Emilio Emnace vs Court of

Appeals
 
Business Organization – Partnership, Agency, Trust – Dissolution and Winding Up –
Prescription 
Emilio Emnace, Jacinto Divinagracia and Vicente Tabanao formed a partnership engaged in
the fishing industry. In 1986, Jacinto decided to leave the partnership hence they agreed to
dissolve the partnership. At that time, the partnership has an estimated asset amounting to
P30,000,000.00.
HOWEVER, until the death of Vicente Tabanao in 1994, Emnace never rendered an
accounting either to Vicente or his heirs. Emnace reneged on his promise to turn over
Tabanao’s share which is 1/3 of the P30M. The heirs of Tabanao then sued Emnace.
Emnace argued, among others, that the heirs are barred by prescription hence they can no
longer demand an accounting. He contends that the partnership was dissolved in 1986 and
that was the time when Tabanao’s (and his heirs’) right to inquire into the business affairs
accrued; that said right has expired in 1990 or 4 years after. So beyond 1990, they can no
longer inquire.
ISSUE: Whether or not Emnace is correct.
HELD: No. Prescription has not run in this case, it has never begun. The three final stages
of partnership are: a) dissolution, b) winding up, and c) termination. In this case, Emnace
and his partners dissolved their partnership but such did not perfect the dissolution because
no accounting took place. The partnership, although dissolved, continues to exist and its
legal personality is retained, at which time it completes the winding up of its affairs,
including the partitioning and distribution of the net partnership assets to the partners. For
as long as the partnership exists, any of the partners (or legal representative – in this case
the heirs of Tabanao) may demand an accounting of the partnership’s
business.  Prescription of the said right starts to run only upon the dissolution of the
partnership when the final accounting is done.
When a final accounting is made, it is only then that prescription begins to run.  In the case
at bar, no final accounting has been made, and that is precisely what the heirs are seeking
in their action before the trial court, since Emnace has failed or refused to render an
accounting of the partnership’s business and assets.  Hence, the said action is not barred
by prescription.
NOTE: Under Article 1809 of the Civil Code, right to demand an accounting may also be
invoked under certain agreements – these are just one of the exceptions. General Rule:
Accounting only when there is dissolution. Exception: Article 1807 and 1809.