Article 1811

ROGER V. NAVARRO, vs. HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37, Cagayan de Oro City,
and KAREN T. GO, doing business under the name KARGO ENTERPRISES
G.R. No. 153788- November 27, 2009
BRION, J.:
This is a petition for review on certiorari[1] that seeks to set aside the Court of Appeals (CA) Decision[2] dated October 16,
2001 and Resolution[3] dated May 29, 2002 in CA-G.R. SP. No. 64701. These CA rulings affirmed the July 26, 2000[4] and March 7,
2001[5] orders of the Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City, denying petitioner Roger V. Navarros
(Navarro) motion to dismiss.
BACKGROUND FACTS
On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case Nos. 98-599 (first complaint)[6] and 98598 (second complaint),[7]before the RTC for replevin and/or sum of money with damages against Navarro. In these complaints, Karen
Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor vehicles in Navarros possession.
The first complaint stated:
1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O. GO, a resident of
Cagayan de Oro City and doing business under the trade name KARGO ENTERPRISES, an entity duly registered
and existing under and by virtue of the laws of the Republic of the Philippines, which has its business address at
Bulua, Cagayan de Oro City; that defendant ROGER NAVARRO is a Filipino, of legal age, a resident of 62 Dolores
Street, Nazareth, Cagayan de Oro City, where he may be served with summons and other processes of the Honorable
Court; that defendant JOHN DOE whose real name and address are at present unknown to plaintiff is hereby joined
as party defendant as he may be the person in whose possession and custody the personal property subject matter of
this suit may be found if the same is not in the possession of defendant ROGER NAVARRO;
2. That KARGO ENTERPRISES is in the business of, among others, buying and selling motor vehicles,
including hauling trucks and other heavy equipment;
3. That for the cause of action against defendant ROGER NAVARRO, it is hereby stated that on August 8,
1997, the said defendant leased [from] plaintiff a certain motor vehicle which is more particularly described as
follows
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-51680
Motor No. 6D15-338735
Plate No. GHK-378
as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE entered into by and between KARGO
ENTERPRISES, then represented by its Manager, the aforementioned GLENN O. GO, and defendant ROGER
NAVARRO xxx; that in accordance with the provisions of the above LEASE AGREEMENT WITH OPTION TO
PURCHASE, defendant ROGER NAVARRO delivered unto plaintiff six (6) post-dated checks each in the amount
of SIXTY-SIX THOUSAND THREE HUNDRED THIRTY-THREE & 33/100 PESOS (P66,333.33) which were
supposedly in payment of the agreed rentals; that when the fifth and sixth checks, i.e. PHILIPPINE BANK OF
COMMUNICATIONS CAGAYAN DE ORO BRANCH CHECKS NOS. 017112 and 017113, respectively dated
January 8, 1998 and February 8, 1998, were presented for payment and/or credit, the same were dishonoredand/or
returned by the drawee bank for the common reason that the current deposit account against which the said checks
were issued did not have sufficient funds to cover the amounts thereof; that the total amount of the two (2)
checks, i.e. the sum of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100
PESOS (P132,666.66) therefore represents the principal liability of defendant ROGER NAVARRO unto plaintiff on
the basis of the provisions of the above LEASE AGREEMENT WITH RIGHT TO PURCHASE; that demands,
written and oral, were made of defendant ROGER NAVARRO to pay the amount of ONE HUNDRED THIRTYTWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66), or to return the subject motor
vehicle as also provided for in the LEASE AGREEMENT WITH RIGHT TO PURCHASE, but said demands were,
and still are, in vain to the great damage and injury of herein plaintiff; xxx
4. That the aforedescribed motor vehicle has not been the subject of any tax assessment and/or fine pursuant to law,
or seized under an execution or an attachment as against herein plaintiff;
xxx
8. That plaintiff hereby respectfully applies for an order of the Honorable Court for the immediate delivery of the
above-described motor vehicle from defendants unto plaintiff pending the final determination of this case on the
merits and, for that purpose, there is attached hereto an affidavit duly executed and bond double the value of the
personal property subject matter hereof to answer for damages and costs which defendants may suffer in the event
that the order for replevin prayed for may be found out to having not been properly issued.
The second complaint contained essentially the same allegations as the first complaint, except that the Lease Agreement with Option
to Purchase involved is datedOctober 1, 1997 and the motor vehicle leased is described as follows:
Make/Type FUSO WITH MOUNTED CRANE

Serial No. FK416K-510528

Motor No. 6D14-423403
The second complaint also alleged that Navarro delivered three post-dated checks, each for the amount of P100,000.00, to Karen Go
in payment of the agreed rentals; however, the third check was dishonored when presented for payment.[8]
On October 12, 1998[9] and October 14, 1998,[10] the RTC issued writs of replevin for both cases; as a result, the Sheriff seized the
two vehicles and delivered them to the possession of Karen Go.
In his Answers, Navarro alleged as a special affirmative defense that the two complaints stated no cause of action, since Karen Go
was not a party to the Lease Agreements with Option to Purchase (collectively, the lease agreements) the actionable documents on
which the complaints were based.
On Navarros motion, both cases were duly consolidated on December 13, 1999.
In its May 8, 2000 order, the RTC dismissed the case on the ground that the complaints did not state a cause of action.
In response to the motion for reconsideration Karen Go filed dated May 26, 2000,[11] the RTC issued another order
dated July 26, 2000 setting aside the order of dismissal. Acting on the presumption that Glenn Gos leasing business is a conjugal
property, the RTC held that Karen Go had sufficient interest in his leasing business to file the action against Navarro. However, the
RTC held that Karen Go should have included her husband, Glenn Go, in the complaint based on Section 4, Rule 3 of the Rules of
Court (Rules).[12] Thus, the lower court ordered Karen Go to file a motion for the inclusion of Glenn Go as co-plaintiff.
When the RTC denied Navarros motion for reconsideration on March 7, 2001, Navarro filed a petition for certiorari with the CA,
essentially contending that the RTC committed grave abuse of discretion when it reconsidered the dismissal of the case and directed
Karen Go to amend her complaints by including her husband Glenn Go as co-plaintiff. According to Navarro, a complaint which
failed to state a cause of action could not be converted into one with a cause of action by mere amendment or supplemental pleading.
On October 16, 2001, the CA denied Navarros petition and affirmed the RTCs order. [13] The CA also denied Navarros motion for
reconsideration in its resolution ofMay 29, 2002,[14] leading to the filing of the present petition.
THE PETITION
Navarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since it did not have the requisite
juridical personality to sue, the actual parties to the agreement are himself and Glenn Go. Since it was Karen Go who filed the
complaints and not Glenn Go, she was not a real party-in-interest and the complaints failed to state a cause of action.
Navarro posits that the RTC erred when it ordered the amendment of the complaint to include Glenn Go as a co-plaintiff,
instead of dismissing the complaint outright because a complaint which does not state a cause of action cannot be converted into one
with a cause of action by a mere amendment or a supplemental pleading. In effect, the lower court created a cause of action for
Karen Go when there was none at the time she filed the complaints.
Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff drastically changed the theory of the
complaints, to his great prejudice. Navarro claims that the lower court gravely abused its discretion when it assumed that the leased
vehicles are part of the conjugal property of Glenn and Karen Go. Since Karen Go is the registered owner of Kargo Enterprises, the
vehicles subject of the complaint are her paraphernal properties and the RTC gravely erred when it ordered the inclusion of Glenn
Go as a co-plaintiff.
Navarro likewise faults the lower court for setting the trial of the case in the same order that required Karen Go to amend
her complaints, claiming that by issuing this order, the trial court violated Rule 10 of the Rules.
Even assuming the complaints stated a cause of action against him, Navarro maintains that the complaints were premature
because no prior demand was made on him to comply with the provisions of the lease agreements before the complaints for replevin
were filed.
Lastly, Navarro posits that since the two writs of replevin were issued based on flawed complaints, the vehicles were illegally
seized from his possession and should be returned to him immediately.
Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no real interest in the subject of
the complaint, even if the lease agreements were signed only by her husband, Glenn Go; she is the owner of Kargo Enterprises and
Glenn Go signed the lease agreements merely as the manager of Kargo Enterprises. Moreover, Karen Go maintains that Navarros
insistence that Kargo Enterprises is Karen Gos paraphernal property is without basis. Based on the law and jurisprudence on the
matter, all property acquired during the marriage is presumed to be conjugal property. Finally, Karen Go insists that her complaints
sufficiently established a cause of action against Navarro. Thus, when the RTC ordered her to include her husband as co-plaintiff,
this was merely to comply with the rule that spouses should sue jointly, and was not meant to cure the complaints lack of cause of
action.
THE COURTS RULING
We find the petition devoid of merit.
Karen Go is the real party-in-interest
The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in the name of the real partyin-interest, i.e., the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the
suit.[15]

