SY v.

CA (313 SCRA 328, August 31, 1999)

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[1] 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 [2], promulgated on
January 15, 1990, which affirmed the Order[3] issued on January 16, 1989 by the Securities and Exchange Commission
(SEC) en banc and the Order[4] 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[5] 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.[6] 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,[7] 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,[8] 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.[9]
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.[10]
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[11] (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[12] (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[13] 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.[14]
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.[15]
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.[16]
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.[17]
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.
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[18] 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[19] 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.[20]

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.[21] On October 5, 1988, Hearing Officer
Tongco came out with an Order[22] (Tongco Order) incorporating the above submissions of the parties and placing[23] 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 banc[24]affirmed the
Tongco Order.
With the denial of their Motion for Reconsideration,[25] 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.[26]
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[27] 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.[28]
From the records on hand, it can be gleaned that the Tongco Order [29], 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[30] 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.[31] 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.[32]
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.[33]
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.[34] 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.[35]

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.[36]
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.[37]
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 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.[38]
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.[39]
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.[40]
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.[41]
On May 31, 1991, the Court of Appeals rendered its questioned decision denying the petition.[42]
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,[43] 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:[44]

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.[45]
 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.[46]
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.[47]
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 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.[48]
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.[49]
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,[50] 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:

xxx xxx xxx

(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:[51]

x x x 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. [52] Sound bases therefor
must appear on record, and there should be a clear showing of its necessity.[53] 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.[54] 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: [55]

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.[56]
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 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.[57] 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.[58] 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.,[59] 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[60] 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. [61]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 parteand 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.[62]
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.[63]
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.[64]
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.
PRIMELINK PROPERTIES AND DEVELOPMENT CORPORATION v. LAZATIN-MAGAT (G.R. No. 167379,
June 27, 2006)

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure of the Decision1 of the
Court of Appeals (CA) in CA-G.R. CV No. 69200 and its Resolution2 denying petitioners’ motion for reconsideration
thereof.

The factual and procedural antecedents are as follows:

Primelink Properties and Development Corporation (Primelink for brevity) is a domestic corporation engaged in real
estate development. Rafaelito W. Lopez is its President and Chief Executive Officer.3

Ma. Clara T. Lazatin-Magat and her brothers, Jose Serafin T. Lazatin, Jaime T. Lazatin and Jose Marcos T. Lazatin (the
Lazatins for brevity), are co-owners of two (2) adjoining parcels of land, with a combined area of 30,000 square meters,
located in Tagaytay City and covered by Transfer Certificate of Title (TCT) No. T-108484of the Register of Deeds of
Tagaytay City.

On March 10, 1994, the Lazatins and Primelink, represented by Lopez, in his capacity as President, entered into a Joint
Venture Agreement5 (JVA) for the development of the aforementioned property into a residential subdivision to be known
as "Tagaytay Garden Villas." Under the JVA, the Lazatin siblings obliged themselves to contribute the two parcels of land
as their share in the joint venture. For its part, Primelink undertook to contribute money, labor, personnel, machineries,
equipment, contractor’s pool, marketing activities, managerial expertise and other needed resources to develop the
property and construct therein the units for sale to the public. Specifically, Primelink bound itself to accomplish the
following, upon the execution of the deed:

a.) Survey the land, and prepare the projects master plans, engineering designs, structural and architectural plans,
site development plans, and such other need plans in accordance with existing laws and the rules and regulations
of appropriate government institutions, firms or agencies;

b.) Secure and pay for all the licenses, permits and clearances needed for the projects;

c.) Furnish all materials, equipment, labor and services for the development of the land in preparation for the
construction and sale of the different types of units (single-detached, duplex/twin, cluster and row house);

d.) Guarantee completion of the land development work if not prevented by force majeure or fortuitous event or
by competent authority, or other unavoidable circumstances beyond the DEVELOPER’S control, not to exceed
three years from the date of the signing of this Joint Venture Agreement, except the installation of the electrical
facilities which is solely MERALCO’S responsibility;

e.) Provide necessary manpower resources, like executive and managerial officers, support personnel and
marketing staff, to handle all services related to land and housing development (administrative and construction)
and marketing (sales, advertising and promotions).6

The Lazatins and Primelink covenanted that they shall be entitled to draw allowances/advances as follows:

1. During the first two years of the Project, the DEVELOPER and the LANDOWNER can draw allowances or
make advances not exceeding a total of twenty percent (20%) of the net revenue for that period, on the basis of
sixty percent (60%) for the DEVELOPER and forty percent (40%) for the LANDOWNERS.

The drawing allowances/advances are limited to twenty percent (20%) of the net revenue for the first two years, in
order to have sufficient reserves or funds to protect and/or guarantee the construction and completion of the
different types of units mentioned above.
 2. After two years, the DEVELOPER and the LANDOWNERS shall be entitled to drawing allowances and/or
advances equivalent to sixty percent (60%) and forty percent (40%), respectively, of the total net revenue or
income of the sale of the units.7

They also agreed to share in the profits from the joint venture, thus:

1. The DEVELOPER shall be entitled to sixty percent (60%) of the net revenue or income of the Joint Venture
project, after deducting all expenses incurred in connection with the land development (such as administrative
management and construction expenses), and marketing (such as sales, advertising and promotions), and

2. The LANDOWNERS shall be entitled to forty percent (40%) of the net revenue or income of the Joint Venture
project, after deducting all the above-mentioned expenses.8

Primelink submitted to the Lazatins its Projection of the Sales-Income-Cost of the project:

SALES-INCOME-COST PROJECTION

lawphil.net
SELLING PRICE COST PRICE DIFFERENCE INCOME
CLUSTER:
A1 3,200,000 - A2 1,260,000 = 1,940,000 x 24 = P 46,560,000.00
TWIN:
B1 2,500,000 - B2 960,000 = 1,540,000 x 24 = 36,960,000.00
SINGLE:
C1 3,500,000 - C2 1,400,000 = 2,100,000 x 16 = 33,600,000.00
ROW-TYPE TOWNHOMES:
D1 1,600,000 - D2 700,000 = 900,000 x 24 = 21,600,000.00

P138,720,000.00
(GROSS) Total Cash Price (A1+B1+C1+D1) = P231,200,000.00
Total Building Expense (A2+B2+C2+D2) = 92,480,000.00
COMPUTATION OF ADD’L. INCOME ON INTEREST
TCP x 30% D/P = P 69,360,000 P 69,360,000.00
Balance = 70% = 161,840,000
x .03069 x 48 = P238,409,740 238,409,740.00
Total Amount (TCP + int. earn.) P307,769,740.00
EXPENSES:
less: A Building expenses P 92,480,000.00
B Commission (8% of TCP) 18,496,000.00
C Admin. & Mgmt. expenses (2% of TCP) 4,624,000.00
D Advertising & Promo exp. (2% of TCP) 4,624,000.00
 E Building expenses for the open
spaces and Amenities (Development
cost not incl. Housing) 400 x 30,000 sqms. 12,000,000.00

