Sy vs. Court of Appeals, GR. No.

94285, August 31, 1999

Parties:
Petitioners - Jesus Sy, Jaime Sy, Estate Of Jose Sy, Estate Of Vicente Sy, Heir Of
Marciano Sy Represented By Justina Vda. De Sy And Willie Sy
Respondents - The Court Of Appeals, Intestate Estate Of Sy Yong Hu, Sec. Hearing
Officer Felipe Tongco, Securities And Exchange Commission

Nature: PETITIONS for review on certiorari of a decision of the Court of Appeals.

Summary:  Sy Yong Hu & Sons is a partnership between Sy Yong Hu and his sons.
Their shares as reflected in the Amended articles of partnership are as follows:  Sy
Yong Hu (31k), Jose Sy (205k), Jayme Sy (112k), Marciano Sy (143k), Willie Sy (85k),
Vicente Sy (85k), and Jesus Sy (88k), with Jose Sy as managing partner. The
partnership was registered with SEC on March 29, 1962. In 1978, 1979, & 1987,
Partners Sy Yong Hu and Jose Sy, Vicent Sy, &Marciano Sy died respectively. At
present, the partnership has valuable assets in the business district of Bacolod.

In Sept 1977, during the lifetime of all the partners, Keng Sian brought an action against
the partnership claiming she is entitled of ½ of the properties and the fruits bec she was
the common law wife of Sy Yong Hu which the latter denied.

During the pendency of the case, Marciano Sy filed a petition for declaratory relief
against Vicente, Jesus, and Jayme, praying he be appointed partner to replace the
deceased Jose. In an answer, Vicente, Jesus, Jayme, who claimed to represent the
majority interest sought the dissolution of partnership and appointed Vicente as
managing partner.

The Hearing Officer, in a decision (Sison Decision) dismissed the petition, and dissolved
the partnership. The Sison Decision was affirmed by the SEC En Banc. In the meantime
the Regional Trial Court appointed one Alex Ferrer as Special Administrator. Thereafter,
Alex Ferrer moved to intervene in the proceedings in for the partition and distribution of
the of the partnership assets on behalf of the respondent intestate estate but was
denied. The Intestate Estate appealed to the SEC en banc. In its decision, the SEC en
banc reiterated that the Abello decision, which upheld the order of dissolution of the
partnership, had long become final and executory. No further appeal was taken from
said decision. During the continuation of SEC Case, the parties brought to the attention
of the Hearing Officer the fact of existence of a Civil Case pending before the RTC.
They also agreed that during the pendency of said case, there would be no disposition
of partnership assets. Hearing Officer Tongco in an order placed the partnership under
a receivership committee. Petitioners appealed to the SEC en banc. In an order (Lopez
Order), the SEC en banc affirmed the Tongco order. Then they filed a special civil
action for certiorari with the Court of Appeals. The appellate court granted the petition
and remanded the case for further execution of the Decisions, ordering partition and
distribution of partnership properties. On motion for reconsideration by private
respondents, the Court of Appeals reversed its earlier decision and remanded the case
to the SEC for the formation of a receivership committee as envisioned in the Tongco
Order. Hence the present petition.

 ISSUE: What is there is a difference between winding up and dissolution

HELD: Petitioners fail to recognize the basic distinctions underlying the principles of

dissolution, winding up and partition or distribution. The dissolution of a partnership is
the change in the relation of the parties caused by any partner ceasing to be associated
in the carrying on, as might be distinguished from the winding up, of its business. Upon
its dissolution, the partnership continues and its legal personality is retained until the
complete winding up of its business culminating in its termination. The dissolution of the
partnership did not mean that the juridical entity was immediately terminated and that
the distribution of the assets to its partners should perfunctorily follow. On the contrary,
the dissolution simply effected a change in the relationship among the partners. The
partnership, although dissolved, continues to exist until its termination, at which time the
winding up of its affairs should have been completed and the net partnership assets are
partitioned and distributed to the partners. It ruled that although the Abello Decision
was, indeed, final and executory, it did not pose any obstacle to the hearing officer to
issue orders not inconsistent therewith because from the time a dissolution is ordered
until the actual termination of the partnership.

SAME SAME

Partnerships; Dissolutions; Words and Phrases; Dissolution of a partnership is

the change in the relation of the parties caused by any partner ceasing to be
associated in the carrying on, as might be distinguished from the winding up, of its
business.—The contentions are untenable. Petitioners fail to recognize the basic
distinctions underlying the principles of dissolution, winding up and partition or
distribution. The dissolution of a partnership is the change in the relation of the parties
caused by any partner ceasing to be associated in the carrying on, as might be
distinguished from the winding up, of its business. Upon its dissolution, the partnership
continues and its legal personality is retained until the complete winding up of its
business culminating in its termination.

Same; Same; The partnership, although dissolved, continues to exist until its
termination, at which time the winding up of its affairs should have been completed
and the net partnership assets are partitioned and distributed to the partners.—The
dissolution of the partnership did not mean that the juridical entity was immediately
terminated and that the distribution of the assets to its partners should perfunctorily
follow. On the contrary, the dissolution simply effected a change in the relationship
among the partners. The partnership, although dissolved, continues to exist until its
termination, at which time the winding up of its affairs should have been completed and
the net partnership assets are partitioned and distributed to the partners.

