( 1st part hanna) (wala pa)

2. right to accounting art. 1842; 1806, 1807, 1809;

Art. 1842. 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. (n)
Art. 1806. Partners shall render on demand true and full information of all things affecting the partnership to any partner
or the legal representative of any deceased partner or of any partner under legal disability. (n)
Art. 1807. Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by
him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation
of the partnership or from any use by him of its property. (n)
Art. 1809. Any partner shall have the right to a formal account as to partnership affairs:
(1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners;
(2) If the right exists under the terms of any agreement;
(3) As provided by article 1807;
(4) Whenever other circumstances render it just and reasonable. (n)
Emnace vs CA, 370 scra 435 (2001)
FACTS: Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a business concern 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 Divinagracias
withdrawal from the partnership. Among the assets to be distributed were five (5) fishing boats, six (6) vehicles, two (2)
parcels of land located at Sto. Nio and Talisay, Negros Occidental, and cash deposits in the local branches of the Bank of
the Philippine Islands and Prudential Bank.
Throughout the existence of the partnership, and even after Vicente Tabanaos untimely demise in 1994, petitioner
failed to submit to Tabanaos heirs any statement of assets and liabilities of the partnership, and to render an accounting of
the partnerships finances. Petitioner also reneged on his promise to turn over to Tabanaos heirs the deceaseds 1/3 share in
the total assets of the partnership, amounting to P30,000,000.00, or the sum of P10,000,000.00, despite formal demand for
payment thereof.
Consequently, Tabanaos heirs, respondents herein, filed against petitioner an action for accounting, payment of
shares, division of assets and damages
Petitioner filed a motion to dismiss the complaint on the grounds of improper venue, lack of jurisdiction over the
nature of the action or suit, and lack of capacity of the estate of Tabanao to sue. On August 30, 1994, the trial court denied
the motion to dismiss. It held that venue was properly laid because, while realties were involved, the action was directed
against a particular person on the basis of his personal liability; hence, the action is not only a personal action but also an
action in personam. As regards petitioners argument of lack of jurisdiction over the action because the prescribed docket
fee was not paid considering the huge amount involved in the claim, the trial court noted that a request for accounting was
made in order that the exact value of the partnership may be ascertained and, thus, the correct docket fee may be paid.
Finally, the trial court held that the heirs of Tabanao had a right to sue in their own names, in view of the provision of
Article 777 of the Civil Code, which states that the rights to the succession are transmitted from the moment of the death
of the decedent.
The following day, respondents filed an amended complaint, incorporating the additional prayer that petitioner be
ordered to sell all (the partnerships) assets and thereafter pay/remit/deliver/surrender/yield to the plaintiffs their
corresponding share in the proceeds thereof. In due time, petitioner filed a manifestation and motion to dismiss. arguing
that the trial court did not acquire jurisdiction over the case due to the plaintiffs failure to pay the proper docket fees.
Further, in a supplement to his motion to dismiss. petitioner also raised prescription as an additional ground warranting the
outright dismissal of the complaint.
On June 15, 1995, the trial court issued an Order, denying the motion to dismiss inasmuch as the grounds raised therein
were basically the same as the earlier motion to dismiss which has been denied. 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. Moreover, an action based on a written contract
prescribes in ten years from the time the right of action accrues.
Petitioner filed a petition for certiorari before the Court of Appeals.
On August 8, 1996, the Court of Appeals rendered the assailed decision, [if !supportFootnotes][12][endif] dismissing the petition
for certiorari, upon a finding that no grave abuse of discretion amounting to lack or excess of jurisdiction was committed
by the trial court in issuing the questioned orders denying petitioners motions to dismiss.
Not satisfied, petitioner filed the instant petition for review, raising the same issues resolved by the Court of

Appeals, namely:
I. Failure to pay the proper docket fee;
II. Parcel of land subject of the case pending before the trial court is outside the said courts territorial jurisdiction;
III. Lack of capacity to sue on the part of plaintiff heirs of Vicente Tabanao; and
IV. Prescription of the plaintiff heirs cause of action.
ISSUE:

Whether the venue was improperly laid since the action is a real action involving a parcel of land that
is located outside the territorial jurisdiction of the court a quo

Whether the surviving spouse of Vicente Tabanao has legal capacity to sue since she was never
appointed as administratrix or executrix of his estate
Whether or not action has prescribed. - RELEVANT

3
HELD:

1.
No. The records indubitably show that respondents are asking that the assets of the partnership be accounted for,
sold and distributed according to the agreement of the partners. The fact that two of the assets of the partnership are
parcels of land does not materially change the nature of the action. It is an action in personam because it is an action
against a person, namely, petitioner, on the basis of his personal liability and not an action in rem where the action is
against the thing itself instead of against the person. In fact, it is only incidental that part of the assets of the partnership
under liquidation happen to be parcels of land.
It also seeks the enforcement of, and petitioner's compliance with, the contract that the partners executed to formalize the
partnership's dissolution, as well as to implement the liquidation and partition of the partnership's assets. Clearly, it is a
personal action that, in effect, claims a debt from petitioner and seeks the performance of a personal duty on his part. In
fine, respondents' complaint seeking the liquidation and partition of the assets of the partnership with damages is a
personal action which may be filed in the proper court where any of the parties reside. As it is, venue in this case was
properly laid and the trial court correctly ruled so.
2. Yes. The surviving spouse does not need to be appointed as executrix or administratrix of the estate before she can file
the action. She and her children are complainants in their own right as successors of Vicente Tabanao. From the very
moment of Vicente Tabanao's death, his rights insofar as the partnership was concerned were transmitted to his heirs, for
rights to the succession are transmitted from the moment of death of the decedent. Whatever claims and rights Vicente
Tabanao had against the partnership and petitioner were transmitted to respondents by operation of law, more particularly
by succession, which is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the
value of the inheritance of a person are transmitted. Moreover, respondents became owners of their respective hereditary
shares from the moment Vicente Tabanao died.
3. The three (3) final stages of a partnership are: (1) dissolution; (2) winding-up; and (3) termination.[36] 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.[37] For as long as the
partnership exists, any of the partners may demand an accounting of the partnerships business. Prescription of the said
right starts to run only upon the dissolution of the partnership when the final accounting is done.
Contrary to petitioners protestations that respondents right to inquire into the business affairs of the partnership
accrued in 1986, prescribing four (4) years thereafter, prescription had not even begun to run in the absence of a final
accounting. 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.
Applied in relation to Articles 1807 and 1809, which also deal with the duty to account, the above-cited provision
states that the right to demand an accounting accrues 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 partnerships business and assets. Hence, the said action is
not barred by prescription.
In fine, the trial court neither erred nor abused its discretion when it denied petitioners motions to dismiss.
Likewise, the Court of Appeals did not commit reversible error in upholding the trial courts orders. Precious time has been
lost just to settle this preliminary issue, with petitioner resurrecting the very same arguments from the trial court all the

