FACTS:
Wilhelm Bauermann (plaintiff-appellee) and Eulalio Carmelo were the sole partners in a mercantile company named Carmelo & Bauermann. Clause 16 of their articles of partnership stipulated that in case of the death of a partner, the partnership “will continue in business with the other surviving partner” and a designated individual (Gustavo Otto if Bauermann dies, or Don Enrique Carmelo if Eulalio Carmelo dies). However, it also provided that “the surviving partner and the representative of the deceased partner may call for a dissolution of the partnership and carry out the liquidation.”

Eulalio Carmelo died on March 25, 1906, leaving behind his widow, Maxima Casas, and children, including Enrique Carmelo (son from a previous marriage).

Bauermann filed a complaint, alleging that Eulalio’s death necessitated the dissolution and liquidation of the company, that Enrique Carmelo (who was not a member) had improperly interfered, and that disagreements among the heirs made judicial intervention necessary. He prayed for the company to be declared in liquidation and for Gustavo Otto to be appointed liquidator.

Maxima Casas, for herself and her children, admitted the allegations and agreed to the requested relief.

Enrique Carmelo denied the necessity of immediate liquidation and filed a cross-complaint. He alleged that under Clause 16, he was entitled to be substituted as sole partner with Bauermann and that the partnership continued. He prayed for a declaration that he and Bauermann were the sole partners, for liquidation, and for himself to be appointed liquidator.

Bauermann countered Enrique Carmelo’s cross-complaint by alleging that Enrique Carmelo was a minor and therefore lacked the legal capacity to become a partner, rendering Clause 16 ineffectual as applied to him. Maxima Casas also responded, claiming her and her children’s interest as heirs and her right to bienes gananciales.

The plaintiff then moved for a judgment on the pleadings. The trial court granted the motion, finding that the business had continued with Bauermann and Maxima Casas (as administratrix), and appointed Gustavo Otto as liquidator “in connection with” Maxima Casas, effectively excluding Enrique Carmelo from participation.

ISSUE:
Did the trial court err in granting a judgment on the pleadings, declaring the partnership in liquidation and appointing a liquidator, without resolving the conflicting claims of the parties regarding partnership membership and the interpretation of the articles of partnership, and by ignoring Enrique Carmelo’s allegations?

RULING:
Yes, the Supreme Court ruled that the trial court’s order must be revoked, and the case remanded for further proceedings.

1. Improper Judgment on the Pleadings: The Court held that a party moving for judgment on the pleadings, without offering proof or allowing the opposing party to introduce evidence, admits the truth of all material and relevant allegations of the opposing party. The trial court erred in finding as fact that the business continued with Bauermann and Maxima Casas as administratrix, and in appointing Otto “in connection with” Maxima Casas, as this ignored and denied Enrique Carmelo’s allegations in his cross-complaint that he alone, to the exclusion of Maxima Casas and her children, was entitled to be substituted for his father as a partner. The trial court was not authorized to decide these contested facts solely on a motion for judgment on the pleadings.

2. Jurisdiction Over Partnership Disputes: The Court clarified that while the Code of Commerce provides for extrajudicial liquidation, when “disputes as to rights of membership render this proceeding impracticable,” interested parties are not precluded from seeking judicial intervention and assistance. The court does have jurisdiction to determine all questions raised in the pleadings, including conflicting claims of partnership membership, as these are necessary to decide the rights of the parties and the nature of the relief they are entitled to. The Court also rejected the argument that the probate court had exclusive jurisdiction over the ownership of the partnership interest, as the question was about ownership based on an agreement, not merely the settlement of an estate’s assets once ownership is established.

The order issued by the trial court was therefore revoked, the motion for judgment on the pleadings overruled, and the case remanded for further proceedings to resolve the conflicting claims regarding partnership membership and other issues raised by the parties.