FIRST DIVISI ON

[G.R. No. 126334. November 23, 2001]

EMILIO EMNACE v. COURT OF APPEALS, ESTATE OF VICENTE
TABANAO, et. al
Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a
business concern known as Ma. Nelma Fishing Industry. Sometime in January of 1986, they
decided to dissolve their partnership and executed an agreement of partition and distribution
of the partnership properties among them, consequent to Jacinto Divinagracias withdrawal
from the partnership. Among the assets to be distributed were five fishing boats, six vehicles,
two parcels of land, and cash deposits in the local branches of the Bank of the Philippine
Islands and Prudential Bank.

Throughout the existence of the partnership, and even after Vicente Tabanaos untimely
demise in 1994, petitioner failed to submit to Tabanaos heirs any statement of assets and
liabilities of the partnership, and to render an accounting of the partnerships
finances. Petitioner also reneged on his promise to turn over to Tabanaos heirs the
deceaseds 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, Tabanaos heirs, respondents herein, filed against petitioner an action for
accounting, payment of shares, division of assets and damages. In their complaint,
respondents prayed as follows:

1. Defendant be ordered to render the proper accounting of all the assets and
liabilities of the partnership at bar; and
2. After due notice and hearing defendant be ordered to
pay/remit/deliver/surrender/yield to the plaintiffs no less than One Third (1/3) of
the assets, properties, dividends, cash, land(s), fishing vessels, trucks, motor
vehicles, and other forms and substance of treasures which belong and/or should
belong, had accrued and/or must accrue to the partnership;

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. The trial court denied the motion to dismiss.

The following day, respondents filed an amended complaint, incorporating the additional
prayer that petitioner be ordered to sell all (the partnerships) assets and thereafter
pay/remit/deliver/surrender/yield to the plaintiffs their corresponding share in the proceeds
thereof. In due time, petitioner filed a manifestation and motion to dismiss, arguing that the
trial court did not acquire jurisdiction over the case due to the plaintiffs failure to pay the
proper docket fees. Further, in a supplement to his motion to dismiss, petitioner also
raised prescription as an additional ground warranting the outright dismissal of the
complaint.

The trial court issued an Order, denying the motion to dismiss inasmuch as the grounds
raised therein were basically the same as the earlier motion to dismiss which has been
denied. Anent the issue of prescription, the 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. Moreover, an action based on a
written contract prescribes in ten years from the time the right of action accrues.

ISSUE: WON the right of the Heirs of Tabanao to file an action for accounting, payment of
shares, division of assets has already prescribed. NO.

RULING:

It can be readily seen that respondents primary and ultimate objective in instituting the
action below was to recover the decedents 1/3 share in the partnerships assets. While they ask
for an accounting of the partnerships assets and finances, what they are actually asking is for
the trial court to compel petitioner to pay and turn over their share, or the equivalent value
thereof, from the proceeds of the sale of the partnership assets.

On the third issue, 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. Petitioners 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 Tabanaos 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, which
is a mode of acquisition by virtue of which the property, rights and obligations to the extent
of the value of the inheritance of a person are transmitted. Moreover, respondents became
owners of their respective hereditary shares from the moment Vicente Tabanao died.

A prior settlement of the estate, or even the appointment of Salvacion Tabanao as

executrix or administratrix, is not necessary for any of the heirs to acquire legal capacity to
sue. 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 petitioners obligations as outlined in their
dissolution agreement were transmitted to respondents. They, therefore, had the capacity to
sue and seek the courts intervention to compel petitioner to fulfill his obligations.

Finally, 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 trial court and the Court of Appeals gave scant consideration to
petitioners hollow arguments, and rightly so.

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 partnerships
business. Prescription of the said right starts to run only upon the dissolution of the
partnership when the final accounting is done.
 Contrary to petitioners protestations that respondents right to inquire into the business
affairs of the partnership accrued in 1986, prescribing four (4) years thereafter, 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.

Applied in relation to Articles 1807 and 1809, which also deal with the duty to account,
the above-cited 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
partnerships business and assets. Hence, the said action is not barred by prescription.

In fine, the trial court neither erred nor abused its discretion when it denied petitioners
motions to dismiss. Likewise, the Court of Appeals did not commit reversible error in
upholding the trial courts orders. Precious time has been lost just to settle this preliminary
issue, with petitioner resurrecting the very same arguments from the trial court all the way up
to the Supreme Court. The litigation of the merits and substantial issues of this controversy is
now long overdue and must proceed without further delay.