TOTAL EXPENSES (A+B+C+D+E) P132,224,000.00

RECONCILIATION OF INCOME VS. EXPENSES
Total Projected Income (incl. income from interest earn.) P307,769,740.00

less: 132,224,000.00
Total Expenses P175,545,740.009

The parties agreed that any unsettled or unresolved misunderstanding or conflicting opinions between the parties relative
to the interpretation, scope and reach, and the enforcement/implementation of any provision of the agreement shall be
referred to Voluntary Arbitration in accordance with the Arbitration Law.10

The Lazatins agreed to subject the title over the subject property to an escrow agreement. Conformably with the escrow
agreement, the owner’s duplicate of the title was deposited with the China Banking Corporation.11However, Primelink
failed to immediately secure a Development Permit from Tagaytay City, and applied the permit only on August 30, 1995.
On October 12, 1995, the City issued a Development Permit to Primelink.12

In a Letter13 dated April 10, 1997, the Lazatins, through counsel, demanded that Primelink comply with its obligations
under the JVA, otherwise the appropriate action would be filed against it to protect their rights and interests. This impelled
the officers of Primelink to meet with the Lazatins and enabled the latter to review its business records/papers. In another
Letter14 dated October 22, 1997, the Lazatins informed Primelink that they had decided to rescind the JVA effective upon
its receipt of the said letter. The Lazatins demanded that Primelink cease and desist from further developing the property.

Subsequently, on January 19, 1998, the Lazatins filed, with the Regional Trial Court (RTC) of Tagaytay City, Branch 18,
a complaint for rescission accounting and damages, with prayer for temporary restraining order and/or preliminary
injunction against Primelink and Lopez. The case was docketed as Civil Case No. TG-1776. Plaintiffs alleged, among
others, that, despite the lapse of almost four (4) years from the execution of the JVA and the delivery of the title and
possession of the land to defendants, the land development aspect of the project had not yet been completed, and the
construction of the housing units had not yet made any headway, based on the following facts, namely: (a) of the 50
housing units programmed for Phase I, only the following types of houses appear on the site in these condition: (aa) single
detached, one completed and two units uncompleted; (bb) cluster houses, one unit nearing completion; (cc) duplex, two
units completed and two units unfinished; and (dd) row houses, two units, completed; (b) in Phase II thereof, all that was
done by the defendants was to grade the area; the units so far constructed had been the object of numerous complaints by
their owners/purchasers for poor workmanship and the use of sub-standard materials in their construction, thus,
undermining the project’s marketability. Plaintiffs also alleged that defendants had, without justifiable reason, completely
disregarded previously agreed accounting and auditing procedures, checks and balances system installed for the mutual
protection of both parties, and the scheduled regular meetings were seldom held to the detriment and disadvantage of
plaintiffs. They averred that they sent a letter through counsel, demanding compliance of what was agreed upon under the
agreement but defendants refused to heed said demand. After a succession of letters with still no action from defendants,
plaintiffs sent a letter on October 22, 1997, a letter formally rescinding the JVA.

Plaintiffs also claimed that in a sales-income-costs projection prepared and submitted by defendants, they (plaintiffs)
stood to receive the amount of P70,218,296.00 as their net share in the joint venture project; to date, however, after almost
four (4) years and despite the undertaking in the JVA that plaintiffs shall initially get 20% of the agreed net revenue
during the first two (2) years (on the basis of the 60%-40% sharing) and their full 40% share thereafter, defendants had yet
to deliver these shares to plaintiffs which by conservative estimates would amount to no less than P40,000,000.00.15

Plaintiffs prayed that, after due proceedings, judgment be rendered in their favor, thus:
WHEREFORE, it is respectfully prayed of this Honorable Court that a temporary restraining order be forthwith issued
enjoining the defendants to immediately stop their land development, construction and marketing of the housing units in
the aforesaid project; after due proceedings, to issue a writ of preliminary injunction enjoining and prohibiting said land
development, construction and marketing of housing units, pending the disposition of the instant case.

After trial, a decision be rendered:

1. Rescinding the Joint Venture Agreement executed between the plaintiffs and the defendants;

2. Immediately restoring to the plaintiffs possession of the subject parcels of land;

3. Ordering the defendants to render an accounting of all income generated as well as expenses incurred and
disbursement made in connection with the project;

4. Making the Writ of Preliminary Injunction permanent;

5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount Forty Million Pesos
(P40,000,000.00) in actual and/or compensatory damages;

6. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of Two Million Pesos
(P2,000,000.00) in exemplary damages;

7. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount equivalent to ten percent (10%)
of the total amount due as and for attorney’s fees; and

8. To pay the costs of this suit.

Other reliefs and remedies as are just and equitable are likewise being prayed for.16

Defendants opposed plaintiffs’ plea for a writ of preliminary injunction on the ground that plaintiffs’ complaint was
premature, due to their failure to refer their complaint to a Voluntary Arbitrator pursuant to the JVA in relation to Section
2 of Republic Act No. 876 before filing their complaint in the RTC. They prayed for the dismissal of the complaint under
Section 1(j), Rule 16 of the Rules of Court:

WHEREFORE, it is respectfully prayed that an Order be issued:

a) dismissing the Complaint on the basis of Section 1(j), Rule 16 of the aforecited Rules of Court, or, in the
alternative,

b) requiring the plaintiffs to make initiatory step for arbitration by filing the demand to arbitrate, and then asking
the parties to resolve their controversies, pursuant to the Arbitration Law, or in the alternative;

c) staying or suspending the proceedings in captioned case until the completion of the arbitration, and

d) denying the plaintiffs’ prayer for the issuance of a temporary restraining order or writ of preliminary
injunction.

Other reliefs and remedies just and equitable in the premises are prayed for.17

In the meantime, before the expiration of the reglementary period to answer the complaint, defendants, invoking their
counsel’s heavy workload, prayed for a 15-day extension18 within which to file their answer. The additional time prayed
for was granted by the RTC.19 However, instead of filing their answer, defendants prayed for a series of 15-day extensions
in eight (8) successive motions for extensions on the same justification.20 The RTC again granted the additional time
prayed for, but in granting the last extension, it warned against further extension.21Despite the admonition, defendants
again moved for another 15-day extension,22 which, this time, the RTC denied. No answer having been filed, plaintiffs
moved to declare the defendants in default,23 which the RTC granted in its Order24 dated June 24, 1998.

