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Sy v. CA
[G.R. No. 94285. August 31, 1999]
JESUS SY, JAIME SY, ESTATE OF JOSE SY, ESTATE OF VICENTE
SY, HEIR OF MARCIANO SY represented by JUSTINA VDA. DE SY
and WILLIE SY, petitioners, vs. THE COURT OF APPEALS,
INTESTATE ESTATE OF SY YONG HU, SEC. HEARING OFFICER
FELIPE TONGCO, SECURITIES AND EXCHANGE COMMISSION,
respondents.
[G.R. No. 100313. August 31, 1999]
SY YONG HU & SONS, JOHN TAN, BACOLOD CANVAS AND
UPHOLSTERY SUPPLY CO., AND NEGROS ISUZU SALES,
petitioners, vs. HONORABLE COURT OF APPEALS (11th Division),
INTESTATE ESTATE OF THE LATE SY YONG HU, JOSE FALSIS,
JR., AND HON. BETHEL KATALBAS-MOSCARDON, RTC OF
NEGROS OCCIDENTAL, Branch 51, respondents.
At bar are two consolidated petitions for review on certiorari under Rule
45 of the Revised Rules of Court, docketed as G. R. Nos. 94285 and
G.R. No. 100313, respectively, seeking to reinstate the Resolution of
the Court of Appeals in CA - G. R. SP No. 17070 and its Decision in
CA-G. R. SP No. 24189.
In G. R. No. 94285, the petitioners assail the Resolution dated June
27, 1990 of the Court of Appeals granting the Motion for
Reconsideration interposed by the petitioners (now the private
respondents) of its Decision, promulgated on January 15, 1990, which
affirmed the Order issued on January 16, 1989 by the Securities and
Exchange Commission (SEC) en banc and the Order of SEC Hearing
Officer Felipe Tongco, dated October 5, 1988,
The facts that matter are as follows:
Sy Yong Hu & Sons is a partnership of Sy Yong Hu and his sons, Jose
Sy, Jayme Sy, Marciano Sy, Willie Sy, Vicente Sy, and Jesus Sy,
registered with the SEC on March 29, 1962, with Jose Sy as managing
partner. The partners and their respective shares are reflected in the
Amended Articles of Partnership as follows:
NAMES AMOUNT CONTRIBUTED
SY YONG HU P 31, 000. 00
JOSE S. SY 205, 000. 00
JAYME S. SY 112, 000. 00
MARCIANO S. SY 143, 000. 00
WILLIE S. SY 85, 000. 00
VICENTE SY 85, 000. 00
JESUS SY 88, 000. 00
Partners Sy Yong Hu, Jose Sy, Vicente Sy, and Marciano Sy died on
May 18, 1978, August 12, 1978, December 30, 1979 and August 7,
1987, respectively. At present, the partnership has valuable assets
such as tracts of lands planted to sugar cane and commercial lots in
the business district of Bacolod City.
Sometime in September, 1977, during the lifetime of all the partners,
Keng Sian brought an action, docketed as Civil Case No. 13388 before
the then Court of First Instance of Negros Occidental, against the
partnership as well as against the individual partners for accounting of
all the properties allegedly owned in common by Sy Yong Hu and the
plaintiff (Keng Sian), and for the delivery or reconveyance of her one-
half (1/2) share in said properties and in the fruits thereof. Keng Sian
averred that she was the common law wife of partner Sy Yong Hu, that
Sy Yong Hu, together with his children, who were partners in the
partnership, connived to deprive her of her share in the properties
acquired during her cohabitation with Sy Yong Hu, by diverting such
properties to the partnership.
In their answer dated November 3, 1977, the defendants, including Sy
Yong Hu himself, countered that Keng Sian is only a house helper of
Sy Yong Hu and his wife, subject properties are exclusively owned by
defendant partnership, and plaintiff has absolutely no right to or
interest therein.
On September 20, 1978, during the pendency of said civil case,
Marciano Sy filed a petition for declaratory relief against partners
Vicente Sy, Jesus Sy and Jayme Sy, docketed as SEC Case No.
1648, praying that he be appointed managing partner of the
partnership, to replace Jose Sy who died on August 12, 1978.
Answering the petition, Vicente Sy, Jesus Sy and Jaime Sy, who claim
to represent the majority interest in the partnership, sought the
dissolution of the partnership and the appointment of Vicente Sy as
managing partner. In due time, Hearing Officer Emmanuel Sison came
out with a decision (Sison Decision) dismissing the petition, dissolving
the partnership and naming Jesus Sy, in lieu of Vicente Sy who had
died earlier, as the managing partner in charge of winding the affairs of
the partnership.
The Sison decision was affirmed in toto by the SEC en banc in a
decision (Abello decision) dated June 8, 1982, disposing thus:
WHEREFORE, the Commission en banc affirms the dispositive
portion of the decision of the Hearing Officer, but clarifies that: (1) the
partnership was dissolved by express will of the majority and not ipso
facto because of the death of any partner in view of the stipulation of
Articles of Partnership and the provisions of the New Civil Code
particularly Art. 1837 [2] and Art. 1841. (2) The Managing Partner
designated by the majority, namely Jesus Sy, vice Vicente Sy
(deceased) shall only act as a manager in liquidation and he shall
submit to the Hearing Officer an accounting and a project of partition,
within 90 days from receipt of this decision. (3) The petitioner is also
required within the same period to submit his counter-project of
partition, from date of receipt of the Managing Partners project of
partition. (4) The case is remanded to the Hearing Officer for
evaluation and approval of the accounting and project of partition.
On the basis of the above decision of the SEC en banc, Hearing
Officer Sison approved a partial partition of certain partnership assets
in an order dated December 2, 1986. Therefrom, respondents
seasonably appealed.
In 1982, the children of Keng Sian with Sy Yong Hu, namely, John
Keng Seng, Carlos Keng Seng, Tita Sy, Yolanda Sy and Lolita Sy, filed
a petition, docketed as SEC Case No 2338, to revoke the certificate of
registration of Sy Yong Hu & Sons, and to have its assets reverted to
the estate of the late Sy Yong Hu. After hearings, the petition was
dismissed by Hearing Officer Bernardo T. Espejo in an Order, dated
January 11, 1984, which Order became final since no appeal was
taken therefrom.
After the dismissal of SEC Case No. 2338, the children of Keng Sian
sought to intervene in SEC Case No. 1648 but their motion to so
intervene was denied in an Order dated May 9, 1985. There was no
appeal from said order.
In the meantime, Branch 43 of the Regional Trial Court of Negros
Occidental appointed one Felix Ferrer as a Special Administrator for
the Intestate Estate of Sy Yong Hu in Civil Case No. 13388. Then, on
August 30, 1985, Alex Ferrer moved to intervene in the proceedings in
SEC Case No. 1648, for the partition and distribution of the partnership
assets, on behalf of the respondent Intestate Estate.
It appears that sometime in December, 1985, Special Administrator
Ferrer filed an Amended Complaint on behalf of respondent Intestate
Estate in Civil Case No. 13388, wherein he joined Keng Sian as
plaintiff and thereby withdrew as defendant in the case. Special
Administrator Ferrer adopted the theory of Keng Sian that the assets of
the partnership belong to Keng Sian and Sy Yong Hu (now
represented by the Estate of Sy Yong Hu) in co-ownership, which
assets were wrongfully diverted in favor of the defendants.
The motion to intervene in SEC Case No. 1648, filed by Special
Administrator Alex Ferrer on behalf of the respondent Estate, was
denied in the order issued on May 9, 1986 by Hearing Officer Sison.
With the denial of the motion for reconsideration, private respondent
Intestate Estate of Sy Yong Hu appealed to the Commission en banc.
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In its decision (Sulit decision) on the aforesaid appeal from the Order
dated May 9, 1986, and the Order dated December 2, 1986, the SEC
en banc ruled:
WHEREFORE, in the interest of Justice and equity, substantive rights
of due process being paramount over the rules of procedure, and in
order to avoid multiplicity of suits; the order of the hearing officer below
dated May 9, 1986 denying the motion to intervene in SEC Case No.
1648 of appellant herein as well as the order dated December 2, 1986
denying the motion for reconsideration are hereby reversed and the
motion to intervene given due course. The instant case is hereby
remanded to the hearing officer below for further proceeding on the
aspect of partition and/or distribution of partnership assets. The urgent
motion for the issuance of a restraining order is likewise hereby
remanded to the hearing officer below for appropriate action.
The said decision of the SEC en banc reiterated that the Abello
decision of June 8, 1982, which upheld the order of dissolution of the
partnership, had long become final and executory. No further appeal
was taken from the Sulit Decision.
During the continuation of the proceedings in SEC Case No. 1648,
now presided over by Hearing Officer Felipe S. Tongco who had
substituted Hearing Officer Sison, the propriety of placing the
Partnership under receivership was taken up. The parties brought to
the attention of the Hearing Officer the fact of existence of Civil Case
No. 903 (formerly Civil Case No. 13388) pending before the Regional
Trial Court of Negros Occidental. They also agreed that during the
pendency of the aforesaid court case, there will be no disposition of the
partnership assets.On October 5, 1988, Hearing Officer Tongco came
out with an Order (Tongco Order) incorporating the above submissions
of the parties and placing the partnership under a receivership
committee, explaining that it is the most equitable fair and just manner
to preserve the assets of the partnership during the pendency of the
civil case in the Regional Trial Court of Bacolod City.
On October 22, 1988, a joint Notice of Appeal to the SEC en banc was
filed by herein petitioners Jayme Sy, Jesus Sy, Estate of Jose Sy,
Estate of Vicente Sy, Heirs of Marciano Sy (represented by Justina
Vda. de Sy), and Willie Sy, against the Intervenor (now private
respondent). In an order (Lopez Order) dated January 16, 1989, the
SEC en bancaffirmed the Tongco Order.
With the denial of their Motion for Reconsideration, petitioners filed a
special civil action for certiorari with the Court of Appeals.
On January 15, 1990, the Court of Appeals granted the petition and set
aside the Tongco and Lopez Orders, and remanded the case for
further execution of the 1982 Abello and 1988 Sulit Decisions, ordering
the partition and distribution of the partnership properties.
Private respondent seasonably interposed a motion for reconsideration
of such decision of the Court of Appeals.
Acting thereupon on June 27, 1990, the Court of Appeals issued its
assailed Resolution, reversing its Decision of January 15, 1990, and
remanding the case to the SEC for the formation of a receivership
committee, as envisioned in the Tongco Order.
G. R. No. 100313 came about in view of the dismissal by the Court of
Appeals of the Petition for Certiorari with a Prayer for Preliminary
Injunction, docketed as CA-G. R. SP No. 24189, seeking to annul and
set aside the orders, dated January 24, 1991 and April 19, 1989,
respectively, in Civil Case No. 5326 before the Regional Trial Court of
Bacolod City.
The antecedent facts are as follows:
Sometime in June of 1988, petitioner Sy Yong Hu & Sons through its
Managing Partner, Jesus Sy, applied for a building permit to
reconstruct its building called Sy Yong Hu & Sons Building, located in
the central business district of Bacolod City, which had been destroyed
by fire in the late 70s. On July 5, 1988, respondent City Engineer
issued Building Permit No. 4936 for the reconstruction of the first two
floors of the building. Soon thereafter, reconstruction work began. In
January, 1989, upon completion of its reconstruction, the building was
occupied by the herein petitioners, Bacolod and Upholstery Supply
Company and Negros Isuzu Sales, which businesses are owned by
successors-in-interest of the deceased partners Jose Sy and Vicente
Sy. Petitioner John Tan, who is also an occupant of the reconstructed
building, is the brother-in-law of deceased partner Marciano Sy.
From the records on hand, it can be gleaned that the Tongco Order,
dated October 5, 1988, in SEC Case No. 1648, had, among others,
denied a similar petition of the intervenors therein (now private
respondents) for a restraining order and/or injunction to enjoin the
reconstruction of the same building. However, on October 10, 1988,
respondent Intestate Estate sent a letter to the City Engineer claiming
that Jesus Sy is not authorized to act for petitioners Sy Yong Hu &
Sons with respect to the reconstruction or renovation of the property of
the partnership. This was followed by a letter dated November 11,
1988, requesting the revocation of Building Permit No. 4936.
Respondent City Engineer inquired later from Jesus Sy for an
authority to sign for and on behalf of Sy Yong Hu & Sons to justify the
latters signature in the application for the building permit, informing
him that absent any proof of his authority, he would not be issued an
occupancy permit On December 27, 1988, respondent Intestate Estate
reiterated its objection to the authority of Jesus Sy to apply for a
building permit and pointing out that in view of the creation of a
receivership committee, Jesus Sy no longer had any authority to act for
the partnership.
In reply, Jesus Sy informed the City Engineer that the Tongco Order
had been elevated to the SEC en banc, making him still the authorized
manager of the partnership. He then requested that an occupancy
permit be issued as Sy Yong Hu & Sons had complied with the
requirements of the City Engineers Office and the National Building
Code.
Unable to convince the respondent City Engineer to revoke subject
building permit, respondent Intestate Estate brought a Petition for
Mandamus with prayer for a Writ of Preliminary Injunction, docketed
as Civil Case No 5326 before the Regional Trial Court of Bacolod City
and entitled Intestate Estate of the Late Sy Yong Hu vs. Engineer
Jose P. Falsis, Jr. The Complaint concluded with the following prayer:
WHEREFORE PREMISES CONSIDERED, it is respectfully prayed of
the Honorable Court that:
1. A writ of Preliminary Injunction be issued to the respondent, after
preliminary hearing is had. compelling his office to padlock the
premises occupied, without the requisite Certificate of Occupancy; to
stop all construction activities, and barricade the same premises so
that the unwary public will not be subject to undue hazards due to lack
of requisite safety precaution;
2. The Respondent be ordered to enforce without exemption every
requisite provision of the Building Code as so mandated by it.
Petitioners Sy Yong Hu & Sons, the owners of the building sought to
be padlocked were not impleaded as party to the petition dated
February 22, 1989. Neither were the lessees-occupants thereon so
impleaded. Thus, they were not notified of the hearing scheduled for
April 5, 1989, on which date the Petition was heard. Subsequently,
however, the Regional Trial Court issued an order dated April 19, 1989
for the issuance of a Writ of Preliminary Mandatory Injunction ordering
the City Engineer to padlock the building.
On May 9, 1989, upon learning of the issuance of the Writ of
Preliminary Injunction, dated May 4, 1989, petitioners immediately filed
the: (1) Motion for Intervention; (2) Answer in Intervention; and (3)
Motion to set aside order of mandatory injunction. In its order dated
June 22, 1989, the Motion for Intervention was granted by the lower
court through Acting Presiding Judge Porfirio A. Parian.
On August 3, 1989, respondent Intestate Estate presented a Motion to
cite Engineer Jose Falsis, Jr. in contempt of court for failure to
implement the injunctive relief.
On August 15, 1989, petitioners submitted an Amended Answer in
Intervention. Reacting thereto, respondent Intestate Estate filed a
Motion to Strike or Expunge from the Record the Amended Answer in
Intervention.
On January 25, 1990, petitioner Sy Yong Hu & Sons again wrote the
respondent City Engineer to reiterate its request for the immediate
issuance of a certificate of occupancy, alleging that the Court of
Appeals in its Decision of January 15, 1990 in CA-G. R. No. 17070 had
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reversed the SEC decision which approved the appointment of a
receivership committee. However, the City Engineer refused to issue
the Occupancy Permit without the conformity of the respondent
Intestate Estate and one John Keng Seng who claims to be an
