G.R. No. 70926.

January 31, 1989 denied having issued to the private respondent

DAN FUE LEUNG, petitioner, vs. HON. the receipt and the Equitable Banking
INTERMEDIATE APPELLATE COURT and Corporation's Check in the amount of
LEUNG YIU, respondents. P12,000.00.

FACTS: The Sun Wah Panciteria, a restaurant, Both the trial court and the appellate court found
was established sometime in October 1955. It that the private respondent is a partner of the
was registered as a single proprietorship and its petitioner in the setting up and operations of the
licenses and permits were issued to and in favor panciteria. Hence, the two courts declared that
of petitioner Dan Fue Leung as the sole the private petitioner is entitled to a share of the
proprietor. About the time the Sun Wah annual profits of the restaurant.
Panciteria started to become operational, the
private respondent gave P4,000.00 as his In essence, the private respondent alleged that
contribution to the partnership. This is evidenced when Sun Wah Panciteria was established, he
by a receipt wherein the petitioner acknowledged gave P4,000.00 to the petitioner with the
his acceptance of the P4,000.00 by affixing his understanding that he would be entitled to
signature thereto. The receipt was written in twenty-two percent (22%) of the annual profit
Chinese characters. The private respondent derived from the operation of the said panciteria.
identified the signature on the receipt as that of These allegations, which were proved, make the
the petitioner because it was affixed by the latter private respondent and the petitioner partners in
in his (private respondents') presence. Witnesses the establishment of Sun Wah Panciteria because
So Sia and Antonio Ah Heng corroborated the Article 1767 of the Civil Code provides that "By
private respondent’s testimony to the effect that the contract of partnership two or more persons
they were both present when the receipt was bind themselves to contribute money, property or
signed by the petitioner. So Sia further testified industry to a common fund, with the intention of
that he himself received from the petitioner a dividing the profits among themselves".
similar receipt evidencing delivery of his own
investment in another amount of P4,000.00. The Therefore, the lower courts did not err in
signatures in the two receipts were indeed the construing the complaint as one wherein the
signatures of the petitioner. private respondent asserted his rights as partner
of the petitioner in the establishment of the Sun
Furthermore, the private respondent received Wah Panciteria, notwithstanding the use of the
from the petitioner the amount of P12,000.00 term financial assistance therein. We agree with
covered by the latter's Equitable Banking the appellate court's observation to the effect
Corporation Check from the profits of the that "... given its ordinary meaning, financial
operation of the restaurant for the year 1974. assistance is the giving out of money to another
Chief of the Savings Department of the China without the expectation of any returns
Banking Corporation testified that said check was therefrom'. It connotes an ex gratia dole out in
deposited by and duly credited to the private favor of someone driven into a state of
respondents savings account with the bank. destitution. But this circumstance under which
Another witness Elvira Rana testified that the the P4,000.00 was given to the petitioner does
check in question was in fact and in truth drawn not obtain in this case.' The complaint explicitly
by the petitioner and debited against his own stated that "as a return for such financial
account in said bank and the said check was assistance, plaintiff (private respondent) would
returned to the petitioner as the maker thereof. be entitled to twenty-two percentum (22%) of
the annual profit derived from the operation of
The petitioner denied having received from the the said panciteria.' The well-settled doctrine is
private respondent the amount of P4,000.00. He that the '"... nature of the action filed in court is
alleged that he did not receive any contribution determined by the facts alleged in the complaint
at the time he started the Sun Wah Panciteria. as constituting the cause of action." (De Tavera
He used his savings from his salaries as an v. Philippine Tuberculosis Society, Inc., 113 SCRA
employee at Camp Stotsenberg in Clark Field and 243; Alger Electric, Inc. v. Court of Appeals, 135
later as waiter at the Toho Restaurant amounting SCRA 37).
to a little more than P2,000.00 as capital in
establishing Sun Wah Panciteria. Petitioner Regarding the prescriptive period within which
presented various government licenses and the private respondent may demand an
permits showing the Sun Wah Panciteria was and accounting, Articles 1806, 1807, and 1809 show
still is a single proprietorship solely owned and that the right to demand an accounting exists as
operated by himself alone. Fue Leung also flatly long as the partnership exists. Prescription begins
to run only upon the dissolution of the FACTS: On May 29, 1940, Tan Sin An and
partnership when the final accounting is done. Antonio C. Goquiolay entered into a general
The resolution of the Intermediate Appellate commercial partnership under the partnership
Court ordering the payment of the petitioner's name "Tan Sin An and Antonio C. Goquiolay", for
obligation shows that the same continues until the purpose of dealing in real estate. The
fully paid. partnership had a capital of P30,000.00,
P18,000.00 of which was contributed by
ISSUE: Whether or not the payment of a Goquiolay and P12,000.00 by Tan Sin An. The
share of profits shall continue into the agreement lodged upon Tan Sin An the sole
future with no fixed ending date. management of the partnership affairs,
stipulating that the lifetime of the partnership
RULING: No. Considering the facts of this case, was fixed at ten (10) years and also that —
the Court may decree a dissolution of the
partnership under Article 1831 of the Civil Code “In the event of the death of any of the partners
which, in part, provides: at any time before the expiration of said term,
the co-partnership shall not be dissolved but will
Art. 1831. On application by or for have to be continued and the deceased partner
a partner the court shall decree a shall be represented by his heirs or assigns in
dissolution whenever: said co-partnership” (Art. XII, Articles of Co-
xxx xxx xxx Partnership).

(3) A partner has been guilty of However, the partnership could be dissolved and
such conduct as tends to affect its affairs liquidated at any time upon mutual
prejudicially the carrying on of the agreement in writing of the partners (Art. XIII,
business; articles of Co-Partnership).

(4) A partner willfully or On May 31, 1940, Antonio Goquiolay executed a

persistently commits a breach of general power of attorney that Tan Sin An should
the partnership agreement, or act as my Manager for said co-partnership for the
otherwise so conducts himself in full period of the term for which said co-
matters relating to the partnership partnership was organized or until the whole
business that it is not reasonably period that the said capital of P30,000.00 of the
practicable to carry on the business co-partnership should last, to carry on to the best
in partnership with him; advantage and interest of the said co-
xxx xxx xxx partnership, to make and execute, sign, seal and
deliver for the co-partnership, and in its name, all
(6) Other circumstances render a bills, bonds, notes, specialties, and trust receipts
dissolution equitable. or other instruments or documents in writing
whatsoever kind or nature which shall be
There shall be a liquidation and winding up of necessary to the proper conduction of the said
partnership affairs, return of capital, and other businesses, including the power to mortgage and
incidents of dissolution because the continuation pledge real and personal properties, to secure the
of the partnership has become inequitable. obligation of the co-partnership, to buy real or
personal properties for cash or upon such terms
G.R. No. L-11840. July 26, 1960 as he may deem advisable, to sell personal or
ANTONIO C. GOQUIOLAY and THE real properties, such as lands and buildings of the
PARTNERSHIP "TAN SIN AN and ANTONIO co-partnership in any manner he may deem
C. GOQUIOLAY", Plaintiffs-Appellants, vs. advisable for the best interest of said co-
WASHINGTON Z. SYCIP, ET AL., Defendants- partnership, to borrow money on behalf of the
Appellees. co-partnership and to issue promissory notes for
the repayment thereof, to deposit the funds of
PARTNERSHIP; MANAGEMENT, RIGHT OF the co-partnership in any local bank or elsewhere
EXCLUSIVE; PERSONAL RIGHT; TERMINATION and to draw checks against funds so deposited.
UPON MANAGER-PARTNER’S DEATH. — The right
of exclusive management conferred upon Tan Sin On May 29, 1940, the plaintiff partnership "Tan
An, being premised upon trust and confidence, Sin An and Goquiolay" purchased the three (3)
was a mere personal right that terminated upon parcels of land, subject-matter of the instant
Tan’s demise. litigation, assuming the payment of a mortgage
obligation of P25,000.00, payable to "La Urbana
Sociedad Mutua de Construcción y Prestamos" for approving the sale in so far as his interest over
a period of ten (10) years, with 10% interest per the parcels of land sold was concerned. The
annum. Another 46 parcels were purchased by probate court annulled the sale executed by the
Tan Sin An in his individual capacity, and he administratrix with respect to the 60% interest of
assumed payment of a mortgage debt thereon Antonio Goquiolay over the properties sold. King
for P35,000.00, with interest. The down payment Chai Pin appealed to the Court of Appeals, which
and the amortization were advanced by Yutivo court later certified the case to us, we rendered
and Co., for the account of the purchasers. decision setting aside the orders of the probate
court complained of and remanding the case for
The two separate obligations were consolidated in new trial, due to the non-inclusion of
an instrument executed by the partnership and indispensable parties.
Tan Sin An, whereby the entire 49 lots were
mortgaged in favor of the "Banco Hipotecario de The second amended complaint in the case at bar
Filipinas" (as successor to "La Urbana") and the prays for the annulment of the sale in favor of
covenantors bound themselves to pay, jointly and Washington Sycip and Betty Lee, and their
severally, the remaining balance of their unpaid subsequent conveyance in favor of the Insular
accounts within eight 8 years, with 8% annual Development Co., Inc., in so far as the three (3)
interest, payable in 96 equal monthly lots owned by the plaintiff partnership are
installments. concerned. The answer averred the validity of the
sale by Kong Chai Pin as successor partner, in
On June 26, 1942, Tan Sin An died, leaving as lieu of the late Tan Sin An. After hearing, the
surviving heirs his widow, Kong Chai Pin, and complaint was dismissed by the lower court;
four minor children. Defendant Kong Chai Pin was hence, this appeal taken directly to us by the
appointed administratrix of the intestate estate of plaintiffs.
her deceased husband.
Appellants also question the validity of the sale
In the meantime, repeated demands for payment covering the entire firm realty, on the ground
were made by the Banco Hipotecario on the that it, in effect, threw the partnership into
partnership and on Tan Sin An. In March, 1944, dissolution, which requires consent of all the
the defendant Sing Yee and Cuan, Co., Inc., upon partners. This view is untenable. That the
request of defendant Yutivo Sons Hardware Co., partnership was left without the real property it
paid the remaining balance of the mortgage debt, originally had will not work its dissolution, since
and the mortgage was cancelled. the firm was not organized to exploit these
precise lots but to engage in buying and selling
Then in 1946, Yutivo Sons Hardware Co. and real estate, and “in general real estate agency
Sing Yee and Cuan Co., Inc. filed their claims in and brokerage business.”
the intestate proceedings of Tan Sin An for
alleged obligations of the partnership. Disclaiming ISSUE: Whether or not the lower court erred
knowledge of said claims at first, Kong Chai Pin in finding that Kong Chai Pin managed the
later admitted the claims and they were business of the partnership after the death
accordingly approved by the Court. of her husband, and that Antonio Goquiolay
knew it.
