Emnace vs. Court of Appeals

Payment of the proper docket fee is a jurisdictional requirement, but under the relaxed Manchester doctrine, the trial court may allow the plaintiff to pay the correct amount within a reasonable time before the applicable prescriptive or reglementary period expires; the fee must be based on the plaintiff's estimated claim and cannot be made contingent on the outcome of the case. An action for accounting, liquidation, and distribution of partnership assets is a personal action in personam, even if the assets include parcels of land; the heirs of a deceased partner may sue in their own names without prior settlement or appointment; and prescription for the right to demand an accounting begins only after final accounting.

Emilio Emnace, Vicente Tabanao, and Jacinto Divinagracia were partners in Ma. Nelma Fishing Industry. The partnership's assets included fishing boats, vehicles, parcels of land in Negros Occidental, and bank deposits. The controversy concerns the consequences of the partnership's dissolution and the rights of a deceased partner's heirs under the Civil Code, as well as procedural requirements under the Rules of Court on docket fees and venue.

Emilio Emnace, Vicente Tabanao, and Jacinto Divinagracia were partners in a business concern known as Ma. Nelma Fishing Industry. In January 1986, they decided to dissolve the partnership and executed an agreement of partition and distribution of the partnership properties among them, consequent to Jacinto Divinagracia's withdrawal from the partnership. Among the assets to be distributed were five fishing boats, six vehicles, two parcels of land located at Sto. Niño and Talisay, Negros Occidental, and cash deposits in the local branches of the Bank of the Philippine Islands and Prudential Bank.

Throughout the existence of the partnership, and even after Vicente Tabanao's death in 1994, Emilio Emnace failed to submit to Tabanao's heirs any statement of assets and liabilities of the partnership and to render an accounting of the partnership's finances. He also reneged on his promise to turn over to Tabanao's heirs the deceased's 1/3 share in the total assets of the partnership, amounting to P30,000,000.00, or the sum of P10,000,000.00, despite formal demand for payment.

Consequently, Tabanao's heirs filed an action for accounting, payment of shares, division of assets, and damages. In their complaint, they prayed that Emilio be ordered to render a proper accounting of all the assets and liabilities of the partnership and to pay, remit, deliver, surrender, or yield to them no less than one-third of the assets, properties, dividends, cash, lands, fishing vessels, trucks, motor vehicles, and other forms of treasure belonging or accruing to the partnership; P200,000.00 as moral damages; and attorney's fees equivalent to thirty percent of the entire share or amount awarded plus P1,000.00 for every court appearance. They later filed an amended complaint adding a prayer that Emilio be ordered to sell all the partnership's assets and thereafter pay, remit, deliver, surrender, or yield to them their corresponding share in the proceeds.

In the proceedings below, Emilio challenged the complaint on grounds of improper venue, lack of jurisdiction over the nature of the action, lack of capacity of the estate of Vicente Tabanao to sue, failure to pay the proper docket fees, and prescription. The trial court and the Court of Appeals found that no final accounting had been made and that Emilio had failed or refused to render an accounting of the partnership's business and assets; respondents had estimated the partnership's total assets at P30,000,000.00 in a letter to Emilio.

• Docket Fees and Jurisdiction: Petitioner argued that the trial court did not acquire jurisdiction over the case because respondents failed to pay the proper docket fees; he maintained that the trial court and the Court of Appeals erred in condoning the non-payment and in allowing the unpaid fees to become a lien on any monetary or property judgment, since the lien provision applies only to pauper-litigants.
• Venue: Petitioner insisted that venue was improperly laid because the action involved a parcel of land located outside the territorial jurisdiction of the court a quo, characterizing the action as a real action.
• Capacity to Sue: Petitioner asserted that the surviving spouse of Vicente Tabanao had no legal capacity to sue because she was never appointed as administratrix or executrix of his estate and there was no intestate case.
• Prescription: Petitioner contended that respondents' action prescribed four years after it accrued in 1986.