Illegitimate son of the Late Sy Yong Hu.
In an order issued on January 24, 1991 upon an Ex Parte Motion to
Have All Pending Incidents Resolved filed by respondent Intestate
Estate, Judge Bethel Katalbas-Moscardon issued an order modifying
the Writ of Preliminary Mandatory Injunction, and directing the
respondent City Engineer to:
x x x immediately order stoppage of any work affecting the
construction of the said building under Lot 259-A-2 located at Gonzaga
Street adjacent to the present Banco de Oro Building, BACOLOD City,
to cancel or cause to be cancelled the Building Permit it had issued; to
order the discontinuance of the occupancy or use of said building or
structure or portion thereof found to be occupied or used, the same
being contrary and violative of the provisions of the Code; and to desist
from issuing any certificate of Occupancy until the merits of this case
can finally be resolved by this Court. x x x
Again, it is emphasized that the issue involved is solely question of
law and the Court cannot see any logical reason that the intervenors
should be allowed to intervene as earlier granted in the Order of the
then Presiding Judge Porfirio A. Parian, of June 22, 1989. Much less
for said intervenors to move for presentation of additional parties, only
on the argument of Intervenors that any restraining order to be issued
by this Court upon the respondent would prejudice their present
occupancy which is self serving, whimsical and in fact immoral. It is
axiomatic that the means would not justify the end nor the end justify
the means. Assuming damage to the present occupants will occur and
assuming further that they are entitled, the same should be ventilated
in a different action against the lessor or landlord, and the present
petition cannot be the proper forum, otherwise, while it maybe argued
that there is a multiplicity of suit which actually is groundless, on the
other hand, there will be only confusion of the issues to be resolved by
the Court. Well valid enough is to reiterate that the present petition is
not the proper forum for the intervenors to shop for whatever relief.
In view of the above, the Order allowing the intervenors in this case is
likewise hereby withdrawn for the purposes above discussed.
Consequently, the Motion to present additional parties is deemed
denied, and the Motion to Strike Or Expunge From The Records the
Amended Answer In Intervention is deemed granted as in fact the
same become moot and academic with the elimination of the
Intervenors in this case.
Pursuant to the above Order of January 24, 1991, respondent City
Engineer served a notice upon petitioners revoking Building Permit No.
4936, ordering the stoppage of all construction work on the building,
and commanding discontinuance of the occupancy thereof.
On February 15, 1991, the aggrieved petitioners filed a Petition for
Certiorari with Prayer for Preliminary Injunction with the Court of
Appeals, docketed as CA-G. R. SP No. 24189.
On February 27, 1991, the Court of Appeals issued a Temporary
Restraining Order enjoining the respondent Judge from implementing
the questioned orders dated January 24, 1991 and April 19, 1989.
After the respondents had sent in their answer, petitioners filed a Reply
with a prayer for the issuance of a writ of mandamus directing the
respondent City Engineer to reissue the building permit previously
issued in favor of petitioner Sy Yong Hu & Sons, and to issue a
certificate of occupancy on the basis of the admission by respondent
City Engineer that petitioner had complied with the provisions of the
National Building Code.
On May 31, 1991, the Court of Appeals rendered its questioned
decision denying the petition.
From the Resolution of the Court of Appeals granting the motion for
reconsideration in CA-G. R. SP No. 17070 and the Decision in CA-G.
R. SP No. 24189, petitioners have come to this Court for relief.
In G. R. No. 94285, petitioners contend by way of assignment of
errors, that:
I. RESPONDENT COURT OF APPEALS ERRED IN REVERSING ITS
MAIN DECISION IN CA-G. R. No. 17070, WHICH DECISION HAD
REMANDED TO THE SEC THE CASE FOR THE PROPER
IMPLEMENTATION OF THE 1982 ABELLO AND 1988 SULIT
DECISIONS WHICH IN TURN ORDERED THE DISTRIBUTION AND
PARTITION OF THE PARTNERSHIP PROPERTIES.
II. RESPONDENT COURT OF APPEALS ERRED IN REINSTATING
THE TONGCO ORDER, WHICH HAD SUSPENDED THE
DISSOLUTION OF THE PARTNERSHIP AND THE DISTRIBUTION
OF ITS ASSETS, AND IN PLACING THE PARTNERSHIP
PROPERTIES UNDER RECEIVERSHIP PENDING THE
RESOLUTION OF CIVIL CASE NO. 903 (13388), ON A GROUND
NOT MADE THE BASIS OF THE SEC RESOLUTION UNDER
REVIEW, I. E., THE DISPOSITION BY A PARTNER OF SMALL
PROPERTIES ALREADY ADJUDICATED TO HIM BY A FINAL SEC
ORDER DATED DECEMBER 2, 1986 AND MADE LONG BEFORE
THE AGREEMENT OF JUNE 28, 1988 OF THE PETITIONERS NOT
TO DISPOSE OF THE PARTNERSHIP ASSETS.
In G. R. No. 100313, Petitioners assign as errors, that:
I. THE HONORABLE COURT OF APPEALS (ELEVENTH DIVISION)
ERRED IN HOLDING THAT RESPONDENT JUDGE DID NOT ACT
WITHOUT JURISDICTION AND WITH GRAVE ABUSE OF
JURISDICTION IN ISSUING THE WRIT OF PRELIMINARY
MANDATORY INJUNCTION.
II. THE HONORABLE COURT OF APPEALS (ELEVENTH DIVISION)
ERRED IN HOLDING THAT THE RESPONDENT JUDGE DID NOT
ACT WITHOUT JURISDICTION AND WITH GRAVE ABUSE OF
DISCRETION IN DISALLOWING THE INTERVENTION OF
PETITIONERS IN CIVIL CASE NO. 5326.
III. THE LOWER COURT ACTED WITH GRAVE ABUSE OF
DISCRETION IN ISSUING AND ORDERING THE IMPLEMENTATION
OF THE WRIT OF PRELIMINARY MANDATORY INJUNCTION
DESPITE THE ABSENCE OR LACK OF AN INJUNCTION BOND.
On the two (2) issues raised in G. R. No. 94285, the Court rules for
respondents.
Petitioners fault the Court of Appeals for affirming the 1989 Decision of
the SEC which approved the appointment of a receivership committee
as ordered by Hearing Officer Felipe Tongco. They theorize that the
1988 Tongco Decision varied the 1982 Abello Decision affirming the
dissolution of the partnership, contrary to the final and executory tenor
of the said judgment. To buttress their theory, petitioners offer the
1988 Sulit Decision which, among others, expressly confirmed the
finality of the Abello Decision.
On the same premise, petitioners aver that when Hearing Officer
Tongco took over from Hearing Officer Sison, he was left with no
course of action as far as the proceedings in the SEC Case were
concerned other than to continue with the partition and distribution of
the partnership assets. Thus, the Order placing the partnership under
a receivership committee was erroneous and tainted with excess of
jurisdiction.
The contentions are untenable. Petitioners fail to recognize the basic
distinctions underlying the principles of dissolution, winding up and
partition or distribution. The dissolution of a partnership is the change
in the relation of the parties caused by any partner ceasing to be
associated in the carrying on, as might be distinguished from the
winding up, of its business. Upon its dissolution, the partnership
continues and its legal personality is retained until the complete
winding up of its business culminating in its termination.
The dissolution of the partnership did not mean that the juridical entity
was immediately terminated and that the distribution of the assets to its
partners should perfunctorily follow. On the contrary, the dissolution
simply effected a change in the relationship among the partners. The
partnership, although dissolved, continues to exist until its termination,
at which time the winding up of its affairs should have been completed
and the net partnership assets are partitioned and distributed to the
partners.
The error, therefore, ascribed to the Court of Appeals is devoid of any
sustainable basis. The Abello Decision though, indeed, final and
executory, did not pose any obstacle to the Hearing Officer to issue
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orders not inconsistent therewith. From the time a dissolution is
ordered until the actual termination of the partnership, the SEC
retained jurisdiction to adjudicate all incidents relative thereto. Thus,
the disputed order placing the partnership under a receivership
committee cannot be said to have varied the final order of dissolution.
Neither did it suspend the dissolution of the partnership. If at all, it only
suspended the partition and distribution of the partnership assets
pending disposition of Civil Case No. 903 on the basis of the
agreement by the parties and under the circumstances of the case. It
bears stressing that, like the appointment of a manager in charge of
the winding up of the affairs of the partnership, said appointment of a
receiver during the pendency of the dissolution is interlocutory in
nature, well within the jurisdiction of the SEC.
Furthermore, having agreed with the respondents not to dispose of the
partnership assets, petitioners effectively consented to the suspension
of the winding up or, more specifically, the partition and distribution of
subject assets. Petitioners are now estopped from questioning the
order of the Hearing Officer issued in accordance with the said
agreement.
Petitioners also assail the propriety of the receivership theorizing that
there was no necessity therefor, and that such remedy should be
granted only in extreme cases, with respondent being duty-bound to
adduce evidence of the grave and irremediable loss or damage which
it would suffer if the same was not granted. It is further theorized that,
at any rate, the rights of respondent Intestate Estate are adequately
protected since notices of lis pendens of the aforesaid civil case have
been annotated on the real properties of the partnership.
To bolster petitioners' contention, they maintain that they are the
majority partners of the partnership Sy Yong Hu & Sons controlling
Ninety Six per cent (96%) of its equity. As such, they have the
greatest interest in preserving the partnership properties for
themselves and therefore, keeping the said properties in their
possession will not bring about any feared damage or dissipation of
such properties, petitioners stressed.
Sec. (6) of Presidential Decree No. 902-A, as amended, reads:
SEC. 6. In order to effectively exercise such jurisdiction, the
Commission shall possess the following powers:
(c) To appoint one or more receivers of the property, real or personal,
which is the subject of the action pending before the commission in
accordance with the pertinent provisions of the Rules of Court, and in
such other cases, whenever necessary in order to preserve the rights
of parties-litigants and/or protect the interest of the investing public and
creditors; xxx.
The findings of the Court of Appeals accord with existing rules and
jurisprudence on receivership. Conformably, it stated that:
From a reexamination of the issues and the evidences involved, We
find merit in respondents motion for reconsideration.
This Court notes with special attention the order dated June 28, 1988
issued by Hearing Officer Felipe S. Tongco in SEC Case No. 1648
(Annex to Manifestation, June 16, 1990) wherein all the parties agreed
on the following:
1. That there is a pending case in court wherein the plaintiffs are
claiming in their complaint that all the assets of the partnership belong
to Sy Yong Hu;
2. That the parties likewise agreed that during the pendency of the
court case, there will be no disposition of the partnership assets and
further hearing is suspended. x x x
As observed by the SEC Commission (sic) in its Order dated January
16, 1989:
Ordinarily, appellants contention would be correct, except that the en
banc order of April 29th appears to have been overtaken, and
accordingly, rendered inappropriate, by subsequent developments in
SEC Case No. 1648, particularly the entry in that proceedings, as of
April 29, 1988, of an intervenor who claims a superior and exclusive
ownership right to all the partnership assets and property. This claim
of superior ownership right is presently pending adjudication before the
Regional Trial Court of Negros Occidental, And precisely because if
this supervening development, it would appear that the parties in SEC
Case No. 1648 agreed among themselves, as of June 28, 1988, that
during the pendency of the Negros Occidental case just mentioned,
there should be no disposition of partnership assets or property, and
further, that the proceedings in SEC Case No. 1648 should be
suspended in the meantime (p. 2, Order; p. 12, Rollo)
As alleged by the respondents and as shown by the records there is
now pending civil case entitled Keng Sian and Intestate of Sy Yong
Hu vs. Jayme Sy, Jesus Sy, Marciano Sy, Willy Sy, Intestate of Jose
Sy, Intestate of Vicente Sy, Sy Yong Hu & co and Sy Yong Hu & Sons
denominated as Civil Case No. 903 before Branch 50 of the Regional
Trial Court of Bacolod City.
Moreover, a review of the records reveal that certain properties in
question have already been sold as of 1987, as evidenced by deeds of
absolute sale executed by Jesus in favor of Reynaldo Navarro (p. 331,
Rollo), among others.
To ensure that no further disposition shall be made of the questioned
assets and in view of the pending civil case in the lower court, there is
a compelling necessity to place all these properties and assets under
the management of a receivership committee. The receivership
committee, which will provide active participation, through a designated
representative, on the part of all interested parties, can best protect the
properties involved and assure fairness and equity for all.
Receivership, which is admittedly a harsh remedy, should be granted
with extreme caution. Sound bases therefor must appear on record,
and there should be a clear showing of its necessity. The need for a
receivership in the case under consideration can be gleaned from the
aforecited disquisition by the Court of Appeals finding that the
properties of the partnership were in danger of being damaged or lost
on account of certain acts of the appointed manager in liquidation.
The dispositions of certain properties by the said manager, on the
basis of an order of partial partition, dated December 2, 1986, by
Hearing Officer Sison, which was not yet final and executory, indicated
that the feared irreparable injury to the properties of the partnership
might happen again. So also, the failure of the manager in liquidation
to submit to the SEC an accounting of all the partnership assets as
required in its order of April 29, 1988, justified the SEC in placing the
subject assets under receivership.
Moreover, it has been held by this Court that an order placing the
partnership under receivership so as to wind up its affairs in an orderly
manner and to protect the interest of the plaintiff (herein private
respondent) was not tainted with grave abuse of discretion. The
allegation that respondents rights are adequately protected by the
notices of lis pendens in Civil Case 903 is inaccurate. As pointed out
in their Comment to the Petition, the private respondents claim that the
partnership assets include the income and fruits thereof. Therefore,
protection of such rights and preservation of the properties involved
are best left to a receivership committee in which the opposing parties
are represented.
What is more, as held in Go Tecson vs. Macaraig:
The power to appoint a receiver pendente lite is discretionary with the
judge of the court of first instance; and once the discretion is exercised,
the appellate court will not interfere, except in a clear case of abuse
thereof, or an extra limitation of jurisdiction.
Here, no clear abuse of discretion in the appointment of a receiver in
the case under consideration can be discerned.
With respect to G. R. No. 100313.
Petitioners argue in this case that the failure of the private respondents
to implead them in Civil Case No. 5326 constituted a violation of due
process. It is their submission that the ex parte grant of said petition
by the trial court worked to their prejudice as they were deprived of an
opportunity to be heard on the allegations of the petition concerning
subject property and assets. The recall of the order granting their
Motion to Intervene was done without the observance of due process
and consequently without jurisdiction on the part of the lower court.
Commenting on the Petition, private respondents maintain that the only
issue in the present case is whether or not there was a violation of the
PARTNERSHIP
CASE DIGEST 1828-1842