In 1949, Kong Chai Pin filed a petition with the
probate court for authority to sell all the 49 RULING: No. We have upheld the validity of the
parcels of land to Washington Z, Sycip and Betty sale of the lands owned by the partnership
Y. Lee, for the purpose primarily of settling the Goquiolay & Tan Sin An, made in 1949 by the
aforesaid debts of Tan Sin An and the widow of the managing partner, Tan Sin An
partnership. Pursuant to a court order, the (executed in her dual capacity of Administratrix
administratrix executed a deed of sale of the 49 of her husband’s estate and as partner, in lieu of
parcels of land to the defendants Washington the husband), in favor of buyers Washington
Sycip and Betty Lee in consideration of Sycip and Betty Lee.
P37,000.00 and of vendees’ assuming payment It is argued that the authority given by Goquiolay
of the claims filed by Yutivo Sons Hardware Co. to the widow Kong Chai Pin was only to manage
and Sing Yee and Cuan Co., Inc. the property, and that it did not include the
power to alienate, citing Article 1713 of the Civil
Learning about the sale to Sycip and Lee, the Code of 1889. What this argument overlooks is
surviving partner Antonio Goquiolay filed a that the widow was not a mere agent, because
petition in the intestate proceedings seeking to she had become a partner upon her husband’s
set aside the order of the probate court death, as expressly provided by the articles of
co-partnership. Even more, granting that by the heirs of the deceased partner without a share
succession to her husband, Tan Sin An, the in the management. Hence, the contractual
widow only became a limited partner, Goquiolay’s stipulation does actually contemplate that the
authorization to manage the partnership property heirs would become general partners rather than
was proof that he considered and recognized her limited ones.
as general partner, at least since 1945. The
reason is plain: Under the Article 148, last Of course, the stipulation would not bind the
paragraph, Code of Commerce, appellant could heirs of the deceased partner should they refuse
not empower the widow, if she were only a to assume personal and unlimited responsibility
limited partner, to administer the properties of for the obligations of the firm. The heirs, in other
the firm, even as a mere agent: words, cannot be compelled to become general
partners against their wishes. But because they
“Limited partners may not perform any act of are not so compellable, it does not legitimately
administration with respect to the interests of the follow that they may not voluntarily choose to
co-partnership, not even in the capacity of agents become general partners, waiving the protective
of the managing partners.” mantle of the general laws of succession. The
heir never was a limited partner, but chose to be,
By seeking authority to manage partnership and became, a general partner right at the start.
property, Tan Sin An’s widow showed that It is immaterial that the heir’s name was not
she desired to be considered a general included in the firm name, since no conversion of
partner. By authorizing the widow to status is involved, and the articles of co-
manage partnership property (which a partnership expressly contemplated the
limited partner could not be authorized to admission of the partner’s heirs into the
do), Goquiolay recognized her as such partnership.
partner, and is now in estoppel to deny her
position as a general partner, with authority It must never be overlooked that this case
to administer and alienate partnership involves the rights acquired by strangers, and
property. does not deal with the rights arising between
partners Goquiolay and the widow of Tan Sin An.
The heir ordinarily (and we did not say Knowing that by law a limited partner is barred
“necessarily”) becomes a limited partner for from managing the partnership business or
his own protection, because he would property, third parties (like the purchasers) who
normally prefer to avoid any liability in found the widow possessing and managing the
excess of the value of the estate inherited firm property with the acquiescence of the
so as not to jeopardize his personal assets. surviving partners were perfectly justified in
But this statutory limitation of responsibility assuming that she had become a general partner,
being designed to protect the heir, the latter and, therefore, in negotiating with her as such a
may disregard it and instead elect to partner, having authority to act for, and in behalf
become a collective or general partner, with of, the firm. This belief, be it noted, was shared
all the rights and privileges of one, and even by the probate court that approved the sale
answering for the debts of the firm not only by the widow of the real property standing in the
with the inheritance but also with the heir’s partnership name. That belief was fostered by the
personal fortune. This choice pertains very inaction of appellant Goquiolay. Note that
exclusively to the heir, and does not require for seven long years, from partner Tan Sin An’s
the assent of the surviving partner. It must death in 1942 to the sale in 1949, there was
be remembered that the articles of co- more than ample time for Goquiolay to take up
partnership here involved expressly stipulated it. the management of these properties, or at least
ascertain how its affairs stood. For seven years
The Articles did not provide that the heirs of the Goquiolay could have asserted his alleged rights,
deceased would be merely limited partner; on the and by suitable notice in the commercial registry
contrary, they expressly stipulated that in case of could have warned strangers that they must deal
death of either partner “the co-partnership . . . with him alone, as sole general partner. But he
will have to be continued” with the heirs or did nothing of the sort, because he was not
assigns. It certainly could not be continued if it interested (supra), and he did not even take
were to be converted from a general partnership steps to pay, or settle, the firm debts that were
into a limited partnership, since the difference overdue since before the outbreak of the last
between the two kinds of associations is war. He did not even take steps, after Tan Sin An
fundamental; and specially because the died, to cancel, or modify, the provisions of the
conversion into a limited association would leave partnership articles that he (Goquiolay) would
have no intervention in the management of the
partnership. This laches certainly contributed to In Rosen v. Rosen, 212 N. Y. Supp. 405, 406, it
confirm the view that the widow of Tan Sin An was held that “a partnership to deal in real estate
had, or was given, authority to manage and deal may be created and either partner has the legal
with the firm’s properties, apart from the right to sell the firm real estate”. In Chester v.
presumption that a general partner dealing with Dickerson, 54 N. Y. 1, 13 Am. Rep. 550, it was
partnership property has the requisite authority held that when the partnership business is to deal
from his co-partners (Litton v. Hill and Cerón, Et in real estate, one partner has ample power, as a
Al., 67 Phil., 513; quoted in our main decision, p. general agent of the firm, to enter into an
11). executory contract for the sale of real estate.”
And in Rovelsky v. Brown, 92 Ala. 522, 9 South
“The stipulation in the articles of partnership that 182, 25 Am. St., Rep. 83, it was held that
any of the two managing partners may contract “if the several partners engaged in the business
and sign in the name of the partnership with the of buying and selling real estate cannot bind the
consent of the other, undoubtedly creates an firm by purchases or sales of such property made
obligation between the two partners, which in the regular course of business, then they are
consists in asking the other’s consent before incapable of exercising the essential rights and
contracting for the partnership. This obligation of powers of general partners and their association
course is not imposed upon a third person who is not really a partnership at all, but a several
contracts with the partnership. Neither is it agency.”
necessary for the third person to ascertain if the
managing partner with whom he contracts has Since the sale by the widow was in conformity
previously obtained the consent of the other. A with the express objective of the partnership, “to
third person may and has a right to presume that engage . . . in buying and selling real estate”
the partner with whom he contracts has, in the (Art. IV, No. 1, Articles of Co-partnership), it
ordinary and natural course of business, the cannot be maintained that the sale was made in
consent of his co-partner; for otherwise he would excess of her powers as general partner.
not enter into the contract. The third person
would naturally not presume that the partner G.R. No. L-11840. December 10, 1963
with whom he enters into the transaction is ANTONIO C. GOQUIOLAY, ET AL., plaintiffs-
violating the articles of partnership, but on the appellants, vs. WASHINGTON Z. SYCIP, ET
contrary, is acting in accordance therewith. And AL., defendants-appellees.
this finds support in the legal presumption that
the ordinary course of business has been followed FACTS: The matter now pending is the
(No. 18, section 334, Code of Civil Procedure), appellant's motion for reconsideration of our main
and that the law has been obeyed (No. 31, decision, wherein we have upheld the validity of
section 334). This last presumption is equally the sale of the lands owned by the partnership
applicable to contracts which have the force of Goquiolay & Tan Sin An, made in 1949 by the
law between the parties." (Litton v. Hill & Cerón, widow of the managing partner, Tan Sin An
Et Al., 67 Phil., 509, 516) (Emphasis supplied) (Executed in her dual capacity as Administratrix
of the husband's estate and as partner in lieu of
It is next urged that the widow, even as a the husband), in favor of the buyers Washington
partner, had no authority to sell the real estate of Sycip and Betty Lee.
the firm. This argument is lamentably superficial
because it fails to differentiate between real Appellant Goquiolay, in his motion for
estate acquired and held as stock-in-trade and reconsideration, insist that, contrary to our
real estate held merely as business site for the holding, Kong Chai Pin, widow of the deceased
partnership. Where the partnership business is to partner Tan Sin An, never became more than
deal in merchandise and goods, i.e., movable a limited partner, incapacitated by law to manage
property, the sale of its real property the affairs of partnership; that the testimony of
(immovables) is not within the ordinary powers of her witness Young and Lim belies that she took
a partner, because it is not in line with the over the administration of the partnership
normal business of the firm. But where the property; and that, in any event, the sale should
express and avowed purpose of the partnership is be set aside because it was executed with the
to buy and sell real estate (as in the present intent to defraud appellant of his share in the
case), the immovables thus acquired by the firm properties sold.
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.
