Goquiolay v. Sycip

SECOND DIVISION
[G.R. No. L-11840. July 26, 1960.]
ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SIN AN and

ANTONIO C. GOQUIOLAY" , plaintiffs-appellants, vs . WASHINGTON Z.
SYCIP, ET AL. , defendants-appellees.
Jose C. Colayco, Manuel O. Chan and Padilla Law Offices for appellants.
Sycip, Quisumbing, Salazar & Associates for appellees.
SYLLABUS
1. PARTNERSHIP; MANAGEMENT, RIGHT OF EXCLUSIVE; PERSONAL RIGHT;

TERMINATION UPON MANAGER-PARTNER'S DEATH. — The right of exclusive
management conferred upon Tan Sin An, being premised upon trust and con dence,
was a mere personal right that terminated upon Tan's demise.
2. ARTICLES OF CO-PARTNERSHIP; RIGHT OF HEIRS TO REPRESENT DECEASED
PARTNER; MANAGERIAL RIGHT; PROPRIETARY INTEREST. — The provision in the
Articles of Co-Partnership stating that "in the event of death of any one of the partners
within the 10-year term of the partnership, the deceased partner shall be represented
by his heirs", could not have referred to the managerial right given to Tan Sin An; more
appropriately, it relates to the succession in the proprietary interest of each partner.
3. ID.; ID.; EFFECT OF HEIRS' FAILURE TO REPUDIATE; HEIRS BECOME
INDIVIDUAL PARTNERS; MINORITY OF HEIRS. — Consonant with the articles of co-
partnership providing for the continuation of the rm notwithstanding the death of one
of the partners, the heirs of the deceased, by never repudiating or refusing to be bound
under the said provision in the articles, became individual partners with Antonio
Goquiolay upon Tan's demise. Minority of the heirs is not a bar to the application of that
clause in the articles of co-partnership. Heirs liability in the partnership being limited to
the value of their importance, they become no more than limited partners, when they
manifest their intent to be bound as general partners.
4. ID.; SALE OF PARTNERSHIP PROPERTIES; CONSENT OF ALL PARTNERS
UNNECESSARY; STRANGERS DEALING WITH PARTNERSHIPS; POWER TO BIND
PARTNERSHIP. — As to whether or not the consent of the other partners was necessary
to perfect the sale of the partnership properties, the Court believes that it is not.
Strangers dealing with a partnership have the right to assume, in the absence of
restrictive clauses in the co- partnership agreement, that every general partner has
power to bind the partnership.
5. ID.; ID.; ESTOPPEL. — By allowing defendant Kong Chai Pin to retain control of
the partnership properties from 1942 to 1949, plaintiff Goquiolay estopped himself
from denying her (Kong Chai Pin's) legal representation of the partnership, with the
power to bind it by proper contracts.
6. PARTNERSHIP; GENERAL PARTNER BY ESTOPPEL; WIDOW OF MANAGING
PARTNER AUTHORIZED BY OTHER PARTNER TO MANAGE PARTNERSHIP. — By
authorizing the widow of the managing partner to manage partnership property (which
a limited partner could not be authorized to do), the other general partner recognized
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her as a general partner, and is now in estoppel to deny her position as a general
partner, with authority to administer and alienate partnership property.
7. ID.; HEIR OF PARTNER, STATUS ORDINARILY AS LIMITED PARTNER BUT MAY
WAIVE IT AND BECOME AS GENERAL PARTNER. — Although the heir of a partner
ordinarily becomes a limited partner for his own protection, yet the heir may disregard
it and instead elect to become a collective or general partner, with all the rights and
obligations of one. This choice pertains exclusively to the heir, and does not require the
assent of the surviving partner.
8. ID.; PRESUMPTIONS; AUTHORITY OF PARTNER TO DEAL WITH PROPERTY. —
A third person has the right to presume that a general partner dealing with partnership
property has the requisite authority from his co-partners.
9. ID.; PROPERTY OF PARTNERSHIP; SALE OF IMMOVABLES, WHEN
CONSIDERED WITHIN THE ORDINARY POWERS OF A GENERAL PARTNER. — Where the
express and avowed purpose of the partnership is to buy and sell real estate (as in the
present case), the immovables thus acquired by the rm form part of its stock-in-trade,
and the sale thereof is in pursuance of partnership purposes, hence within the ordinary
powers of the partner.
10. ID.; SALE OF PARTNERSHIP PROPERTY; ACTION FOR RESCISSION ON
GROUND OF FRAUD; NO INADEQUACY OF PRICE; CASE AT BAR. — Appellant's claim
that the price was inadequate, relies on the testimony of a realtor, who in 1955, six
years after the sale in the question, asserted that the land was by then worth double the
price for which it was sold. But taking into account the continued rise of real estate
values since liberation, and the fact that the sale in question was practically a forced
sale because the partnership has no other means to pay the legitimate debts, this
evidence certainly does not show such "gross inadequacy" as to justify the rescission
of the sale.
11. ID.; ID.; ID.; RELATIONSHIP ALONE IN NO BADGE OF FRAUD. — The Supreme
court has ruled that relationship alone is not a badge of fraud (Oria Hnos. vs.
McMicking, 21 Phil., 243; Hermandad de Smo. Nombre de Jesus vs. Sanchez, 40
Official Gazette 1685).
12. ID.; ID.; ID.; FRAUD OF CREDITORS DISTINGUISHED FROM FRAUD TO OBTAIN
CONSENT. — Fraud used to obtain a party's consent to a contract (deceit or dolus in
contrahendo) is different from fraud of creditors that gives rise to a rescission of
contract.
13. ID.; ID.; ID.; SUBSIDIARY NATURE; ALLEGATION OF NO OTHER MEANS TO
OBTAIN REPARATION, NECESSARY. — The action for rescission is subsidiary; it can not
be instituted except when the party suffering damage has no other legal means to
obtain reparation for the same. hence, if there is no allegation or evidence that the
plaintiff can not obtain reparation from the widow and heirs of the deceased partner,
the suit to rescind the sale in question s not maintainable, even if the fraud charged
actually did exist.
DECISION
REYES, J.B.L. J : p
Direct appeal from the decision of the Court of First Instance of Davao (the
amount involved being more than P200,000) dismissing the plaintiffs-appellants'
complaint.
From the stipulation of facts of the parties and the evidence on record, it would
appear that on May 29, 1940, Tan Sin An and Antonio C. Goquiolay entered into a
general commercial partnership under the partnership name "Tan Sin An and Antonio C.
Goquiolay", for the purpose of dealing in real estate. The partnership had a capital of
P30,000.00, P18,000.00 of which was contributed by Goquiolay and P12,000.00 by Tan
Sin An. The agreement lodged upon Tan Sin An the sole management of the partnership
affairs, stipulating that —
"III. The co-partnership shall be composed of said Tan Sin An as sole
managing and partner (sic), and Antonio C. Goquiolay as co-partner.
"VIII. The affairs of the co-partnership shall be managed exclusively by the
managing and partner (sic) or by his authorized agent, and it is expressly
stipulated that the managing and partner (sic) may delegate the entire
management of the affairs of the co- partnership by irrevocable power of attorney
to any person, rm or corporation he may select upon such terms as regards
compensation as he may deem proper, and vest in such person, rm or
corporation full power and authority, as the agent of the co-partnership and in his
name, place and stead to do anything for it or on his behalf which he as such
managing and partner (sic) might do or cause to be done.
"IX. The co-partner shall have no voice or participation in the management
of the affairs of the co-partnership; but he may examine its accounts once every
six (6) months at any time during ordinary business hours, and in accordance
with the provisions of the Code of Commerce." (Articles of Co-Partnership).
The lifetime of the partnership was fixed at ten (10) years and also that —
"In the event of the death of any of the partners at any time before the
expiration of said term, the co-partnership shall not be dissolved but will have to
be continued and the deceased partner shall be represented by his heirs or
assigns in said co-partnership" (Art. XII, Articles of Co-Partnership).
However, the partnership could be dissolved and its affairs liquidated at any time upon
mutual agreement in writing of the partners (Art. XIII, articles of Co-Partnership).
On May 31, 1940, Antonio Goquiolay executed a general power of attorney to this
effect:
"That besides the powers and duties granted the said Tan Sin An by the
articles of co-partnership of said co-partnership "Tan Sin An and Antonio
Goquiolay", the said Tan Sin An should act as my Manager for said co-
partnership for the full period of the term for which said co-partnership was
organized or until the whole period that the said capital of P30,000.00 of the co-
partnership should last, to carry on to the best advantage and interest of the said
co-partnership, to make and execute, sign, seal and deliver for the co-partnership,
and in its name, all bills, bonds, notes, specialties, and trust receipts or other
instruments or documents in writing whatsoever kind or nature which shall be
necessary to the proper conduction of the said businesses, including the power to
mortgage and pledge real and personal properties, to secure the obligation of the
co-partnership, to buy real or personal properties for cash or upon such terms as
he may deem advisable, to sell personal or real properties, such as lands and
buildings of the co-partnership in any manner he may deem advisable for the best
interest of said co-partnership, to borrow money on behalf of the co-partnership
and to issue promissory notes for the repayment thereof, to deposit the funds of
the co-partnership in any local bank or elsewhere and to draw checks against
funds so deposited . . .
