Lim vs.

Philippine Fishing Gear Industries Inc

Lim vs. Philippine Fishing Gear Industries Inc. [GR 136448, 3 November 1999]

FACTS: Lim Tong Lim requested Peter Yao and Antonio Chuato engage in commercial fishing with him.
The three agreed to purchase two fishing boats but since they do not have the money they borrowed from
one Jesus Lim the brother of Lim Tong Lim. Subsequently, they again borrowed money for the purchase
of fishing nets and other fishing equipments. Yao and Chua represented themselves as acting in behalf of
Ocean Quest Fishing Corporation (OQFC) and they contracted with Philippine Fishing Gear Industries
(PFGI) for the purchase of fishing nets amounting to more than P500k. However, they were unable to pay
PFGI and hence were sued in their own names as Ocean Quest Fishing Corporation is a non-existent
corporation. Chua admitted his liability while Lim Tong Lim refused such liability alleging that Chua and
Yao acted without his knowledge and consent in representing themselves as a corporation.

ISSUE: Whether Lim Tong Lim is liable as a partner

HELD: Yes. It is apparent from the factual milieu that the three decided to engage in a fishing business.
Moreover, their Compromise Agreement had revealed their intention to pay the loan with the proceeds of
the sale and to divide equally among them the excess or loss. The boats and equipment used for their
business entails their common fund. The contribution to such fund need not be cash or fixed assets; it
could be an intangible like credit or industry. That the parties agreed that any loss or profit from the sale
and operation of the boats would be divided equally among them also shows that they had indeed formed
a partnership. The principle of corporation by estoppel cannot apply in the case as Lim Tong Lim also
benefited from the use of the nets in the boat, which was an asset of the partnership. Under the law on
estoppel, those acting in behalf of a corporation and those benefited by it, knowing it to be without valid
existence are held liable as general partners. Hence, the question as to whether such was legally formed
for unknown reasons is immaterial to the case.

VILLAREAL V. RAMIREZ
VILLAREAL V. RAMIREZ
Facts:

In 1984, Villareal, Carmelito Jose and Jesus Jose formed a partnership with a capital of P750,000for the
operation of a restaurant and catering business. Respondent Ramirez joined as a partner in the business
with the capital contribution of P250,000. In 1987, Jesus Jose withdrew from the partnership and within
the same time, Villareal and Carmelito Jose, petitioners closed the business without prior knowledge of
respondents In March 1987, respondents wrote a letter to petitioners stating that they were no longer
interested in continuing the partnership and that they were accepting the latters offer to return their
capital contribution. This was left unheeded by the petitioners, and by reason of which respondents filed a

complaint in the RTC.RTC ruled that the parties had voluntarily entered into a partnership, which could be
dissolved at any time, and this dissolution was showed by the fact that petitioners stopped operating the
restaurant. On appeal, CA upheld RTCs decision that the partnership was dissolved and it added that
respondents had no right to demand the return of their capital contribution. However since petitioners did
not give the proper accounting for the liquidation of the partnership, the CA took it upon itself to compute
their liabilities and the amount that is proper to the respondent. The computation of which was:(capital of
the partnership outstanding obligation) / remaining partners =amount due to private respondent
Issue: W/N petitioners are liable to respondents for the latters share in the partnership?
Ruling: No. Respondents have no right to demand from petitioner the return of their equity share. As
found by the court 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.
However, before the partners can be paid their shares, the creditors of the partnership must first be
compensated. Therefore, 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 and all
partnership creditors have been paid. CAs computation of the amount to be refunded to respondents as
their share was thus erroneous.

HEIRS OF TAN ENG KEE vs.CA

HEIRS OF TAN ENG KEE vs.CA 341 SCRA 740, G.R. No. 126881, October 3, 2000

FACTS: After the second World War, Tan EngKee and Tan Eng Lay, pooling their resources and industry
together, entered into a partnership engaged in the business of selling lumber and hardware and
construction supplies. They named their enterprise "Benguet Lumber" which they jointly managed until
Tan EngKee's death. Petitioners herein averred that the business prospered due to the hard work and
thrift of the alleged partners. However, they claimed that in 1981, Tan Eng Lay and his children caused
the conversion of the partnership "Benguet Lumber" into a corporation called "Benguet Lumber
Company." The incorporation was purportedly a ruse to deprive Tan EngKee and his heirs of their rightful
participation in the profits of the business. Petitioners prayed for accounting of the partnership assets, and
the dissolution, winding up and liquidation thereof, and the equal division of the net assets of Benguet
Lumber. The RTC ruled in favor of petitioners, declaring that Benguet Lumber is a joint venture which is
akin to a particular partnership. The Court of Appeals rendered the assailed decision reversing the
judgment of the trial court.