Three things must be always held in mind in the
discussion of this motion to reconsider, being We thus find that Goquiolay did not merely rely
basic and beyond controversy: on reports from Lim and Young; he actually
manifested his willingness that the widow should
(a) That we are dealing here with the transfer of manage the partnership properties. Whether or
partnership property by one partner, acting in not she complied with this authority is a question
behalf of the firm, to a stranger. There is no between her and the appellant, and is not here
question between partners inter se; involved. But the authority was given, and she
did have it when she made the questioned sale,
(b) That partnership was expressly organized: “to because it was never revoked.
engage in real estate business, either by buying
and selling real estate.” The Articles of co- It is argued that the authority given by Goquiolay
partnership, in fact, expressly provided that: to the widow Kong Chai Pin was only
IV. The object and purpose of the co- to manage the property, and that it did not
partnership are as follows: include the power to alienate, citing Article 1713
1. To engage in real estate business, of the Civil Code of 1889. What this argument
either by buying and selling real estates; overlooks is that the widow was not a mere
to subdivide real estates into lots for the agent, because she had become a partner upon
purpose of leasing and selling them.; her husband's death, as expressly provided by
the articles of co-partnership. Even more,
(c) That the properties sold were not part of the granting that by succession to her husband, Tan
contributed capital (which was in cash) but land Sin An, the widow only became a limited
precisely acquired to be sold, although subject to partner, Goquiolay's authorization to manage the
a mortgage in favor of the original owners, from partnership property was proof that he
whom the partnership had acquired them. considered and recognized her as general
partner, at least since 1945. The reason is plain:
ISSUE: Whether or not widow of the Under the law (Article 148, last paragraph, Code
deceased partner Tan Sin An, never became of Commerce), appellant could not empower the
more than a limited partner, incapacitated widow, if she were only a limited partner, to
by law to manage the affairs of partnership administer the properties of the firm, even as a
mere agent:
RULING: No. It is first averred that there is “not
one iota of evidence” that Kong Chai Pin Limited partners may not perform any act
managed and retained possession of the of administration with respect to the
partnership properties. Suffice it to point out that interests of the co-partnership, not even
appellant Goquiolay himself admitted it. These in the capacity of agents of the managing
admissions of Goquiolay are certainly entitled to partners. (Emphasis supplied).
greater weight than those of Hernando Young
and Rufino Lim, having been made against the By seeking authority to manage partnership
party's own interest. property, Tan Sin An's widow showed that she
desired to be considered a general partner. By
Moreover, the appellant's reference to the authorizing the widow to manage partnership
testimony of Hernando Young, that the witness property (which a limited partner could not be
found the properties “abandoned and authorized to do), Goquiolay recognized her as
undeveloped”, omits to mention that said part of such partner, and is now in estoppel to deny her
the testimony. Plainly, both Young and Lim's position as a general partner, with authority to
testimonies do not belie, or contradict, administer and alienate partnership property.
Goquiolay's admission that he told Mr. Yu Eng Lai
that the widow “could just do it” (i.e., continue to Besides, as we pointed out in our main decision,
manage the properties). Witnesses Lim and the heir ordinarily (and we did not say
Young referred to the period of Japanese “necessarily”) becomes a limited partner for his
occupation; but Goquiolay's authority was, in own protection, because he would normally
fact, given to the widow in 1945, after the prefer to avoid any liability in excess of the value
occupation. of the estate inherited so as not to jeopardize his
Again, the disputed sale by the widow took place personal assets. But this statutory limitation of
in 1949. That Kong Chai Pin carried out no acts of responsibility being designed to protect the heir,
management during the Japanese occupation the latter may disregard it and instead elect to
(1942-1944) does not mean that she did not do become a collective or general partner, with all
so from 1945 to 1949. the rights and privileges of one, and answering
for the debts of the firm not only with the It must never be overlooked that this case
inheritance but also with the heir's personal involved the rights acquired by strangers, and
fortune. This choice pertains exclusively to the does not deal with the rights existing between
heir, and does not require the assent of the partners Goquiolay and the widow of Tan Sin An.
surviving partner. Knowing that by law a limited partner is barred
from managing the partnership business or
It must be remember that the articles of co- property, third parties (like the purchasers) who
partnership here involved expressly stipulated found the widow possessing and managing the
that: firm property with the acquiescence (or at least
In the event of the death of any of the without apparent opposition) of the surviving
partners at any time before the expiration partners were perfectly justified in assuming that
of said term, the co-partnership shall not she had become a general partner, and,
be dissolved but will have to be continued therefore, in negotiating with her as such a
and the deceased partner shall be partner, having authority to act for, and in behalf
represented by his heirs or assigns in said of the firm. This belief, be it noted, was shared
co-partnership (Art. XII, Articles of Co- even by the probate court that approved the sale
Partnership). by the widow of the real property standing in the
partnership name. That belief was fostered by the
The Articles did not provide that the heirs of the very inaction of appellant Goquiolay. Note that
deceased would be merely limited partners; on for seven long years, from partner Tan Sin An's
the contrary, they expressly stipulated that in death in 1942 to the sale in 1949, there was
case of death of either partner “the co- more than ample time for Goquiolay to take up
partnership ... will have to be continued” with the the management of these properties, or at least
heirs or assigns. It certainly could not be ascertain how its affairs stood. For seven years
continued if it were to be converted from a Goquiolay could have asserted his alleged rights,
general partnership into a limited partnership, and by suitable notice in the commercial registry
since the difference between the two kinds of could have warned strangers that they must deal
associations is fundamental; and specially with him alone, as sole general partner. But
because the conversion into a limited association he did nothing of the sort, because he was not
would have the heirs of the deceased partner interested, and he did not even take steps to
without a share in the management. Hence, the pay, or settle the firm debts that were overdue
contractual stipulation does actually contemplate since before the outbreak of the last war. He did
that the heirs would become general not even take steps, after Tan Sin An died, to
partners rather than limited ones. cancel, or modify, the provisions of the
partnership articles that he (Goquiolay) would
Of course, the stipulation would not bind the have no intervention in the management of the
heirs of the deceased partner should they refuse partnership. This laches certainly contributed to
to assume personal and unlimited responsibility confirm the view that the widow of Tan Sin An
for the obligations of the firm. The heirs, in other had, or was given, authority to manage and deal
words, cannot be compelled to become general with the firm's properties apart from the
partners against their wishes. But because they presumption that a general partner dealing with
are not so compellable, it does not legitimately partnership property has to requisite authority
follow that they may not voluntarily choose to from his co-partners (Litton vs. Hill and Ceron, et
become general partners, waiving the protective al., 67 Phil. 513; quoted in our main decision, p.
mantle of the general laws of succession. And in 11).
the latter event, it is pointless to discuss the
legality of any conversion of a limited partner into The stipulation in the articles of
a general one. The heir never was a limited partnership that any of the two managing
partner, but chose to be, and became, a general partners may contract and sign in the
partner right at the start. name of the partnership with the consent
of the othe, undoubtedly creates on
It is immaterial that the heir's name was not obligation between the two partners,
included in the firm name, since no conversion of which consists in asking the other's
status is involved, and the articles of co- consent before contracting for the
partnership expressly contemplated the partnership. This obligation of course is
admission of the partner's heirs into the not imposed upon a third person who
partnership. contracts with the partnership. Neither it
is necessary for the third person to
ascertain if the managing partner with
 whom he contracts has previously were solidary (Joint and several) debtors, and
obtained the consent of the other. A third Rule 87, section 6 is the effect that:
person may and has a right to presume Where the obligation of the decedent
that the partner with whom he contracts is joint and several with another
has, in the ordinary and natural course of debtor, the claim shall be filed against
business, the consent of his co-partner; the decedent as if he were the only
for otherwise he would not enter into the debtor, without prejudice to the right of
contract. The third person would naturally the estate to recover contribution from the
not presume that the partner with whom other debtor. (Emphasis supplied).
he enters into the transaction is violating
the articles of partnership, but on the Secondly, the solidary obligation was guaranteed
contrary is acting in accordance therewith. by a mortgage on the properties of the
And this finds support in the legal partnership and those of Tan Sim An personally,
presumption that the ordinary course of and a mortgage is indivisible, in the sense that
business has been followed (No. 18, each and every parcel under mortgage answers
section 334, Code of Civil Procedure), and for the totality of the debt (Civ. Code of 1889,
that the law has been obeyed (No. 31, Article 1860; New Civil Code, Art. 2089).
section 334). This last presumption is
equally applicable to contracts which have A final and conclusive consideration: The fraud
the force of law between the parties. charged not being one used to obtain a party's
(Litton vs. Hill & Ceron, et al., 67 Phil. consent to a contract (i.e., not being deceit
409, 516). (Emphasis supplied.) or dolus in contrahendo), if there is fraud at al, it
can only be a fraud of creditors that gives rise to
It is next urged that the widow, even as a a rescission of the offending contract. But by
partner, had no authority to sell the real estate of express provision of law (Article 1294, Civil Code
the firm. This argument is lamentably superficial of 1889; Article 1383, New Civil Code) “the action
because it fails to differentiate between real for rescission is subsidiary; it cannot be instituted
estate acquired and held as stock-in-trade and except when the party suffering damage has no
real estate held merely as business other legal means to obtain reparation for the
site (Vivante's "taller o banco social") for the same.” Since there is no allegation, or evidence,
partnership. Where the partnership business is to that Goquiolay cannot obtain reparation from the
deal in merchandise and goods, i.e., movable widow and heirs of Tan Sin An, the present suit
property, the sale of its real property to rescind the sale in question is not
(immovables) is not within the ordinary powers of maintainable, even if the fraud charged actually
a partner, because it is not in line with the did exist.
normal business of the firm. But where the
express and avowed purpose of the partnership is G.R. No. L-14832. January 28, 1961
to buy and sell real estate (as in the present NG CHO CIO ET AL., plaintiffs-appellants, vs.
case), the immovables thus acquired by the firm NG DIONG, defendant-appellant.
from part of its stock-in-trade, and the sale C. N. HODGES, ET AL., defendants-appellees.
thereof is in pursuance of partnership purposes,
hence within the ordinary powers of the partner. FACTS: On May 23, 1925, Ng Diong, Ng Be
This distinction is supported by the opinion of Chuat, Ng Feng Tuan Ng Be Kian Ng Cho Cio, Ng
Gay de Montella. Sian King and Ng Due King entered into a
contract of general co-partnership under the
Since the sale by the widow was in conformity name NG CHIN BENG HERMANOS. The
with the express objective of the partnership, “to partnership was to exist for a period of 10 years
engage ... in buying and selling real estate” (Art. and Ng Diong was named as managing partner.
IV, No. 1 Articles of Co-partnership), it cannot be On May 10, 1935, the articles of co-partnership
maintained that the sale was made in excess of were amended by extending its life to 16 years
her power as general partner. more to be counted from May 23, 1925, or up to
May 23, 1941.
