Benjamin Yu vs.
National Labor Relations ceasing to be associated in the carrying on as a
Commission (NLRC)
224 SCRA 75
FACTS:
Petitioner Yu was hired as the Assistant General
Manager of Jade Mountain Products Company
Limited primarily responsible for the overall
operations of marble quarrying and export business of
said partnership. He was hired by a virtue of a
Partnership Resolution in 1985 with a monthly salary
of P4,000.00. Initially he received only half of his
stipulated monthly salary and was promised by the
partners that the balance would be paid upon securing
additional operating funds from abroad.
However, in 1988 without his knowledge the general
partners as well as one of the limited partners sold and
transferred their interest to Willy Co and Emmanuel
Zapanta. Thus the new major partners decided to
transfer the firm’s main office but opted to continue
the operation of the old partnership under its old firm
name and with all its employees and workers except
for the petitioner.
Upon knowing of the changes in the partnership,
petitioner went to the new main office to meet the new
partners and demand the payment of his unpaid
salaries, but the latter refused to pay him and instead
informed him that since he bought the business from
the original partners, it was for him to decide whether
or not he was responsible for the obligations of the old
partnership including petitioners unpaid salaries.
Hence, petitioner was dismissed from said partnership.
ISSUES:
1. Whether the partnership which had hired the
petitioner as Asst. General Manager had been
extinguished and replaced by a new partnership
composed of Willy Co and Emmanuel Zapanta.
2. Whether petitioner could assert his rights under his
employment contract as against the new partnership
HELD:
1. Yes. The legal effect of the changes in the
membership of the partnership was the dissolution of
the old partnership which had hired the petitioner in
1984 and the emergence of the new firm composed of
Willy Co and Emmanuel Zapanta in 1988. This is
based on the following provisions:
Art. 1828. The dissolution of partnership is the change
in the relation of the partners caused by any partner
distinguished from the winding up of the business.
Art. 1830. Dissolution is caused: (1) without violation
of the agreement between the partners; (b) by the
express will of any partner, who must act in good faith,
when no definite term or particular undertaking is
specified; (2) in contravention of the agreement
between the partners, where the circumstances do not
permit a dissolution under any other provision of this
article, by the express will of any partner at any time;
However, the legal consequence of dissolution of a
partnership do not automatically result in the
termination of the legal personality of the old
partnership as according to Art. 1829, “on dissolution
of the partnership is not terminated, but continues until
the winding up of the partnership affairs is completed.
The new partnership simply continued the operations
of the old partnership under its old firm name without
winding up the business affairs of the old partnership.
2. Yes. Under Art. 1840, creditors of the old
partnership are also creditors of the new partnership
which continued the business of former without
liquidation of the partnership affairs. Thus, creditor of
the old Jade Mountain, such as the petitioner is entitled
to enforce his claim for unpaid salaries, as well as
other claims relating to his employment with the old
partnership against the new Jade Mountain.
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 partnership.
But Yu is not entitled to reinstatement. Reason: new
partnership was entitled to appoint and hire a new gen.
or asst. gen. manager to run the affairs of the business
enterprise take over. An asst. gen. manager belongs to
the most senior ranks of management and anew
partnership is entitled to appoint a top manager of its
own choice and confidence. Thenon-retention of Yu
did not constitute unlawful termination.
The new partnership had its own new General
Manager, Co, the principal new owner himself. Yu’s
old position thus became superfluous or redundant. Yu
is entitled to separation pay at the rate of one month’s
pay for each year of service that they had rendered to
the old partnership, a fraction of at least 6 months
being considered as a whole year
SECOND DIVISION
[ G.R. No. 206147, January 13, 2016 ]
MICHAEL C. GUY, PETITIONER, VS. ATTY.
GLENN C. GACOTT, RESPONDENT.
DECISION
MENDOZA, J.:
Before this Court is a petition for review on certiorari
under Rule 45 of the Rules of Court filed by petitioner
Michael C. Guy (Guy), assailing the June 25, 2012
Decision[1] and the March 5, 2013 Resolution[2] of
the Court of Appeals (CA) in CA-G.R. CV No. 94816,
which affirmed the June 28, 2009[3] and February 19,
2010[4] Orders of the Regional Trial Court, Branch
52, Puerto Princesa City, Palawan (RTC), in Civil
Case No. 3108, a case for damages. The assailed RTC
orders denied Guy's Motion to Lift Attachment Upon
Personalty[5] on the ground that he was not a
judgment debtor.
The Facts
It appears from the records that on March 3, 1997,
Atty. Glenn Gacott (Gacott) from Palawan purchased
two (2) brand new transreceivers from Quantech
Systems Corporation (QSC) in Manila through its
employee Rey Medestomas (Medestomas), amounting
to a total of PI 8,000.00. On May 10, 1997, due to
major defects, Gacott personally returned the
transreceivers to QSC and requested that they be