way up to the Supreme Court. The litigation of the merits and substantial issues of this controversy is now long overdue
and must proceed without further delay.
Dan Fue Leung vs IAC
FACTS: This case originated from a complaint filed by respondent Leung Yiu with the then Court of First Instance of
Manila, Branch II to recover the sum equivalent to twenty-two percent (22%) of the annual profits derived from the
operation of Sun Wah Panciteria since October, 1955 from petitioner Dan Fue Leung.
The Sun Wah Panciteria, a restaurant, located at Florentino Torres Street, Sta. Cruz, Manila, was established
sometime in October, 1955. It was registered as a single proprietorship and its licenses and permits were issued to and in
favor of petitioner Dan Fue Leung as the sole proprietor. Respondent Leung Yiu adduced evidence during the trial of the
case to show that Sun Wah Panciteria was actually a partnership and that he was one of the partners having contributed
P4,000.00 to its initial establishment.
The private respondents evidence is summarized as follows:
About the time the Sun Wah Panciteria started to become operational, the private respondent gave P4,000.00 as
his contribution to the partnership. This is evidenced by a receipt identified as Exhibit "A" wherein the petitioner
acknowledged his acceptance of the P4,000.00 by affixing his signature thereto. The receipt was written in
Chinese characters so that the trial court commissioned an interpreter in the person of Ms. Florence Yap to
translate its contents into English. Florence Yap issued a certification and testified that the translation to the best
of her knowledge and belief was correct. The private respondent identified the signature on the receipt as that of
the petitioner (Exhibit A-3) because it was affixed by the latter in his (private respondents') presence. Witnesses
So Sia and Antonio Ah Heng corroborated the private respondents testimony to the effect that they were both
present when the receipt (Exhibit "A") was signed by the petitioner. So Sia further testified that he himself
received from the petitioner a similar receipt (Exhibit D) evidencing delivery of his own investment in another
amount of P4,000.00 An examination was conducted by the PC Crime Laboratory on orders of the trial court
granting the private respondents motion for examination of certain documentary exhibits. The signatures in
Exhibits "A" and 'D' when compared to the signature of the petitioner appearing in the pay envelopes of
employees of the restaurant, namely Ah Heng and Maria Wong (Exhibits H, H-1 to H-24) showed that the
signatures in the two receipts were indeed the signatures of the petitioner.
Furthermore, the private respondent received from the petitioner the amount of P12,000.00 covered by the
latter's Equitable Banking Corporation Check No. 13389470-B from the profits of the operation of the restaurant
for the year 1974. Witness Teodulo Diaz, Chief of the Savings Department of the China Banking Corporation
testified that said check (Exhibit B) was deposited by and duly credited to the private respondents savings account
with the bank after it was cleared by the drawee bank, the Equitable Banking Corporation. Another witness Elvira
Rana of the Equitable Banking Corporation testified that the check in question was in fact and in truth drawn by
the petitioner and debited against his own account in said bank. This fact was clearly shown and indicated in the
petitioner's statement of account after the check (Exhibit B) was duly cleared. Rana further testified that upon
clearance of the check and pursuant to normal banking procedure, said check was returned to the petitioner as the
maker thereof.
The petitioner denied having received from the private respondent the amount of P4,000.00. He contested and impugned
the genuineness of the receipt (Exhibit D). His evidence is summarized as follows:
The petitioner did not receive any contribution at the time he started the Sun Wah Panciteria. He used his savings from his
salaries as an employee at Camp Stotsenberg in Clark Field and later as waiter at the Toho Restaurant amounting to a little
more than P2,000.00 as capital in establishing Sun Wah Panciteria. To bolster his contention that he was the sole owner of
the restaurant, the petitioner presented various government licenses and permits showing the Sun Wah Panciteria was and
still is a single proprietorship solely owned and operated by himself alone. Fue Leung also flatly denied having issued to
the private respondent the receipt (Exhibit G) and the Equitable Banking Corporation's Check No. 13389470 B in the
amount of P12,000.00 (Exhibit B).
As between the conflicting evidence of the parties, the trial court gave credence to that of the plaintiffs. Hence, the court
ruled in favor of the private respondent.
The private respondent filed a verified motion for reconsideration in the nature of a motion for new trial and, as
supplement to the said motion, he requested that the decision rendered should include the net profit of the Sun Wah
Panciteria which was not specified in the decision, and allow private respondent to adduce evidence so that the said
decision will be comprehensively adequate and thus put an end to further litigation.
The motion was granted over the objections of the petitioner.
The petitioner appealed the trial court's amended decision to the then Intermediate Appellate Court. The questioned
decision was further modified by the appellate court.