Neither was there any anomaly in the filing of the
claims of Yutivo and Sing Yee Cuan & Co., (as On January 5, 1938, the partnership obtained
subrogees of the Banco Hipotecario) in from the National Loan and Investment Board a
proceedings for the settlement of the estate of loan in the amount of P30, 000.00 and of P50,
Tan Sin An. This for two reasons: First, Tan Sin 000.00, and to guarantee its payment it executed
An and the partnership "Tan Sin An & Goquiolay" in its favor a mortgage on lots of the cadastral
survey of Iloilo.
 deemed proper and wise by Ng Diong, who
Sometime in 1938, the partnership was declared continued to be the manager of the partnership,
insolvent upon petition of its creditors wherein to sell all its properties mortgaged to Hodges in
one Crispino Melocoton was elected as assignee. order that the excess may be applied to the
As a consequence, the titles to the seven parcels Payment of said other obligations, and to that
of land were issued in his name as assignee. In effect Ng Diong executed a deed of sale thereof
due time, the creditors filed their claims in said in favor of Hodges for the sum of P124,580.00.
proceeding. Out of this price; the sum of P103,883.34 was
applied to the payment of the debt of the
On August 9, 1940, a majority of the creditors partnership to Hodges and the balance was paid
with claims, and the partners of the firm, acting to the other creditors of the partnership. On the
thru counsel, entered into a composition same date, Hodges executed another contract
agreement whereby it was agreed that said giving the partnership the right to repurchase
creditors would receive 20% of the amount of Lots Nos. 237, 386 and 829 in installments for
their claims in full payment thereof. Prior to this the sum of P26,000.00 within three years with
agreement, however, defendant Julian Go had interest the rate of 1% Per annum, Payable
already acquired the rights of 24 of the creditors monthly.
of the insolvent whose total claims amounted to
P139,323.10. Said composition agreement was On May 23, 1947, the partnership had not yet
approved by the insolvency court. paid its indebtedness to Julian Go in the amount
of P24,864.62 under the composition agreement,
On January 30, 1941, the Agricultural and nor did it have any money to repurchase Lots
Industrial Bank which had succeeded the National Nos. 237, 386 and 829 and so Ng Diong, in
Loan and Investment Board assigned its rights behalf of the partnership, transferred the right of
and interests in the loans obtained from it by the the latter to repurchase the same from Hodges to
partnership in favor of C.N. Hodges, together Julian Go in full payment of the partnership's
with the right and interest in the mortgage indebtedness to him. And having Julian Go
executed to secure the loans. Since said loans exercised the option January 6, 1948, Hodges
became due and no payment was forthcoming, executed a deed of sale of the properties in his
Hodges asked permission from the insolvency favor, and pursuant thereto the register of deeds
court to file a complaint against the assignee to issued new titles' in his name covering said lots.
foreclose the mortgage executed to secure the On May 29, 1948, Hodges executed another deed
same in a separate proceeding, and permission of sale covering Lots Nos. 317-A, 236-B, 233 and
having been grante. Meanwhile, war broke out 540 for the sum of P119,067.79 in favor of Jose
and nothing appears to have been done in the C. Tayengco. And on August 31, 1948, Tayengco
insolvency proceedings. The court records were mortgaged said lots, together with three other
destroyed. However, they were reconstituted lots of his, to the Bank of the Philippine Islands to
later and given due course. secure a loan of P126,000.00 to be used in the
construction of a commercial building on said
On August 15, 1945, the partners of the insolvent lots.
firm and Julian Go, who acquired most of the
claims of the creditors, filed a petition with the ISSUE: Whether or not the sale made by Ng
insolvency court praying at the insolvency Diong in behalf of the partnership NG CHIN
proceedings be closed or terminated cause the BENG HERMANOS of the seven lots
composition agreement the creditors had belonging to it in favor of C. N. Hodges on
submitted relative to the settlement of the claims April 2, 1946 is null and void because at that
had already been approved. On October 6, 1946, time said parcels were still in the custody of
the court, acting favorably on the petition, the assignee of the insolvency proceedings,
ordered, closure of the proceedings directing the or in custodia legis, and, hence, the same is
assignee to turn and reconvey all the properties null and void
of the partnership back to the latter as required
by law. RULING: No. It should be recalled that on
August 8, 1940 the majority of the creditors of
As of said date, April 2, 1946, the indebtedness the partnership, as well as the representatives of
of the partnership to C. N. Hodges which was the the latter, submitted to the court taking
subject of the foreclosure proceedings in a cognizance of the insolvency proceedings
separate case was P103,883.34. In order to pay a composition agreement whereby it was agreed
off the same and raise necessary funds to pay that said creditors would receive 20% of the
the other obligations of the partnership, it was amount of their claims in full payment thereof.
This agreement was approved which, in EUGENIA LICHAUCO, ET AL., Plaintiffs-
contemplation of law, has the effect of putting an Appellants, vs. FAUSTINO
end to the insolvency proceedings. However, no LICHAUCO, Defendant-Appellant.
further step was taken thereon because of the
outbreak of the war. Later, the record of the case FACTS: This action was brought by two of the
was reconstituted and the parties on August 15, partners of an enterprise of which the defendant
1945 filed a petition with the court praying for was manager, to secure an accounting of its
the dismissal and closure of the proceedings in affairs, and the payment to the plaintiffs of their
view of the approval of the aforesaid composition respective shares of capital and profits.
agreement, and acting favorably thereon, the
court issued an order declaring the proceedings The defendant admitted the allegations of the
terminated and ordering the assignee to return complaint as to the organization of the enterprise
and reconvey the properties the partnership. The and the participation of the plaintiffs therein, but
actual reconveyance was done by the assignee he contended that the plaintiffs could not
on April 2, 1946. maintain this action under the terms of the
written contract by virtue of which the enterprise
It would, therefore, appear that for legal and was organized. Judgment was rendered for the
practical purposes the insolvency ended on said balance shown to be due the plaintiffs. To this
date. Since then partnership became, restored to judgment, both plaintiffs and defendant
its status quo. It again reacquired its personality excepted, and the record is now before us on
as such with Ng Diong as its general manager. their respective bills of exceptions.
From that date on its properties ceased to be in
custodia legis. Such being the case, it is obvious In October, 1901, a notarial instrument was
that when Ng Diong as manager of the executed in Manila, by the terms of which a
partnership sold the seven parcels of land to C. partnership was duly organized for the purpose of
N. Hodges on April 2, 1946 by virtue of a deed of carrying on a rice-cleaning business at Dagupan,
sale acknowledged before a notary public on April and for the purchase and sale of “palay” and rice.
6, 1946, the properties were already was at The articles of association, which were not
liberty to do what it may deem convenient and recorded in the mercantile registry, contain,
proper to protect its interest. And acting among others, the following provisions:
accordingly, Ng Diong made the sale in the
exercise of the power granted to him by the 2. The association will be named F. Lichauco
partnership in its articles of co-partnership. We Hermanos and will be domiciled in the center of
do not, therefore, find anything irregular in this its operations, that is, in the pueblo of Dagupan,
actuation of Ng Diong. Province of Pangasinan.
3. The association cannot be dissolved except by
Since at the time of the sale the life of the the consent and agreement of two-thirds of its
partnership had already expired, the question partners and in the event of the death of any of
may be fixed: Who shall wind up it business the latter, the heirs of the deceased, if they be
affairs? May its manager still execute the sale of minors or otherwise incapacitated, shall be
its properties to C. N. Hodges as was done by Ng represented in the association by their legal
Diong? The answer to this question cannot but be representatives or if two-thirds of the surviving
in the affirmative because Ng Diong was still the partners agree thereto, the participation of the
managing partner of the partnership and he had deceased partner may be liquidated.
the necessary authority to liquidate its affairs 4. The management and direction of the
under its articles of co-partnership. And association shall be in charged of Don Faustino
considering that war had intervened and the Lichauco y Santos, who shall be domiciled in this
affairs of the partnership were placed under city of Manila, with ample powers to direct and
receivership up to October 6, 1945, we are of the manage the business; to carry out all manner of
opinion that Ng Diong could still exercise his purchases and sales of “palay,” rice, chattels,
power as liquidator when he executed the sale in machinery and whatsoever may be necessary
question in favor of C. N. Hodges. This is and proper for the business of the association; to
sanctioned by Article 228 of the Code of make all contracts of every kind related to said
Commerce which was the law in force at the business, either orally, in private documents or in
time. public instruments, as he deems fit; to appoint
subordinates and other employees such as may
G.R. No. L-10040. January 31, 1916 be necessary; and finally to perform whatever
acts and things he may deem suitable to the
interest of the association; and to appear before
the courts of justice and other authorities and possession the substantial balance due to his
public offices in such matters as may concern the associates. But it is to be observed that, viewed
association and to appoint agents for those for many standpoint, these statements, made
matters to which he cannot attend personally. and rendered by the defendant as to the affairs
of the association, taken together with the other
The business thus organized was carried on until evidence in the record, leave no room for doubt
May, 1904, when it was found to be unprofitable that from the time he concluded the operations of
and discontinued by the defendant manager; and the business in 1904 until the date of the
thereafter, the machinery of the rice mil was institution of this action in 1912 he made no
dismantled by his orders, and offered for sale. No attempt to account to his associates or to turn
accounting ever was made to his associates by over to them the amount due them on a proper
the defendant until this action was instituted in accounting.
October, 1912, although it appears that in the
year 1905, Mariano Limjap, one of the ISSUE: Whether or not the trial court erred
participants in the venture, demanded a rendition in rendering judgment in favor of the
of accounts; and that Eugenia Lichauco, one of plaintiffs and against the defendant for any
the plaintiffs in this action, made repeated sum, without first decreeing a dissolution of
unsuccessful demands for the return of her share the association and final liquidation of its
of the capital invested in the enterprise. And yet assets in accordance with paragraph 10 of
it further appears that during all that time the the articles of association, and because such
defendant manager of the defunct enterprise had judgment is not within the issues joined.
in his possession not less than P20,000, the cash
balance on hand, over and above all claims of RULING: No. It is elementary that no lawful
indebtedness after suspending operations in liquidation and distribution of capital and
1904; and that since that time he received or assets of any company or association can
should have received substantial sums of money ever take place except upon dissolution
from the sale of the machinery of the dismantled thereof.
mill.