Interestingly, although Navarro admits that Karen Go is the registered owner of the business name Kargo Enterprises, he still insists
that Karen Go is not a real party-in-interest in the case. According to Navarro, while the lease contracts were in Kargo Enterprises
name, this was merely a trade name without a juridical personality, so the actual parties to the lease agreements were Navarro and
Glenn Go, to the exclusion of Karen Go.
As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it ordered the inclusion of Glenn
Go as co-plaintiff, since this in effect created a cause of action for the complaints when in truth, there was none.
We do not find Navarros arguments persuasive.
The central factor in appreciating the issues presented in this case is the business name Kargo Enterprises. The name
appears in the title of the Complaint where the plaintiff was identified as KAREN T. GO doing business under the name KARGO
ENTERPRISES, and this identification was repeated in the first paragraph of the Complaint. Paragraph 2 defined the business
KARGO ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the defendant leased from plaintiff a certain
motor vehicle that was thereafter described. Significantly, the Complaint specifies and attaches as its integral part the Lease
Agreement that underlies the transaction between the plaintiff and the defendant. Again, the name KARGO ENTERPRISES entered
the picture as this Lease Agreement provides:
This agreement, made and entered into by and between:
GLENN O. GO, of legal age, married, with post office address at xxx, herein referred to as the LESSORSELLER; representing KARGO ENTERPRISES as its Manager,
xxx
thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented. In other words, by the express
terms of this Lease Agreement, Glenn Go did sign the agreement only as the manager of Kargo Enterprises and the latter is clearly
the real party to the lease agreements.
As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a natural person, nor a juridical
person, as defined by Article 44 of the Civil Code:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or purpose, created by law; their personality
begins as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical
personality, separate and distinct from that of each shareholder, partner or member.
Thus, pursuant to Section 1, Rule 3 of the Rules, [16] Kargo Enterprises cannot be a party to a civil action. This legal reality
leads to the question: who then is the proper party to file an action based on a contract in the name of Kargo Enterprises?
We faced a similar question in Juasing Hardware v. Mendoza,[17] where we said:
Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court. The law merely
recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single
individual, and requires the proprietor or owner thereof to secure licenses and permits, register the business name,
and pay taxes to the national government. It does not vest juridical or legal personality upon the sole proprietorship
nor empower it to file or defend an action in court.
Thus, the complaint in the court below should have been filed in the name of the owner of Juasing
Hardware. The allegation in the body of the complaint would show that the suit is brought by such person as
proprietor or owner of the business conducted under the name and style Juasing Hardware. The descriptive words
doing business as Juasing Hardware may be added to the title of the case, as is customarily done. [18] [Emphasis
supplied.]
This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states:
SEC. 2. Parties in interest. A real party in interest is the party who stands to be benefited or injured by the judgment
in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every
action must be prosecuted or defended in the name of the real party in interest.
As the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from or be injured by a
judgment in this case. Thus, contrary to Navarros contention, Karen Go is the real party-in-interest, and it is legally incorrect to say
that her Complaint does not state a cause of action because her name did not appear in the Lease Agreement that her husband signed
in behalf of Kargo Enterprises. Whether Glenn Go can legally sign the Lease Agreement in his capacity as a manager of Kargo
Enterprises, a sole proprietorship, is a question we do not decide, as this is a matter for the trial court to consider in a trial on the
merits.
Glenn Gos Role in the Case

We find it significant that the business name Kargo Enterprises is in the name of Karen T. Go, [19] who described herself in
the Complaints to be a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City, and doing business
under the trade name KARGO ENTERPRISES.[20] That Glenn Go and Karen Go are married to each other is a fact never brought in
issue in the case. Thus, the business name KARGO ENTERPRISES is registered in the name of a married woman, a fact material to
the side issue of whether Kargo Enterprises and its properties are paraphernal or conjugal properties. To restate the parties
positions, Navarro alleges that Kargo Enterprises is Karen Gos paraphernal property, emphasizing the fact that the business is
registered solely in Karen Gos name. On the other hand, Karen Go contends that while the business is registered in her name, it is in
fact part of their conjugal property.
The registration of the trade name in the name of one person a woman does not necessarily lead to the conclusion that the
trade name as a property is hers alone, particularly when the woman is married. By law, all property acquired during the marriage,
whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be
conjugal unless the contrary is proved. [21] Our examination of the records of the case does not show any proof that Kargo Enterprises
and the properties or contracts in its name are conjugal. If at all, only the bare allegation of Navarro to this effect exists in the records
of the case. As we emphasized in Castro v. Miat:[22]
Petitioners also overlook Article 160 of the New Civil Code. It provides that all property of the marriage
is presumed to be conjugal partnership, unless it be prove[n] that it pertains exclusively to the husband or to the
wife. This article does not require proof that the property was acquired with funds of the partnership. The
presumption applies even when the manner in which the property was acquired does not appear. [23] [Emphasis
supplied.]
Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises as a sole proprietorship is conjugal or
paraphernal property, we hold that it is conjugal property.
Article 124 of the Family Code, on the administration of the conjugal property, provides:
Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both
spouses jointly. In case of disagreement, the husbands decision shall prevail, subject to recourse to the court by the
wife for proper remedy, which must be availed of within five years from the date of the contract implementing such
decision.
xxx
This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in managing their conjugal
property, i.e., Kargo Enterprises. No need exists, therefore, for one to obtain the consent of the other before performing an act of
administration or any act that does not dispose of or encumber their conjugal property.
Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the contract of partnership in all
that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements. In other
words, the property relations of the husband and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of Gains of
the Family Code and, suppletorily, by the spouses marriage settlement and by the rules on partnership under the Civil Code. In the
absence of any evidence of a marriage settlement between the spouses Go, we look at the Civil Code provision on partnership for
guidance.
A rule on partnership applicable to the spouses circumstances is Article 1811 of the Civil Code, which states:
Art. 1811. A partner is a co-owner with the other partners of specific partnership property.
The incidents of this co-ownership are such that:
(1) A partner, subject to the provisions of this Title and to any agreement between the partners, has an equal right
with his partners to possess specific partnership property for partnership purposes; xxx
Under this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the properties registered
under this name; hence, both have an equal right to seek possession of these properties. Applying Article 484 of the Civil Code,
which states that in default of contracts, or special provisions, co-ownership shall be governed by the provisions of this Title, we find
further support in Article 487 of the Civil Code that allows any of the co-owners to bring an action in ejectment with respect to the
co-owned property.
While ejectment is normally associated with actions involving real property, we find that this rule can be applied to the
circumstances of the present case, following our ruling in Carandang v. Heirs of De Guzman.[24] In this case, one spouse filed an
action for the recovery of credit, a personal property considered conjugal property, without including the other spouse in the action.
In resolving the issue of whether the other spouse was required to be included as a co-plaintiff in the action for the recovery of the
credit, we said:
Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the spouses
Carandang, seems to be either an indispensable or a necessary party. If she is an indispensable party, dismissal
would be proper. If she is merely a necessary party, dismissal is not warranted, whether or not there was an order for
her inclusion in the complaint pursuant to Section 9, Rule 3.
Article 108 of the Family Code provides:

Art. 108. The conjugal partnership shall be governed by the rules on the contract of
partnership in all that is not in conflict with what is expressly determined in this Chapter or by the
spouses in their marriage settlements.
This provision is practically the same as the Civil Code provision it superseded:
Art. 147. The conjugal partnership shall be governed by the rules on the contract of
partnership in all that is not in conflict with what is expressly determined in this Chapter.
In this connection, Article 1811 of the Civil Code provides that [a] partner is a co-owner with the other
partners of specific partnership property. Taken with the presumption of the conjugal nature of the funds used to
finance the four checks used to pay for petitioners stock subscriptions, and with the presumption that the credits
themselves are part of conjugal funds, Article 1811 makes Quirino and Milagros de Guzman co-owners of the
alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring an action
for the recovery thereof. In the fairly recent cases of Baloloy v. Hular andAdlawan v. Adlawan, we held that, in a
co-ownership, co-owners may bring actions for the recovery of co-owned property without the necessity of joining
all the other co-owners as co-plaintiffs because the suit is presumed to have been filed for the benefit of his coowners. In the latter case and in that of De Guia v. Court of Appeals, we also held that Article 487 of the Civil
Code, which provides that any of the co-owners may bring an action for ejectment, covers all kinds of action for
the recovery of possession.
In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to
Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring an action, any kind of action,
for the recovery of co-owned properties. Therefore, only one of the co-owners, namely the co-owner who filed the
suit for the recovery of the co-owned property, is an indispensable party thereto. The other co-owners are not
indispensable parties. They are not even necessary parties, for a complete relief can be accorded in the suit even
without their participation, since the suit is presumed to have been filed for the benefit of all co-owners.
[25]
[Emphasis supplied.]
Under this ruling, either of the spouses Go may bring an action against Navarro to recover possession of the Kargo
Enterprises-leased vehicles which they co-own. This conclusion is consistent with Article 124 of the Family Code, supporting as it
does the position that either spouse may act on behalf of the conjugal partnership, so long as they do not dispose of or encumber the
property in question without the other spouses consent.
On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to recover possession of the
leased vehicles, he only needs to be impleaded as a pro-forma party to the suit, based on Section 4, Rule 4 of the Rules, which states:
Section 4. Spouses as parties. Husband and wife shall sue or be sued jointly, except as provided by law.
Non-joinder of indispensable parties not ground to dismiss action
Even assuming that Glenn Go is an indispensable party to the action, we have held in a number of cases [26] that the
misjoinder or non-joinder of indispensable parties in a complaint is not a ground for dismissal of action. As we stated
in Macababbad v. Masirag:[27]
Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of parties is a
ground for the dismissal of an action, thus:
Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is
ground for dismissal of an action. Parties may be dropped or added by order of the court on
motion of any party or on its own initiative at any stage of the action and on such terms as are
just. Any claim against a misjoined party may be severed and proceeded with separately.
In Domingo v. Scheer, this Court held that the proper remedy when a party is left out is to implead the
indispensable party at any stage of the action. The court, either motu proprioor upon the motion of a party, may
order the inclusion of the indispensable party or give the plaintiff opportunity to amend his complaint in order to
include indispensable parties. If the plaintiff to whom the order to include the indispensable party is directed
refuses to comply with the order of the court, the complaint may be dismissed upon motion of the defendant or
upon the court's own motion. Only upon unjustified failure or refusal to obey the order to include or to amend is
the action dismissed.
In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her husband as a party plaintiff is fully in order.
Demand not required prior
to filing of replevin action
In arguing that prior demand is required before an action for a writ of replevin is filed, Navarro apparently likens a replevin
action to an unlawful detainer.

