Testate Estate of Mota v. Serra February 14, 1925 TESTATE ESTATE OF LAZARO MOTA, deceased, ET AL., plain i!!

s"appellan s, #s. SAL$A%OR SERRA, de!endan "appellee. VILLAMOR, J.: SUMMARY: Serra, as &'ner &! (al)a *en ral, en ered in & a c&n rac &! par ners+ip 'i + M& a e al, as &'ners &! San ,sidr& *en ral, !&r +e c&ns ruc i&n &! a railr&ad line. ,n said a-ree)en , +ey s ipula ed +a e.penses 'ill be b&rne by b& + par ies 5/"5/ al +&u-+ e.penses 'ill be ini ially !&r +e acc&un &! M& a e . al. Subse0uen ly +&'e#er, Serra s&ld (al)a & 1+i a2er 3 *&ncepci&n, +e la er e.pressin- a'areness &! ab&#e c&n rac and 'illin-ness & subr&-a e +e)sel#es in & +e &bli-a i&ns +ere!&r. T+erea! er, *&ncepci&n 3 1+i a2er als& b&u-+ !r&) M& a e al. +e 4 &! +e railr&ad line and +ey a-reed +a +e par ners+ip "Palma" and "San Isidro," !&r)ed be 'een Serra 3 M& a e al, s+&uld be diss&l#ed up&n +e e.ecu i&n &! +e c&n rac . Serra bein- unable & pay +is &bli-a i&n under +e c&n rac &! par ners+ip 5162 &! +e e.penses7, M& a e . al. ins i u ed an ac i&n !&r c&llec i&n. As de!ense, Serra alle-ed +a a +e er)ina i&n &! +e par ners+ip be 'een +e), +is &bli-a i&n +erein +as been e. in-uis+ed. HELD: Serra is s ill liable & +e par ners+ip. DOCTRINE: T+e diss&lu i&n &! a !ir) d&es n& relie#e any &! i s )e)bers !r&) liabili y !&r e.is in- &bli-a i&ns, al +&u-+ i d&es sa#e +e) !r&) ne' &bli-a i&ns & '+ic+ +ey +a#e n& e.pressly &r i)pliedly assen ed, and any &! +e) )ay be disc+ar-ed !r&) &ld &bli-a i&ns by n&#a i&n &r & +er !&r) &! release. A partnership contin es! even after "isso# tion! for the p rpose of $in"in% p its affairs. A +e er)ina i&n &! +e &b8ec !&r '+ic+ i 'as crea ed +e par ners+ip is e. in-uis+ed, pendin- +e 'indin- up &! s&)e inciden s and &bli-a i&ns &! +e par ners+ip, bu in suc+ case, +e par ners+ip 'ill be repu ed as e.is in- un il +e 8uridical rela i&ns arisin- &u &! +e c&n rac are diss&l#ed. A partnership cannot &e consi"ere" as e'tin% ishe" nti# a## the o&#i%ations pertainin% to it are f #fi##e". (ACTS: Feb. 1, 19199 %e!endan Sal#ad&r Serra, La:ar& M& a, n&' deceased, and ;uan ;. $idaurra:a-a !&r +i)sel! and in be+al! &! +is br& +er, Feli. and %i&nisi& $idaurra:a-a, en ered in & a contract of partnership !&r +e c&ns ruc i&n and e.pl&i a i&n &! a railr&ad line &! ab&u 1/ 2)s. !r&) +e <San Isidro" and <Palma" cen rals & +e place 2n&'n as <Nandong." o Ori-inal capi al s ipula ed9 (15/,/// & be paid by par ies in e0ual par s o M& a e . al. 'ere en rus ed 'i + +e ad)inis ra i&n &! +e par ners+ip. o M& a e al &'ns <San ,sidr&< *en ral '+ile Serra &'ns =(al)a> *en ral o T+e e.penses un il +e er)ina i&n &! '+ic+ s+all be !&r +e acc&un &! +e <San Isidro" Central 5M& a e al7 o 4 &! e.penses s+all be b&rne by +e "Palma" Central 5Serra7 'i + +e &bli-a i&n & rei)burse M& a e al 'i +in 5 years 'i + in eres a +e ra e &! 1/? p.a. T+e a-reed capi al 5(15/27 +&'e#er, did n& pr&#e su!!icien , as +e e.penses up & May 15, 192/, +ad reac+ed (22@,/92.92 ;an. 29, 192/9 Serra en ered in & a contract of sa#e 'i + $enanci& *&ncepci&n, (+il. *. 