These contentions of counsels for the defendant
There is evidence in the record tending to show take no account of the provisions of both the Civil
that the defendant informed some of his and Commercial Codes for the dissolution and
associates, about the year 1906 or 1907, that the liquidation of the different classes of partnerships
whole enterprise was bankrupt; and it appears and mercantile associations upon the occurrence
that some months prior to the institution of this of certain contingencies not within the control of
action, he rendered upon demand of counsel, a the partners. The provisions of paragraph 10
so-called account showing a balance to the credit of the articles of partnership prohibiting the
of the enterprise of only P643.64; although at the dissolution of the association under review,
trial, some six months afterwards, he expressly except by the consent and agreement of
admitted the existence of a cash balance of some two-thirds of its partners, denied the right
P23,131.53, and the amount by the trial judge as to a less number of the partners to effect a
due by him on account of the venture was dissolution of the partnership through
P29,549.99. The defendant explained that the judicial intervention or otherwise; but in no
account rendered to counsel for the plaintiffs wise limited or restricted the rights of the
showing a balance of P634.64 was mailed by one individual partners in the event the
of his employees without his knowledge, and that dissolution of the association was effected,
it was a stupid blunder which he greatly not by any act of theirs, but by the express
regretted; and it would seem that his statement mandate of statutory law. It would be absurd
as to the bankruptcy of the enterprise were not and unreasonable to hold that such an
intended to be understood as an assertion that association could never be dissolved and
there was no balance due the partners, but liquidated without the consent and agreement of
merely that the enterprise had not paid, and that two-thirds of its partners notwithstanding that it
the losses of operation had exceeded the profits. had lost all its capital, or had become bankrupt,
or that the enterprise for which it had been
Giving the defendant the benefit of the doubt, we organized had been concluded or utterly
are inclined to accept these explanations of these abandoned.
incidents, as it is hardly possible that he could
have hoped to escape indefinitely the necessity of Chapter 3 of Title VIII [Book IV,] of the Civil
accounting for his management of the enterprise, Code prescribes the means by which partnership
and thus permanently retain in his own
as defined in that code, may be terminated. The liquidate its affairs and account to his
first article of that chapter is as follows: associates for their respective shares in the
1700. Partnership is extinguished: capital invested - this not merely from the
(1) When the term for which it was constituted very nature of his relation to the enterprise
expires. and of his duties to those associated with
(2) When the thing is lost, or the business for him as partners, but also by the express
which it was constituted ends. mandate of the law. The association having
(3) By the natural death, civil interdiction, or been dissolved by the termination and
insolvency of any of the partners, and in the case abandonment of the enterprise for which it
provided for in article 1699. was organized, he owed this duty to
(4) By the will of any of the partners, subject to liquidate and account to all and to each of
the provisions of articles 1705 and 1707. his associates, and upon his failure to
Partnerships, to which article 1670 refers, are perform that duty, all or any of them had a
excepted from the provisions of Nos. 3 and 4 of clear legal right to compel him to fulfill it.
this article, in the cases in which they should Each of his associates had a perfect right to
exist, according to the Code of Commerce. demand for himself a full, complete and
satisfactory accounting, and in the event that he
1670. Civil partnerships, on account of the conceived himself aggrieved in this regard, to
objects for which they are destined, may adopt institute the appropriate judicial proceedings to
all the forms accepted by the Code of Commerce. secure relief.
In this case, the provisions of the same shall be
applicable, in so far as they are not in conflict The duty of the defendant to liquidate the affairs
with those of the present Code. of the enterprise and to account to his associates
promptly upon the dissolution of the association
Articles 221 and 222 of the Code of Commerce in the year 1904 is expressly prescribed in the
are as follows: Commercial Code, whether we regard the
association, so far as it affects the mutual rights
221. Associations of any kind whatsoever shall be and obligations of the partners, as clothed with
completely dissolved for the following reasons: the forms of a “sociedad de cuentas en
(1) The termination of the period fixed in the participacion” (joint account partnership) or a
articles of association of the conclusion of the “sociedad en comindata.”
enterprise which constitutes its purpose. Article 243 of the Code of Commerce prescribes
(2) The entire loss of the capital. with reference to “cuentas en participacio” (joint
(3) The failure of the association. accounts) that:

222. General and limited co-partnerships shall 243. The liquidation shall be effected by the
furthermore be totally dissolved for the following manager, and after the transactions have been
reasons: concluded he shall render a proper account of its
(1) The death of one of the general partners if results.
the articles of co-partnership do not contain an Articles 229 and 230 of the same Code are as
express agreement that the heirs of deceased follows:
partner are to continue in the co-partnership, or
an agreement to the effect that said co- 229. In general or limited co-partnerships, should
partnership will continue between the surviving there be no opposition on the part of any of the
partners. partners, the persons who managed the common
(2) The insanity of a managing partner or any funds shall continue in charge of the liquidation;
other cause which renders him incapable of but should all the partners not agree thereto a
administering his property. general meeting shall be called without delay,
(3) The failure of any of the general partners. and the decision adopted at the same shall be
It cannot be doubted that under these provisions enforced with regard to the appointment of
of law the association of which the defendant was liquidators from among the members of the
nominated manager was totally dissolved in the association or not, as well as in all that refers to
year 1904, when the rice mill for the operation of the form and proceedings of the liquidation and
which it was organized was dismantled, the the management of the common funds.
machinery offered for sale and the whole
enterprise concluded and abandoned. 230. Under the penalty of removal the liquidators
shall -
Upon the dissolution of the association in (1) Draw up and communicate to the members,
1904 it became the duty of the defendant to within the period of twenty days, an inventory of
the common property, with a balance of the ISSUE: Whether or not the CFI erred in
association in liquidation according to its books. dismissing the amended complaint
(2) Communicate in the same manner to the
members every month the condition of the RULING: No. The demurrer interposed by
liquidation. defendant to the amended complaint filed by
plaintiff having been sustained on the grounds
We conclude that an express statutory obligation that the facts alleged in said complaint are not
imposed upon the defendant an imperative sufficient to constitute a cause of action and that
obligation to proceed without delay to the the complaint is ambiguous, unintelligible and
liquidation of the association in the year 1904 vague.
and the further duty to account to his associates
for the result of that liquidation. While he appears In the amended complaint it is prayed that
to have gone forward with the liquidation far defendant Carmen de Luna be sentenced to pay
enough to collect all the cash resources of the plaintiff damages in the sum of P700,432 as a
association into his own hands, how utterly failed result of the administration, said to be
neglected to account therefor to his associates or fraudulent, of the partnership, "Centro Escolar de
to make any attempt so to do, and we are of Señoritas", of which plaintiff, defendant and the
opinion that the plaintiffs were clearly entitled to deceased Librada Avelino were members. For
bring this action to compel an accounting, and the purpose of adjudicating to plaintiff
the payment of their respective shares of the damages which he alleges to have suffered
capital invested, together with damages resulting as a partner by reason of the supposed
from the failure of the defendant to perform the fraudulent management of the partnership
duty expressly imposed upon him by statute. The referred to, it is first necessary that a
damages arising from the failure to account liquidation of the business thereof be made
consisted of the loss of the use of the money to to the end that the profits and losses may
which they would have been entitled upon a be known and the causes of the latter and
proper accounting, from the date at which it the responsibility of the defendant as well
should have been turned over by the defendant as the damages which each partner may
until it is actually paid by him, that is to say, have suffered, may be determined. It is not
interest on that amount at the rate of six per alleged in the complaint that such a liquidation
centum per annum until paid. has been effected nor is it prayed that it be
made. (Po Yeng Cheo vs. Lim Ka Yam, 44 Phil.,
G.R. No. L-45464. April 28, 1939 172).
JOSUE SONCUYA, plaintiff-appellant, vs.
CARMEN DE LUNA, defendant-appellee. Having reached the conclusion that the facts
alleged in the complaint are not sufficient to
FACTS: In 1936, plaintiff filed an amended constitute a cause of action on the part of
complaint against Carmen de Luna in her own plaintiff as member of the partnership
name and as co-administratrix of the intestate "Centro Escolar de Señoritas" to collect
estate, of Librada Avelino, in praying that damages from defendant as managing
defendant be sentenced to pay him the sum of partner thereof, without a previous
P700,432 as damages and costs. Carmen de liquidation, we do not deem it necessary to
Luna interposed a demurrer based on the discuss the remaining question of whether or not
following grounds: (1) That the complaint does the complaint is ambiguous, unintelligible and
not contain facts sufficient to constitute a cause vague.
of action; and (2) that the complaint is
ambiguous, unintelligible and vague. Trial on the In view of the foregoing considerations, we are of
demurrer found the same well-founded and the opinion and so hold that for a partner to be
sustained it, ordering the plaintiff to amend his able to claim from another partner who
complaint within a period of ten days from receipt manages the general co-partnership,
of notice of the order. damages allegedly suffered by him by
reason of the fraudulent administration of
Plaintiff having manifested that he would prefer the latter, a previous liquidation of said
not to amend his amended complaint, the partnership is necessary.
attorney for the defendant, filed a motion praying
that the amended complaint be dismissed. Said G.R. No. L-27343. February 28, 1979
motion was granted by The CFI of Manila. MANUEL G. SINGSONG, et al., BACOLOD
Appellant took an appeal. SOUTHERN LUMBER YARD, and OPPEN,
ESTEBAN, INC., plaintiffs-appellees, vs.
 ISABELA SAWMILL, et al., defendants-
appellants. The fact that the defendant ‘Isabela Sawmill’ is
indebted to the plaintiff Oppen, Esteban, Inc. in
FACTS: In 1951 the defendants Leon Garibay, the amount of P1,288.89 as the unpaid balance
Margarita G. Saldejeno, and Timoteo of an obligation of P20,500.00 contracted is
Tubungbanua entered into a Contract of expressly admitted in paragraph 2 and 3 of the
Partnership under the firm name “Isabela Stipulation.
Sawmill”.
It is contended by the appellants that the CFI of
That in 1956, the plaintiff Oppen, Esteban, Inc. Negros Occidental had no jurisdiction over Civil
sold a Motor Truck and two Tractors to the Case No. 5343 because the plaintiffs Oppen,
partnership Isabela Sawmill for the sum of Esteban, Inc., Agustin R. Tonsay, Jose L. Espinos
P20,500.00. In order to pay the said purchase and the Bacolod Southern Lumber Yard sought to
price, the said partnership agreed to make collect sums of money, the biggest amount of
arrangements with the International Harvester which was less than P2,000.00 and, therefore,
Company at Bacolod City so that the latter would within the jurisdiction of the municipal court.
sell farm machinery to Oppen, Esteban, Inc. with
the understanding that the price was to be paid ISSUE: Whether or not the remaining
by the partnership. That through the method of partners terminate the business of the
payment stipulated in the contract, the partnership “Isabela Sawmill”.
International Harvester Company has been paid a
total of P19,211.11, leaving an unpaid balance of RULING: No. It is true that the dissolution of
P1,288.89. a partnership is caused by any partner
ceasing to be associated in the carrying on
In 1958, Civil Case No. 4797 was filed by the of the business. However, on dissolution,
spouses Cecilio Saldajeno and Margarita G. the partnership is not terminated but
Saldajeno against the Isabela Sawmill, Leon continuous until the winding up to the
Garibay, and Timoteo Tubungbanua. Defendants business.
Leon Garibay, Timoteo Tubungbanua and
Margarita G. Saldajeno entered into a The remaining partners did not terminate the
“Memorandum Agreement” and executed a business of the partnership “Isabela Sawmill”.
document entitled “Assignment of Rights with Instead of winding up the business of the
Chattel Mortgage”. That thereafter the partnership, they continued the business still in
defendants Leon Garibay and Timoteo the name of said partnership. It is expressly
Tubungbanua did not divide the assets and stipulated in the memorandum-agreement that
properties of the “Isabela Sawmill” between the remaining partners had constituted
them, but they continued the business of said themselves as the partnership entity, the
partnership under the same firm name “Isabela “Isabela Sawmill”.
Sawmill”.