On June 25, 1998, defendants filed, via registered mail, their "Answer with Counterclaim and Opposition to the Prayer for
the Issuance of a Writ of Preliminary Injunction."25 On July 8, 1998, defendants filed a Motion to Set Aside the Order of
Default.26 This was opposed by plaintiffs.27 In an Order28 dated July 14, 1998, the RTC denied defendants’ motion to set
aside the order of default and ordered the reception of plaintiffs’ evidence ex parte. Defendants filed a motion for
reconsideration29 of the July 14, 1998 Order, which the RTC denied in its Order30 dated October 21, 1998.

Defendants thereafter interposed an appeal to the CA assailing the Order declaring them in default, as well as the Order
denying their motion to set aside the order of default, alleging that these were contrary to facts of the case, the law and
jurisprudence.31 On September 16, 1999, the appellate court issued a Resolution32 dismissing the appeal on the ground that
the Orders appealed from were interlocutory in character and, therefore, not appealable. No motion for reconsideration of
the Order of the dismissal was filed by defendants.

In the meantime, plaintiffs adduced ex parte their testimonial and documentary evidence. On April 17, 2000, the RTC
rendered a Decision, the dispositive part of which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows:

1. Ordering the rescission of the Joint Venture Agreement as of the date of filing of this complaint;

2. Ordering the defendants to return possession, including all improvements therein, of the real estate property
belonging to the plaintiffs which is described in, and covered by Transfer Certificate of Title No. T-10848 of the
Register of Deeds of Tagaytay City, and located in Barangay Anulin, City of Tagaytay;

3. Ordering the defendants to turn over all documents, records or papers that have been executed, prepared and
retained in connection with any contract to sell or deed of sale of all lots/units sold during the effectivity of the
joint venture agreement;

4. Ordering the defendants to pay the plaintiffs the sum of P1,041,524.26 representing their share of the net
income of the P2,603,810.64 as of September 30, 1995, as stipulated in the joint venture agreement;

5. Ordering the defendants to pay the plaintiffs’ attorney’s fees in the amount of P104,152.40;

6. Ordering the defendants to pay the costs.

SO ORDERED.33

The trial court anchored its decision on the following findings:

x x x Evidence on record have shown patent violations by the defendants of the stipulations particularly paragraph II
covering Developer’s (defendant) undertakings, as well as paragraph III and paragraph V of the JVA. These violations are
not limited to those made against the plaintiffs alone as it appears that some of the unit buyers themselves have their own
separate gripes against the defendants as typified by the letters (Exhibits "G" and "H") of Mr. Emmanuel Enciso.

xxxx

Rummaging through the evidence presented in the course of the testimony of Mrs. Maminta on August 6, 1998 (Exhibits
"N," "O," "P," "Q" and "R" as well as submarkings, pp. 60 to 62, TSN August 6, 1998) this court has observed, and is thus
convinced, that a pattern of what appears to be a scheme or plot to reduce and eventually blot out the net income
generated from sales of housing units by defendants, has been established. Exhibit "P-2" is explicit in declaring that, as of
September 30, 1995, the joint venture project earned a net income of aboutP2,603,810.64. This amount, however, was
drastically reduced in a subsequent financial report submitted by the defendants to P1,954,216.39. Shortly thereafter, and
to the dismay of the plaintiffs, the defendants submitted an income statement and a balance sheet (Exhibits "R" and "R-1")
indicating a net loss of P5,122,906.39 as of June 30, 1997.

Of the reported net income of P2,603,810.64 (Exhibit "P-2") the plaintiffs should have received the sum ofP1,041,524.26
representing their 40% share under paragraph II and V of the JVA. But this was not to be so. Even before the plaintiffs
could get hold of their share as indicated above, the defendants closed the chance altogether by declaring a net loss. The
court perceives this to be one calculated coup-de-grace that would put to thin air plaintiffs’ hope of getting their share in
the profit under the JVA.

That this matter had reached the court is no longer a cause for speculation. The way the defendants treated the JVA and
the manner by which they handled the project itself vis-à-vis their partners, the plaintiffs herein, there is bound to be
certain conflict as the latter repeatedly would received the losing end of the bargain.

Under the intolerable circumstances, the plaintiffs could not have opted for some other recourse but to file the present
action to enforce their rights. x x x34

On May 15, 2000, plaintiffs filed a Motion for Execution Pending Appeal35 alleging defendants’ dilatory tactics for its
allowance. This was opposed by defendants.36

On May 22, 2000, the RTC resolved the motion for execution pending appeal in favor of plaintiffs.37 Upon posting a bond
of P1,000,000.00 by plaintiffs, a writ of execution pending appeal was issued on June 20, 2000.38

Defendants appealed the decision to the CA on the following assignment of errors:

THE TRIAL COURT ERRED IN DECIDING THE CASE WITHOUT FIRST REFERRING THE COMPLAINT FOR
VOLUNTARY ARBITRATION (RA NO. 876), CONTRARY TO THE MANDATED VOLUNTARY ARBITRATION
CLAUSE UNDER THE JOINT VENTURE AGREEMENT, AND THE DOCTRINE IN "MINDANAO PORTLAND
CEMENT CORPORATION V. MCDONOUGH CONSTRUCTION COMPANY OF FLORIDA" (19 SCRA 814-815).

II

THE TRIAL COURT ERRED IN ISSUING A WRIT OF EXECUTION PENDING APPEAL EVEN IN THE ABSENCE
OF GOOD AND COMPELLING REASONS TO JUSTIFY SAID ISSUANCE, AND DESPITE PRIMELINK’S
STRONG OPPOSITION THERETO.

III

THE TRIAL COURT ERRED IN REFUSING TO DECIDE PRIMELINK’S MOTION TO QUASH THE WRIT OF
EXECUTION PENDING APPEAL AND THE MOTION FOR RECONSIDERATION, ALTHOUGH THE COURT
HAS RETAINED ITS JURISDICTION TO RULE ON ALL QUESTIONS RELATED TO EXECUTION.

IV

THE TRIAL COURT ERRED IN RESCINDING THE JOINT VENTURE AGREEMENT ALTHOUGH PRIMELINK
HAS SUBSTANTIALLY DEVELOPED THE PROJECT AND HAS SPENT MORE OR LESS FORTY MILLION
PESOS, AND DESPITE APPELLEES’ FAILURE TO PRESENT SUFFICIENT EVIDENCE JUSTIFYING THE SAID
RESCISSION.

