CASE ANALYSIS:

DISSOLUTION, LIQUIDATION AND WINDING-UP

VILLAREAL VS. RAMIREZ

(G.R. No. 144214, July 14, 2003)

I. FACTS:

Petitioners Luzviminda 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. Respondent Donaldo Efren C. Ramirez joined as a partner in the
business on September 5, 1984. His capital contribution of P250,000 was
paid by his parents, Sps. Cesar and Carmelita Ramirez.

After Jesus Jose withdrew from the partnership in January 1987, his
capital contribution of P250,000 was refunded to him in cash by agreement
of the partners. In the same month, 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.

Thereafter, respondent spouses wrote petitioners, saying that they

were no longer interested in continuing their partnership or in reopening the
restaurant, and that they were accepting the latter’s offer to return their
capital contribution. The repeated oral and written requests were, however,
left unheeded. Hence, respondents subsequently filed a Complaint for the
collection of a sum of money from petitioners.

II. ISSUE: W/N petitioners are liable to respondents for the latter’s share in
the partnership.

III. RULING:

No. Respondents have no right to demand from petitioner the return of

their equity share. Under the NCC, “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. However,
before the partners can be paid their shares, the creditors of the partnership
must first be compensated.
 Therefore, 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 and all partnership creditors have been paid.

IRMA IDOS VS. COURT OF APPEALS

(G.R. No. 110782, September 25, 1998)

I. FACTS:

Petitioner Irma Idos was engaged in the business of leather tanning.

In 1985, Eddie Alarilla joined Idos, forming a partnership business. However,
the partnership did not last long as it was dissolved one year after. Upon
liquidation, the business had Php 1.8M receivables and stocks. Alarilla’s
share was Php 900,000 for which Idos issued four checks.

Alarilla was able to encash the first three checks but failed to encash
the last check. Hence, Alarilla filed an Information for violation of BP 22
against Idos. As defense, Idos claimed that they were still in the process of
winding up the affairs of the partnership and he issued the check merely to
evidence the proportionate share of Alarilla in the partnership assets upon its
dissolution.

II. ISSUE: W/N the partnership is dissolved.

III. RULING:

NO. Under the law, dissolution does not automatically result in the
termination of the legal personality of the partnership, nor the relations of
the partners among themselves who remain as co-partners until the
partnership is terminated and winding up is completed.

Here, even if the parties agreed to dissolve the partnership, such

agreement did not automatically put an end to the partnership, since they
still had to sell the goods on hand and collect the receivables from debtors.
In short, they were still in the process of winding up, or the process of
settling business affairs after dissolution, when the check in question was
issued.