There was no liquidation of the assets of the
In 1959, the Provincial Sheriff of Negros partnership. The remaining partners, Leon
Occidental published two (2) notices that he Garibay and Timoteo Tubungbanua, continued
would sell at public auction certain trucks, doing the business of the partnership in the name
tractors, machinery, office equipment and other of “Isabela Sawmill”. They used the properties of
things that were involved in Civil Case No. 5223 said partnership.
of the Court of First Instance of Negros
Occidental, entitled "Margarita G. Saldajeno vs. The properties mortgaged to Margarita G.
Leon Garibay, et al." In 1969, the Provincial Saldajeno by the remaining partners, Leon
Sheriff of Negros Occidental executed a Garibay and Timoteo Tubungbanua, belonged to
Certificate of Sale in favor of the defendant the partnership “Isabela Sawmill.” The appellant,
Margarita G. Saldajeno, as a result of the sale Margarita G. Saldajeno, was correctly held liable
conducted by him. by the trial court because she purchased at public
auction the properties of the partnership which
In 1959, the defendant Margarita G. Saldajeno were mortgaged to her.
executed a deed of sale in favor of the Pan
Oriental Lumber Company transferring to the It does not appear that the withdrawal of
latter for the sum of P45,000.00 the trucks, Margarita G. Saldajeno from the partnership was
tractors, machinery, and other things that she published in the newspapers. The appellees and
had purchased at a public. the public in general had a right to expect that
whatever, credit they extended to Leon Garibay drawn in the handwriting of appellant. Appellees
and Timoteo Tubungbanua doing the business in thereafter made demands upon appellant for
the name of the partnership “Isabela Sawmill” payment, but appellant having refused, they filed
could be enforced against the properties of said the initial complaint in the court below. Appellant
partnership. The judicial foreclosure of the chattel defended by denying any partnership with
mortgage executed in favor of Margarita G. appellees, whom he claimed to be mere
Saldajeno did not relieve her from liability to the employees of his.
creditors of the partnership.
The CFI of Bohol dismissed the complaint on the
The appellant, Margrita G. Saldajeno, cannot ground that the other were indispensable parties
complain. She is partly to blame for not insisting but did not been impleaded. Upon appeal, the CA
on the liquidation of the assets of the reversed.
partnership. She even agreed to let Leon Garibay
and Timoteo Tubungbanua continue doing the ISSUE: Whether or not the appellees' action
business of the partnership “Isabela Sawmill” by cannot be entertained, because in the
entering into the memorandum-agreement with distribution of all or part of a partnership's
them. assets, all the partners have no interest and
are indispensable parties without whose
Although it may be presumed that Margarita G. intervention no decree of distribution can be
Saldajeno had action in good faith, the appellees validly entered.
also acted in good faith in extending credit to the
partnership. Where one of two innocent RULING: Yes. A partner's share cannot be
persons must suffer, that person who gave returned without first dissolving and
occasion for the damages to be caused must liquidating the partnership (Po Yeng Cheo
bear the consequences. Had Margarita G. vs. Lim Ka Yam, 44 Phil. 177), for the return
Saldajeno not entered into the memorandum- is dependent on the discharge of the
agreement allowing Leon Garibay and Timoteo creditors, whose claims enjoy preference
Tubungbanua to continue doing the business of over those of the partners; and it is self-
the partnership, the appellees would not have evident that all members of the partnership
been misled into thinking that they were still are interested in his assets and business,
dealing with the partnership “Isabela Sawmill”. and are entitled to be heard in the matter of
Under the facts, it is of no moment that the firm's liquidation and the distribution of
technically speaking the partnership its property. The liquidation is not signed by the
“Isabela Sawmill” was dissolved by the other members of the partnership besides
withdrawal therefrom of Margarita G. appellees and appellant; it does not appear that
Saldajeno. The partnership was not they have approved, authorized, or ratified the
terminated and it continued doping business same, and, therefore, it is not binding upon
through the two remaining partners. them. At the very least, they are entitled to be
heard upon its correctness.
G.R. No. L-17526. June 30, 1962
GREGORIO MAGDUSA, ET AL., petitioners, vs. In addition, unless a proper accounting and
GERUNDIO ALBARAN, ET AL., respondents. liquidation of the partnership affairs is first
had, the capital shares of the appellees, as
FACTS: The CA found that appellant and retiring partners, cannot be repaid, for the
appellees, together with various other persons, firm's outside creditors have preference
had verbally formed a partnership de facto, for over the assets of the enterprise (Civ. Code,
the sale of general merchandise in Surigao, to Art. 1839), and the firm's property cannot
which appellant contributed P2,000 as capital, be diminished to their prejudice. Finally, the
and the others contributed their labor, under the appellant cannot be held liable in his personal
condition that out of the net profits of the capacity for the payment of partners' shares for
business 25% would be added to the original he does not hold them except as manager of, or
capital, and the remaining 75% would be divided trustee for, the partnership. It is the latter that
among the members in proportion to the length must refund their shares to the retiring partners.
of service of each. Sometime in 1953 and 1954, Since not all the members of the partnership
the appellees expressed their desire to withdraw have been impleaded, no judgment for refund
from the partnership, and appellant thereupon can be rendered, and the action should have
made a computation to determine the value of been dismissed.
the partners' shares to that date. The results of
the computation were embodied in the document G.R. No. L-40098. August 29, 1975
ANTONIO LIM TANHU, DY OCHAY, ALFONSO reconsideration thereof. These motions were
LEONARDO NG SUA and CO OYO, petitioners, denied in an order dated December 6, 1974 but
vs. HON. JOSE R. RAMOLETE as Presiding received by the movants only on December 23,
Judge, Branch III, CFI, Cebu and TAN 1974. By resolution of January 24, 1975, the
PUT, respondents. Court of Appeals dismissed said petition, holding
that its filing was premature, considering that the
FACTS: Originally, this litigation was a complaint motion to quash the order of October 28, 1974
filed by respondent Tan Put only against the was still unresolved by the trial court. On the
spouses-petitioners Antonio Lim Tanhu and Dy other hand, on January 20, 1975, the other
Ochay. Subsequently, in an amended complaint, defendants, petitioners herein, filed their notice
their son Lim Teck Chuan and the other spouses- of appeal, appeal bond and motion for extension
petitioners Alfonso Leonardo Ng Sua and Co Oyo to file their record on appeal, which was granted.
and their son Eng Chong Leonardo were included
as defendants. In said amended complaint, ISSUE: Whether or not plaintiff is married to
respondent Tan alleged that she is the widow of the deceased Tee Hoon Lim Po Chuan to be
Tee Hoon Lim Po Chuan, who was a partner in entitled to ¹/3 share of the assets and
the commercial partnership, Glory Commercial properties of the partnership.
Company with Antonio Lim Tanhu and Alfonso Ng
Sua that defendant Antonio Lim Tanhu, Alfonso RULING: No. Under Article 55 of the Civil Code,
Leonardo Ng Sua, Lim Teck Chuan, and Eng the declaration of the contracting parties that
Chong Leonardo, through fraud and machination, they take each other as husband and wife “shall
took actual and active management of the be set forth in an instrument” signed by the
partnership and although Tee Hoon Lim Po Chuan parties as well as by their witnesses and the
was the manager of Glory Commercial Company, person solemnizing the marriage. Accordingly,
defendants managed to use the funds of the the primary evidence of a marriage must be an
partnership to purchase lands and building's in authentic copy of the marriage contract. While a
the cities of Cebu, Lapulapu, Mandaue, and the marriage may also be proved by other competent
municipalities of Talisay and Minglanilla, some of evidence, the absence of the contract must first
which were hidden, but the description of those be satisfactorily explained. Surely, the
already discovered were stated. certification of the person who allegedly
solemnized a marriage is not admissible evidence
In a single answer with counterclaim, over the of such marriage unless proof of loss of the
signature of their common counsel, defendants contract or of any other satisfactory reason for its
denied specifically not only the allegation that non-production is first presented to the court. In
respondent Tan is the widow of Tee Hoon the case at bar, the purported certification issued
because, according to them, his legitimate wife by a Mons. Jose M. Recoleto, Bishop, Philippine
was Ang Siok Tin still living and with whom he Independent Church, Cebu City, is not, therefore,
had four (4) legitimate children, a twin born in competent evidence, there being absolutely no
1942, and two others born in 1949 and 1965, all showing as to unavailability of the marriage
presently residing in Hongkong, but also all the contract and, indeed, as to the authenticity of the
allegations of fraud and conversion quoted above, signature of said certifier, the jurat allegedly
the truth being, according to them, that proper signed by a second assistant provincial fiscal not
liquidation had been regularly made of the being authorized by law, since it is not part of the
business of the partnership and Tee Hoon used to functions of his office. Besides, inasmuch as the
receive his just share until his death, as a result bishop did not testify, the same is hearsay.
of which the partnership was dissolved and what
corresponded to him were all given to his wife Incidentally, another memorandum purports to
and children. be the certificate of birth of one Antonio T. Uy
supposed to have been born on March 23, 1937
On February 3, 1973, however, the date set for at Centro Misamis, Misamis Occidental, the son of
the pre-trial, both of the two defendants-spouses one Uy Bien, father, and Tan Put, mother.
the Lim Tanhus and Ng Suas, did not appear, for Significantly, respondents have not made any
which reason, upon motion of plaintiff, they were adverse comment on this document. It is more
all “declared in DEFAULT when they failed to likely, therefore, that the witness is really the son
appear at the pre-trial.” of plaintiff by her husband Uy Kim Beng. But she
testified she was childless. So which is which? In
Upon learning of these orders, the defendant Lim any event, if on the strength of this document,
Teck Cheng and defendant Eng Chong Leonardo, Nuñez is actually the legitimate son of Tan Put
thru their counsels, filed a motion for and not her adopted son, he would have been but
13 years old in 1949, the year of her alleged In the light of all these circumstances, We find no
marriage to Po Chuan, and even then, alternative but to hold that plaintiff Tan Put's
considering such age, his testimony in regard allegation that she is the widow of Tee Hoon Lim
thereto would still be suspect. Po Chuan has not been satisfactorily established
and that, on the contrary, the evidence on record
We refer to the income tax return of the convincingly shows that her relation with said
deceased Tee Hoon Lim Po Chuan indicating that deceased was that of a common-law wife and
the name of his wife was Ang Sick Tin and (2) the furthermore, that all her claims against the
quitclaim, wherein plaintiff Tan Put stated that company and its surviving partners as well as
she had been living with the deceased without those against the estate of the deceased have
benefit of marriage and that she was his already been settled and paid.
