1809 – Right to formal accounting

1842 – Right to an account by a partner upon dissolution

G.R. No. 126334      November 23, 2001

EMILIO EMNACE, petitioner,
vs.
COURT OF APPEALS, ESTATE OF VICENTE TABANAO, SHERWIN TABANAO, VICENTE WILLIAM TABANAO,
JANETTE TABANAO DEPOSOY, VICENTA MAY TABANAO VARELA, ROSELA TABANAO and VINCENT
TABANAO, respondents.

Facts:

Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a business 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 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. 

Petitioner raised prescription as an additional ground warranting the outright dismissal of the complaint.

Anent the issue of prescription, the trial court ruled that prescription begins to run only upon the dissolution of the
partnership when the final accounting is done. Hence, prescription has not set in the absence of a final accounting.

On appeal, petitioner contends that the trial court should have dismissed the complaint on the ground of prescription,
arguing that respondents' action prescribed four (4) years after it accrued in the year (1986) during the dissolution of
the partnership.

Issue: W/N the respondents’ has the right to demand accounting?

Held: Yes

Whatever claims and rights Vicente Tabanao had against the partnership and petitioner were transmitted to
respondents by operation of law, more particularly by succession. Moreover, respondents became owners of their
respective hereditary shares from the moment Vicente Tabanao died.

From the moment of his death, his rights as a partner and to demand fulfillment of petitioner's obligations as outlined
in their dissolution agreement were transmitted to respondents. They, seek the court's intervention to compel
petitioner to fulfill his obligations.

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.

Article 1842 of the Civil Code provides:

 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.

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.