1+i a2er, and Eusebi& R. de Lu:uria-a, o Serra s&ld +e es a e and cen ral 2n&'n as "Palma" 'i + i s runnin- business, as 'ell as all +e i)pr&#e)en s, )ac+ineries and buildin-s, real and pers&nal pr&per ies, ri-+ s, c+&ses in ac i&n and in eres s, includin- +e su-ar plan a i&n &! +e +ar#es year &! 192/ & 1921, c&#erin- all +is pr&per y o T+ey 'ere 'illin- & assu)e +e SerraAs &bli-a i&n & M& a e al o *&n rac , par. 59 ... The endee here!" obligates himself to res#e$t the a%oresaid $ontra$t 5*&n rac &! (ar ners+ip7 and all o!ligations arising there%rom. Be!&re +e deli#ery & +e purc+asers &! +e ha$ienda +us s&ld, Lu:uria-a ren&unced all +is ri-+ s under +e c&n rac &! sale in !a#&r &! *&ncepci&n 3 1+i a2er. ;uly 1C, 192/9 T+us, *&ncepci&n, 1+i a2er 3 Serra e.ecu ed an& +er "ee" of a&so# te sa#e &! +e said <(al)a< Es a e !&r (1,@95,9@1.9/. o Serra recei#ed a +e i)e &! e.ecu in- +e deed and +e balance 'as payable by ins all)en s in +e !&r) and )anner s ipula ed in +e c&n rac . o (urc+asers -uaran eed +e unpaid balance &! +e purc+ase price by a !irs and special )&r -a-e in !a#&r &! Serra up&n +e ha$ienda and +e cen ral 'i + all +e i)pr&#e)en s, buildin-s, )ac+ineries, and appur enances +en e.is in- &n +e said ha$ienda. o *lause @ &! +e deed9 1+i a2er 3 *&ncepci&n s a e +a +ey are a'are &! +e c&n rac +a Serra +as 'i + +e pr&prie &rs &! +e <San ,sidr&< *en ral and hereby obligate themselves to respect the said contract and subrogate themselves into the rights and obligations thereunder. T+ey als& bind +e)sel#es & c&)ply 'i + all +e c&n rac s +ere &!&re en ered by +e #end&r 'i + +e cus &)ers, c&parceners &n s+ares and e)pl&yees. ;an. D, 19219 *&ncepci&n 3 1+i a2er b&u-+ !r&) M& a e al. +e 4 &! +e railr&ad line per ainin- & +e la er, e.ecu in- a Contract of Sa#e. o (rice9 (2EC,C22.15, e.cludin- any a)&un '+ic+ Serra )i-+ be &'in- & M& a e al. o O! +e purc+ase price, *&ncepci&n 3 1+i a2er paid (4C,544.4E &nly. o The) a%ree" that the partnership "Palma" an" "San Isidro," for*e" &) the a%ree*ent of (e&. +! +,+, sho #" &e "isso#ve" pon the e'ec tion of the contract! an" that the sai" partnership a%ree*ent sho #" &e tota##) cance##e" an" of no force an" effect $hatever. T+us, "&a$ienda Palma," 'ith the entire railroad, +e sub8ec ")a er &! +e c&n rac &! par ners+ip be 'een M& a e al. and Serra, beca)e +e pr&per y &! 1+i a2er 3 *&ncepci&n. 1+i a2er 3 *&ncepci&n +a#in- !ailed & pay & Serra a par &! +e purc+ase price 5(C5/,///7, Serra, !&recl&sed +e )&r -a-e up&n +e said ha$ienda. o , 'as ad8udica ed & +i) a +e public sale !&r (5//,///. Fe 'as pu in p&ssessi&n includin- '+a 'as plan ed a +e i)e, &-e +er 'i + all +e i)pr&#e)en s )ade by 1+i a2er 3 *&ncepci&n. Since Serra !ailed & pay 4 &! +e a)&un e.pended by M& a e al. up&n +e c&ns ruc i&n &! +e railr&ad line 5(11E,/4@.4@7, as 'ell as 1+i a2er 3 *&ncepci&n, Mota et a#. instit te" the present action. (RAGER9