“common-law wife”. Surely, these two documents
are far more reliable than all the evidence of the If, as We have seen, plaintiff's evidence of her
plaintiff put together. alleged status as legitimate wife of Po Chuan is
not only unconvincing but has been actually
And in regard to the quitclaim containing the overcome by the more competent and weighty
admission of a common-law relationship only, it evidence in favor of the defendants, her attempt
is to be observed that His Honor found that to substantiate her main cause of action that
“defendants Lim Tanhu and Ng Sua had the defendants Lim Tanhu and Ng Sua have
plaintiff execute a quitclaim where they gave defrauded the partnership Glory Commercial Co.
plaintiff the amount of P25,000 as her share in and converted its properties to themselves is
the capital and profits of the business of Glory even more dismal. From the very evidence
Commercial Co. which was engaged in the summarized by His Honor in the decision in
hardware business”, without making mention of question, it is clear that not an iota of reliable
any evidence of fraud and misrepresentation in proof exists of such alleged misdeeds.
its execution, thereby indicating either that no
evidence to prove that allegation of the plaintiff Of course, the existence of the partnership has
had been presented by her or that whatever not been denied, it is actually admitted impliedly
evidence was actually offered did not produce in defendants' affirmative defense that Po
persuasion upon the court. Stated differently, Chuan's share had already been duly settled with
since the existence of the quitclaim has been duly and paid to both the plaintiff and his legitimate
established without any circumstance to detract family. But the evidence as to the actual
from its legal import, the court should have held participation of the defendants Lim Tanhu and Ng
that plaintiff was bound by her admission therein Sua in the operation of the business that could
that she was the common-law wife only of Po have enabled them to make the extractions of
Chuan and what is more, that she had already funds alleged by plaintiff is at best confusing and
renounced for valuable consideration whatever at certain points manifestly inconsistent.
claim she might have relative to the partnership
Glory Commercial Co. In her amended complaint, plaintiff repeatedly
alleged that as widow of Po Chuan she is entitled
And when it is borne in mind that in addition to to ¹/3 share of the assets and properties of the
all these considerations, there are mentioned and partnership. In fact, her prayer in said complaint
discussed in the memorandum of petitioners (1) is, among others, for the delivery to her of such
the certification of the Local Civil Registrar of ¹/3 share. According to the decision, plaintiff had
Cebu City and (2) a similar certification of the shown that she had money of her own when she
Apostolic Prefect of the Philippine Independent “married” Po Chuan and “that prior to and just
Church, Parish of Sto. Niño, Cebu City, that their after the marriage of the plaintiff to Po Chuan,
respective official records corresponding to she was engaged in the drugstore business; that
December 1949 to December 1950 do not show not long after her marriage, upon the suggestion
any marriage between Tee Hoon Lim Po Chuan of Po Chuan, the plaintiff sold her drugstore for
and Tan Put, neither of which certifications have P125,000 which amount she gave to her husband
been impugned by respondent until now, it in the presence of Tanhu and was invested in the
stands to reason that plaintiff's claim of marriage partnership Glory Commercial Co. sometime in
is really unfounded. Indeed, not only does this 1950; that after the investment of the above-
document prove that plaintiff's relation to the stated amount in the partnership, its business
deceased was that of a common-law wife but that flourished and it embarked in the import business
they had settled their property interests with the and also engaged in the wholesale and retail
payment to her of P40,000. trade of cement and GI sheets and huge profits.”
To begin with, this theory of her having His Honor confirmed the same by finding and
contributed of P125,000 to the capital of the holding that “it is likewise clear that real
partnership by reason of which the business properties together with the improvements in the
flourished and amassed all the millions referred names of defendants Lim Tanhu and Ng Sua were
to in the decision has not been alleged in the acquired with partnership funds as these
complaint, and inasmuch as what was being defendants were only partners-employees of
rendered was a judgment by default, such theory deceased Po Chuan in the Glory Commercial Co.
should not have been allowed to be the subject of until the time of his death on March 11, 1966.”
any evidence. But inasmuch as it was the clerk of Nowhere is it shown in the decision how said
court who received the evidence, it is defendants could have extracted money from the
understandable that he failed to observe the rule. partnership in the fraudulent and illegal manner
Then, on the other hand, if it was her capital that pretended by plaintiff. Neither in the testimony of
made the partnership flourish, why would she Nuñez nor in that of plaintiff, can there be found
claim to be entitled to only to ¹/ 3 of its assets and any single act of extraction of partnership funds
profits? Under her theory found proven by committed by any of said defendants. That the
respondent court, she was actually the owner of partnership might have grown into a multi-million
everything, particularly because His Honor also enterprise and that the properties described in
found “that defendants Lim Tanhu and Ng Sua the exhibits enumerated in the decision are not in
were partners in the name but they were the names of Po Chuan, who was Chinese, but of
employees of Po Chuan that defendants Lim the defendants who are Filipinos, do not
Tanhu and Ng Sua had no means of livelihood at necessarily prove that Po Chuan had not gotten
the time of their employment with the Glory his share of the profits of the business or that the
Commercial Co. under the management of the properties in the names of the defendants were
late Po Chuan except their salaries therefrom; ...” bought with money of the partnership.
Why then does she claim only ¹/ 3 share? Is this
an indication of her generosity towards If Po Chuan was in control of the affairs and the
defendants or of a concocted cause of action running of the partnership, how could the
existing only in her confused imagination defendants have defrauded him of such huge
engendered by the death of her common-law amounts as plaintiff had made his Honor believe?
husband with whom she had settled her Upon the other hand, since Po Chuan was in
common-law claim for recompense of her control of the affairs of the partnership, the more
services as common law wife for less than what logical inference is that if defendants had
she must have known would go to his legitimate obtained any portion of the funds of the
wife and children? partnership for themselves, it must have been
with the knowledge and consent of Po Chuan, for
Actually, as may be noted from the decision which reason no accounting could be demanded
itself, the trial court was confused as to the from them therefor, considering that Article 1807
participation of defendants Lim Tanhu and Ng of the Civil Code refers only to what is taken by a
Sua in Glory Commercial Co. At one point, they partner without the consent of the other partner
were deemed partners, at another point mere or partners.
employees and then elsewhere as partners-
employees, a newly found concept, to be sure, in Moreover, it is very significant that according to
the law on partnership. And the confusion is the very tax declarations and land titles listed in
worse comfounded in the judgment which allows the decision, most if not all of the properties
these "partners in name” and “partners- supposed to have been acquired by the
employees” or employees who had no means of defendants Lim Tanhu and Ng Sua with funds of
livelihood and who must not have contributed the partnership appear to have been transferred
any capital in the business, “as Po Chuan was to their names only in 1969 or later, that is, long
practically the owner of the partnership having after the partnership had been automatically
the controlling interest”, ¹/3 each of the huge dissolved as a result of the death of Po Chuan.
assets and profits of the partnership. Incidentally, Accordingly, defendants have no obligation to
it may be observed at this juncture that the account to anyone for such acquisitions in the
decision has made Po Chuan play the inconsistent absence of clear proof that they had violated the
role of being “practically the owner” but at the trust of Po Chuan during the existence of the
same time getting his capital from the P125,000 partnership. (See Hanlon vs. Hansserman and.
given to him by plaintiff and from which capital Beam, 40 Phil. 796.)
the business allegedly “flourished.”
The decision is rather emphatic in that Lim Tanhu
and Ng Sua had no known income except their
salaries. On the other hand, with respect to Lim might result after such liquidation to belong
Tanhu, the decision itself states that according to to the deceased partner, and before this is
the supposed income tax return of Lim Tanhu for finished, it is impossible to determine, what
1964, he had an income of P4,800 as salary from rights or interests, if any, the deceased had
Philippine Metal Industries alone and had a total (Bearneza vs. Dequilla 43 Phil. 237). In other
assess sable net income of P23,920.77 that year words, no specific amounts or properties
for which he paid a tax of P4,656.00. And he had may be adjudicated to the heir or legal
a net income of P32,000 for which be paid a tax representative of the deceased partner
of P3,512.40. As early as 1962, “his fishing without the liquidation being first
business in Madridejos Cebu was making money, terminated.
and he reported a net gain from operation the
amount of P865.64”. From what then did his Cristobal Bonnevie vs. Jaime Hernandez
Honor gather the conclusion that all the 95 Phil. 175
properties registered in his name have come
from funds malversed from the partnership? FACTS: Plaintiffs with other associates formed a
secret partnership for the purpose of acquiring
It is rather unusual that His Honor delved into the properties of the MERALCO. No formal articles
financial statements and books of Glory were drawn as the members intended to
Commercial Co. without the aid of any incorporate once the deal had been
accountant or without the same being explained consummated. In the meantime they elected
by any witness who had prepared them or who Serranzana and Serrano general manager and
has knowledge of the entries therein. This must secretary-treasurer. Negotiation for purchase
be the reason why there are apparent commenced but as it made no headway
inconsistencies and inaccuracies in the defendant Hernandez was taken in as member so
conclusions His Honor made out of them. We do that he could push the deal through. Using
not hesitate to make the observation that His partnership funds, he was able to buy the
Honor, unless he is a certified public accountant, MERALCO properties for P122,000.
was hardly qualified to read such exhibits and
draw any definite conclusions therefrom, without The members then proceeded with formation of
risk of erring and committing an injustice. Under the proposed corporation, apportioning among
the circumstances, We are not prepared to permit themselves its shares of stock in proportion to
anyone to predicate any claim or right from their contributions to the capital and their
respondent court's unaided exercise of individual efforts in acquiring of the MERALCO
accounting knowledge. properties. But before the incorporation papers
could be perfected, plaintiffs together with Judge
Additionally, We note that the decision has not Reyes expressed their desire to withdraw from
made any finding regarding the allegation in the the partnership and get back their investment
amended complaint that a corporation due to fear that the venture might be a failure.
denominated Glory Commercial Co., Inc. was The members agreed to a resolution that those
organized after the death of Po Chuan with partners who did not want to remain in the
capital from the funds of the partnership. We association should be allowed to withdraw and
further note that while His Honor has ordered get back their contributions. Plaintiffs et al.
defendants to deliver or pay jointly and severally withdrew from the partnership, and the same
to the plaintiff P4,074,394.18 or ¹/ 3 of the was dissolved. The next day the withdrawing
P12,223,182.55, the supposed cash belonging to partners were reimbursed their respective
the partnership, in the same breath, they have contributions to the partnership fund.
also been sentenced to partition and give
¹/3 share of the properties enumerated in the The members who remained in formed the
dispositive portion of the decision, which corporation and took in new associates. And
seemingly are the very properties allegedly defendant, in fulfillment of his trust, made a
purchased from the funds of the partnership formal assignment of the MERALCO properties to
which would naturally include the the treasurer of the corporation, giving them a
P12,223,182.55 defendants have to account for. book value of P365,000, in return for which the
Besides, assuming there has not yet been corporation issued, to the various subscribers to
any liquidation of the partnership, contrary its capital stock, shares of stock of the total face
to the allegation of the defendants, then value of P225,000 and assumed the obligation of
Glory Commercial Co. would have the status paying what was still due the MERALCO on the
of a partnership in liquidation and the only purchase price. The new corporation was named
right plaintiff could have would be to what “Bicol Electric Company.”
