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ADRIANO ARBES, ET AL vs. VICENTE POLISTICO, ET AL., G.R. No. 31057 September 7, 1929 VILLAMOR, J.

: FACTS: This is an action to bring about liquidation of the funds and property of the association called "Turnuhan Polistico & Co." The plaintiffs were members or shareholders, and the defendants were designated as president-treasurer, directors and secretary of said association. This case is brought for 2nd time. In the 1st one, the court court held then that in an action against the officers of a voluntary association to wind up its affairs and enforce an accounting for money and property in their possessions, it is not necessary that all members of the association be made parties to the action. The court appointed commissioner of Insular Auditor's Office, to examine all the books, documents, and accounts of "Turnuhan Polistico & Co.," and to receive whatever evidence. Commissioner's report show a balance of P24, 607.80 cash on hand. Despite defendants objection to the report, the trial court rendered judgment holding said association is unlawful. And sentenced defendants jointly and severally to return the amount and documents to the plaintiffs and members of the association. The Appellant alleged that the association being unlawful, some charitable institution to whom the partnership funds may be ordered to be turned over, should be included, as a party defendant. Referring to article 1666 of the Civil Code, which provides: A partnership must have a lawful object, and must be established for the common benefit of the partners. When the dissolution of an unlawful partnership is decreed, the profits shall be given to charitable institutions of the domicile of the partnership, or, in default of such, to those of the province. ISSUE: Whether or not charitable institution is a necessary party to this case. HELD: No. No charitable institution is a necessary party in the present case of determination of the rights of the parties. The action which may arise from said article, in the case of unlawful partnership, is that for the recovery of the amounts paid by the member from those in charge of the administration of said partnership, and it is not necessary for the said parties to base their action to the existence of the partnership, but on the fact that of having contributed some

money to the partnership capital. And hence, the charitable institution of the domicile of the partnership, and in the default thereof, those of the province are not necessary parties in this case. The article cited above permits no action for the purpose of obtaining the earnings made by the unlawful partnership, during its existence as result of the business in which it was engaged, because for the purpose, as Manresa remarks, the partner will have to base his action upon the partnership contract, which is to annul and without legal existence by reason of its unlawful object; and it is self evident that what does not exist cannot be a cause of action. Hence, paragraph 2 of the same article provides that when the dissolution of the unlawful partnership is decreed, the profits cannot inure to the benefit of the partners, but must be given to some charitable institution.The profits are so applied, and not the contributions, because this would be an excessive and unjust sanction for, as we have seen, there is no reason, in such a case, for depriving the partner of the portion of the capital that he contributed, the circumstances of the two cases being entirely different. Art. 1807. Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property.

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