ATP WEEK 13: DISSOLUTION AND WINDING UP
CASE 1 GREGORIO ORTEGA, TOMAS DEL CASTILLO, JR. AND
BENJAMIN BACORRO V. CA, SEC AND JOAQUIN MISA – Karla
Gutierrez
DOCTRINE: A partnership that does not fix its term is a partnership at will.
Neither would the presence of a period for its specific duration or the
statement of a particular purpose for its creation prevent the dissolution of
any partnership by an act or will of a partner. Upon its dissolution, the
partnership continues and its legal personality is retained until the complete
winding up of its business culminating in its termination.
FACTS:
1. Ortega, then a senior partner in the law firm Bito, Misa, and Lozada
withdrew in said firm.
2. He filed with SEC a petition for dissolution and liquidation of
partnership.
3. SEC en banc ruled that withdrawal of Misa from the firm had
dissolved the partnership. Reason: since it is partnership at will, the
law firm could be dissolved by any partner at anytime, such as by
withdrawal therefrom, regardless of good faith or bad faith, since no
partner can be forced to continue in the partnership against his will.
4. During the pendency of the case with the Court of Appeals,
Attorney Jesus Bito and Attorney Mariano Lozada both died on,
respectively, 05 September 1991 and 21 December 1991.
5. The death of the two partners, as well as the admission of new
partners, in the law firm prompted Attorney Misa to renew his
application for receivership (in CA G.R. SP No. 24648).
6. He expressed concern over the need to preserve and care for the
partnership assets. The other partners opposed the prayer.
7. The Court of Appeals, finding no reversible error on the part of
respondent Commission, AFFIRMED in toto the SEC decision and
order appealed from.
8. CA reasoned that
a. (a) that Atty. Misa's withdrawal from the partnership had
changed the relation of the parties and inevitably caused
the dissolution of the partnership;
b. (b) that such withdrawal was not in bad faith;
c. (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. (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
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e. (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.
f. Petitioners filed Pet. For Review in the Supreme Court
ISSUE: 1. WON the partnership of Bito, Misa & Lozada (now Bito, Lozada,
Ortega & Castillo) is a partnership at will;
2. WON the withdrawal of Misa dissolved the partnership regardless of his
good or bad faith;
HELD:
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.”
2. Yes. Any one of the partners may, at his sole pleasure, dictate a
dissolution of the partnership at will (e.g. by way of withdrawal of a partner).
He must, however, act in good faith, not that the attendance of bad faith
can prevent the dissolution of the partnership but that it can result in a
liability for damages
CASE 2 - MARJORIE TOCAO AND WILLIAM BELO v CA AND NENITA
ANAY – Rob Estomo
DOCTRINE: Any one of the partners may, at his sole pleasure, dictate a
dissolution of the partnership at will, though he must, however, act in good
faith.
FACTS: Anay met Belo, then VP for operations of Ultra Clean Water
Purifier, through her former employer in Bangkok. Belo introduced Anay to
Tocao, desired to enter into a joint venture with her for the imporatation and
distribution of kitchen cookwares. Belo volunteered to be finance the joint
venture. Geminisse Enterprise was made and Belo acted as capitalist,
Tocao was the general manager and president, and Anay was then made
the manager of the marketing department and later, made vice-president.
The parties however, did not reduce to writing their agreement regarding
the percentage for which each of the partners are entitled. The same were
made orally under the assurance of Belo that he was sincere and
dependable when it comes to financial commitments. The enterprise was
very successful and West Bend Company invited Anay to attend a meeting
ATP WEEK 13: DISSOLUTION AND WINDING UP
for distributors in Wisconsin. Tocao, as general manager and president of
Geminise even wrote a letter to support the visa application of Anay to be
able to attend the meeting in Wisconsin. Upon returning from Wisconsin,
received an invoice from Belo, the latter explained that this was her share in
the profits as well as her commission for the sales that she was able to
make. Anay later found out that Tocao sent a letter to the then manager of
the Cubao branch of Geminise that she (Anay) was not to be allowed to
enter the premises as her services are no longer needed. Feeling that she
was illegally dismissed and booted out of the partnership, Anay wrote a
letter to both petitioners herein but the same were left unanswered. Un-
faltered, her lawyer then wrote another letter to the same parties pertaining
to the same matter, which again, was left unanswered. Anay instituted a
complaint for collection of sum of money and for an accounting to
determine her interest in the partnership (Geminese) in the RTC of Makati
against petitioners herein. Belo defended himself by saying that he was
merely a guarantor of the business established by Tocao and should not be
held liable. Tocao on the one hand argued that she and Anay were not
partners and that the latter was merely an employee of the former. The
RTC ruled in favour of Anay and the same decision was affirmed by the CA
with some modification in the award of damages.
ISSUE: W/N a partnership exists between the parties, giving Anay the
power to demand for an accounting, and ultimately dissolve the
partnership?
HELD: Yes, there exists unaccounted and unremitted stocks of Geminese
in the possession of the CA intended to offset the damages awarded to
Anay, which is the best evidence of the existence of a partnership.
RATIO: A partnership may be constituted in any form and a public
document is only necessary where an immovable property is contributed in
the said partnership. Since a contract of partnership is consensual, an oral
contract of partnership is as good as a written one. The Court has duly
proven that Belo has a proprietary interest in the partnership, contrary to
what he is claiming. He was present in all the meetings. Further, the
contention of Tocao that she and Anay has an employer-employee
relationship is untenable as Tocao has always regarded Anay to be her
equal and that they receive equal shares in the profits of the business. It is
difficult to believe that Tocao was the employer of Anay because they
receive the same amount of income in the business. Tocao and Belo further
underscores the fact that the CA did not return the @unaccounted and
unremitted stocks of Geminesse Enterprises, obviously a ploy to offset the
damages awarded to Anay, that claim, more than anything else, proves the
existence of a partnership.
