Partnership Dissolution: When Interest Accrues on Unliquidated Claims

When a partnership dissolves, the winding-up process often requires an accounting and inventory of assets before a partner's share can be determined. A recurring question is whether interest runs on claims that are not yet liquidated. The Supreme Court addressed this in Sunga-Chan v. Court of Appeals (G.R. No. 164401, June 25, 2008), clarifying the rules on interest for unliquidated claims and the solidary liability of partners who continue a business without consent.

The Facts of the Case

In 1977, Lamberto Chua and Jacinto Sunga formed a partnership to market liquefied petroleum gas under the name Shellite Gas Appliance Center. Although registered as a sole proprietorship in Jacinto's name, the partners agreed to share net profits equally.

After Jacinto's death in 1989, his widow Cecilia Sunga and daughter Lilibeth Sunga-Chan continued the business without Chua's consent. Chua's demands for an accounting and winding up went unheeded, prompting him to file a complaint in 1992 for winding up, accounting, appraisal, and recovery of shares.

The trial court ruled in Chua's favor in 1997, ordering the petitioners to render an accounting, return misappropriated assets, pay Chua his one-half share, and wind up the partnership. This decision became final and executory in December 2001.

The Dispute Over Interest

During execution, Chua submitted a computation of claims totaling over PhP 8.7 million, which included 12% interest on his share of partnership assets, on goodwill, and on unremitted profits. The petitioners objected, arguing that interest should not run on unliquidated claims.

The trial court approved Chua's computation, and the Court of Appeals affirmed. The petitioners appealed to the Supreme Court.

The Ruling: Interest on Unliquidated Claims

The Supreme Court partly granted the petition, applying the rules from Eastern Shipping Lines, Inc. v. Court of Appeals (G.R. No. 97412, July 12, 1994).

The Court distinguished between two types of obligations:

Loans or forbearance of money. Under Central Bank Circular No. 416, the 12% per annum interest rate applies to loans or forbearance of money, goods, or credit, and to judgments involving such obligations.

Other obligations. Under Article 2209 of the Civil Code, the 6% per annum interest rate applies to indemnities for damages arising from breach or delay in performing obligations generally.

Crucially, the Court held that no interest may be adjudged on unliquidated claims except when the demand can be established with reasonable certainty, citing Article 2213 of the Civil Code.

Applying these rules, the Court ruled:

• The unremitted monthly profits of PhP 35,000 from 1988 to May 1992 earned 6% interest from the rendition of the trial court's decision (October 7, 1997) until it became final (December 20, 2001). Thereafter, the total earned 12% interest as a forbearance of credit.

• The goodwill value of PhP 250,000, damages, attorney's fees, and litigation fees earned 12% interest from finality of the decision.

• However, no interest accrued on Chua's share of partnership assets. The Court explained that this share was an unliquidated claim—it could not be determined with reasonable certainty until the accounting and inventory were approved. The claim became liquidated only when the trial court approved the computation on November 6, 2002. Since Chua's computation was submitted on October 15, 2002, no interest could be added to his share of the assets.

The Court adjusted Chua's total claim to PhP 5,529,392.52.

Solidary Liability of the Partners

The Court also ruled that the petitioners' obligation was solidary, not merely joint. Under Article 1207 of the Civil Code, solidarity exists when the law or the nature of the obligation requires it.

Here, the acts complained of—continuing the business and managing Shellite against Chua's will—were not severable. It was impossible to determine where one petitioner's liability ended and the other's began. The obligation to render an accounting, inventory assets, and wind up the partnership was indivisible.

Liability of Community Property

The Court held that the absolute community property of Lilibeth Sunga-Chan and her husband could be levied upon to satisfy the judgment. Under Article 94 of the Family Code, the absolute community is liable for debts and obligations contracted by either spouse to the extent the family benefited. The Court found no indication that the family did not benefit from the misappropriated partnership assets.

Since Chua's bid of PhP 8 million exceeded his adjusted claim of PhP 5,529,392.52, the Court ordered Chua to pay the excess of PhP 2,470,607.48 to Sunga-Chan.

Practical Takeaways

• Interest does not automatically run on unliquidated claims. A claim must be established with reasonable certainty before interest accrues, per Article 2213 of the Civil Code.

• The applicable interest rate depends on the nature of the obligation. Loans and forbearance of money carry 12% interest; other obligations carry 6% under Article 2209.

• Once a money judgment becomes final and executory, the entire amount earns 12% interest as a forbearance of credit until fully paid.

• Partners who continue a dissolved partnership's business without consent may be held solidarily liable, especially when their acts are inseparable and the extent of each party's misappropriation cannot be quantified.

• Community property may answer for obligations contracted by either spouse if the family benefited, subject to the Family Code's provisions.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.