Creditors of the old partnership are also the creditors of the new partnership

which continues the business

BENJAMIN YU vs. NATIONAL LABOR RELATIONS COMMISSION and JADE
MOUNTAIN PRODUCTS COMPANY LIMITED, WILLY CO, RHODORA D.
BENDAL, LEA BENDAL, CHIU SHIAN JENG and CHEN HO-FU
G.R. No. 97212 June 30, 1993
FELICIANO, J.:
FACTS: Yu ex-Assistant General Manager of the marble quarrying and export
business operated by a registered partnership called Jade Mountain Products
Co. Ltd. The partnership was originally organized with Bendals as general partners
and Chin Shian Jeng,Chen Ho-Fu and Yu Chang as limited partners; partnership
business consisted of exploitinga marble deposit in Bulacan. Yu, as Assistant
General Manager, had a monthly salary of 4000. Yu, however, actually
received only half of his
stipulated salary,
since
he had accepted the
promise of the partners that the balance would be paid when the firm shall have
secured additional operating funds from abroad. Yu actually managed the
operations and finances of thebusiness; he had overall supervision of the workers
at the marble quarry in Bulacan and took charge of the preparation of papers
relating to the exportation of the firms products. General partners Bendals sold
and transferred their interests in the partnership to Co and Emmanuel Zapanta.
Partnership was constituted solely by Co and Zapanta; it continued to use the old
firm name of Jade Mountain. Yu dismissed by the new partners.
ISSUES:
1. Whether or not the partnership which had hired Yu as Assistant General
Manager had beenextinguished and replaced by a new partnership composed of
Co and Zapanta
2. If indeed anew partnership had come into existence, whether or not Yu could
nonetheless assert his rights under his employment contract with the old
partnership as against the new partnership
HELD:
1. Yes. Changes in the membership of the partnership resulted in the dissolution
of the old partnership which had hired Yu and the emergence of a new partnership
composedof Co and Zapanta.
Art. 1828. The dissolution of a partnership is the change in the relation of thepartn
ers caused by any
partner ceasing to be associated in the carrying on as
distinguished from the winding up of the business.
Art. 1830. Dissolution is caused:(1) without violation of the agreement between
the partners;(b) by the express will of any partner, who must act in good faith,
when no definite termor particular undertaking is specified; (2) in contravention of
the agreement between the partners, where the circumstances donot permit a
dissolution under any other provision of this article, by the express will of any
partner at any time;
No winding up of affairs in this case as contemplated

in Art. 1829: on dissolution thepartnership is not terminated, but continues until

the
winding
up
of
partnership
affairs
is
completed.
The new partnership simply took over the business enterprise owned by the oldpa
rtnership, and
continued using the old name of Jade Mountain Products CompanyLimited, without
winding up the business affairs of the old partnership, paying off its
debts,liquidating and distributing its net assets, and then re-assembling the said
assets or mostof them and opening a new business enterprise.
2. Yes. the new partnership is liable for the debts of the old partnership. Yu is
entitled to enforce his claim for unpaid salaries, as well as other claims relating to
hisemployment with the previous partnership, against the new partnership. But Yu
is not entitled to reinstatement. Reason: new partnership was entitled to
appointand hire a new gen. or asst. gen. manager to run the affairs of the
business enterprisetake over. An asst. gen. manager belongs to the most senior
ranks of management and anew partnership is entitled to appoint a top manager
of its own choice and confidence. Thenon-retention of Yu did not constitute
unlawful termination. The new partnership had itsown new General Manager, Co,
the principal new owner himself. Yus old position thusbecame superfluous
or redundant. Yu is entitled to separation pay at the rate of one months pay for
each year of service thathe had rendered to the old partnership, a fraction of at
least 6 months being considered asa whole year.