Topic ARTICLE 1818-1821 Digested by: Sheldon Cooper

Title of the Case ANTONIO C. GOQUIOLAY, ET AL. vs. WASHINGTON Z. SYCIP, ET AL.
Doctrine (Syllabus)
 By authorizing the widow of the managing partner to manage partnership property (which a limited partner could not be authorized to do),
the other general partner recognized her as a general partner, and is now in estoppel to deny her position as a general partner, with authority
to administer and alienate partnership property
 A third person has the right to presume that a general partner dealing with partnership property has the requisite authority from his co-partners.
Facts
Tan Sin An and Goquiolay entered into a general commercial partnership under the partnership name “Tan Sin An and Antonio Goquiolay” for the
purpose of dealing in real estate. The agreement lodged upon Tan Sin An the sole management of the partnership affairs. The lifetime of the
partnership was fixed at ten years and the Articles of Co-partnership stipulated that in the event of death of any of the partners before the expiration
of the term, the partnership will not be dissolved but will be continued by the heirs or assigns of the deceased partner. But the partnership could be
dissolved upon mutual agreement in writing of the partners.

Goquiolay executed a GPA in favor of Tan Sin An. The plaintiff partnership purchased 3 parcels of land which was mortgaged to “La Urbana” as
payment of P25,000. Another 46 parcels of land were purchased by Tan Sin An in his individual capacity which he assumed payment of a mortgage
debt for P35K. A downpayment and the amortization were advanced by Yutivo and Co.

The two obligations were consolidated in an instrument executed by the partnership and Tan Sin An, whereby the entire 49 lots were mortgaged in
favor of “Banco Hipotecario”
Tan Sin An died leaving his widow, Kong Chai Pin and four minor children. The widow subsequently became the
administratrix of the estate. Repeated demands were made by Banco Hipotecario on the partnership and on Tan Sin An. 
Defendant Sing Yee,
upon request of defendant Yutivo Sons , paid the remaining balance of the mortgage debt, the mortgage was cancelled

Yutivo Sons and Sing Yee filed their claim in the intestate proceedings of Tan Sin An for advances, interest and taxes paid in amortizing and
discharging their obligations to “La Urbana” and “Banco Hipotecario” Kong Chai Pin filed a petition with the probate court for authority to sell all
the 49 parcels of land. She then sold it to Sycip and Lee in consideration of P37K and of the vendees assuming payment of the claims filed by
Yutivo Sons and Sing Yee.

Later, Sycip and Lee executed in favor of Insular Development a deed of transfer covering the 49 parcels of land.
When Goquiolay learned about
the sale to Sycip and Lee, he filed a petition in the intestate proceedings 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. Probate court annulled the sale executed by the administratrix w/ respect to the 60% interest of
Goquiolay over the properties Administratrix appealed.
The decision of probate court was set aside for failure to include the indispensable parties.
New pleadings were filed
The second amended complaint prays for the annulment of the sale in favor of Sycip and Lee and their subsequent conveyance to Insular
Development. The complaint was dismissed by the lower court hence this appeal.

PLAINTIFF’S ARGUMENTS: 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.

DEFENDANT’S ARGUMENTS: The defendant’s 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.

Issue 1 Whether or not a widow or substitute become also a general partner or only a limited partner
Ruling 1 Kong Chai Pin became a mere general partner. 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), Goqulay 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.

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.

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 firm
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.

The articles did not provide that the heirs of the deceased would be merely limited partners; on the contrary, they expressly

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 stipulated that in case of death of either partner, “the co partnership will have to be continued” with the heirs or assignees. 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 actually contemplated that the heirs would become general partners rather than limited ones.

It is immaterial that the heir’s name was not included in the firm 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 is immaterial that the heir’s name was not included in the firm 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.

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 firm.
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 firm from part of its stock-in-trade, and the sale thereof is in pursuance of partnership
purposes, hence within the ordinary powers of the partner.

On 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: 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.

With regard to the relationship between the parties, suffice it to say that the Supreme Court has ruled that relationship alone
is not a badge of fraud. There is no evidence that the original buyers, Washington Sycip and Betty Lee, were without
independent means to purchase the property.

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. Secondly, the solidary obligation was guaranteed by a mortgage on the properties of the partnership and
those of Tan Sin An personally, and a mortgage is indivisible, in the sense that each and every parcel under mortgage answers
for the totality of the debt.

Keywords General Partner by Estoppel

Heir of Partner

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