. Winding up means the administration of the
assets of the partnership for the purpose of terminating
the business and discharging the obligations of the
partnership.
It must be stressed, too, that although the Lazatins
acquired possession of the lands and the improvements
thereon, the said lands and improvements remained
partnership property, subject to the rights and
obligations of the parties, inter se, of the creditors and of
third parties and subject to the outcome of the
settlement of the accounts between the parties, absent
any agreement of the parties in their JVA to the contrary
(here no agreement in the JVA as to winding up). Until
the partnership accounts are determined, it cannot be
ascertained how much any of the parties is entitled to, if
at all.
04. VILLAREAL vs. RAMIREZ
FACTS:
In 1984, Villareal, Carmelito Jose and Jesus Jose, formed
a partnership for the purpose of operating a restaurant.
Each contributed P250,000.00. In 1984, Ramirez was
added as a partner after he contributed P250,000.00. In
1987, Jesus withdrew from the partnership and his
capital share of P250k was returned to him as agreed
upon by the other partners. Thereafter, the restaurant
suffered losses. Without informing Ramirez, Villareal and
Carmelito shut down the restaurant. They then turned
over the restaurant equipments to Ramirez.Later,
Ramirez sent a letter to Villareal and Carmelito telling
them he’s no longer interested in being a partner and
that he’s demanding his shares in the partnership.
Villareal and Carmelito ignored the request of Ramirez
hence the latter sued them.
In their defense, Villareal and Carmelito said that the
restaurant equipments served as payment to Ramirez
when they were delivered to them; that Ramirez cannot
ask for share in equity because the restaurant incurred
debts (P240,658.00) and irreversible business losses.
Ramirez argued by saying that the equipments were
merely placed in their house for storage as the two
partners allegedly searched for a better restaurant
location; that he was not aware of any losses or any
indebtedness because he never took part in the
management of the restaurant.
The trial court ruled in favor of Ramirez. The Court of
Appeals affirmed the trial court and it further ordered
Villareal and Carmelito to pay Ramirez P253,114.00. The
computation was done as follows: (Original Partnership
Capital – Partnership Debt = Partnership Asset) ÷
Number of partners; hence: (P1,000,000.00 –
P240,658.00 = P759,342.00) ÷ 3 = P253,114.00.
ISSUE
1 WON respondents have the right to demand the return
of their equity share
2 WON the CA’s computation of the amount to be
refunded as to the respondents’ 1/3 share is correct
RATIO
1 NO. "The partnership has a juridical personality
separate and distinct from that of each of the partners."
Since the capital was contributed to the partnership , not
12
to petitioners, it is the partnership that must refund the
equity of the retiring partners.

2 NO. 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. 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 1)all the
partnership assets will have been liquidated — in other
words, sold and converted to cash — and 2)all
partnership creditors, if any, paid. The CA's computation
of the amount to be refunded to respondents as their
share was thus erroneous.
When petitioners and respondents ventured into
business together, they should have prepared for the
fact that their investment would either grow or shrink. In
the present case, the investment of respondents
substantially dwindled.

The original amount of P250,000 which they had

invested could no longer be returned to them, because
one third of the partnership properties at the time of
dissolution did not amount to that much.

It is a long established doctrine that the law does not

relieve parties from the effects of unwise, foolish or
disastrous contracts they have entered into with all the
required formalities and with full awareness of what they
were doing. Courts have no power to relieve them from
obligations they have voluntarily assumed, simply
because their contracts turn out to be disastrous deals or
unwise investments.

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