Upload 10 - Magdusa V Albaran

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Magdusa v. Albaran
[G.R. No. L-17526] | [June 30, 1962] | [REYES, J.B.L., J]
Petitioners: GREGORIO MAGDUSA, ET AL.

Respondents: GERUNDIO ALBARAN, ET AL.,
Doctrine:
Article 1839. In settling accounts between the partners after dissolution, the following rules shall be observed,
subject to any agreement to the contrary:
(1) The assets of the partnership are:
(a) The partnership property,
(b) The contributions of the partners necessary for the payment of all the liabilities specified in No. 2.
(2) The liabilities of the partnership shall rank in order of payment, as follows:
(a) Those owing to creditors other than partners,
(b) Those owing to partners other than for capital and profits,
(c) Those owing to partners in respect of capital,
(d) Those owing to partners in respect of profits.
(3) The assets shall be applied in the order of their declaration in No. 1 of this article to the satisfaction of the
liabilities.
(4) The partners shall contribute, as provided by article 1797, the amount necessary to satisfy the liabilities.
(5) An assignee for the benefit of creditors or any person appointed by the court shall have the right to enforce
the contributions specified in the preceding number.
(6) Any partner or his legal representative shall have the right to enforce the contributions specified in No. 4, to
the extent of the amount which he has paid in excess of his share of the liability.
(7) The individual property of a deceased partner shall be liable for the contributions specified in No. 4.
(8) When partnership property and the individual properties of the partners are in possession of a court for
distribution, partnership creditors shall have priority on partnership property and separate creditors on
individual property, saving the rights of lien or secured creditors.
(9) Where a partner has become insolvent or his estate is insolvent, the claims against his separate property
shall rank in the following order:
(a) Those owing to separate creditors;
(b) Those owing to partnership creditors;
(c) Those owing to partners by way of contribution. (n)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
CASE SUMMARY
FACTS: The CA found that the parties had verbally formed a partnership de facto for the sale of general
merchandise in Surigao whereby Petitioner Magdusa 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. When Respondents Albaran et al expressed their desire to withdraw from the partnership, Magdusa
made a computation to determine the value of the partners' shares to that date and embodied the results in a
handwritten document (Exhibit C). Then, respondents made demands for payment but Magdusa refused
claiming that there was no partnership and that Albaran were merely his employees. Respondents filed a
complaint before the CFI. The CFI dismissed the complaint on the ground that the other partners were
indispensable parties but had not been impleaded. The CA reversed the CFI judgment and ordered petitioner
Magdusa to pay to respondents Albaran et al sums of money by way of refund of their shares as partners.
Hence, this petition for review.
HELD: The assailed CA decision is reversed. 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.
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
ISSUES AND HELD
1. W/N the respondents’ complaint should be dismissed for failing to implead all partners – YES
 Petitioner: In the distribution of all or part of a partnership's assets, all the partners have an interest and
are indispensable parties without whose intervention no decree of distribution can be validly entered.
 SC:
o 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 its assets and business, and are entitled to be
heard in the matter of the firm's liquidation and the distribution of its property.
o The liquidation Exhibit "C" is not signed by the other members of the partnership besides Albran
et al and Magdusa; 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.
o 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.
o Finally, 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.
o 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.
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
RULING: in favor of
IN VIEW OF THE FOREGOING, the decision of the Court of Appeals is reversed, and the action ordered
dismissed, without prejudice to a proper proceeding for the dissolution and liquidation of the common
enterprise. Costs against appellees.
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
NOTES

Upload 10 - Magdusa V Albaran

Uploaded by

Copyright:

Available Formats

Upload 10 - Magdusa V Albaran

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Upload 10 - Magdusa V Albaran

Uploaded by

Copyright:

Available Formats

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Petitioners: GREGORIO MAGDUSA, ET AL.

ISSUES AND HELD

You might also like