For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond, pursuant to Section 2, Rule 60 of the
Rules, which states:
Sec. 2. Affidavit and bond.
The applicant must show by his own affidavit or that of some other person who personally knows the facts:
(a)

That the applicant is the owner of the property claimed, particularly describing it, or is entitled to the
possession thereof;

(b)

That the property is wrongfully detained by the adverse party, alleging the cause of detention thereof
according to the best of his knowledge, information, and belief;

(c)

That the property has not been distrained or taken for a tax assessment or a fine pursuant to law, or seized
under a writ of execution or preliminary attachment, or otherwise placed undercustodia legis, or if so seized,
that it is exempt from such seizure or custody; and

(d) The actual market value of the property.

The applicant must also give a bond, executed to the adverse party in double the value of the property as stated in
the affidavit aforementioned, for the return of the property to the adverse party if such return be adjudged, and for
the payment to the adverse party of such sum as he may recover from the applicant in the action.
We see nothing in these provisions which requires the applicant to make a prior demand on the possessor of the property before he
can file an action for a writ of replevin. Thus, prior demand is not a condition precedent to an action for a writ of replevin.
More importantly, Navarro is no longer in the position to claim that a prior demand is necessary, as he has already admitted in his
Answers that he had received the letters that Karen Go sent him, demanding that he either pay his unpaid obligations or return the
leased motor vehicles. Navarros position that a demand is necessary and has not been made is therefore totally unmeritorious.
WHEREFORE, premises considered, we DENY the petition for review for lack of merit. Costs against petitioner Roger V.
Navarro.
SO ORDERED.
____________________________________________________________________________________________________________

ENRIQUE CLEMENTE,
vs.
DIONISIO GALVAN, JOSE ECHEVARRIA,
G.R. No. L-45662

April 26, 1939

DIAZ, J.:
The intervenor Jose Echevarria having lost in the Court of First Instance of manila which rendered judgment against him, the pertinent
portion of which reads: "and with respect to the complaint of the intervenor, the mortgage executed in his favor by plaintiff is declared
null and void, and said complaint in intervention, as well as the counterclaim filed by the defendant against the intervenor, is
dismissed, without pronouncement as to costs," he appealed to this court on the ground that, according to him, the lower court
committed the errors assigned in his brief as follows:
I. The court a quo erred in finding in the appealed decision that plaintiff was unable to take possession of the machines
subject of the deed of mortgage Exhibit B either before or after the execution thereof.
II. The court a quo likewise erred in deciding the present case against the intervenor-appellant, on the ground, among others,
that "plaintiff has not adduced any evidence nor has he testified to show that the machines mortgaged by him to the
intervenor have ever belonged to him, notwithstanding that said intervenor is his close relative.".
III. The lower court also erred in declaring null and void the mortgage executed by plaintiff in favor of the intervenor and,
thereby, dismissing the complaint in intervention.
IV. The lower court lastly erred in ordering the receiver J. D. Mencarini to deliver to the defendant the aforesaid machines
upon petition of the plaintiff.

In order to have a clear idea of the question, it is proper to state the facts bearing on the case as they appear in the decision and
judgment of the lower court and in the documents which constitute all the evidence adduced by the parties during the trial.
On June 6, 1931, plaintiff and defendant organized a civil partnership which they named "Galvan y Compaia" to engage in the
manufacture and sale of paper and other stationery. they agreed to invest therein a capital of P100,000, but as a matter of fact they did
not cover more than one-fifth thereof, each contributing P10,000. Hardly a year after such organization, the plaintiff commenced the
present case in the above-mentioned court to ask for the dissolution of the partnership and to compel defendant to whom the
management thereof was entrusted to submit an accounting of his administration and to deliver to him his share as such partner. In his
answer defendant expressed his conformity to the dissolution of the partnership and the liquidation of its affairs; but by way of
counterclaim he asked that, having covered a deficit incurred by the partnership amounting to P4,000 with his own money, plaintiff
reimburse him of one-half of said sum. On petition of the plaintiff a receiver and liquidator to take charge of the properties and
business for the partnership while the same was not yet definitely dissolved, was appointed, the person chosen being Juan D.
Mencarini. The latter was already discharging the duties of his office when the court, by virtue of a petition ex parte of the plaintiff,
issued the order of May 24, 1933, requiring said receiver to deliver to him (plaintiff) certain machines which were then at Nos. 705707 Ylaya Street, Manila but authorizing him to charge their value of P4,500 against the portion which may eventually be due to said
plaintiff. To comply with said order, the receiver delivered to plaintiff the keys to the place where the machines were found, which was
the same place where defendant had his home; but before he could take actual possession of said machines, upon the strong opposition
of defendant, the court, on motion of the latter, suspended the effects of its order of May 24, 1933. In the meantime the judgments
rendered in cases Nos. 42794 and 43070 entitled "Philippine Education Co., Inc. vs. Enrique Clemente" for the recovery of a sum of
money, and "Jose Echevarria vs.Enrique Clemente", also for the recovery of a sum of money, respectively, were made executory; and
in order to avoid the attachment and subsequent sale of the machines by the sheriff for the satisfaction from the proceeds thereof of the
judgments rendered in the two cases aforecited, plaintiff agreed with the intervenor, who is his nephew, to execute, as he in fact
executed in favor of the latter, a deed of mortgage Exhibit B encumbering the machines described in said deed in which it is stated that
"they are situated on Singalong Street No. 1163", which is a place entirely different from the house Nos. 705 and 707 on Ylaya Street
hereinbefore mentioned. The one year agreed upon in the deed of mortgage for the fulfillment by the plaintiff of the obligation he had
contracted with the intervenor, having expired, the latter commenced case No. 49629 to collect his mortgage credit. The intervenor, as
plaintiff in the said case, obtained judgment in his favor because the defendant did not interpose any defense or objection, and,
moreover, admitted being really indebted to the intervenor in the amount set forth in the deed of mortgage Exhibit B. The machines
which the intervenor said were mortgaged to him were then in fact in custodia legis, as they were under the control of the receiver and
liquidator Juan D. Mencarini. It was, therefore, useless for the intervenor to attach the same in view of the receiver's opposition; and
the question having been brought to court, it decided that nothing could be done because the receiver was not a party to the case which
the intervenor instituted to collect his aforesaid credit. (Civil case No. 49629.) The question ended thus because the intervenor did not
take any other step until he thought of joining in this case as intervenor.
1. From the foregoing facts, it is clear that plaintiff could not obtain possession of the machines in question. The constructive
possession deducible from the fact that he had the keys to the place where the machines were found (Ylaya Street Nos. 705707), as they had been delivered to him by the receiver, does not help him any because the lower court suspended the effects
of the other whereby the keys were delivered to him a few days after its issuance; and thereafter revoked it entirely in the
appealed decision. Furthermore, when he attempted to take actual possession of the machines, the defendant did not allow
him to do so. Consequently, if he did not have actual possession of the machines, he could not in any manner mortgage them,
for while it is true that the oft-mentioned deed of mortgage Exhibit B was annotated in the registry of property, it is no less
true the machines to which it refers are not the same as those in question because the latter are on Ylaya Street Nos. 705-707
and the former are on Singalong Street No. 1163. It can not be said that Exhibit B-1, allegedly a supplementary contract
between the plaintiff and the intervenor, shows that the machines referred to in the deed of mortgage are the same as those in
dispute and which are found on Ylaya Street because said exhibit being merely a private document, the same cannot vary or
alter the terms of a public document which is Exhibit B or the deed of mortgage.
2. The second error attributed to the lower court is baseless. The evidence of record shows that the machines in contention
originally belonged to the defendant and from him were transferred to the partnership Galvan y Compania. This being the
case, said machines belong to the partnership and not to him, and shall belong to it until partition is effected according to the
result thereof after the liquidation.
3. The last two errors attributed by the appellant to the lower court have already been disposed of by the considerations above
set forth. they are as baseless as the previous ones.
In view of all the foregoing, the judgment appealed from is affirmed, with costs against the appellant. So ordered.
Avancea, C. J., Villa-Real, Imperial, Laurel, Concepcion, and Moran, JJ., concur.
____________________________________________________________________________________________________________

Article 1813
LUZVIMINDA J. VILLAREAL, DIOGENES VILLAREAL and CARMELITO JOSE, vs.
DONALDO EFREN C. RAMIREZ and Spouses CESAR G. RAMIREZ JR. and CARMELITA C. RAMIREZ,
G.R. No. 144214
July 14, 2003