THE TRIAL COURT ERRED IN DECIDING THAT THE APPELLEES HAVE THE RIGHT TO TAKE OVER THE
SUBDIVISION AND TO APPROPRIATE FOR THEMSELVES ALL THE EXISTING IMPROVEMENTS
INTRODUCED THEREIN BY PRIMELINK, ALTHOUGH SAID RIGHT WAS NEITHER ALLEGED NOR PRAYED
FOR IN THE COMPLAINT, MUCH LESS PROVEN DURING THE EX PARTE HEARING, AND EVEN WITHOUT
ORDERING APPELLEES TO FIRST REIMBURSE PRIMELINK OF THE SUBSTANTIAL DIFFERENCE
BETWEEN THE MARKET VALUE OF APPELLEES’ RAW, UNDEVELOPED AND UNPRODUCTIVE LAND
(CONTRIBUTED TO THE PROJECT) AND THE SUM OF MORE OR LESS FORTY MILLION PESOS WHICH
PRIMELINK HAD SPENT FOR THE HORIZONTAL AND VERTICAL DEVELOPMENT OF THE PROJECT,
THEREBY ALLOWING APPELLEES TO UNJUSTLY ENRICH THEMSELVES AT THE EXPENSE OF
PRIMELINK.39

The appeal was docketed in the CA as CA-G.R. CV No. 69200.

On August 9, 2004, the appellate court rendered a decision affirming, with modification, the appealed decision. The fallo
of the decision reads:

WHEREFORE, in view of the foregoing, the assailed decision of the Regional Trial Court of Tagaytay City, Branch 18,
promulgated on April 17, 2000 in Civil Case No. TG-1776, is hereby AFFIRMED. Accordingly, Transfer Certificate of
Title No. T-10848 held for safekeeping by Chinabank pursuant to the Escrow Agreement is ordered released for return to
the plaintiffs-appellees and conformably with the affirmed decision, the cancellation by the Register of Deeds of Tagaytay
City of whatever annotation in TCT No. 10848 by virtue of the Joint Venture Agreement, is now proper.

SO ORDERED.40

Citing the ruling of this Court in Aurbach v. Sanitary Wares Manufacturing Corporation,41 the appellate court ruled that,
under Philippine law, a joint venture is a form of partnership and is to be governed by the laws of partnership. The
aggrieved parties filed a motion for reconsideration,42 which the CA denied in its Resolution43dated March 7, 2005.

Petitioners thus filed the instant Petition for Review on Certiorari, alleging that:

1) DID THE HONORABLE COURT OF APPEALS COMMIT A FATAL AND REVERSIBLE LEGAL
ERROR AND/OR GRAVE ABUSE OF DISCRETION IN ORDERING THE RETURN TO THE
RESPONDENTS OF THE PROPERTY WITH ALL IMPROVEMENTS THEREON, EVEN WITHOUT
ORDERING/REQUIRING THE RESPONDENTS TO FIRST PAY OR REIMBURSE PRIMELINK OF ALL
EXPENSES INCURRED IN DEVELOPING AND MARKETING THE PROJECT, LESS THE ORIGINAL
VALUE OF THE PROPERTY, AND THE SHARE DUE RESPONDENTS FROM THE PROFITS (IF ANY) OF
THE JOINT VENTURE PROJECT?

2) IS THE AFORESAID ORDER ILLEGAL AND CONFISCATORY, OPPRESSIVE AND

UNCONSCIONABLE, CONTRARY TO THE TENETS OF GOOD HUMAN RELATIONS AND VIOLATIVE
OF EXISTING LAWS AND JURISPRUDENCE ON JUDICIAL NOTICE, DEFAULT, UNJUST
ENRICHMENT AND RESCISSION OF CONTRACT WHICH REQUIRES MUTUAL RESTITUTION, NOT
UNILATERAL APPROPRIATION, OF PROPERTY BELONGING TO ANOTHER?44

Petitioners maintain that the aforesaid portion of the decision which unconditionally awards to respondents "all
improvements" on the project without requiring them to pay the value thereof or to reimburse Primelink for all expenses
incurred therefore is inherently and essentially illegal and confiscatory, oppressive and unconscionable, contrary to the
tenets of good human relations, and will allow respondents to unjustly enrich themselves at Primelink’s expense. At the
time respondents contributed the two parcels of land, consisting of 30,000 square meters to the joint venture project when
the JVA was signed on March 10, 1994, the said properties were worth not more than P500.00 per square meter, the "price
tag" agreed upon the parties for the purpose of the JVA. Moreover, before respondents rescinded the JVA sometime in
October/November 1997, the property had already been substantially developed as improvements had already been
introduced thereon; petitioners had likewise incurred administrative and marketing expenses, among others, amounting to
more or less P40,000,000.00.45

Petitioners point out that respondents did not pray in their complaint that they be declared the owners and entitled to the
possession of the improvements made by petitioner Primelink on the property; neither did they adduce evidence to prove
their entitlement to said improvements. It follows, petitioners argue, that respondents were not entitled to the
improvements although petitioner Primelink was declared in default.

They also aver that, under Article 1384 of the New Civil Code, rescission shall be only to the extent necessary to cover
the damages caused and that, under Article 1385 of the same Code, rescission creates the obligation to return the things
which were not object of the contract, together with their fruits, and the price with its interest; consequently, it can be
effected only when respondents can return whatever they may be obliged to return. Respondents who sought the
rescission of the JVA must place petitioner Primelink in the status quo. They insist that respondents cannot rescind and, at
the same time, retain the consideration, or part of the consideration received under the JVA. They cannot have the benefits
of rescission without assuming its burden. All parties must be restored to their original positions as nearly as possible
upon the rescission of a contract. In the event that restoration to the status quo is impossible, rescission may be granted if
the Court can balance the equities and fashion an appropriate remedy that would be equitable to both parties and afford
complete relief.

Petitioners insist that being defaulted in the court a quo would in no way defeat their claim for reimbursement because
"[w]hat matters is that the improvements exist and they cannot be denied."46 Moreover, they point out, the ruling of this
Court in Aurbach v. Sanitary Wares Manufacturing Corporation47 cited by the CA is not in point.

On the other hand, the CA ruled that although respondents therein (plaintiffs below) did not specifically pray for their
takeover of the property and for the possession of the improvements on the parcels of land, nevertheless, respondents were
entitled to said relief as a necessary consequence of the ruling of the trial court ordering the rescission of the JVA. The
appellate court cited the ruling of this Court in the Aurbach case and Article 1838 of the New Civil Code, to wit:

As a general rule, the relation of the parties in joint ventures is governed by their agreement. When the agreement is silent
on any particular issue, the general principles of partnership may be resorted to.48

Respondents, for their part, assert that Articles 1380 to 1389 of the New Civil Code deal with rescissible contracts. What
applies is Article 1191 of the New Civil Code, which reads:

ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with
articles 1385 and 1388 and the Mortgage Law.