replaced. Medestomas received the returned
transreceivers and promised to send him the
replacement units within two (2) weeks from May 10,
1997.
Time passed and Gacott did not receive the
replacement units as promised. QSC informed him
that there were no available units and that it could not
refund the purchased price. Despite several demands,
both oral and written, Gacott was never given a
replacement or a refund. The demands caused Gacott
to incur expenses in the total amount of P40,936.44.
Thus, Gacott filed a complaint for damages. Summons
was served upon QSC and Medestomas, afterwhich
they filed their Answer, verified by Medestomas
himself and a certain Elton Ong (Ong). QSC and
Medestomas did not present any evidence during the
trial.[6]
In a Decision,[7] dated March 16, 2007, the RTC
found that the two (2) transreceivers were defective
and that QSC and Medestomas failed to replace the
same or return Gacott's money. The dispositive portion
of the decision reads:
WHEREFORE, judgment is hereby rendered in favor
of the plaintiff, ordering the defendants to jointly and
severally pay plaintiff the following:
1. Purchase price plus 6% per annum from March
3,1997 up to and until fully paid -------------------------
------------------------------- P 18,000.00
2. Actual Damages -----------------------------------
40,936.44
3. Moral Damages -----------------------------------
75,000.00
4. Corrective Damages ----------------------------
100,000.00
5. Attorney's Fees ------------------------------------
60,000.00
6. Costs.
SO ORDERED.
The decision became final as QSC and Medestomas
did not interpose an appeal. Gacott then secured a Writ
of Execution,[8] dated September 26, 2007.
During the execution stage, Gacott learned that QSC
was not a corporation, but was in fact a general
partnership registered with the Securities and
Exchange Commission (SEC). In the articles of
partnership,[9] Guy was appointed as General
Manager of QSC.
To execute the judgment, Branch Sheriff Ronnie L.
Felizarte (Sheriff Felizarte) went to the main office of
the Department of Transportation and
Communications, Land Transportation Office
(DOTC-LTO), Quezon City, and verified whether
Medestomas, QSC and Guy had personal properties
registered therein.[10] Upon learning that Guy had
vehicles registered in his name, Gacott instructed the
sheriff to proceed with the attachment of one of the
motor vehicles of Guy based on the certification issued
by the DOTC-LTO.[11]
On March 3, 2009, Sheriff Felizarte attached Guy's
vehicle by virtue of the Notice of Attachment/Levy
upon Personalty[12] served upon the record custodian
of the DOTC-LTO of Mandaluyong City. A similar
notice was served to Guy through his housemaid at his
residence.
Thereafter, Guy filed his Motion to Lift Attachment
Upon Personalty, arguing that he was not a judgment
debtor and, therefore, his vehicle could not be
attached.[13] Gacott filed an opposition to the motion.
The RTC Order
On June 28, 2009, the RTC issued an order denying
Guy's motion. It explained that considering QSC was
not a corporation, but a registered partnership, Guy
should be treated as a general partner pursuant to
Section 21 of the Corporation Code, and he may be
held jointly and severally liable with QSC and
Medestomas. The trial court wrote:
All persons who assume to act as a corporation
knowing it to be without authority to do so shall be
liable as general partners for all debts, liabilities and
damages incurred or arising as a result thereof x x x.
Where, by any wrongful act or omission of any partner
acting in the ordinary course of the business of the
partnership x x x, loss or injury is caused to any
person, not being a partner in the partnership, or any
penalty is incurred, the partnership is liable therefore
to the same extent as the partner so acting or omitting
to act. All partners are liable solidarity with the
partnership for everything chargeable to the
partnership under Article 1822 and 1823.[14]
Accordingly, it disposed:
WHEREFORE, with the ample discussion of the
matter, this Court finds and so holds that the property
of movant Michael Guy may be validly attached in
satisfaction of the liabilities adjudged by this Court
against Quantech Co., the latter being an ostensible
Corporation and the movant being considered by this
Court as a general partner therein in accordance with
the order of this court impressed in its decision to this
case imposing joint and several liability to the
defendants. The Motion to Lift Attachment Upon
Personalty submitted by the movant is therefore
DENIED for lack of merit.
SO ORDERED.[15]
Not satisfied, Guy moved for reconsideration of the
denial of his motion. He argued that he was neither
impleaded as a defendant nor validly served with
summons and, thus, the trial court did not acquire
jurisdiction over his person; that under Article 1824 of
the Civil Code, the partners were only solidarily liable
for the partnership liability under exceptional
circumstances; and that in order for a partner to be
liable for the debts of the partnership, it must be shown
that all partnership assets had first been exhausted.[16]
On February 19, 2010, the RTC issued an order[17]
denying his motion.
The denial prompted Guy to seek relief before the CA.
The CA Ruling
On June 25, 2012, the CA rendered the assailed
decision dismissing Guy's appeal for the same reasons
given by the trial court. In addition thereto, the
appellate court stated:
We hold that Michael Guy, being listed as a general