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DISPOSITIVE: Anay won. Case is remanded to the RTC to effect proper
dissolution.
*Tocao was a former ramp model.
CASE 3 - ROJAS V MAGLANA – Rebecca Flores
DOCTRINE: A withdrawing partner is liable for damages if the cause of
withdrawal is not justified or no cause was given but in no case can he be
compelled to be in the firm.
PARTIES
1. Maglana – general manager
2. Rojas – logging superinterndent
3. Pahamoting – industrial partner
FACTS
1. Maglana and Rojas executed their Articles of Co-Partnership called
Eastcoast Development Enterprises (EDE) with only the two of
them as partners and having an indefinite term of existence.
2. The purpose of the partnership was to "apply or secure timber
and/or minor forests products licenses and concessions over public
and/or private forest lands and to operate, develop and promote
such forests rights and concessions."
3. Maglana shall manage the business affairs of the partnership whil
Rojas shall be the logging superintendent (logging operations)
4. It is also provided in the said articles of co-partnership that all
profits and losses of the partnership shall be divided share and
share alike between the partners.
5. Because of the difficulties encountered, Rojas and Maglana
decided to avail of the services of Pahamotang as industrial
partner.
6. So Maglana, Rojas and Pahamotang executed their Articles of Co-
Partnership the same firm name – EDE
7. The only difference the purpose now included the renewal of timber
licenes instead of just securing them AND the term was now fixed
to 30 years.
8. The new partnership operated and had profits of P643,633.07
9. But later on Pahomatong decided to withdraw as partner. He was
paid in full of his share and participation in the partnership
10. After the withdrawal of Pahamotang, the partnership was continued
by Maglana and Rojas without the benefit of any written agreement
or reconstitution of their written Articles of Partnership
11. PROBLEM: Rojas entered into a management contract with
another logging enterprise, the CMS Estate, Inc. He left and
abandoned EDE partnership AND withdrew his equipment from the
ATP WEEK 13: DISSOLUTION AND WINDING UP
partnership for use in CMS. This equipment was his contribution to
the first partnership which he transferred to CMS
12. Maglana wrote Rojas reminding him of his obligation to contribute,
either in cash or in equipment, to the capital investments of the
partnership as well as his obligation to perform his duties as logging
superintendent.
13. But Rojas told Maglana that he will not be able to comply with the
promised contributions and be will not work as logging
superintendent.
14. Maglana then told Rojas that Rojas’ share will just be 20% of the
net profits.
15. Meanwhile, Rojas in bad faith took funds from the partnership more
than his contribution
16. So Maglana notified Rojas by a letter that Maglana was dissolving
the partnership
17. ACTION: Rojas now filed an action against Maglana for the
recovery of properties, accounting, receivership and damages.
18. The lower court ruled that the partnership carried on by Rojas and
Maglana after the dissolution of the second partnership was a de
facto partnership and at will BECAUSE there was no term, express
or implied.
ISSUES: (The true issue is: What is the nature of the partnership of
Maglana and Rojas after the withdrawal of Pahomotang) but first determine:
1. Whether or not the first partnership was dissolved? NO
2. Whether or not the second partnership was dissolved? YES
3. Whether ot not Maglana can unilaterally dissolve the partnership? YES
RULING:
1. NO. The first partnership was not dissolved.
1. It was not the intention of the partners to dissolve the first
partnership. The second partnership was mistakenly called
“Additional Agreement”
2. The only change was: They took in one industrial partner; gave him
an equal share in the profits and fixed the term of the second
partnership to (30) years, everything else was the same.
3. Same name, purposes and capital contributions were adopted.
4. MOST IMPORTANT: All subsequent renewals of Timber Licenses
were secured in favor of the First Partnership, the original licensee.
5. To all intents and purposes therefore, the First Articles of
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Partnership were only amended, in the form of Supplementary
Articles of Co-Partnership (Exhibit "C") which was never registered
2. YES. It was dissolved by common consent. But the dissolution did not
affect the first partnership which continued to exist.
Maglana and Rojas agreed to purchase the interest, share and participation
in the second partnership of Pahamotang and they later on became the
owners of equipment contributed by Pahamotang.
When Maglana reminded Rojas of his obligation to contribute either in cash
or in equipment, to the capital investment of the partnership as well as his
obligation to perform his duties as logging superintendent is a strong
indication that the first partnership was not dissolved, because such matters
refers to the provisions of the Articles of Co-Partnership of the first
partnership.
3. YES. Maglana can unilaterally dissolve the partnership. Since both of
them are the only partners, it is in effect a withdrawal. With his withdrawal,
the number of members is decreased, hence, the dissolution.
Under Article 1830, par. 2 of the Civil Code, even if there is a specified
term, one partner can cause its dissolution by expressly withdrawing even
before the expiration of the period, with or without justifiable cause
Maglana was not in bad faith in dissolving the partnership because Rojas
was the one who abandoned the partnership and refused to give his
contribution. It was the proper thing for Maglana to dissolve the partnership.
DISPOSITIVE
EDE Partnership continued to exist UNTIL liquidated
The sharing of the basis of the partners should be guided by the Articles.
CASE 4 - Petition for Authority to Continue Use of Firm Name "SYCIP,
SALAZAR, FELICIANO, HERNANDEZ & CASTILLO." – Carlo Guevara
DOCTRINE: Art. 1815. Every partnership shall operate under a firm name,
which may or may not include the name of one or more of the
partners.Those who, not being members of the partnership, include their
names in the firm name, shall be subject to the liability, of a partner.
A saleable goodwill can exist only in a commercial partnership and cannot
arise in a professional partnership consisting of lawyers. 
FACTS:
ATP WEEK 13: DISSOLUTION AND WINDING UP
Two separate Petitions were filed by the surviving partners of Atty.
Alexander Sycip, who died on May 5, 1975, and by the surviving partners of
Atty. Herminio Ozaeta, who died on February 14, 1976, praying that they be
allowed to continue using, in the names of their firms, the names of
partners who had passed away. Both Petitions were ordered consolidated.