• Accounting and Docket Fees: Respondents asserted that until and unless a proper accounting was done, the exact value of the partnership's assets and their corresponding share could not be ascertained, and they felt justified in not having paid the commensurate docket fee; they expressed willingness to remit any payable balance or lien on whatever award the court might grant.
• Relief Sought: Respondents prayed for an accounting of all partnership assets and liabilities, payment of at least one-third of the partnership assets, moral damages of P200,000.00, attorney's fees of thirty percent of the award plus P1,000.00 per appearance, and, in their amended complaint, the sale of all partnership assets and payment of their share from the proceeds.

• Docket Fees and Jurisdiction: Whether the trial court acquired jurisdiction over the action despite respondents' failure to pay the proper docket fees, and whether the complaint should be dismissed outright or payment may be allowed within a reasonable time.
• Venue: Whether the action is a real action that must be filed where the parcels of land are located, or a personal action that may be filed where the defendant resides or may be found, or where the plaintiffs reside.
• Capacity to Sue: Whether the heirs of Vicente Tabanao, including the surviving spouse, have legal capacity to sue without prior settlement of the estate or appointment as administratrix or executrix.
• Prescription: Whether respondents' cause of action for accounting and payment of shares is barred by prescription.

• Docket Fees and Jurisdiction: No, jurisdiction did not attach on the initial payment, but dismissal was not automatically required; under the relaxed Manchester doctrine, the trial court should determine the proper fee based on the estimated claim and allow payment within a reasonable time before prescription expires. The lien provision invoked below is unavailable because respondents are not pauper-litigants.
• Venue: No. The action is a personal action in personam because it seeks accounting, liquidation, partition, and enforcement of personal obligations; the inclusion of land assets is incidental. Venue was properly laid under Section 2(b), Rule 4.
• Capacity to Sue: Yes. The heirs may sue in their own names as successors; rights are transmitted from the moment of death under Article 777, and no prior settlement or appointment as executor or administrator is necessary.
• Prescription: No. The right to demand an accounting accrues at dissolution absent a contrary agreement, and prescription begins only after final accounting; no final accounting was made.

• Docket Fees and Jurisdiction: The claim was not one beyond pecuniary estimation; respondents themselves estimated the partnership assets at P30,000,000.00 and their share at P10,000,000.00, so the docket fee was determinable by informed and practical estimation. Payment of filing fees cannot be made contingent on the result of the case; an initial payment based on the estimated amount must accompany the filing, subject to adjustment under Section 5(a), Rule 141. The trial court erred in not dismissing the complaint outright for failure to pay the proper docket fees, but because there was no intent to defraud and respondents showed willingness to pay, the strict Manchester doctrine was relaxed. Under National Steel Corp. vs. Court of Appeals, the court acquires jurisdiction if the initiatory pleading is accompanied by the requisite fees, or if the fees are fully paid within a reasonable time granted by the court, unless prescription has set in. The trial court must therefore determine the proper docket fee based on the estimated amount and direct payment within a reasonable time before the prescriptive or reglementary period expires; failure to comply, upon motion, warrants dismissal. The lien under Section 16, Rule 141 applies only to pauper-litigants; respondents are not paupers. However, under Section 5(a) and Sun Insurance Office, Ltd. vs. Hon. Maximiano Asuncion, only the difference between the amount finally awarded and the fees paid upon filing may be adjusted and subjected to a lien.
• Venue: The complaint sought an accounting of partnership assets, their sale, and distribution according to the partners' agreement. Although two partnership assets were parcels of land, the action was not against the land itself but against Emilio on the basis of his personal liability. It was an action in personam, not in rem, and the land was only incidental to the liquidation. Claridades vs. Mercader held that a prayer for the sale of partnership assets, including a fishpond, did not change the nature of the action because the sale was merely incidental to liquidation. The action also sought enforcement of the dissolution agreement and performance of a personal duty, making it a personal action that could be filed where any of the parties resided. Venue was properly laid, and venue does not affect jurisdiction.
• Capacity to Sue: From the moment of Vicente Tabanao's death, his rights insofar as the partnership was concerned were transmitted to his heirs under Article 777 of the Civil Code. Succession transmits the property, rights, and obligations of the decedent to the heirs, who become owners of their hereditary shares from the moment of death. A prior settlement of the estate or the appointment of Salvacion Tabanao as executrix or administratrix was not necessary for the heirs to acquire legal capacity to sue. As successors who stepped into the shoes of the decedent, they could commence any action originally pertaining to him, including the demand for Emilio's obligations under the dissolution agreement.
• Prescription: The three final stages of a partnership are dissolution, winding-up, and termination. Although dissolved, the partnership continues to exist and retains its legal personality while it completes the winding up of its affairs, including partitioning and distributing net assets. For as long as the partnership exists, any partner may demand an accounting. Under Article 1842 of the Civil Code, in relation to Articles 1807 and 1809, the right to an account accrues at the date of dissolution in the absence of any agreement to the contrary. Prescription begins to run only when a final accounting is made. No final accounting had been made; indeed, respondents were seeking that accounting because Emilio failed or refused to render one. The action was therefore not barred by prescription.