partner of QSC during that time, cannot feign
ignorance of the existence of the court summons. The
verified Answer filed by one of the partners, Elton
Ong, binds him as a partner because the Rules of Court
does not require that summons be served on all the
partners. It is sufficient that service be made on the
"president, managing partner, general manager,
corporate secretary, treasurer or in-house counsel." To
Our mind, it is immaterial whether the summons to
QSC was served on the theory that it was a
corporation. What is important is that the summons
was served on QSC's authorized officer xxx.[18]
The CA stressed that Guy, being a partner in QSC, was
bound by the summons served upon QSC based on
Article 1821 of the Civil Code. The CA further opined
that the law did not require a partner to be actually
involved in a suit in order for him to be made liable.
He remained "solidarity liable whether he participated
or not, whether he ratified it or not, or whether he had
knowledge of the act or omission."[19]
Aggrieved, Guy filed a motion for reconsideration but
it was denied by the CA in its assailed resolution, dated
March 5, 2013.
Hence, the present petition raising the following
ISSUE
THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR IN
HOLDING THAT PETITIONER GUY IS
SOLIDARILY LIABLE WITH THE PARTNERSHIP
FOR DAMAGES ARISING FROM THE BREACH
OF THE CONTRACT OF SALE WITH
RESPONDENT GACOTT.[20]
Guy argues that he is not solidarity liable with the
partnership because the solidary liability of the
partners under Articles 1822, 1823 and 1824 of the
Civil Code only applies when it stemmed from the act
of a partner. In this case, the alleged lapses were not
attributable to any of the partners. Guy further invokes
Article 1816 of the Civil Code which states that the
liability of the partners to the partnership is merely
joint and subsidiary in nature.
In his Comment,[21] Gacott countered, among others,
that because Guy was a general and managing partner
of QSC, he could not feign ignorance of the
transactions undertaken by QSC. Gacott insisted that
notice to one partner must be considered as notice to
the whole partnership, which included the pendency of
the civil suit against it.
In his Reply,[22] Guy contended that jurisdiction over
the person of the partnership was not acquired because
the summons was never served upon it or through any
of its authorized office. He also reiterated that a
partner's liability was joint and subsidiary, and not
solidary.
The Court's Ruling
The petition is meritorious.
The service of summons was
flawed; voluntary appearance
cured the defect
Jurisdiction over the person, or jurisdiction in
personam - the power of the court to render a personal
judgment or to subject the parties in a particular action
to the judgment and other rulings rendered in the
action - is an element of due process that is essential
in all actions, civil as well as criminal, except in
actions in rem or quasi in rem.[23] Jurisdiction over
the person of the plaintiff is acquired by the mere filing
of the complaint in court. As the initiating party, the
plaintiff in a civil action voluntarily submits himself to
the jurisdiction of the court. As to the defendant, the
court acquires jurisdiction over his person either by the
proper service of the summons, or by his voluntary
appearance in the action.[24]
Under Section 11, Rule 14 of the 1997 Revised Rules
of Civil Procedure, when the defendant is a
corporation, partnership or association organized
under the laws of the Philippines with a juridical
personality, the service of summons may be made on
the president, managing partner, general manager,
corporate secretary, treasurer, or in-house counsel.
Jurisprudence is replete with pronouncements that
such provision provides an exclusive enumeration of
the persons authorized to receive summons for
juridical entities.[25]
The records of this case reveal that QSC was never
shown to have been served with the summons through
any of the enumerated authorized persons to receive
such, namely: president, managing partner, general
manager, corporate secretary, treasurer or in-house
counsel. Service of summons upon persons other than
those officers enumerated in Section 11 is invalid.
Even substantial compliance is not sufficient service
of summons. The CA was obviously mistaken when it
opined that it was immaterial whether the summons to
QSC was served on the theory that it was a
corporation.[27]
Nevertheless, while proper service of summons is
necessary to vest the court jurisdiction over the
defendant, the same is merely procedural in nature and
the lack of or defect in the service of summons may be
cured by the defendant's subsequent voluntary
submission to the court's jurisdiction through his filing
a responsive pleading such as an answer. In this case,
it is not disputed that QSC filed its Answer despite the
defective summons. Thus, jurisdiction over its person
was acquired through voluntary appearance.
A partner must be separately
and distinctly impleaded before
he can be bound by a judgment
The next question posed is whether the trial court's
jurisdiction over QSC extended to the person of Guy
insofar as holding him solidarity liable with the
partnership. After a thorough study of the relevant
laws and jurisprudence, the Court answers in the
negative.
Although a partnership is based on delectus personae
or mutual agency, whereby any partner can generally
represent the partnership in its business affairs, it is
non sequitur that a suit against the partnership is