They base their petitions on:
1. Article 1840: The use by the person or partnership
continuing the business of the partnership name, or the
name of a deceased partner as part thereof, shall not of
itself make the individual property of the deceased partner
liable for any debts contracted by such person or
partnership.
2. Other professions, such as accountancy and engineering,
authorized the adoption of firm names without any
restriction as to the use, in such firm name, of the name of
a deceased partner.
3. Canon 33 of the CPR: The continued use of the name of a
deceased or former partner when permissible by local
custom, is not unethical but care should be taken that no
imposition or deception is practiced through this use.
4. There is no possibility of imposition or deception because
the deaths of their respective deceased partners were well-
publicized.
5. No local custom prohibits the continued use of a deceased
partner's name in a professional firm's name.
6. The continued use of a deceased partner's name in the
firm name of law partnerships has been consistently
allowed by U.S. Courts and is an accepted practice in the
legal profession of most countries in the world.   It must be conceded that in the Philippines, no local custom permits or
ISSUE: WON continued use of a deceased partner's name in the firm name
of law partnerships is warranted.
RULING: NO. Inasmuch as the two law firms are partnerships, the use in
their partnership names of the names of deceased partners will run counter
to Article 1815 of the Civil Code.
Art. 1815. Every partnership shall operate under a firm name, which
may or may not include the name of one or more of the partners.
Those who, not being members of the partnership, include their
names in the firm name, shall be subject to the liability, of a partner.
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Tacit in the above provision that names in a firm name of a partnership
must either be those of living partners and. in the case of non-partners,
should be living persons who can be subjected to liability. In fact, Article
1825 of the Civil Code prohibits a third person from including his name in
the firm name under pain of assuming the liability of a partner. The heirs of
a deceased partner in a law firm cannot be held liable as the old members
to the creditors of a firm particularly where they are non-lawyers. 
Article 1840 treats more of a commercial partnership with a good will to
protect rather than of a professional partnership, with no saleable good will
but whose reputation depends on the personal qualifications of its individual
members. Thus, it has been held that a saleable goodwill can exist only in a
commercial partnership and cannot arise in a professional partnership
consisting of lawyers. 
A partnership for the practice of law cannot be likened to partnerships
formed by other professionals or for business. A partnership for the practice
of law is not a legal entity. It is a mere relationship or association for a
particular purpose. It is not a partnership formed for the purpose of carrying
on trade or business or of holding property. The right to practice law is not a
natural or constitutional right but is in the nature of a privilege or franchise
limited to persons of good moral character with special qualifications duly
ascertained and certified.
 
Canon 33 does not consider as unethical  the continued use of the name of
a deceased or former partner in the firm name of a law partnership when
such a practice is permissible by local custom but the Canon warns that
care should be taken that no imposition or deception is practiced through
this use.
allows the continued use of a deceased or former partner's name in the firm
names of law partnerships. Firm names, under our custom, Identify the
more active and/or more senior members or partners of the law firm. 
The practice of law is intimately and peculiarly related to the administration
of justice and should not be considered like an ordinary "money-making
trade."
DISPOSITIVE: Petition is DENIED.
DISSENTING: AQUINO, J.
Art. 1840 of the Civil Code, which speaks of the use by the partnership of
the name of a deceased partner as part of the partnership name, is cited to
justify the petitions. Also invoked is the canon that the continued use by a
ATP WEEK 13: DISSOLUTION AND WINDING UP 5
law firm of the name of a deceased partner, "when permissible by local
custom, is not unethical" as long as "no imposition or deception is practised
through this use" (Canon 33 of the Canons of Legal Ethics). ISSUE: Whether or not there is a partnership between Fue Leung
and Leung Yiu?
The petition may be granted with the condition that it be indicated in the
If yes WON Leung Liu is entitled to profits?
letterheads of the two firms (as the case may be) that Alexander Sycip,
former Justice Ozaeta and Herminio Ozaeta are dead or the period when
they served as partners should be stated therein. RULING YES, there is partnership.
ART. 1767- two or more persons bind themselves to contribute to a
Obviously, the purpose of the two firms in continuing the use of the names common fund with the intention of dividing the profits among
of their deceased founders is to retain the clients who had customarily themselves.
sought the legal services of Attorneys Sycip and Ozaeta and to benefit from
the goodwill attached to the names of those respected and esteemed law The “financial assistance” of respondent to petitioner is in effect a
practitioners. That is a legitimate motivation. The retention of their names is simple loan, however it cannot be applied in this case. The giving of
not illegal per se.  4k by the respondent to the petitioner. That the complaint explicitly
stated that “as a return for such financial assistance plaintiff
CASE 5 - FUE LEUNG VS. IAC & LEUNG YIU – Metha Orolfo (respondent) would be entitled 22% of the annual profit derived from
the operation of panceteria”
DOCTRINE
The right to accounting exist as long as the partnership exsist. YES, he is entitled to liquidation and its profits.
ART. 1842- the right to an account of his interest shall accure to any
partner, or his legal representative as against the winding up
FACTS partners or surviving partners or the person or partnershop
1. Sun Wah Panceteria is a restaurant a single proprietorship continuing the business at the date of dissolution, in the absence or
named to Dan Fue Leung. any agreement to the contrary.
2. Respondent Leung Yiu showed evidence in trial that the
panceteria was actually a partnership and that he was one of the Petitioner: action is prescribed filing after the lapse of 22 years 9
partners that he contributed 4,000PHP months and 12 days (10 years lang daw dapat under art 1144).
3. Respondent’s evidence are his receipt of 4000 evidencing his SC: Arts 1806, 1807 and 1809 show that the right to demand an
money deposited in the bank of petitioner which was interpreted accounting exist as long as the partnership exist. Prescription begins
by Florence Yap (receipt was written in chinese character) to run only upon the dissolution of the partnership when the final
4. Witnesses that they received from the petitioner a similar receipt accounting is done.
as stated above.