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Building Code. They contend that after due and proper hearing before
the lower court, it was fully established that the provisions of the said
Code had been violated, warranting issuance of the Writ of Preliminary
Injunction dated April 19, 1989. They further asseverate that the
petitioners, who are the owner and lessees in the building under
controversy, have nothing to do with the case for mandamus since it is
directed against the respondent building official to perform a specific
duty mandated by the provisions of the Building Code.
In his Comment, the respondent City Engineer, relying on the validity
of the order of the trial court to padlock the building, denied any
impropriety in his compliance with the said order.
After a careful examination of the records on hand, the Court finds
merit in the petition.
In opposing the petition, respondent intestate estate anchors its stance
on the existence of violations of pertinent provisions of the aforesaid
Code. As regards due process, however, a distinction must be made
between matters of substance. In essence, procedural due process
refers to the method or manner by which the law is enforced, while
substantive due process requires that the law itself, not merely the
procedure by which the law would be enforced, is fair, reasonable, and
just. Although private respondent upholds the substantive aspect of
due process, it, in the same breath, brushes aside its procedural
aspect, which is just as important, if the constitutional injunction
against deprivation of property without due process is to be observed.
Settled is the rule that the essence of due process is the opportunity to
be heard. Thus, in Legarda vs. Court of Appeals et al., the Court held
that as long as a party was given the opportunity to defend her interest
in due course, he cannot be said to have been denied due process of
law.
Contrary to these basic tenets, the trial court gave due course to the
petition for mandamus, and granted the prayer for the issuance of a
writ of preliminary injunction on May 4, 1989, notwithstanding the fact
that the owner (herein petitioner Sy Yong Hu) of the building and its
occupants were not impleaded as parties in the case. Affirming the
same, the Court of Appeals acknowledged that the lower court came
out with the said order upon the testimony of the lone witness for the
respondent, in the person of the City Engineer, whose testimony was
not effectively traversed by the petitioners. This conclusion arrived at
by the Court of Appeals is erroneous in the face of the irrefutable fact
that the herein petitioners were not made parties in the said case and,
consequently, had absolutely no opportunity to cross examine the
witness of private respondent and to present contradicting evidence.
To be sure, the petitioners are indispensable parties in Civil Case No.
5326, which sought to close subject building. Such being the case, no
final determination of the claims thereover could be had. That the
petition for mandamus with a prayer for the issuance of a writ of
preliminary mandatory injunction was only directed against the City
Engineer is of no moment. No matter how private respondent justifies
its failure to implead the petitioners, the alleged violation of the
provisions of the Building Code relative to the reconstruction of the
building in question, by petitioners, did not warrant an ex parte and
summary resolution of the petition. The violation of a substantive law
should not be confused with punishment of the violator for such
violation. The former merely gives rise to a cause of action while the
latter is its effect, after compliance with the requirements of due
process.
The trial court failed to give petitioners their day in court to be heard
before they were condemned for the alleged violation of certain
provisions of the Building Code. Being the owner of the building in
question and lessees thereon, petitioners possess property rights
entitled to be protected by law. Their property rights cannot be
arbitrarily interfered with without running afoul with the due process
rule enshrined in the Bill of Rights.
For failure to observe due process, the herein respondent court acted
without jurisdiction. As a result, petitioners cannot be bound by its
orders. Generally accepted is the principle that no man shall be
affected by any proceeding to which he is a stranger, and strangers to
a case are not bound by judgment rendered by the court.
In similar fashion, the respondent court acted with grave abuse of
discretion when it disallowed the intervention of petitioners in Civil
Case No. 5326. As it was, the issuance of the Writ of Preliminary
Injunction directing the padlocking of the building was improper for
non-conformity with the rudiments of due process.
Parenthetically, the trial court, in issuing the questioned order, ignored
established principles relative to the issuance of a Writ of Preliminary
Injunction. For the issuance of the writ of preliminary injunction to be
proper, it must be shown that the invasion of the right sought to be
protected is material and substantial, that the right of complainant is
clear and unmistakable and that there is an urgent and paramount
necessity for the writ to prevent serious damage.
In light of the allegations supporting the prayer for the issuance of a
writ of preliminary injunction, the Court is at a loss as to the basis of
the respondent judge in issuing the same. What is clear is that
complainant (now private respondent) therein, which happens to be a
juridical person (Estate of Sy Yong Hu), made general allegations of
hazard and serious damage to the public due to violations of various
provisions of the Building Code, but without any showing of any grave
damage or injury it was bound to suffer should the writ not issue.
Finally, the Court notes, with disapproval, what the respondent court
did in ordering the ejectment of the lawful owner and the occupants of
the building, and disposed of the case before him even before it was
heard on the merits by the simple expedient of issuing the said writ of
preliminary injunction. In Ortigas & Company Limited Partnership vs.
Court of Appeals et al. this Court held that courts should avoid issuing
a writ of preliminary injunction which in effect disposes of the main
case without trial.
Resolution of the third issue has become moot and academic in view
of the Courts finding of grave abuse of discretion tainting the issuance
of the Writ of Preliminary Injunction in question.
WHEREFORE, the Resolution of the Court of Appeals in CA-G. R. No.
17070 is AFFIRMED and its Decision in CA-G. R. No. 24189
REVERSED. No pronouncement as to costs.
SO ORDERED.
Roja v. Maglana
Facts:
Maglana (M) and Rojas (R) executed their Articles of Co-
partnership called Eastcoast Development Enterpises.
It had an indefinite term of existence and was registered with
the SEC and had a Timber License. Its PURPOSE was
to apply or secure timber and/or private forest lands and to
operate.
M shall manage the business affairs while R shall be the
logging superintendent. All profits and losses shall be
divided share and share alike.
The two availed the services of Pahamotangas (P) industrial
partner and executed another articles of co-partnership.
M and R purchase the interest, share and participation in
thepartnership of P. They shall become owners of all
equipment contributed by P.
Subsequently, R entered into a management contract with
CMS Estate Inc.
M wrote him: his contribution to the capital investments as
well as his duties as logging superintendent. R replied: he
will not be able to comply with both.
M then told R that the latters share will just be 20% of the
net profits. R took funds from the partnership more than his
contribution. M notified R that he dissolved the partnership.
R filed an action against M for the recovery of properties and
accounting of the partnership and damages.
Issue:
1. What is the nature of the partnership?
2. Can M voluntarily dissolve the partnership on his own?
3. Can M be liable for damages?
4. How should the profit and losses be liquidated?
5. Is R entitled to any profit?
Rule:
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CASE DIGEST 1828-1842


