Sy v. CA [G.R. No. 94285. August 31, 1999] JESUS SY, JAIME SY, ESTATE OF JOSE SY, ESTATE OF VICENTE SY, HEIR OF MARCIANO SY represented by JUSTINA VDA. DE SY and WILLIE SY, petitioners, vs. THE COURT OF APPEALS, INTESTATE ESTATE OF SY YONG HU, SEC. HEARING OFFICER FELIPE TONGCO, SECURITIES AND EXCHANGE COMMISSION, respondents. [G.R. No. 100313. August 31, 1999] SY YONG HU & SONS, JOHN TAN, BACOLOD CANVAS AND UPHOLSTERY SUPPLY CO., AND NEGROS ISUZU SALES, petitioners, vs. HONORABLE COURT OF APPEALS (11th Division), INTESTATE ESTATE OF THE LATE SY YONG HU, JOSE FALSIS, JR., AND HON. BETHEL KATALBAS-MOSCARDON, RTC OF NEGROS OCCIDENTAL, Branch 51, respondents. At bar are two consolidated petitions for review on certiorari under Rule 45 of the Revised Rules of Court, docketed as G. R. Nos. 94285 and G.R. No. 100313, respectively, seeking to reinstate the Resolution of the Court of Appeals in CA - G. R. SP No. 17070 and its Decision in CA-G. R. SP No. 24189. In G. R. No. 94285, the petitioners assail the Resolution dated June 27, 1990 of the Court of Appeals granting the Motion for Reconsideration interposed by the petitioners (now the private respondents) of its Decision, promulgated on January 15, 1990, which affirmed the Order issued on January 16, 1989 by the Securities and Exchange Commission (SEC) en banc and the Order of SEC Hearing Officer Felipe Tongco, dated October 5, 1988, The facts that matter are as follows: Sy Yong Hu & Sons is a partnership of Sy Yong Hu and his sons, Jose Sy, Jayme Sy, Marciano Sy, Willie Sy, Vicente Sy, and Jesus Sy, registered with the SEC on March 29, 1962, with Jose Sy as managing partner. The partners and their respective shares are reflected in the Amended Articles of Partnership as follows: NAMES AMOUNT CONTRIBUTED SY YONG HU P 31, 000. 00 JOSE S. SY 205, 000. 00 JAYME S. SY 112, 000. 00 MARCIANO S. SY 143, 000. 00 WILLIE S. SY 85, 000. 00 VICENTE SY 85, 000. 00 JESUS SY 88, 000. 00 Partners Sy Yong Hu, Jose Sy, Vicente Sy, and Marciano Sy died on May 18, 1978, August 12, 1978, December 30, 1979 and August 7, 1987, respectively. At present, the partnership has valuable assets such as tracts of lands planted to sugar cane and commercial lots in the business district of Bacolod City. Sometime in September, 1977, during the lifetime of all the partners, Keng Sian brought an action, docketed as Civil Case No. 13388 before the then Court of First Instance of Negros Occidental, against the partnership as well as against the individual partners for accounting of all the properties allegedly owned in common by Sy Yong Hu and the plaintiff (Keng Sian), and for the delivery or reconveyance of her one- half (1/2) share in said properties and in the fruits thereof. Keng Sian averred that she was the common law wife of partner Sy Yong Hu, that Sy Yong Hu, together with his children, who were partners in the partnership, connived to deprive her of her share in the properties acquired during her cohabitation with Sy Yong Hu, by diverting such properties to the partnership. In their answer dated November 3, 1977, the defendants, including Sy Yong Hu himself, countered that Keng Sian is only a house helper of Sy Yong Hu and his wife, subject properties are exclusively owned by defendant partnership, and plaintiff has absolutely no right to or interest therein. On September 20, 1978, during the pendency of said civil case, Marciano Sy filed a petition for declaratory relief against partners Vicente Sy, Jesus Sy and Jayme Sy, docketed as SEC Case No. 1648, praying that he be appointed managing partner of the partnership, to replace Jose Sy who died on August 12, 1978. Answering the petition, Vicente Sy, Jesus Sy and Jaime Sy, who claim to represent the majority interest in the partnership, sought the dissolution of the partnership and the appointment of Vicente Sy as managing partner. In due time, Hearing Officer Emmanuel Sison came out with a decision (Sison Decision) dismissing the petition, dissolving the partnership and naming Jesus Sy, in lieu of Vicente Sy who had died earlier, as the managing partner in charge of winding the affairs of the partnership. The Sison decision was affirmed in toto by the SEC en banc in a decision (Abello decision) dated June 8, 1982, disposing thus: WHEREFORE, the Commission en banc affirms the dispositive portion of the decision of the Hearing Officer, but clarifies that: (1) the partnership was dissolved by express will of the majority and not ipso facto because of the death of any partner in view of the stipulation of Articles of Partnership and the provisions of the New Civil Code particularly Art. 1837 [2] and Art. 1841. (2) The Managing Partner designated by the majority, namely Jesus Sy, vice Vicente Sy (deceased) shall only act as a manager in liquidation and he shall submit to the Hearing Officer an accounting and a project of partition, within 90 days from receipt of this decision. (3) The petitioner is also required within the same period to submit his counter-project of partition, from date of receipt of the Managing Partners project of partition. (4) The case is remanded to the Hearing Officer for evaluation and approval of the accounting and project of partition. On the basis of the above decision of the SEC en banc, Hearing Officer Sison approved a partial partition of certain partnership assets in an order dated December 2, 1986. Therefrom, respondents seasonably appealed. In 1982, the children of Keng Sian with Sy Yong Hu, namely, John Keng Seng, Carlos Keng Seng, Tita Sy, Yolanda Sy and Lolita Sy, filed a petition, docketed as SEC Case No 2338, to revoke the certificate of registration of Sy Yong Hu & Sons, and to have its assets reverted to the estate of the late Sy Yong Hu. After hearings, the petition was dismissed by Hearing Officer Bernardo T. Espejo in an Order, dated January 11, 1984, which Order became final since no appeal was taken therefrom. After the dismissal of SEC Case No. 2338, the children of Keng Sian sought to intervene in SEC Case No. 1648 but their motion to so intervene was denied in an Order dated May 9, 1985. There was no appeal from said order. In the meantime, Branch 43 of the Regional Trial Court of Negros Occidental appointed one Felix Ferrer as a Special Administrator for the Intestate Estate of Sy Yong Hu in Civil Case No. 13388. Then, on August 30, 1985, Alex Ferrer moved to intervene in the proceedings in SEC Case No. 1648, for the partition and distribution of the partnership assets, on behalf of the respondent Intestate Estate. It appears that sometime in December, 1985, Special Administrator Ferrer filed an Amended Complaint on behalf of respondent Intestate Estate in Civil Case No. 13388, wherein he joined Keng Sian as plaintiff and thereby withdrew as defendant in the case. Special Administrator Ferrer adopted the theory of Keng Sian that the assets of the partnership belong to Keng Sian and Sy Yong Hu (now represented by the Estate of Sy Yong Hu) in co-ownership, which assets were wrongfully diverted in favor of the defendants. The motion to intervene in SEC Case No. 1648, filed by Special Administrator Alex Ferrer on behalf of the respondent Estate, was denied in the order issued on May 9, 1986 by Hearing Officer Sison. With the denial of the motion for reconsideration, private respondent Intestate Estate of Sy Yong Hu appealed to the Commission en banc. PARTNERSHIP CASE DIGEST 1828-1842
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In its decision (Sulit decision) on the aforesaid appeal from the Order dated May 9, 1986, and the Order dated December 2, 1986, the SEC en banc ruled: WHEREFORE, in the interest of Justice and equity, substantive rights of due process being paramount over the rules of procedure, and in order to avoid multiplicity of suits; the order of the hearing officer below dated May 9, 1986 denying the motion to intervene in SEC Case No. 1648 of appellant herein as well as the order dated December 2, 1986 denying the motion for reconsideration are hereby reversed and the motion to intervene given due course. The instant case is hereby remanded to the hearing officer below for further proceeding on the aspect of partition and/or distribution of partnership assets. The urgent motion for the issuance of a restraining order is likewise hereby remanded to the hearing officer below for appropriate action. The said decision of the SEC en banc reiterated that the Abello decision of June 8, 1982, which upheld the order of dissolution of the partnership, had long become final and executory. No further appeal was taken from the Sulit Decision. During the continuation of the proceedings in SEC Case No. 1648, now presided over by Hearing Officer Felipe S. Tongco who had substituted Hearing Officer Sison, the propriety of placing the Partnership under receivership was taken up. The parties brought to the attention of the Hearing Officer the fact of existence of Civil Case No. 903 (formerly Civil Case No. 13388) pending before the Regional Trial Court of Negros Occidental. They also agreed that during the pendency of the aforesaid court case, there will be no disposition of the partnership assets.On October 5, 1988, Hearing Officer Tongco came out with an Order (Tongco Order) incorporating the above submissions of the parties and placing the partnership under a receivership committee, explaining that it is the most equitable fair and just manner to preserve the assets of the partnership during the pendency of the civil case in the Regional Trial Court of Bacolod City. On October 22, 1988, a joint Notice of Appeal to the SEC en banc was filed by herein petitioners Jayme Sy, Jesus Sy, Estate of Jose Sy, Estate of Vicente Sy, Heirs of Marciano Sy (represented by Justina Vda. de Sy), and Willie Sy, against the Intervenor (now private respondent). In an order (Lopez Order) dated