Later, the appellate court, in a resolution, modified its decision and affirmed the lower court's decision. The dispositive
portion of the resolution reads:
In the same resolution, the motion for reconsideration filed by petitioner was denied.
Both the trial court and the appellate court found that the private respondent is a partner of the petitioner in the
setting up and operations of the panciteria. While the dispositive portions merely ordered the payment of the respondents
share, there is no question from the factual findings that the respondent invested in the business as a partner. Hence, the
two courts declared that the private petitioner is entitled to a share of the annual profits of the restaurant. The petitioner,
however, claims that this factual finding is erroneous. Thus, the petitioner argues: "The complaint avers that private
respondent extended 'financial assistance' to herein petitioner at the time of the establishment of the Sun Wah Panciteria,
in return of which private respondent allegedly will receive a share in the profits of the restaurant. The same complaint did
not claim that private respondent is a partner of the business. It was, therefore, a serious error for the lower court and the
Hon. Intermediate Appellate Court to grant a relief not called for by the complaint. It was also error for the Hon.
Intermediate Appellate Court to interpret or construe 'financial assistance' to mean the contribution of capital by a partner
to a partnership;" (p. 75, Rollo)
In essence, the private respondent alleged that when Sun Wah Panciteria was established, he gave P4,000.00 to the
petitioner with the understanding that he would be entitled to twenty-two percent (22%) of the annual profit derived from
the operation of the said panciteria. These allegations, which were proved, make the private respondent and the petitioner
partners in the establishment of Sun Wah Panciteria because Article 1767 of the Civil Code provides that "By the contract
of partnership two or more persons bind themselves to contribute money, property or industry to a common fund, with the
intention of dividing the profits among themselves".
Therefore, the lower courts did not err in construing the complaint as one wherein the private respondent asserted
his rights as partner of the petitioner in the establishment of the Sun Wah Panciteria, notwithstanding the use of the term
financial assistance therein. We agree with the appellate court's observation to the effect that "... given its ordinary
meaning, financial assistance is the giving out of money to another without the expectation of any returns therefrom'. It
connotes an ex gratia dole out in favor of someone driven into a state of destitution. But this circumstance under which
the P4,000.00 was given to the petitioner does not obtain in this case.' (p. 99, Rollo) The complaint explicitly stated that
"as a return for such financial assistance, plaintiff (private respondent) would be entitled to twenty-two percentum (22%)
of the annual profit derived from the operation of the said panciteria.' (p. 107, Rollo) The well-settled doctrine is that the
'"... nature of the action filed in court is determined by the facts alleged in the complaint as constituting the cause of
action." (De Tavera v. Philippine Tuberculosis Society, Inc., 113 SCRA 243; Alger Electric, Inc. v. Court of Appeals, 135
SCRA 37).
ISSUE: Whether or not the private respondent is a partner of the petitioner in the establishment of Sun Wah Panciteria.
HELD: YES. Leung Yiu alleged that when the Panciteria was established, he gave P4,000 with the understanding that he
would be entitled to 22% of the annual profit . This makes them partners in the establishment of Sun Wah Panciteria
because NCC 1767 provides that "By the contract of partnership two or more persons bind themselves to contribute
money, property or industry to a common fund, with the intention of dividing the profits among themselves.
The petitioner raises the issue of prescription. He argues: The Hon. Respondent Intermediate Appellate Court gravely
erred in not resolving the issue of prescription in favor of petitioner. The alleged receipt is dated October 1, 1955 and the
complaint was filed only on July 13, 1978 or after the lapse of twenty-two (22) years, nine (9) months and twelve (12)
days. From October 1, 1955 to July 13, 1978, no written demands were ever made by private respondent.
The petitioner's argument is based on Article 1144 of the Civil Code which provides:
Art. 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
in relation to Article 1155 thereof which provides:
Art. 1155. The prescription of actions is interrupted when they are filed before the court, when there is a written
extra-judicial demand by the creditor, and when there is any written acknowledgment of the debt by the debtor.'
The argument is not well-taken.
The private respondent is a partner of the petitioner in Sun Wah Panciteria. The requisites of a partnership which are 1)
two or more persons bind themselves to contribute money, property, or industry to a common fund; and 2) intention on the
part of the partners to divide the profits among themselves (Article 1767, Civil Code; Yulo v. Yang Chiao Cheng, 106 Phil.
110)-have been established. As stated by the respondent, a partner shares not only in profits but also in the losses of the
firm. If excellent relations exist among the partners at the start of business and all the partners are more interested in
seeing the firm grow rather than get immediate returns, a deferment of sharing in the profits is perfectly plausible. It
would be incorrect to state that if a partner does not assert his rights anytime within ten years from the start of operations,

such rights are irretrievably lost. The private respondent's cause of action is premised upon the failure of the petitioner to
give him the agreed profits in the operation of Sun Wah Panciteria. In effect the private respondent was asking for an
accounting of his interests in the partnership.
It is Article 1842 of the Civil Code in conjunction with Articles 1144 and 1155 which is applicable. Article 1842
states:
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 or any agreement to the contrary.
Regarding the prescriptive period within which the private respondent may demand an accounting, Articles 1806,
1807, and 1809 show that the right to demand an accounting exists as long as the partnership exists. Prescription begins to
run only upon the dissolution of the partnership when the final accounting is done.
ILDEFONSO DE LA ROSA, administrator of the intestate estate of the deceased Go-Lio, plaintiffappellant, vs. ENRIQUE ORTEGA GO-COTAY, defendant-appellant.
Facts:During the Spanish regime the Chinamen Go-Lio and Vicente Go-Sengco formed a society for the Purchase and

sale of articles of commerce, and for this purpose they opened a store in the town of San Isidro, Nueva Ecija. Later GoLio went to China. Vicente Go-Sengco died and his son Enrique Ortega Go-Cotay took charge of the business. Go-Lio
died in China in October, 1916, leaving a widow and three children, one of whom came to the Philippines and filed a
petition for the appointment of Ildefonso de la Rosa as administrator of the intestate estate of his deceased father,
which petition was granted by the Court of First Instance of Nueva Ecija. Ildefonso de la Rosa, in his capacity as
administrator of the intestate estate of the deceased Go-Lio, requested Enrique Ortega Go-Cotay to wind up the
business and to deliver to him the portion corresponding to the deceased Go-Lio. Enrique Ortega Go-Cotay denied the
petition, alleging that the business was his exclusively. In view of this denial, Ildefonso de la Rosa, as administrator, on
July 2, 1918, filed with the Court of First Instance of Nueva Ecija a complaint against Enrique Ortega Go-Cotay in which
he prayed that the defendant be sentenced to deliver to the plaintiff one-half of all the property of the partnership
formed by Go-Lio and Vicente Go-Sengco, with costs against the defendant, and that the said plaintiff be appointed
receiver for the property of the said partnership.
Defendant, in answering the complaint, denied each and every allegation thereof, and as a special defense
alleged that more than ten years had elapsed before the filing of the complaint, and prayed that he be absolved
therefrom, with costs against the plaintiff.
On August 3, 1918, the Court of First Instance of Nueva Ecija appointed Justo Cabo-Chan, Francisco T.
Tantengco and Go-Tiao, as commissioners to make an inventory, liquidate and determine the one-half belonging to
the plaintiff of all of the property of the store in question.
On August 9, 1918, in order to prevent Justo Cabo-Chan from assuming the office of receiver, pursuant to
the order of the court dated August 3, 1918, the defendant filed a bond in the sum of P10,000.
Under the date of November 15, 1920, the said commissioners submitted to the court their report, showing
the net profits of the business between the period from 1913 to 1917, which amounted to the total sum of
P25,038.70 and consisted of the following items:
Profits for the year 1913 - 2,979.00
Profits for the year 1914 - 3,046.94
Profits for the year 1915 - 4,103.07
Profits for the year 1916 - 4,736.00
Profits for the year 1917 - 10,174.69
Total 25,038.70
The record having been remanded and two of the commissioners having filed their resignations, the court
below appointed again Justo Cabo-Chan suggested by the defendant and Cua Poco suggested by the plaintiff, as
commissioners, who submitted two reports, one prepared by commissioners Tantengco and Cua Poco, and the
other by commissioner Justo Cabo-Chan. The former stated in their report that they had examined the books for
the years 1919 to 1922, for the reason, they said, that they appeared "to have been prepared by some person in a
careful way at a certain time." The latter commissioner examined all the books and stated in his report that the
business had suffered a net loss amounting to the sum of P89,099.22.
After trial and the parties having introduced all their evidence, the lower court, by order of December 13,
1924, disapproved the report of the commissioners Tantengco and Cua Poco, but approved, with slight
modifications, the report of commissioner Cabo-Chan, holding that the result of the liquidation showed liabilities to
the amount of P89,690.45 in view of which plaintiff had nothing to recover from defendant, as there was no profit
to divide.
Issue:

