Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-18707 December 9, 1922
PO YENG CHEO, plaintiff-appellee,
vs.
LM !" Y"M, defendant-appellant.
F. R. Feria and Romualdez Bros. for appellant.
Quintin Llorente and Carlos C. Viana for appellee.

STREET, J.:
By the amended complaint in this action, the present plaintiff, Po en! Cheo, alle!ed sole o"ner of a
business formerly conducted in the City of Manila under the style of #"on! Cheon!, as mana!in!
partner in said business and to recover from him its properties and assets. $he defendant havin!
died durin! the pendency of the cause in the court belo" and the death su!!ested of record, his
administrator, one %im oc& $oc&, "as re'uired to appear and ma&e defense.
(n a decision dated )uly *, *+,*, the -onorable C. A. (mperial, presidin! in the court belo", found
that the plaintiff "as entitled to an accountin! from %im #a am, the ori!inal defendant, as mana!er
of the business already reffered to, and he accordin!ly re'uired %im oc& $oc&, as administrator, to
present a li'uidation of said business "ithin a stated time. $his order bore no substantial fruit, for the
reason that %im oc& $oc& personally &ne" nothin! about the aforesaid business ."hich had ceased
operation more than ten years previously/ and "as apparently unable to find any boo&s or
documents that could shed any real li!ht on its transaction. -o"ever, he did submit to the court a
paper "ritten by %im #a am in life purportin! to !ive, "ith va!ue and uncertain details, a history of
the formation of the #"on! Cheon! $ay and some account of its disruption and cessation from
business in *+*0. $o this narrative "as appended a statement of assets and liabilities, purportin! to
sho" that after the business "as li'uidate, it "as actually debtor to %im #a am to the e1tent of
several thousand pesos. Appreciatin! the "orthlessness of this so-called statement, and all parties
apparently reali2in! that nothin! more "as li&ely to be discovered by further insistin! on an
accountin!, the court proceeded, on 3ecember ,4, *+,*, to render final 5ud!ment in favor of the
plaintiff.
$he decision made on this occasion ta&es as its basis the fact stated by the court in its earlier
decision of )uly *, *+,*, "hich may be briefly set fourth as follo"s6l awphil .net
$he plaintiff, Po en! Cheo, is the sole heir of one Po 7ui ao, deceased, and as such Po en!
Cheo inherited the interest left by Po 7ui ao in a business conducted in Manila under the style of
#"on! Cheon! $ay. $his business had been in e1istence in Manila for many years prior to *+08, as
a mercantile partnership, "ith a capitali2ation of P*90,000, en!a!ed in the import and e1port trade:
and after the death of Po 7ui ao the follo"in! seven persons "ere interested therein as partners in
the amounts set opposite their respective names, to "it6 Po en! Cheo, P90,000: Chua Chi e&,
P;0,000: %im #a am, P*0,000: %ee #om Chuen, P*0,000: %ey <in! #"on!, P*0,000: Chan %ion!
Chao, P*0,000: %ee -o uen, P*0,000. $he mana!er of #"on! Cheon! $ay, for many years prior of
its complete cessation from business in *+*0, "as %im #a am, the ori!inal defendant herein.
Amon! the properties pertainin! to #"on! Cheon! $ay and consistin! part of its assets "ere ten
shares of a total par value of P*0,000 in an enterprise conducted under the name of ut =ion! Chyip
#ons&i and certain shares to the amon! of P*,000 in the Manila Electric Railroad and %i!ht
Company, of Manila.
(n the year *+*0 .e1act date unstated/ #"on! Cheon! $ay ceased to do business, o"in! principally
to the fact that the plaintiff ceased at that time to transmit merchandise from -on!&on!, "here he
then resided. %im #a am appears at no time to have submitted to the partners any formal
li'uidation of the business, thou!h repeated demands to that effect have been made upon him by
the plaintiff.
(n vie" of the facts above stated, the trial 5ud!e rendered 5ud!ment in favor of the plaintiff, Po en!
Cheo, to recover of the defendant %im oc& $oc&, as administrator of %im #a am, the sum of si1ty
thousand pesos .P90,000/, constitutin! the interest of the plaintiff in the capital of #"on! Cheon!
$ay, plus the plaintiff>s proportional interest in shares of the ut =ion! Chyip #ons&i and Manila
Electric Railroad and %i!ht Company, estimated at P**,000, to!ether "ith the costs. ?rom this
5ud!ment the defendant appealed.
(n be!innin! our comment on the case, it is to be observed that this court finds itself strictly
circumscribed so far as our po"er of revie" is concerned, to the facts found by the trial 5ud!e, for the
plaintiff did not appeal from the decision of the court belo" in so far as it "as unfavorable to him, and
the defendant, as appellant, has not caused a !reat part of the oral testimony to be brou!ht up. (t
results, as stated, that "e must accept the facts as found by the trial 5ud!e: and our revie" must be
limited to the error, or errors, if any, "hich may be apparent upon the face of the appealed decision,
in relation "ith the pleadin!s of record.