517 T+a +e deed &! Feb. 1, 1919 5*&n rac &! (ar ners+ip7 be declared #alid and bindin-H 527 T+a a! er +e e.ecu i&n &! +e said d&cu)en , Serra i)pr&#ed ec&n&)ically s& as & be able & pay M& a e al. +e a)&un &'ed, bu +a +e re!used & pay ei +er in par &r in '+&le +e said a)&un n& 'i +s andin- +e se#eral de)ands )ade &n +i) !&r +e purp&seH and o 5E7 Serra be sen enced & pay M& a e al. (11E,/4@.4@, 'i + +e s ipula ed in eres a 1/? p.a. Serra se up +ree special de!enses9 o 517 T+e n&#a i&n &! +e c&n rac by +e subs i u i&n &! +e deb &r 'i + +e c&n!&r)i y &! +e credi &rsH o 527 +e c&n!usi&n &! +e ri-+ s &! +e credi &r and deb &rH and o 5E7 +e e. in-uis+)en &! +e c&n rac 5*&n rac &! par ners+ip7 TC: Abs&l#ed Serra !r&) +e c&)plain . o T+ere 'as a n&#a i&n &! +e c&n rac by +e subs i u i&n &! +e deb &r. 1+i a2er 3 *&ncepci&n, up&n purc+asin- +e <Palma" *en ral, 'ere subr&-a ed in +e place &! +e Serra in all +is ri-+ s and &bli-a i&ns under +e c&n rac rela in- & +e railr&ad line e.is in- be 'een "Palma" and <San Isidro" cen rals and M& a e al. a-reed & +is subr&-a i&n o As & +e prayer +a c&n rac &! par ners+ip be declared #alid and bindin-, +ere 'as n& 'ay &! re#i#in- +e c&n rac '+ic+ +e par ies +e)sel#es in in eres +ad sp&n ane&usly and #&lun arily e. in-uis+ed +ru +e *&n rac &! Sale be . *&ncepci&n, 1+i a2er 3 M& a e al. &n 4 &! +e railr&ad M& a e al. appealed & S*. ISSUE: 1+e +er Serra cann& be +eld liable & pay M& a e . al. a par &! +e c&s &! +e c&ns ruc i&n &! +e railr&ad line s ipula ed in +e c&n rac &! par ners+ip by reas&n &! +e diss&lu i&n &! +e par ners+ipI 5JO, Serra is liable7 RATIO: JO$AT,OJ Serra: By +e subs i u i&n &! +e deb &r 'i + +e c&nsen &! +e credi &r, +e &bli-a i&n &! Serra & pay +is &bli-a i&n under +e c&n rac &! par ners+ip 'as e. in-uis+ed since +ere 'as a n&#a i&n &! +e c&n rac SC: T+ere 'as n& n&#a i&n. T+ere 'as n&ne in endedH M& a e . al +a#e n& e.pressly c&nsen ed & +e subs i u i&n &! Serra. , s+&uld be n& ed +a in &rder & -i#e n&#a i&n i s le-al e!!ec , +e la' re0uires +a +e credi &r s+&uld c&nsen & +e subs i u i&n &! a ne' deb &r. T+is c&nsen )us be -i#en e.pressly !&r +e reas&n +a , since n&#a i&n e. in-uis+es +e pers&nali y &! +e !irs deb &r '+& is & be subs i u ed by ne' &ne, i i)plies &n +e par &! +e credi &r a 'ai#er &! +e ri-+ +a +e +ad be!&re +e n&#a i&n '+ic+ 'ai#er )us be e.press T+e !ac +a (+il. *. 1+i a2er and $enanci& *&ncepci&n 'ere 'illin- & assu)e +e SerraAs &bli-a i&n & M& a e al. is &! n& a#ail, i! +e la er +a#e n& e.pressly c&nsen ed & +e subs i u i&n &! +e !irs deb &r. Le er presen ed as pr&&! &! alle-ed c&nsen &! M& a e . al & +e subs i u i&n &! 1+i a2er 3 *&ncepci&n &nly s+&'s +a +ey as2ed +e '& & be +eir ne$ partners 5n& subs i u ed7. , is na ural +a M& a e al. s+&uld +a#e d&ne +is. S ill, +ere 'as n& +in- & s+&' +e e.press c&nsen , +e )ani!es and delibera e in en i&n &! Es a e &! M& a e al. & e.e)p Serra !r&) +is &bli-a i&n and & rans!er i & +is success&rs in in eres , 1+i a2er 3 *&ncepci&n. o Serra rans!erred +is ha$ienda & *. 1+i a2er 3 *&ncepci&n and )ade i 2n&'n & M& a e al. +a +e ne' &'ners '&uld +&ld +e)sel#es liable !&r +e c&s &! c&ns ruc in- +e said railr&ad line. M& a e al. c&uld n& pre#en +e Serra !r&) sellin- & +e) +is "&a$ienda Palma" 'i + +e ri-+ s +a +e +ad &#er +e railr&ad in 0ues i&n. o Serra cease" to &e a partner in sai" #ine an"! therefore! Mota et a#. ha" to ta-e the ven"ees as their ne$ partners. o M& a e al. +ad & c&)e & an unders andin- 'i + +e ne' &'ners &! +e <Facienda (al)a< in c&nnec i&n 'i + +e railr&ad line <(al)a"San ,sidr&"Jand&n-.