5. That Respondent received from the petitioner 12,000PHP DISPOSITIVE: Leung Yiu WON. Petition of Fue Leung is dismissed.
(Equitable Banking Corp Check) as his profits for the year 1974.
Witnesses (employees) from bank testified.
6. PETITIONER: he denied having received 4000 and contested
the genuineness of the receipt. That it is a sole ownership and he
got his 2000PHP capital because he worked in Toho Restaurant
as waiter. He also denied giving 12000PHP check to respondent.
7. RTC: respondent won. Petitioner should pay 22% of annual net
profit and attys fees for 5k and cost of suit.
8. IAC: modified that decision and affirmed rtc’s decision.
ATP WEEK 13: DISSOLUTION AND WINDING UP
CASE 6: MAGDUSA v. ALBARAN – Joshua Salteras
DOCTRINE: A partner’s share cannot be returned without first dissolving
and liquidating the partnership, for the return is dependent on the discharge
of the creditors, whose claims enjoy preference over those of the partners.
FACTS: Magdusa (appellant) and Albaran (appellee), together with various
other persons had verbally formed a partnership de facto, for the sale of
general merchandise in Surigao, 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. Sometime in 1953
and 1954, the appellees expressed their desire to withdraw from the
partnership, and appellant thereupon made a computation to determine the
value of the partners' shares to that date. The results of the computation
were embodied in the document Exhibit "C", drawn in the handwriting of
appellant. The appellees made demands upon appellant for payment, but
appellant having refused, they filed the initial complaint in IAC. Appellant
defended by denying any partnership with appellees, whom he claimed to
be mere employees of his. The IAC dismissed the complaint on the ground
that other paties were indispensable parties but had not been impleaded.
The CA however reversed the ruling of the IAC. The CA stated that the
case at bar is not an action for a dissolution of a partnership and winding up
of its affairs or liquidation of its assets in which the interest of other partners
who are not brought into the case may be affected. The action of the
plaintiffs is one for the recovery of a sum of money with Gregorio Magdusa
as the principal defendant. The partnership, with Gregorio Magdusa as
managing partner, was brought into the case as an alternative defendant
only. Therefore, he should be held solely liable.
ISSUE/S: 1) WON the appellees can have their share/interest without first
dissolving or liquidating the partnership.
2) WON Magdusa is held personally liable to the appellees.
HELD: 1) NO. The appellees CANNOT have their share/interest without
first dissolving or liquidating the partnership.
2) NO. Magdusa is NOT held personally liable to the appellees.
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RATIO: 1) The return of the shares of a partner 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. 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. 
2) Magdusa 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.
DISPOSTIVE: Magdusa won.
CASE 7 - SISON V. HELEN MCQUAID – Karla Gutierrez
DOCTRINE/S: Liquidation shall happen before a partner may claim his
share of profit from the partnership.
FACTS:
 
1. Plaintiff brought an action in the CFI against defendant. Defendant
borrowed from him money (P 2,210) to enable her to pay her
obligations and to add to her capital in her lumber business.
2. She could not pay so she proposed to take plaintiff as a partner in her
business, plaintiff to contribute the P 2,210 due him from defendant.
3. Plaintiff agreed to defendant's proposal and, as a result, there was
formed between them, under the provisions of the Civil Code, a
partnership in which they were to share alike in the income or profits of
the business, each to get one-half thereof
4. Before the last World War, the partnership sold 230,000‐board ft. of
lumbe rto the US Army for P 13,800.00.
5. Defendant refused to deliver ½ of it (P 6,900.00) to plaintiff despite his
repeated demands.
6. Plaintiff filed an action to compel defendant to pay him his half of the
profit from the partnership.
7. The case was dismissed upon the ground of prescription.
ATP WEEK 13: DISSOLUTION AND WINDING UP
ISSUE: Whether or not plaintiff is entitled to the sum he claims before
liquidation of the partnership?
HELD: NO. Order of dismissal was affirmed, but on the ground that the
complaint states no cause of action.
RATIO: (ON ISSUE OF NO CAUSE OF ACTION) It is not clear from the
complaint just when the cause of action accrued. Thus the dismissal of the
case is erroneous.
However order should be retained on the ground that the complaint has no
cause of action.  Plaintiff seeks to recover from defendant one-half of the
purchase price of lumber sold by the partnership to the United States Army.
But his complaint does not show why he should be entitled to the sum he
claims.
(ON THE ISSUE OF COLLECTION BEFORE LIQUIDATION)
It does not allege that there has been a liquidation of the partnership
business and the said sum has been found to be due him as his share of
the profits.
The proceeds from the sale of a certain amount of lumber cannot be
considered profits until costs and expenses have been deducted. Moreover,
the profits of the business cannot be determined by taking into account the
result of one particular transaction instead of all the transactions had.
Hence, the need for a general liquidation before a member of a partnership
may claim a specific sum as his share of the profits.
CASE 8 - JOSUE SONCUYA v CARMEN DE LUNA – Rob Estomo
DOCTRINE: For a partner to be able to claim from another partner who
manages the general civil partnership, damages allegedly suffered by him
by reason of the fraudulent administration of the latter, a previous
liquidation of said partnership is necessary.
FACTS: Soncuya, in her own name and as co-administratrix of the intestate
estate of Librada Avelino, filed a complaint in the CFI of Manila against
Carmen de Luna for a sum of money. De Luna then filed a demurer against
the complaint alleging that 1. The complaint does not contain facts sufficient
to constitute a cause of action and 2. That the complaint is ambiguous,
unintelligible and vague. The CFI found the complaint well founded and
ordered Soncuya to amend his complaint, but the latter manifested that he
would prefer not to amend his amended complaint. The attorney of de Luna
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then filed a motion to dismiss, which was granted by the CFI. Hence, this
present appeal, Soncuya assigning 20 alleged errors.