PANGANIBAN, J.:
A share in a partnership can be returned only after the completion of the latter's dissolution, liquidation and winding up of the
business.
The Case
The Petition for Review on Certiorari before us challenges the March 23, 2000 Decision1 and the July 26, 2000 Resolution2 of the
Court of Appeals3 (CA) in CA-GR CV No. 41026. The assailed Decision disposed as follows:
"WHEREFORE, foregoing premises considered, the Decision dated July 21, 1992 rendered by the Regional Trial Court,
Branch 148, Makati City is hereby SET ASIDE and NULLIFIED and in lieu thereof a new decision is rendered ordering the
[petitioners] jointly and severally to pay and reimburse to [respondents] the amount of P253,114.00. No pronouncement as to
costs."4
Reconsideration was denied in the impugned Resolution.
The Facts
On July 25, 1984, Luzviminda J. Villareal, Carmelito Jose and Jesus Jose formed a partnership with a capital of P750,000 for the
operation of a restaurant and catering business under the name "Aquarius Food House and Catering Services." 5 Villareal was
appointed general manager and Carmelito Jose, operations manager.
Respondent Donaldo Efren C. Ramirez joined as a partner in the business on September 5, 1984. His capital contribution of P250,000
was paid by his parents, Respondents Cesar and Carmelita Ramirez.6
After Jesus Jose withdrew from the partnership in January 1987, his capital contribution of P250,000 was refunded to him in cash by
agreement of the partners.7
In the same month, without prior knowledge of respondents, petitioners closed down the restaurant, allegedly because of increased
rental. The restaurant furniture and equipment were deposited in the respondents' house for storage. 8
On March 1, 1987, respondent spouses wrote petitioners, saying that they were no longer interested in continuing their partnership or
in reopening the restaurant, and that they were accepting the latter's offer to return their capital contribution. 9
On October 13, 1987, Carmelita Ramirez wrote another letter informing petitioners of the deterioration of the restaurant furniture and
equipment stored in their house. She also reiterated the request for the return of their one-third share in the equity of the partnership.
The repeated oral and written requests were, however, left unheeded.10
Before the Regional Trial Court (RTC) of Makati, Branch 59, respondents subsequently filed a Complaint 11 dated November 10, 1987,
for the collection of a sum of money from petitioners.
In their Answer, petitioners contended that respondents had expressed a desire to withdraw from the partnership and had called for its
dissolution under Articles 1830 and 1831 of the Civil Code; that respondents had been paid, upon the turnover to them of furniture and
equipment worth over P400,000; and that the latter had no right to demand a return of their equity because their share, together with
the rest of the capital of the partnership, had been spent as a result of irreversible business losses. 12
In their Reply, respondents alleged that they did not know of any loan encumbrance on the restaurant. According to them, if such
allegation were true, then the loans incurred by petitioners should be regarded as purely personal and, as such, not chargeable to the
partnership. The former further averred that they had not received any regular report or accounting from the latter, who had solely
managed the business. Respondents also alleged that they expected the equipment and the furniture stored in their house to be
removed by petitioners as soon as the latter found a better location for the restaurant.13
Respondents filed an Urgent Motion for Leave to Sell or Otherwise Dispose of Restaurant Furniture and Equipment 14 on July 8, 1988.
The furniture and the equipment stored in their house were inventoried and appraised at P29,000.15 The display freezer was sold for
P5,000 and the proceeds were paid to them.16
After trial, the RTC 17 ruled that the parties had voluntarily entered into a partnership, which could be dissolved at any time.
Petitioners clearly intended to dissolve it when they stopped operating the restaurant. Hence, the trial court, in its July 21, 1992
Decision, held there liable as follows:18
"WHEREFORE, judgment is hereby rendered in favor of [respondents] and against the [petitioners] ordering the [petitioners]
to pay jointly and severally the following:

(a) Actual damages in the amount of P250,000.00

(b) Attorney's fee in the amount of P30,000.00
(c) Costs of suit."
The CA Ruling
The CA held that, although respondents had no right to demand the return of their capital contribution, the partnership was nonetheless
dissolved when petitioners lost interest in continuing the restaurant business with them. Because petitioners never gave a proper
accounting of the partnership accounts for liquidation purposes, and because no sufficient evidence was presented to show financial
losses, the CA. computed their liability as follows:
"Consequently, since what has been proven is only the outstanding obligation of the partnership in the amount of
P240,658.00, although contracted by the partnership before [respondents'] have joined the partnership but in accordance with
Article 1826 of the New Civil Code, they are liable which must have to be deducted from the remaining capitalization of the
said partnership which is in the amount of P1,000,000.00 resulting in the amount of P759,342.00, and in order to get the
share of [respondents], this amount of P759,342.00 must be divided into three (3) shares or in the amount of P253,114.00 for
each share and which is the only amount which [petitioner] will return to [respondents'] representing the contribution to the
partnership minus the outstanding debt thereof."19
Hence, this Petition.20
Issues
In their Memorandum,21 petitioners submit the following issues for our consideration:
"9.1. Whether the Honorable Court of Appeals' decision ordering the distribution of the capital contribution, instead of the net
capital after the dissolution and liquidation of a partnership, thereby treating the capital contribution like a loan, is in
accordance with law and jurisprudence;
"9.2. Whether the Honorable Court of Appeals' decision ordering the petitioners to jointly and severally pay and reimburse
the amount of [P]253,114.00 is supported by the evidence on record; and
"9.3. Whether the Honorable Court of Appeals was correct in making [n]o pronouncement as to costs."22
On closer scrutiny, the issues are as follows: (1) whether petitioners are liable to respondents for the latter's share in the partnership;
(2) whether the CA's computation of P253,114 as respondents' share is correct; and (3) whether the CA was likewise correct in not
assessing costs.
This Court's Ruling
The Petition has merit.
First Issue:
Share in Partnership
Both the trial and the appellate courts found that a partnership had indeed existed, and that it was dissolved on March 1, 1987. They
found that the dissolution took place when respondents informed petitioners of the intention to discontinue it because of the former's
dissatisfaction with, and loss of trust in, the latter's management of the partnership affairs. These findings were amply supported by the
evidence on record. Respondents consequently demanded from petitioners the return of their one-third equity in the partnership.
We hold that respondents have no right to demand from petitioners the return of their equity share. Except as managers of the
partnership, petitioners did not personally hold its equity or assets. "The partnership has a juridical personality separate and distinct
from that of each of the partners."23 Since the capital was contributed to the partnership, not to petitioners, it is the partnership that
must refund the equity of the retiring partners.24
Second Issue:
What Must Be Returned?
Since it is the partnership, as a separate and distinct entity, that must refund the shares of the partners, the amount to be refunded is
necessarily limited to its total resources. In other words, it can only pay out what it has in its coffers, which consists of all its assets.
However, before the partners can be paid their shares, the creditors of the partnership must first be compensated. 25 After all the
creditors have been paid, whatever is left of the partnership assets becomes available for the payment of the partners' shares.

Evidently, in the present case, the exact amount of refund equivalent to respondents' one-third share in the partnership cannot be
determined until all the partnership assets will have been liquidated in other words, sold and converted to cash and all
partnership creditors, if any, paid. The CA's computation of the amount to be refunded to respondents as their share was thus
erroneous.
First, it seems that the appellate court was under the misapprehension that the total capital contribution was equivalent to the gross
assets to be distributed to the partners at the time of the dissolution of the partnership. We cannot sustain the underlying idea that the
capital contribution at the beginning of the partnership remains intact, unimpaired and available for distribution or return to the
partners. Such idea is speculative, conjectural and totally without factual or legal support.
Generally, in the pursuit of a partnership business, its capital is either increased by profits earned or decreased by losses sustained. It
does not remain static and unaffected by the changing fortunes of the business. In the present case, the financial statements presented
before the trial court showed that the business had made meager profits.26 However, notable therefrom is the omission of any provision
for the depreciation27 of the furniture and the equipment. The amortization of the goodwill28 (initially valued at P500,000) is not
reflected either. Properly taking these non-cash items into account will show that the partnership was actually sustaining substantial
losses, which consequently decreased the capital of the partnership. Both the trial and the appellate courts in fact recognized the
decrease of the partnership assets to almost nil, but the latter failed to recognize the consequent corresponding decrease of the capital.
Second, the CA's finding that the partnership had an outstanding obligation in the amount of P240,658 was not supported by evidence.
We sustain the contrary finding of the RTC, which had rejected the contention that the obligation belonged to the partnership for the
following reason:
"x x x [E]vidence on record failed to show the exact loan owed by the partnership to its creditors. The balance sheet (Exh. '4')
does not reveal the total loan. The Agreement (Exh. 'A') par. 6 shows an outstanding obligation of P240,055.00 which the
partnership owes to different creditors, while the Certification issued by Mercator Finance (Exh. '8') shows that it was Sps.
Diogenes P. Villareal and Luzviminda J. Villareal, the former being the nominal party defendant in the instant case, who
obtained a loan of P355,000.00 on Oct. 1983, when the original partnership was not yet formed."
Third, the CA failed to reduce the capitalization by P250,000, which was the amount paid by the partnership to Jesus Jose when he
withdrew from the partnership.
Because of the above-mentioned transactions, the partnership capital was actually reduced. When petitioners and respondents ventured
into business together, they should have prepared for the fact that their investment would either grow or shrink. In the present case, the
investment of respondents substantially dwindled. The original amount of P250,000 which they had invested could no longer be
returned to them, because one third of the partnership properties at the time of dissolution did not amount to that much.
It is a long established doctrine that the law does not relieve parties from the effects of unwise, foolish or disastrous contracts they
have entered into with all the required formalities and with full awareness of what they were doing. Courts have no power to relieve
them from obligations they have voluntarily assumed, simply because their contracts turn out to be disastrous deals or unwise
investments.29
Petitioners further argue that respondents acted negligently by permitting the partnership assets in their custody to deteriorate to the
point of being almost worthless. Supposedly, the latter should have liquidated these sole tangible assets of the partnership and
considered the proceeds as payment of their net capital. Hence, petitioners argue that the turnover of the remaining partnership assets
to respondents was precisely the manner of liquidating the partnership and fully settling the latter's share in the partnership.
We disagree. The delivery of the store furniture and equipment to private respondents was for the purpose of storage. They were
unaware that the restaurant would no longer be reopened by petitioners. Hence, the former cannot be faulted for not disposing of the
stored items to recover their capital investment.
Third Issue:
Costs
Section 1, Rule 142, provides:
"SECTION 1. Costs ordinarily follow results of suit. Unless otherwise provided in these rules, costs shall be allowed to
the prevailing party as a matter of course, but the court shall have power, for special reasons, to adjudge that either party shall
pay the costs of an action, or that the same be divided, as may be equitable. No costs shall be allowed against the Republic of
the Philippines unless otherwise provided by law."
Although, as a rule, costs are adjudged against the losing party, courts have discretion, "for special reasons," to decree otherwise.
When a lower court is reversed, the higher court normally does not award costs, because the losing party relied on the lower court's
judgment which is presumed to have been issued in good faith, even if found later on to be erroneous. Unless shown to be patently
capricious, the award shall not be disturbed by a reviewing tribunal.