< M& a e al. 'ere n& a par y & +e *&n rac &! Sale be 'een Serra, 1+i a2er, *&ncepci&n 3 Lu:uria-a. J& s ipula i&n '+ereby +e &bli-a i&n &! +e Serra 'as n&#a ed 'i + +e c&nsen &! +e credi &r MERK,JK OF %EBTOR 3 *RE%,TOR Serra: T+ere 'as a )er-er &! +e ri-+ s &! deb &r and credi &r, '+ereby +e !ul!ill)en &! +e &bli-a i&n beca)e e. in-uis+ed. o %eb &! Serra 'as rans!erred & 1+i a2er 3 *&ncepci&n by +e *&n rac &! Sale be . Serra, 1+i a2er, *&ncepci&n 3 Lu:uria-a. o T+ese in urn ac0uired +e credi &! +e Tes a e Es a e &! La:ar& M& a e al. by #ir ue &! +e deb 5*&n rac &! Sale &n 4 &! +e railr&ad7H +us +e ri-+ s &! +e deb &r and credi &r 'ere )er-ed in &ne pers&n. SC: J&. T+e ri-+ s and i les '+ic+ M& a e al. s&ld & 1+i a2er 3 *&ncepci&n re!er &nly & &ne"+al! &! +e railr&ad line. T+e credi '+ic+ +ey +ad a-ains Serra !&r 4 &! +e c&s &! c&ns ruc i&n &! +e said line 'as n& included in +e sale c&n ained in +e *&n rac &! Sale &n 4 &! +e railr&ad. T+a M& a e al. s&ld +eir ri-+ s and i les &#er 4 &! +e line, is e#iden !r&) +e #ery *&n rac &! Sale. T+e purc+asers, 1+i a2er and *&ncepci&n, & secure +e pay)en &! +e price, e.ecu ed a )&r -a-e in !a#&r &! M& a e al. &n +e sa)e ri-+ s and i les +a +ey +ad b&u-+ and als& up&n '+a +ey +ad purc+ased !r&) Serra. ,n & +er '&rds, 1+i a2er 3 *&ncepci&n )&r -a-ed un & M& a e al. '+a +ey +ad b&u-+ !r&) M& a e al. and als& '+a +ey +ad b&u-+ !r&) Serra. T+e ri-+ s and i les rans!erred by M& a e al. & 1+i a2er 3 *&ncepci&n 'ere &nly +&se +ey +ad &#er +e & +er +al! &! +e railr&ad line. J& n&#a i&n &! +e c&n rac be 'een M& a e al. and Serra, as re-ards +e &bli-a i&n &! +e la er & pay +e !&r)er 4 &! +e c&s &! +e c&ns ruc i&n &! +e said railr&ad line, and since M& a e al. did n& include in +e sale, e#idenced by *&n rac &! Sale, +e credi +a +ey +ad a-ains +e Serra. T+a +e &bli-a i&n &! +e Serra beca)e e. in-uis+ed by +e )er-er &! +e ri-+ s &! credi &r and deb &r by +e purc+ase &! 1+i a2er and *&ncepci&n is '+&lly un enable. TERMINATION O( .ARTNERSHI. o o

By #ir ue &! +e *&n rac &! Sale &n 4 &! +e railr&ad, +e Tes a e Es a e &! La:ar& M& a e al. and (+il. *. 1+i a2er and $enanci& *&ncepci&n, by c&))&n c&nsen , decided & diss&l#e +e par ners+ip be 'een <Facienda (al)a< and <Facienda San ,sidr&,< +us cancellin- +e c&n rac &! par ners+ip &! February 1, 1919. TC: By +e er)ina i&n &! +e par ners+ip, as s+&'n by +e *&n rac &! Sale be . *&ncepci&n, 1+i a2er 3 M& a e al, n& le-al ri-+ s can be deri#ed +ere!r&). Serra: M& a e al. cann& en!&rce any ri-+ arisin- &u &! +a c&n rac &! par ners+ip, '+ic+ +as been annulled, suc+ as +e ri-+ & clai) n&' a par &! +e c&s &! +e c&ns ruc i&n &! +e railr&ad line s ipula ed in +a c&n rac . SC: SerraAs c&n en i&n si-ni!ies +a any pers&n, '+& +as c&n rac ed a #alid &bli-a i&n 'i + a par ners+ip, is e.e)p !r&) c&)plyin- 'i + +is &bli-a i&n by +e )ere !ac &! +e diss&lu i&n &! +e par ners+ip. SerraAs c&n en i&n is un enable. T+e diss&lu i&n &! a par ners+ip )us n& be unders &&d in +e abs&lu e and s ric sense s& +a at the ter*ination of the o&/ect for $hich it $as create" the partnership is e'tin% ishe"! pen"in% the $in"in% p of so*e inci"ents an" o&#i%ations of the partnership! & t in s ch case! the partnership $i## &e rep te" as e'istin% nti# the / ri"ica# re#ations arisin% o t of the contract are "isso#ve". SC of Spain 0(e&. 