They insist that petitioners are not entitled to rescission for the improvements because, as found by the RTC and the CA, it
was petitioner Primelink that enriched itself at the expense of respondents. Respondents reiterate the ruling of the CA, and
argue as follows:

PRIMELINK argued that the LAZATINs in their complaint did not allege, did not prove and did not pray that they are
and should be entitled to take over the development of the project, and that the improvements and existing structures
which were introduced by PRIMELINK after spending more or less Forty Million Pesos – be awarded to them. They
merely asked in the complaint that the joint venture agreement be rescinded, and that the parcels of land they contributed
to the project be returned to them.

PRIMELINK’s argument lacks merit. The order of the court for PRIMELINK to return possession of the real estate
property belonging to the LAZATINs including all improvements thereon was not a judgment that was different in kind
than what was prayed for by the LAZATINs. The order to return the property with all the improvements thereon is just a
necessary consequence to the order of rescission.
As a general rule, the relation of the parties in joint ventures is governed by their agreement. When the agreement is silent
on any particular issue, the general principles of partnership may be resorted to. In Aurbach v. Sanitary Wares
Manufacturing Corporation, the Supreme Court discussed the following points regarding joint ventures and partnership:

The legal concept of a joint venture is of common law origin. It has no precise legal definition, but it has been generally
understood to mean an organization formed for some temporary purpose. (Gates v. Megargel, 266 Fed. 811 [1920]) It is,
in fact, hardly distinguishable from the partnership, since elements are similar – community of interest in the business,
sharing of profits and losses, and a mutual right of control. (Blackner v. McDermott, 176 F.2d 498 [1949]; Carboneau v.
Peterson, 95 P.2d 1043 [1939]; Buckley v. Chadwick, 45 Cal.2d 183, 288 P.2d 12, 289 P.2d 242 [1955]) The main
distinction cited by most opinions in common law jurisdictions is that the partnership contemplates a general business
with some degree of continuity, while the joint venture is formed for the execution of a single transaction, and is thus of a
temporary nature. (Tuffs v. Mann, 116 Cal.App. 170, 2 P.2d 500 [1931]; Harmon v. Martin, 395 III. 595, 71 N.E.2d 74
[1947]; Gates v. Megargel, 266 Fed. 811 [1920]) This observation is not entirely accurate in this jurisdiction, since under
the Civil Code, a partnership may be particular or universal, and a particular partnership may have for its object a specific
undertaking. (Art. 1783, Civil Code). It would seem therefore that, under Philippine law, a joint venture is a form of
partnership and should thus be governed by the laws of partnership. The Supreme Court has, however, recognized a
distinction between these two business forms, and has held that although a corporation cannot enter into a partnership
contract, it may, however, engage in a joint venture with others. (At p. 12, Tuazon v. Bolanos, 95 Phil. 906 [1954];
Campos and Lopez – Campos Comments, Notes and Selected Cases, Corporation Code 1981) (Emphasis Supplied)

The LAZATINs were able to establish fraud on the part of PRIMELINK which, in the words of the court a quo, was a
pattern of what appears to be a scheme or plot to reduce and eventually blot out the net incomes generated from sales of
housing units by the defendants. Under Article 1838 of the Civil Code, where the partnership contract is rescinded on the
ground of the fraud or misrepresentation of one of the parties thereto, the party entitled to rescind is, without prejudice to
any other right is entitled to a lien on, or right of retention of, the surplus of the partnership property after satisfying the
partnership liabilities to third persons for any sum of money paid by him for the purchase of an interest in the partnership
and for any capital or advance contributed by him. In the instant case, the joint venture still has outstanding liabilities to
third parties or the buyers of the property.

It is not amiss to state that title to the land or TCT No. T-10848 which is now held by Chinabank for safekeeping pursuant
to the Escrow Agreement executed between Primelink Properties and Development Corporation and Ma. Clara T.
Lazatin-Magat should also be returned to the LAZATINs as a necessary consequence of the order of rescission of
contract. The reason for the existence of the Escrow Agreement has ceased to exist when the joint venture agreement was
rescinded.49

Respondents stress that petitioners must bear any damages or losses they may have suffered. They likewise stress that they
did not enrich themselves at the expense of petitioners.

In reply, petitioners assert that it is unjust and inequitable for respondents to retain the improvements even if their share in
the P1,041,524.26 of the net income of the property and the sale of the land were to be deducted from the value of the
improvements, plus administrative and marketing expenses in the total amount ofP40,000,000.00. Petitioners will still be
entitled to an accounting from respondents. Respondents cannot deny the existence and nature of said improvements as
they are visible to the naked eye.

The threshold issues are the following: (1) whether respondents are entitled to the possession of the parcels of land
covered by the JVA and the improvements thereon introduced by petitioners as their contribution to the JVA; (2) whether
petitioners are entitled to reimbursement for the value of the improvements on the parcels of land.

The petition has no merit.

On the first issue, we agree with petitioners that respondents did not specifically pray in their complaint below that
possession of the improvements on the parcels of land which they contributed to the JVA be transferred to them.
Respondents made a specific prayer in their complaint that, upon the rescission of the JVA, they be placed in possession
of the parcels of land subject of the agreement, and for other "reliefs and such other remedies as are just and equitable in
the premises." However, the trial court was not precluded from awarding possession of the improvements on the parcels
of land to respondents in its decision. Section 2(c), Rule 7 of the Rules of Court provides that a pleading shall specify the
relief sought but it may add as general prayer for such further or other relief as may be deemed just and equitable. Even
without the prayer for a specific remedy, proper relief may be granted by the court if the facts alleged in the complaint and
the evidence introduced so warrant.50 The court shall grant relief warranted by the allegations and the proof even if no
such relief is prayed for.51 The prayer in the complaint for other reliefs equitable and just in the premises justifies the grant
of a relief not otherwise specifically prayed for.52

The trial court was not proscribed from placing respondents in possession of the parcels of land and the improvements on
the said parcels of land. It bears stressing that the parcels of land, as well as the improvements made thereon, were
contributed by the parties to the joint venture under the JVA, hence, formed part of the assets of the joint venture. 53 The
trial court declared that respondents were entitled to the possession not only of the parcels of land but also of the
improvements thereon as a consequence of its finding that petitioners breached their agreement and defrauded respondents
of the net income under the JVA.

On the second issue, we agree with the CA ruling that petitioner Primelink and respondents entered into a joint venture as
evidenced by their JVA which, under the Court’s ruling in Aurbach, is a form of partnership, and as such is to be
governed by the laws on partnership.