January 16, 1989, the SEC en bancaffirmed the Tongco Order. With the denial of their Motion for Reconsideration, petitioners filed a special civil action for certiorari with the Court of Appeals. On January 15, 1990, the Court of Appeals granted the petition and set aside the Tongco and Lopez Orders, and remanded the case for further execution of the 1982 Abello and 1988 Sulit Decisions, ordering the partition and distribution of the partnership properties. Private respondent seasonably interposed a motion for reconsideration of such decision of the Court of Appeals. Acting thereupon on June 27, 1990, the Court of Appeals issued its assailed Resolution, reversing its Decision of January 15, 1990, and remanding the case to the SEC for the formation of a receivership committee, as envisioned in the Tongco Order. G. R. No. 100313 came about in view of the dismissal by the Court of Appeals of the Petition for Certiorari with a Prayer for Preliminary Injunction, docketed as CA-G. R. SP No. 24189, seeking to annul and set aside the orders, dated January 24, 1991 and April 19, 1989, respectively, in Civil Case No. 5326 before the Regional Trial Court of Bacolod City. The antecedent facts are as follows: Sometime in June of 1988, petitioner Sy Yong Hu & Sons through its Managing Partner, Jesus Sy, applied for a building permit to reconstruct its building called Sy Yong Hu & Sons Building, located in the central business district of Bacolod City, which had been destroyed by fire in the late 70s. On July 5, 1988, respondent City Engineer issued Building Permit No. 4936 for the reconstruction of the first two floors of the building. Soon thereafter, reconstruction work began. In January, 1989, upon completion of its reconstruction, the building was occupied by the herein petitioners, Bacolod and Upholstery Supply Company and Negros Isuzu Sales, which businesses are owned by successors-in-interest of the deceased partners Jose Sy and Vicente Sy. Petitioner John Tan, who is also an occupant of the reconstructed building, is the brother-in-law of deceased partner Marciano Sy. From the records on hand, it can be gleaned that the Tongco Order, dated October 5, 1988, in SEC Case No. 1648, had, among others, denied a similar petition of the intervenors therein (now private respondents) for a restraining order and/or injunction to enjoin the reconstruction of the same building. However, on October 10, 1988, respondent Intestate Estate sent a letter to the City Engineer claiming that Jesus Sy is not authorized to act for petitioners Sy Yong Hu & Sons with respect to the reconstruction or renovation of the property of the partnership. This was followed by a letter dated November 11, 1988, requesting the revocation of Building Permit No. 4936. Respondent City Engineer inquired later from Jesus Sy for an authority to sign for and on behalf of Sy Yong Hu & Sons to justify the latters signature in the application for the building permit, informing him that absent any proof of his authority, he would not be issued an occupancy permit On December 27, 1988, respondent Intestate Estate reiterated its objection to the authority of Jesus Sy to apply for a building permit and pointing out that in view of the creation of a receivership committee, Jesus Sy no longer had any authority to act for the partnership. In reply, Jesus Sy informed the City Engineer that the Tongco Order had been elevated to the SEC en banc, making him still the authorized manager of the partnership. He then requested that an occupancy permit be issued as Sy Yong Hu & Sons had complied with the requirements of the City Engineers Office and the National Building Code. Unable to convince the respondent City Engineer to revoke subject building permit, respondent Intestate Estate brought a Petition for Mandamus with prayer for a Writ of Preliminary Injunction, docketed as Civil Case No 5326 before the Regional Trial Court of Bacolod City and entitled Intestate Estate of the Late Sy Yong Hu vs. Engineer Jose P. Falsis, Jr. The Complaint concluded with the following prayer: WHEREFORE PREMISES CONSIDERED, it is respectfully prayed of the Honorable Court that: 1. A writ of Preliminary Injunction be issued to the respondent, after preliminary hearing is had. compelling his office to padlock the premises occupied, without the requisite Certificate of Occupancy; to stop all construction activities, and barricade the same premises so that the unwary public will not be subject to undue hazards due to lack of requisite safety precaution; 2. The Respondent be ordered to enforce without exemption every requisite provision of the Building Code as so mandated by it. Petitioners Sy Yong Hu & Sons, the owners of the building sought to be padlocked were not impleaded as party to the petition dated February 22, 1989. Neither were the lessees-occupants thereon so impleaded. Thus, they were not notified of the hearing scheduled for April 5, 1989, on which date the Petition was heard. Subsequently, however, the Regional Trial Court issued an order dated April 19, 1989 for the issuance of a Writ of Preliminary Mandatory Injunction ordering the City Engineer to padlock the building. On May 9, 1989, upon learning of the issuance of the Writ of Preliminary Injunction, dated May 4, 1989, petitioners immediately filed the: (1) Motion for Intervention; (2) Answer in Intervention; and (3) Motion to set aside order of mandatory injunction. In its order dated June 22, 1989, the Motion for Intervention was granted by the lower court through Acting Presiding Judge Porfirio A. Parian. On August 3, 1989, respondent Intestate Estate presented a Motion to cite Engineer Jose Falsis, Jr. in contempt of court for failure to implement the injunctive relief. On August 15, 1989, petitioners submitted an Amended Answer in Intervention. Reacting thereto, respondent Intestate Estate filed a Motion to Strike or Expunge from the Record the Amended Answer in Intervention. On January 25, 1990, petitioner Sy Yong Hu & Sons again wrote the respondent City Engineer to reiterate its request for the immediate issuance of a certificate of occupancy, alleging that the Court of Appeals in its Decision of January 15, 1990 in CA-G. R. No. 17070 had PARTNERSHIP CASE DIGEST 1828-1842
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reversed the SEC decision which approved the appointment of a receivership committee. However, the City Engineer refused to issue the Occupancy Permit without the conformity of the respondent Intestate Estate and one John Keng Seng who claims to be an Illegitimate son of the Late Sy Yong Hu. In an order issued on January 24, 1991 upon an Ex Parte Motion to Have All Pending Incidents Resolved filed by respondent Intestate Estate, Judge Bethel Katalbas-Moscardon issued an order modifying the Writ of Preliminary Mandatory Injunction, and directing the respondent City Engineer to: x x x immediately order stoppage of any work affecting the construction of the said building under Lot 259-A-2 located at Gonzaga Street adjacent to the present Banco de Oro Building, BACOLOD City, to cancel or cause to be cancelled the Building Permit it had issued; to order the discontinuance of the occupancy or use of said building or structure or portion thereof found to be occupied or used, the same being contrary and violative of the provisions of the Code; and to desist from issuing any certificate of Occupancy until the merits of this case can finally be resolved by this Court. x x x Again, it is emphasized that the issue involved is solely question of law and the Court cannot see any logical reason that the intervenors should be allowed to intervene as earlier granted in the Order of the then Presiding Judge Porfirio A. Parian, of June 22, 1989. Much less for said intervenors to move for presentation of additional parties, only on the argument of Intervenors that any restraining order to be issued by this Court upon the respondent would prejudice their present occupancy which is self serving, whimsical and in fact immoral. It is axiomatic that the means would not justify the end nor the end justify the means. Assuming damage to the present occupants will occur and assuming further that they are entitled, the same should be ventilated in a different action against the lessor or landlord, and the present petition cannot be the proper forum, otherwise, while it maybe argued that there is a multiplicity of suit which actually is groundless, on the other hand, there will be only confusion of the issues to be resolved by the Court. Well valid enough is to reiterate that the present petition is not the proper forum for the intervenors to shop for whatever relief. In view of the above, the Order allowing the intervenors in this case is likewise hereby withdrawn for the purposes above discussed. Consequently, the Motion to present additional parties is deemed denied, and the Motion to Strike Or Expunge From The Records the Amended Answer In Intervention is deemed granted as in fact the same become moot and academic with the elimination of the Intervenors in this case. Pursuant to the above Order of January 24, 1991, respondent City Engineer served a notice upon petitioners revoking Building Permit No. 4936, ordering the stoppage of all construction work on the building, and commanding discontinuance of the occupancy thereof. On February 15, 1991, the aggrieved petitioners filed a Petition for Certiorari with Prayer for Preliminary Injunction with the Court of Appeals, docketed as CA-G. R. SP No. 24189. On February 27, 1991, the Court of Appeals issued a Temporary Restraining Order enjoining the respondent Judge from implementing the questioned orders dated January 24, 1991 and April 19, 1989. After the respondents had sent in their answer, petitioners filed a Reply with a prayer for the issuance of a writ of