Sy Yong Hu and Sons et al v.

CA
No. 20

Case

GR No. 94285 August 31 1999

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
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,