WHEREFORE, the Petition is GRANTED, and the assailed Decision and Resolution SET ASIDE. This disposition is without prejudice
to proper proceedings for the accounting, the liquidation and the distribution of the remaining partnership assets, if any. No
pronouncement as to costs.
SO ORDERED.
Puno, Corona and Carpio-Morales, JJ ., concur.
Sandoval-Gutierrez, J ., on official leave.
___________________________________________________________________________________________________________

JOSEFINA P. REALUBIT, vs. PROSENCIO

D. JASO and EDEN G. JASO,
G.R. No. 178782- September 21, 2011
PEREZ, J.:
The validity as well as the consequences of an assignment of rights in a joint venture are at issue in this petition for review
filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure,[1] assailing the 30 April 2007 Decision [2] rendered by the Court of
Appeals (CA) then Twelfth Division in CA-G.R. CV No. 73861,[3] the dispositive portion of which states:
WHEREFORE, the Decision appealed from is SET ASIDE and we order the dissolution of the joint venture between
defendant-appellant Josefina Realubit and Francis Eric Amaury Biondo and the subsequent conduct of accounting,
liquidation of assets and division of shares of the joint venture business.
Let a copy hereof and the records of the case be remanded to the trial court for appropriate proceedings.[4]
The Facts
On 17 March 1994, petitioner Josefina Realubit (Josefina) entered into a Joint Venture Agreement with Francis Eric Amaury Biondo
(Biondo), a French national, for the operation of an ice manufacturing business. With Josefina as the industrial partner and Biondo as
the capitalist partner, the parties agreed that they would each receive 40% of the net profit, with the remaining 20% to be used for the
payment of the ice making machine which was purchased for the business. [5] For and in consideration of the sum of P500,000.00,
however, Biondo subsequently executed a Deed of Assignment dated 27 June 1997, transferring all his rights and interests in the
business in favor of respondent Eden Jaso (Eden), the wife of respondent Prosencio Jaso. [6] With Biondos eventual departure from the
country, the Spouses Jaso caused their lawyer to send Josefina a letter dated 19 February 1998, apprising her of their acquisition of
said Frenchmans share in the business and formally demanding an accounting and inventory thereof as well as the remittance of their
portion of its profits.[7]
Faulting Josefina with unjustified failure to heed their demand, the Spouses Jaso commenced the instant suit with the filing of
their 3 August 1998 Complaint against Josefina, her husband, Ike Realubit (Ike), and their alleged dummies, for specific performance,
accounting, examination, audit and inventory of assets and properties, dissolution of the joint venture, appointment of a receiver and
damages. Docketed as Civil Case No. 98-0331 before respondent Branch 257 of the Regional Trial Court (RTC) of Paraaque City, said
complaint alleged, among other matters, that the Spouses Realubit had no gainful occupation or business prior to their joint venture
with Biondo; that with the income of the business which earned not less than P3,000.00 per day, they were, however, able to acquire
the two-storey building as well as the land on which the joint ventures ice plant stands, another building which they used as their
office and/or residence and six (6) delivery vans; and, that aside from appropriating for themselves the income of the business, the
Spouses Realubit have fraudulently concealed the funds and assets thereof thru their relatives, associates or dummies. [8]
Served with summons, the Spouses Realubit filed their Answer dated 21 October 1998, specifically denying the material
allegations of the foregoing complaint.Claiming that they have been engaged in the tube ice trading business under a single
proprietorship even before their dealings with Biondo, the Spouses Realubit, in turn, averred that their said business partner had left
the country in May 1997 and could not have executed the Deed of Assignment which bears a signature markedly different from that
which he affixed on their Joint Venture Agreement; that they refused the Spouses Jasos demand in view of the dubious circumstances
surrounding their acquisition of Biondos share in the business which was established at Don Antonio Heights, Commonwealth
Avenue, Quezon City; that said business had already stopped operations on 13 January 1996 when its plant shut down after its power
supply was disconnected by MERALCO for non-payment of utility bills; and, that it was their own tube ice trading business which
had been moved to 66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City that the Spouses Jaso mistook for the ice
manufacturing business established in partnership with Biondo. [9]
The issues thus joined and the mandatory pre-trial conference subsequently terminated, the RTC went on to try the case on its
merits and, thereafter, to render its Decision dated 17 September 2001, discounting the existence of sufficient evidence from which the
income, assets and the supposed dissolution of the joint venture can be adequately reckoned. Upon the finding, however, that the
Spouses Jaso had been nevertheless subrogated to Biondos rights in the business in view of their valid acquisition of the latters share
as capitalist partner,[10] the RTC disposed of the case in the following wise:
WHEREFORE, defendants are ordered to submit to plaintiffs a complete accounting and inventory of the assets and
liabilities of the joint venture from its inception to the present, to allow plaintiffs access to the books and accounting
records of the joint venture, to deliver to plaintiffs their share in the profits, if any, and to pay the plaintiffs the
amount of P20,000. for moral damages. The claims for exemplary damages and attorneys fees are denied for lack of
basis.[11]
On appeal before the CA, the foregoing decision was set aside in the herein assailed Decision dated 30 April 2007, upon the
following findings and conclusions: (a) the Spouses Jaso validly acquired Biondos share in the business which had been transferred to

and continued its operations at 66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City and not dissolved as claimed by the
Spouses Realubit; (b) absent showing of Josefinas knowledge and consent to the transfer of Biondos share, Eden cannot be considered
as a partner in the business, pursuant to Article 1813 of the Civil Code of the Philippines; (c) while entitled to Biondosshare in the
profits of the business, Eden cannot, however, interfere with the management of the partnership, require information or account of its
transactions and inspect its books; (d) the partnership should first be dissolved before Eden can seek an accounting of its transactions
and demand Biondos share in the business; and, (e) the evidence adduced before the RTC do not support the award of moral damages
in favor of the Spouses Jaso.[12]
The Spouses Realubits motion for reconsideration of the foregoing decision was denied for lack of merit in the CAs 28 June
2007 Resolution,[13] hence, this petition.
The Issues
The Spouses Realubit urge the reversal of the assailed decision upon the negative of the following issues, to wit:
A.

WHETHER OR NOT THERE WAS A VALID ASSIGNMENT OF RIGHTS TO THE JOINT

VENTURE.