On May 29, 1940, the plaintiff partnership "Tan Sin An and Goquiolay" purchased
the three (3) parcels of land, known as Lots Nos. 526, 441 and 521 of the Cadastral
Survey of Davao, subject-matter of the instant litigation, assuming the payment of a
mortgage obligation of P25,000.00, payable to "La Urbana Sociedad Mutua de
Construcción y Prestamos" for a period of ten (10) years, with 10% interest per annum.
Another 46 parcels were purchased by Tan Sin An in his individual capacity, and he
assumed payment of a mortgage debt thereon for P35,000.00, with interest. The down
payment and the amortization were advanced by Yutivo and Co., for the account of the
purchasers.
On September 25, 1940, the two separate obligations were consolidated in an
instrument executed by the partnership and Tan Sin An, whereby the entire 49 lots were
mortgaged in favor of the "Banco Hipotecario de Filipinas" (as successor to "La
Urbana") and the covenantors bound themselves to pay, jointly and severally, the
remaining balance of their unpaid accounts amounting to P52,282.80 within eight 8
years, with 8% annual interest, payable in 96 equal monthly installments.
On June 26, 1942, Tan Sin An died, leaving as surviving heirs his widow, Kong
Chai Pin, and four minor children, namely: Tan L. Cheng, Tan L. Hua, Tan C. Chiu and Tan
K. Chuan. Defendant Kong Chai Pin was appointed administratrix of the intestate estate
of her deceased husband.
In the meantime, repeated demands for payment were made by the Banco
Hipotecario on the partnership and on Tan Sin An. In March, 1944, the defendant Sing
Yee and Cuan, Co., Inc., upon request of defendant Yutivo Sons Hardware Co., paid the
remaining balance of the mortgage debt, and the mortgage was cancelled.
Then in 1946, Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. led
their claims in the intestate proceedings of Tan Sin An for P62,415.91 and P54,310.13,
respectively, as alleged obligations of the partnership "Tan Sin An and Antonio C.
Goquiolay" and Tan Sin An, for advances, interests and taxes paid in amortizing and
discharging their obligations to "La Urbana" and the "Banco Hipotecario". Disclaiming
knowledge of said claims at rst, Kong Chai Pin later admitted the claims in her
amended answer and they were accordingly approved by the Court.
On March 29, 1949, Kong Chai Pin led a petition with the probate court for
authority to sell all the 49 parcels of land to Washington Z, Sycip and Betty Y. Lee, for
the purpose primarily of settling the aforesaid debts of Tan Sin An and the partnership.
Pursuant to a court order of April 2, 1949, the administratrix executed on April 4, 1949,
a deed of sale 1 of the 49 parcels of land to the defendants Washington Sycip and Betty
Lee in consideration of P37,000.00 and of vendees' assuming payment of the claims
led by Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. Later, in July, 1949,
defendants Sycip and Betty Lee executed in favor of the Insular Development Co., Inc. a
deed of transfer covering the said 49 parcels of land.
Learning about the sale to Sycip and Lee, the surviving partner Antonio Goquiolay
led, on or about July 25, 1949, a petition in the intestate proceedings seeking to set
aside the order of the probate court approving the sale in so far as his interest over the
parcels of land sold was concerned. In its order of December 29, 1949, the probate
court annulled the sale executed by the administratrix with respect to the 60% interest
of Antonio Goquiolay over the properties sold. King Chai Pin appealed to the Court of
Appeals, which court later certi ed the case to us (93 Phil., 413; 49 Off. Gaz. [7] 2307).
On June 30, 1953, we rendered decision setting aside the orders of the probate court
complained of and remanding the case for new trial, due to the non-inclusion of
indispensable parties. Thereafter, new pleadings were filed.
The second amended complaint in the case at bar prays, among other things, for
the annulment of the sale in favor of Washington Sycip and Betty Lee, and their
subsequent conveyance in favor of the Insular Development Co., Inc., in so far as the
three (3) lots owned by the plaintiff partnership are concerned. The answer averred the
validity of the sale by Kong Chai Pin as successor partner, in lieu of the late Tan Sin An.
After hearing, the complaint was dismissed by the lower court in its decision dated
October 30, 1956; hence, this appeal taken directly to us by the plaintiffs, as the amount
involved is more than P200,000.00. Plaintiffs-appellants assign as errors that —
"I. — The lower court erred in holding that Kong Chai Pin became the
managing partner of the partnership upon the death of her husband, Tan Sin An,
by virtue of the articles of Partnership executed between the Tan Sin An and
Antonio Goquiolay, and the general power of attorney granted by Antonio
Goquiolay.
II — The lower court erred in holding that Kong Chai Pin could act alone as
sole managing partner in view of the minority of the other heirs.
III — The lower court erred in holding that Kong Chai Pin was the only heir
qualified to act as managing partner.
IV — The lower court erred in holding that Kong Chai Pin had authority to
sell the partnership properties by virtue of the articles of partnership and the
general power of attorney granted to Tan Sin An in order to pay the partnership
indebtedness.
V — The lower court erred in nding that the partnership did not pay its
obligation to the Banco Hipotecario.
VI — The lower court erred in holding that the consent of Antonio Goquiolay
was not necessary to consummate the sale of the partnership properties.
VII — The lower court erred in nding that Kong Chai Pin managed the
business of the partnership after the death of her husband, and that Antonio
Goquiolay knew it.
VIII — The lower court erred in holding that the failure of Antonio Goquiolay
to oppose the management of the partnership by Kong Chai Pin estops him now
from attacking the validity of the sale of the partnership properties.
IX — The lower court erred in holding that the buyers of the partnership
properties acted in good faith.
X — The lower court erred in holding that the sale was not fraudulent
against the partnership and Antonio Goquiolay.
XI — The lower court erred in holding that the sale was not only necessary
but beneficial to the partnership.
XII — The lower court erred in dismissing the complaint and in ordering
Antonio Goquiolay to pay the costs of suit."
There is merit in the contention that the lower court erred in holding that the
widow, Kong Chai Pin, succeeded her husband, Tan Sin An, in the sole management of
the partnership, upon the latter's death. While, as we previously stated in our narration
of facts, the Articles of Co-Partnership and the power of attorney executed by Antonio
Goquiolay conferred upon Tan Sin An the exclusive management of the business, such
power, premised as it is upon trust and con dence, was a mere personal right that
terminated upon Tan's demise. The provision in the articles stating that "in the event of
death of any one of the partners within the 10-year term of the partnership, the
deceased partner shall be represented by his heirs", could not have referred to the
managerial right given to Tan Sin An; more appropriately, it related to the succession in
the proprietary interest of each partner. The covenant that Antonio Goquiolay shall have
no voice or participation in the management of the partnership, being a limitation upon
his right as a general partner, must be held coextensive only with Tan's right to manage
the affairs, the contrary not being clearly apparent.
Upon the other hand, consonant with the articles of co- partnership providing for
the continuation of the rm notwithstanding the death of one of the partners, the heirs
of the deceased, by never repudiating or refusing to be bound under the said provision
in the articles, became individual partners with Antonio Goquiolay upon Tan's demise.
The validity of like clauses in partnership agreements is expressly sanctioned under
Article 222 of the Code of Commerce. 1
Minority of the heirs is not a bar to the application of that clause in the articles of
co-partnership (2 Vivante, Tratado de Derecho Mercantil, 493; Planiol, Traite
Elementaire de Droit Civil, English translation by the Louisiana State Law Institute, Vol.
2, Pt. 2, p. 177).
Appellants argue, however, that since the "new" members' liability in the
partnership was limited merely to the value of the share or estate left by the deceased
Tan Sin An, they became no more than limited partners and, as such, were disquali ed
from the management of the business under Article 148 of the Code of Commerce.
Although ordinarily, this effect follows from the continuance of the heirs in the
partnership, 2 it was not so with respect to the widow Kong Chai Pin, who, by her
a rmative actions, manifested her intent to be bound by the partnership agreement
not only as a limited but as a general partner. Thus, she managed and retained
possession of the partnership properties and was admittedly deriving income
therefrom up to and until the same were sold to Washington Sycip and Betty Lee. In
fact, by executing the deed of sale of the parcels of land in dispute in the name of the
partnership, she was acting no less than as a managing partner. Having thus preferred
to act as such, she could be held liable for the partnership debts and liabilities as a
general partner, beyond what she might have derived only from the estate of her
deceased husband. By allowing her to retain control of the rm's property from 1942 to
1949, plaintiff estopped himself to deny her legal representation of the partnership,
with the power to bind it by proper contracts.
The question now arises as to whether or not the consent of the other partners
was necessary to perfect the sale of the partnership properties to Washington Sycip
and Betty Lee. The answer is, we believe, in the negative. Strangers dealing with a
partnership have the right to assume, in the absence of restrictive clauses in the co-
partnership agreement, that every general partner has power to bind the partnership,
specially those partners acting with ostensible authority. And so, we held in one case:
". . . Third persons, like the plaintiff, are not bound in entering into a
contract with any of the two partners, to ascertain whether or not this partner with
whom the transaction is made has the consent of the other partner. The public
need not make inquiries as to the agreements had between the partners. Its
knowledge is enough that it is contracting with the partnership which is
represented by one of the managing partners.
'There is a general presumption that each individual partner is an agent for
the rm and that he has authority to bind the rm in carrying on the partnership
transactions.' [Mills vs. Riggle, 112 Pac., 617]
'The presumption is su cient to permit third persons to hold the rm liable
on transactions entered into by one of the members of the rm acting apparently
in its behalf and within the scope of his authority.' [Le Roy vs. Johnson, 7 U.S.
Law, Ed., 391](George Litton vs. Hill & Ceron, et al., 67 Phil., 513-514)."
