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ILDEFONSO DE LA ROSA vs. ENRIQUE ORTEGA GO-COTAY

G.R. No. L-24243, January 15, 1926

Art. 1818

Chinamen Go-Lio and Vicente Go-Sengco formed a society for the purchase and sale of articles

of commerce, and they opened a store for this purpose. Later Go-Lio went to China. Vicenyte Go-Sengco

died and his son Enrique Ortega Go-Cotay took charge of the businesses. Go-Lio died in China in

October, 1916, Ildefonso de la Rosa was administrator by the CFI for the intestate estate of his deceased

father.

de la Rosa requested Go-Cotay to wind up the business and to deliver to him the portion

corresponding to the deceased Go-Lio. Go-Cotay denied the petition, alleging that the business was his

exclusively. In view of this denial, de la Rosa filed with the CFI a complaint against Co-Cotay in which he

prayed that the defendant be sentenced to deliver to the plaintiff one-half of all the property of the

partnership. The assets of the partnership, as well as the value of its property, could not be determined

when making the liquidation because there was no inventory and for this reason it was not possible to

determine the capital of the partnership. The plaintiff, however, seems to be agreeable to considering

the initial partnership capital as the capital at the time of the winding up of the business.

ISSUE: Should the partnership bear the losses incurred under the management of defendant?

RULING: NO. Go-Cotay assumed complete responsibility for the business by objecting to the

appointment of a receiver as prayed for by plaintiff, and giving a bond therefor. Until that date his acts

were those of a managing partner, binding against the partnership; but thereafter his acts were those of

a receiver whose authority is contained in section 175 of the Code of Civil Procedure.

A receiver has no right to carry on and conduct a business unless he is authorized or directed by the

court to do some, and such authority is not derived from an order of appointment to take and preserve

the property (34 Cyc., 283; 23 R. C. L., 73). It does not appear that the defendant as a receiver was

authorized by the court to continue the business of the partnership in liquidation. This being so, he ispersonally liable for the losses that the business may have sustained. (34 Cyc., 296.) The partnership

must not, therefore, be liable for the acts of the defendant in connection with the management of the

business until August 3, 1918, the date when he ceased to be a member and manager in order to

become receiver.

NOTES:

PARTNERSHIPS; LIQUIDATION OF THEIR BUSINESS; DETERMINING PROFITSWhen in liquidating a

partnership the profits for a given period of time cannot be exactly determined for lack of evidence, but

the profits for certain periods prior and subsequent thereto are known, the profits corresponding to the

said given time may be determined by finding the average of those profits already known and

multiplying it by the length of the time included between said periods.

MANAGING PARTNER; His AUTHORITY; RECEIVER.When to prevent a receiver from taking charge of a

business in dissolution, the managing partner gives a bond and continues the business, he ceases to be

managing partner from that time in order to become receiver; and while before that date the property

was liable for his acts, yet that is not the case with his subsequent acts, which are regulated by the

provisions of section 175 of the Code of Civil Procedure, and without express judicial authority he

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cannot continue the business of the partnership, being personally liable for the losses should he do so.

(34 Cyc., 296.)

LUZVIMINDA J. VILLAREAL, DIOGENES VILLAREAL and CARMELITO JOSE,petitioners, vs. DONALDO

EFREN C. RAMIREZ and Spouses CESAR G. RAMIREZ JR. and CARMELITA C.

RAMIREZ, respondents.

The Facts

L. Villareal, C. Jose and J. Jose formed a partnership with a capital of P750,000 for the operation of a

restaurant and catering business. Villareal was appointed general manager and C. Jose, operations

manager. Respondent D. Ramirez joined as a partner in the business with contribution of P250,000. J.

Jose withdrew from the partnership whereby his capital contribution of P250,000 was refunded to him

in cash by agreement of the partners.

In the same month following J. Joses withdrawal, without prior knowledge of respondents,

petitioners closed down the restaurant, allegedly because of increased rental. The restaurant furniture

and equipment were deposited in the respondents house for storage.

On March 1, 1987, respondent spouses wrote petitioners, saying that they were no longer

interested in continuing their partnership or in reopening the restaurant, and that they were acceptingthe latters offer to return their capital contribution. Despite repeated oral and written requests were,

however, left unheeded. Hence a complaint for a collection of a sum of money was filed in the RTC

where it ruled in favor of respondents. An appeal to the CA was filed and the higher court ruled that

respondents be refunded the amount of P253,114. Hence the appeal to the SC.

Issues:

Whether petitioners are liable to respondents for the latters share in the partnership.

Whether the CAs computation of respondents share is correct.

Ruling:

First Issue: Share in PartnershipThe dissolution took place when respondents informed petitioners of their intention to discontinue

it because of the formers dissatisfaction with, and loss of trust in, the latters management of the

partnership affairs. These findings were amply supported by the evidence on record. Respondents

consequently demanded from petitioners the return of their one-third equity in the partnership.

We hold that respondents have no right to demand from petitioners the return of their equity

share. Except as managers of the partnership, 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.

Second Issue: What Must Be Returned?

Since it is the partnership, as a separate and distinct entity, that must refund the shares of the

partners, the amount to be refunded is necessarily limited to its total resources. In other words, it can

only pay out what it has in its coffers, which consists of all its assets. However, before the partners can

be paid their shares, the creditors of the partnership must first be compensated. After all the creditors

have been paid, whatever is left of the partnership assets becomes available for the payment of the

partners shares.