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1. Under the circumstances, the relationship of Rojas and Maglana
after the withdrawal of Pahamotang can neither be considered as a De
Facto Partnership, nor a Partnership at Will, for as stressed, there is an
existing partnership, duly registered. The second partnership was
dissolved by common consent. Said dissolution did not affect the first
partnership which continued to exist.
2. Yes. Article 1830, par. 2 of the Civil Code, even if there is a
specified term, one partner can cause its dissolution by expressly
withdrawing even before the expiration of the period, with or without
justifiable cause. Of course, if the cause is not justified or no cause
was given, the withdrawing partner is liable for damages.
3. No. In the given situation Maglana cannot be said to be in bad faith
nor can he be liable for damages. The records show that Rojas not
only abandoned the partnership but also took funds in an amount more
than his contribution prior to the dissolution.
4. Articles of Co-Partnership; that is, all profits and losses of the
partnership shall be divided "share and share alike" between the
partners but an accounting must first be made.
5. No. He failed to give theamount he had undertaken to contribute
thus, had become a debtor of the partnership (Art. 1786 of NCC). On
50-50% basis, Rojas will be liable in the amount of P131,166.00; on
80-20%, he will be liable for P40,092.96 and finally on the basis of
actual capital contribution, he will be liable for P52,040.31.

