[G.R. No. 144214. July 14, 2003]; LUZVIMINDA J.

VILLAREAL, DIOGENES VILLAREAL and CARMELITO

JOSE, petitioners, vs. DONALDO EFREN C. RAMIREZ and Spouses CESAR G. RAMIREZ JR. and CARMELITA
C. RAMIREZ, respondents.;PANGANIBAN, J.:

FACTS:

 In 1984, Villareal, Carmelito Jose and Jesus Jose, formed a partnership for the purpose of operating a
restaurant.“Aquarius Food House and Catering Services.”Villareal was appointed general manager and
Carmelito Jose, operations manager. Each contributed P250,000.00. In 1984, Ramirez was added as a
partner after he contributed P250,000.00was paid by his mommy and daddy, resp.s Cesar and Carmelita
Ramirez. In 1987, Jesus withdrew from thepartnership and his capital share of P250k was returned to him as
agreed upon by the other partners.

 Thereafter, the restaurant suffered losses. Without informing Ramirez, Villareal and Carmelito shut down the
restaurant. They then turned over the restaurant equipment to Ramirez.

 Later, Ramirez sent a letter to Villareal and Carmelito telling them he’s no longer interested in being a partner
and that he’s demanding his shares in the partnership. Villareal and Carmelito ignored the request of Ramirez
hence the latter sued them.

 In their defense, Villareal and Carmelito said that the restaurant equipment served as payment to Ramirez
when they were delivered to them; that Ramirez cannot ask for share in equity because the restaurant
incurred debts (P240,658.00) and irreversible business losses. Ramirez argued by saying that the equipment
were merely placed in their house for storage as the two partners allegedly searched for a better restaurant
location; that he was not aware of any losses or any indebtedness because he never took part in the
management of the restaurant.

 The TC ruled in favor of Ramirez. The CA affirmed and it further ordered Villareal and Carmelito to pay
Ramirez P253,114.00.

 The computation was done as follows:

(Original Partnership Capital – Partnership Debt =Partnership Asset) ÷ Number of partners; hence:
(P1,000,000.00 – P240,658.00 = P759,342.00) ÷ 3 = P253,114.00.

ISSUE: WON CA is correct

HELD: Nopesieezzz.

It is impossible that the said P1,000,000.00 original capital did not fluctuate. It could not have remained stagnant.
Further, the Court of Appeals missed to note that one partner left and his contribution was returned (Jesus Jose).
Generally, in the pursuit of a partnership business, its capital is either increased by profits earned or decreased by
losses sustained. It does not remain static and unaffected by the changing fortunes of the business.

The SC also noted that Ramirez cannot demand his equity shares from Villareal and Carmelito – because it should be
the partnership – the partners and thepartnership has a separate and distinct personality.

In determining Ramirez’ share in the equity, losses must be accounted for. He cannot ask for an amount equivalent to
his capital contribution especially in this case where the partnership incurred debts and losses. At any rate, Ramirez’
share is 1/3 of whatever assets the partnership still has after debts and losses are deducted. Hence there is a need for
a proper proceeding for the accounting, liquidation, and distribution of the remainingpartnership assets. A share in
a partnership can be returned only after the completion of the latter’s dissolution, liquidation and winding up of
the business.
On the issue of whether or not the turning over of the restaurant equipment to Ramirez served as payment of the
latter’s share, it is wrong for Villarreal and Carmelito to assert that it served as a payment. Ramirez was merely made
to believe that said equipment are being stored in his place and not being given to him as payment.