d2015member

Luzviminda Villareal, Diogenes Villareal, and Carmelito Jose v. Donaldo Ramirez and Spouses Cesar & Carmelita Jimenez (2003) Panganiban, J. Petitioners set up a partnership and respondents later joined as partners and paid a capital contribution. When the rentals for the place of business went up, petitioners closed down the business and delivered the furniture & equipment of the business to respondents. Later, respondents wanted out of the partnership and demands return of the contribution. Luviminda Villareal, Carmelito Jose, and Jesus Jose formed a partnership with a capital of P750,000 for the operation of a restaurant and catering business (the Aquarius Food House). Later on, Donaldo Ramirez joined as a partner and his capital contribution of P350,000 was paid by his parents, Spouses Ramirez. 3 yrs later, Jesus Jose withdrew from the partnership and his capital contribution of P250,000 was refunded to him by agreement of the partners. In that same month, Villareal, Villareal, and Jose (petitioners, see above) closed the restaurant without prior knowledge of Ramirez & his parents (respondents, see above) because of increased rent. o Furniture and equipment were deposited in the Ramirezes house for storage 2 months later (March 1, 1987), the Ramirezes wrote to petitioners saying they were no longer interested in the partnership or reopening the restaurant and that they were accepting the petitioners offer to return their contribution 7 months later, Carmelita Ramirez wrote to petitioners informing them of the deterioration of the furniture and reiterated the request for return of 1/3 share in the equity of the partnership. o Request unheeded. Ramirezes filed a complaint for collection of a sum of money. Petitioners answer: o That the Ramirezes expressed a desire to withdraw from the partnership and called for its dissolution under NCC 1830 and 1831 o That the Ramirezes had been paid, upon the turnover to them of furniture and equipment worth over P400,000; o That the Ramirezes had no right to demand a return of their equity because their share, together with the rest of the capital of the partnership, had been spent as a result of irreversible business losses. TC decided in favor of the Ramirezes. CA held that, although Ramirezes had no right to demand the return of their capital contribution, the partnership was still dissolved when petitioners lost interest in continuing the restaurant business with them. Then CA computed the liability of the petitioners since they never gave a proper accounting of the partnership accounts. Petitioners certiorari to SC.

Issues/Held: W/n petitioners are liable for the Ramirezes share in the partnership --- NO Ratio: Both the TC and CA found that a partnership had existed, and that it was dissolved on March 1, 1987. Dissolution took place when the Ramirezes informed petitioners of the intention to discontinue because of the their dissatisfaction with, and loss of trust in, the petitioners management of the partnership affairs. o Ramirezes consequently demanded from petitioners the return of their one-third equity in the partnership. The Ramirezes have no right to demand from petitioners the return of their equity share. Except as managers of the partnership, petitioners did not personally hold its equity or assets. 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. 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. Partnership can only pay out what it has in its coffers, which consists of all its assets. BUT, 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. In this case, the exact amount of refund equivalent to the Ramirezes 1/3 share in the partnership cannot be determined until all the partnership assets have been liquidated (i.e., sold and converted to cash) and all partnership creditors paid. A share in a partnership can be returned only after the completion of the dissolution, liquidation and winding up of the business. The CA's computation of the amount to be refunded to respondents as their share was erroneous. Did not account for depreciation. The CA was mistaken in thinking that the total capital contribution was equivalent to the gross assets to be distributed to the partners at the time of the dissolution of the partnership. Capital is either increased by profits or decreased by losses. In this case, the financial statements presented showed that the business had made meager profits. BUT there was not computation for the depreciation of the furniture and the equipment. Taking this into account, partnership was actually sustaining substantial losses.

d2015member

CA failed to reduce the capital by P250,000, which was the amount paid by the partnership to Jesus Jose when he withdrew from the partnership.

Petitioners further argue that respondents acted negligently by permitting the partnership assets in their custody to deteriorate to the point of being almost worthless. Supposedly, petitioners argue that the Ramirezes should have liquidated these and considered the proceeds as payment of their net capital. SC disagrees. The delivery of the furniture and equipment to the Ramirezes was for the purpose of storage. They were unaware that the restaurant would no longer be reopened by petitioners. Petition granted.