B. WHETHER THE COURT MAY ORDER PETITIONER [JOSEFINA REALUBIT] AS PARTNER IN THE
JOINT VENTURE TO RENDER [A]N ACCOUNTING TO ONE WHO IS NOT A PARTNER IN SAID
JOINT VENTURE.
C. WHETHER PRIVATE RESPONDENTS [SPOUSES JASO] HAVE ANY RIGHT IN THE JOINT VENTURE
AND IN THE SEPARATE ICE BUSINESS OF PETITIONER[S].[14]
The Courts Ruling
We find the petition bereft of merit.
The Spouses Realubit argue that, in upholding its validity, both the RTC and the CA inordinately gave premium to the
notarization of the 27 June 1997 Deed of Assignment executed by Biondo in favor of the Spouses Jaso. Calling attention to the latters
failure to present before the RTC said assignor or, at the very least, the witnesses to said document, the Spouses Realubit maintain that
the testimony of Rolando Diaz, the Notary Public before whom the same was acknowledged, did not suffice to establish its
authenticity and/or validity. They insist that notarization did not automatically and conclusively confer validity on said deed, since it is
still entirely possible that Biondo did not execute said deed or, for that matter, appear before said notary public. [15] The dearth of merit
in the Spouses Realubits position is, however, immediately evident from the settled rule that documents acknowledged before notaries
public are public documents which are admissible in evidence without necessity of preliminary proof as to their authenticity and due
execution.[16]
It cannot be gainsaid that, as a public document, the Deed of Assignment Biondo executed in favor of Eden not only enjoys a
presumption of regularity[17] but is also considered prima facie evidence of the facts therein stated. [18] A party assailing the authenticity
and due execution of a notarized document is, consequently, required to present evidence that is clear, convincing and more than
merely preponderant.[19] In view of the Spouses Realubits failure to discharge this onus, we find that both the RTC and the CA
correctly upheld the authenticity and validity of said Deed of Assignment upon the combined strength of the above-discussed
disputable presumptions and the testimonies elicited from Eden [20] and Notary Public Rolando Diaz.[21] As for the Spouses Realubits
bare assertion that Biondos signature on the same document appears to be forged, suffice it to say that, like fraud, [22] forgery is never
presumed and must likewise be proved by clear and convincing evidence by the party alleging the same. [23] Aside from not being
borne out by a comparison of Biondos signatures on the Joint Venture Agreement[24] and the Deed of Assignment,[25] said forgery is,
moreover debunked by Biondos duly authenticated certification dated 17 November 1998, confirming the transfer of his interest in the
business in favor of Eden.[26]
Generally understood to mean an organization formed for some temporary purpose, a joint venture is likened to a particular
partnership or one which has for its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a
profession or vocation.[27] The rule is settled that joint ventures are governed by the law on partnerships [28] which are, in turn, based on
mutual agency or delectus personae.[29] Insofar as a partners conveyance of the entirety of his interest in the partnership is concerned,
Article 1813 of the Civil Code provides as follows:
Art. 1813. A conveyance by a partner of his whole interest in the partnership does not itself dissolve the partnership,
or, as against the other partners in the absence of agreement, entitle the assignee, during the continuance of the
partnership, to interfere in the management or administration of the partnership business or affairs, or to require any
information or account of partnership transactions, or to inspect the partnership books; but it merely entitles the
assignee to receive in accordance with his contracts the profits to which the assigning partners would otherwise be
entitled. However, in case of fraud in the management of the partnership, the assignee may avail himself of the usual
remedies.
In the case of a dissolution of the partnership, the assignee is entitled to receive his assignors interest and may
require an account from the date only of the last account agreed to by all the partners.
From the foregoing provision, it is evident that (t)he transfer by a partner of his partnership interest does not make the
assignee of such interest a partner of the firm, nor entitle the assignee to interfere in the management of the partnership business or to
receive anything except the assignees profits. The assignment does not purport to transfer an interest in the partnership, but only a
future contingent right to a portion of the ultimate residue as the assignor may become entitled to receive by virtue of his proportionate
interest in the capital.[30] Since a partners interest in the partnership includes his share in the profits, [31] we find that the CA committed
no reversible error in ruling that the Spouses Jaso are entitled to Biondos share in the profits, despite Juanitas lack of consent to the
assignment of said Frenchmans interest in the joint venture. Although Eden did not, moreover, become a partner as a consequence of
the assignment and/or acquire the right to require an accounting of the partnership business, the CA correctly granted her prayer for

dissolution of the joint venture conformably with the right granted to the purchaser of a partners interest under Article 1831 of
the Civil Code.[32]
Considering that they involve questions of fact, neither are we inclined to hospitably entertain the Spouses Realubits
insistence on the supposed fact that Josefinas joint venture with Biondo had already been dissolved and that the ice manufacturing
business at 66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City was merely a continuation of the same business they
previously operated under a single proprietorship. It is well-entrenched doctrine that questions of fact are not proper subjects of appeal
by certiorari under Rule 45 of the Rules of Court as this mode of appeal is confined to questions of law.[33] Upon the principle that this
Court is not a trier of facts, we are not duty bound to examine the evidence introduced by the parties below to determine if the trial and
the appellate courts correctly assessed and evaluated the evidence on record. [34] Absent showing that the factual findings complained of
are devoid of support by the evidence on record or the assailed judgment is based on misapprehension of facts, the Court will limit
itself to reviewing only errors of law.[35]
Based on the evidence on record, moreover, both the RTC [36] and the CA[37] ruled out the dissolution of the joint venture and
concluded that the ice manufacturing business at the aforesaid address was the same one established by Juanita and Biondo. As a rule,
findings of fact of the CA are binding and conclusive upon this Court, [38] and will not be reviewed or disturbed on appeal [39] unless the
case falls under any of the following recognized exceptions: (1) when the conclusion is a finding grounded entirely on speculation,
surmises and conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) where there is a grave abuse
of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the
CA, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and
appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings of fact are conclusions without citation of
specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioners' main and reply briefs
are not disputed by the respondents; and, (10) when the findings of fact of the CA are premised on the supposed absence of evidence
and contradicted by the evidence on record. [40] Unfortunately for the Spouses Realubits cause, not one of the foregoing exceptions
applies to the case.
WHEREFORE, the petition is DENIED for lack of merit and the assailed CA Decision dated 30 April 2007 is,
accordingly, AFFIRMED in tot
______________________________________________________________________________________

Article 1815
PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME "SYCIP, SALAZAR, FELICIANO,
HERNANDEZ & CASTILLO." LUCIANO E. SALAZAR, FLORENTINO P. FELICIANO, BENILDO G. HERNANDEZ.
GREGORIO R. CASTILLO. ALBERTO P. SAN JUAN, JUAN C. REYES. JR., ANDRES G. GATMAITAN, JUSTINO H.
CACANINDIN, NOEL A. LAMAN, ETHELWOLDO E. FERNANDEZ, ANGELITO C. IMPERIO, EDUARDO R. CENIZA,
TRISTAN A. CATINDIG, ANCHETA K. TAN, and ALICE V. PESIGAN, petitioners.
IN THE MATTER OF THE PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME "OZAETA,
ROMULO, DE LEON, MABANTA & REYES." RICARDO J. ROMULO, BENJAMIN M. DE LEON, ROMAN MABANTA,
JR., JOSE MA, REYES, JESUS S. J. SAYOC, EDUARDO DE LOS ANGELES, and JOSE F. BUENAVENTURA, petitioners.

MELENCIO-HERRERA,
Two separate Petitions were filed before this Court 1) by the surviving partners of Atty. Alexander Sycip, who died on May 5, 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. In the Court's Resolution of September 2, 1976, both
Petitions were ordered consolidated.
Petitioners base their petitions on the following 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 when it provides in the last paragraph
that: t.hqw
The use by the person or partnership continuing the business of the partnership name, or the name of a deceased
partner as part thereof, shall not of itself make the individual property of the deceased partner liable for any debts
contracted by such person or partnership. 1
2. In regulating other professions, such as accountancy and engineering, the legislature has authorized the adoption of firm names
without any restriction as to the use, in such firm name, of the name of a deceased partner; 2 the legislative authorization given to those
engaged in the practice of accountancy a profession 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." 3
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
law partnership because Canon 33 of the Canons of Professional Ethics adopted by the American Bar Association declares that: t.
hqw
... The continued use of the name of a deceased or former partner when permissible by local custom, is not unethical
but care should be taken that no imposition or deception is practiced through this use. ... 4
4. 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 stationeries now being used by them carry new letterheads indicating the
years when their respective deceased partners were connected with the firm; petitioners will notify all leading national and
international law directories of the fact of their respective deceased partners' deaths. 5
5. No local custom prohibits the continued use of a deceased partner's name in a professional firm's name; 6 there is no custom or
usage in the Philippines, or at least in the Greater Manila Area, which recognizes that the name of a law firm necessarily Identifies the
individual members of the firm. 7
6. 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. 8
The question involved in these Petitions first came under consideration by this Court in 1953 when a law firm in Cebu (the Deen case)
continued its practice of including in its firm name that of a deceased partner, C.D. Johnston. 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."
The same issue was raised before this Court in 1958 as an incident in G. R. No. L-11964, entitled Register of Deeds of Manila vs.
China Banking Corporation. The law firm of Perkins & Ponce Enrile moved to intervene asamicus curiae. Before acting thereon, the
Court, in a Resolution of April 15, 1957, stated that it "would like to be informed why the name of Perkins is still being used although
Atty. E. A. Perkins is already dead." In a Manifestation dated May 21, 1957, the law firm of Perkins and Ponce Enrile, raising
substantially the same arguments as those now being raised by petitioners, prayed that the continued use of the firm name "Perkins &
Ponce Enrile" be held proper.
On June 16, 1958, this Court resolved: t.hqw
After carefully considering the reasons given by Attorneys Alfonso Ponce Enrile and Associates for their continued
use of the name of the deceased E. G. Perkins, the Court found no reason to depart from the policy it adopted in June
1953 when it required Attorneys Alfred P. Deen and Eddy A. Deen of Cebu City to desist from including in their
firm designation, the name of C. D. Johnston, deceased. The Court believes that, in view 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.
Petitioners herein now seek a re-examination of the policy thus far enunciated by the Court.
The Court finds no sufficient reason to depart from the rulings thus laid down.
A. Inasmuch as "Sycip, Salazar, Feliciano, Hernandez and Castillo" and "Ozaeta, Romulo, De Leon, Mabanta and Reyes" are
partnerships, the use in their partnership names of the names of deceased partners will run counter to Article 1815 of the Civil Code
which provides: t.hqw
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.
It is clearly tacit in the above provision that names in a firm name of a partnership must either be those of living partners and. in the
case of non-partners, should be living persons who can be subjected to liability. In fact, Article 1825 of the Civil Code prohibits a third
person from including his name in the firm name under pain of assuming the liability of a partner. 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. Thus, Canon 34
of the Canons of Professional Ethics "prohibits an agreement for the payment to the widow and heirs of a deceased lawyer of a
percentage, either gross or net, of the fees received from the future business of the deceased lawyer's clients, both because the
recipients of such division are not lawyers and because such payments will not represent service or responsibility on the part of the