How should the accounting and liquidation of partnership assets and profits be done when the relevant facts
for its computation are not available?

Held:

From the evidence it appears that the partnership capital was P4,779.39, and the net profits until the year
1915 amounted to P5,551.40. Because some books of account had been destroyed by white ants (anay), the
liquidation of the business of the partnership for the period from 1906 to 1912 could not be made. But knowing

the net profit for the period between 1904 and 1905, which is P5,551.40, and finding the average of
the profits for each of these years, which is P2,775.70; and knowing the net profit for the year 1913,
which is P2,979, we can find the average between the net profit for 1905, namely, P2,275.70, and the
net profit for the said year 1913, namely, P2,979. Said average is the sum of P2,877.35, which may be
considered as the average of the net annual profits for the period between 1906 and 1912, which in
seven years make a total of P20,141.45. The assets of the partnership, as well as the value of its property,
could not be determined when making the liquidation because there was no inventory and for this reason it was
not possible to determine the capital of the partnership. The plaintiff, however, seems to be agreeable to
considering the initial partnership capital as the capital at the time of the winding up of the business.
As to the first semester of 1918, during which time the defendant had been managing the business of the
partnership as a member and manager, taking into account that the profits had been on the increase, said profits
having reached the amount of P10,174.69 in the year 1917, it would not be an exaggeration to estimate that the
profits for 1918 would have been at least the same as the profits of 1917; so that for the first half of 1918, the
profit would be P5,087.34.
In conclusion we have the following profits of the business of this partnership now in liquidation, to wit:
Capital of partnership 4,779.39
Profits until 190 5,651.40
Profits 1906-1912 20,141.4
Profits 1913-1917 25,038.70
Profits first semester 1918 6,087.34
Total 60,598.28
One-half of this total, that is, P30,299.14 pertains to the plaintiff as administrator of the intestate estate of
Go-Lio.

3.
right
to
damages
for
wrongful
dissolution

art.
1837,
2nd
par.,
(1)
(b)
4. right to continue business on wrongful dissolution art. 1837, 2nd par.
ART. 1837. When dissolution is caused in any way, except in contravention of the partnership agreement, each partner, as
against his co-partners and all persons claiming through them in respect of their interests in the partnership, unless otherwise
agreed, may have the partnership property applied to discharge its liabilities, and the surplus applied to pay in cash the net amount
owing to the respective partners. But if dissolution is caused by expulsion of a partner, bona fi de under the partnership agreement
and if the expelled partner is discharged from all partnership liabilities, either by payment or agreement under the second paragraph
of article 1835, he shall receive in cash only the net amount due him from the partnership.

When dissolution is caused in contravention of the partnership agreement, the rights of

the partners shall be as follows:
(1) Each partner who has not caused dissolution wrongfully shall have:
(a) All the rights specified in the first paragraph of this article, and
(b) The right, as against each partner who has caused the dissolution wrongfully, to damages
for breach of the agreement.
(2) The partners who have not caused the dissolution wrongfully, if they all desire to continue the business in the same name either
by themselves or jointly with others, may do so, during the agreed term for the partnership and for that purpose may possess the
partnership property, provided they secure the payment by bond approved by the court, or pay to any partner who has caused the
dissolution wrongfully, the value of his interest in the partnership at the dissolution, less any damages recoverable under the second
paragraph, No. 1(b) of this article, and in like manner indemnify him against all present or future partnership liabilities.
(3) A partner who has caused the dissolution wrongfully shall have:
(a) If the business is not continued under the provisions of the second paragraph, No. 2, all the rights of a partner under the fi rst
paragraph, subject to liability for damages in the second paragraph, No. 1(b), of this article.
(b) If the business is continued under the second paragraph, No. 2, of this article, the right as against his co-partners and all claiming
through them in respect of their interests in the partnership, to have the value of his interest in the partnership, less any damage
caused to his co-partners by the dissolution, ascertained and paid to him in cash, or the payment secured by a bond approved by the
court and to be released from all existing liabilities of the partnership; but in ascertaining the value of the partners interest, the value
of the good will of the business shall not be considered.
Right of partner to application of partnership property on dissolution
The liquidation of the assets of the partnership following its dissolution is governed by various provisions of the Civil Code
such as Article 1837. However, an agreement of the partners, like any other contract, is binding among them and normally takes
precedence to the extent applicable over the general provisions of the Civil Code. (Ortega vs. Court of Appeals, 245 SCRA 529
[1995].)
The objectives of Article 1837 are, in the main, to provide for the payment of the partner who leaves the firm, and to
indemnify him against existing or possible future liability. (Teller, op. cit., p.110.)
The right of every partner, on a dissolution, against the other partners and persons claiming through them in respect of their interests
as partners, to have the partnership property applied to discharge partnership liabilities and the surplus assets, if any, distributed in
cash to the respective partners, after deducting what may be due to the firm from them as partners, constitutes what is known as the
partners lien. (31 Words and Phrases 380.) The extent of this right depends on whether the dissolution is caused without violation
of the partnership agreement, or in violation of the partnership agreement. The guilty partner is given by law certain rights.
Rights where dissolution not in contraventionof agreement.
Unless otherwise agreed, the rights of each partner in case of dissolution without violation of partnership agreement are as
follows:
(1) To have the partnership property applied to discharge the liabilities of the partnership; and
(2) To have the surplus, if any, applied to pay in cash the net amount owing to the respective partners.
When the dissolution is caused by expulsion of a partner bona fide (so without violation of the partnership agreement), such expelled
partner may be discharged from all partnership liabilities either by payment or by an agreement between him, the partnership
creditors, and the other partners. (Art. 1835.) He shall have the right only to receive in cash the net amount due him from the
partnership.

