Dan Fue Leung v. IAC

Dan Fue Leung v. Hon.
Intermediate Appellate Court and Leung Yiu

G.R. No. 70926 January 31, 1989
Facts: This case originated from a complaint filed by respondent Leung Yiu to recover
the sum equivalent to twenty-two percent (22%) of the annual profits derived from the
operation of Sun Wah Panciteria since October, 1955 from petitioner Dan Fue Leung.
The Sun Wah Panciteria, a restaurant, located at Florentino Torres Street, Sta. Cruz,
Manila, was established sometime in October, 1955. It was registered as a single
proprietorship and its licenses and permits were issued to and in favor of Dan Fue
Leung as the sole proprietor. About the time the Sun Wah Panciteria started to become
operational, Leung Yiu gave P4,000.00 as his contribution to the partnership. This is
evidenced by a receipt wherein Dan Fue Leung acknowledged his acceptance of the
P4,000.00 by affixing his signature thereto. The receipt was written in Chinese
characters so that the trial court commissioned an interpreter in the person of Ms.
Florence Yap to translate its contents into English. Witnesses So Sia and Antonio Ah
Heng corroborated Yiu s testimony to the effect that they were both present when the
receipt was signed. Sia further testified that he himself received from Leung a similar
receipt evidencing delivery of his own investment in another amount of P4,000.00.
Furthermore, the Yiu from the Leung the amount of P12,000.00 covered by the latter's
Equitable Banking Corporation Check No. 13389470-B from the profits of the operation
of the restaurant for the year 1974.
Leung denied having received Yiu the amount of P4,000.00. Allegedly, he used his
savings from his salaries as an employee at Camp Stotsenberg in Clark Field and later
as waiter at the Toho Restaurant amounting to a little more than P2,000.00 as capital in
establishing Sun Wah Panciteria. To bolster his contention, Leung presented various
government licenses and permits showing the Sun Wah Panciteria was and still is a
single proprietorship solely owned and operated by himself alone. Fue Leung also flatly
denied having issued Equitable Banking Corporation's Check No. 13389470 B in the
amount of P12,000.00.
As between the conflicting evidence of the parties, the trial court gave credence to that
of the plaintiff, Yiu. Leung appealed the trial court's amended decision to the then
Intermediate Appellate Court affirming it in toto. Both the trial court and the appellate
court found that the Yiu is a partner in the setting up and operations of the panciteria.
Hence, the two courts declared that the private petitioner is entitled to a share of the
annual profits of the restaurant. Leung argues that the courts erroneously interpreted
'financial assistance' to mean the contribution of capital by a partner to a partnership."
He also raises the issue of prescription since the alleged receipt is dated October 1,
1955 and the complaint was filed only on July 13, 1978 or after the lapse of twenty-two
(22) years, nine (9) months and twelve (12) days considering no written demands were
ever made by Yiu.
Issue: whether or not the private respondent is a partner of the petitioner in the
establishment of Sun Wah Panciteria.
Ruling: The lower courts did not err in construing the complaint as one wherein the
private respondent asserted his rights as partner of the petitioner in the establishment of
the Sun Wah Panciteria, notwithstanding the use of the term financial assistance
therein. We agree with the appellate court's observation to the effect that "... given its
ordinary meaning, financial assistance is the giving out of money to another without the
expectation of any returns therefrom'. It connotes an ex gratia dole out in favor of
someone driven into a state of destitution. But this circumstance under which the
P4,000.00 was given to the petitioner does not obtain in this case.'The complaint
explicitly stated that "as a return for such financial assistance, plaintiff would be entitled
to twenty-two percentum (22%) of the annual profit derived from the operation of the
said panciteria.'
The private respondent is a partner of the petitioner in Sun Wah Panciteria. The
requisites of a partnership which are 1) two or more persons bind themselves to
contribute money, property, or industry to a common fund; and 2) intention on the part of
the partners to divide the profits among themselves (Article 1767, Civil Code; Yulo)have been established. As stated by the respondent, a partner shares not only in profits
but also in the losses of the firm. If excellent relations exist among the partners at the
start of business and all the partners are more interested in seeing the firm grow rather
than get immediate returns, a deferment of sharing in the profits is perfectly plausible. It
would be incorrect to state that if a partner does not assert his rights anytime within ten
years from the start of operations, such rights are irretrievably lost. The private
respondent's cause of action is premised upon the failure of the petitioner to give him
the agreed profits in the operation of Sun Wah Panciteria. In effect the private
respondent was asking for an accounting of his interests in the partnership.
It is Article 1842 of the Civil Code in conjunction with Articles 1144 and 1155 which is
applicable. Article 1842 states:
The right to an account of his interest shall accrue to any partner, or his
legal representative as against the winding up partners or the surviving
partners or the person or partnership continuing the business, at the date
of dissolution, in the absence or any agreement to the contrary.
Regarding the prescriptive period within which the private respondent may demand an
accounting, Articles 1806, 1807, and 1809 show that the right to demand an accounting
exists as long as the partnership exists. Prescription begins to run only upon the
dissolution of the partnership when the final accounting is done.

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Dan Fue Leung v. Hon.

Intermediate Appellate Court and Leung Yiu

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