ISSUE: W/N Soncuya has a cause of action against de Luna?
HELD: No, the business has not yet been liquidated.
RATIO: In the amended complaint of Soncuya, it was prayed that de Luna
was made to pay the sum pf P700,432 as a result of the administration,
said to be fraudulent, of the partnership, ‘Centro Escolar de Senoritas’, of
which Soncuya, de Luna, and Avelino are member of. For the purpose of
adjudicating to the 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. A
partner to be able to claim from another partner who manages the general
civil partnership, damages allegedly suffered by him by reason of the
fraudulent administration of the latter, a previous liquidation of said
partnership is necessary.
DISPOSITIVE: de Luna won.
CASE 9 – MAXIMO GUIDOTE v ROMANA BORJA as administratrix of
the estate of Narciso Santos – Rebecca Flores
DOCTRINE: the death of one of the partners dissolves the partnership, but
the liquidation of its affairs is by law intrusted to the surviving partners or to
liquidators, NOT to the executors of the deceased partner.
When a partner dies, the surviving partners are considered trustees of the
representatives of the deceased partner in regard to his interest in the firm
and are held to that strictness of accountability required of an incident to the
position of one occupying a confidential relation.
PARTIES:
1. Maximo Guidote – An industrial partner, filing the case to recover
2. Romana Borja – administratix of the estate of Narciso
3. Narciso Santos – capitalist partner.
FACTS
1. Maximo Guidote brought an action against Romana Borja
(administratix) to recover the sum of P9,534.14, part of the alleged
net profits of the “Taller Sinukuan” partnership, in which Santos
(deceased) was a capitalist partner and Maximo, an industrial
ATP WEEK 13: DISSOLUTION AND WINDING UP
partner.
2. Romana admitted the partnership and in a counterclaim orderd
Maximo to render an accounting of the partnership and to pay to
the estate of the deceased P25,000 as net profits, credits, and
property pertaining to said deceased.
3. In the trial court it was found that when Santos died, Maximo failed
to liquidate the affairs of the partnership and to render an account
to the the administratix of Santos’ estate. So Maximo was ordered
to render a full and complete accounting.
4. Maximo rendered an accounting made by Tomas Alfonso but was
objected by Romana. So Romana presented an account and
liquidation prepared by Lindaya and Santiago showing a balance of
29K and 26K respectively, in favor of the estate.
5. To contradict conclusions of Lindaya and Santiago, Maximo
presented the Alfonso(accountant) and Gaudier the bookkeeper.
But court ruled that the testimonies of Alfonso and Gaudier were
unreliable.
6. Court found that the conclusions reached by Lindaya and Santiago
were just and correct. So Maximo was ordered to pay the estate
26K
7. Thus, Maximo appealed.
8. Maximo argued that since Santos(deceased) up to his death was
the one who generally took care of the payments and cllections of
the partnership, his legal representatives were under the obligation
to render accounts of the opreations of the partnership.
ISSUE: Whether or not the Romana Borja, the legal represenative of the
deceased has the obligation to render an accounting to Maximo, the
surviving partner?
RULING: NO because the death of one of the partners dissolves the
partnership, but the liquidation of its affairs is by law intrusted to the
surviving partners or to liquidators, NOT to the executors of the deceased
partner.
It is the duty of surviving partners to render an account of the performance
of their trust to the personal representatives of the deceased partner, and to
pay over to them the share of such deceased member in the surplus of firm
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property, whether it consists of real or personal assets
DISPOSITIVE: Borja won. Maximo, as surviving partner was ordered to
render an accounting.
CASE 10: PO YENG CHEO v LIM KA YAM – Carlo Guevara
DOCTRINE: One partner, suing alone, cannot recover of the managing
partner the value of such partner's individual interest; and a liquidation of
the business is an essential prerequisite.
The managing partner of a mercantile enterprise is not a debtor to the
shareholders for the capital embarked by them in the business; and he can
only be made liable for the capital when, upon liquidation of the business,
there are found to be assets in his hands applicable to capital account. 
FACTS:
Plaintiff Po Yeng Cheo is the sole heir of one Po Gui Yao, deceased, and
as such Po Yeng Cheo inherited the interest left by Po Gui Yao in a
business under the style of Kwong Cheong Tay. It is a mercantile
partnership engaged in the import and export trade.
After the death of Po Gui Yao, seven other people including original
defendant Lim Ka Yam were interested to become partners. They
contributed their respective shares and Lim Ka Yam became managing
partner. Some the properties of the said partnership consisted in shares
from Yut Siong Chyip Konski and Manila Electric Railroad and Light
Company, of Manila.
In 1910, Kwong Cheong Tay ceased to do business since the plaintiff
ceased to transmit merchandise from Hong kong, where he then resided.
Lim Ka Yam appears at no time to have submitted to the partners any
formal liquidation of the business, though repeated demands to that effect
have been made upon him by the plaintiff.
A complaint was filed by the plaintiff to recover from him its properties and
assets. The defendant having died during the pendency of the cause, his
administrator, one Lim Yock Tock, was required to appear and make
defense. The trial court ruled in favor of the plaintiff. From this judgment the
defendant appealed.
ISSUE: WON the manager/defendant Lim Ka Yam was liable for the said
properties and assets.
ATP WEEK 13: DISSOLUTION AND WINDING UP
RULING: NO. It was erroneous to give judgment in favor of the plaintiff for
his aliquot part of the par value of said shares.  unproductive.
One partner, suing alone, cannot recover of the managing partner the value
of such partner's individual interest; and a liquidation of the business is an
essential prerequisite. In case at bar, the shares referred to (constituting the
only assets of Kwong Cheong Tay) have not been converted into ready
money and doubtless still remain in the name of Kwong Cheong Tay as
owner. Under these circumstances it is impossible to sustain a judgment in
favor of the plaintiff for his aliquot part of the par value of said shares, which
would be equivalent to allowing one of several coowners to recover from
another, without process of division, a part of an undivided property.