If the dissolution is proper or rightful, no partner is liable for any loss sustained as a result of the dissolution.
Rights where dissolution in contravention of agreement.
When the partnership is dissolved in violation of the partnership agreement, the rights of a partner vary depending upon
whether he is the innocent or the guilty partner.
(1) Rights of partner who has not caused the dissolution wrongfully:
(a) To have partnership property applied for the payment of its liabilities and to receive in cash his share of the surplus;
(b) To be indemnified for damages caused by the partner guilty of wrongful dissolution;
(c) To continue the business in the same name during the agreed term of the partnership, by themselves or jointly with others; and
(d) To possess partnership property should they decide to continue the business.
(2) Rights of partner who has wrongfully caused the dissolution:
(a) If the business is not continued by the other partners, to have the partnership property applied to discharge its liabilities and to
receive in cash his share of the surplus less damages caused by his wrongful dissolution.
(b) If the business is continued:
1) To have the value of his interest in the partnership at the time of the dissolution, less any damage caused by the
dissolution to his co-partners, ascertained and paid in cash or secured by bond approved by the court; and
2) To be released from all existing and future liabilities of the partnership.
Note that the innocent partners have more rights than the guilty partners and that the latter are made liable for damages caused by
their wrongful dissolution, and in ascertaining the value of their interest, the value of the goodwill of the business is not considered,
obviously as a penalty for their bad faith. If the innocent partners decide to buy the guilty partners interest, they may continue the
partnership business in the same firm name. The guilty partner is entitled to his share of the appraised value of the business less the
damages recoverable by the innocent partners. If they decide otherwise, they may wind up the partnership business.

(4th part edward) (wala pa)

8. Liability of person or partnership continuing business to dissolved partnerships creditors art. 1840, (1),
(2), (3), (4), (5), (6)
Art. 1840. In the following cases creditors of the dissolved partnership are also
creditors of the person or partnership continuing the business:
(1) When any new partner is admitted into an existing partnership, or when any
partner retires and assigns (or the representative of the deceased partner assigns)
his rights in partnership property to two or more of the partners, or to one or more of
the partners and one or more third persons, if the business is continued without
liquidation of the partnership affairs;
(2) When all but one partner retire and assign (or the representative of a deceased
partner assigns) their rights in partnership property to the remaining partner, who
continues the business without liquidation of partnership affairs, either alone or with
others;
(3) When any partner retires or dies and the business of the dissolved partnership is
continued as set forth in Nos. 1 and 2 of this article, with the consent of the retired
partners or the representative of the deceased partner, but without any assignment
of his right in partnership property;
(4) When all the partners or their representatives assign their rights in partnership
property to one or more third persons who promise to pay the debts and who
continue the business of the dissolved partnership;
(5) When any partner wrongfully causes a dissolution and the remaining partners
continue the business under the provisions of article 1837, second paragraph, No. 2,
either alone or with others, and without liquidation of the partnership affairs;
(6) When a partner is expelled and the remaining partners continue the business
either alone or with others without liquidation of the partnership affairs.
The liability of a third person becoming a partner in the partnership continuing the
business, under this article, to the creditors of the dissolved partnership shall be
satisfied out of the partnership property only, unless there is a stipulation to the
contrary.
When the business of a partnership after dissolution is continued under any
conditions set forth in this article the creditors of the dissolved partnership, as
against the separate creditors of the retiring or deceased partner or the
representative of the deceased partner, have a prior right to any claim of the retired
partner or the representative of the deceased partner against the person or
partnership continuing the business, on account of the retired or deceased partner's
interest in the dissolved partnership or on account of any consideration promised for
such interest or for his right in partnership property.

