G.R. No. L-5242

ALDECOA & CO., plaintiff-appellant, vs. WARNER, BARNES & CO., LTD., defendant-appellee.

August 6, 1910

FACTS:

Aldecoa & Co. (plaintiff-appellant), a mercantile association in liquidation, filed a complaint against Warner, Barnes & Co., Ltd. (defendant-appellee), successor to Warner, Barnes & Co., alleging that on December 1, 1898, the two firms formed a joint-account partnership for a hemp business in Albay, with Aldecoa & Co. sharing equally in gains and losses, and Warner, Barnes & Co. (later Warner, Barnes & Co., Ltd.) acting as manager. The partnership’s operations concluded on December 31, 1903.

Aldecoa & Co. alleged that Warner, Barnes & Co., Ltd., as manager, failed to render proper, verified accounts and to liquidate the business. It further claimed that the defendant denied its right to examine vouchers, merely forwarding copies of book entries which contained errors and omissions. Specifically, Aldecoa & Co. pointed to: (a) improper crediting of hemp at a lower price than market value, causing significant injury; (b) a shortage of 4,332.96 piculs of hemp not credited; and (c) other instances of undervaluing hemp. Aldecoa & Co. also alleged a conspiracy between the managers of both firms to defraud the plaintiff, leading to its partners not knowing about the fraudulent acts until after December 31, 1906.

While the accounts for the period from June 30, 1899, to December 31, 1902, were allegedly approved by Aldecoa & Co.’s previous managers, the plaintiff sought their revision due to the alleged errors, omissions, fraud, and deceit. The accounts for 1903, the final year of the partnership, were admittedly not yet approved.

ISSUE:

Whether a new trial is necessary to compel the managing partner of a joint-account partnership to render a complete and verified account, including the liquidation of common assets, and to allow for the revision of previously “approved” accounts where error, omission, fraud, or deceit is alleged and proven.

RULING:

Yes, a new trial is necessary.

The Supreme Court set aside the judgment appealed from and remanded the case to the lower court for a new trial. The Court held that it was not possible to render a final decision on the various issues without a complete and proper accounting and liquidation.

The Court emphasized the duties of a managing partner in a joint-account partnership:
1. Duty to Liquidate and Account: Article 243 of the Code of Commerce mandates that the manager shall effect the liquidation and render a proper account of its results after the transactions have concluded, including all property and effects belonging to the partnership.
2. Revision of Accounts: Even if accounts pertaining to certain years may have been previously “approved,” they may be revised if error, omission, fraud, or deceit is subsequently proven.

The Court therefore ordered the following for the new trial:
The defendant must, within a fixed period, render an account, verified by vouchers, for its management of the joint-account partnership from December 1, 1898, to June 29, 1899, and for the entire year 1903. This must include all property belonging to the partnership, with the precise start date of the partnership to be ascertained.
In the examination of all accounts, the parties may allege and prove facts conducive to their revision or approval.
With respect to the accounts corresponding to the period from June 30, 1899, to December 31, 1902 (already approved), the trial court must duly consider the alleged errors, omissions, mistakes, and fraudulent or deceitful acts.
The trial court must decide all issues raised and provide proper remedies in its final judgment.