DAN FUE LEUNG v IAC
part of the partners to divide the profits among
The petitioner asks for the reversal of the decision of the
then Intermediate Appellate Court
This case originated from a complaint filed by
respondent Leung Yiu 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 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 P4,000.00to 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 theP4,000.00 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 or 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 and used his savings from his salaries
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
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: YES
WON right to accounting as prescribed? No
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
themselves have been established.
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.
regarding the prescriptive period within which the private
respondent may demand accounting articles 1806, 1807,
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
US v Clarin
Sometime before 1910, Pedro Larin formed a
partnership with Pedro Tarug, Eusebio Clarin and Carlos
de Guzman. Larin, being the capitalist, agreed to
contribute P172.00 to the partnership and the three
others shall use said fund to trade mangoes. The three
industrial partners bought mangoes and sell them and
they earned P203.00 but they failed to give Larins share
of the profits. Larin charged them with the crime of
estafa, but the provincial fiscal filed an information only
against Eusebio Clarin in which he accused him of
appropriating to himself not only the P172 but also the
share of the profits that belonged to Larin, amounting to
P15.50. Clarin was eventually convicted.
ISSUE: Whether or not the conviction is correct.
HELD: No. The P172.00 having been received by the
partnership, the business commenced and profits
accrued, the action that lies with the partner who
furnished the capital for the recovery of his money is not
a criminal action for estafa, but a civil one arising from
the partnership contract for a liquidation of the
partnership and a levy on its assets if there should be
any.
The then Penal Code provides that those who are guilty
of estafa are those who, to the prejudice of another,
shall appropriate or misapply any money, goods, or any
kind of personal property which they may have received
as a deposit on commission for administration or in any
other producing the obligation to deliver or return the
same, (as, for example, in commodatum, precarium,
and other unilateral contracts which require the return of
the same thing received) does not include money
received for a partnership; otherwise the result would be
that, if the partnership, instead of obtaining profits,
suffered losses, as it could not be held liable civilly for
the share of the capitalist partner who reserved the
ownership of the money brought in by him, it would have
to answer to the charge of estafa, for which it would be
sufficient to argue that the partnership had received the
money under obligation to return it.
Emnace v CA
Emilio Emnace, Jacinto Divinagracia and Vicente
Tabanao formed a partnership engaged in the fishing
industry. In 1986, Jacinto decided to leave the
partnership hence they agreed to dissolve the
partnership. At that time, the partnership has an
estimated asset amounting to P30,000,000.00.
HOWEVER, until the death of Vicente Tabanao in 1994,
Emnace never rendered an accounting either to Vicente
or his heirs. Emnace reneged on his promise to turn over
Tabanaos share which is 1/3 of the P30M. The heirs of
Tabanao then sued Emnace. Emnace argued, among
others, that the heirs are barred by prescription hence
they can no longer demand an accounting. He contends
that the partnership was dissolved in 1986 and that was
the time when Tabanaos (and his heirs) right to inquire
into the business affairs accrued; that said right has
expired in 1990 or 4 years after. So beyond 1990, they
can no longer inquire.
ISSUE: WON right to demand accounting has
prescribed? No
HELD: No. Prescription has not run in this case, it has
never begun. The three final stages of partnership are:
a) dissolution, b) winding up, and c) termination. In this
case, Emnace and his partners dissolved their
partnership but such did not perfect the dissolution
because no accounting took place. The partnership,
although dissolved, continues to exist and its legal
personality is retained, at which time it completes the
winding up of its affairs, including the partitioning and
distribution of the net partnership assets to the partners.
For as long as the partnership exists, any of the partners
(or legal representative in this case the heirs of
Tabanao) may demand an accounting of the
partnerships business. Prescription of the said right
starts to run only upon the dissolution of the partnership
when the final accounting is done.
When a final accounting is made, it is only then that
prescription begins to run. In the case at bar, no final
accounting has been made, and that is precisely what
the heirs are seeking in their action before the trial court,
since Emnace has failed or refused to render an
accounting of the partnerships business and assets.
Hence, the said action is not barred by prescription.