Nothing in this article shall be held to modify any right of creditors to set aside any
assignment on the ground of fraud.
The use by the person or partnership continuing the business of the partnership
name, or the name of a deceased partner as part thereof, shall not of itself make the
individual property of the deceased partner liable for any debts contracted by such
person or partnership. (n)
Dissolution of a partnership by change in membership.
(1) Causes. The change in the relation of the partners resulting in the dissolution of the
partnership may take place when a new partner is admitted; or when a partner retires; or dies; or
when a partner withdraws; or is expelled from the partnership; or when the other partners assign
their rights to the sole remaining partner (Bernardo vs. Pascual, 109 Phil. 936 [1960].); or when
all the partners assign their rights in partnership property to third persons.
Any change in membership dissolves a partnership and creates a new one.
(2) Continuation of partnership without liquidation. A partnership dissolved by any of these
happenings need not undergo the procedure relating to dissolution and winding of its business
affairs. The remaining partners (and/or new partners) may elect to continue the business of the
old partnership without interruption by simply taking over the business enterprise owned by the
preceding partner and continuing the use of the old name. 10 The rights and obligations of the
partners as among themselves in case of such continuation are set forth in Article 1837.
As the partnership is the result of a contract, a change in the parties to the contract necessarily
results in a new contract. Hence, a change in membership of a partnership creates a new
partnership upon the continuation of the business by the partners.
Rights of creditors of dissolved partnership which is continued.
Article 1840 deals with the rights of creditors when the partnership is dissolved by a change of
membership and its business is continued (Art. 1837[2].) by a former partner, either alone or
with new partners, without liquidation of partnership affairs.
(1) Equal rights of dissolved and new partnership creditors. In such case, the law makes the
creditors of the dissolved partnership also creditors of the persons or partnership continuing the
business. In other words, both classes of creditors, the old and the new, are treated alike, being
given equal rights in partnership property. The purpose of the law is to maintain the preferential
rights of the old creditors to the partnership property as against the separate creditors of the
partners. It is immaterial to determine under which one or more of the six (6) cases mentioned in
Article 1840 the dissolution falls the creditors of the old partnership are also the creditors of
the new partnership which continues the business of the old one without liquidation of the
partnership affairs. (Yu vs. National Labor Relations Commission, 224 SCRA 75 [1993].)
(2) Liability of persons continuing business. Note that under paragraph 2, the liability of the
new or incoming partners shall be satisfied out of partnership property only unless there is a
stipulation to the contrary. (Art. 1826.) Note that paragraph 1, No. 4, applies only when the third
person continuing the business of the dissolved partnership promises to pay the debts of the
partnership. Otherwise, creditors of the dissolved partnership have no claim on the person or
partnership continuing the business or its property unless the assignment can be set aside as a
fraud on creditors under paragraph 4.
(3) Prior right of dissolved partnership creditors as against purchaser.
When a retiring or deceased partner has sold his interest in the partnership without a final
settlement with creditors of the partnership, such creditors have an equitable lien on the
consideration paid to the retiring or deceased partner by the purchaser thereof. This lien comes
ahead of the claims of the separate creditors of the retired or deceased partner. Application of
the rule set forth in paragraph 3 does and sometimes leaves the retiring or deceased partner
with a continuing liability the exact duration of which is not specified except that it shall apply
only in favor of those creditors at the time of the retirement or death of a partner. (Barrett &
Seago, op. cit., p. 480.)
Continuation of dissolved partnership business by another company.
(1) When corporation deemed a mere continuation of prior partnership.

 The weight of authority supports the view that where a corporation was formed by, and
consisted of, members of a partnership whose business and property was conveyed and
transferred to the corporation for the purpose of continuing its business, in payment for which
corporate capital stock was issued, such corporation is presumed to have assumed partnership
debts and is prima facie liable therefor.
The reason for the rule is that the members of the partnership may be said to have simply put a
new coat, or taken on a corporate cloak, and the corporation is a mere continuation of the
partnership. (Laguna Transportation Co., Inc. vs. Social Security System, 107 Phil. 833 [1960].)
(2) When obligations of company bought out considered assumed by vendee. In some cases,
when one company buys out another and continues the business of the latter company, the
buyer may be said to assume the obligations of the company bought out when said obligations
are not of considerable amount or value especially when incurred in the ordinary course, and
when the business of the latter is continued.
However, when said obligation is of extraordinary value, and the company was bought out not to
continue its business but to stop its operation in order to eliminate competition, it cannot be said
that the vendee assumed all the obligations of the rival company. (Phil. Air Lines, Inc. vs.
Balinguit, 99 Phil. 486 [1956].)
Exemption from liability of individual property of deceased partner.
(1) Debts incurred by person or partnership continuing business.
The last paragraph of Article 1840 primarily deals with the exemption from liability to creditors
of a dissolved partnership of the individual property of the deceased partner for debts contracted
by the person or partnership which continues the business using the partnership name or the
name of the deceased partner as part thereof. What the law contemplates is a hold-over
situation preparatory to formal reorganization.
(2) Commercial partnership continued after dissolution. Article 1840 treats more of a
commercial partnership with goodwill to protect rather than a professional partnership (see Art.
1767, par. 2.) with no saleable goodwill but whose reputation depends on the personal
qualifications of its individual members. (In the Matter of the Petition for Authority to Continue
Use of the Firm Name Sycip, Salazar, etc./Ozaeta, Romulo, etc., 92 SCRA 1 [1979].)
As a general rule, upon the dissolution of a commercial partnership, the succeeding partners or
parties have the right to carry on the business under the old name, in the absence of stipulation
forbidding it, since the name of a commercial partnership is a partnership asset inseparable from
the goodwill of the firm. On the other hand, a professional partnership the reputation of which
depends on the individual skill of the members, such as partnerships of attorneys or physicians,
has no goodwill to be distributed as a firm asset on its dissolution, however intrinsically valuable
such skill and reputation may be, especially where there is no provision in the partnership
agreement relating to goodwill as an asset. (Ibid., citing 60 Am. Jur. 2d 115.)
E. Liquidation and distribution of assets
1. general rules art. 1839

Art. 1839. In settling accounts between the partners after dissolution, the following
rules shall be observed, subject to any agreement to the contrary:
(1)
The
assets
of
the
partnership
are:
(a) The partnership property,
(b) The contributions of the partners necessary for the payment of all the liabilities
specified in No. 2.
(2) The liabilities of the partnership shall rank in order of payment, as follows:
(a) Those owing to creditors other than partners,
(b) Those owing to partners other than for capital and profits,
(c) Those owing to partners in respect of capital,
(d) Those owing to partners in respect of profits.

