EMILIO EMNACE v. COURT OF APPEALS, G.R. No. 126334.

November 23, 2001

Facts:
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 Divinagracia’s withdrawal from the
partnership.

Throughout the existence of the partnership, and even after Vicente Tabanao’s untimely demise
in 1994, petitioner failed to submit to Tabanao’s heirs any statement of assets and liabilities of
the partnership, and to render an accounting of the partnership’s finances. Petitioner also
reneged on his promise to turn over to Tabanao’s heirs the deceased’s 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, Tabanao’s heirs, respondents herein, filed against petitioner an action for
accounting, payment of shares, division of assets and damages.

The following day, respondents filed an amended complaint, incorporating the additional prayer
that petitioner be ordered to "sell all (the partnership’s) 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 but was denied.

The motion to dismiss and the petition for certiorari filed before the Court of Appeals were
denied.

Hence, this petition.

Issue:

Whether or not the court should have dismissed the complaint on the ground of prescription?

Held:

No.

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 partnership’s business. Prescription of the
said right starts to run only upon the dissolution of the partnership when the final accounting is
done.

Contrary to petitioner’s 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:
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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 partnership’s business and
assets. Hence, the said action is not barred by prescription.