Emnace v. CA - Digest

Emnace v.
CA
GR No. 126334 (23 November 2001)
Ynares-Santiago, J. kmd
SUBJECT MATTER: Partnerships; Rights of a partner
CASE SUMMARY:
Emnace, Tabanao, and Divina-Gracia were partners in a fishing industry. They decided to dissolve their partnership. However
hroughout the existence of the partnership, and even after Vicente Tabanao’s demise, Emnace failed to submit to Tabanao’s
heirs any statement of assets and liabilities of the partnership, and to render an accounting of the partnership’s finances.
Emnace also failed to turn over Tabanao’s shares. Heirs of Tabanao filed an action for accounting and payment of shares against
Emnace. The issue in this case is WON the heirs action for accounting has prescribed. The SC ruled in favor of Emnace.
DOCTRINE:
For as long as the partnership exists, any of the partners may demand an accounting of the partnership’s business, and
prescription of the said right starts to run only upon the dissolution of the partnership when the final accounting is done.
FACTS:
Emilio Emnace, Vicente Tabanao and Jacinto Divina-gracia were partners in a fishing business, Ma. Nelma Fishing Industry.
After Jacinto Divinagracia’s withdrew from the partnership, they decided to dissolve their partnership and executed an
agreement of partition and distribution of the partnership properties among them some time in January of 1986. Assets to be
distributed were five (5) fishing boats, six (6) vehicles, and two (2) parcels of land.
Tabanao died in 1994.
Throughout the existence of the partnership, and even after Vicente Tabanao’s demise, petitioner failed to submit to Tabanao’s
heirs any statement of assets and liabilities of the partnership, and to render an accounting of the partnership’s finances.
Petitioner also reneged on his promise to turn over to Tabanao’s heirs the deceased’s 1/3 share in the total assets of the
partnership, amounting to P30,000,000.00, or the sum of P10,000,000.00, despite formal demand for payment thereof.
Consequently, Tabanao’s heirs, respondents herein, filed against petitioner an action for accounting, payment of shares, division
of assets and damages.
Petitioner filed a motion to dismiss the complaint on the grounds of improper venue, lack of jurisdiction over the nature of the
action or suit, and lack of capacity of the estate of Tabanao to sue.
Trial court denied the motion to dismiss.
Respondents filed an amended complaint, incorporating the additional prayer that petitioner be ordered to “sell all (the
partnership’s) assets and thereafter pay/remit/deliver/surrender/yield to the plaintiffs” their corresponding share in the
proceeds thereof.
Petitioner filed a manifestation and motion to dismiss. As an additional ground, petitioner raised prescription warranting the
outright dismissal of the complaint trial court denying the motion to dismiss
Trial court ruled that prescription begins to run only upon the dissolution of the partnership when the final accounting is done.
Hence, prescription has not set in the absence of a final accounting.
Court of Appeals rendered the assailed decision, dismissing the petition for certiorari.
Petitioner filed the instant petition for review.
ISSUE/S:
1. WON the action for accounting was filed in an improper venue. (NO)
2. WON the surviving spouse of Tabunao has legal capacity to sue. (YES)
3. WON the action for accounting has prescribed. (NO)  TOPICAL
HOLDING/RATIO:
1. Petitioner’s argument:
Petitioner insists that venue was improperly laid since the action is a real action involving a parcel of land that is
located outside the territorial jurisdiction of the court a quo.
SC ruled that there was no error on the part of the trial court and the Court of Appeals in holding that it was filed in
correct venue.
An action for accounting, payment of partnership shares, division of assets and damages is a personal action which,
under the Rules, may be commenced and tried where the defendant resides or may be found, or where the plaintiffs
reside, at the election of the latter
Petitioner asserts that the surviving spouse of Vicente Tabanao has no legal capacity to sue since she was never
appointed as administratrix or executrix of his estate.
SC ruled that petitioner’s objection in this regard is misplaced. The surviving spouse does not need to be appointed as
executrix or administratrix of the estate before she can file the action. She and her children are complainants in their
own right as successors of Vicente Tabanao. From the very moment of Vicente Tabanao’s death, his rights insofar as
the partnership was concerned were transmitted to his heirs, for rights to the succession are transmitted from the
moment of death of the decedent.
Whatever claims and rights Vicente Tabanao had against the partnership and petitioner were transmitted to
respondents by operation of law, more particularly by succession. Moreover, respondents became owners of their
respective hereditary shares from the moment Vicente Tabanao died.
As successors who stepped into the shoes of their decedent upon his death, they can commence any action originally
pertaining to the decedent. From the moment of his death, his rights as a partner and to demand fulfillment of
petitioner’s obligations as outlined in their dissolution agreement were transmitted to respondents. They, therefore,
had the capacity to sue and seek the court’s intervention to compel petitioner to fulfill his obligations.
Petitioner contends that the trial court should have dismissed the complaint on the ground of prescription, arguing
that respondents’ action prescribed four (4) years after it accrued in 1986.
The three (3) final stages of a partnership are: (1) dissolution; (2) winding-up; and (3) termination. 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 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.
The SC found that prescription had not even begun to run in the absence of a final accounting.
Article 1842 of the Civil Code provides:

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 of any agreement to the contrary.
The provision states that the right to demand an accounting accrues at the date of dissolution in the absence of any
agreement to the contrary. 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 respondents are seeking in their action
before the trial court, since petitioner has failed or refused to render an accounting of the partnership’s business and
assets. Hence, the said action is not barred by prescription.
WHEREFORE, in view of all the foregoing, the instant petition is DENIED for lack of merit, and the case is REMANDED to the
Regional Trial Court.

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Article 1842 of the Civil Code provides:

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