recipient. " Accordingly, neither the widow nor the heirs can be held liable for transactions entered into after the death of their lawyerpredecessor. There being no benefits accruing, there ran be no corresponding liability.
Prescinding the law, there could be practical objections to allowing the use by law firms of the names of deceased partners. 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 old firm's reputation established by deceased partners.
B. In regards to the last paragraph of Article 1840 of the Civil Code cited by petitioners, supra, the first factor to consider is that it is
within Chapter 3 of Title IX of the Code entitled "Dissolution and Winding Up." The Article primarily deals with the exemption from
liability in cases of a dissolved partnership, of the individual property of the deceased partner for debts contracted 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.
Secondly, Article 1840 treats more of a commercial partnership with a good will to protect rather than of aprofessional 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. 9t.hqw
As a general rule, upon the dissolution of a commercial partnership the succeeding partners or parties have the right
to carry on the business under the old name, in the absence of a stipulation forbidding it, (s)ince the name of a
commercial partnership is a partnership asset inseparable from the good will of the firm. ... (60 Am Jur 2d, s 204, p.
115) (Emphasis supplied)
On the other hand, t.hqw
... a professional partnership the reputation of which depends or; the individual skill of the members, such as
partnerships of attorneys or physicians, has no good win to be distributed as a firm asset on its dissolution, however
intrinsically valuable such skill and reputation may be, especially where there is no provision in the partnership
agreement relating to good will as an asset. ... (ibid, s 203, p. 115) (Emphasis supplied)
C. A partnership for the practice of law cannot be likened to partnerships formed by other professionals or for business. For one thing,
the law on accountancy specifically allows the use of a trade name in connection with the practice of accountancy. 10 t.hqw
A partnership for the practice of law is not a legal entity. It is a mere relationship or association for a particular
purpose. ... It is not a partnership formed for the purpose of carrying on trade or business or of holding
property." 11 Thus, it has been stated that "the use of a nom de plume, assumed or trade name in law practice is
improper. 12
The usual reason given for different standards of conduct being applicable to the practice of law from those
pertaining to business is that the law is a profession.
Dean Pound, in his recently published contribution to the Survey of the Legal Profession, (The Lawyer from
Antiquity to Modern Times, p. 5) defines a profession as "a group of men pursuing a learned art as a common calling
in the spirit of public service, no less a public service because it may incidentally be a means of livelihood."
xxx xxx xxx
Primary characteristics which distinguish the legal profession from business are:
1. A duty of public service, of which the emolument is a byproduct, and in which one may attain the highest
eminence without making much money.
2. A relation as an "officer of court" to the administration of justice involving thorough sincerity, integrity, and
reliability.
3. A relation to clients in the highest degree fiduciary.
4. A relation to colleagues at the bar characterized by candor, fairness, and unwillingness to resort to current
business methods of advertising and encroachment on their practice, or dealing directly with their clients. 13
"The right to practice law is not a natural or constitutional right but is in the nature of a privilege or franchise. 14 It is limited to persons
of good moral character with special qualifications duly ascertained and certified. 15 The right does not only presuppose in its

possessor integrity, legal standing and attainment, but also the exercise of a special privilege, highly personal and partaking of the
nature of a public trust." 16
D. Petitioners cited Canon 33 of the Canons of Professional Ethics of the American Bar Association" in support of their petitions.
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.
It must be conceded that in the Philippines, no local custom permits or allows the continued use of a deceased or former partner's
name in the firm names of law partnerships. Firm names, under our custom, Identify the more active and/or more senior members or
partners of the law firm. A glimpse at the history of the firms of petitioners and of other law firms in this country would show how
their firm names have evolved and changed from time to time as the composition of the partnership changed. t.hqw
The continued use of a firm name after the death of one or more of the partners designated by it is proper only
where sustained by local custom and not where by custom this purports to Identify the active members. ...
There would seem to be a question, under the working of the Canon, as to the propriety of adding the name of a new
partner and at the same time retaining that of a deceased partner who was never a partner with the new one. (H.S.
Drinker, op. cit., supra, at pp. 207208) (Emphasis supplied).
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 title.
E. Petitioners argue that U.S. Courts have consistently allowed the continued use of a deceased partner's name in the firm name of law
partnerships. But that is so because it is sanctioned by custom.
In the case of Mendelsohn v. Equitable Life Assurance Society (33 N.Y.S. 2d 733) which petitioners Salazar, et al. quoted in their
memorandum, the New York Supreme Court sustained the use of the firm name Alexander & Green even if none of the present ten
partners of the firm bears either name because the practice was sanctioned by custom and did not offend any statutory provision or
legislative policy and was adopted by agreement of the parties. The Court stated therein: t.hqw
The practice sought to be proscribed has the sanction of custom and offends no statutory provision or legislative
policy. Canon 33 of the Canons of Professional Ethics of both the American Bar Association and the New York State
Bar Association provides in part as follows: "The continued use of the name of a deceased or former partner, when
permissible by local custom is not unethical, but care should be taken that no imposition or deception is practiced
through this use." There is no question as to local custom. Many firms in the city use the names of deceased
members with the approval of other attorneys, bar associations and the courts. The Appellate Division of the First
Department has considered the matter and reached The conclusion that such practice should not be prohibited.
(Emphasis supplied)
xxx xxx xxx
Neither the Partnership Law nor the Penal Law prohibits the practice in question. The use of the firm name herein is
also sustainable by reason of agreement between the partners. 18
Not so in this jurisdiction where there is no local custom that sanctions the practice. Custom has been defined as a rule of conduct
formed by repetition of acts, uniformly observed (practiced) as a social rule, legally binding and obligatory. 19 Courts take no judicial
notice of custom. A custom must be proved as a fact, according to the rules of evidence. 20 A local custom as a source of right cannot
be considered by a court of justice unless such custom is properly established by competent evidence like any other fact. 21 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.
Moreover, judicial decisions applying or interpreting the laws form part of the legal system. 22 When the Supreme Court in the Deen
and Perkins cases issued its Resolutions directing lawyers to desist from including the names of deceased partners in their firm
designation, it laid down a legal rule against which no custom or practice to the contrary, even if proven, can prevail. This is not to
speak of our civil law which clearly ordains that a partnership is dissolved by the death of any partner. 23 Custom which are contrary to
law, public order or public policy shall not be countenanced. 24
The practice of law is intimately and peculiarly related to the administration of justice and should not be considered like an ordinary
"money-making trade." t.hqw

... It is of the essence of a profession that it is practiced in a spirit of public service. A trade ... aims primarily at
personal gain; a profession at the exercise of powers beneficial to mankind. If, as in the era of wide free opportunity,
we think of free competitive self assertion as the highest good, lawyer and grocer and farmer may seem to be freely
competing with their fellows in their calling in order each to acquire as much of the world's good as he may within
the allowed him by law. But the member of a profession does not regard himself as in competition with his
professional brethren. He is not bartering his services as is the artisan nor exchanging the products of his skill and
learning as the farmer sells wheat or corn. There should be no such thing as a lawyers' or physicians' strike. The best
service of the professional man is often rendered for no equivalent or for a trifling equivalent and it is his pride to do
what he does in a way worthy of his profession even if done with no expectation of reward, This spirit of public
service in which the profession of law is and ought to be exercised is a prerequisite of sound administration of
justice according to law. The other two elements of a profession, namely, organization and pursuit of a learned art
have their justification in that they secure and maintain that spirit. 25
In fine, petitioners' desire to preserve the Identity of their firms in the eyes of the public must bow to legal and ethical impediment.
ACCORDINGLY, 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.
SO ORDERED.
Teehankee, Concepcion, Jr., Santos, Fernandez, Guerrero and De Castro, JJ., concur
Fernando, C.J. and Abad Santos, J., took no part.