When the RTC rescinded the JVA on complaint of respondents based on the evidence on record that petitioners willfully
and persistently committed a breach of the JVA, the court thereby dissolved/cancelled the partnership.54With the
rescission of the JVA on account of petitioners’ fraudulent acts, all authority of any partner to act for the partnership is
terminated except so far as may be necessary to wind up the partnership affairs or to complete transactions begun but not
yet finished.55 On dissolution, the partnership is not terminated but continues until the winding up of partnership affairs is
completed.56 Winding up means the administration of the assets of the partnership for the purpose of terminating the
business and discharging the obligations of the partnership.

The transfer of the possession of the parcels of land and the improvements thereon to respondents was only for a specific
purpose: the winding up of partnership affairs, and the partition and distribution of the net partnership assets as provided
by law.57 After all, Article 1836 of the New Civil Code provides that unless otherwise agreed by the parties in their JVA,
respondents have the right to wind up the partnership affairs:

Art. 1836. Unless otherwise agreed, the partners who have not wrongfully dissolved the partnership or the legal
representative of the last surviving partner, not insolvent, has the right to wind up the partnership affairs, provided,
however, that any partner, his legal representative or his assignee, upon cause shown, may obtain winding up by the court.

It must be stressed, too, that although respondents acquired possession of the lands and the improvements thereon, the said
lands and improvements remained partnership property, subject to the rights and obligations of the parties, inter se, of the
creditors and of third parties under Articles 1837 and 1838 of the New Civil Code, and subject to the outcome of the
settlement of the accounts between the parties as provided in Article 1839 of the New Civil Code, absent any agreement
of the parties in their JVA to the contrary.58 Until the partnership accounts are determined, it cannot be ascertained how
much any of the parties is entitled to, if at all.

It was thus premature for petitioner Primelink to be demanding that it be indemnified for the value of the improvements
on the parcels of land owned by the joint venture/partnership. Notably, the JVA of the parties does not contain any
provision designating any party to wind up the affairs of the partnership.

Thus, under Article 1837 of the New Civil Code, the rights of the parties when dissolution is caused in contravention of
the partnership agreement are as follows:

(1) Each partner who has not caused dissolution wrongfully shall have:

(a) All the rights specified in the first paragraph of this article, and

(b) The right, as against each partner who has caused the dissolution wrongfully, to damages for breach of
the agreement.
 (2) The partners who have not caused the dissolution wrongfully, if they all desire to continue the business in the
same name either by themselves or jointly with others, may do so, during the agreed term for the partnership and
for that purpose may possess the partnership property, provided they secure the payment by bond approved by the
court, or pay to any partner who has caused the dissolution wrongfully, the value of his interest in the partnership
at the dissolution, less any damages recoverable under the second paragraph, No. 1(b) of this article, and in like
manner indemnify him against all present or future partnership liabilities.

(3) A partner who has caused the dissolution wrongfully shall have:

(a) If the business is not continued under the provisions of the second paragraph, No. 2, all the rights of a
partner under the first paragraph, subject to liability for damages in the second paragraph, No. 1(b), of this
article.

(b) If the business is continued under the second paragraph, No. 2, of this article, the right as against his
co-partners and all claiming through them in respect of their interests in the partnership, to have the value
of his interest in the partnership, less any damage caused to his co-partners by the dissolution, ascertained
and paid to him in cash, or the payment secured by a bond approved by the court, and to be released from
all existing liabilities of the partnership; but in ascertaining the value of the partner’s interest the value of
the good-will of the business shall not be considered.

And under Article 1838 of the New Civil Code, the party entitled to rescind is, without prejudice to any other right,
entitled:

(1) To a lien on, or right of retention of, the surplus of the partnership property after satisfying the partnership
liabilities to third persons for any sum of money paid by him for the purchase of an interest in the partnership and
for any capital or advances contributed by him;

(2) To stand, after all liabilities to third persons have been satisfied, in the place of the creditors of the partnership
for any payments made by him in respect of the partnership liabilities; and

(3) To be indemnified by the person guilty of the fraud or making the representation against all debts and
liabilities of the partnership.

The accounts between the parties after dissolution have to be settled as provided in Article 1839 of the New Civil Code:

Art. 1839. In settling accounts between the partners after dissolution, the following rules shall be observed, subject to any
agreement to the contrary:

(1) The assets of the partnership are:

(a) The partnership property,

(b) The contributions of the partners necessary for the payment of all the liabilities specified in No. 2.

(2) The liabilities of the partnership shall rank in order of payment, as follows:

(a) Those owing to creditors other than partners,

(b) Those owing to partners other than for capital and profits,

(c) Those owing to partners in respect of capital,

(d) Those owing to partners in respect of profits.

 (3) The assets shall be applied in the order of their declaration in No. 1 of this article to the satisfaction of the
liabilities.

(4) The partners shall contribute, as provided by article 1797, the amount necessary to satisfy the liabilities.

(5) An assignee for the benefit of creditors or any person appointed by the court shall have the right to enforce the
contributions specified in the preceding number.

(6) Any partner or his legal representative shall have the right to enforce the contributions specified in No. 4, to
the extent of the amount which he has paid in excess of his share of the liability.

(7) The individual property of a deceased partner shall be liable for the contributions specified in No. 4.

(8) When partnership property and the individual properties of the partners are in possession of a court for
distribution, partnership creditors shall have priority on partnership property and separate creditors on individual
property, saving the rights of lien or secured creditors.

(9) Where a partner has become insolvent or his estate is insolvent, the claims against his separate property shall
rank in the following order:

(a) Those owing to separate creditors;

(b) Those owing to partnership creditors;

(c) Those owing to partners by way of contribution.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 69200 are AFFIRMED insofar as they conform to this Decision of the Court.

Costs against petitioners.

SO ORDERED.
BENJAMIN YU v. NATIONAL LABOR RELATIONS COMMISSION (G.R. No. 97212, June 30, 1993)

FELICIANO, J.:

Petitioner Benjamin Yu was formerly the Assistant General Manager of the marble quarrying and export business
operated by a registered partnership with the firm name of "Jade Mountain Products Company Limited" ("Jade
Mountain"). The partnership was originally organized on 28 June 1984 with Lea Bendal and Rhodora Bendal as general
partners and Chin Shian Jeng, Chen Ho-Fu and Yu Chang, all citizens of the Republic of China (Taiwan), as limited
partners. The partnership business consisted of exploiting a marble deposit found on land owned by the Sps. Ricardo and
Guillerma Cruz, situated in Bulacan Province, under a Memorandum Agreement dated 26 June 1984 with the Cruz
spouses. 1 The partnership had its main office in Makati, Metropolitan Manila.

