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SINGSONG v ISABELLA SAWMILL

Facts: Defendants Garibay, Margarita Saldajeno and Tubungbanua entered into a contract of
partnership under the frm name Isabela Sawmill! Said partnership owed unpaid balances to plainti"s!
# ci$il case for the dissolution was fled by the spouses Saldajeno against Isabela Sawmill, Garibay and
Tubungbanua! %ater on said parties entered into a memorandum agreement wherein Garibay and
Tubungbanua ha$e bound themsel$es to answer for any and all obligations of the defunct partnership
to its creditors and third persons! Defendants Garibay and Tubungbanua did not di$ide the assets and
properties of the &Isabella Sawmill' between them, but they continued the business of said partnership
under the same frm name!
The remaining partners e(ecuted an &#ssignment of )ights with *hattel Mortgage' in fa$or of
Saldajeno in order to secure the performance of their obligations! +owe$er, since they defaulted in
their payment a judgment was rendered in fa$or of Saldejano which caused the foreclosure of the *M!
The ,ro$incial Sheri" published notices that he would sell at a public auction certain properties -of the
partnership. mortgaged by Garibay and Tubungbanua in fa$or of Saldejano and later on e(ecuted a
sale in the latters fa$or, selling for /01 the assets of the partnership! Saldejano in turn sold to ,an
2riental lumber company for 341 part of the said properties she had bought at the public auction!
The plainti"s, in a ci$il action, sought to restrain the Sheri" from proceeding with the sales and to ha$e
the chattel mortgage declared null and $oid in fraud of creditors! Defendant M! Saldajeno claims that
all the plainti"s sa$e for 2ppan are creditors of Garibay and Tubungbanua and not of the defunct
partnership and that said creditors had 5nowledge and notice that the former partnership had been
dissol$ed!
The trial court ruled in fa$or of the plainti"s thus, the herein defendants appealed! The court ruled that
there was no *M o$er the properties as such were owned by the partnership and that the plainti"s
ha$e a preferred right o$er it as against Saldejano! #s such, the latter must pay the plainti"s the
respecti$e amounts for which the partnership is indebted to them! Garibay and Tubungbanua are also
liable to pay to the plainti"s whate$er amount that they may not collect from Saldajeno! The
defendants appealed to the *# but the latter transferred the records of the case to the S*!
SC: The remaining partners did not terminate the business of the partnership! It is e(pressly stipulated
in the memorandum agreement that the remaining partners had constituted themsel$es as the
partnership entity, the &Isabella Sawmill'! There was no li6uidation of the assets of the partnership!
The remaining partners continued doing business of the partnership in the name of &Isabella Sawmill'!
They used the properties of the partnership! The properties mortgaged to M! Saldajeno by the
remaining partners belonged to the partnership! It does not appear that the withdrawal of M! Saldajeno
was published in the newspapers! The appellees and the public in general had a right to e(pect that
whate$er credit they e(tended to the remaining partners doing business in the name of &Isabela
sawmill' could be enforced against the properties of said partnership! The judicial foreclosure e(ecuted
in fa$or of Saldajeno did not relie$e her from liability to the creditors of the partnership! Technically
spea5ing the partnership was dissol$ed by the withdrawal of Saldajeno but not terminated and it
continued doing business through the two remaining partners!
The plainti"s were prejudiced in their rights by the e(ecution of the chattel mortgage o$er the
properties of the partnership in fa$or of Saldajeno by the remaining partners and they had a right to
fle the action to nullify the chattel mortgage in 6uestion! The spouses Saldejano ha$e a right to be
reimbursed whate$er amounts they shall pay the appellees by their Garibay and Tubungbanua as in
the memorandum agreement, they undertoo5 to release Saldejano from any obligation of the
partnership to third persons!