Limited Partnership

Antonio C. GOQUIOLAY, et al., plaintiffs-appellants, v. Washington Z. SYCIP, et al., defendantappellees. Pon.: J. JBL Reyes An heir ordinarily becomes a limited partner but may opt to elect himself/herself as a general partner.

Doctrine: Facts: 1. 2.

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This is a motion for reconsideration (MR) filed by the appellants GOQUILAY for a previous decision of the Court, upholding the validity of the sale of the appellants' partnership property (lands) to the appelleebuyers. The partnership of Goquiolay and Tan Sin An was made in 1940, whose venture involved the buying and selling of real estate. TAN SIN AN was the exclusive managing partner, and that in the event of death of one the partners, the partnership would continue and the deceased partner shall be represented by his heirs. GOQUIOLAY executed a general power of attorney in favor of TAN SIN AN. In 1940, the partnership acquired 3 parcels of land in Davao. The sale of lands was made in 1949 by Kong Chai PIN, widow of the managing partner Tan Sin AN (died in 1942). The Court outlined the following incontrovertible points: a. the transfer of the partnership property was made by 1 partner, acting in behalf of the firm, to a stranger; b. and that the properties sold were lands, not part of the contributed cash capital, acquired precisely to be sold, although subject to a mortgage to the previous owners. Note also that the widow PIN was allowed to remain, occupy and manage the properties. GOQUIOLAY insisted that the widow PIN is a limited partner, incapacitated by law to manage the affairs of the partnership; and, that the sale of lands was made in order to defraud him of his share in the properties sold.

Issue: ISSUE #1 - Was widow PIN a limited partner? Or a general one, capable of conveying the lands to buyerdefendant-appellees? ISSUE #2 - Can the buyer-appellees justified in buying from PIN based upon reliance of her acts of management over the properties? Held: Issue 1: Mrs. Kong Chai PIN was a general partner. It was mentioned in the articles of co-partnership that PIN shall be a partner upon her husband's death. In Art. XII: "the co-partnership will have to be continued and the deceased partner shall be represented by his heirs..." As culled from appellant's testimonies, she was not merely a limited partner because GOQUIOLAY himself authorized PIN to manage the partnership property in 1945 (allowing PIN to continue occupying and managing the properties because of her lack of other means of income). This authorization to stay and manage the lands was deemed as a recognition of her being a general partner. He is estopped to think and claim otherwise. Heirs ordinarily become limited partners so that they may avoid liability in excess of the value of the estate inherited so as not to jeopardize his personal assets; but a stipulation contrary to such shall overturn such view. To convert a partnership from general to limited shall leave the heirs of the deceased without a share in the management of the property. Heirs may choose to follow the stipulation, they cannot be compelled to be a general partner if they choose not to, and vice versa. To reiterate, the heir may waive the status of being a limited partner. He/she may disregard it and elect to be a general partner; and the choice of such pertains to the heir, and does not require the consent of the surviving partner. It is immaterial if the name of the heir is not included in the firm name because no conversion of status is involved. More so, the articles allowed the entrance of heirs to the partnership.

Issue 2: YES. Third parties/strangers (in this case Sycip et al) who bought the properties from widow PIN were justified in assuming that PIN had become a general partner, having authority to act for the firm. She was after all, occupying, possessing and managing the firm properties with acquiescence of the partners. For 7 years, from 1942 to the sale in 1949, GOQUIOLAY could have asserted his rights and assumed management of the properties, but he did not do so. In Litton v. Hill and Ceron, a third party has a right to presume that the party whom he contracts has the consent of his co-partner.

Other issues settled: On partnership property: as long as the sale is in line with the business, it shall be part of the ordinary powers of the partner. The immovables acquired by this firm, a real estate firm no less, form part of its stock in trade and the sale (as in this case) is in pursuance of partnership purposes. One cannot claim rescission on the ground of fraud due to inadequacy of price. Appellant caused the properties to be evaluated, and claims that the prices in which they were sold were "grossly inadequate", but the Court took note that there was a continued rise of real estate prices since the liberation and that the partnership needed the sale immediately to pay off its debts, there was no unreasonable selling based on price. Fraud of creditors is different from fraud of fraud to obtain consent. Only upon fraud of creditors can a rescission of contract rise.

Dispositive: Motion for reconsideration filed by GOQUIOLAY was denied. *** DISSENT (J. Bautista Angelo) *Important: READ THE DISSENT. Most of the comprehensive facts are located there. The following are summations of the dissenting view of J. Bautista Angelo: 1. 2. There can be no estoppel in this case. The PIN's acts of management were not adequately proven. The buyers were not misled nor did they rely on the acts of management but relied mostly on the opinion of their counsel. Mere acceptance of the inheritance does not make the heir of a general partner a general partner himself. The heir MUST DECLARE that he is entering the partnership as a general partner UNLESS there was a declaration in the decedent's will that the heir accept the condition as a prerequisite of the inheritance. Here, the deceased partner died intestate. Such a declaration is necessary. IF NONE WAS MADE, he/she shall only be a limited partner. Limited partners are not allowed to perform acts of administration. If PIN did not do the acts stated above, then her nature remains to be a limited partner. Assuming arguendo that she was made a general partner, general partners cannot sell partnership properties without authority from the other partners for such sale shall be in invalid for being in excess of her authority.

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