We are not unaware of the provision of Article 129 of the Code of Commerce to
the effect that —
"If the management of the general partnership has not been limited by
special agreement to any of the members, all shall have the power to take part in
the direction and management of the common business, and the members
present shall come to an agreement for all contracts or obligations which may
concern the association." (Emphasis supplied)
but this obligation is one imposed by law on the partners among themselves, that does
not necessarily affect the validity of the acts of a partner, while acting within the scope
of the ordinary course of business of the partnership, as regards third persons without
notice. The latter may rightfully assume that the contracting partner was duly
authorized to contract for and in behalf of the rm and that, furthermore, he would not
ordinarily act to the prejudice of his co- partners. The regular course of business
procedure does not require that each time a third person contracts with one of the
managing partners, he should inquire as to the latter's authority to do so, or that he
should rst ascertain whether or not the other partners had given their consent thereto.
In fact, Article 130 of the same Code of Commerce provides that even if a new
obligation was contracted against the express will of one of the managing partners, "it
shall not be annulled for such reason, and it shall produce its effects without prejudice
to the responsibility of the member or members who contracted it, for the damages
they may have caused to the common fund."
Cesar Vivante (2 Tratado de Derecho Mercantil, pp. 114-115) points out:
"367. Primera hipotesis. — A falta de factos especiales, la facultad de
administrar corresponde a cada socio personalmente. No hay que esperar
ciertamente concordia con tantas cabezas, y para cuando no vayan de acuerdo,
la disciplina del Código no ofrece un sistema e caz que evite los inconvenientes.
Pero, ante el silencio del contrato, debia quizá el legislador privar de la
administración a uno de los socios en bene cio del otro? Sería una arbitrariedad.
Deberá quizá declarar nula la Sociedad que no haya elegido Administrador? El
remedio sería peor que el mal. Deberá, tal vez, pretender que todos los socios
concurran en todo acto de la Sociedad? Pero este concurso de todos habría
reducido a la impotencia la administración, que es asunto de todos los días y de
todas horas. Hubieran sido disposiciones menos oportunas que lo adoptado por
el Código, el cual se confía al espiritu de reciproca con anza que debería animar
la colaboración de los socios, y en la ley in exible de responsabilidad que implica
comunidad en los intereses de los mismos.
En esta hipótesis, cada socio puede ejercer todos los negocios
comprendidos en el contrato social sin dar de ello noticia a los otros, porque cada
uno de ellos ejerce la administración en la totalidad de sus relaciones, salvo su
responsabilidad en el caso de una administración culpable. Si debiera dar noticia,
el bene cio de su simultánia actividad, frecuentemente distribuída en lugares y
en tiempos diferentes, se echaría a perder. Se objetará el que de esta forma, el
derecho de oposición de cada uno de los socios puede quedar frustrado. Pero se
puede contestar que este derecho de oposición concedido por la ley como un
remedio excepcional, debe subordinarse al derecho de ejercer el o cio de
Administrador, que el Código concede sin límite: 'se presume que los socios se
han concedido recíprocamente la facultad de administrar uno para otro.' Se haría
precipitar esta hipótesis en la otra de una administración colectiva (art. 1.721,
Código Cívil) y se acabaría con pedir el consentimiento, a lo menos tácito, de
todos los socios — lo que el Código excluye . . ., si se obligase al socio
Administrador a dar noticia previa del negocio a los otros, a n de que pudieran
oponerse si no consintieran."
Commenting on the same subject, Gay de Montellá (Código de Comercio, Tomo
II, 147-148) opines:
"Para obligar a las Compañías enfrente de terceros (art. 128 del Código),
no es bastante que los actos y contratos hayan sido ejecutados por un socio o
varios en nombre colectivo, sino que es preciso el concurso de estos dos
elementos, uno, que el socio o socios tengan reconocida la facultad de
administrar la Compañía, y otro, que el acto o contrato haya sido ejecutado en
nombre de la Sociedad y usando de su rma social. Asi es que toda obligación
contraida bajo la razon social, se presume contraida por la Compañía. Esta
presuncion es impuesta por motivos de necesidad practica. El tercero no puede
cada vez que trata con la Compañía, inquirir si realmente el negocio concierne a
la Sociedad. La presuncion es juris tantum y no juris et de jure, de modo que sí el
gerente suscribe bajo la razón social una obligación que no interesa a la
Sociedad, éste podrá rechazar la acción del tercero probando que el acreedor
conocía que la obligación no tenía ninguna relación con ella. Si tales actos y
contratos no comportasen la concurrencia de ambos elementos, serían nulos y
podría decretarse la responsabilidad civil o penal contra sus autores.
En el caso que tales actos o contratos hayan sido tácitamente aprobados
por la Compañía, o contabilizados en sus libros, si el acto o contrato ha sido
convalidado sin protesta y se trata de acto o contrato que ha producido bene cio
social, tendría plena validez, aun cuando le faltase algunos o ambos de aquellos
requisítos antes señalados.
Cuando los Estatutos o la escritura social no contienen ninguna cláusula
relativa al nombramiento o designación de uno o mas de un socio para
administrar la Compañía (art. 129 del Código) todos tienen por un igual el
derecho de concurir a la decisión y manejo de los negocios comunes . . ."
Although the partnership under consideration is a commercial partnership and,
therefore, to be governed by the Code of Commerce, the provisions of the old Civil
Code may give us some light on the right of one partner to bind the partnership. States
Art. 1695 thereof:
"Should no agreement have been made with respect to the form of
management, the following rules shall be observed:
1. All the partners shall be considered agents, and whatever any one of
them may do individually shall bind the partnership; but each one may oppose
any act of the others before it has become legally binding."
The records fail to disclose that appellant Goquiolay made any opposition to the
sale of the partnership realty to Washington Z. Sycip and Betty Lee; on the contrary, it
appears that he (Goquiolay) only interposed his objections after the deed of
conveyance was executed and approved by the probate court, and, consequently, his
opposition came too late to be effective.
Appellants assail the correctness of the amounts paid for the account of the
partnership as found by the trial court. This question, however, need not be resolved
here, as in the deed of conveyance executed by Kong Chai Pin, the purchasers
Washington Sycip and Betty Lee assumed, as part consideration of the purchase, the
full claims of the two creditors, Sing Yee and Cuan Co., Inc. and Yutivo Sons Hardware
Co.
Appellants also question the validity of the sale covering the entire rm realty, on
the ground that it, in effect, threw the partnership into dissolution, which requires
consent of all the partners. This view is untenable. That the partnership was left without
the real property it originally had will not work its dissolution, since the rm was not
organized to exploit these precise lots but to engage in buying and selling real estate,
and "in general real estate agency and brokerage business". Incidentally, it is to be
noted that the payment of the solidary obligation of both the partnership and the late
Tan Sin An, leaves open the question of accounting and contribution between the co-
debtors, that should be ventilated separately.
Lastly, appellants point out that the sale of the partnership properties was only a
fraudulent device by the appellees, with the connivance of Kong Chai Pin, to ease out
Antonio Goquiolay from the partnership. The "devise", according to the appellants,
started way back sometime in 1945, when one Yu Khe Thai sounded out Antonio
Goquiolay on the possibility of selling his share in the partnership; and upon his refusal
to sell, was followed by the ling of the claims of Yutivo Sons Hardware Co. and Sing
Yee and Cuan Co., Inc. in the intestate estate proceedings of Tan Sin An. As creditors of
Tan Sin An and the plaintiff partnership (whose liability was alleged to be joint and
several), Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. had every right to
le their claims in the intestate proceedings. The denial of the claims at rst by Kong
Chai Pin (for lack of su cient knowledge) negatives any conspiracy on her part in the
alleged fraudulent scheme, even if she subsequently decided to admit their validity after
studying the claims and nding it best to admit the same. It may not be amiss to
remark that the probate court approved the questioned claims.
There is complete failure of proof, moreover, that the price for which the
properties were sold was unreasonably low, or in any way unfair, since appellants
presented no evidence of the market value of the lots as of the time of their sale to
appellees Sycip and Lee. The alleged value of P31,056.58 in May of 1955 is no proof of
the market value in 1949, specially because in the interval, the new owners appear to
have converted the land into a subdivision, which they could not do without opening
roads and otherwise improving the property at their own expense. Upon the other hand,
Kong Chai Pin hardly had any choice but to execute the questioned sale, as it appears
that the partnership had neither cash nor other properties with which to pay its
obligations. Anyway, we cannot consider seriously the inferences freely indulged in by
the appellants as allegedly indicating fraud in the questioned transactions, leading to
the conveyance of the lots in dispute to the appellee Insular Development Co., Inc.
Wherefore, nding no reversible error in the appealed judgment, we a rm the
same, with costs against appellant Antonio Goquiolay.
Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia, Barrera
and Gutierrez David, JJ., concur.
RESOLUTION
December 10, 1963
REYES, J.B.L., J : p
The matter now pending is the appellant's motion for reconsideration of our main
decision, wherein we have upheld the validity of the sale of the lands owned by the
partnership Goquiolay & Tan Sin An, made in 1949 by the widow of the managing
partner, Tan Sin An (executed in her dual capacity of Administratrix of her husband's
estate and as partner, in lieu of the husband), in favor of buyers Washington Sycip and
Betty Lee for the following consideration:
Cash paid P37,000.00
Debts assumed by purchaser:
To Yutivo 62,415.91
To Sing Yee Cuan & Co. 54,310.13
__________
TOTAL P153,726.04
Appellant Goquiolay, in his motion for reconsideration, insists that, contrary to
our holding, Kong Chai Pin, widow of the deceased partner Tan Sin An, never became
more than a limited partner, incapacitated by law to manage the affairs of the
partnership; that the testimony of her witnesses Young and Lim belies that she took
over administration of the partnership property; and that, in any event, the sale should
be set aside because it was executed with the intent to defraud appellant of his share in
the properties sold.