necessarily a suit impleading each and every partner.
It must be remembered that a partnership is a juridical
entity that has a distinct and separate personality from
the persons composing it.[28]
In relation to the rules of civil procedure, it is
elementary that a judgment of a court is conclusive and
binding only upon the parties and their successors-in-
interest after the commencement of the action in
court.[29] A decision rendered on a complaint in a
civil action or proceeding does not bind or prejudice a
person not impleaded therein, for no person shall be
adversely affected by the outcome of a civil action or
proceeding in which he is not a party.[30] The
principle that a person cannot be prejudiced by a ruling
rendered in an action or proceeding in which he has
not been made a party conforms to the constitutional
guarantee of due process of law.[31]
In Muñoz v. Yabut, Jr.,[32] the Court declared that a
person not impleaded and given the opportunity to
take part in the proceedings was not bound by the
decision declaring as null and void the title from which
his title to the property had been derived. The effect of
a judgment could not be extended to non-parties by
simply issuing an alias writ of execution against them,
for no man should be prejudiced by any proceeding to
which he was a stranger.
In Aguila v. Court of Appeals[33] the complainant had
a cause of action against the partnership. Nevertheless,
it was the partners themselves that were impleaded in
the complaint. The Court dismissed the complaint and
held that it was the partnership, not its partners,
officers or agents, which should be impleaded for a
cause of action against the partnership itself. The
Court added that the partners could not be held liable
for the obligations of the partnership unless it was
shown that the legal fiction of a different juridical
personality was being used for fraudulent, unfair, or
illegal purposes.[34]
Here, Guy was never made a party to the case. He did
not have any participation in the entire proceeding
until his vehicle was levied upon and he suddenly
became QSC's "co-defendant debtor" during the
judgment execution stage. It is a basic principle of law
that money judgments are enforceable only against the
property incontrovertibly belonging to the judgment
debtor.[35] Indeed, the power of the court in executing
judgments extends only to properties unquestionably
belonging to the judgment debtor alone. An execution
can be issued only against a party and not against one
who did not have his day in court. The duty of the
sheriff is to levy the property of the judgment debtor
not that of a third person. For, as the saying goes, one
man's goods shall not be sold for another man's
debts.[36]
In the spirit of fair play, it is a better rule that a partner
must first be impleaded before he could be prejudiced
by the judgment against the partnership. As will be
discussed later, a partner may raise several defenses
during the trial to avoid or mitigate his obligation to
the partnership liability. Necessarily, before he could
present evidence during the trial, he must first be
impleaded and informed of the case against him. It
would be the height of injustice to rob an innocent
partner of his hard-earned personal belongings without
giving him an opportunity to be heard. Without any
showing that Guy himself acted maliciously on behalf
of the company, causing damage or injury to the
complainant, then he and his personal properties
cannot be made directly and solely accountable for the
liability of QSC, the judgment debtor, because he was
not a party to the case.
Further, Article 1821 of the Civil Code does not state
that there is no need to implead a partner in order to be
bound by the partnership liability. It provides that:
Notice to any partner of any matter relating to
partnership affairs, and the knowledge of the partner
acting in the particular matter, acquired while a partner
or then present to his mind, and the knowledge of any
other partner who reasonably could and should have
communicated it to the acting partner, operate as
notice to or knowledge of the partnership, except in the
case of fraud on the partnership, committed by or with
the consent of that partner.
[Emphases and Underscoring Supplied]
A careful reading of the provision shows that notice to
any partner, under certain circumstances, operates as
notice to or knowledge to the partnership only.
Evidently, it does not provide for the reverse situation,
or that notice to the partnership is notice to the
partners. Unless there is an unequivocal law which
states that a partner is automatically charged in a
complaint against the partnership, the constitutional
right to due process takes precedence and a partner
must first be impleaded before he can be considered as
a judgment debtor. To rule otherwise would be a
dangerous precedent, harping in favor of the
deprivation of property without ample notice and
hearing, which the Court certainly cannot
countenance.
Partners' liability is subsidiary and generally joint;
immediate levy upon the property of a partner cannot
be made
Granting that Guy was properly impleaded in the
complaint, the execution of judgment would be
improper. Article 1816 of the Civil Code governs the
liability of the partners to third persons, which states
that:
Article 1816. All partners, including industrial ones,
shall be liable pro rata with all their property and after
all the partnership assets have been exhausted, for the