mandamus directing the respondent City Engineer to reissue the building permit previously issued in favor of petitioner Sy Yong Hu & Sons, and to issue a certificate of occupancy on the basis of the admission by respondent City Engineer that petitioner had complied with the provisions of the National Building Code. On May 31, 1991, the Court of Appeals rendered its questioned decision denying the petition. From the Resolution of the Court of Appeals granting the motion for reconsideration in CA-G. R. SP No. 17070 and the Decision in CA-G. R. SP No. 24189, petitioners have come to this Court for relief. In G. R. No. 94285, petitioners contend by way of assignment of errors, that: I. RESPONDENT COURT OF APPEALS ERRED IN REVERSING ITS MAIN DECISION IN CA-G. R. No. 17070, WHICH DECISION HAD REMANDED TO THE SEC THE CASE FOR THE PROPER IMPLEMENTATION OF THE 1982 ABELLO AND 1988 SULIT DECISIONS WHICH IN TURN ORDERED THE DISTRIBUTION AND PARTITION OF THE PARTNERSHIP PROPERTIES. II. RESPONDENT COURT OF APPEALS ERRED IN REINSTATING THE TONGCO ORDER, WHICH HAD SUSPENDED THE DISSOLUTION OF THE PARTNERSHIP AND THE DISTRIBUTION OF ITS ASSETS, AND IN PLACING THE PARTNERSHIP PROPERTIES UNDER RECEIVERSHIP PENDING THE RESOLUTION OF CIVIL CASE NO. 903 (13388), ON A GROUND NOT MADE THE BASIS OF THE SEC RESOLUTION UNDER REVIEW, I. E., THE DISPOSITION BY A PARTNER OF SMALL PROPERTIES ALREADY ADJUDICATED TO HIM BY A FINAL SEC ORDER DATED DECEMBER 2, 1986 AND MADE LONG BEFORE THE AGREEMENT OF JUNE 28, 1988 OF THE PETITIONERS NOT TO DISPOSE OF THE PARTNERSHIP ASSETS. In G. R. No. 100313, Petitioners assign as errors, that: I. THE HONORABLE COURT OF APPEALS (ELEVENTH DIVISION) ERRED IN HOLDING THAT RESPONDENT JUDGE DID NOT ACT WITHOUT JURISDICTION AND WITH GRAVE ABUSE OF JURISDICTION IN ISSUING THE WRIT OF PRELIMINARY MANDATORY INJUNCTION. II. THE HONORABLE COURT OF APPEALS (ELEVENTH DIVISION) ERRED IN HOLDING THAT THE RESPONDENT JUDGE DID NOT ACT WITHOUT JURISDICTION AND WITH GRAVE ABUSE OF DISCRETION IN DISALLOWING THE INTERVENTION OF PETITIONERS IN CIVIL CASE NO. 5326. III. THE LOWER COURT ACTED WITH GRAVE ABUSE OF DISCRETION IN ISSUING AND ORDERING THE IMPLEMENTATION OF THE WRIT OF PRELIMINARY MANDATORY INJUNCTION DESPITE THE ABSENCE OR LACK OF AN INJUNCTION BOND. On the two (2) issues raised in G. R. No. 94285, the Court rules for respondents. Petitioners fault the Court of Appeals for affirming the 1989 Decision of the SEC which approved the appointment of a receivership committee as ordered by Hearing Officer Felipe Tongco. They theorize that the 1988 Tongco Decision varied the 1982 Abello Decision affirming the dissolution of the partnership, contrary to the final and executory tenor of the said judgment. To buttress their theory, petitioners offer the 1988 Sulit Decision which, among others, expressly confirmed the finality of the Abello Decision. On the same premise, petitioners aver that when Hearing Officer Tongco took over from Hearing Officer Sison, he was left with no course of action as far as the proceedings in the SEC Case were concerned other than to continue with the partition and distribution of the partnership assets. Thus, the Order placing the partnership under a receivership committee was erroneous and tainted with excess of jurisdiction. The contentions are untenable. Petitioners fail to recognize the basic distinctions underlying the principles of dissolution, winding up and partition or distribution. The dissolution of a partnership is the change in the relation of the parties caused by any partner ceasing to be associated in the carrying on, as might be distinguished from the winding up, of its business. Upon its dissolution, the partnership continues and its legal personality is retained until the complete winding up of its business culminating in its termination. The dissolution of the partnership did not mean that the juridical entity was immediately terminated and that the distribution of the assets to its partners should perfunctorily follow. On the contrary, the dissolution simply effected a change in the relationship among the partners. The partnership, although dissolved, continues to exist until its termination, at which time the winding up of its affairs should have been completed and the net partnership assets are partitioned and distributed to the partners. The error, therefore, ascribed to the Court of Appeals is devoid of any sustainable basis. The Abello Decision though, indeed, final and executory, did not pose any obstacle to the Hearing Officer to issue PARTNERSHIP CASE DIGEST 1828-1842
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orders not inconsistent therewith. From the time a dissolution is ordered until the actual termination of the partnership, the SEC retained jurisdiction to adjudicate all incidents relative thereto. Thus, the disputed order placing the partnership under a receivership committee cannot be said to have varied the final order of dissolution. Neither did it suspend the dissolution of the partnership. If at all, it only suspended the partition and distribution of the partnership assets pending disposition of Civil Case No. 903 on the basis of the agreement by the parties and under the circumstances of the case. It bears stressing that, like the appointment of a manager in charge of the winding up of the affairs of the partnership, said appointment of a receiver during the pendency of the dissolution is interlocutory in nature, well within the jurisdiction of the SEC. Furthermore, having agreed with the respondents not to dispose of the partnership assets, petitioners effectively consented to the suspension of the winding up or, more specifically, the partition and distribution of subject assets. Petitioners are now estopped from questioning the order of the Hearing Officer issued in accordance with the said agreement. Petitioners also assail the propriety of the receivership theorizing that there was no necessity therefor, and that such remedy should be granted only in extreme cases, with respondent being duty-bound to adduce evidence of the grave and irremediable loss or damage which it would suffer if the same was not granted. It is further theorized that, at any rate, the rights of respondent Intestate Estate are adequately protected since notices of lis pendens of the aforesaid civil case have been annotated on the real properties of the partnership. To bolster petitioners' contention, they maintain that they are the majority partners of the partnership Sy Yong Hu & Sons controlling Ninety Six per cent (96%) of its equity. As such, they have the greatest interest in preserving the partnership properties for themselves and therefore, keeping the said properties in their possession will not bring about any feared damage or dissipation of such properties, petitioners stressed. Sec. (6) of Presidential Decree No. 902-A, as amended, reads: SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: (c) To appoint one or more receivers of the property, real or personal, which is the subject of the action pending before the commission in accordance with the pertinent provisions of the Rules of Court, and in such other cases, whenever necessary in order to preserve the rights of parties-litigants and/or protect the interest of the investing public and creditors; xxx. The findings of the Court of Appeals accord with existing rules and jurisprudence on receivership. Conformably, it stated that: From a reexamination of the issues and the evidences involved, We find merit in respondents motion for reconsideration. This Court notes with special attention the order dated June 28, 1988 issued by Hearing Officer Felipe S. Tongco in SEC Case No. 1648 (Annex to Manifestation, June 16, 1990) wherein all the parties agreed on the following: 1. That there is a pending case in court wherein the plaintiffs are claiming in their complaint that all the assets of the partnership belong to Sy Yong Hu; 2. That the parties likewise agreed that during the pendency of the court case, there will be no disposition of the partnership assets and further hearing is suspended. x x x As observed by the SEC Commission (sic) in its Order dated January 16, 1989: Ordinarily, appellants contention would be correct, except that the en banc order of April 29th appears to have been overtaken, and accordingly, rendered inappropriate, by subsequent developments in SEC Case No. 1648, particularly the entry in that proceedings, as of April 29, 1988, of an intervenor who claims a superior and exclusive ownership right to all the partnership assets and property. This claim of superior ownership right is presently pending adjudication before the Regional Trial Court of Negros Occidental, And precisely because if this supervening development, it would appear that the parties in SEC Case No. 1648 agreed among themselves, as of June 28, 1988, that during the pendency of the Negros Occidental case just mentioned, there should be no disposition of partnership assets or property, and further, that the proceedings in SEC Case No. 1648 should be suspended in the meantime (p. 2, Order; p. 12, Rollo) As alleged by the respondents and as shown by the records there is now pending civil case entitled Keng Sian and Intestate of Sy Yong Hu vs. Jayme Sy, Jesus Sy, Marciano Sy, Willy Sy, Intestate of Jose Sy, Intestate of Vicente Sy, Sy Yong Hu & co and Sy Yong Hu & Sons denominated as Civil Case No. 903 before Branch 50 of the Regional Trial Court of Bacolod City. Moreover, a review of the records reveal that certain properties in question have already been sold as of 1987, as evidenced by deeds of absolute sale executed by Jesus in favor of Reynaldo Navarro (p. 331, Rollo), among others. To ensure that no further disposition shall be made of the questioned assets and in view of the pending civil case in