 On the theory that as managing partner, it was
On its first year, the company was losing money defendant's duty to liquidate its affairs upon its
but the business became profitable eventually. dissolutions. Plaintiffs never asked for liquidation
Two years from their withdrawal from the during the dissolution. No liquidation was called
partnership, plaintiffs brought the present for because when plaintiffs withdrew from the
suit against Jaime Hernandez, claiming a share in partnership the understanding was that after
the profit the latter is supposed to have made they had been reimbursed their investment, they
from the assignment of the MERALCO properties were no longer to have any further interest in the
to the corporation, estimated by plaintiffs to partnership or its assets and liabilities.
be P225,000 and their share of it to be
P115,312.50. As a general rule, when a partner retires from
the firm, he is entitled to the payment of
Defendant's answer denies that he has made any what may be due him after liquidation. But
profit out of the assignment in question and certainly no liquidation is necessary where there
alleges that in any event plaintiffs, after their is already a settlement or an agreement as to
withdrawal from the partnership, ceased to have what the retiring partner shall receive,
any further interest in the subsequent similar to the instant case.
transactions of the remaining members.
A settlement was agreed upon on the very day
Plaintiffs filed a suit against Jaime Hernandez, the partnership was dissolved. When plaintiffs
claiming a share in the profit the latter is and Judge Jaime Reyes withdrew from the
supposed to have made from the assignment of partnership, the only condition was that they
the MERALCO properties to the corporation. were to be repaid their contributions or
investments within three days from said
ISSUE: Whether or not the partnership had date. Condition was fulfilled when on the
realized profit out of the MERALCO following day they were reimbursed the
properties made by the defendant to the respective amounts due them pursuant to
corporation. No. the agreement.

If there was indeed a profit, Whether or not Acceptance by the withdrawing partners,
the plaintiffs are entitled for their share out including plaintiffs, of their investment, was
of such profit. No. understood and intended by all the parties as
a final settlement of their rights or claim the
RULING: withdrawing partners might have in the
dissolved partnership. Such being the case
1. No. It is true that the value set for those they are now precluded from claiming any share
properties in the deed of assignment in the alleged profits, should there be any, at the
was P365,000 when the acquisition price time of the dissolution.
was only P122,000. The difference between
the two sums was really made out of the G.R. No. 109248 July 3, 1995
transaction, for the assignment was not GREGORIO F. ORTEGA, TOMAS O. DEL
made for cash but in payment for CASTILLO, JR., and BENJAMIN T.
subscriptions to shares of stock in the BACORRO, petitioners, vs. HON. COURT OF
assignee, and while those shares had a total APPEALS, SECURITIES AND EXCHANGE
face value of P225,000 this is not COMMISSION and JOAQUIN L.
necessarily their real worth. MISA, respondents.

2. No Assuming that the assignment actually FACTS: The law firm of ROSS, LAWRENCE,
brought profit to the partnership, it plaintiffs were SELPH and CARRASCOSO was duly registered in
still not entitled to receive from the profit. the Mercantile Registry on 4 January 1937 and
reconstituted with the Securities and Exchange
Plaintiffs maintain that the latter should be Commission on 4 August 1948. The SEC records
held liable for damages caused to them, show that there were several subsequent
consisting of the loss of their share of the amendments to the articles of partnership, to
profits, due to defendant's failure to perform change the firm name to ROSS, SELPH and
his duty as a liquidator of the dissolved CARRASCOSO; on 6 July 1965 . . . to ROSS,
partnership SELPH, SALCEDO, DEL ROSARIO, BITO & MISA;
on 18 April 1972 to SALCEDO, DEL ROSARIO,
BITO, MISA & LOZADA; on 4 December 1972 to
SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA; any retiring or withdrawing partner in the
on 11 March 1977 to DEL ROSARIO, BITO, MISA partnership interest.
& LOZADA; on 7 June 1977 to BITO, MISA &
LOZADA; on 19 December 1980, Joaquin L. Misa On appeal, the SEC en banc reversed the decision
appellees Jesus B. Bito and Mariano M. Lozada of the Hearing Officer and held that the
associated themselves together, as senior withdrawal of Attorney Joaquin L. Misa had
partners with respondents-appellees Gregorio F. dissolved the partnership of “Bito, Misa &
Ortega, Tomas O. del Castillo, Jr., and Benjamin Lozada.” The Commission ruled that, being a
Bacorro, as junior partners. partnership at will, the law firm could be
dissolved by any partner at anytime, such as by
On February 17, 1988, petitioner-appellant wrote his withdrawal therefrom, regardless of good
the respondents-appellees a letter stating: faith or bad faith, since no partner can be forced
I am withdrawing and retiring from the to continue in the partnership against his will.
firm of Bito, Misa and Lozada, effective at
the end of this month. The parties sought a reconsideration of the above
“I trust that the accountants will be decision. Attorney Misa, in addition, asked for an
instructed to make the proper liquidation appointment of a receiver to take over the assets
of my participation in the firm.” of the dissolved partnership and to take charge of
the winding up of its affairs. SEC issued an order
On the same day, petitioner-appellant wrote denying reconsideration, as well as rejecting the
respondents-appellees another letter stating: petition for receivership. The parties filed with the
“Further to my letter to you today, I would appellate court separate appeals.
like to have a meeting with all of you with
regard to the mechanics of liquidation, During the pendency of the case with the Court
and more particularly, my interest in the of Appeals, Attorney Jesus Bito and Attorney
two floors of this building. I would like to Mariano Lozada both died on, respectively, 05
have this resolved soon because it has to September 1991 and 21 December 1991. The
do with my own plans.” Court of Appeals, finding no reversible error on
the part of respondent Commission, AFFIRMED in
On 19 February 1988, petitioner-appellant wrote toto the SEC decision and order appealed from.
respondents-appellees another letter stating:
“The partnership has ceased to be ISSUE:
mutually satisfactory because of the 1. Whether or not the Court of Appeals has
working conditions of our employees erred in holding that the partnership of Bito,
including the assistant attorneys. All my Misa & Lozada (now Bito, Lozada, Ortega &
efforts to ameliorate the below Castillo) is a partnership at will;
subsistence level of the pay scale of our 2. Whether or not the Court of Appeals has
employees have been thwarted by the erred in holding that the withdrawal of
other partners. Not only have they refused private respondent dissolved the
to give meaningful increases to the partnership regardless of his good or bad
employees, even attorneys, are dressed faith; and
down publicly in a loud voice in a manner
that deprived them of their self-respect. RULING:
The result of such policies is the formation 1. Yes. A partnership that does not fix its term is
of the union, including the assistant a partnership at will. That the law firm “Bito, Misa
attorneys.” & Lozada,” and now “Bito, Lozada, Ortega and
Castillo,” is indeed such a partnership need not
On 30 June 1988, petitioner filed with this be unduly belabored. We quote, with approval,
Commission's Securities Investigation and like did the appellate court, the findings and
Clearing Department (SICD) a petition for disquisition of respondent SEC on this
dissolution and liquidation of partnership. On 13 matter; viz:
July 1988, respondents-appellees filed their
opposition to the petition. Petitioner filed his The partnership agreement (amended
Reply to the Opposition. On 31 March 1989, the articles of 19 August 1948) does not
hearing officer rendered a decision enjoining provide for a specified period or
petitioner and respondenst to abide by the undertaking. The “DURATION” clause
provisions of the Agreement relative to the simply states:
matter governing the liquidation of the shares of "5. DURATION. The
partnership shall continue
 so long as mutually good faith, not that the attendance of bad
satisfactory and upon the faith can prevent the dissolution of the
death or legal incapacity of partnership but that it can result in a
one of the partners, shall be liability for damages.
continued by the surviving
partners." 2. NO. In passing, neither would the presence
of a period for its specific duration or the
The hearing officer however opined that statement of a particular purpose for its
the partnership is one for a specific creation prevent the dissolution of any
undertaking and hence not a partnership partnership by an act or will of a partner.
at will, citing paragraph 2 of the Amended Among partners, mutual agency arises and the
Articles of Partnership (19 August 1948): doctrine of delectus personae allows them to
"2. Purpose. The purpose have the power, although not necessarily
for which the partnership is the right, to dissolve the partnership. An
formed, is to act as legal unjustified dissolution by the partner can subject
adviser and representative him to a possible action for damages.
of any individual, firm and
corporation engaged in The dissolution of a partnership is the
commercial, industrial or change in the relation of the parties caused
other lawful businesses and by any partner ceasing to be associated in
occupations; to counsel and the carrying on, as might be distinguished
advise such persons and from the winding up of, the business. Upon
entities with respect to their its dissolution, the partnership continues
legal and other affairs; and and its legal personality is retained until the
to appear for and represent complete winding up of its business
their principals and client in culminating in its termination.
all courts of justice and
government departments The liquidation of the assets of the
and offices in the partnership following its dissolution is
Philippines, and elsewhere governed by various provisions of the Civil
when legally authorized to Code; however, an agreement of the
do so." partners, like any other contract, is binding
among them and normally takes precedence
The “purpose” of the partnership is not to the extent applicable over the Code's
the specific undertaking referred to in the general provisions.
law. Otherwise, all partnerships, which
necessarily must have a purpose, would The term “retirement” must have been used in
all be considered as partnerships for a the articles, as we so hold, in a generic sense to
definite undertaking. There would mean the dissociation by a partner, inclusive of
therefore be no need to provide for resignation or withdrawal, from the partnership
articles on partnership at will as none that thereby dissolves it.
would so exist. Apparently what the law
contemplates, is a specific undertaking or
“project” which has a definite or definable
period of completion.

The birth and life of a partnership at will is

predicated on the mutual desire and consent
of the partners. The right to choose with
whom a person wishes to associate himself
is the very foundation and essence of that
partnership. Its continued existence is, in
turn, dependent on the constancy of that
mutual resolve, along with each partner's
capability to give it, and the absence of a
cause for dissolution provided by the law
itself. Verily, any one of the partners may, at
his sole pleasure, dictate a dissolution of the
partnership at will. He must, however, act in