contracts which may be entered into in the name and
for the account of the partnership, under its signature
and by a person authorized to act for the partnership.
However, any partner may enter into a separate
obligation to perform a partnership contract.
[Emphasis Supplied]
This provision clearly states that, first, the partners'
obligation with respect to the partnership liabilities is
subsidiary in nature. It provides that the partners shall
only be liable with their property after all the
partnership assets have been exhausted. To say that
one's liability is subsidiary means that it merely
becomes secondary and only arises if the one primarily
liable fails to sufficiently satisfy the obligation. Resort
to the properties of a partner may be made only after
efforts in exhausting partnership assets have failed or
that such partnership assets are insufficient to cover
the entire obligation. The subsidiary nature of the
partners' liability with the partnership is one of the
valid defenses against a premature execution of
judgment directed to a partner.
In this case, had he been properly impleaded, Guy's
liability would only arise after the properties of QSC
would have been exhausted. The records, however,
miserably failed to show that the partnership's
properties were exhausted. The report[37] of the
sheriff showed that the latter went to the main office
of the DOTC-LTO in Quezon City and verified
whether Medestomas, QSC and Guy had personal
properties registered therein. Gaeott then instructed
the sheriff to proceed with the attachment of one of the
motor vehicles of Guy.[38] The sheriff then served the
Notice of Attachment/Levy upon Personalty to the
record custodian of the DOTC-LTO of Mandaluyong
City. A similar notice was served to Guy through his
housemaid at his residence.
Clearly, no genuine efforts were made to locate the
properties of QSC that could have been attached to
satisfy the judgment - contrary to the clear mandate of
Article 1816. Being subsidiarily liable, Guy could only
be held personally liable if properly impleaded and
after all partnership assets had been exhausted.
Second, Article 1816 provides that the partners'
obligation to third persons with respect to the
partnership liability is pro rata or joint. Liability is
joint when a debtor is liable only for the payment of
only a proportionate part of the debt. In contrast, a
solidary liability makes a debtor liable for the payment
of the entire debt. In the same vein, Article 1207 does
not presume solidary liability unless: 1) the obligation
expressly so states; or 2) the law or nature requires
solidarity. With regard to partnerships, ordinarily, the
liability of the partners is not solidary.[39] The joint
liability of the partners is a defense that can be raised
by a partner impleaded in a complaint against the
partnership.
In other words, only in exceptional circumstances
shall the partners' liability be solidary in nature.
Articles 1822, 1823 and 1824 of the Civil Code
provide for these exceptional conditions, to wit:
Article 1822. Where, by any wrongful act or omission
of any partner acting in the ordinary course of the
business of the partnership or with the authority of his
co-partners, loss or injury is caused to any person, not
being a partner in the partnership, or any penalty is
incurred, the partnership is liable therefor to the same
extent as the partner so acting or omitting to act.
Article 1823. The partnership is bound to make good
the loss:
(1) Where one partner acting within the scope of his
apparent authority receives money or property of a
third person and misapplies it; and
(2) Where the partnership in the course of its business
receives money or property of a third person and the
money or property so received is misapplied by any
partner while it is in the custody of the partnership.
Article 1824. All partners are liable solidarity with the
partnership for everything chargeable to the
partnership under Articles 1822 and 1823.
[Emphases Supplied]
In essence, these provisions articulate that it is the act
of a partner which caused loss or injury to a third
person that makes all other partners solidarity liable
with the partnership because of the words "any
wrongful act or omission of any partner acting in the
ordinary course of the business, " "one partner acting
within the scope of his apparent authority" and
"misapplied by any partner while it is in the custody of
the partnership." The obligation is solidary because the
law protects the third person, who in good faith relied
upon the authority of a partner, whether such authority
is real or apparent.[40]
In the case at bench, it was not shown that Guy or the
other partners did a wrongful act or misapplied the
money or property he or the partnership received from
Gacott. A third person who transacted with said
partnership can hold the partners solidarity liable for
the whole obligation if the case of the third person falls
under Articles 1822 or 1823.[41] Gacott's claim
stemmed from the alleged defective transreceivers he
bought from QSC, through the latter's employee,
Medestomas. It was for a breach of warranty in a
contractual obligation entered into in the name and for
the account of QSC, not due to the acts of any of the
partners. For said reason, it is the general rule under
Article 1816 that governs the joint liability of such
breach, and not the exceptions under Articles 1822 to
1824. Thus, it was improper to hold Guy solidarity
liable for the obligation of the partnership.