• Docket Fees as Jurisdictional Requirement and the Relaxed Manchester Doctrine — Payment of the proper docket fee is a jurisdictional requirement, and the fee must be based on the plaintiff's estimated claim at the time of filing; it cannot be made contingent on the outcome of the case. Under the relaxed Manchester doctrine, however, the trial court may allow the plaintiff to pay the correct amount within a reasonable time before the applicable prescriptive or reglementary period expires. Failure to comply, upon motion, warrants dismissal. The lien under Section 16, Rule 141 applies only to pauper-litigants; only the deficiency between the amount finally awarded and the fees paid upon filing may be adjusted and subjected to a lien.
• Personal Action in Partnership Liquidation — An action for accounting, liquidation, partition, and distribution of partnership assets is a personal action in personam, even if the partnership assets include parcels of land, because it is directed against a person on the basis of personal liability and seeks enforcement of personal obligations. Venue lies where the defendant resides or may be found, or where the plaintiffs reside, at the election of the latter.
• Capacity of Heirs to Sue — The rights of a decedent are transmitted to the heirs from the moment of death under Article 777 of the Civil Code. The heirs may sue in their own names as successors without prior settlement of the estate or appointment as executor or administrator, and they may commence any action originally pertaining to the decedent.
• Partnership Dissolution, Winding-Up, and Accounting Prescription — Dissolution does not terminate the partnership; the partnership continues to exist and retains its legal personality until winding-up is completed. The right to demand an accounting accrues at the date of dissolution in the absence of any agreement to the contrary, and prescription begins to run only after a final accounting is made.
• Venue Distinguished from Jurisdiction — Venue touches upon the substance or merits of the case and does not affect the court's jurisdiction; a personal action may be filed in the proper court where any of the parties reside.

• "It is thus imperative for respondents to pay the corresponding docket fees in order that the trial court may acquire jurisdiction over the action." — This states the jurisdictional character of docket fees and frames the central procedural issue.
• "The court acquires jurisdiction over the action if the filing of the initiatory pleading is accompanied by the payment of the requisite fees, or, if the fees are not paid at the time of the filing of the pleading, as of the time of full payment of the fees within such reasonable time as the court may grant, unless, of course, prescription has set in the meantime." — Quoted from National Steel Corp. vs. Court of Appeals, this passage supplies the relaxed rule allowing payment within a reasonable time.
• "The fact that two of the assets of the partnership are parcels of land does not materially change the nature of the action. It is an action in personam because it is an action against a person, namely, petitioner, on the basis of his personal liability. It is not an action in rem where the action is against the thing itself instead of against the person." — This defines the personal-action character of the suit and supports the venue ruling.
• "For as long as the partnership exists, any of the partners may demand an accounting of the partnership's business. Prescription of the said right starts to run only upon the dissolution of the partnership when the final accounting is done." — This articulates the rule on accounting and prescription in partnership dissolution.