When a member of a mercantile partnership dies, the duty of liquidating its
affair devolves upon the surviving member, or members, of the firm, not
upon the legal representative of the deceased partner. Upon the death of
Lim Ka Yam it therefore became the duty of his surviving associates to take
the proper steps to settle the affairs of the firm, and any claim against him,
or his estate, for a sum of money due to the partnership by reason of any
misappropriation of its funds by him, or for damages resulting from his
wrongful acts as manager, should be prosecuted against his estate in
administration.
The property pertaining to Kwong Cheong Tay, like the shares in the Yut
Siong Chyip Konski and the Manila Electric Railroad and Light Company,
are in the possession of the deceased partner, the proper step for the
surviving associates to take would be to make application to the court
having charge to the administration to require the administrator to surrender
such property.
DISPOSITIVE: Defendant Lim Ka Yam Won
CASE 11 CLARIDADES VS. MERCADER ET AL. – Metha Orolfo
DOCTRINE: A venue which was properly laid when the complaint
was filed cannot, subsequently, become improper in consequence of
the issues later raised by any of the intervenors.
FACTS
1. Petitioner Dr. Simeon S. Claridades brought this action for the
dissolution of partnership against Vicente Mercader and Perfecto
Fernandez.
2. Their main asset is a fish pond in Marinduque.
9
3. Defendants admitted partnership and their operation is already
4. There are three intervenors in the filed action (Reyes, Ascuncion
and Zulueta)
5. They are saying that they have rights and interest in the said fish
pond (recovering sum of money, assignee and ½ owners,
respectively).
6. Lower court: improper venue.
7. Hence, this petition.
ISSUE: Whether or not the action should be instituted in the CFI of
Bulacan (where it was filed) or in Marinduque (where the property is
situtated)?
RULING: It should be in BULACAN.
The subject matter of this case is the possessor of the fish pond, the
plaintiff prays in the complaint that the assets of the partnership,
including the said fishpond be sold, that the proceeds of the sale be
applied to the payment of the debts of partnership and that the
residue be distributed equally among the partners.
Therefore, the plaintiff’s complaint mere seeks for the liquidation of
the partnership with the defendants (Fernandez and mercader).
Which is obviously PERSONAL ACTION, which may be brought
from the place of residence of either plaintiff or defendants.
Since, plaintiff resides in bulacan and the defendants dis not object
the venue in other words they have waived whatever rights they had.
A venue which was properly laid when the complaint was filed
cannot, subsequently, become improper in consequence of the
issues later raised by any of the intervenors.
DISPOSITIVE: CLARIDADES WON. Cost against the intervenors.
CASE 12 - VILLAREAL v. RAMIREZ – Joshua Salteras
ATP WEEK 13: DISSOLUTION AND WINDING UP
DOCTRINE: Since the capital was contributed to the partnership, not ot
petitioners, it is the partnership that must refund the equity of the retiring
partners.
Before the partners can be paid their shares, the creditors of the
partnership must first be compensated.
FACTS: On July 25, 1984, Luzviminda J. Villareal, Carmelito Jose and
Jesus Jose formed a partnership with a capital of P750,000 for the
operation of a restaurant and catering business under the name “Aquarius
Food House and Catering Services.” Villareal was appointed general
manager and Carmelito Jose, operations manager. After some time,
Respondent Donaldo Efren C. Ramirez joined as a partner in the business
on September 5, 1984.  His capital contribution of P250,000 was paid by
his parents, Cesar and Carmelita Ramirez (respondent spouses).
Jesus Jose then withdrew from the partnership and was able to refund his
capital contribution (250K). In the same month of Jesus’ withdrawal, the
Villareal closed down the restaurant due to the fact that the rentals for the
said locations increased. The respondent spouses wrote Villareal that they
were no longer interested in continuing their partnership and that they are
asking for the return of their one-third share in the equity of the partnership.
Villareal, however, did not heed to the letters that were sent. The
respondent spouses then filed a case in the RTC of Makati for the collection
of money from Villareal. Villareal contended that respondents had
expressed a desire to withdraw from the partnership and had called for its
dissolution under Articles 1830 and 1831 of the Civil Code; that
respondents had been paid, upon the turnover to them of furniture and
equipment worth over P400,000; and that the latter had no right to demand
a return of their equity because their share, together with the rest of the
capital of the partnership, had been spent as a result of irreversible
business losses.
RTC ruled that there was a voluntary partnership between the parties and
that it could be dissolved at any time. Villareal clearly intended to dissolve
when they stopped the operation of the restaurant. The said court ordered
Villareal to to pay the respondent spouses 250K for damages.
The CA held that the respondents did not have any right to demand from
the petitioners the return of their capital contribution. It also ordered the
distribution of the capital contribution, instead of the net capital after the
10
dissolution and liquidation of a partnership, thereby treating the capital
contribution like a loan.
ISSUE/S: WON the respondents have the right to demand from petitioners
the return of their equity share.
HELD: NO. The respondents does NOT have the right to demand from
petitioners the return of their equity share.
RATIO: Except as managers of the partnership, petitioners did not
personally hold its equity or assets.  “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 to petitioners, it is the
partnership that must refund the equity of the retiring partners.
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
all the partnership assets will have been liquidated -- in other words, sold
and converted to cash -- and all partnership creditors, if any, paid.  The
CA’s computation of the amount to be refunded to respondents as their
share was thus erroneous. 
DISPOSITIVE: Villareal won.