Finally, Section 21 of the Corporation Code,[42] as
invoked by the RTC, cannot be applied to sustain
Guy's liability. The said provision states that a general
partner shall be liable for all debts, liabilities and
damages incurred by an ostensible corporation. It must
be read, however, in conjunction with Article 1816 of
the Civil Code, which governs the liabilities of
partners against third persons. Accordingly, whether
QSC was an alleged ostensible corporation or a duly
registered partnership, the liability of Guy, if any,
would remain to be joint and subsidiary because, as
previously stated, all partners shall be liable pro rata
with all their property and after all the partnership
assets have been exhausted for the contracts which
may be entered into in the name and for the account of
the partnership.
WHEREFORE, the petition is GRANTED. The June
25, 2012 Decision and the March 5, 2013 Resolution
of the Court of Appeals in CA-G.R. CV No. 94816 are
hereby REVERSED and SET ASIDE. Accordingly,
the Regional Trial Court, Branch 52, Puerto Princesa
City, is ORDERED TO RELEASE Michael C. Guy's
Suzuki Grand Vitara subject of the Notice of
Levy/Attachment upon Personalty.
SO ORDERED.
Magdusa vs Albaran
5 SCRA 511
FACTS
Appellant and appellees, together with various other
persons, had verbally formed a partnership de facto for
the sale of general merchandise in Surigao, to which
appellant contributed P2,000 as capital, and the others
contributed their labor, under the condition that out of
the net profits of the business 25% would be added to
the original capital, and the remaining 75% would be
divided among the members in proportion to the
length of service of each. The appellees expressed
their desire to withdraw from the partnership, and
appellant thereupon made a computation (exhibit C) to
determine the value of the partners' shares to that date.
Appellees thereafter made demands upon appellant for
payment, but appellant having refused, they filed the
initial complaint in the court.
ISSUE:
The main argument of appellant is that the appellees'
action cannot be entertained, because in the
distribution of all or part of a partnership's assets, all
the partners have no interest and are indispensable
parties without whose intervention no decree of
distribution can be validly entered.
HELD:
A partner's share cannot be returned without first
dissolving and liquidating the partnership (Po Yeng
Cheo vs. Lim Ka Yam, 44 Phil. 177), for the return is
dependent on the discharge of the creditors, whose
claims enjoy preference over those of the partners; and
it is self-evident that all members of the partnership
are interested in his assets and business, and are
entitled to be heard in the matter of the firm's
liquidation and the distribution of its property. The
liquidation (exhibit C) is not signed by the other
members of the partnership besides appellees and
appellant; it does not appear that they have approved,
authorized, or ratified the same, and, therefore, it is not
binding upon them. At the very least, they are entitled
to be heard upon its correctness.
In addition, unless a proper accounting and liquidation
of the partnership affairs is first had, the capital shares
of the appellees, as retiring partners, cannot be repaid,
for the firm's outside creditors have preference over
the assets of the enterprise (Civ. Code, Art. 1839), and
the firm's property cannot be diminished to their
prejudice. Finally, the appellant cannot be held liable
in his personal capacity for the payment of partners'
shares for he does not hold them except as manager of,
or trustee for, the partnership. It is the latter that must
refund their shares to the retiring partners. Since not
all the members of the partnership have been
impleaded, no judgment for refund can be rendered,
and the action should have been dismissed
Soncuya v. de Luna
G.R. No. L-45464, April 28, 1939
Facts:
Petitioner filed a complaint against respondent for
damages as a result of the fraudulent administration of
the partnership, “Centro Escolar de Senoritas” of
which petitioner and the deceased Avelino Librada
were members. For the purpose of adjudicating to
plaintiff damages which he alleges to have suffered as
a partner, it is necessary that a liquidation of the
business be made that the end profits and losses may
be known and the causes of the latter and the
responsibility of the defendant as well as the damages
in which each partner may have suffered, maybe
determined.