the lower court, there is a compelling necessity to place all these properties and assets under the management of a receivership committee. The receivership committee, which will provide active participation, through a designated representative, on the part of all interested parties, can best protect the properties involved and assure fairness and equity for all. Receivership, which is admittedly a harsh remedy, should be granted with extreme caution. Sound bases therefor must appear on record, and there should be a clear showing of its necessity. The need for a receivership in the case under consideration can be gleaned from the aforecited disquisition by the Court of Appeals finding that the properties of the partnership were in danger of being damaged or lost on account of certain acts of the appointed manager in liquidation. The dispositions of certain properties by the said manager, on the basis of an order of partial partition, dated December 2, 1986, by Hearing Officer Sison, which was not yet final and executory, indicated that the feared irreparable injury to the properties of the partnership might happen again. So also, the failure of the manager in liquidation to submit to the SEC an accounting of all the partnership assets as required in its order of April 29, 1988, justified the SEC in placing the subject assets under receivership. Moreover, it has been held by this Court that an order placing the partnership under receivership so as to wind up its affairs in an orderly manner and to protect the interest of the plaintiff (herein private respondent) was not tainted with grave abuse of discretion. The allegation that respondents rights are adequately protected by the notices of lis pendens in Civil Case 903 is inaccurate. As pointed out in their Comment to the Petition, the private respondents claim that the partnership assets include the income and fruits thereof. Therefore, protection of such rights and preservation of the properties involved are best left to a receivership committee in which the opposing parties are represented. What is more, as held in Go Tecson vs. Macaraig: The power to appoint a receiver pendente lite is discretionary with the judge of the court of first instance; and once the discretion is exercised, the appellate court will not interfere, except in a clear case of abuse thereof, or an extra limitation of jurisdiction. Here, no clear abuse of discretion in the appointment of a receiver in the case under consideration can be discerned. With respect to G. R. No. 100313. Petitioners argue in this case that the failure of the private respondents to implead them in Civil Case No. 5326 constituted a violation of due process. It is their submission that the ex parte grant of said petition by the trial court worked to their prejudice as they were deprived of an opportunity to be heard on the allegations of the petition concerning subject property and assets. The recall of the order granting their Motion to Intervene was done without the observance of due process and consequently without jurisdiction on the part of the lower court. Commenting on the Petition, private respondents maintain that the only issue in the present case is whether or not there was a violation of the PARTNERSHIP CASE DIGEST 1828-1842
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Building Code. They contend that after due and proper hearing before the lower court, it was fully established that the provisions of the said Code had been violated, warranting issuance of the Writ of Preliminary Injunction dated April 19, 1989. They further asseverate that the petitioners, who are the owner and lessees in the building under controversy, have nothing to do with the case for mandamus since it is directed against the respondent building official to perform a specific duty mandated by the provisions of the Building Code. In his Comment, the respondent City Engineer, relying on the validity of the order of the trial court to padlock the building, denied any impropriety in his compliance with the said order. After a careful examination of the records on hand, the Court finds merit in the petition. In opposing the petition, respondent intestate estate anchors its stance on the existence of violations of pertinent provisions of the aforesaid Code. As regards due process, however, a distinction must be made between matters of substance. In essence, procedural due process refers to the method or manner by which the law is enforced, while substantive due process requires that the law itself, not merely the procedure by which the law would be enforced, is fair, reasonable, and just. Although private respondent upholds the substantive aspect of due process, it, in the same breath, brushes aside its procedural aspect, which is just as important, if the constitutional injunction against deprivation of property without due process is to be observed. Settled is the rule that the essence of due process is the opportunity to be heard. Thus, in Legarda vs. Court of Appeals et al., the Court held that as long as a party was given the opportunity to defend her interest in due course, he cannot be said to have been denied due process of law. Contrary to these basic tenets, the trial court gave due course to the petition for mandamus, and granted the prayer for the issuance of a writ of preliminary injunction on May 4, 1989, notwithstanding the fact that the owner (herein petitioner Sy Yong Hu) of the building and its occupants were not impleaded as parties in the case. Affirming the same, the Court of Appeals acknowledged that the lower court came out with the said order upon the testimony of the lone witness for the respondent, in the person of the City Engineer, whose testimony was not effectively traversed by the petitioners. This conclusion arrived at by the Court of Appeals is erroneous in the face of the irrefutable fact that the herein petitioners were not made parties in the said case and, consequently, had absolutely no opportunity to cross examine the witness of private respondent and to present contradicting evidence. To be sure, the petitioners are indispensable parties in Civil Case No. 5326, which sought to close subject building. Such being the case, no final determination of the claims thereover could be had. That the petition for mandamus with a prayer for the issuance of a writ of preliminary mandatory injunction was only directed against the City Engineer is of no moment. No matter how private respondent justifies its failure to implead the petitioners, the alleged violation of the provisions of the Building Code relative to the reconstruction of the building in question, by petitioners, did not warrant an ex parte and summary resolution of the petition. The violation of a substantive law should not be confused with punishment of the violator for such violation. The former merely gives rise to a cause of action while the latter is its effect, after compliance with the requirements of due process. The trial court failed to give petitioners their day in court to be heard before they were condemned for the alleged violation of certain provisions of the Building Code. Being the owner of the building in question and lessees thereon, petitioners possess property rights entitled to be protected by law. Their property rights cannot be arbitrarily interfered with without running afoul with the due process rule enshrined in the Bill of Rights. For failure to observe due process, the herein respondent court acted without jurisdiction. As a result, petitioners cannot be bound by its orders. Generally accepted is the principle that no man shall be affected by any proceeding to which he is a stranger, and strangers to a case are not bound by judgment rendered by the court. In similar fashion, the respondent court acted with grave abuse of discretion when it disallowed the intervention of petitioners in Civil Case No. 5326. As it was, the issuance of the Writ of Preliminary Injunction directing the padlocking of the building was improper for non-conformity with the rudiments of due process. Parenthetically, the trial court, in issuing the questioned order, ignored established principles relative to the issuance of a Writ of Preliminary Injunction. For the issuance of the writ of preliminary injunction to be proper, it must be shown that the invasion of the right sought to be protected is material and substantial, that the right of complainant is clear and unmistakable and that there is an urgent and paramount necessity for the writ to prevent serious damage. In light of the allegations supporting the prayer for the issuance of a writ of preliminary injunction, the Court is at a loss as to the basis of the respondent judge in issuing the same. What is clear is that complainant (now private respondent) therein, which happens to be a juridical person (Estate of Sy Yong Hu), made general allegations of hazard and serious damage to the public due to violations of various provisions of the Building Code, but without any showing of any grave damage or injury it was bound to suffer should the writ not issue. Finally, the Court notes, with disapproval, what the respondent court did in ordering the ejectment of the lawful owner and the occupants of the building, and disposed of the case before him even before it was heard on the merits by the simple expedient of issuing the said writ of preliminary injunction. In Ortigas & Company Limited Partnership vs. Court of Appeals et al. this Court held that courts should avoid issuing a writ of preliminary injunction which in effect disposes of the main case without trial. Resolution of the third issue has become moot and academic in view of the Courts finding of grave abuse of discretion tainting the issuance of the Writ of Preliminary Injunction in question. WHEREFORE, the Resolution of the Court of Appeals in CA-G. R. No. 17070 is AFFIRMED and its Decision in CA-G. R. No. 24189 REVERSED. No pronouncement as to costs. SO ORDERED. Roja v. Maglana Facts: Maglana (M) and Rojas (R) executed their Articles of Co- partnership called Eastcoast Development Enterpises. It had an indefinite term of existence and was registered with the SEC and had a Timber License. Its PURPOSE was to apply or secure timber and/or private forest lands and to operate. M shall manage the business affairs while R shall be the logging superintendent. All profits and losses shall be divided share and share alike. The two availed the services of Pahamotangas (P) industrial partner and executed another articles of co-partnership. M and R purchase the interest, share and participation in thepartnership of P. They shall become owners of all equipment contributed by P. Subsequently, R entered into a management contract with CMS Estate Inc. M wrote him: his contribution to the capital investments as well as his duties as logging superintendent. R replied: he will not be able to comply with both. M then told R that the latters share will just be 20% of the net profits. R took funds from the partnership more than his contribution. M notified R that he dissolved the partnership. R filed an action against M for the recovery of properties and accounting of the partnership and damages. Issue: 1. What is the nature of the partnership? 