ISSUE: Whether the deceased Tan EngKee and Tan Eng Lay are joint adventurers and/or partners in a
business venture and/or particular partnership called Benguet Lumber and as such should share in the
profits and/or losses of the business venture or particular partnership

RULING: There was no partnership whatsoever. Except for a firm name, there was no firm account, no
firm letterheads submitted as evidence, no certificate of partnership, no agreement as to profits and

losses, and no time fixed for the duration of the partnership. There was even no attempt to submit an
accounting corresponding to the period after the war until Kee's death in 1984. It had no business book,
no written account nor any memorandum for that matter and no license mentioning the existence of a
partnership. Also, the trial court determined that Tan EngKee and Tan Eng Lay had entered into a joint
venture, which it said is akin to a particular partnership. A particular partnership is distinguished from a
joint adventure, to wit:(a) A joint adventure (an American concept similar to our joint accounts) is a sort of
informal partnership, with no firm name and no legal personality. In a joint account, the participating
merchants can transact business under their own name, and can be individually liable therefor. (b)
Usually, but not necessarily a joint adventure is limited to a SINGLE TRANSACTION, although the
business of pursuing to a successful termination maycontinue for a number of years; a partnership
generally relates to a continuing business of various transactions of a certain kind. A joint venture
"presupposes generally a parity of standing between the joint co-ventures or partners, in which each party
has an equal proprietary interest in the capital or property contributed, and where each party exercises
equal rights in the conduct of the business. The evidence presented by petitioners falls short of the
quantum of proof required to establish a partnership. In the absence of evidence, we cannot accept as an
established fact that Tan EngKee allegedly contributed his resources to a common fund for the purpose of
establishing a partnership. Besides, it is indeed odd, if not unnatural, that despite the forty years the
partnership was allegedly in existence, Tan EngKee never asked for an accounting. The essence of a
partnership is that the partners share in the profits and losses .Each has the right to demand an
accounting as long as the partnership exists. A demand for periodic accounting is evidence of a
partnership. During his lifetime, Tan EngKee appeared never to have made any such demand for
accounting from his brother, Tang Eng Lay. We conclude that Tan EngKee was only an employee, not a
partner since they did not present and offer evidence that would show that Tan EngKee received amounts
of money allegedly representing his share in the profits of the enterprise. There being no partnership, it
follows that there is no dissolution, winding up or liquidation to speak of.

EMNACE vs. C.A

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 Tabanaos 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 Tabanaos (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 partnerships 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 partnerships 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.

LILIBETH SUNGHA CHAN vs. CHUA

Business Organization Partnership, Agency, Trust Prescription Demand for an
accounting Oral Partnership
FACTS: In 1977, Chua and Jacinto Sunga verbally agreed to form a partnership for the sale
and distribution of Shellane LPGs. Their business was very profitable but in 1989 Jacinto
died. Upon Jacintos death, his daughter Lilibeth took over the business as well as the
business assets. Chua then demanded for an accounting but Lilibeth kept on evading him.
In 1992 however, Lilibeth gave Chua P200k. She said that the same represents a partial
payment; that the rest will come after she finally made an accounting. She never made an
accounting so in 1992, Chua filed a complaint for Winding Up of Partnership Affairs,
Accounting, Appraisal and Recovery of Shares and Damages with Writ of Preliminary
Attachment against Lilibeth.
Lilibeth in her defense argued among others that Chuas action has prescribed.
ISSUE: Whether or not Chuas claim is barred by prescription.

HELD: No. The action for accounting filed by Chua three (3) years after Jacintos death was
well within the prescribed period. The Civil Code provides that an action to enforce an oral
contract prescribes in six (6) years while the right to demand an accounting for a partners
interest as against the person continuing the business accrues at the date of dissolution, in
the absence of any contrary agreement. Considering that the death of a partner results in
the dissolution of the partnership, in this case, it was after Jacintos death that Chua as the
surviving partner had the right to an account of his interest as against Lilibeth. It bears
stressing that while Jacintos death dissolved the partnership, the dissolution did not
immediately terminate the partnership. The Civil Code expressly provides that upon
dissolution, the partnership continues and its legal personality is retained until the complete
winding up of its business, culminating in its termination.