Issue: Whether the petitioner is entitled to damages.
Ruling:
According to the Supreme Court the complaint is not
sufficient to constitute a cause of action on the part of
the plaintiff as member of the partnership to collect
damages from defendant as managing partner thereof,
without previous liquidation. In view of the foregoing
considerations, for a partner to be able to claim from
another partner who manages the general co-
partnership, damages allegedly suffered by him by
reason of the fraudulent administration of the latter, a
previous liquidation of said partnership is necessary.
Full Text
G.R. No. L-45464 April 28, 1939
JOSUE SONCUYA, plaintiff-appellant,
vs.
CARMEN DE LUNA, defendant-appellee.
Josue Soncuya in his own behalf.
Conrado V. Sanchez and Jesus de Veyra for appellee.
VILLA-REAL, J.:
On September 11, 1936, plaintiff Josue Soncuya filed
with the Court of First Instance of Manila and
amended complaint against Carmen de Luna in her
own name and as co-administratrix of the intestate
estate, of Librada Avelino, in which, upon the facts
therein alleged, he prayed that defendant be sentenced
to pay him the sum of P700,432 as damages and costs.
To the aforesaid amended complaint defendant
Carmen de Luna interposed a demurrer based on the
following grounds: (1) That the complaint does not
contain facts sufficient to constitute a cause of action;
and (2) that the complaint is ambiguous, unintelligible
and vague.
Trial on the demurrer having been held and the parties
heard, the court found the same well-founded and
sustained it, ordering the plaintiff to amend his
complaint within a period of ten days from receipt of
notice of the order.
Plaintiff having manifested that he would prefer not to
amend his amended complaint, the attorney for the
defendant, Carmen de Luna, filed a motion praying
that the amended complaint be dismissed with costs
against the plaintiff. Said motion was granted by The
Court of First Instance of Manila which ordered the
dismissal of the aforesaid amended complaint, with
costs against the plaintiff.
From this order of dismissal, the appellant took an
appeal, assigning twenty alleged errors committed by
the lower court in its order referred to.
The demurrer interposed by defendant to the amended
complaint filed by plaintiff having been sustained on
the grounds that the facts alleged in said complaint are
not sufficient to constitute a cause of action and that
the complaint is ambiguous, unintelligible and vague,
the only questions which may be raised and considered
in the present appeal are those which refer to said
grounds.
In the amended complaint it is prayed that defendant
Carmen de Luna be sentenced to pay plaintiff damages
in the sum of P700,432 as a result of the
administration, said to be fraudulent, of the
partnership, "Centro Escolar de Señoritas", of which
plaintiff, defendant and the deceased Librada Avelino
were members. For the purpose of adjudicating to
plaintiff damages which he alleges to have suffered as
a partner by reason of the supposed fraudulent
management of the partnership referred to, it is first
necessary that a liquidation of the business thereof be
made to the end that the profits and losses may be
known and the causes of the latter and the
responsibility of the defendant as well as the damages
which each partner may have suffered, may be
determined. It is not alleged in the complaint that such
a liquidation has been effected nor is it prayed that it
be made. Consequently, there is no reason or cause for
plaintiff to institute the action for damages which he
claims from the managing partner Carmen de Luna
(Po Yeng Cheo vs. Lim Ka Yam, 44 Phil., 172).
Having reached the conclusion that the facts alleged in
the complaint are not sufficient to constitute a cause of
action on the part of plaintiff as member of the
partnership "Centro Escolar de Señoritas" to collect
damages from defendant as managing partner thereof,
without a previous liquidation, we do not deem it
necessary to discuss the remaining question of whether
or not the complaint is ambiguous, unintelligible and
vague.
In view of the foregoing considerations, we are of the
opinion and so hold that for a partner to be able to
claim from another partner who manages the general
copartnership, damages allegedly suffered by him by
reason of the fraudulent administration of the latter, a
previous liquidation of said partnership is necessary.
Wherefore, finding no error in the order appealed from prayer for dissolution of the joint venture may be
the same is affirmed in all its parts, with costs against granted conformably with the right granted to the
the appellant. So ordered. purchaser of a partner‟s interest under Article 1813