Proceedin! then to consider the appealed decision in relation "ith the facts therein stated and other
facts appearin! in the orders and proceedin!s in the cause, it is 'uite apparent that the 5ud!ment
cannot be sustained. (n the first place, it "as erroneous in any event to !ive 5ud!ment in favor of the
plaintiff to the e1tent of his share of the capital of #"on! Cheon! $ay. $he mana!in! partner of a
mercantile enterprise is not a debtor to the shareholders for the capital embar&ed by them in the
business: and he can only be made liable for the capital "hen, upon li'uidation of the business,
there are found to be assets in his hands applicable to capital account. $hat the sum of one hundred
and si1ty thousand pesos .P*90,000/ "as embar&ed in this business many years a!o reveals
nothin! as to the condition of the capital account at the time the concern ceased to do business: and
even supposin!--as the court possibly did--that the capital "as intact in *+0@, this "ould not prove it
"as intact in *+*0 "hen the business ceased to be a !oin! concern: for in that precise interval of
time the capital may have been diminished or dissipated from causes in no "ise char!eable to the
ne!li!ence or misfeasance of the mana!er.
A!ain, so far as appears from the appealed decision, the only property pertainin! to #"on! Cheon!
$ay at the time this action "as brou!ht consisted of shares in the t"o concerns already mentioned of
the total par value of P**,000. Af course, if these shares had been sold and converted into money,
the proceeds, if not needed to pay debts, "ould have been distributable amon! the various persons
in interest, that is, amon! the various shareholders, in their respective proportions. But under the
circumstances revealed in this case, it "as erroneous to !ive 5ud!ment in favor of the plaintiff for his
ali'uot part of the par value of said shares. (t is elementary that one partner, suin! alone, cannot
recover of the mana!in! partner the value of such partner>s individual interest: and a li'uidation of
the business is an essential prere'uisite. (t is true that in %ichauco vs. %ichauco .88 Phil., 8;0/, this
court permitted one partner to recover of the mana!er the plaintiff>s ali'uot part of the proceeds of
the business, then lon! since closed: but in that case the affairs of the defunct concern had been
actually li'uidate by the mana!er to the e1tent that he had apparently converted all its properties into
money and had poc&eted the same--"hich "as admitted:--and nothin! remained to be done e1cept
to compel him to pay over the money to the persons in interest. (n the present case, the shares
referred to--constitutin! the only assets of #"on! Cheon! $ay--have not been converted into ready
money and doubtless still remain in the name of #"on! Cheon! $ay as o"ner. Bnder these
circumstances it is impossible to sustain a 5ud!ment in favor of the plaintiff for his ali'uot part of the
par value of said shares, "hich "ould be e'uivalent to allo"in! one of several coo"ners to recover
from another, "ithout process of division, a part of an undivided property.
Another condition "ill be noted as present in this case "hich in our opinion is fatal to the
maintenance of the appealed 5ud!ment. $his is that, after the death of the ori!inal defendant, %im #a
am, the trial court allo"ed the action to proceed a!ainst %im oc& $oc&, as his administrator, and
entered 5ud!ment for a sum of money a!ainst said administrator as the accountin! party,--
not"ithstandin! the insistence of the attorneys for the latter that the action should be discontinued in
the form in "hich it "as then bein! prosecuted. $he error of the trial court in so doin! can be readily
demonstrated from more than one point of vie".
(n the first place, it is "ell settled that "hen a member of a mercantile partnership dies, the duty of
li'uidatin! its affair devolves upon the survivin! member, or members, of the firm, not upon the le!al
representative of the deceased partner. .<ahl vs. 3onaldson =im C Co., ; Phil., **: =u!o and
=hibata vs. 7reen, 9 Phil., 4DD/ And the same rule must be e'ually applicable to a civil partnership
clothed "ith the form of a commercial association .art. *940, Civil Code: %ichauco vs. %ichauco, 88
Phil., 8;0/ Bpon the death of %im #a am it therefore became the duty of his survivin! associates to
ta&e the proper steps to settle the affairs of the firm, and any claim a!ainst him, or his estate, for a
sum of money due to the partnership by reason of any misappropriation of its funds by him, or for
dama!es resultin! from his "ron!ful acts as mana!er, should be prosecuted a!ainst his estate in
administration in the manner pointed out in sections 9@9 to 40*, inclusive, of the Code of Civil
Procedure. Moreover, "hen it appears, as here, that the property pertainin! to #"on! Cheon! $ay,
li&e the shares in the ut =ion! Chyip #ons&i and the Manila Electric Railroad and %i!ht Company,
are in the possession of the deceased partner, the proper step for the survivin! associates to ta&e
"ould be to ma&e application to the court havin! char!e to the administration to re'uire the
administrator to surrender such property.
But, in the second place, as already indicated, the proceedin!s in this cause, considered in the
character of an action for an accountin!, "ere futile: and the court, abandonin! entirely the effort to
obtain an accountin!, !ave 5ud!ment a!ainst the administrator upon the supposed liability of his
intestate to respond for the plaintiff>s proportionate share of the capital and assets. But of course the
action "as not maintainable in this aspect after the death of the defendant: and the motion to
discontinue the action as a!ainst the administrator should have been !ranted.
$he 5ud!ment must be reversed, and the defendant "ill be absolved from the complaint: but it "ill be
understood that this order is "ithout pre5udice to any proceedin! "hich may be underta&en by the
proper person or persons in interest to settle the affairs of #"on! Cheon! $ay and in connection
there"ith to recover from the administrator of %im #a am the shares in the t"o concerns mentioned
above. No special pronouncement "ill be made as to costs of either. =o ordered.
Araullo, C. J., Johnson, Malcolm, Aance!a, and Villamor, JJ., concur.
"strand, J., concurs in the result.
Johns, and Romualdez, JJ., too# no part in the decision of this case.