1! +,234: Lp+eld +is d&c rine (ACTS: T+ere 'as a par ners+ip !&r)ed be 'een se#eral pers&ns & purc+ase s&)e lands s&ld by +e s a e. T+e par ners+ip paid +e purc+ase price and dis ribu ed a)&n- i s )e)bers +e lands s& ac0uired. o A! er +e lapse &! s&)e i)e, &ne &! +e par ners ins i u ed an ac i&n in +e c&ur &! Bada8&:, prayin- +a +e be accep ed as a par ner 'i + +e sa)e ri-+ s and &bli-a i&ns as +e & +ers, !&r +e reas&n +a +e +ad n& been all&'ed all +a +e +ad a ri-+ &. o T+e c&ur -ran ed +e pe i i&n, '+ic+ 8ud-)en 'as a!!ir)ed by +e A(dien$ia de Ca$eres. o Fr&) +a decisi&n, +e & +er par ner sued &u a 'ri &! err&r T+ere is in!rin-e)en &! +e *i#il *&de since all contracts are reputed consummated and therefore extinguished, when the contracting parties fulfill all the obligations arisin- +ere!r&) By +e pay)en &! +e )&ney and +e -ran in- and dis ribu i&n &! +e lands 'i +&u any &pp&si i&n, +e 8uridical rela i&ns be 'een +e c&n rac in- par ies bec&)e extinguished and none of the parties has any right of action under the contract. HELD: %enied +e 'ri . S&)e c&rrec i&ns and li0uida i&ns as2ed by +e ac &r 'ere s ill pendin-. T+e ar icles ci ed 'ere n& in!rin-ed because a partnership cannot &e consi"ere" as e'tin% ishe" nti# a## the o&#i%ations pertainin% to it are f #fi##e". 511 Manresa, pa-e E12.7 E/ *yc., pa-e @599 The "isso# tion of a fir* "oes not re#ieve an) of its *e*&ers fro* #ia&i#it) for e'istin% o&#i%ations! a#tho %h it "oes save the* fro* ne$ o&#i%ations to $hich the) have not e'press#) or i*p#ie"#) assente"! an" an) of the* *a) &e "ischar%e" fro* o#" o&#i%ations &) novation of other for* of re#ease. It is often sai" that a partnership contin es! even after "isso# tion! for the p rpose of $in"in% p its affairs ,JTEREST Serra: As in +e ar icles &! par ners+ip &n Feb. 1, 1919, i 'as a-reed +a Serra '&uld pu up 4 &! +e c&s &! +e railr&ad line 'i +in 5 years !r&) Feb. 1, 1919, 'i + in eres a 1/? p.a. (resen ac i&n is pre)a ure since, !r&) +e e.ecu i&n &! +e c&n rac un il +e da e &! +e c&)plain 5Oc . 25, 19227, +e 5 years, 'i +in '+ic+ +e Serra c&uld pay +is par &! +e c&s &! +e c&ns ruc i&n &! +e line, +ad n& ye elapsed. SC: Mora et.a# an" the s ccessors in interest of the Serra! &) * t a# consent! "isso#ve" the partnership on 5 ne +1! +,62! cance##in% the contract of partnership & all &! '+ic+ Serra c&nsen ed as e#idenced by +is alle-a i&ns in +is ans'er. T+us, +ere is no reason %or 'aiting %or the e)#iration o% * "ears 'hi$h the #arties themsel es had seen %it to sti#(late . T+e pr&#isi&ns &! Ar . 11E, re-ardin- +e !ul!ill)en &! pure &bli-a i&ns, )us be applied in +is case. DIS.OSITI7E: ;ud-)en appealed !r&) Re#ersed. Serra is indeb ed & Tes a e Es a e &! La:ar& M& a, et al., !&r (11E,/4@.4@ 'i + +e a-reed in eres M 1/? p.a. !r&) +e da e &! +e !ilin- &! +e c&)plain .