Benjamin Yu was hired by virtue of a Partnership Resolution dated 14 March 1985, as Assistant General Manager with a
monthly salary of P4,000.00. According to petitioner Yu, however, he actually received only half of his stipulated
monthly 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. Benjamin Yu actually managed the operations and finances of the
business; he had overall supervision of the workers at the marble quarry in Bulacan and took charge of the preparation of
papers relating to the exportation of the firm's products.

Sometime in 1988, without the knowledge of Benjamin Yu, the general partners Lea Bendal and Rhodora Bendal sold and
transferred their interests in the partnership to private respondent Willy Co and to one Emmanuel Zapanta. Mr. Yu Chang,
a limited partner, also sold and transferred his interest in the partnership to Willy Co. Between Mr. Emmanuel Zapanta
and himself, private respondent Willy Co acquired the great bulk of the partnership interest. The partnership now
constituted solely by Willy Co and Emmanuel Zapanta continued to use the old firm name of Jade Mountain, though they
moved the firm's main office from Makati to Mandaluyong, Metropolitan Manila. A Supplement to the Memorandum
Agreement relating to the operation of the marble quarry was entered into with the Cruz spouses in February of
1988. 2 The actual operations of the business enterprise continued as before. All the employees of the partnership
continued working in the business, all, save petitioner Benjamin Yu as it turned out.

On 16 November 1987, having learned of the transfer of the firm's main office from Makati to Mandaluyong, petitioner
Benjamin Yu reported to the Mandaluyong office for work and there met private respondent Willy Co for the first time.
Petitioner was informed by Willy Co that the latter had bought the business from the original partners and that it was for
him to decide whether or not he was responsible for the obligations of the old partnership, including petitioner's unpaid
salaries. Petitioner was in fact not allowed to work anymore in the Jade Mountain business enterprise. His unpaid salaries
remained unpaid. 3

On 21 December 1988. Benjamin Yu filed a complaint for illegal dismissal and recovery of unpaid salaries accruing from
November 1984 to October 1988, moral and exemplary damages and attorney's fees, against Jade Mountain, Mr. Willy Co
and the other private respondents. The partnership and Willy Co denied petitioner's charges, contending in the main that
Benjamin Yu was never hired as an employee by the present or new partnership. 4

In due time, Labor Arbiter Nieves Vivar-De Castro rendered a decision holding that petitioner had been illegally
dismissed. The Labor Arbiter decreed his reinstatement and awarded him his claim for unpaid salaries, backwages and
attorney's fees. 5

On appeal, the National Labor Relations Commission ("NLRC") reversed the decision of the Labor Arbiter and dismissed
petitioner's complaint in a Resolution dated 29 November 1990. The NLRC held that a new partnership consisting of Mr.
Willy Co and Mr. Emmanuel Zapanta had bought the Jade Mountain business, that the new partnership had not retained
petitioner Yu in his original position as Assistant General Manager, and that there was no law requiring the new
partnership to absorb the employees of the old partnership. Benjamin Yu, therefore, had not been illegally dismissed by
the new partnership which had simply declined to retain him in his former managerial position or any other position.
Finally, the NLRC held that Benjamin Yu's claim for unpaid wages should be asserted against the original members of the
preceding partnership, but these though impleaded had, apparently, not been served with summons in the proceedings
before the Labor Arbiter. 6
Petitioner Benjamin Yu is now before the Court on a Petition for Certiorari, asking us to set aside and annul the
Resolution of the NLRC as a product of grave abuse of discretion amounting to lack or excess of jurisdiction.

The basic contention of petitioner is that the NLRC has overlooked the principle that a partnership has a juridical
personality separate and distinct from that of each of its members. Such independent legal personality subsists, petitioner
claims, notwithstanding changes in the identities of the partners. Consequently, the employment contract between
Benjamin Yu and the partnership Jade Mountain could not have been affected by changes in the latter's membership. 7

Two (2) main issues are thus posed for our consideration in the case at bar: (1) whether the partnership which had hired
petitioner Yu as Assistant General Manager had been extinguished and replaced by a new partnerships composed of Willy
Co and Emmanuel Zapanta; and (2) if indeed a new partnership had come into existence, whether petitioner Yu could
nonetheless assert his rights under his employment contract as against the new partnership.

In respect of the first issue, we agree with the result reached by the NLRC, that is, that the legal effect of the changes in
the membership of the partnership was the dissolution of the old partnership which had hired petitioner in 1984 and the
emergence of a new firm composed of Willy Co and Emmanuel Zapanta in 1987.

The applicable law in this connection — of which the NLRC seemed quite unaware — is found in the Civil Code
provisions relating to partnerships. Article 1828 of the Civil Code provides as follows:

Art. 1828. The dissolution of a partnership is the change in the relation of the partners caused by any
partner ceasing to be associated in the carrying on as distinguished from the winding up of the business.
(Emphasis supplied)

Article 1830 of the same Code must also be noted:

Art. 1830. Dissolution is caused:

(1) without violation of the agreement between the partners;

xxx xxx xxx

(b) by the express will of any partner, who must act in good faith, when
no definite term or particular undertaking is specified;

xxx xxx xxx

(2) in contravention of the agreement between the partners, where the

circumstances do not permit a dissolution under any other provision of
this article, by the express will of any partner at any time;

xxx xxx xxx

(Emphasis supplied)

In the case at bar, just about all of the partners had sold their partnership interests (amounting to 82% of the total
partnership interest) to Mr. Willy Co and Emmanuel Zapanta. The record does not show what happened to the remaining
18% of the original partnership interest. The acquisition of 82% of the partnership interest by new partners, coupled with
the retirement or withdrawal of the partners who had originally owned such 82% interest, was enough to constitute a new
partnership.

The occurrence of events which precipitate the legal consequence of dissolution of a partnership do not, however,
automatically result in the termination of the legal personality of the old partnership. Article 1829 of the Civil Code states
that:
 [o]n dissolution the partnership is not terminated, but continues until the winding up of partnership affairs
is completed.

In the ordinary course of events, the legal personality of the expiring partnership persists for the limited purpose of
winding up and closing of the affairs of the partnership. In the case at bar, it is important to underscore the fact that the
business of the old partnership was simply continued by the new partners, without the old partnership undergoing the
procedures relating to dissolution and winding up of its business affairs. In other words, the new partnership simply took
over the business enterprise owned by the preceeding partnership, and continued using the old name of Jade Mountain
Products Company Limited, 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 most of them and opening a new
business enterprise. There were, no doubt, powerful tax considerations which underlay such an informal approach to
business on the part of the retiring and the incoming partners. It is not, however, necessary to inquire into such matters.