Bearneza v. Dequilla
Facts:
In the year 1903, Balbino Dequilla, the herein defendant,
and Perpetua Bearneza formed apartnership for the purpose
of exploiting a fish pond with Perpetua obligating herself to
contributeto the payment of the expenses of the business,
which obligation she made good, and bothagreeing to divide
the profits between themselves, which they had been doing
until the death of the said Perpetua in the year 1912.

The deceased left a will in one of the clause of which she
appointerd Domingo Bearnez, the herein plaintiff, as her heir
to succeed to all her rights and interests in the fish pond in
question. Domingo Bearnez then instituted an action to
recover a part of the fishpond belonging to the decedent,
including of the profits from 1913-1919.

The defendant alleges that "the formation of the supposed
partnership between the plaintiff andthe defendant for the
exploitation of the aforesaid fish pond was not carried into
effect, on accountof the plaintiff having refused to defray the
expenses of reconstruction and exploitation of said
fishpond." and further averred that the right of the plaintiff
had already prescribed.
Judgment was then rendered declaring the plaintiff owner of
one-half of the fishpond but without awading him of any
damages. From this judgement the defendant appeals.

Issue: W/N the plaintiff has any right to maintain an action for recovery
of the said one-half of the fishpond?

Rule: None.

The partnership formed was a particular partnership, it having had for
its subject-matter a specified thing, the exploitation of the
aforementioned fishpond. Al t hough, as t he t r i al cour t says
i n i t s deci si on, t he def endant , i n hi s l et t er s t o
Per pet ua or her husband, makes reference to the fish pond, calling
it "our," or "your fish pond," this referencecannot be held to include
the land on which the said fish pond was built. I t has
not been pr oven t hat Bear neza par t i ci pat ed i n t he
owner shi p of t he sai d l and.

Therefore, the land on which the fish pond was constructed did not
constitute part of thesubject-matter of the partnership.

This partnership was dissolved by the death of Perpetua Bearneza.

Neither can it be maintained that the partnership continued to exist
after the death of Perpetua, inasmuch as it does not appear that any
stipulation to that effect has ever beenmade by her and the defendant-
The par t ner shi p havi ng been di ssol ved by t he deat h of
Per pet ua Bear neza, i t s subsequent l egal status was that of
a partnership in liquidation, and the only rights inherited by her
testamentaryheir, the herein plaintiff, were those resulting from the said
liquidation in favor of the deceasedpartner, and nothing more.

Lichauco v. Lichauco
Facts:

In 1901, F. Lichauco Hermanos partnership was formed. It
was provided, among others, in the partnership agreement
that Faustino Lichauco will be the managing partner; and
that the firm cannot be dissolved except upon the 2/3 vote of
all the partners.

In 1904, the firm wasnt performing well and was unprofitable
and so its machineries were dismantled. In 1905, Eugenia
and one other partner demanded Faustino to make an
accounting of the firms assets but Faustino refused to do so.

Belatedly in 1912, Eugenia et al filed a civil suit against
Faustino to compel the latter to perform an accounting.

Faustino, in his defense, argued that the firm was not
dissolved pursuant to the partnership agreement there being
no 2/3 vote from all the members (Faustino et al are only 1/5
of the firm).

ISSUE: Whether or not Eugenia et al can demand an accounting.

RULE: Yes.

The firm was already dissolved in 1904 when its machineries were
dismantled this was a sign that the firm abandoned and concluded
the purpose for it was formed (rice cleaning business). Upon said
dissolution, it was the duty of Faustino to liquidate the assets and
inform his partners.

The provision which requires a 2/3 votes of all the partners to dissolve
the firm cannot be given effect because the same denied the right of a
less number of partners to effect the dissolution especially where the
firm has already sustained huge losses.

It would be absurd and unreasonable to hold that such an association
could never be dissolved and liquidated without the consent and
agreement of two-thirds of its partners, notwithstanding that it had lost
all its capital, or had become bankrupt, or that the enterprise for which
it had been organized had been concluded or utterly abandoned.

Yu v. NLRC
Facts:

Partnership was originally organized with Bendals as general
partners and Chin Shian Jeng,Chen Ho-Fu and Yu Chang as
limited partners; partnership business consisted of
exploitinga marble deposit in Bulacan.

Partnership hired Yu (petitioner), as Assistant General
Manager, had a monthly salary of 4000. Yu, however,
actually received only half of his stipulated salary, since he
had accepted the promise of the partners that the balance
would be paid when the firm shall have secured additional
operating funds from abroad.

Yu managed the operations and finances of the business.

However, General Partners Bendals sold and transferred
their interests in the partnership to Co and Emmanuael
Zapanta. Eventually, partnership was constituted solely by
Co and Zapanta; it continued to use the old firm name.

Yu was dismissed by the new partners.

Issues:

1. W/N the previous partnership is dissolve?
2. W/N their still exist a partnership?
3. W/N Yu can assert his rights under his employment against
the new partnership?

Held:
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CASE DIGEST 1828-1842


Page 7 of 10

1. Yes. Changes in the membership of the partnership resulted in the
dissolution of the old partnership.
(Legal Basis: Art. 1828; 1830)

2. Yes. The new partnership simply took over the business enterprise
owned by the old partnership. Without winding up the business affairs
of the old partnership, paying off its debts,liquidating and distributing its
net assets, and then re-assembling the said assets or mostof them and
opening a new business enterprise. (Art. 1829)

3. Yes. the new partnership is liable for the debts of the old
partnership. (Art. 1840)

Yu is entitled to enforce his claim for unpaid salaries, as well as other
claims relating to his employment with the previous partnership,
against the new partnership.

But Yu is not entitled to reinstatement. Reason: new partnership was
entitled to appoint and hire a new gen. Or asst. Mgr. to run the affairs
of the business enterprise. An asst. gen. manager belongs to the most
senior ranks of management and anew partnership is entitled to
appoint a top manager of its own choice and confidence. The non-
retention of Yu did not constitute unlawful termination.

The new partnership had its own new Gen. Mgr. Yus old position thus
became superfluous or redundant.