2. Can M voluntarily dissolve the partnership on his own? 3. Can M be liable for damages? 4. How should the profit and losses be liquidated? 5. Is R entitled to any profit? Rule: PARTNERSHIP CASE DIGEST 1828-1842
Page 6 of 10
1. Under the circumstances, the relationship of Rojas and Maglana after the withdrawal of Pahamotang can neither be considered as a De Facto Partnership, nor a Partnership at Will, for as stressed, there is an existing partnership, duly registered. The second partnership was dissolved by common consent. Said dissolution did not affect the first partnership which continued to exist. 2. Yes. Article 1830, par. 2 of the Civil Code, even if there is a specified term, one partner can cause its dissolution by expressly withdrawing even before the expiration of the period, with or without justifiable cause. Of course, if the cause is not justified or no cause was given, the withdrawing partner is liable for damages. 3. No. In the given situation Maglana cannot be said to be in bad faith nor can he be liable for damages. The records show that Rojas not only abandoned the partnership but also took funds in an amount more than his contribution prior to the dissolution. 4. Articles of Co-Partnership; that is, all profits and losses of the partnership shall be divided "share and share alike" between the partners but an accounting must first be made. 5. No. He failed to give theamount he had undertaken to contribute thus, had become a debtor of the partnership (Art. 1786 of NCC). On 50-50% basis, Rojas will be liable in the amount of P131,166.00; on 80-20%, he will be liable for P40,092.96 and finally on the basis of actual capital contribution, he will be liable for P52,040.31.
Bearneza v. Dequilla Facts: In the year 1903, Balbino Dequilla, the herein defendant, and Perpetua Bearneza formed apartnership for the purpose of exploiting a fish pond with Perpetua obligating herself to contributeto the payment of the expenses of the business, which obligation she made good, and bothagreeing to divide the profits between themselves, which they had been doing until the death of the said Perpetua in the year 1912.
The deceased left a will in one of the clause of which she appointerd Domingo Bearnez, the herein plaintiff, as her heir to succeed to all her rights and interests in the fish pond in question. Domingo Bearnez then instituted an action to recover a part of the fishpond belonging to the decedent, including of the profits from 1913-1919.
The defendant alleges that "the formation of the supposed partnership between the plaintiff andthe defendant for the exploitation of the aforesaid fish pond was not carried into effect, on accountof the plaintiff having refused to defray the expenses of reconstruction and exploitation of said fishpond." and further averred that the right of the plaintiff had already prescribed. Judgment was then rendered declaring the plaintiff owner of one-half of the fishpond but without awading him of any damages. From this judgement the defendant appeals.
Issue: W/N the plaintiff has any right to maintain an action for recovery of the said one-half of the fishpond?
Rule: None.
The partnership formed was a particular partnership, it having had for its subject-matter a specified thing, the exploitation of the aforementioned fishpond. Al t hough, as t he t r i al cour t says i n i t s deci si on, t he def endant , i n hi s l et t er s t o Per pet ua or her husband, makes reference to the fish pond, calling it "our," or "your fish pond," this referencecannot be held to include the land on which the said fish pond was built. I t has not been pr oven t hat Bear neza par t i ci pat ed i n t he owner shi p of t he sai d l and.
Therefore, the land on which the fish pond was constructed did not constitute part of thesubject-matter of the partnership.
This partnership was dissolved by the death of Perpetua Bearneza.
Neither can it be maintained that the partnership continued to exist after the death of Perpetua, inasmuch as it does not appear that any stipulation to that effect has ever beenmade by her and the defendant- The par t ner shi p havi ng been di ssol ved by t he deat h of Per pet ua Bear neza, i t s subsequent l egal status was that of a partnership in liquidation, and the only rights inherited by her testamentaryheir, the herein plaintiff, were those resulting from the said liquidation in favor of the deceasedpartner, and nothing more.
Lichauco v. Lichauco Facts:
In 1901, F. Lichauco Hermanos partnership was formed. It was provided, among others, in the partnership agreement that Faustino Lichauco will be the managing partner; and that the firm cannot be dissolved except upon the 2/3 vote of all the partners.
In 1904, the firm wasnt performing well and was unprofitable and so its machineries were dismantled. In 1905, Eugenia and one other partner demanded Faustino to make an accounting of the firms assets but Faustino refused to do so.
Belatedly in 1912, Eugenia et al filed a civil suit against Faustino to compel the latter to perform an accounting.
Faustino, in his defense, argued that the firm was not dissolved pursuant to the partnership agreement there being no 2/3 vote from all the members (Faustino et al are only 1/5 of the firm).
ISSUE: Whether or not Eugenia et al can demand an accounting.
RULE: Yes.
The firm was already dissolved in 1904 when its machineries were dismantled this was a sign that the firm abandoned and concluded the purpose for it was formed (rice cleaning business). Upon said dissolution, it was the duty of Faustino to liquidate the assets and inform his partners.
The provision which requires a 2/3 votes of all the partners to dissolve the firm cannot be given effect because the same denied the right of a less number of partners to effect the dissolution especially where the firm has already sustained huge losses.
It would be absurd and unreasonable to hold that such an association could never be dissolved and liquidated without the consent and agreement of two-thirds of its partners, notwithstanding that it had lost all its capital, or had become bankrupt, or that the enterprise for which it had been organized had been concluded or utterly abandoned.
Yu v. NLRC Facts:
Partnership was originally organized with Bendals as general partners and Chin Shian Jeng,Chen Ho-Fu and Yu Chang as limited partners; partnership business consisted of exploitinga marble deposit in Bulacan.
Partnership hired Yu (petitioner), as Assistant General Manager, had a monthly salary of 4000. Yu, however, actually received only half of his stipulated salary, since he had accepted the promise of the partners that the balance would be paid when the firm shall have secured additional operating funds from abroad.
Yu managed the operations and finances of the business.
However, General Partners Bendals sold and transferred their interests in the partnership to Co and Emmanuael Zapanta. Eventually, partnership was constituted solely by Co and Zapanta; it continued to use the old firm name.
Yu was dismissed by the new partners.
Issues:
1. W/N the previous partnership is dissolve? 2. W/N their still exist a partnership? 3. W/N Yu can assert his rights under his employment against the new partnership?
Held: PARTNERSHIP CASE DIGEST 1828-1842
Page 7 of 10
1. Yes. Changes in the membership of the partnership resulted in the dissolution of the old partnership. (Legal Basis: Art. 1828; 1830)
2. Yes. The new partnership simply took over the business enterprise owned by the old partnership. Without winding up the business affairs of the old partnership, paying off its debts,liquidating and distributing its net assets, and then re-assembling the said assets or mostof them and opening a new business enterprise. (Art. 1829)
3. Yes. the new partnership is liable for the debts of the old partnership. (Art. 1840)
Yu is entitled to enforce his claim for unpaid salaries, as well as other claims relating to his employment with the previous partnership, against the new partnership.
But Yu is not entitled to reinstatement. Reason: new partnership was entitled to appoint and hire a new gen. Or asst. Mgr. to run the affairs of the business enterprise. An asst. gen. manager belongs to the most senior ranks of management and anew partnership is entitled to appoint a top manager of its own choice and confidence. The non- retention of Yu did not constitute unlawful termination.