CASE 13 - LAGUNA TRANSPORTATION CO., INC. VS SSS – Karla
Gutierrez
ATP WEEK 13: DISSOLUTION AND WINDING UP
DOCTRINE: where a corporation was formed by, and consisted of
members of a partnership whose business and property was conveyed and
transferred to the corporation for the purpose of continuing its business, in
payment for which corporate capital stock was issued, such corporation is
presumed to have assumed partnership debts, and is prima facie liable
therefor (LIABILITY)
The reason for the rule is that the members of the partnership may be said
to have simply put on a new coat, or taken on a corporate cloak, and the
corporation is a mere continuation of the partnership.
FACTS:
1. Sometime in 1949 the Binan Transportation Co sold part of the lines
and equipment it operates to Gonzalo Mercado, Artemio Mercado,
Florentino Mata and Dominador Vera Cruz.
2. After this sale, the vendees formed an unregistered partnership under
the name of Laguna Transportation Company which continued to
operate the lines and equipment bought from Binan Transpo Company.
3. The original partners with an additional two members, organized a
corporation known as the Laguna Transportation Company, Inc which
was registered with the SEC.
4. The petitioner corporation filed this case praying that an order be
issued by the court declaring that it is not bound to register as a
member of respondent SSS and that they are not obliged to pay the
latter the contributions required under the Social Security Act.
5. It is worthy to note that the corporation continued the same
transportation business of the unregistered partnership.
6. The corporation was claiming exemption from coverage for it only
started its business on June 20, 1956 but Nov. 11 1957 the SSS
notified it that it was within the coverage of the Social Security Act.
ISSUE: WON the plaintiff is within the coverage of the Social Security Act
given that they were a partnership that converted into a corporation?
HELD: YES. Section 9 of the Social Security Act, in part, provides:
SEC. 9 Compulsory Coverage. — Coverage in the System shall be
compulsory upon all employees between the ages of sixteen and sixty
years, inclusive, if they have been for at least six months in the service of
an employer who is a member of the System. Provided, That the
Commission may not compel any employer to become a member of the
System unless he shall have been in operation for at least two years . . . .
The partnership Laguna Transportation Company commenced its business
as a common carrier in 1949. When it filed to be formed as a corporation, it
only added the word “Inc” to indicate that it was now duly incorporated
11
under existing laws. Since it continued the same business like the
unregistered partnership, there was only a change in form. Where a
corporation was formed by, and consisted of members of a partnership
whose business and property was conveyed and transferred to the
corporation for the purpose of continuing its business, in payment for which
corporate capital stock was issued, such corporation is presumed to have
assumed partnership debts, and is prima facie liable therefor. The reason
for the rule is that the members of the partnership may be said to have
simply put on a new coat, or taken on a corporate cloak, and the
corporation is a mere continuation of the partnership. Hence, there was
really no need to exempt them for it has been operating already for more
than six years by continuing with the business of the partnership.
.
CASE 14: BENJAMIN YU v NLRC AND JADE MOUNTAIN PRODUCTS
CO. LTD. – Rob Estomo
DOCTRINE: Under Art 1840 of the NCC, creditors of the old partnership
continued by new partners, are also creditors of the latter’s partnership.
FACTS: Benjamin Yu was the Assistant General Manager of the marble
quarrying and export business operated by a registered partnership ‘Jade
Mountain Products Co. Ltd.’. The original partners, as general partners,
were Lea Bendal and Rhodora Bendal and three Chinese national were
limited partners of the said partnership. Yu supervised the operations of the
partnership in Bulacan where the quarrying site was located in the lot of the
Sps. Cruz, evidenced by a memorandum of agreement between the
partners and the spouses. The principal office of the partnership was in
Makati. Yu was supposed to receive P4,000 for his services buut he alleges
that he was not able to receive the full amount and he was told that he will
be reimbursed when the partnership would be ablt to secure more funds
from abroad. After some time, the original partners as well as one of the
limited partners sold their interest to Willy Co and Emmanuel Zapanta, the
former being the partner with the most interest. The principal office of the
partnership was transferred to Mandaluyong, but no significant changes
were made to the operations of the partnership. Willy Co then assumed the
position of General Manager and Yu was not retained. Yu then filed a case
for illegal dismissal with recover of back wages in the NLRC against private
respondent partnership and Willy Co, Emmanuel ZApante, and the former
general partners as respondents. The Labor arbiter ruled in favour of Yu
ruling that he was illegally dismissed. Upon appeal, the NLRC reversed the
decision of the Labor Arbiter, ruling that because the interests of the opld
partners has already been sold to Willy Co and Emmanuel Zapanta, a new
partnership has been formed and the new partners had the right not to
ATP WEEK 13: DISSOLUTION AND WINDING UP
retain Yu and to appoint a new general manager. The NLRC further ruled
that the claim for unpaid wages should have been filed against the old
partners.
ISSUE: W/N Benjamin Yu was entitled to his unpaid wages.
HELD: Yes, the creditors of the old partnership are creditors of the new
partnership as well.
RATIO: In the ordinary course of events, the legal personality of the
expiring partnership persists for the limited purpose of winding up and
closing of the affairs of the partnership. In the case at bar, it is important to
underscore the fact that the business of the old partnership was simply
continued by the new partners, without the old partnership undergoing the
procedures related to dissolution and winding up of its business affairs.
Under the above described situation, not only the retiring partners but also
the new partnership itself which continued the business of the old
partnership are liable for the debts of the preceding partnership. Under Art
1840 of the NCC, creditors of the old Jade Mountain are also creditors of
the new Jade Mountain. Indeed, a creditor of the old Jade Mountain like Yu
in respect of his claim for unpaid wages, is entitled to priority vis-à-vis any
claim of any retired or previous partner insofar as such retired partner’s
interest in the dissolved partnership is concerned.
DISPOSITIVE: Yu won. Court found that the new partnership shabbily
treated Yu in depriving him of his unpaid wages. The partnership was
ordered to pay moral and exemplary damages and attorney’s fees.
*Total percentage held by Willy Co and Emmanuel Zapanta was 82% of the
partnership. The remaining 18% could not be traced but it was held by the
Court that 82% was sufficient to constitute a change in partnership.