Yu is entitled to separation pay at the rate of one months pay for each
year of service thathe had rendered to the old partnership, a fraction of
at least 6 months being considered asa whole year.

Goquiolay v. Sycip(108 Phil 947)
Syllabus:
1. PARTNERSHIP; MANAGEMENT, RIGHT OF EXCLUSIVE;
PERSONAL RIGHT; TERMINATION UPON MANAGER-PARTNERS
DEATH. The right of exclusive management conferred upon Tan
Sin An, being premised upon trust and confidence, was a mere
personal right that terminated upon Tans demise.

2. ARTICLES OF CO-PARTNERSHIP; RIGHT OF HEIRS TO
REPRESENT DECEASED PARTNER; MANAGERIAL RIGHT;
PROPRIETARY INTEREST. The provision in the Articles of Co-
Partnership stating that "in the event of death of any one of the
partners within the 10-year term of the partnership, the deceased
partner shall be represented by his heirs", could not have referred to
the managerial right given to Tan Sin An; more appropriately, it relates
to the succession in the proprietary interest of each partner.

3. ID.; ID.; EFFECT OF HEIRS FAILURE TO REPUDIATE; HEIRS
BECOME INDIVIDUAL PARTNERS; MINORITY OF HEIRS.
Consonant with the articles of co-partnership providing for the
continuation of the firm notwithstanding the death of one of the
partners, the heirs of the deceased, by never repudiating or refusing to
be bound under the said provision in the articles, became individual
partners with Antonio Goquiolay upon Tans demise. Minority of the
heirs is not a bar to the application of that clause in the articles of co-
partnership. Heirs liability in the partnership being limited to the value
of their importance, they become no more than limited partners, when
they manifest their intent to be bound as general partners.

4. ID.; SALE OF PARTNERSHIP PROPERTIES; CONSENT OF ALL
PARTNERS UNNECESSARY; STRANGERS DEALING WITH
PARTNERSHIPS; POWER TO BIND PARTNERSHIP. As to
whether or not the consent of the other partners was necessary to
perfect the sale of the partnership properties, the Court believes that it
is not. Strangers dealing with a partnership have the right to assume,
in the absence of restrictive clauses in the co- partnership agreement,
that every general partner has power to bind the partnership.

5. ID.; ID.; ESTOPPEL. By allowing defendant Kong Chai Pin to
retain control of the partnership properties from 1942 to 1949, plaintiff
Goquiolay estopped himself from denying her (Kong Chai Pins) legal
representation of the partnership, with the power to bind it by proper
contracts.

6. PARTNERSHIP; GENERAL PARTNER BY ESTOPPEL; WIDOW
OF MANAGING PARTNER AUTHORIZED BY OTHER PARTNER TO
MANAGE PARTNERSHIP. By authorizing the widow of the
managing partner to manage partnership property (which a limited
partner could not be authorized to do), the other general partner
recognized her as a general partner, and is now in estoppel to deny
her position as a general partner, with authority to administer and
alienate partnership property.

7. ID.; HEIR OF PARTNER, STATUS ORDINARILY AS LIMITED
PARTNER BUT MAY WAIVE IT AND BECOME AS GENERAL
PARTNER. Although the heir of a partner ordinarily becomes a
limited partner for his own protection, yet the heir may disregard it and
instead elect to become a collective or general partner, with all the
rights and obligations of one. This choice pertains exclusively to the
heir, and does not require the assent of the surviving partner.

8. ID.; PRESUMPTIONS; AUTHORITY OF PARTNER TO DEAL WITH
PROPERTY. A third person has the right to presume that a general
partner dealing with partnership property has the requisite authority
from his co-partners.

9. ID.; PROPERTY OF PARTNERSHIP; SALE OF IMMOVABLES,
WHEN CONSIDERED WITHIN THE ORDINARY POWERS OF A
GENERAL PARTNER. Where the express and avowed purpose of
the partnership is to buy and sell real estate (as in the present case),
the immovables thus acquired by the firm form part of its stock-in-
trade, and the sale thereof is in pursuance of partnership purposes,
hence within the ordinary powers of the partner.

10. ID.; SALE OF PARTNERSHIP PROPERTY; ACTION FOR
RESCISSION ON GROUND OF FRAUD; NO INADEQUACY OF
PRICE; CASE AT BAR. Appellants claim that the price was
inadequate, relies on the testimony of a realtor, who in 1955, six years
after the sale in the question, asserted that the land was by then worth
double the price for which it was sold. But taking into account the
continued rise of real estate values since liberation, and the fact that
the sale in question was practically a forced sale because the
partnership has no other means to pay the legitimate debts, this
evidence certainly does not show such "gross inadequacy" as to justify
the rescission of the sale.

11. ID.; ID.; ID.; RELATIONSHIP ALONE IN NO BADGE OF FRAUD.
The Supreme court has ruled that relationship alone is not a badge
of fraud (Oria Hnos. v. McMicking, 21 Phil., 243; Hermandad de Smo.
Nombre de Jesus v. Sanchez, 40 Official Gazette 1685).

12. ID.; ID.; ID.; FRAUD OF CREDITORS DISTINGUISHED FROM
FRAUD TO OBTAIN CONSENT. Fraud used to obtain a partys
consent to a contract (deceit or dolus in contrahendo) is different from
fraud of creditors that gives rise to a rescission of contract.

13. ID.; ID.; ID.; SUBSIDIARY NATURE; ALLEGATION OF NO
OTHER MEANS TO OBTAIN REPARATION, NECESSARY. The
action for rescission is subsidiary; it can not be instituted except when
the party suffering damage has no other legal means to obtain
reparation for the same. hence, if there is no allegation or evidence
that the plaintiff can not obtain reparation from the widow and heirs of
the deceased partner, the suit to rescind the sale in question s not
maintainable, even if the fraud charged actually did exist.
Facts:
Goquiolay and Tan Sin An were partners, engage in realestate
business, who owned 3 parcels of land.
Tan Sin An purchased 46 parcels of land. Both the partnership and
Tan Sin An alone executed mortgages in f avor of the same company,
La Urbanidad Sociedad Mutua deConstruccion. For the partnership, it
was P25,000 while for Tan Sin An, it was P35,000.

The two mortgage obligations were consolidated and transferred to the
Banco Hipotecario de Filipinas and as a result, Tan Sin An, inhis
individual capacity, and the partnership bound themselvesto pay jointly
and severally within a period of 8 yrs.

On 1942, Tan Sin An died, his widow, Kong Chai Pin was
madeAdministratrix of his estates in 1944. In 1949, she executed asale
of these lands. This was executed in her dual capacity as
PARTNERSHIP
CASE DIGEST 1828-1842


Page 8 of 10

Administratrix of her husbands estates and as partner
in lieu of her husband. She sold these to
respondents WashingtonSycip and Betty Lee.

DEFENSE: Goquiolay insists that Kong Chai Pin never became
more than alimited partner, incapacitated by law to manage the
affairs of partnership; that the testimony of Kongs witnesses
belie that she took over the administration of the partnership
property; and that, in any event, the sale should be set aside
because it was executed with the intent to defraud Goquiolay of
his share in the properties sold.

Issue: W/N Tan Sin Ans widow, Kong Chai Pin, became partner when
her husband died, allowing her to validly sell the property that belongs
to the partnership?

Rule: Yes.

The heir ordinarilybecomes a limited partner for his own protection,
because hewould normally prefer to avoid any liability in excess of the
value of the estate inherited so as not to jeopardize his personal
assets, however, he may also elect to become general partner
instead.

The Articles did not provide that the heirs of the deceasedwould be
merely
limited partners; on the contrary, theyexpressly stipulated that in case
of death of either partner "theco-partnership ... will have to be
continued " with the heirs or assigns.

Also, Goquiolay is estopped from saying that Kong Chai Pin is not
ageneral partner because he granted her the authority to manage the
partnership properties.

In addition to this authority, the Court had yet again stressed the fact
that he had 7 years between the death of his partner and the sale
made by his partners widow to take up the management of the
properties himself, which he clearly failed to do.

Goquiolay v Sycip 9 SCRA 663

The case was previously affirmed. (CHECK FOR DIFFERENCE KAI
GALIBOG KO :D)
In re Sycip92 SCRA 1
Facts:
Two separate Petitions were filed before this Court 1) by the surviving
partners of Atty. Alexander Sycip, who died on May5, 1975, and 2) by
the surviving partners of Atty. Herminio Ozaeta, who died on February
14, 1976, praying that they be allowed to continue using, in the names
of their firms, the names of partners who had passed away.

Jurisprudence:
the Deen case: the matter was resolved with this Court advising the
firm to desist from including in their firm designation the name of C. D.
Johnston, who has long been dead.
Register of Deeds of Manila vs. China Banking Corporation: inview of
the personal and confidential nature of the relations between attorney
and client, and the high standards demanded in the canons of
professional ethics, no practice should be allowed which even in a
remote degree could give rise to the possibility of deception. Said
attorneys are accordingly advised to drop the name "PERKINS" from
their firm name.