The new partnership had its own new Gen. Mgr. Yus old position thus became superfluous or redundant.
Yu is entitled to separation pay at the rate of one months pay for each year of service thathe had rendered to the old partnership, a fraction of at least 6 months being considered asa whole year.
Goquiolay v. Sycip(108 Phil 947) Syllabus: 1. PARTNERSHIP; MANAGEMENT, RIGHT OF EXCLUSIVE; PERSONAL RIGHT; TERMINATION UPON MANAGER-PARTNERS DEATH. The right of exclusive management conferred upon Tan Sin An, being premised upon trust and confidence, was a mere personal right that terminated upon Tans demise.
2. ARTICLES OF CO-PARTNERSHIP; RIGHT OF HEIRS TO REPRESENT DECEASED PARTNER; MANAGERIAL RIGHT; PROPRIETARY INTEREST. The provision in the Articles of Co- Partnership stating that "in the event of death of any one of the partners within the 10-year term of the partnership, the deceased partner shall be represented by his heirs", could not have referred to the managerial right given to Tan Sin An; more appropriately, it relates to the succession in the proprietary interest of each partner.
3. ID.; ID.; EFFECT OF HEIRS FAILURE TO REPUDIATE; HEIRS BECOME INDIVIDUAL PARTNERS; MINORITY OF HEIRS. Consonant with the articles of co-partnership providing for the continuation of the firm notwithstanding the death of one of the partners, the heirs of the deceased, by never repudiating or refusing to be bound under the said provision in the articles, became individual partners with Antonio Goquiolay upon Tans demise. Minority of the heirs is not a bar to the application of that clause in the articles of co- partnership. Heirs liability in the partnership being limited to the value of their importance, they become no more than limited partners, when they manifest their intent to be bound as general partners.
4. ID.; SALE OF PARTNERSHIP PROPERTIES; CONSENT OF ALL PARTNERS UNNECESSARY; STRANGERS DEALING WITH PARTNERSHIPS; POWER TO BIND PARTNERSHIP. As to whether or not the consent of the other partners was necessary to perfect the sale of the partnership properties, the Court believes that it is not. Strangers dealing with a partnership have the right to assume, in the absence of restrictive clauses in the co- partnership agreement, that every general partner has power to bind the partnership.
5. ID.; ID.; ESTOPPEL. By allowing defendant Kong Chai Pin to retain control of the partnership properties from 1942 to 1949, plaintiff Goquiolay estopped himself from denying her (Kong Chai Pins) legal representation of the partnership, with the power to bind it by proper contracts.
6. PARTNERSHIP; GENERAL PARTNER BY ESTOPPEL; WIDOW OF MANAGING PARTNER AUTHORIZED BY OTHER PARTNER TO MANAGE PARTNERSHIP. By authorizing the widow of the managing partner to manage partnership property (which a limited partner could not be authorized to do), the other general partner recognized her as a general partner, and is now in estoppel to deny her position as a general partner, with authority to administer and alienate partnership property.
7. ID.; HEIR OF PARTNER, STATUS ORDINARILY AS LIMITED PARTNER BUT MAY WAIVE IT AND BECOME AS GENERAL PARTNER. Although the heir of a partner ordinarily becomes a limited partner for his own protection, yet the heir may disregard it and instead elect to become a collective or general partner, with all the rights and obligations of one. This choice pertains exclusively to the heir, and does not require the assent of the surviving partner.
8. ID.; PRESUMPTIONS; AUTHORITY OF PARTNER TO DEAL WITH PROPERTY. A third person has the right to presume that a general partner dealing with partnership property has the requisite authority from his co-partners.
9. ID.; PROPERTY OF PARTNERSHIP; SALE OF IMMOVABLES, WHEN CONSIDERED WITHIN THE ORDINARY POWERS OF A GENERAL PARTNER. Where the express and avowed purpose of the partnership is to buy and sell real estate (as in the present case), the immovables thus acquired by the firm form part of its stock-in- trade, and the sale thereof is in pursuance of partnership purposes, hence within the ordinary powers of the partner.
10. ID.; SALE OF PARTNERSHIP PROPERTY; ACTION FOR RESCISSION ON GROUND OF FRAUD; NO INADEQUACY OF PRICE; CASE AT BAR. Appellants claim that the price was inadequate, relies on the testimony of a realtor, who in 1955, six years after the sale in the question, asserted that the land was by then worth double the price for which it was sold. But taking into account the continued rise of real estate values since liberation, and the fact that the sale in question was practically a forced sale because the partnership has no other means to pay the legitimate debts, this evidence certainly does not show such "gross inadequacy" as to justify the rescission of the sale.
11. ID.; ID.; ID.; RELATIONSHIP ALONE IN NO BADGE OF FRAUD. The Supreme court has ruled that relationship alone is not a badge of fraud (Oria Hnos. v. McMicking, 21 Phil., 243; Hermandad de Smo. Nombre de Jesus v. Sanchez, 40 Official Gazette 1685).
12. ID.; ID.; ID.; FRAUD OF CREDITORS DISTINGUISHED FROM FRAUD TO OBTAIN CONSENT. Fraud used to obtain a partys consent to a contract (deceit or dolus in contrahendo) is different from fraud of creditors that gives rise to a rescission of contract.
13. ID.; ID.; ID.; SUBSIDIARY NATURE; ALLEGATION OF NO OTHER MEANS TO OBTAIN REPARATION, NECESSARY. The action for rescission is subsidiary; it can not be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. hence, if there is no allegation or evidence that the plaintiff can not obtain reparation from the widow and heirs of the deceased partner, the suit to rescind the sale in question s not maintainable, even if the fraud charged actually did exist. Facts: Goquiolay and Tan Sin An were partners, engage in realestate business, who owned 3 parcels of land. Tan Sin An purchased 46 parcels of land. Both the partnership and Tan Sin An alone executed mortgages in f avor of the same company, La Urbanidad Sociedad Mutua deConstruccion. For the partnership, it was P25,000 while for Tan Sin An, it was P35,000.
The two mortgage obligations were consolidated and transferred to the Banco Hipotecario de Filipinas and as a result, Tan Sin An, inhis individual capacity, and the partnership bound themselvesto pay jointly and severally within a period of 8 yrs.
On 1942, Tan Sin An died, his widow, Kong Chai Pin was madeAdministratrix of his estates in 1944. In 1949, she executed asale of these lands. This was executed in her dual capacity as PARTNERSHIP CASE DIGEST 1828-1842
Page 8 of 10
Administratrix of her husbands estates and as partner in lieu of her husband. She sold these to respondents WashingtonSycip and Betty Lee.
DEFENSE: Goquiolay insists that Kong Chai Pin never became more than alimited partner, incapacitated by law to manage the affairs of partnership; that the testimony of Kongs witnesses belie that she took over the administration of the partnership property; and that, in any event, the sale should be set aside because it was executed with the intent to defraud Goquiolay of his share in the properties sold.
Issue: W/N Tan Sin Ans widow, Kong Chai Pin, became partner when her husband died, allowing her to validly sell the property that belongs to the partnership?
Rule: Yes.
The heir ordinarilybecomes a limited partner for his own protection, because hewould normally prefer to avoid any liability in excess of the value of the estate inherited so as not to jeopardize his personal assets, however, he may also elect to become general partner instead.
The Articles did not provide that the heirs of the deceasedwould be merely limited partners; on the contrary, theyexpressly stipulated that in case of death of either partner "theco-partnership ... will have to be continued " with the heirs or assigns.
Also, Goquiolay is estopped from saying that Kong Chai Pin is not ageneral partner because he granted her the authority to manage the partnership properties.
In addition to this authority, the Court had yet again stressed the fact that he had 7 years between the death of his partner and the sale made by his partners widow to take up the management of the properties himself, which he clearly failed to do.
Goquiolay v Sycip 9 SCRA 663
The case was previously affirmed. (CHECK FOR DIFFERENCE KAI GALIBOG KO :D) In re Sycip92 SCRA 1 Facts: Two separate Petitions were filed before this Court 1) by the surviving partners of Atty. Alexander Sycip, who died on May5, 1975, and 2) by the surviving partners of Atty. Herminio Ozaeta, who died on February 14, 1976, praying that they be allowed to continue using, in the names of their firms, the names of partners who had passed away.
Jurisprudence: the Deen case: the matter was resolved with this Court advising the firm to desist from including in their firm designation the name of C. D. Johnston, who has long been dead. Register of Deeds of Manila vs. China Banking Corporation: inview of the personal and confidential nature of the relations between attorney and client, and the high standards demanded in the canons of professional ethics, no practice should be allowed which even in a remote degree could give rise to the possibility of deception. Said attorneys are accordingly advised to drop the name "PERKINS" from their firm name.