Three things must be always held in mind in the discussion of this motion to
reconsider, being basic and beyond controversy:
(a) That we are dealing here with the transfer of partnership property by one
partner, acting in behalf of the rm, to a stranger. There is no question between
partners inter se, and this aspect of the case was expressly reserved in the main
decision of 26 July 1960;
(b ) That the partnership was expressly organized "to engage in real estate
business, either by buying and selling real estate". The Articles of co-partnership, in fact,
expressly provided that:
"IV. The object and purpose of the co-partnership are as follows:
1. To engage in real estate business, either by buying and selling real
estates; to subdivide real estates into lots for the purpose of leasing and selling
them.";
(c) That the properties sold were not part of the contributed capital (which was
in cash) but land precisely acquired to be sold, although subject to a mortgage in favor
of the original owners, from whom the partnership had acquired them.
With these points rmly in mind, let us turn to the points insisted upon by
appellant.
It is rst averred that there is "not one iota of evidence" that Kong Chai Pin
managed and retained possession of the partnership properties. Su ce it to point out
that appellant Goquiolay himself admitted that —
". . . Mr. Yu Eng Lai asked me if I can just let Mrs. Kong Chai Pin continue
to manage the properties (as) she had no other means of income. Then I said,
because I wanted to help Mrs. Kong Chai Pin, she could just do it and besides I
am not interested in agricultural lands. I allowed her to take care of the properties
in order to help her and because I believe in God and I wanted to help her."
Q. So the answer to my question is you did not take any steps?
A. I did not.
Q. And this conversation which you had with Mrs. Yu Eng Lai was few months
after 1945?
A. In the year 1945." (Emphasis supplied)
The appellant subsequently rati ed this testimony in his deposition of 30 June
1956, page 8-9, wherein he stated:
"that plantation was being occupied at that time by the widow, Mrs. Tan
Sin An, and of course they are receiving quite a lot of bene t from that
plantation."
Discarding the self-serving expressions, these admissions of Goquiolay are
certainly entitled to greater weight than those of Hernando Young and Ru no Lim,
having been made against the party's own interest.
Moreover, the appellant's reference to the testimony of Hernando Young, that the
witness found the properties "abandoned and undeveloped", omits to mention that said
part of the testimony started with the question:
"Now, you said that about 1942 or 1943 you returned to Davao. Did you
meet Mrs. Kong Chai Pin there in Davao at that time?
Similarly, the testimony of Ru no Lim, to the effect that the properties of the
partnership were undeveloped, and the family of the widow (Kong Chai Pin) did not
receive any income from the partnership properties, was given in answer to the
question:
"According to Mr. Goquiolay, during the Japanese occupation Tan Sin An
and his family lived on the plantation of the partnership and derived their
subsistence from that plantation. What can you say to that?" (Dep. 19 July 1956,
p. 8)
And also —
"What can you say as to the development of these other properties of the
partnership which you saw during the occupation?" (Dep., p. 13, Emphasis
supplied)
to which witness gave the following answer:
I saw the properties in Mamay still undeveloped. The third property which is in
Tigatto is about eleven (11) hectares and planted with abaca seedlings planted
by Mr. Sin An. When I went there with Hernando Young we saw all the abaca
destroyed. The place was occupied by the Japanese Army . They planted camotes
and vegetables to feed the Japanese Army. Of course they never paid any money
to Tan Sin An or his family." (Dep., Lim, pp. 13-14. (Emphasis supplied)
Plainly, Both Young and Lim's testimonies do not belie, or contradict, Goquiolay's
admission that he told Mr. Yu Eng Lai that the widow "could just do it" (i. e., continue to
manage the properties). Witnesses Lim and Young referred to the period of Japanese
occupation; but Goquiolay's authority was, in fact, given to the widow in 1945, after the
occupation.
Again, the disputed sale by the widow took place in 1949. That Kong Chai Pin
carried out no acts of management during the Japanese occupation (1942-1944) does
not mean that she did not do so from 1945 to 1949.
We thus nd that Goquiolay did not merely rely on reports from Lim and Young;
he actually manifested his willingness that the widow should manage the partnership
properties. Whether or not she complied with this authority is a question between her
and the appellant, and is not here involved. But the authority was given, and she did have
it when she made the questioned sale, because it was never revoked.
It is argued that the authority given by Goquiolay to the widow Kong Chai Pin was
only to manage the property, and that it did not include the power to alienate, citing
Article 1713 of the Civil Code of 1889. What this argument overlooks is that the widow
was not a mere agent, because she had become a partner upon her husband's death, as
expressly provided by the articles of co-partnership. Even more, granting that by
succession to her husband, Tan Sin An, the widow only became a limited partner,
Goquiolay's authorization to manage the partnership property was proof that he
considered and recognized her as general partner, at least since 1945. The reason is
plain: Under the law (Article 148, last paragraph, Code of Commerce), appellant could
not empower the widow, if she were only a limited partner, to administer the properties
of the firm, even as a mere agent:
"Limited partners may not perform any act of administration with respect
to the interests of the co-partnership, not even in the capacity of agents of the
managing partners." (Emphasis supplied)
By seeking authority to manage partnership property, Tan Sin An's widow
showed that she desired to be considered a general partner. By authorizing the widow
to manage partnership property (which a limited partner could not be authorized to do),
Goquiolay recognized her as such partner, and is now in estoppel to deny her position
as a general partner, with authority to administer and alienate partnership property.
Besides, as we pointed out in our main decision, the heir ordinarily (and we did
not say "necessarily") becomes a limited partner for his own protection, because he
would normally prefer to avoid any liability in excess of the value of the estate inherited
so as not to jeopardize his personal assets. But this statutory limitation of
responsibility being designed to protect the heir, the latter may disregard it and instead
elect to become a collective or general partner, with all the rights and privileges of one,
and answering for the debts of the rm not only with the inheritance but also with the
heir's personal fortune. This choice pertains exclusively to the heir, and does not require
the assent of the surviving partner.
It must be remembered that the articles of co-partnership here involved
expressly stipulated that:
"In the event of the death of any of the partners at any time before the
expiration of said term, the co-partnership shall not be dissolved but will have to
be continued and the deceased partner shall be represented by his heirs or
assigns in said co-partnership" (Art. XII, Articles of Co-Partnership).
The Articles did not provide that the heirs of the deceased would be merely
limited partner; on the contrary, they expressly stipulated that in case of death of either
partner "the co-partnership . . . will have to be continued" with the heirs or assigns. It
certainly could not be continued if it were to be converted from a general partnership
into a limited partnership, since the difference between the two kinds of associations is
fundamental; and specially because the conversion into a limited association would
leave the heirs of the deceased partner without a share in the management. Hence, the
contractual stipulation does actually contemplate that the heirs would become general
partners rather than limited ones.
Of course, the stipulation would not bind the heirs of the deceased partner
should they refuse to assume personal and unlimited responsibility for the obligations
of the rm. The heirs, in other words, can not be compelled to become general partners
against their wishes. But because they are not so compellable, it does not legitimately
follow that they may not voluntarily choose to become general partners, waiving the
protective mantle of the general laws of succession. And in the latter event, it is
pointless to discuss the legality of any conversion of a limited partner into a general
one. The heir never was a limited partner, but chose to be, and became, a general
partner right at the start.
It is immaterial that the heir's name was not included in the rm name, since no
conversion of status is involved, and the articles of co-partnership expressly
contemplated the admission of the partner's heirs into the partnership.
It must never be overlooked that this case involves the rights acquired by
strangers, and does not deal with the rights arising between partners Goquiolay and the
widow of Tan Sin An. The issues between the partners inter se were expressly reserved
in our main decision. Now, in determining what kind of partner the widow of partner Tan
Sin An had elected to become, strangers had to be guided by her conduct and
actuations and those of appellant Goquiolay. Knowing that by law a limited partner is
barred from managing the partnership business or property, third parties (like the
purchasers) who found the widow possessing and managing the rm property with the
acquiescence (or at least without apparent opposition) of the surviving partners were
perfectly justi ed in assuming that she had become a general partner, and, therefore, in
negotiating with her as such a partner, having authority to act for, and in behalf of, the
rm. This belief, be it noted, was shared even by the probate court that approved the
sale by the widow of the real property standing in the partnership name. That belief was
fostered by the very inaction of appellant Goquiolay. Note that for seven long years,
from partner Tan Sin An's death in 1942 to the sale in 1949, there was more than ample
time for Goquiolay to take up the management of these properties, or at least ascertain
how its affairs stood. For seven years Goquiolay could have asserted his alleged rights,
and by suitable notice in the commercial registry could have warned strangers that they
must deal with him alone, as sole general partner. But he did nothing of the sort,
because he was not interested (supra), and he did not even take steps to pay, or settle,
the rm debts that were overdue since before the outbreak of the last war. He did not
even take steps, after Tan Sin An died, to cancel, or modify, the provisions of the
partnership articles that he (Goquiolay) would have no intervention in the management
of the partnership. This laches certainly contributed to con rm the view that the widow
of Tan Sin An had, or was given, authority to manage and deal with the rm's properties,
apart from the presumption that a general partner dealing with partnership property
has the requisite authority from his co-partners (Litton vs. Hill and Cerón, et al., 67 Phil.,
513; quoted in our main decision, p. 11).