Josefina Realubit v. Eden and Prosencio Jaso

G.R. No. 178782 September 21, 2011

Facts:

Petitioner entered into a Joint Venture Agreement with

one Francis Biondo, a French national, for the
operation of an ice manufacturing business. Petitioner
was designated industrial partner and Biondo was
capitalist partner. Subsequently, Biondo executed a
Deed of Assignment, transferring all his rights and
interests in the business in favor of respondent Eden
Jaso. The spouses Jaso sent petitioner a letter
demanding an accounting and inventory of the
partnership, and remittance of their portion of the
profits. Petitioner failed to heed their demand, alleging
that the joint venture with Biondo had already ceased
operations, and the present business was under a single
proprietorship. Respondents filed a suit for specific
performance, accounting, and dissolution of the joint
venture.

Issue:

Whether or not respondent, as assignee of the partner

Biondo, may order petitioner to render an accounting
of the joint venture.

Held:

No. A joint venture is generally understood to mean an

organization formed for some temporary purpose. It is
likened to a partnership or one which has for its object
determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or
vocation.

Article 1813 provides: “(t)he transfer by a partner of

his partnership interest does not make the assignee of
such interest a partner of the firm, nor entitle the
assignee to interfere in the management of the
partnership business or to receive anything except the
assignee's profits. The assignment does not purport to
transfer an interest in the partnership, but only a future
contingent right to a portion of the ultimate residue as
the assignor may become entitled to receive by virtue
of his proportionate interest in the capital.”

Although respondent did not become partner as a

consequence of the assignment of rights, however, her