Issue:
Petitioners seek a re-examination of the policy thus farenunciated by
the Court.

Held:
The Court finds no sufficient reason to depart from the rulings thus laid
down. The petitions filed herein are denied and petitioners advised to
drop the names "SYCIP" and "OZAETA" from their respective firm
names. Those names may, however, be included in the listing of
individuals who have been partners in their firms indicating the years
during which they served as such.

Ratio: Arguments of Petitioners Court
Petitioners arguments:

1.Under the law, a partnership is not prohibited from continuing its
business under a firm name which includes the name of a deceased
partner; in fact, Article 1840 of the Civil Code explicitly sanctions the
practice the use in their partnership names of the names of deceased
partners will run counter to Article 1815 of the Civil Code
1. The heirs of a deceased partner in a law firm cannot be held liable
as the old members to the creditors of a firm particularly where they
are non-lawyers.

Accordingly, neither the widow nor the heirs can beheld liable for
transactions entered into after the deathof their lawyer-predecessor.
There being no benefitsa ccruing, there ran be no

Art. 1815. Every partnership shall operate under a firm name, which
may or may not include the name of one or more of the partners.
Those who, not being members of the partnership, include their names
in the firm name, shall be subject to the liability, of a partner.
corresponding liability.

The public relations value of the use of an old firm name can tend to
create undue advantages and disadvantages in the practice of the
profession. An able lawyer without connections will have to make a
name for himself starting from scratch. Another able lawyer, who can
join an old firm, can initially ride on that oldf irm's reputation
established by deceased partners.

In regards to the last paragraph of Article 1840 of the Civil Code cited
by petitioners:

1)The Article primarily deals with the exemption from liability in cases
of a dissolved partnership,of the individual property of the deceased
partner for debtscontracted by the person or partnership which
continues the
Business using the partnership name or the name of the deceased
partner as part thereof. What the law contemplates therein is a hold-
over situation preparatory to formal reorganization.

2) Article 1840 treats more of a
commercial partnership with a goodwill to protect rather than of
a professional partnership, with no saleable good will but whose
reputation depends on the personal qualifications of its individual
members. Thus, it has been held that a saleable goodwill can exist
only in a commercial partnership and cannot arise in a professional
partnership consisting of lawyers

2. the legislative authorization given to those engaged in the practice of
accountancy
a profession
A partnership for the practice of law cannot be likened to partnerships
formed by other professionals or for
requiring the same degree of trust and confidence in respect of clients
as that implicit in the relationship of attorney and client

To acquire and use a trade name, strongly indicates that there is no
fundamental policy that is offended by the continued use by a firm of
professionals of a firm name which includes the name of a deceased
partner, at least where such firm name has acquired the characteristics
of a "trade name. "business. For one thing, the aw on accountancy
specifically allows the us eof a trade name in connection with the
practice of accountancy.3.

The Canons of Professional Ethics are not transgressed by the
continued use of the name of a deceased partner in the firm name of a
lawpartnership4.

No local custom prohibits the continued use of a deceased partner's
name in a professional firm's name
It is true that Canon 33
Does not consider as unethical
The continued use of the name of a deceased or former partner in the
firm name of a law partnership when such a practice is permissible by
local custom
but the Canon warns that care should be taken that no imposition or
deception is practiced through this use.

The continued use of a firmname after the death of one or more of the
partners designated by
it is proper only where sustained by local custom and not whereby
custom this purports toIdentify the active members.
...5.
There is no possibility of imposition or deception because the deaths
of their respective deceased partners were well-publicized in all
newspapers of general circulation for several days;

The possibility of deception upon the public, real or consequential,
where the name of a deceased partner continues to be used cannot be
ruled out. A person in search of legal counsel might be guided by the
familiar ring of a distinguished name appearing in a firm title2.

The continued use of a deceased partner's name in the firm name of
law partnerships has been consistently allowed by U.S .Courts and is
an accepted practice in the legal profession of most countries in the
world.

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Page 9 of 10


We find such proof of the existence of a local custom, and of the
elements requisite to constitute the same, wanting herein. Merely
because something is done as a matter of practice does not mean
that Courts can rely on the same for purposes of adjudication as a
juridical custom. Juridical custom must be differentiated from social
custom. The former can supplement statutory law or be applied in the
absence of such statute. Not so with the latter.



Ng Cho Cio v. Ng Diong
G.R. No. L-14832 January 28, 1961
NG CHO CIO ET AL., plaintiffs-appellants,
vs.NG DIONG, defendant-appellant.
C. N. HODGES, ET AL., defendants-appellees.
This action was begun in the Court of First Instance of Iloilo by Ng Cho
Cio Ng Sian King and Ng Due King to recover their three-fourths (3/4)
pro-indiviso share on seven (7) parcels of land situated in the City of
Iloilo which were sold by Ng Diong as manager of the commercial firm
NG CHIN BENG HERMANOS in favor of C.N. Hodges. The latter had
sold four of those parcels of land to Jose C. Tayengco and the other
three parcels to Julian Go, and for that reason these two were included
as party defendants. As the original plaintiffs sold their rights, title and
interest in said partnership to Ng Be Chuat and Ng Feng Tuan, the
latter two were allowed to intervene as plaintiffs. Since Jose C.
Tayengco had mortgaged three of the lands which he purchased from
C. N. Hodges in favor of the Bank of the Philippine Islands, the
complaint was amended so as to include the Bank also as party
defendant.
On October 16, 1956, after trial had begun, defendant Ng Diong died,
whereupon his heirs were order to substitute him parties defendants.
Defendants C. N. Hodges, Ng Diong and Jose C. Tayengco answered
the complaint separately setting up certain special defenses and
counterclaims. In substance, they refuted the allegations set forth in
the complaint and prayed for its dismissal.
The parties submitted a partial Stipulation of facts on many points
covered by the pleadings thus simplifying the trial of the case while at
the same time they introduced additional evidence in amplification of
the fact stipulated, Thereupon, the trial court, after a thorough
evaluation of the evidence, rendered decision dismissing the complaint
with costs. Plaintiffs interposed the present appeal on purely questions
of law.
The pertinent facts may be briefly stated, as follow On May 23, 1925,
Ng Diong, Ng Be Chuat, Ng Feng Tuan Ng Be Kian Ng Cho Cio, Ng
Sian King and Ng Due King entered into a contract of general co-
partnership under the name NG CHIN BENG HERMANOS. The
partnership was to exist for a period of 10 years from May 23, 1925
and Ng Diong was named as managing partner. On May 10, 1935, the
articles of co-partnership were amended by extending its life to 16
years more to be counted from May 23, 1925, or up to May 23, 1941.
On January 5, 1938, the partnership obtained from the National Loan
and Investment Board a loan in the amount of P30,000.00, and to
guarantee its payment it executed in its favor a mortgage on Lots Nos.
236-B, 317-A, 233 and 540 of the cadastral survey of Iloilo. On the
same date, the partnership also obtained from the same entity another
loan in the amount of P50,000.00 to secure which it also executed in
its favor a mortgage on Lots Nos. 386, 829 and 237 of the same
cadastral survey.
Sometime in 1938, the partnership was declared insolvent upon
petition of its creditors in, Special Proceedings No. 2419 of the Court of
First Instance of Iloilo wherein one Crispino Melocoton was elected as
assignee. As a consequence, on June 21, 1939, the titles to the seven
parcels of land abovementioned were issued in his name as assignee.
In due time, the creditors filed their claims in said proceeding which
totalled P192,901.12.
On August 9, 1940, a majority of the creditors with claims amounting to
P139,704.81, and the partners of the firm, acting thru counsel, entered
into a composition agreement whereby it was agreed that said
creditors would receive 20% of the amount of their claims in full
payment thereof. Prior to this agreement, however, defendant Julian
Go had already acquired the rights of 24 of the creditors of the
insolvent whose total claims amounted to P139,323.10. Said
composition agreement was approved by the insolvency court.
On January 30, 1941, the Agricultural and Industrial Bank which had
succeeded the National Loan and Investment Board assigned its rights
and interests in the loans obtained from it by the partnership in the
aggregate amount of P80,000.00 in favor of C.N. Hodges, together
with the right and interest in the mortgage executed to secure the
loans. Since said loans became due and no payment was forthcoming,
Hodges asked permission from the insolvency court to file a complaint
against the assignee to foreclose he mortgage executed to secure the
same in a separate proceeding, and permission having been granted,
Hodges filed a complaint for that purpose on May 13, 1941. In his
complaint, Hodges prayed that the assignee be ordered to pay him the
sum of P75,622.90, with interest at 8% per annum thereon from March
6, 1941, plus P8,000.00 attorney's fees, exclusive of costs and
charges. Meanwhile, war broke out and nothing appears to have been
done in the insolvency proceedings. The court records were destroyed.
However, they were reconstituted later and given due course.
On August 15, 1945, the partners of the insolvent firm and Julian Go,
who acquired most of the claims of the creditors, filed a petition with
the insolvency court praying at the insolvency proceedings be closed
or terminated cause the composition agreement the creditors had
submitted relative to the settlement of the claims had already been
approved on October 10, 1940. And on October 6, 1946, the court,
acting favorably on the petition, ordered, closure of the proceedings
directing the assignee to turn and reconvey all the properties of the
partnership back to the latter as required by law. In accordance with
this order of the court, the assignee executed a deed of reconveyance
of the properties to the partnership on April 2, 1946 and by virtue
thereof, the register of deeds cancelled the titles issued in the name of
the assignee and issued new ones in lieu thereof in the name of the
partnership.
As of said date, April 2, 1946, the indebtedness of the partnership to C.
N. Hodges which was the subject of the foreclosure proceedings in a
separate case was P103,883.34. In order to pay off the same and raise
necessary funds to pay the other obligations of the partnership, it was
deemed proper and wise by Ng Diong, who continued to be the
manager of the partnership, to sell all its properties mortgaged to
Hodges in order that the excess may be applied to the Payment of said
other obligations, and to that effect Ng Diong executed on April 2, 1946
a deed of sale thereof in favor of Hodges for the sum of P124,580.00.
Out of this price; the sum of P103,883.34 was applied to the payment
of the debt of the partnership to Hodges and the balance was paid to
the other creditors of the partnership. On the same date, Hodges
executed another contract giving the partnership the right to
repurchase Lots Nos. 237, 386 and 829 in installments for the sum of
P26,000.00 within three years with interest the rate of 1% Per annum,
Payable monthly.
On May 23, 1947, the partnership had not yet paid its indebtedness to
Julian Go in he amount of P24,864.62 under the composition
agreement, nor did it have any money to repurchase Lots Nos. 237,
386 and 829 and so Ng Diong, in behalf of the partnership, transferred
the right of the latter to repurchase the same from Hodges to Julian Go
in full payment of the partnership's indebtedness to him. And having
Julian Go exercised the option January 6, 1948, Hodges executed a
deed of sale of the properties in his favor, and pursuant thereto the
register of deeds issued new titles' in his name covering said lots. On
May 29, 1948, Hodges executed another deed of sale covering Lots
Nos. 317-A, 236-B, 233 and 540 for the sum of P119,067.79 in favor of
Jose C. Tayengco. And on August 31, 1948, Tayengco mortgaged said
lots, together with three other lots of his, to the Bank of the Philippine
Islands to secure a loan of P126,000.00 to be used in the construction
of a commercial building on said lots.
Appellants make in their brief six assignments of errors, which,
reduced to bare essentials, may be boiled down to the following points:
(1) the sale made by Ng Diong in behalf of the partnership NG CHIN
BENG HERMANOS of the seven lots belonging to it in favor of C. N.
Hodges on April 2, 1946 is null and void because at that time said
parcels were still in the custody of the assignee of the insolvency
proceedings, or in custodia legis, and, hence, the same is null and
void; (2) said sale is also null and void "because of the disparity,
irrationality and unreasonableness between the consideration and the
real value of the properties when sold"; and (3) the lower court erred in
not finding that the two deeds of mortgage executed by he partnership
in favor of the National Loan and Investment Board which were later
assigned to C. N. Hodges can no longer be enforced because the
action to foreclose the same has already prescribed.
PARTNERSHIP
CASE DIGEST 1828-1842


