G.R. No. 110782, 25 September 1998

FACTS:

Petitioner, Irma L. Idos, is a businesswoman engaged in leather tanning was accused by the complainant, Eddie Alarilla her erstwhile supplier and business partner for violation of B.P. 22. The complainant Eddie Alarilla supplied chemicals and rawhide to the accused-appellant Irma L. Idos for use in the latter’s business of manufacturing leather. He joined the accused-appellant’s business and formed with her the short-lived partnership under the style “Tagumpay Manufacturing which was dissolved by agreement of the parties.

Upon liquidation of the business, the partnership had as of May 1986 receivables and stocks worth P1,800,000.00. The complainant’s share of the assets was P900,000.00 and to pay such share for accused-appellant issued four (4) postdated checks where one of the checks bounced. The complainant demanded payment from the accused-appellant but the latter failed to pay. In a letter reply, the accused-appellant denied liability. She claimed that the check had been given upon demand of complainant in May 1986 only as “assurance” of his share in the assets of the partnership and that it was not supposed to be deposited until the stocks had been sold. Complainant then filed an action before the court for violating BP 22 against petitioner.

Accused-appellant insisted that the complainant had known that the checks were to be funded from the proceeds of the sale of the stocks and the collection of receivables. She claimed that the complainant himself asked for the checks because he did not want to continue in the tannery business and had no use for a share of the stocks.

Trail court rendered a decision finding the petitioner guilty and her motion for reconsideration was denied. The decision was affirmed by the appellate court, hence, this petition.

ISSUE:

Whether or not the agreement between the petitioner and complainant to dissolve the partnership automatically terminated the partnership in question.

RULING:

It could not be denied that though the parties — petitioner and complainant — had agreed to dissolve the partnership, such ageement 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” the affairs of the partnership, when the check in question was issued.

Under the Civil Code, the three final stages of a partnership are (1) dissolution; (2) winding-up; and (3) termination. These stages are distinguished, to wit:

1. Dissolution Defined

Dissolution is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business (Art. 1828). It is that point of time the time the partners cease to carry on the business tonether. (Citation omitted).

2. Winding Up Defined

Winding up is the process of settling business affairs of dissolution.

3. Termination Defined

Termination is the point in time after all the partnership affairs have been wound up.

These final stages in the life of a partnership are recognized under the Civil Code that explicitly declares that upon dissolution, the partnership is not terminated, to wit:

Art 1828. The dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business.
Art. 1829. On dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is completed. (Emphasis supplied.)

The best evidence of the existence of the partnership, which was not yet terminated (though in the winding up stage), were the unsold goods and uncollected receivables, which were presented to the trial court. Since the partnership has not been terminated, the petitioner and private complainant remained as co-partners. The check was thus issued by the petitioner to complainant, as would a partner to another, and not as payment from a debtor to a creditor.

*Case digest by Jay Mark P. Balbosa, JD-IV, Andres Bonifacio Law School, SY 2019-2020