"The stipulation in the articles of partnership that any of the two managing
partners may contract and sign in the name of the partnership with the consent of
the other, undoubtedly creates an obligation between the two partners, which
consists in asking the other's consent before contracting for the partnership. This
obligation of course is not imposed upon a third person who contracts with the
partnership. Neither is it necessary for the third person to ascertain if the
managing partner with whom he contracts has previously obtained the consent of
the other. A third person may and has a right to presume that the partner with
whom he contracts has, in the ordinary and natural course of business, the
consent of his co-partner; for otherwise he would not enter into the contract. The
third person would naturally not presume that the partner with whom he enters
into the transaction is violating the articles of partnership, but on the contrary, is
acting in accordance therewith. And this nds support in the legal presumption
that the ordinary course of business has been followed (No. 18, section 334, Code
of Civil Procedure), and that the law has been obeyed (No. 31, section 334). This
last presumption is equally applicable to contracts which have the force of law
between the parties." (Litton vs. Hill & Cerón, et al., 67 Phil., 509, 516) (Emphasis
supplied)
It is next urged that the widow, even as a partner, had no authority to sell the real
estate of the rm. This argument is lamentably super cial because it fails to
differentiate between real estate acquired and held as stock-in-trade and real state held
merely as business site (Vivante's "taller ó banco social") for the partnership. Where the
partnership business is to deal in merchandise and goods, i.e., movable property, the
sale of its real property (immovables) is not within the ordinary powers of a partner,
because it is not in line with the normal business of the rm. But where the express and
avowed purpose of the partnership is to buy and sell real estate (as in the present
case), the immovables thus acquired by the rm form part of its stock-in-trade, and the
sale thereof is in pursuance of partnership purposes, hence within the ordinary powers
of the partner. This distinction is supported by the opinion of Gay de Montella 1 , in the
very passage quoted in the appellant's motion for reconsideration:
"La enajenación puede entrar en las facultades del gerente: cuando es
conforme a los nes sociáles. Pero esta facultad de enajenar limitada a las
ventas conforme a los nes sociáles, viene limitada a los objetos de comecio ó a
los productos de la fabrica para explotación de los cuales se ha constituido la
Sociedad. Ocurrira una cosa parecida cuando el objeto de la Sociedad fuese la
compra y venta de inmuebles, en cuyo caso el gerente estaría facultado para
otorgar las ventas que fuere necesario." (Montella) (Emphasis supplied)
The same rule obtains in American law.
In Rosen vs. Rosen, 212 N. Y. Supp. 405, 406, it was held:
"a partnership to deal in real estate may be created and either partner has the
legal right to sell the firm real estate"
In Chester vs. Dickerson, 54 N. Y. 1, 13 Am. Rep. 550:
"And hence, when the partnership business is to deal in real estate, one
partner has ample power, as a general agent of the rm, to enter into an executory
contract for the sale of real estate."
And in Rovelsky vs. Brown, 92 Ala. 522, 9 South 182, 25 Am. St., Rep. 83:
"If the several partners engaged in the business of buying and selling real
estate can not bind the rm by purchases or sales of such property made in the
regular course of business, then they are incapable of exercising the essential
rights and powers of general partners and their association is not really a
partnership at all, but a several agency."
Since the sale by the widow was in conformity with the express objective of the
partnership, "to engage . . . in buying and selling real estate" (Art. IV, No. 1, Articles of
Copartnership), it can not be maintained that the sale was made in excess of her
powers as general partner.
Considerable stress is laid by appellant in the ruling of the Supreme Court of Ohio
in McGrath, et al., vs. Cowen, et al., 49 N. E., 338. But the facts of that case are vastly
different from the one before us. In the McGrath case, the Court expressly found that:
"The rm was then, and for some time had been, insolvent, in the sense
that its property was insu cient to pay its debts, though it still had good credit,
and was actively engaged in the prosecution of its business. On that day, which
was Saturday, the plaintiff caused to be prepared, ready for execution, the four
chattel mortgages in question, which cover all the tangible property then
belonging to the rm, including the counters, shelving, and other furnishings and
xtures necessary for, and used in carrying on, its business, and signed the same
in this form: "In witness whereof, the said Cowen & McGrath, a rm, and Owen
McGrath, surviving partner of said rm, and Owen McGrath, individually, have
hereunto set their hands, this 20th day of May, A. D. 1893. Cowen & McGrath, by
Owen McGrath. Owen McGrath, Surviving partner of Cowen & McGrath. Owen
McGrath" At the same time, the plaintiff had prepared, ready for ling, the petition
for the dissolution of the partnership and appointment of a receiver, which he
subsequently led, as hereinafter stated. On the day the mortgages were signed,
they were placed in the hands of the mortgagees, which was the first intimation to
them that there was any intention to make then. At that time none of the claims
secured by the mortgages were due, except, it may be, a small part of one of them,
a n d none of the creditors to whom the mortgages were made had requested
security, or were pressing for the payment of their debts . . . The mortgages
appear to be without a su cient condition of defeasance, and contain a
stipulation authorizing the mortgagees to take immediate possession of the
property, which they did as soon as the mortgages were filed, through the attorney
who then represented them, as well as the plaintiff; and the stores were at once
closed, and possession delivered by them to the receiver appointed upon the ling
of the petition. The avowed purpose of the plaintiff in the course pursued by him,
was to terminate the partnership, place its property beyond the control of the rm,
and insure the preference of the mortgages, all of which was known to them at
the time; . . ." (Cas cit., p. 343, Italics supplied)
It is natural that from these facts the Supreme Court of Ohio should draw the
conclusion that conveyances were made with intent to terminate the partnership, and
that they were not within the powers of McGrath as partner. But there is no similarity
between those acts and the sale by the widow of Tan Sin An. In the McGrath case, the
sale included even the xtures used in the business, in our case, the lands sold were
those acquired to be sold. In the McGrath case, none of the creditors were pressing for
payment; in our case, the creditors had been unpaid for more than seven years, and
their claims had been approved by the probate court for payment. In the McGrath case,
the partnership received nothing beyond the discharge of its debts; in the present case,
not only were its debts assumed by the buyers, but the latter paid, in addition,
P37,000.00 in cash to the widow, to the pro t of the partnership. Clearly, the McGrath
ruling is not applicable.
We will now turn to the question of fraud. No direct evidence of it exists; but
appellant points out, as indicia thereof, the allegedly low price paid for the property, and
the relationship between the buyers, the creditors of the partnership, and the widow of
Tan Sin An.
First, as to the price: As already noted, this property was actually sold for a total
of P153,726.04, of which P37,000.00 was in cash, and the rest in partnership debts
assumed by the purchaser. These debts (P62,415.91 to Yutivo, and P54,310.13 to Sing
Yee Cuan & Co.) are not questioned; they were approved by the Court, and its approval
is now nal. The claims were, in fact, for the balance on the original purchase price of
the land sold (due rst to La Urbana, later to the Banco Hipotecario) plus accrued
interests and taxes, redeemed by the two creditors-claimants. To show that the price
was inadequate, appellant relies on the testimony of the realtor Mata, who in 1955, six
years after the sale in question, asserted that the land was worth P312,000.00. Taking
into account the continued rise of real estate values since liberation, and the fact that
the sale in question was practically a forced sale because the partnership had no other
means to pay its legitimate debts, this evidence certainly does not show such "gross
inadequacy" as to justify rescission of the sale. If at the time of the sale (1949) the
price of P153,726.04 was really low, how is it that appellant was not able to raise the
amount, even if the creditor's representative, Yu Khe Thai, had already warned him four
years before (1945) that the creditors wanted their money back, as they were justly
entitled to?
It is argued that the land could have been mortgaged to raise the sum needed to
discharge the debts. But the lands were already mortgaged, and had been mortgaged
since 1940, rst to La Urbana, and then to the Banco Hipotecario. Was it reasonable to
expect that other persons would loan money to the partnership when it was unable
even to pay the taxes on the property, and the interest on the principal since 1940? If it
had been possible to nd lenders willing to take a chance on such a bad nancial
record, would not Goquiolay have taken advantage of it? But the fact is clear on the
record that since liberation until 1949 Goquiolay never lifted a nger to discharge the
debts of the partnership. Is he entitled now to cry fraud after the debts were
discharged with no help from him?
With regard to the relationship between the parties, su ce it to say that the
Supreme Court has ruled that relationship alone is not a badge of fraud (Oria Hnos. vs.
McMicking, 21 Phil., 243; also Hermandad de Smo. Nombre de Jesus vs. Sanchez, 40
Off. Gaz., 1685). There is no evidence that the original buyers, Washington Sycip and
Betty Lee, were without independent means to purchase the property. That the Yutivos
should be willing to extend credit to them, and not to appellant, is neither illegal nor
immoral; at the very least, these buyers did not have a record of inveterate defaults like
the partnership "Tan Sin An & Goquiolay".