• Manchester Development Corp. vs. Court of Appeals, 149 SCRA 562 (1987) — The strict ruling on docket fees; distinguished because there was no intent to defraud and respondents showed willingness to pay.
• Pilipinas Shell Petroleum Corporation vs. Court of Appeals, 171 SCRA 674 (1989) — Held that initial filing fees correspond to the estimated amount of the claim, subject to adjustment; payment cannot be contingent on the result.
• Sun Insurance Office, Ltd. vs. Hon. Maximiano Asuncion, 170 SCRA 274 (1989) — Cited for the rule that an additional filing fee may constitute a lien on the judgment when the specific claim is left for determination.
• National Steel Corp. vs. Court of Appeals, 302 SCRA 522 (1999) — Supplied the rule that jurisdiction attaches upon payment of the requisite fees or full payment within a reasonable time granted by the court, unless prescription has set in.
• Claridades vs. Mercader, 17 SCRA 1 (1966) — Held that a prayer for sale of partnership assets, including a fishpond, did not change the action's personal character because the sale was incidental to liquidation.
• Asiavest Limited vs. Court of Appeals, 296 SCRA 539 (1998) — Cited for the distinction between an action in personam and an action in rem.
• Ruiz vs. Court of Appeals, 303 SCRA 637 (1999) — Cited for the principle that an action claiming a debt and seeking performance of a personal duty is a personal action.
• La Tondena Distillers, Inc. vs. Ponferrada, 264 SCRA 540 (1996) — Cited for the rule that a personal action may be filed where any of the parties reside.
• Coronel vs. Court of Appeals, 263 SCRA 15 (1996) — Cited with Article 777 for the transmission of rights to the heirs upon death.
• Opulencia vs. Court of Appeals, 293 SCRA 385 (1998) — Cited for the rule that heirs become owners of their hereditary shares from the moment of the decedent's death.
• Heirs of Ignacio Conti vs. Court of Appeals, 300 SCRA 345 (1998) — Cited for the rule that no prior settlement or appointment of an executor or administrator is necessary for heirs to acquire capacity to sue.
• Idos vs. Court of Appeals, 296 SCRA 194 (1998) — Cited for the three final stages of a partnership: dissolution, winding-up, and termination.
• Sy vs. Court of Appeals, 313 SCRA 328 (1999) and Ortega vs. Court of Appeals, 245 SCRA 529 (1995) — Cited for the rule that a dissolved partnership continues to exist until winding-up is completed.
• Fue Leung vs. IAC, 169 SCRA 746 (1989) — Cited for the rule that the right to an accounting and the running of prescription are tied to the final accounting.
• Colarina vs. Court of Appeals, 303 SCRA 647 (1999) — Cited for liberal construction of docket-fee rules and relaxation of the Manchester doctrine.
• Gregorio vs. Angeles, 180 SCRA 490 (1989) — Cited for the requirement of informed and practical estimation of the claim for docket-fee purposes.
• Ballatan vs. Court of Appeals, 304 SCRA 34 (1999) — Cited for the jurisdictional nature of docket fees.
• Philippine Banking Corp. vs. Tensuan, 228 SCRA 385 (1993) — Cited for the principle that venue does not affect jurisdiction.

• Section 16, Rule 141, Rules of Court — Provides that legal fees shall be a lien on the monetary or property judgment in favor of a pauper-litigant. The Court held respondents could not invoke it because they were not litigating as paupers.
• Section 5(a), Rule 141, Rules of Court — Classifies claims into those immediately ascertainable and those not immediately ascertainable; if the value or sum claimed is less or more than the appraisal, the difference in fee shall be refunded or paid. The Court applied it to require initial payment based on the estimated claim, subject to adjustment.
• Section 2(b), Rule 4, Rules of Court — Provides that personal actions may be commenced and tried where the defendant resides or may be found, or where the plaintiffs reside, at the election of the latter. The Court used it to uphold venue.
• Article 777, Civil Code — States that rights to succession are transmitted from the moment of the decedent's death. The Court relied on it to hold that the heirs had capacity to sue in their own names.
• Article 774, Civil Code — Defines succession as a mode of acquisition by which the property, rights, and obligations of a person are transmitted to his heirs. The Court cited it to explain the transmission of Vicente Tabanao's partnership rights.
• Article 1842, Civil Code — Provides that the right to an account of his interest accrues to any partner, or his legal representative, against the winding-up partners or surviving partners at the date of dissolution, absent an agreement to the contrary. The Court applied it to hold that prescription had not begun absent a final accounting.
• Articles 1807 and 1809, Civil Code — Deal with the duty to account among partners. The Court read them in relation to Article 1842 in resolving the prescription issue.

Davide, Jr., C.J., Puno, Kapunan, Pardo, JJ., concur.