Issue: Petitioners seek a re-examination of the policy thus farenunciated by the Court.
Held: The Court finds no sufficient reason to depart from the rulings thus laid down. The petitions filed herein are denied and petitioners advised to drop the names "SYCIP" and "OZAETA" from their respective firm names. Those names may, however, be included in the listing of individuals who have been partners in their firms indicating the years during which they served as such.
Ratio: Arguments of Petitioners Court Petitioners arguments:
1.Under the law, a partnership is not prohibited from continuing its business under a firm name which includes the name of a deceased partner; in fact, Article 1840 of the Civil Code explicitly sanctions the practice the use in their partnership names of the names of deceased partners will run counter to Article 1815 of the Civil Code 1. The heirs of a deceased partner in a law firm cannot be held liable as the old members to the creditors of a firm particularly where they are non-lawyers.
Accordingly, neither the widow nor the heirs can beheld liable for transactions entered into after the deathof their lawyer-predecessor. There being no benefitsa ccruing, there ran be no
Art. 1815. Every partnership shall operate under a firm name, which may or may not include the name of one or more of the partners. Those who, not being members of the partnership, include their names in the firm name, shall be subject to the liability, of a partner. corresponding liability.
The public relations value of the use of an old firm name can tend to create undue advantages and disadvantages in the practice of the profession. An able lawyer without connections will have to make a name for himself starting from scratch. Another able lawyer, who can join an old firm, can initially ride on that oldf irm's reputation established by deceased partners.
In regards to the last paragraph of Article 1840 of the Civil Code cited by petitioners:
1)The Article primarily deals with the exemption from liability in cases of a dissolved partnership,of the individual property of the deceased partner for debtscontracted by the person or partnership which continues the Business using the partnership name or the name of the deceased partner as part thereof. What the law contemplates therein is a hold- over situation preparatory to formal reorganization.
2) Article 1840 treats more of a commercial partnership with a goodwill to protect rather than of a professional partnership, with no saleable good will but whose reputation depends on the personal qualifications of its individual members. Thus, it has been held that a saleable goodwill can exist only in a commercial partnership and cannot arise in a professional partnership consisting of lawyers
2. the legislative authorization given to those engaged in the practice of accountancy a profession A partnership for the practice of law cannot be likened to partnerships formed by other professionals or for requiring the same degree of trust and confidence in respect of clients as that implicit in the relationship of attorney and client
To acquire and use a trade name, strongly indicates that there is no fundamental policy that is offended by the continued use by a firm of professionals of a firm name which includes the name of a deceased partner, at least where such firm name has acquired the characteristics of a "trade name. "business. For one thing, the aw on accountancy specifically allows the us eof a trade name in connection with the practice of accountancy.3.
The Canons of Professional Ethics are not transgressed by the continued use of the name of a deceased partner in the firm name of a lawpartnership4.
No local custom prohibits the continued use of a deceased partner's name in a professional firm's name It is true that Canon 33 Does not consider as unethical The continued use of the name of a deceased or former partner in the firm name of a law partnership when such a practice is permissible by local custom but the Canon warns that care should be taken that no imposition or deception is practiced through this use.
The continued use of a firmname after the death of one or more of the partners designated by it is proper only where sustained by local custom and not whereby custom this purports toIdentify the active members. ...5. There is no possibility of imposition or deception because the deaths of their respective deceased partners were well-publicized in all newspapers of general circulation for several days;
The possibility of deception upon the public, real or consequential, where the name of a deceased partner continues to be used cannot be ruled out. A person in search of legal counsel might be guided by the familiar ring of a distinguished name appearing in a firm title2.
The continued use of a deceased partner's name in the firm name of law partnerships has been consistently allowed by U.S .Courts and is an accepted practice in the legal profession of most countries in the world.
PARTNERSHIP CASE DIGEST 1828-1842
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We find such proof of the existence of a local custom, and of the elements requisite to constitute the same, wanting herein. Merely because something is done as a matter of practice does not mean that Courts can rely on the same for purposes of adjudication as a juridical custom. Juridical custom must be differentiated from social custom. The former can supplement statutory law or be applied in the absence of such statute. Not so with the latter.
Ng Cho Cio v. Ng Diong G.R. No. L-14832 January 28, 1961 NG CHO CIO ET AL., plaintiffs-appellants, vs.NG DIONG, defendant-appellant. C. N. HODGES, ET AL., defendants-appellees. This action was begun in the Court of First Instance of Iloilo by Ng Cho Cio Ng Sian King and Ng Due King to recover their three-fourths (3/4) pro-indiviso share on seven (7) parcels of land situated in the City of Iloilo which were sold by Ng Diong as manager of the commercial firm NG CHIN BENG HERMANOS in favor of C.N. Hodges. The latter had sold four of those parcels of land to Jose C. Tayengco and the other three parcels to Julian Go, and for that reason these two were included as party defendants. As the original plaintiffs sold their rights, title and interest in said partnership to Ng Be Chuat and Ng Feng Tuan, the latter two were allowed to intervene as plaintiffs. Since Jose C. Tayengco had mortgaged three of the lands which he purchased from C. N. Hodges in favor of the Bank of the Philippine Islands, the complaint was amended so as to include the Bank also as party defendant. On October 16, 1956, after trial had begun, defendant Ng Diong died, whereupon his heirs were order to substitute him parties defendants. Defendants C. N. Hodges, Ng Diong and Jose C. Tayengco answered the complaint separately setting up certain special defenses and counterclaims. In substance, they refuted the allegations set forth in the complaint and prayed for its dismissal. The parties submitted a partial Stipulation of facts on many points covered by the pleadings thus simplifying the trial of the case while at the same time they introduced additional evidence in amplification of the fact stipulated, Thereupon, the trial court, after a thorough evaluation of the evidence, rendered decision dismissing the complaint with costs. Plaintiffs interposed the present appeal on purely questions of law. The pertinent facts may be briefly stated, as follow On May 23, 1925, Ng Diong, Ng Be Chuat, Ng Feng Tuan Ng Be Kian Ng Cho Cio, Ng Sian King and Ng Due King entered into a contract of general co- partnership under the name NG CHIN BENG HERMANOS. The partnership was to exist for a period of 10 years from May 23, 1925 and Ng Diong was named as managing partner. On May 10, 1935, the articles of co-partnership were amended by extending its life to 16 years more to be counted from May 23, 1925, or up to May 23, 1941. On January 5, 1938, the partnership obtained from the National Loan and Investment Board a loan in the amount of P30,000.00, and to guarantee its payment it executed in its favor a mortgage on Lots Nos. 236-B, 317-A, 233 and 540 of the cadastral survey of Iloilo. On the same date, the partnership also obtained from the same entity another loan in the amount of P50,000.00 to secure which it also executed in its favor a mortgage on Lots Nos. 386, 829 and 237 of the same cadastral survey. Sometime in 1938, the partnership was declared insolvent upon petition of its creditors in, Special Proceedings No. 2419 of the Court of First Instance of Iloilo wherein one Crispino Melocoton was elected as assignee. As a consequence, on June 21, 1939, the titles to the seven parcels of land abovementioned were issued in his name as assignee. In due time, the creditors filed their claims in said proceeding which totalled P192,901.12. On August 9, 1940, a majority of the creditors with claims amounting to P139,704.81, and the partners of the firm, acting thru counsel, entered into a composition agreement whereby it was agreed that said creditors would receive 20% of the amount of their claims in full payment thereof. Prior to this agreement, however, defendant Julian Go had already acquired the rights of 24 of the creditors of the insolvent whose total claims amounted to P139,323.10. Said composition agreement was approved by the insolvency court. On January 30, 1941, the Agricultural and Industrial Bank which had succeeded the National Loan and Investment Board assigned its rights and interests in the loans obtained from it by the partnership in the aggregate amount of P80,000.00 in favor of C.N. Hodges, together with the right and interest in the mortgage executed to secure the loans. Since said loans became due and no payment was forthcoming, Hodges asked permission from the insolvency court to file a complaint against the assignee to foreclose he mortgage executed to secure the same in a separate proceeding, and permission having been granted, Hodges filed a complaint for that purpose on May 13, 1941. In his complaint, Hodges prayed that the assignee be ordered to pay him the sum of P75,622.90, with interest at 8% per annum thereon from March 6, 1941, plus P8,000.00 attorney's fees, exclusive of costs and charges. Meanwhile, war broke out and nothing appears to have been done in the insolvency proceedings. The court records were destroyed. However, they were reconstituted later and given due course. On August 15, 1945, the partners of the insolvent firm and Julian Go, who