What is important for present purposes is that, under the above described situation, not only the retiring partners
(Rhodora Bendal, et al.) but also the new partnership itself which continued the business of the old, dissolved, one, are
liable for the debts of the preceding partnership. In Singson, et al. v. Isabela Saw Mill, et al, 8 the Court held that under
facts very similar to those in the case at bar, a withdrawing partner remains liable to a third party creditor of the old
partnership. 9 The liability of the new partnership, upon the other hand, in the set of circumstances obtaining in the case at
bar, is established in Article 1840 of the Civil Code which reads as follows:

Art. 1840. In the following cases creditors of the dissolved partnership are also creditors of the person or
partnership continuing the business:

(1) When any new partner is admitted into an existing partnership, or when any partner retires and assigns
(or the representative of the deceased partner assigns) his rights in partnership property to two or more of
the partners, or to one or more of the partners and one or more third persons, if the business is continued
without liquidation of the partnership affairs;

(2) When all but one partner retire and assign (or the representative of a deceased partner assigns) their
rights in partnership property to the remaining partner, who continues the business without liquidation of
partnership affairs, either alone or with others;

(3) When any Partner retires or dies and the business of the dissolved partnership is continued as set
forth in Nos. 1 and 2 of this Article, with the consent of the retired partners or the representative of the
deceased partner, but without any assignment of his right in partnership property;

(4) When all the partners or their representatives assign their rights in partnership property to one or
more third persons who promise to pay the debts and who continue the business of the dissolved
partnership;

(5) When any partner wrongfully causes a dissolution and remaining partners continue the businessunder
the provisions of article 1837, second paragraph, No. 2, either alone or with others, andwithout
liquidation of the partnership affairs;

(6) When a partner is expelled and the remaining partners continue the business either alone or with
others without liquidation of the partnership affairs;

The liability of a third person becoming a partner in the partnership continuing the business, under this
article, to the creditors of the dissolved partnership shall be satisfied out of the partnership property only,
unless there is a stipulation to the contrary.

When the business of a partnership after dissolution is continued under any conditions set forth in this
article the creditors of the retiring or deceased partner or the representative of the deceased partner, have a
prior right to any claim of the retired partner or the representative of the deceased partner against the
person or partnership continuing the business on account of the retired or deceased partner's interest in the
 dissolved partnership or on account of any consideration promised for such interest or for his right in
partnership property.

Nothing in this article shall be held to modify any right of creditors to set assignment on the ground of
fraud.

xxx xxx xxx

(Emphasis supplied)

Under Article 1840 above, creditors of the old Jade Mountain are also creditors of the new Jade Mountain which
continued the business of the old one without liquidation of the partnership affairs. Indeed, a creditor of the old Jade
Mountain, like petitioner Benjamin Yu in respect of his claim for unpaid wages, is entitled to priority vis-a-visany claim
of any retired or previous partner insofar as such retired partner's interest in the dissolved partnership is concerned. It is
not necessary for the Court to determine under which one or mare of the above six (6) paragraphs, the case at bar would
fall, if only because the facts on record are not detailed with sufficient precision to permit such determination. It is,
however, clear to the Court that under Article 1840 above, Benjamin 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 Jade Mountain.

It is at the same time also evident to the Court that the new partnership was entitled to appoint and hire a new general or
assistant general manager to run the affairs of the business enterprise take over. An assistant general manager belongs to
the most senior ranks of management and a new partnership is entitled to appoint a top manager of its own choice and
confidence. The non-retention of Benjamin Yu as Assistant General Manager did not therefore constitute unlawful
termination, or termination without just or authorized cause. We think that the precise authorized cause for termination in
the case at bar was redundancy. 10 The new partnership had its own new General Manager, apparently Mr. Willy Co, the
principal new owner himself, who personally ran the business of Jade Mountain. Benjamin Yu's old position as Assistant
General Manager thus became superfluous or redundant. 11 It follows that petitioner Benjamin Yu is entitled to separation
pay at the rate of one month's pay for each year of service that he had rendered to the old partnership, a fraction of at least
six (6) months being considered as a whole year.

While the new Jade Mountain was entitled to decline to retain petitioner Benjamin Yu in its employ, we consider that
Benjamin Yu was very shabbily treated by the new partnership. The old partnership certainly benefitted from the services
of Benjamin Yu who, as noted, previously ran the whole marble quarrying, processing and exporting enterprise. His work
constituted value-added to the business itself and therefore, the new partnership similarly benefitted from the labors of
Benjamin Yu. It is worthy of note that the new partnership did not try to suggest that there was any cause consisting of
some blameworthy act or omission on the part of Mr. Yu which compelled the new partnership to terminate his services.
Nonetheless, the new Jade Mountain did not notify him of the change in ownership of the business, the relocation of the
main office of Jade Mountain from Makati to Mandaluyong and the assumption by Mr. Willy Co of control of operations.
The treatment (including the refusal to honor his claim for unpaid wages) accorded to Assistant General Manager
Benjamin Yu was so summary and cavalier as to amount to arbitrary, bad faith treatment, for which the new Jade
Mountain may legitimately be required to respond by paying moral damages. This Court, exercising its discretion and in
view of all the circumstances of this case, believes that an indemnity for moral damages in the amount of P20,000.00 is
proper and reasonable.

In addition, we consider that petitioner Benjamin Yu is entitled to interest at the legal rate of six percent (6%) per
annum on the amount of unpaid wages, and of his separation pay, computed from the date of promulgation of the award of
the Labor Arbiter. Finally, because the new Jade Mountain compelled Benjamin Yu to resort to litigation to protect his
rights in the premises, he is entitled to attorney's fees in the amount of ten percent (10%) of the total amount due from
private respondent Jade Mountain.

WHEREFORE, for all the foregoing, the Petition for Certiorari is GRANTED DUE COURSE, the Comment filed by
private respondents is treated as their Answer to the Petition for Certiorari, and the Decision of the NLRC dated 29
November 1990 is hereby NULLIFIED and SET ASIDE. A new Decision is hereby ENTERED requiring private
respondent Jade Mountain Products Company Limited to pay to petitioner Benjamin Yu the following amounts:
 (a) for unpaid wages which, as found by the Labor Arbiter, shall be computed at the rate
of P2,000.00 per month multiplied by thirty-six (36) months (November 1984 to
December 1987) in the total amount of P72,000.00;

(b) separation pay computed at the rate of P4,000.00 monthly pay multiplied by three (3)
years of service or a total of P12,000.00;

(c) indemnity for moral damages in the amount of P20,000.00;

(d) six percent (6%) per annum legal interest computed on items (a) and (b) above,
commencing on 26 December 1989 and until fully paid; and

(e) ten percent (10%) attorney's fees on the total amount due from private respondent
Jade Mountain.

Costs against private respondents.

SO ORDERED.