Appellant seeks to create the impression that he was the victim of a conspiracy
between the Yutivo rm and their component members. But no proof is adduced. If he
was such a victim, he could have easily defeated the conspirators by raising money and
paying off the rm's debts between 1945 and 1949; but he did not; he did not even care
to look for a purchaser of the partnership assets. Were it true that the conspiracy to
defraud him arose (as he claims) because of his refusal to sell the lands when in 1945
Yu Khe Thai asked him to do so, it is certainly strange that the conspirators should wait
4 years, until 1949, to have the sale effected by the widow of Tan Sin An, and that the
sale should have been routed through the probate court taking cognizance of Tan Sin
An's estate, all of which increased the risk that the supposed fraud should be detected.
Neither was there any anomaly in the ling of the claims of Yutivo and Sing Yee
Cuan & Co., (as subrogees of the Banco Hipotecario) in proceedings for the settlement
of the estate of Tan Sin An. This for two reasons: First, Tan Sin An and the partnership
"Tan Sin An & Goquiolay" were solidary (joint and several) debtors (Exhibit "N" mortgage
to the Banco Hipotecario), and Rule 87, section 6, is to the effect that:
"Where the obligation of the decedent is joint and several with another
debtor, the claim shall be led against the decedent as if he were the only debtor,
without prejudice to the right of the estate to recover contribution from the other
debtor." (Emphasis supplied)
Secondly, the solidary obligation was guaranteed by a mortgage on the
properties of the partnership and those of Tan Sin An personally, and a mortagage in
indivisible, in the sense that each and every parcel under mortgage answers for the
totality of the debt (Civ. Code of 1889, Article 1860; New Civil Code, Art. 2089).
A nal and conclusive consideration. The fraud charged not being one used to
obtain a party's consent to a contract (i.e., not being deceit or dolus in contrahendo), if
there is fraud at all, it can only be a fraud of creditors that gives rise to a rescission of
the offending contract. But by express provision of law (Article 1294, Civil Code of
1889; Article 1383, New Civil Code), "the action for rescission is subsidiary; it can not
be instituted except when the party suffering damage has no other legal means to
obtain reparation for the same". Since there is no allegation, or evidence, that Goquiolay
can not obtain reparation from the widow and heirs of Tan Sin An, the present suit to
rescind the sale in question is not maintenable, even if the fraud charged actually did
exist.
Premises considered, the motion for reconsideration is denied.
Bengzon, C.J., Padilla, Concepcion, Barrera and Dizon, JJ., concur.
Separate Opinions
BAUTISTA ANGELO, J., dissenting :
This is an appeal from a decision of the Court of First Instance of Davao

dismissing the complaint led by Antonio C. Goquiolay, et al., seeking to annul the sale
made by Kong Chai Pin of three parcels of land to Washington Z. Sycip and Betty Y. Lee
on the ground that it was executed without proper authority and under fraudulent
circumstances. In a decision rendered on July 26, 1960, we a rmed this decision
although on grounds different from those on which the latter is predicated. The case is
once more before us on a motion for reconsideration led by appellants raising both
questions of fact and of law.
On May 29, 1940, Tan Sin An and Antonio C. Goquiolay executed in Davao City a
commercial partnership for a period of ten years with a capital of P30,000.00 of which
Goquiolay contributed P18,000.00 representing 60% while Tan Sin An P12,000.00
representing 40%. The business of the partnership was to engage in buying real estate
properties for subdivision, resale and lease. The partnership was duly registered, and
among the conditions agreed upon in the partnership agreement which are material to
this case are: (1) that Tan Sin An would be the exclusive managing partner, and (2) in
the event of the death of any of the partners the partnership would continue, the
deceased to be represented by his heirs. On May 31, 1940, Goquiolay executed a
general power of attorney in favor of Tan Sin An appointing the latter manager of the
partnership and conferring upon him the usual powers of management.
On May 29, 1940, the partnership acquired three parcels of land known as Lots
Nos. 526, 441 and 521 of the cadastral survey of Davao, the only assets of the
partnership, with the capital originally invested, nancing the balance of the purchase
price with a mortgage in favor of "La Urbana Sociedad Mutua de Construcción
Prestamos" in the amount of P25,000.00 payable in ten years. On the same date, Tan
Sin An, in his individual capacity, acquired 46 parcels of land executing a mortgage
thereon in favor of the same company for the sum of P35,000.00. On September 25,
1940, these two mortgage obligations were consolidated and transferred to the Banco
Hipotecario de Filipinas and as a result Tan Sin An, in his individual capacity, and the
partnership bound themselves to pay jointly and severally the total amount of
P52,282.80, with 8% annual interest thereon within the period of eight years mortgaging
in favor of said entity the 3 parcels of land belonging to the partnership to Tan Sin An.
Tan Sin An died on June 26, 1942 and was survived by his widow, defendant
Kong Chai Pin, and four children, all of whom are minors of tender age. On March 18,
1944, Kong Chai Pin was appointed administratrix of the intestate estate of Tan Sin An.
And on the same date, Sing, Yee and Cuan Co., Inc. paid to the Banco Hipotecario the
remaining unpaid balance of the mortgage obligation of the partnership amounting to
P46,116.75 in Japanese currency.
Sometime in 1945, after the liberation of Manila, Yu Khe Thai, president and
general manager of Yutivo Sons Hardware Co. and Sing, Yee and Cuan Co., Inc., called
for Goquiolay and the two had a conference in the o ce of the former during which he
offered to buy the interest of Goquiolay in the partnership. In 1948, Kong Chai Pin, the
widow, sent her counsel, Atty. Dominador Zuño, to ask Goquiolay to execute in her favor
a power of attorney. Goquiolay refused both to sell his interest in the partnership as
well as to execute the power of attorney.
Having failed to get Goquiolay to sell his share in the partnership, Yutivo Sons
Hardware Co., and Sing, Yee and Cuan Co., Inc. led in November, 1946 a claim each in
the intestate proceedings of Tan Sin An for the sum of P84,705.48 and P66,529.91,
respectively, alleging that they represent obligations of both Tan Sin An and the
partnership. After rst denying any knowledge of the claims, Kong Chai Pin, as
administratrix, admitted later without quali cation the two claims in an amended
answer she file on February 28, 1947. The admission was predicated on the ground that
she and the creditors were closely related by blood, a nity and business ties. In due
course, these two claims were approved by the court.
On March 29, 1949, more than two years after the approval of the claims, Kong
Chai Pin led a petition in the probate court to sell all the properties of the partnership
as well as some of the conjugal properties left by Tan Sin An for the purpose of paying
the claims. Following approval by the court of the petition for authority to sell, Kong
Chai Pin, in her capacity as administratrix, and presuming to act as managing partner of
the partnership, executed on April 4, 1949 a deed of sale of the properties owned by
Tan Sin An and by the partnership in favor of Betty Y. Lee and Washington Z. Sycip in
consideration of the payment to Kong Chai Pin of the sum of P37,000.00, and the
assumption by the buyers of the claims filed by Yutivo Sons Hardware Co. and Sing, Yee
and Cuan Co., Inc. in whose favor the buyers executed a mortgage on the properties
purchased. Betty Y. Lee and Washington Z. Sycip subsequently executed a deed of sale
of the same properties in favor of their co-defendant Insular Development Company,
Inc. It should be noted that these transactions took place without the knowledge of
Goquiolay and it is admitted that Betty Y. Lee and Washington Z. Sycip bought the
properties on behalf of the ultimate buyer, the Insular Development Company, Inc., with
money given by the latter.
Upon learning of the sale of the partnership properties, Goquiolay led on July
25, 1949 in the intestate proceedings a petition to set aside the order of the court
approving the sale. The court granted the petition. While the order was pending appeal
in the Supreme Court, Goquiolay led the present case on January 15, 1953 seeking to
nullify the sale as stated in the early part of this decision. In the meantime, the Supreme
Court remanded the original case to the probate court for rehearing due to lack of
necessary parties.
The plaintiffs in their complaint challenged the authority of Kong Chai Pin to sell
the partnership properties on the ground that she had no authority to sell because even
granting that she became a partner upon the death of Tan Sin An the power of attorney
granted in favor of the latter expired after his death.
Defendants, on the other hand, defended the validity of the sale on the theory that
she succeeded to all the rights and prerogatives of Tan Sin An as managing partner.
The trial court sustained the validity of the sale on the ground that under the
provisions of the articles of partnership allowing the heirs of the deceased partner to
represent him in the partnership after his death Kong Chai Pin became a managing
partner, this being the capacity held by Tan Sin An when he died.
In the decision rendered by this Court on July 26, 1960, we a rmed this decision
but on different grounds, among which the salient points are: (1) the power of attorney
given by Goquiolay to Tan Sin An as manager of the partnership expired after his death;
(2) his widow Kong Chai Pin did not inherit the management of the partnership, it being
a personal right; (3) as a general rule, the heirs of a deceased general partner come into
the partnership in the capacity only of limited partners; (4) Kong Chai Pin, however,
became a general partner because she exercised certain alleged acts of management;
and (5) the sale being necessary to pay the obligations of the partnership, she was
therefore authorized to sell the partnership properties without the consent of Goquiolay
under the principle of estoppel, the buyers having the right to rely on her acts of
management and to believe her to be in fact the managing partner.
Considering that some of the above ndings of fact and conclusions of law are
without legal or factual basis, appellants have in due course led a motion for
reconsideration which because of the importance of the issues therein raised has been
the subject of mature deliberation.
In support of said motion, appellants advanced the following arguments:
1. If the conclusion of the Court is that heirs as a general rule enter the
partnership as limited partners only, therefore Kong Chai Pin, who must
necessarily have entered the partnership as a limited partner originally , could have
not chosen to be a general partner by exercising the alleged acts of management,
because under Article 148 of the Code of Commerce a limited partner cannot
intervene in the management of the partnership, even if given a power of attorney
by the general partners. An Act prohibited by law cannot give rise to any right and
is void under the express provisions of the Civil Code.
