GREGORIO MAGDUSA, ET AL. VS. GERUNDIO ALBARAN, ET AL.

G.R. No. L-17526

June 30, 1962
FACTS: The appellant and appellees, together with various other persons,
had verbally formed a partnership de facto, for the sale of general
merchandise in Surigao, Surigao, to which appellant contributed P2,000 as
capital, and the others contributed their labor.
Sometime in 1953 and 1954, the appellees expressed their desire to
withdraw from the partnership, and appellant thereupon made a
computation to determine the value of the partners' shares to that date. The
results of the computation were embodied in the document Exhibit "C",
drawn in the handwriting of appellant.
Appellees thereafter made demands upon appellant for payment, but
appellant refused. Thus, the former filed a complaint. However, it was
dismissed by the CFI of Bohol on the ground that other indispensable
parties (other partners who did not sign the document exh. C) were not
impleaded.
The CA ruled otherwise by saying, This is not an action for a dissolution
of a partnership and winding up of its affairs or liquidation of its assets in
which the interest of other partners who are not brought into the case may
be affected.
ISSUE: Whether or not the partners share can be returned without first
dissolving or liquidating the partnership.
RULING: No. A partner's share can not be returned without first dissolving
and liquidating the partnership (Po Yeng Cheo vs. Lim Ka Yam, 44 Phil. 177),
for the return is dependent on the discharge of the creditors, whose claims
enjoy preference over those of the partners; and it is self-evident that all
members of the partnership are interested in his assets and business, and
are entitled to be heard in the matter of the firm's liquidation and the
distribution of its property. The liquidation Exhibit "C" is not signed by the
other members of the partnership besides appellees and appellant; it does
not appear that they have approved, authorized, or ratified the same, and,
therefore, it is not binding upon them. At the very least, they are entitled to
be heard upon its correctness.
In addition, unless a proper accounting and liquidation of the partnership
affairs is first had, the capital shares of the appellees, as retiring partners,
can not be repaid, for the firm's outside creditors have preference over the
assets of the enterprise (Civ. Code, Art. 1839), and the firm's property can

not be diminished to their prejudice. Finally, the appellant can not be held
liable in his personal capacity for the payment of partners' shares for he
does not hold them except as manager of, or trustee for, the partnership. It
is the latter that must refund their shares to the retiring partners. Since not
all the members of the partnership have been impleaded, no judgment for
refund can be rendered, and the action should have been dismissed.
LUZVIMINDA J. VILLAREAL, DIOGENES VILLAREAL and CARMELITO
JOSE Vs. DONALDO EFREN C. RAMIREZ and Spouses CESAR G.
RAMIREZ JR. and CARMELITA C. RAMIREZ
G.R. No. 144214. July 14, 2003
FACTS: On July 25, 1984, Luzviminda J. Villareal, Carmelito Jose and Jesus
Jose formed a partnership with a capital of P750,000 for the operation of a
restaurant and catering business under the name Aquarius Food House and
Catering Services.
Villareal was appointed general manager and Carmelito Jose, operations
manager.
Donaldo Efren C. Ramirez joined as a partner (capital was from his parents,
Sps. Ramirez) in the business on September 5, 1984.
On January 1987, 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.
Respondents had expresses their intention not to continue the partnership
and demanded from the petitioners the return of their capital. However,
their demand was unheeded and thus filed a complaint before the RTC of
Makati for collection of sum of money.
ISSUE: W/N dissolution and winding up of the partnership is necessary
before partners is given their return of their share.
RULING: Yes. 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.

Evidently, in the present case, 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 -- in other words, sold and converted to cash -- and all
partnership creditors, if any, paid.