acquired most of the claims of the creditors, filed a petition with the insolvency court praying at the insolvency proceedings be closed or terminated cause the composition agreement the creditors had submitted relative to the settlement of the claims had already been approved on October 10, 1940. And on October 6, 1946, the court, acting favorably on the petition, ordered, closure of the proceedings directing the assignee to turn and reconvey all the properties of the partnership back to the latter as required by law. In accordance with this order of the court, the assignee executed a deed of reconveyance of the properties to the partnership on April 2, 1946 and by virtue thereof, the register of deeds cancelled the titles issued in the name of the assignee and issued new ones in lieu thereof in the name of the partnership. As of said date, April 2, 1946, the indebtedness of the partnership to C. N. Hodges which was the subject of the foreclosure proceedings in a separate case was P103,883.34. In order to pay off the same and raise necessary funds to pay the other obligations of the partnership, it was deemed proper and wise by Ng Diong, who continued to be the manager of the partnership, to sell all its properties mortgaged to Hodges in order that the excess may be applied to the Payment of said other obligations, and to that effect Ng Diong executed on April 2, 1946 a deed of sale thereof in favor of Hodges for the sum of P124,580.00. Out of this price; the sum of P103,883.34 was applied to the payment of the debt of the partnership to Hodges and the balance was paid to the other creditors of the partnership. On the same date, Hodges executed another contract giving the partnership the right to repurchase Lots Nos. 237, 386 and 829 in installments for the sum of P26,000.00 within three years with interest the rate of 1% Per annum, Payable monthly. On May 23, 1947, the partnership had not yet paid its indebtedness to Julian Go in he amount of P24,864.62 under the composition agreement, nor did it have any money to repurchase Lots Nos. 237, 386 and 829 and so Ng Diong, in behalf of the partnership, transferred the right of the latter to repurchase the same from Hodges to Julian Go in full payment of the partnership's indebtedness to him. And having Julian Go exercised the option January 6, 1948, Hodges executed a deed of sale of the properties in his favor, and pursuant thereto the register of deeds issued new titles' in his name covering said lots. On May 29, 1948, Hodges executed another deed of sale covering Lots Nos. 317-A, 236-B, 233 and 540 for the sum of P119,067.79 in favor of Jose C. Tayengco. And on August 31, 1948, Tayengco mortgaged said lots, together with three other lots of his, to the Bank of the Philippine Islands to secure a loan of P126,000.00 to be used in the construction of a commercial building on said lots. Appellants make in their brief six assignments of errors, which, reduced to bare essentials, may be boiled down to the following points: (1) the sale made by Ng Diong in behalf of the partnership NG CHIN BENG HERMANOS of the seven lots belonging to it in favor of C. N. Hodges on April 2, 1946 is null and void because at that time said parcels were still in the custody of the assignee of the insolvency proceedings, or in custodia legis, and, hence, the same is null and void; (2) said sale is also null and void "because of the disparity, irrationality and unreasonableness between the consideration and the real value of the properties when sold"; and (3) the lower court erred in not finding that the two deeds of mortgage executed by he partnership in favor of the National Loan and Investment Board which were later assigned to C. N. Hodges can no longer be enforced because the action to foreclose the same has already prescribed. PARTNERSHIP CASE DIGEST 1828-1842
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Anent the first issue, it would be well to state the following facts by way of clarification: It should be recalled that on August 8, 1940 the majority of the creditors of the partnership, as well as the representatives of the latter, submitted to the court taking cognizance of the insolvency proceedings a composition agreement whereby it was agreed that said creditors would receive 20% of the amount of their claims in full payment thereof. This agreement was approved on October 10, 1940 which, in contemplation of law, has the effect of putting an end to the insolvency proceedings. However, no further step was taken thereon because of the outbreak of the war. Later, the record of the case was reconstituted and the parties on August 15, 1945 filed a petition with the court praying for the dismissal and closure of the proceedings in view of the approval of the aforesaid composition agreement, and acting favorably thereon, the court on October 6, 1945, issued an order declaring the proceedings terminated and ordering the assignee to return and reconvey the properties the partnership. The actual reconveyance was done by a assignee on April 2, 1946. It would, therefore, appear that for legal and practical purposes the insolvency ended on said date. Since then partnership became, restored to its status quo. It again reacquired its personality as such with Ng Diong as its general manager. From that date on its properties ceased to be in custodia legis. Such being the case, it is obvious that when Ng Diong as manager of the partnership sold the seven parcels of land to C. N. Hodges on April 2, 1946 by virtue of a deed of sale acknowledged before a notary public on April 6, 1946, the properties were already was at liberty to do what it may deem convenient and proper to protect its interest. And acting accordingly, Ng Diong made the sale in the exercise of the power granted to him by the partnership in its articles of co-partnership. We do not, therefore, find anything irregular in this actuation of Ng Diong. Since at the time of the sale the life of the partnership had already expired, the question may be fixed: Who shall wind up it business affairs? May its manager still execute the sale of its properties to C. N. Hodges as was done by Ng Diong? The answer to this question cannot but be in the affirmative because Ng Diong was still the managing partner of the partnership and he had the necessary authority to liquidate its affairs under its articles of co-partnership. And considering that war had intervened and the affairs of the partnership were placed under receivership up to October 6, 1945, we are of the opinion that Ng Diong could still exercise his power as liquidator when he executed the sale in question in favor of C. N. Hodges. This is sanctioned by Article 228 of the Code of Commerce which was the law in force at the time. 1
With regard to the second issue, it is contended that the trial court should have declared the sale of the lots made to C. N. Hodges null and void "because of the disparity, irrationality and unreasonableness between the consideration and real value of the properties when sold." In stressing his point, counsel contends that the lands in question, which are located in a commercial section of the City of Iloilo, were frittered away only for a "pittance of P124,580.00" when, borrowing his words they could have been sold like hot cakes to any resident of the city of regular financial standing upon proper approaches and representations, because at that time those properties were fairly worth one-half of a million pesos." This claim may be true, but the same is unsupported. Appellants have failed to introduce any evidence to show that they could have secured better offers for the properties if given a chance to do so and that they advance now is a mere speculation or conjecture which had no place in our judicial system. Since every claim must be substantiated by sufficient evidence, and this appellants have failed to do, their pretense cannot be entertained. Neither can we give any value to the claim that the action for the foreclosure of the mortgage executed by the partnership in favor of C. N. Hodges has already prescribed not only because the same is immaterial but because it is an issue that appellants are raising for the first time in this appeal. Such issue has never been raised in their pleadings, nor in the trial court. Verily, this claim has no merit. With regard to the appeal taken by the heirs of defendant Ng Diong whose main claim is that the trial court failed to adjudicate to the partnership the properties which were bought by Julian Go from C. N. Hodges, suffice it to say that the same could not be done, firstly, because no such claim was made by them in their pleadings in the trial court, and, secondly, because the evidence shows that said properties were bought by Julian Go by virtue of the option given to him by the partnership for a valuable consideration in full payment of the credits assigned to him by a good number of creditors of said partnership. There is no evidence that he promised to reconvey the same to the partnership. WHEREFORE, the decision appealed from is affirmed, with costs against appellants. Singson v. Isabela Sawmill GRN L- 27343 February 28, 1979Fernadez,
Facts: Isabela Sawmill was formed by partners Saldajeno, Lon and Timoteo .Withdraw from the partnership and after dissolution, L and T continued the business still under the name Isabela Sawmill. The partnership is indebted to various creditors and that Sheriff sold the assets of Isabela Sawmill to S and was subsequently sold to a separate company.
Issue: Whether or not Isabela Sawmill ceased to be a partnership and that creditors could no longer demand payment.
Ruling: On dissolution, the partnership is not terminated but continues until the winding up of the business. It does not appear that the withdrawal of S from the partnership was published in the newspapers. The Apelles and the public had a right to expect the public had a right to expect that whatever credit they extended to L & T doing business. In the name of the partnership could be enforced against the partnership of said partnership. The judicial foreclosure of the chattel mortgage executed in the favor of S did not relieve her from liability to the creditors of the partnership .It may be presumed S acted in good faith, the Apelles also acted in good faith in extending credit to they partnership. Where one of the two innocent persons must suffer, that persons must suffer, that person who gave occasion for the damages to be caused must bear the consequences.