2. The buyers were not strangers to Kong Chai Pin, all of them being
members of the Yu (Yutivo) family, the rest, members of the law rm which
handles the Yutivo interests and handled the papers of sale. They did not rely on
the alleged acts of management — they believed (this was the opinion of their
lawyers) that Kong Chai Pin succeeded her husband as a managing partner and it
was on this theory alone that they submitted the case in the lower court.
3. The alleged acts of management were denied and repudiated by the very
witnesses presented by the defendants themselves.
The arguments advanced by appellants are in our opinion well-taken and furnish
su cient basis to reconsider our decision if we want to do justice to Antonio C.
Goquiolay. And to justify this conclusion, it is enough that we lay stress on the following
points: (1) there is no su cient factual basis to conclude that Kong Chai Pin executed
acts of management to give her the character of general manager of the partnership, or
to serve as basis for estoppel that may bene t the purchasers of the partnership
properties; (2) the alleged acts of management, even if proven, could not give Kong
Chai Pin the character of general manager for the same is contrary to law and well-
known authorities; (3) even if Kong Chai Pin acted as general manager she had no
authority to sell the partnership properties as to make it legal and valid; and (4) Kong
Chai Pin had no necessity to sell the properties to pay the obligation of the partnership
and if she did so it was merely to favor the purchasers who were close relatives to the
prejudice of Goquiolay.
1. This point is pivotal for if Kong Chai Pin did not execute the acts of
management imputed to her our ruling cannot be sustained. In making our aforesaid
ruling we apparently gave particular importance to the fact that it was Goquiolay
himself who tried to prove the acts of management. Appellants, however, have
emphasized the fact, and with reason, that the appellees themselves are the ones who
denied and refuted the so-called acts of management imputed to Kong Chai Pin. to
have a clear view of this factual situation, it becomes necessary that we analyze the
evidence of record.
Plaintiff Goquiolay, it is intimated, testi ed on cross- examination that he had a
conversion with one Hernando Young in Manila in the year 1945 who informed him that
Kong Chai Pin "was attending to the properties and deriving some income therefrom
and she had no other means of livelihood except those properties and some rentals
derived from the properties." He went on to say by way of remark that she could
continue doing this because he wanted to help her. On point that he emphasized was
that he was "not interested in agricultural lands."
On the other hand, defendants presented Hernando Young, the same person
referred to by Goquiolay, who was a close friend of the family of Kong Chai Pin, for the
purpose of denying the testimony of Goquiolay. Young testified that in 1945 he was still
in Davao, and insisted no less than six times during his testimony that he was not in
Manila in 1945, the year when he allegedly gave the information to Goquiolay, stating
that he arrived in Manila for the first time in 1947. He testified further that he had visited
the partnership properties during the period covered by the alleged information given
by him to Goquiolay and that he found them "abandoned and underdeveloped," and that
Kong Chai Pin was not deriving any income from them.
The other witness for the defendants, Ru no Lim, also testi ed that he had seen
the partnership properties and corroborated the testimony of Hernando Young in all
respects: "the properties in Mamay were underdeveloped, the shacks were destroyed in
Tigato, and the family of Kong Chai Pin did not receive any income from the partnership
properties." He speci cally rebutted the testimony of Goquiolay in his deposition given
on June 30, 1956 that Kong Chai Pin and her family were living in the partnership
properties and stated that the 'family never actually lived in the properties of the
partnership even before the war or after the war."
It is unquestionable that Goquiolay was merely repeating an information given to
him by a third person, Hernando Young - he stressed this point twice. A careful analysis
of the substance of Goquiolay's testimony will show that he merely had no objection to
allowing Kong Chai Pin to continue attending to the properties in order to give her some
means of livelihood, because, according to the information given him by Hernando
Young, which he assumed to be true, Kong Chai Pin had no other means of livelihood.
But certainly he made it very clear that he did not allow her to manage the partnership
when he explained his reason for refusing to sign a general power of attorney for Kong
Chai Pin which her counsel, Atty. Zuño, brought with him to his house in 1948. He said:
". . . Then Mr. Yu Eng Lai told me that he brought with him Atty. Zuño and
he asked me if I could execute a general power of attorney for Mrs. Kong Chai Pin.
Then I told Atty. Zuño what is the use of executing a general power of attorney for
Mrs. Kong Chai Pin when Mrs. Kong Chai Pin had already got that plantation for
agricultural purposes, I said for agricultural purposes she can use that plantation .
. ." (T.s.n., p. 9, Hearing on May 5, 1955)
It must be noted that in his testimony Goquiolay was categorically stating his
opposition to the management of the partnership by Kong Chai Pin and carefully made
the distinction that his conformity was for her to attend to the partnership properties in
order to give her merely a means of livelihood. It should be stated that the period
covered by the testimony refers to the period of occupation when living condition was
di cult and precarious. And Atty. Zuño, it should also be stated, did not deny the
statement of Goquiolay.
It can therefore be seen that the question as to whether Kong Chai Pin exercised
certain acts of management of the partnership properties is highly controverted. The
most that we can say is that the alleged acts are doubtful more so when they are
disputed by the defendants themselves who later became the purchasers of the
properties, and yet these alleged acts, if at all, only refer to management of the
properties and not to management of the partnership, which are two different things.
In resume, we may conclude that the sale of the partnership properties by Kong
Chai Pin cannot be upheld on the ground of estoppel, rst, because the alleged acts of
management have not been clearly proven; second, because the record clearly shows
that the defendants, or the buyers, were not misled nor did they rely on the acts of
management, but instead they acted solely on the opinion of their counsel, Atty.
Quisumbing, to the effect that she succeeded her husband in the partnership as
managing partner by operation of law; and third, because the defendants are
themselves estopped to invoke a defense which they tried to dispute and repudiate.
2. Assuming arguendo that the acts of management imputed to Kong Chai Pin
are true, could such acts give her the character of general manager of the partnership
as we have concluded in our decision?
Our answer is in the negative because it is contrary to law and precedents.
Garrigues, a well-known commentator, is clearly of the opinion that mere acceptance of
the inheritance does not make the heir of a general partner a general partner himself.
He emphasized that the heir must declare that he is entering the partnership as a
general partner unless the deceased partner has made it an express condition in his will
that the heir accepts the condition of entering the partnership as a prerequisite of
inheritance, in which case acceptance of the inheritance is enough. 1 But here Tan Sin
An died intestate.
Now, could Kong Chai Pin be deemed to have declared her intention to become
general partner by exercising acts of management? We believe not, for, in consonance
with our ruling that as a general rule the heirs of a deceased partner succeed as limited
partners only by operation of law, it is obvious that the heir, upon entering the
partnership, must make a declaration of his character, otherwise he should be deemed
as having succeeded as limited partner by the mere acceptance of inheritance. And
here Kong Chai Pin did not make such declaration. Being then a limited partner upon the
death of Tan Sin An by operation of law, the peremptory prohibition contained in Article
148 2 of the Code of Commerce became binding upon her and as a result she could not
change her status by violating its provisions not only under the general principle that
prohibited acts cannot produce any legal effect, but also because under the provisions
of Article 147 3 of the same Code she was precluded from acquiring more rights than
those pertaining to her as a limited partner. The alleged acts of management, therefore,
did not give Kong Chai Pin the character of general manager to authorize her to bind the
partnership.
Assuming also arguendo that the alleged acts of management imputed to Kong
Chai Pin gave her the character of a general partner, could she sell the partnership
properties without authority from the other partners?
Our answer is also in the negative in the light of the provisions of the articles of
partnership and the pertinent provisions of the Code of Commerce and the Civil Code.
Thus, Article 129 of the Code of Commerce says:
"If the management of the general partnership has not been limited by
special agreement to any of the members, all shall have the power to take part in
the direction and management of the common business, and the members
present shall come to an agreement for all contracts or obligations which may
concern the association."
And the pertinent portions of the Articles of partnership provides:
"VII. The affairs of the co-partnership shall be managed exclusively by the
managing partner or by his authorized agent, and it is expressly stipulated that
the managing partner may delegate the entire management of the affairs of the
co-partnership by irrevocable power of attorney to any person, rm or corporation
he may select, upon such terms as regards compensation as he may deem
proper, and vest in such person, rm or corporation full power and authority, as
the agent of the co-partnership and in his name, place and stead to do anything
for it or on his behalf which he as such managing partner might do or cause to be
done." (Page 23, Record on Appeal)
It would thus be seen that the powers of the managing partner are not de ned
either under the provisions of the Code of Commerce or in the articles of partnership, a
situation which, under Article 2 of the same Code, renders applicable herein the
provisions of the Civil Code. And since, according to well-known authorities, the
relationship between a managing partner and the partnership is substantially the same
as that of the agent and his principal, 4 the extent of the power of Kong Chai Pin must,
therefore, be determined under the general principles governing agency. And, on this
point, the law says that an agency created in general terms includes only acts of
administration, but with regard to the power to compromise, sell, mortgage, and other
acts of strict ownership, an express power of attorney is required. 5 Here Kong Chai Pin
did not have such power when she sold the properties of the partnership.