Martinez v. Ong Pong Co
Martinez delivered P1,500 to Ong Pong Co and
Ong Lay to invest in a store
They agreed that the profits and losses would be
equally shared by all of them
Martinez was demanding for the two Ongs to
render an accounting or to refund him the P1,500
Ong Pong Co alleged that Ong Lay, now
deceased, was the one who managed the business, and
the capita of P1,500 resulted in a loss so that he should
not be made liable
Issue: WON Ong Pong Co is liable? YES What is
the extent of his liability? joint
Held: The 2 partners (Ongs) were the
administrators/managers and are obliged to render
accounting. Since neither of them rendered an account,
nor proved the alleged losses, they are obliged to return
the capital to Martinez.
Where two partners receive from another a sum of
money for the establishment of a business, and agree to
share with the latter the profits or losses that may result
therefrom, the said two persons, as the apparent
administrators of the partnership, acted as agents for the
capitalist partner, and by virtue thereof are bound to fulfill
the contract which implies the management of the
business.
Article 1796 is not applicable because no other money
than that contributed as capital was involved. The liability
of the partners is joint. Ong Pong Co shall only pay P750
to Martinez.
Agustin v. Inocencio
The parties to this controversy, who had been
conducting a partnership as industrial partners without
capital, contributed from its profits the sum of P807.28
as a fund toward the construction of a casco for use in
their business, to which they added P3,500, borrowed
from Maria del Rosario, the wife of the defendant,
Bartolome Inocencio, he being the managing partner
. It is admitted that this total, a little over P4,300, was the
estimated cost of the casco, but in the progress of the
work the defendant found that it called for additional
funds, which he advanced to the amount of P2,024.49. It
is satisfactorily appears from the evidence that this
amount is necessary in order to complete the work
undertaken. Although it would seem that he failed to
notify his partners of the various items from time to time
going to make up this sum, it is shown that the books
were at all times open to their inspection, and that, being
asked to examine them, they omitted to do so, and that
the plaintiff Juan Agustin, representing all the partners,
was also present at the construction of the casco, in
charge of the practical work and cognizant of its needs
and its progress.
The work done in the casco having been within the
scope of the association and necessary to carry out its
express object, the borrowing of the money required to
carry it on, with the acquiescence if not with the
affirmative consent of his associates, was not outside
the powers of the managing partner and constitutes a
debt for which all the associates are liable.
The note passed into the hands of the defendant by
reason of the successive deaths of his wife and of their
only child, each without debts, and for the amount
thereof he became a creditor, subject, however, to the
deduction therefrom of his proportionate part of the
indebtedness.
The trial court treated his claim on this note, as well as
the sum of P2,024.49 furnished by him, as an addition to
his capital in the firm, rather than as a loan, and this
constitutes one of the grounds of error stated by the
appellant. We do not deem it necessary to pass upon
this objection, for the reason that, considered as a loan,
this sum would place the defendant as a creditor in a
stronger position as against his associates than if
regarded as a mere contribution to capital. The error, if it
be an error, is not, therefore, prejudicial to the plaintiff,
but is rather beneficial to him. The respondent did not
except to it.
DISSOLUTION:
Idos v. CA
In 1985, Eddie Alarilla and Irma Idos formed a
partnership which they decided to terminate after a year.
To pay Alarillas share of the asset, Idos issued 4 post
dated checks. Alarilla was able to encash the first,
second and fourth checks but the third was dishonored
for insufficiency of funds. He demanded payment but
Idos failed to pay. She claimed that the checks were
issued as assurance of Alarillas share in the assets of
the partnership and that it was supposed to be deposited
until the stocks were sold. He filed an information for
violation of BP blg. 22 against Idos in which she was
found guilty by the trial court.
Issue: Did the court confused and merged into one the
legal concepts of dissolution, liquidation and termination
of a partnership?
Ruling: The partners agreement to terminate the
partnership did not automatically dissolved the
partnership. They were in the process of winding-up
when the check in question was issued. The best
evidence of the existence of the partnership, which was
not yet terminated were the unsold goods and
uncollected receivables which were presented to the trial
court. Article 1829 of the Civil Code provides that on
dissolution the partnership is not terminated but
continues until the winding-up of partnership affairs is
completed. Since the partnership has not been
terminated, Idos and Alarilla remained co-partners. The
check was issued by petitioner to respondent as would a
partner to another and not as a payment by debtor to
creditor. Thus, absent the first element of the complained
offense, the act is not punishable by the statute.