(3) The assets shall be applied in the order of their declaration in No. 1 of this article
to the satisfaction of the liabilities.
(4) The partners shall contribute, as provided by article 1797, the amount necessary
to satisfy the liabilities.
(5) An assignee for the benefit of creditors or any person appointed by the court shall
have the right to enforce the contributions specified in the preceding number.
(6) Any partner or his legal representative shall have the right to enforce the
contributions specified in No. 4, to the extent of the amount which he has paid in
excess of his share of the liability.
(7) The individual property of a deceased partner shall be liable for the contributions
specified in No. 4.
(8) When partnership property and the individual properties of the partners are in
possession of a court for distribution, partnership creditors shall have priority on
partnership property and separate creditors on individual property, saving the rights
of lien or secured creditors.
(9) Where a partner has become insolvent or his estate is insolvent, the claims
against
his
separate
property
shall
rank
in
the
following
order:
(a) Those owing to separate creditors;
(b) Those owing to partnership creditors;
(c) Those owing to partners by way of contribution. (n)
Liquidation and distribution of assets of dissolved partnership.
The process of winding up, where the business of the dissolved partnership is not continued,
consists in liquidating partnership property (turning it into cash), paying outstanding debts,
collecting outstanding receivables, distributing the proceeds, and any other actions required to
bring partnership business to a close. Until the partnership accounts are determined, it cannot be
determined how much any of the partners is entitled, if at all.
Partners severally have the implied authority to sell partnership property and to collect
obligations due to the partnership. These powers may be delegated to one or more of their
number as liquidating partner or partners.
The law, however, does not require a partnership to convert all its assets into cash before making
a distribution to the partners.
It is within the power of the court to order a distribution of its assets in cash, property, or a
combination of both.
(1) Property which may be made available for distribution includes, in addition to the partnership
property, contributions which may be collected from the partners so far as may be necessary for
the payment of partnership obligations to creditors and to partners. (Crane, op. cit., pp. 476477.)
(2) A partner has a right to have debts owing to the partnership from his co-partners deducted
from their respective shares. This right is called equitable lien or quasi-lien in American law.
It exists only when the affairs of the partnership are rounded up and the shares of the partners
are computed after dissolution.
(3) Each partner is entitled to a share in the surplus property of the partnership, if any, in
proportion to his interest in the partnership. (see Art. 1812.) This rule is called the partners lien
law in American law.
Rules in settling accounts between partners after dissolution.
Article 1839 sets forth a priority system for the distribution of partnership property (see Art.
1810.) and individual property when a partnership is dissolved to those entitled thereto.
The following rules as to distribution are subject to variation by agreement of the partners, either
in their original partnership agreement or in a dissolution agreement (Ibid.), subject to the rights
of partnership creditors.
(1) Assets of the partnership. They are:
(a) Partnership property (including goodwill); and
(b) Contributions of the partners necessary for the payment of all liabilities in accordance with
Article 1797.

(2) Order of application of the assets. The partnership assets shall be applied to the
satisfaction of the liabilities of the partnership in the following order:
(a) First, those owing to partnership creditors;
(b) Second, those owing to partners other than for capital and profits such as loans given by the
partners or advances for business expenses;
(c) Third, those owing for the return of the capital contributed by the partners; and
(d) Finally, if any partnership assets remain, they are distributed as profits to the partners in the
proportion in which profits are to be shared.
(3) Loans and advances made by partners. Loans and advances made by partners to the
partnership are not capital.
Nor are undivided profits, unless otherwise agreed. Capital contributions are returnable only on
dissolution, but loans are payable at maturity and accumulated profits may be withdrawn at any
time by consent of a majority. (Babb and Martin, op. cit., p. 240.)
Amounts paid into the partnership in excess of a partners agreed capital contributions constitute
loans or advances which draw interest on which they are made. Accumulated profits do not draw
interest, as they are not regarded as loans and advances merely because they are left with the fi
rm. (Ibid., p. 248.)
(4) Capital contributed by partners. Capital represents a debt of the firm to the contributing
partners. If, on dissolution, partnership assets are insufficient to repay capital investments, the
deficit is a capital loss which requires contribution like any other loss. (Ibid.) The return of the
amount equivalent to the capital contribution of each partner shall be increased by his share of
undistributed profits or decreased by his share of net losses.
A partner who furnishes no capital but contributes merely his skill and services is not entitled to
any part of the firm capital on dissolution in the absence of agreement. He must look for his
compensation to his share of the profits remaining after repayment of the capital to the
contributors. (Ibid., op. cit., p. 96, citing Mosely vs. Taylor, 173 N.C. 286.)
The total capital contribution of the partners is not equivalent to the gross assets to be
distributed to the partners at the time of the dissolution of the partnership. It may be impaired or
become unavailable for distribution or return to the partners because of losses sustained by the
partnership. (see Villareal vs. Ramirez, 406 SCRA 145 [2003].)
(5) Right of a partner where assets insufficient. If the assets enumerated in No. 1 are
insufficient (i.e., there is an overall loss), the deficit is a capital loss which requires contribution
like any other loss. Any partner or his legal representative (to the extent of the amount which he
has paid in excess of his share of the liability), or any assignee for the benefit of creditors or any
person appointed by the court, shall have the right to enforce the contributions of the partners
provided in Article 1797. If any of the partners does not pay his share of the loss, the remaining
partners have to pay but they can sue the non-paying partner for indemnification.
(6) Liability of deceased partners individual property. The individual property of a deceased
partner shall be liable for his share of the contributions necessary to satisfy the liabilities of the
partnership incurred while he was a partner. (Arts. 1816, 1835, par. 3.)
(7) Priority to payment of partnership creditors/partners creditors.
When partnership property and the individual properties of the partners are in possession of
the court for distribution, partnership creditors shall first be paid from partnership property and
separate creditors from the individual properties of the partners. (see Sec. 51, Act No. 1956 [The
Insolvency Law], as amended.) Neither class of creditors is allowed to trespass on the fund
belonging to the other until the claims of that other shall have been satisfied. (40 Am. Jur. 402403.) Stated otherwise, the general rule is: Partnership assets to partnership creditors,
individual assets to individual creditors; anything left from either goes to the other. It involves
the ranking of assets in a certain order toward the payment of outstanding debts. This rule is
known as the doctrine of the marshalling of assets.
In an American case, it was held that the United States does not have the right to be paid its
income taxes due from individual partners out of the assets of a bankrupt firm in preference to
the claim of partnership creditors. (United States vs. Kauffman, 267 U.S. 408, cited by Teller, p.
120.) In line with the rule is the second paragraph of Article 1835.
Suppose one is a creditor of all the partners solidarily on a transaction independent of the
partnership, may he, under the bankruptcy law, share pari passu with the partnership creditors in