Of course, there is authority to the effect that a managing partner, even without
express power of attorney, may perform acts affecting ownership if the same are
necessary to promote or accomplish a declared object of the partnership, but here the
transaction is not for this purpose. It was effected not to promote any avowed object
of the partnership. 6 Rather, the sale was effected to pay an obligation of the
partnership by selling its real properties which Kong Chai Pin could not do without
express authority. The authorities supporting this view are overwhelming.
"La enajenación puede entrar en las facultades del gerente, cuando es
conforme a los nes sociales. Pero esta facultad de enajenar limitada a las
ventas conforme a los nes sociales, viene limitada a los objetos de comercio, o
los productos de la fábrica para explotación de los cuales se ha constítuido la
Sociedad. Ocurrira una cosa parecida cuando el objeto de la Sociedad fuese la
compra y venta de inmuebles, en cuyo caso el gerente estaria facultado para
otorgar las ventas que fuere necesario. Por el contrario, el gerente no tiene
atribuciones para vender las instalaciones del comercio ni la fábrica, ni las
maquinarias, vehículos de transporte, etc., que forman parte de la explotación
social. En todos estas casos, ígualmente que si tratase de la venta de una marca
o procedimiento mecánico o quimico, etc., siendo actos de disposición seria
necesario contar con la conformidad expresa de todos los socios." (R. Gay de
Montella, id., pp. 223-224, Italics supplied)
"Los poderes de los Administradores no tienen ante el silencio del contrato
otros limites que los señalados por el objeto de la Sociedad y, por consiguiente,
pueden llevar a cabo todas las operaciones que sirven para aquel ejercicio,
incluso cambiando repetidas veces los propios acuerdos según el interés
convenido de la Sociedad. Pueden contratar y despedir a los empleados, tomar en
arriendo almacenes y tiendas, expedir cambiales, girarlas, avalarlas, dar en
prenda o en hipoteca los bienes de la sociedad y adquirir inmuebles destinados a
su explotación o al empleo estable de sus capitales. Pero no podrán ejecutar los
actos que están en contradicción con la explotación que les fue con ada no
podran cambiar el objeto, el domicilio la razón social; fundir a la Sociedad en otra;
ceder la acción, y por tanto, el uso de la rma social a otro renunciar
de nitivamente el ejercicio de uno de otro ramo comercio que se les haya
con ado y enajenar o pignorar el taller o el banco social excepto que la venta o
piqnoracion tengan por el objeto procurar los medios necesarios para la
continuación de la empresa social." (Cesar Vivante, Tratado de Derecho Mercantil,
pp. 124-125, Vol. II, la. ed.; Italics supplied).
"The act of one partner to bind the rm, must be necessary for the carrying
on of its business. If all that can be said of it was that it was convenient, or that it
facilitated the transaction of the business of the rm, that is not su cient, in the
absence of evidence of sanction by other partners. Nor, it seems, will necessity
itself be su cient if it be an extraordinary necessity. What is necessary for
carrying on the business of the rm under ordinary circumstances and in the
usual way, is the test. Lindl. Partn. Sec. 126. While, within this rule, one member of
a partnership may, in the usual and ordinary course of its business, make a valid
sale or pledge, by way of mortgage or otherwise, of all or part of its effects
intended for sale, to a bona de purchaser or mortgagee, without the consent of
the other members of the rm, it is not within the scope of his implied authority to
make a nal disposition of all of its effects, including those employed as the
means of carrying on its business, the object and effect of which is to
immediately terminate the partnership, and place its property beyond its control.
Such a disposition, instead of being within the scope of the partnership business,
or in the usual and ordinary way of carrying it on, is necessarily subversive of the
object of the partnership, and contrary to the presumed intention of the
partnership in its formation." (McGrath, et al. vs. Cowen, et al., 49 N.F. 338, 343;
Italics supplied)
Since Kong Chai Pin sold the partnership properties not in line with the business
of the partnership but to pay its obligation without rst obtaining the consent of the
other partners, the sale is invalid being in excess of her authority.
4. Finally, the sale under consideration was effected in a suspicious manner as
may be gleaned from the following circumstances:
(a) The properties subject of the instant sale which consist of three parcels of
land situated in the City of Davao have an area of 200 hectares more or less, or
2,000,000 square meters. These properties were purchased by the partnership for
purposes of subdivision. According to realtor Mata, who testi ed in court, these
properties could command at the time he testi ed a value of not less than
P312,000.00, and according to Dalton Chen, manager of the rm which took over the
administration, since the date of sale no improvement was ever made thereon precisely
because of this litigation. And yet, for said properties, aside from the sum of
P37,000.00 which was paid for the properties of the deceased and the partnership, only
the paltry sum of P66,529.91 was paid as a consideration therefor, of which the sum of
P46,116.75 was even paid in Japanese currency.
(b ) Considering the area of the properties Kong Chai Pin had no valid reason to
sell them if her purpose was only to pay the partnership's obligation. She could have
negotiated a loan if she wanted to pay it by placing the properties as security, but
preferred to sell them even at such low prices because of her close relationship with
the purchasers and creditors who conveniently organized a partnership to exploit them,
as may be seen from the following relationship of their pedigree:
KONG CHAI PIN, the administratrix, was a granddaughter of Jose P. Yutivo,
founder of the defendant Yutivo Sons Hardware Co. YUTIVO SONS HARDWARE
CO, and SIN YEE CUAN CO, INC., alleged creditors, are owned by the heirs of Jose
P. Yutivo (Sing, Yee & Cuan are the three children of Jose). YU KHE THAI is a
grandson of the same Jose P. Yutivo, and president of the two alleged creditors.
He is the acknowledged head of the Yu families. WASHINGTON Z. SYCIP, one of
the original buyers, 'is married to Ana Yu, a daughter of Yu Khe Thai, BETTY Y.
LEE, the other original buyer is also a daughter of Yu Khe Thai. The INSULAR
DEVELOPMENT CO., the ultimate buyer, was organized for the speci c purpose of
buying the partnership properties. Its incorporators were: Ana Yu and Betty V. Lee,
Atty. Quisumbing and Salazar the lawyers who studied the papers of sale and
have been counsel for the Yutivo interests; Dalton Chen a brother-in-law of Yu Khe
Thai and an executive of Sing Yee & Cuan Co; Lillian Yu, daughter of Yu Eng Poh,
an executive of Yutivo Sons Hardware, and Simeon Daguiwag, a trusted
employee of the Yutivos.
(c) Lastly, even since Tan Sin An died in 1942 the creditors, who were close
relatives of Kong Chai Pin, have already conceived the idea of possessing the lands for
purposes of subdivision, excluding Goquiolay from their plan, and this is evident from
the following sequence of events:
Tan Sin An died in 1942 and intestate proceedings were opened in 1944. In
1946, the creditors of the partnership led their claim against the partnership in
the intestate proceedings. The creditors studied ways and means of liquidating
the obligation of the partnership, leading to the formation of the defendant Insular
Development Co., composed of members of the Yutivo family and the counsel of
record of the defendants, which subsequently bought the properties of the
partnership and assumed the obligation of the latter in favor of the creditors of
the partnership, Yutivo Sons Hardware and Sing, Yee & Cuan, also of the Yutivo
family. The buyers took time to study the commercial potentialities of the
partnership properties and their lawyers carefully studied the document and other
papers involved in the transaction. All these steps led nally to the sale of the
three partnership properties.
Upon the strength of the foregoing considerations, I vote to grant motion
for reconsideration.
Labrador, Paredes and Makalintal, JJ., concur.
Footnotes
1. In her capacity as administratrix of the intestate estate and as a managing partner of the
plaintiff partnership (Exh. "AA-6").
1. "General and limited partnership shall furthermore be dissolved by reason of the following
cases: (1) The death of one of the general partners, if the partnership contract does not
contain an express provision for the continuation of the heirs of the deceased partner
in the partnership or for the continuation of the partnership among the surviving
partners". (See also Codigo Civil, Manresa, Vol XI, pp. 423- 424, 1950 ed.)
2. Gay de Montella, Tratado Practico de Sociedades Mercantiles, Vol. II, p. 289; Tratado de
Derecho Mercantil, Vivante, Vol. II, pp. 493-494.
1. Tratado Practico de Sociedades Mercantiles, Tomo I, p. 223. (Italics supplied).

1. "Tratado de Derecho Mercantil, Tomo I, Vol. 30 pp. 1211-1212.
2. ". . . The limited partner may not perform any act in the administration of the interests of
the company, even in the capacity of attorney-in-fact of the managing partners."
3. "Should any limited partner include his name or allow its inclusion in the rm name, he
shall be subject, with respect to persons not members of the company, to the same
responsibilities as the managers, without acquiring more rights than those
corresponding to his character as limited partner." (Italics supplied)
4. Derecho Mercantil, David Supino, 4a ed., p. 179; Cesar Vivante, Tratado de Derecho
Mercantil, pp. 124-125, Vol. II, la. ed., R. Gay de Montella, Tratado Practico de
Sociedades Mercantiles, pp. 223-224. Tomo I, 3a. ed.
5. Article 1713, Spanish Civil Code.
6. The main business of the partnership is to engage in the real estate business in general,
particularly in buying and selling real estate. (Page 23, Record on Appeal)

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SECOND DIVISION

[G.R. No. L-11840. July 26, 1960.]

ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SIN AN and

1. PARTNERSHIP; MANAGEMENT, RIGHT OF EXCLUSIVE; PERSONAL RIGHT;

This is an appeal from a decision of the Court of First Instance of Davao

1. Tratado Practico de Sociedades Mercantiles, Tomo I, p. 223. (Italics supplied).

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