Same; Same; Securities and Exchange Commission; Jurisdiction; From the time
a dissolution is ordered until the actual termination of the partnership, the Securities
and Exchange Commission retains jurisdiction to adjudicate all incidents relative
thereto; Like the appointment of a manager in charge of the winding up of the affairs of
the partnership, the appointment of a receiver during the pendency of the dissolution is
interlocutory in nature, well within the jurisdiction of the Securities and Exchange
Commission.—The error, therefore, ascribed to the Court of Appeals is devoid of any
sustainable basis. The Abello Decision though, indeed, final and executory, did not pose
any obstacle to the Hearing Officer to issue orders not inconsistent therewith. From the
time a dissolution is ordered until the actual termination of the partnership, the SEC
retained jurisdiction to adjudicate all incidents relative thereto. Thus, the disputed order
placing the partnership under a receivership committee cannot be said to have varied
the final order of dissolution. Neither did it suspend the dissolution of the partnership. If
at all, it only suspended the partition and distribution of the partnership assets pending
disposition of Civil Case No. 903 on the basis of the agreement by the parties and under
the circumstances of the case. It bears stressing that, like the appointment of a
manager in charge of the winding up of the affairs of the partnership, said appointment
of a receiver during the pendency of the dissolution is interlocutory in nature, well within
the jurisdiction of the SEC.
 PO YENG CHEO vs. LIM KA YAM
Facts:
The plaintiff, Po Yeng Cheo, is the sole heir of one Po Gui Yao, deceased, and as such
Po Yeng Cheo inherited the interest left by Po Gui Yao in a business conducted in
Manila under the style of Kwong Cheong Tay. This business had been in existence in
Manila for many years prior to 1903, as a mercantile partnership, engaged in the import
and export trade; and after the death of Po Gui Yao the following seven persons were
interested therein as partners in the amounts set opposite their respective names, to
wit: Po Yeng Cheo, Chua Chi Yek, Lim Ka Yam, Lee Kom Chuen, Ley Wing Kwong,
Chan Liong Chao, Lee Ho Yuen. The manager of Kwong Cheong Tay, for many years
prior of its complete cessation from business in 1910, was Lim Ka Yam, the original
defendant herein.
Among the properties pertaining to Kwong Cheong Tay and consisting part of its assets
were ten shares of a total par value of P10,000 in an enterprise conducted under the
name of Yut Siong Chyip Konski and certain shares to the among of P1,000 in the
Manila Electric Railroad and Light Company, of Manila.
In the year 1910 Kwong Cheong Tay ceased to do business, owing principally to the
fact that the plaintiff ceased at that time to transmit merchandise from Hongkong, where
he then resided. Lim Ka Yam appears at no time to have submitted to the partners any
formal liquidation of the business, though
The trial judge rendered judgment in favor of the plaintiff, Po Yeng Cheo, to recover of
the defendant Lim Yock Tock, as administrator of Lim Ka Yam, the sum of sixty
thousand pesos (P60,000), constituting the interest of the plaintiff in the capital of
Kwong Cheong Tay, plus the plaintiff's proportional interest in shares of the Yut Siong
Chyip Konski and Manila Electric Railroad and Light Company, estimated at P11,000,
together with the costs. From this judgment the defendant appealed.
Issue:
Whether or not the award given to Po Yeng Cheo constituting his interest to the extent
of his share of the capital of Kwong Cheong Tay was proper.
Held:
No.
It was erroneous in any event to give judgment in favor of the plaintiff to the extent of his
share of the capital of Kwong Cheong Tay. The managing partner of a mercantile
enterprise is not a debtor to the shareholders for the capital embarked by them in the
business; and he can only be made liable for the capital when, upon liquidation of the
business, there are found to be assets in his hands applicable to capital account.
The only property pertaining to Kwong Cheong Tay at the time this action was brought
consisted of shares in the two concerns already mentioned of the total par value of
P11,000. Of course, if these shares had been sold and converted into money, the
proceeds, if not needed to pay debts, would have been distributable among the various
persons in interest, that is, among the various shareholders, in their respective
proportions. But under the circumstances revealed in this case, it was erroneous to give
judgment in favor of the plaintiff for his aliquot part of the par value of said shares. It is
elementary that one partner, suing alone, cannot recover of the managing partner the
value of such partner's individual interest; and a liquidation of the business is an
essential prerequisite.
Moreover, after the death of the original defendant, Lim Ka Yam, the trial court allowed
the action to proceed against Lim Yock Tock, as his administrator, and entered
judgment for a sum of money against said administrator as the accounting party. This is
an error because it is well settled that when a member of a mercantile partnership dies,
the duty of liquidating its affair devolves upon the surviving member, or members, of the
firm, not upon the legal representative of the deceased partner.
The judgment must be reversed, and the defendant will be absolved from the complaint.