CASE 15 – DOMINGO BEARNEZA V BALBINO DEQUILLA – Rebecca
Flores
DOCTRINE: After the dissolution of a partnership by the death of one of its
members, its legal status is that of a partnership in liquidation, and the only
rights and interests transmitted to the legal successor or successors of the
said deceased are those resulting in his favor from such liquidation.
FACTS
1. Balbino Dequilla and Perpetua Bearneza formed a partnership for
the purpose of exploiting a fish pond
2. Perpetua will contribute to the payment of the expenses of the
12
business
3. They agreed to divide the profits between themselves, which they
had been doing until Perpetua’s death.
4. Perpetua left a will and appointed Domingo Bearneza (plaintiff) as
her heir to succeed to all her rights and interests in the fish pond in
question.
5. Domingo now made a demand on Balbino for the delivery of the
part of the fish pond (called Alimango and Dalusan) belonging to
the deceased (Perpetua) but Balbino refused.
6. So Domingo brought this action to recover the said part of the fish
pond and ½ of the profits of the partnership.
7. Balbino now alleges that formation of the supposed partnership
between the him and Perpetua for the exploitation of the aforesaid
fish pond was not carried into effect because Perpetua refused to
defray the expenses of reconstruction and exploitation of the fish
pond. He also alleged that Domingo’s action was already barred by
prescription.
8. Lower court declared Perpetua as the owner of ½ of the fish pond
(Alimango and Dalusan)
ISSUE: Whether or not Domingo is entitled to recover ½ of the fish pond?
RULING: NO.The partnership formed between Perpetua and Balbino was
civil in nature. It was a particular partnership, its subject matter is the
exploitation of the fish pond.
The partnership was dissolved when Perpetua died. It wasn’t shown that
the partnership continued to exist after Perpetua’s death. Thus, its legal
status was that of a partnership in liquidation, and the only rights inherited
by Perpetua’s testamentary heir, Domingo, were those resulting from the
said liquidation in favor of the Perpetua and nothing more.
But in order to determine the rights or interests of Perpetua, liquidation
must first take place.
It wasn’t also shown that a community of property existed, thus it is not
known that whether Perpetua still had any interest in the partnership
property which could have been transmitted to Domingo.
Thus the court found that Domingo has not sufficiently shown his right of
action.
ATP WEEK 13: DISSOLUTION AND WINDING UP
DISPOSITIVE: Balbino won. Domingo cannot get ½ of the fish pond unless
liquidation takes place. The ruling of the lower court that Perpetua/Domingo
is the owner of ½ of the fish pond is reversed.
CASE 16: BONNEVIE v HERNANDEZ – Carlo Guevara
DOCTRINE: When a partner retires from the firm, he is entitled to the
payment of what may be due him after a liquidation. But certainly no
liquidation is necessary where there is already a settlement or an
agreement as to what the retiring partner shall receive.
FACTS:
Plaintiffs Cristobal Bonnevie, et al. with other associates formed a secret
partnership for the purpose of acquiring the plants, franchises and other
properties of the Manila Electric Co. (Meralco) in the provinces of
Camarines Sur, Albay, and Sorsogon, with the idea of continuing that
company's business in that region. 
No formal articles were drawn for it was the purpose of the members to
incorporate once the deal had been consummated. Defendant Jaime
Hernandez became a member of the partnership to pursue the deal. Using
partnership funds, he was able to buy the Meralco properties for P122,000,
paying P40,000 upon the signing of the deed of sale and agreeing to pay
the balance in two equal installments with interest and a penalty clause that
The members of the partnership proceeded with the formation of the
proposed corporation. However, several partners, not satisfied with the way
matters were being run and fearful that the venture might prove a failure,
expressed their desire to withdraw from the partnership and get back the
money they had invested therein.
A resolution was presented where the partners should be allowed to
withdraw and get back their contributions. It was granted and they withdrew
from the partnership and the partnership was then dissolved. In accordance
with the terms of the resolution, the withdrawing partners were reimbursed
their respective contributions to the partnership fund. The formation of the
corporation continued and it was named "Bicol Electric Company."
The Plaintiffs brought the present an action against Defendant Hernandez,
claiming a share in the profit the latter is supposed to have made from the
assignment of the Meralco properties to the corporation. Defendant's
answer denies that he has made any profit out of the assignment in
question and alleges that in any event plaintiffs, after their withdrawal from
the partnership, ceased to have any further interest in the subsequent
transactions of the remaining members.
13
Lower court ruled in favor of the defendant. The plaintiffs appealed.
 
ISSUE: WON the plaintiffs have a right to the profits of the corporation.
RULING: NO. No liquidation was called for because when plaintiffs
withdrew from the partnership the understanding was that after they had
been reimbursed their investment, they were no longer to have any further
interest in the partnership or its assets and liabilities.
Plaintiffs maintain that the defendant should be held liable for damages
caused to them, consisting of the loss of their share of the profits, due to
defendant's failure properly to perform his duty as a liquidator of the
dissolved partnership, this on the theory that as managing partner of the
partnership, it was defendant's duty to liquidate its affairs upon its
dissolutions. But it does not appear that plaintiffs have ever asked for
liquidation. Defendant was not the managing partner of the partnership.
As a general rule, when a partner retires from the firm, he is entitled to the
payment of what may be due him after a liquidation. But certainly no
liquidation is necessary where there is already a settlement or an
agreement as to what the retiring partner shall receive. In the case at bar, it
appears that a settlement was agreed upon on the very day the partnership
was dissolved. For when plaintiffs and Judge Jaime Reyes withdrew from
the partnership on that day they did so as agreed to by all the partners,
subject to the only condition that they were to be repaid their contributions
or investments within three days from said date. And this condition was
fulfilled when on the following day they were reimbursed the respective
amounts due them pursuant to the agreement.
DISPOSTIVE: Defendant Jaime Hernandez Won.