Idos v. CA

Idos v.
CA and People
GR No. 110782, 25 September 1995, Quisumbing, J.
Partnership
PET Idos was engaged in a partnership with her business partner. The two agreed to dissolve
the same and PET issued her partner checks in the amount of his share in the partnership. One
check could not be encashed and a BP 22 case was filed against PET. The court acquitted PET,
finding that the partnership was still in existence at the time and thus the check was not issued
for value, an element in a violation of BP 22.
FACTS
 PET Idos is engaged in leather tanning.
o She was accused of violation of BP 22 by her supplier and business partner,
complainant Alarilla
 The two had a partnership, Tagumpay Manufacturing.
o The partners would later agree to terminate their partnership.
 Upon Liquidation: P1.8M worth of stocks left, with complainant’s share of
the assets at P900k.
 PET issued 4 postdated checks to complainant to pay for his share, but only 3 were able
to be encashed. Complainant demanded payment but PET failed to pay, and the former
ultimately filed a complaint for violation of BP 22 against the latter.
 PET claimed that the checks were issued only as an assurance of the complainant’s share,
and were not meant to be encashed until all the stocks of the partnership were sold.
o She argued that complainant asked for the checks as he did not want to continue
in the tannery business and had no use for a share of the stocks.
 The Trial Court found PET guilty, and the CA affirmed.
ISSUES & HOLDING

 Was the partnership still in existence at the time of issuance of the check? – YES. The
partnership was in the winding up phase, with unsold stocks and uncollected
receivables.
 Was PET liable for violation of BP 22? – NO. The partnership was still in existence
and the check was thus issued from one partner to another, as evidence of shares in
the partnership – it was not issued for value.
RATIO
The partnership had not yet ended – it was winding up
its affairs
 The Court ruled that while the partners had agreed to dissolve the partnership, the
agreement did not immediately put an end to the same, as they still had to sell the stocks
remaining and collect receivables from their debtors.
o They were still in the process of winding up the partnership affairs when the
check was issued.
 It enumerated 3 final stages of a partnership: dissolution, winding up, and termination.
o Dissolution: the change in the relation of the partners caused by any partner
ceasing to be associated in the carrying on of the business – the point in time
when the partners stop carrying on the business together.
o Winding up: process of settling the business affairs after dissolution (ex.
Collecting of assets previously demandable)
o Termination: the point in time after all the partnership affairs have been wound
up.
 These stages in the life of a partnership were recognized in the Civil Code (Articles 1828 1
and 18292), which provided that the upon dissolution the partnership is not terminated.
 Best evidence of the existence of the partnership (in the winding up stage): the unsold
goods and uncollected receivables.
o Since the partnership had not yet been terminated, PET and the complainant
remained partners; the check was issued from one partner to another and not from
a debtor to a creditor.
 The court found that the check was issued to evidence the complainant’s share in the
property, or as assurance that he would receive his share.
o The check was not issued to apply on account or for value: it was drawn without
consideration at the time of issue.
 The issuance of the check then did not have the first element of the offense under BP 22:
the making, drawing, and issuance of any check to apply on account or for value.
DISPOSITIVE
Petition GRANTED. PETITIONER
ACQUITTED.
1
1828. The dissolution of a partnership is the change in the relation of the partners caused by any partner
ceasing to be associated in the carrying on as distinguished from the winding up of the business.
2
1829. On dissolution the partnership is not terminated, but continues until the winding up of partnership
affairs is completed.

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ISSUES & HOLDING

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