its assets? No. This is so even though both the partnership and its members are in bankruptcy.
Having secured priority over the firm creditors against the individual property of the firm
members, the creditors are relegated to a secondary position to the firm creditors, since the
claim is not based on a firm obligation. (In re Nashville Laundry Co., 240 Fed. 795, cited in Teller,
p. 120.) Furthermore, partnership is regarded as a legal entity separate and distinct from its
members.
(8) Distribution of property of insolvent partner. If a partner is insolvent, his individual property
shall be distributed as follows:
(a) First, to those owing to separate creditors;
(b) Then, to those owing to partnership creditors; and
(c) Lastly, to those owing to partners by way of contribution.
The preference of the individual creditors of a partner in the distribution of his separate estate
results, as a principle of equity, from the preference of partnership creditors in the partnership
funds. The separate creditor of an individual partner can execute against the assets of the firm
only to the extent of the interest of the partner in the firm assets, which is nothing more than a
right to any surplus remaining after firm creditors have been paid. (Teller, op. cit., p. 121.)
2. order of application of partnerships assets art. 1839 (1(a), (b); (3)
ART. 1839. In settling accounts between the partners after dissolution, the following rules shall
be observed, subject to any agreement to the contrary:
(1) The assets of the partnership are:
(a) The partnership property,
(b) The contributions of the partners necessary for the payment of all the
liabilities specified in No. 2.
(2) The liabilities of the partnership shall rank in order of payment, as follows:
(a) Those owing to creditors other than partners,
(b) Those owing to partners other than for capital and profi ts,
(c) Those owing to partners in respect of capital,
(d) Those owing to partners in respect of profi ts.
(3) The assets shall be applied in the order of their declaration in No. 1 of this article
to the satisfaction of the liabilities.
(4) The partners shall contribute, as provided by article 1797, the amount necessary to satisfy
the liabilities.
(5) An assignee for the benefi t of creditors or any person appointed by the court shall have the
right to enforce the contributions specifi ed in the preceding number.
(6) Any partner or his legal representative shall have the right to enforce the contributions specifi
ed in No. 4, to the extent of the amount which he has paid in excess of his share of the liability.
(7) The individual property of a deceased partner shall be liable for the contributions specifi ed in
No. 4.
(8) When partnership property and the individual properties of the partners are in possession of a
court for distribution, partnership creditors shall have priority on partnership property and
separate creditors on individual property, saving the rights of lien or secured creditors.
(9) Where a partner has become insolvent or his estate is insolvent, the claims against his
separate property shall rank in the following order:
(a) Those owing to separate creditors;
(b) Those owing to partnership creditors;
(c) Those owing to partners by way of contributions. (n)
3. order of priority of liabilities art. 1839 (3)
ART. 1839. In settling accounts between the partners after dissolution, the following rules shall
be observed, subject to any agreement to the contrary:
XXXXX
(3) The assets shall be applied in the order of their declaration in No. 1 of this article
to the satisfaction of the liabilities.
XXXXX

4. contribution of partners art. 1839 (3), (4), (5); (6); & art. 1797
ART. 1839. In settling accounts between the partners after dissolution, the following rules shall
be observed, subject to any agreement to the contrary:
XXXXX
(3) The assets shall be applied in the order of their declaration in No. 1 of this article
to the satisfaction of the liabilities.
(4) The partners shall contribute, as provided by article 1797, the amount necessary
to satisfy the liabilities.
(5) An assignee for the benefit of creditors or any person appointed by the court shall
have the right to enforce the contributions specified in the preceding number.
(6) Any partner or his legal representative shall have the right to enforce the
contributions specified in No. 4, to the extent of the amount which he has paid in
excess of his share of the liability.
XXXXX
ART. 1797. The losses and profi ts shall be distributed in conformity with the agreement. If only
the share of each partner in the profi ts has been agreed upon, the share of each in the losses
shall be in the same proportion. In the absence of stipulation, the share of each partner in the
profi ts and losses shall be in proportion to what he may have contributed, but the industrial
partner shall not be liable for the losses. As for the profi ts, the industrial partner shall receive
such share as may be just and equitable under the circumstances. If besides his services he has
contributed capital, he shall also receive a share in the profi ts in proportion to his capital.
(1689a)
5. priority between partnership creditors and separate creditors art. 1839 (8), (9);
sec. 51, insolvency law
ART. 1839. In settling accounts between the partners after dissolution, the following rules shall
be observed, subject to any agreement to the contrary:
XXXXX
(8) When partnership property and the individual properties of the partners are in
possession of a court for distribution, partnership creditors shall have priority on
partnership property and separate creditors on individual property, saving the rights
of lien or secured creditors.
(9) Where a partner has become insolvent or his estate is insolvent, the claims
against his separate property shall rank in the following order:
(a) Those owing to separate creditors;
(b) Those owing to partnership creditors;
(c) Those owing to partners by way of contributions. (n)
XXXXX
CHAPTER
VII
of
Act
1956
known
as
Insolvency
Law
PARTNERSHIPS & CORPORATIONS
Sec. 51. Partnerships. A partnership, during the continuation of the partnership business, or
after its dissolution and before the final settlement thereof, may be adjudged insolvent, either on
the petition of the partners or any one of them, or on the petition of three or more creditors of
the partnership, qualified as provided in section twenty of this Act, in either of which cases the
court shall issue an order in the manner provided by this Act, upon which all the property of the
partnership, and also all the separate property of each of the partners, if they are liable, shall be
taken, excepting such parts thereof as may be exempt by law; and all creditors of the
partnership, and the separate creditors of each partner, shall be allowed to prove their
respective claims; and the assignee shall be chosen by the creditors of the partnership, and shall
also keep separate accounts of the property of the partnership, and of the separate estate of
each member thereof. The expenses of the proceedings shall be paid from the partnership
property and the individual property of the partners in such proportions as the court shall
determine. The net proceeds of the partnership property shall be appropriated to the payment of
the partnership debts and the net proceeds of the individual estate of each partner to the
payment of his individual debts. Should any surplus remain of the property of any partner after

paying his individual debts, such surplus shall be added to the partnership assets and be applied
to the payment of the partnership debts. Should any surplus of the partnership property remain
after paying the partnership debts, such surplus shall be added to the assets of the individual
partners in the proportion of their respective interests in the partnership. Certificate of discharge
shall be granted or refused to each partner as the same would or ought to be if the proceedings
had been by or against him alone under this Act; and in all other respects the proceedings as to
the partners shall be conducted in like manner as if they had been commenced and prosecuted
by or against one person alone. If such partners reside in different provinces, the court in which
the petition is first filed shall retain exclusive jurisdiction over the case. If the petition to be filed
by less than all the partners of a partnership those partners who do not join in the petition shall
be ordered to show cause why they, as individuals, and said partnership, should not be adjudged
to be insolvent, in the same manner as other debtors are required to show cause upon a
creditor's petition, as in this Act provided; and no order of adjudication shall be made in said
proceedings until after the hearing of said order to show cause.