Page 10 of 10

Anent the first issue, it would be well to state the following facts by way
of clarification: It should be recalled that on August 8, 1940 the majority
of the creditors of the partnership, as well as the representatives of the
latter, submitted to the court taking cognizance of the insolvency
proceedings a composition agreement whereby it was agreed that said
creditors would receive 20% of the amount of their claims in full
payment thereof. This agreement was approved on October 10, 1940
which, in contemplation of law, has the effect of putting an end to the
insolvency proceedings. However, no further step was taken thereon
because of the outbreak of the war. Later, the record of the case was
reconstituted and the parties on August 15, 1945 filed a petition with
the court praying for the dismissal and closure of the proceedings in
view of the approval of the aforesaid composition agreement, and
acting favorably thereon, the court on October 6, 1945, issued an order
declaring the proceedings terminated and ordering the assignee to
return and reconvey the properties the partnership. The actual
reconveyance was done by a assignee on April 2, 1946.
It would, therefore, appear that for legal and practical purposes the
insolvency ended on said date. Since then partnership became,
restored to its status quo. It again reacquired its personality as such
with Ng Diong as its general manager. From that date on its properties
ceased to be in custodia legis. Such being the case, it is obvious that
when Ng Diong as manager of the partnership sold the seven parcels
of land to C. N. Hodges on April 2, 1946 by virtue of a deed of sale
acknowledged before a notary public on April 6, 1946, the properties
were already was at liberty to do what it may deem convenient and
proper to protect its interest. And acting accordingly, Ng Diong made
the sale in the exercise of the power granted to him by the partnership
in its articles of co-partnership. We do not, therefore, find anything
irregular in this actuation of Ng Diong.
Since at the time of the sale the life of the partnership had already
expired, the question may be fixed: Who shall wind up it business
affairs? May its manager still execute the sale of its properties to C. N.
Hodges as was done by Ng Diong? The answer to this question cannot
but be in the affirmative because Ng Diong was still the managing
partner of the partnership and he had the necessary authority to
liquidate its affairs under its articles of co-partnership. And considering
that war had intervened and the affairs of the partnership were placed
under receivership up to October 6, 1945, we are of the opinion that
Ng Diong could still exercise his power as liquidator when he executed
the sale in question in favor of C. N. Hodges. This is sanctioned by
Article 228 of the Code of Commerce which was the law in force at the
time.
1

With regard to the second issue, it is contended that the trial court
should have declared the sale of the lots made to C. N. Hodges null
and void "because of the disparity, irrationality and unreasonableness
between the consideration and real value of the properties when sold."
In stressing his point, counsel contends that the lands in question,
which are located in a commercial section of the City of Iloilo, were
frittered away only for a "pittance of P124,580.00" when, borrowing his
words they could have been sold like hot cakes to any resident of the
city of regular financial standing upon proper approaches and
representations, because at that time those properties were fairly worth
one-half of a million pesos."
This claim may be true, but the same is unsupported. Appellants have
failed to introduce any evidence to show that they could have secured
better offers for the properties if given a chance to do so and that they
advance now is a mere speculation or conjecture which had no place
in our judicial system. Since every claim must be substantiated by
sufficient evidence, and this appellants have failed to do, their pretense
cannot be entertained.
Neither can we give any value to the claim that the action for the
foreclosure of the mortgage executed by the partnership in favor of C.
N. Hodges has already prescribed not only because the same is
immaterial but because it is an issue that appellants are raising for the
first time in this appeal. Such issue has never been raised in their
pleadings, nor in the trial court. Verily, this claim has no merit.
With regard to the appeal taken by the heirs of defendant Ng Diong
whose main claim is that the trial court failed to adjudicate to the
partnership the properties which were bought by Julian Go from C. N.
Hodges, suffice it to say that the same could not be done, firstly,
because no such claim was made by them in their pleadings in the trial
court, and, secondly, because the evidence shows that said properties
were bought by Julian Go by virtue of the option given to him by the
partnership for a valuable consideration in full payment of the credits
assigned to him by a good number of creditors of said partnership.
There is no evidence that he promised to reconvey the same to the
partnership.
WHEREFORE, the decision appealed from is affirmed, with costs
against appellants.
Singson v. Isabela Sawmill
GRN L- 27343 February 28, 1979Fernadez,

Facts: Isabela Sawmill was formed by partners Saldajeno, Lon and
Timoteo .Withdraw from the partnership and after dissolution, L and T
continued the business still under the name Isabela Sawmill. The
partnership is indebted to various creditors and that Sheriff sold the
assets of Isabela Sawmill to S and was subsequently sold to a
separate company.

Issue: Whether or not Isabela Sawmill ceased to be a partnership and
that creditors could no longer demand payment.

Ruling: On dissolution, the partnership is not terminated but continues
until the winding up of the business. It does not appear that the
withdrawal of S from the partnership was published in the newspapers.
The Apelles and the public had a right to expect the public had a right
to expect that whatever credit they extended to L & T doing business.
In the name of the partnership could be enforced against the
partnership of said partnership. The judicial foreclosure of the chattel
mortgage executed in the favor of S did not relieve her from liability to
the creditors of the partnership .It may be presumed S acted in good
faith, the Apelles also acted in good faith in extending credit to they
partnership. Where one of the two innocent persons must suffer, that
persons must suffer, that person who gave occasion for the damages
to be caused must bear the consequences.