Separate Opinions

FERNANDO, C.J., concurring:

The petitions are denied, as there are only four votes for granting them, seven of the Justices being of the contrary view, as explained
in the plurality opinion of Justice Ameurfina Melencio-Herrera. It is out of delicadeza that the undersigned did not participate in the
disposition of these petitions, as the law office of Sycip, Salazar, Feliciano, Hernandez and Castillo started with the partnership of
Quisumbing, Sycip, and Quisumbing, the senior partner, the late Ramon Quisumbing, being the father-in-law of the undersigned, and
the most junior partner then, Norberto J. Quisumbing, being his brother- in-law. For the record, the undersigned wishes to invite the
attention of all concerned, and not only of petitioners, to the last sentence of the opinion of Justice Ameurfina Melencio-Herrera:
'Those names [Sycip and Ozaeta] may, however, be included in the listing of individuals wtes
AQUINO, J., dissenting:
I dissent. The fourteen members of the law firm, Sycip, Salazar, Feliciano, Hernandez & Castillo, in their petition of June 10, 1975,
prayed for authority to continue the use of that firm name, notwithstanding the death of Attorney Alexander Sycip on May 5, 1975
(May he rest in peace). He was the founder of the firm which was originally known as the Sycip Law Office.
On the other hand, the seven surviving partners of the law firm, Ozaeta, Romulo, De Leon, Mabanta & Reyes, in their petition of
August 13, 1976, prayed that they be allowed to continue using the said firm name notwithstanding the death of two partners, former
Justice Roman Ozaeta and his son, Herminio, on May 1, 1972 and February 14, 1976, respectively.
They alleged that the said law firm was a continuation of the Ozaeta Law Office which was established in 1957 by Justice Ozaeta and
his son and that, as to the said law firm, the name Ozaeta has acquired an institutional and secondary connotation.
Article 1840 of the Civil Code, which speaks of the use by the partnership of the name of a deceased partner as part of the partnership
name, is cited to justify the petitions. Also invoked is the canon that the continued use by a law firm of the name of a deceased partner,
"when permissible by local custom, is not unethical" as long as "no imposition or deception is practised through this use" (Canon 33 of
the Canons of Legal Ethics).
I am of the opinion that the petition may be granted with the condition that it be indicated in the letterheads of the two firms (as the
case may be) that Alexander Sycip, former Justice Ozaeta and Herminio Ozaeta are dead or the period when they served as partners
should be stated therein.

Obviously, the purpose of the two firms in continuing the use of the names of their deceased founders is to retain the clients who had
customarily sought the legal services of Attorneys Sycip and Ozaeta and to benefit from the goodwill attached to the names of those
respected and esteemed law practitioners. That is a legitimate motivation.
The retention of their names is not illegal per se. That practice was followed before the war by the law firm of James Ross.
Notwithstanding the death of Judge Ross the founder of the law firm of Ross, Lawrence, Selph and Carrascoso, his name was retained
in the firm name with an indication of the year when he died. No one complained that the retention of the name of Judge Ross in the
firm name was illegal or unethical.

# Separate Opinions
FERNANDO, C.J., concurring:
The petitions are denied, as there are only four votes for granting them, seven of the Justices being of the contrary view, as explained
in the plurality opinion of Justice Ameurfina Melencio-Herrera. It is out of delicadeza that the undersigned did not participate in the
disposition of these petitions, as the law office of Sycip, Salazar, Feliciano, Hernandez and Castillo started with the partnership of
Quisumbing, Sycip, and Quisumbing, the senior partner, the late Ramon Quisumbing, being the father-in-law of the undersigned, and
the most junior partner then, Norberto J. Quisumbing, being his brother- in-law. For the record, the undersigned wishes to invite the
attention of all concerned, and not only of petitioners, to the last sentence of the opinion of Justice Ameurfina Melencio-Herrera:
'Those names [Sycip and Ozaeta] may, however, be included in the listing of individuals wtes
AQUINO, J., dissenting:
I dissent. The fourteen members of the law firm, Sycip, Salazar, Feliciano, Hernandez & Castillo, in their petition of June 10, 1975,
prayed for authority to continue the use of that firm name, notwithstanding the death of Attorney Alexander Sycip on May 5, 1975
(May he rest in peace). He was the founder of the firm which was originally known as the Sycip Law Office.
On the other hand, the seven surviving partners of the law firm, Ozaeta, Romulo, De Leon, Mabanta & Reyes, in their petition of
August 13, 1976, prayed that they be allowed to continue using the said firm name notwithstanding the death of two partners, former
Justice Roman Ozaeta and his son, Herminio, on May 1, 1972 and February 14, 1976, respectively.
They alleged that the said law firm was a continuation of the Ozaeta Law Office which was established in 1957 by Justice Ozaeta and
his son and that, as to the said law firm, the name Ozaeta has acquired an institutional and secondary connotation.
Article 1840 of the Civil Code, which speaks of the use by the partnership of the name of a deceased partner as part of the partnership
name, is cited to justify the petitions. Also invoked is the canon that the continued use by a law firm of the name of a deceased partner,
"when permissible by local custom, is not unethical" as long as "no imposition or deception is practised through this use" (Canon 33 of
the Canons of Legal Ethics).
I am of the opinion that the petition may be granted with the condition that it be indicated in the letterheads of the two firms (as the
case may be) that Alexander Sycip, former Justice Ozaeta and Herminio Ozaeta are dead or the period when they served as partners
should be stated therein.
Obviously, the purpose of the two firms in continuing the use of the names of their deceased founders is to retain the clients who had
customarily sought the legal services of Attorneys Sycip and Ozaeta and to benefit from the goodwill attached to the names of those
respected and esteemed law practitioners. That is a legitimate motivation.
The retention of their names is not illegal per se. That practice was followed before the war by the law firm of James Ross.
Notwithstanding the death of Judge Ross the founder of the law firm of Ross, Lawrence, Selph and Carrascoso, his name was retained
in the firm name with an indication of the year when he died. No one complained that the retention of the name of Judge Ross in the
firm name was illegal or unethical.
___________________________________________________________________________________________________________
TECK SEING AND CO., LTD., SANTIAGO JO CHUNG, ET AL.,vs. PACIFIC COMMERCIAL COMPANY, ET AL
G.R. No. 19892
September 6, 1923
MALCOLM, J.:
Following the presentation of an application to be adjudged an insolvent by the "Sociedad Mercantil, Teck Seing & Co., Ltd.," the
creditors, the Pacific Commercial Company, Piol & Company, Riu Hermanos, and W. H. Anderson & Company, filed a motion in
which the Court was prayed to enter an order: "(A) Declaring the individual partners as described in paragraph 5 parties to this
proceeding; (B) to require each of said partners to file an inventory of his property in the manner required by section 51 of Act No.
1956; and (C) that each of said partners be adjudicated insolvent debtors in this proceeding." The trial judge first granted the motion,

but, subsequently, on opposition being renewed, denied it. It is from this last order that an appeal was taken in accordance with section
82 of the Insolvency Law.
There has been laid before us for consideration and decision a question of some importance and of some intricacy. The issue in the
case relates to a determination of the nature of the mercantile establishment which operated under the name of Teck Seing & co., Ltd.,
and this issue requires us to look into, and analyze, the document constituting Teck Seing & Co., Ltd. It reads:
ESCRITURA DE SOCIEDAD MERCANTIL LIMITADA
Sepan todos por la presente:
Que nosotros, Santiago Jo Chung Cang, mayor de edad comerciante, vecino y residente del municipio de Tabogon Provincia
de Cebu, Islas Filipinas, Go Tayco, mayor de edad, comerciante, vecino y residente del municipio de Cebu Provincia de
Cebu, Islas Filipinas, Yap Gueco, mayor de edad, comerciante, vecino y residente del municipio y Provincia de Cebu, Islas
Filipinas, Lim Yogsing, mayor de edad comerciante, vecino y residente del municipio de Cebu, Provincia de Cebu, Islas
Filipinas, y Jo Ybec, mayor de edad, comerciante, vecino y residente del municipio de Jagna, Provincia de Bohol, Islas
Filipinas, hacemos constar por la presente, que constituimos y formamos una sociedad mercantil limitada, bajo las leyes
vigentes en las Islas Filipinas y para ser registrada de acuerdo con los reglamentos vigentes del Codigo de Comercio en
Filipinas.
Que la razon social se denominara "Teck Seing & Co., Ltd." y tendra su domicilio principal en la Calle Magallanes No. 94,
de la Ciudad de Cebu, Provincia de Cebu, Islas Filipinas.
Que el capital social sera de treinta mil pesos (P30,000) moneda legal de las Islas Filipinas, dividido en cinco acciones de a
P6,000 como sigue:
Santiago Jo Chung Cang . . . . . . . . . . . . .

P6,000.00

Go Tayco . . . . . . . . . . . . . . . . . . . . . . . . . .

6,000.00

Yap Gueco . . . . . . . . . . . . . . . . . . . . . . . .

6,000.00

Jo Ybec . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,000.00

Lim Yogsing . . . . . . . . . . . . . . . . . . . . . . .

6,000.00

Total . . . . . . . . . . . . . . . . . . . . . .

30,000.00

Que la duracion de la sociedad sera la de seis aos, a contar de la fecha de esta escritura, pudiendo prorrogarse este tiempo a
discrecion unanime de todos los accionistas.
El objeto de la sociedad sera la compra y venta de mercaderias en general.
El administrador o administradores de la sociedad podran, previa conformidad de los accionistas, establecer cuantas
sucursales o establecimientos considere necesarios para facilitar sus negocios y el mayor desarrollo del comercio a que se
dedica la sociedad, verificando todas las operaciones que crean convenientes para el fomento de su capital.
Las ganancias o perdidas que resultaren durante cada ao comercial, se distribuiran proporcionalmente entre los accionistas,
de acuerdo con el capital aportado por cada uno de los mismos.
Las ganancias que resultaren en cada ao comercial, si resultaren algunas ganancias, no podran ser retiradas pors los
accionistas hasta dentro del termino de tres aos a contar de la fecha del primer balance anual del negocio, quedadno por
tanto estas ganancias en reserva, para ampliar el capital aportado opor los accionistas y ampliar por tanto la esfera de accion
emprendida por la misma sociedad. Al pasar o expirar el termino de tres aos, cada accionista podra retirar o depositar en
poder de la sociedad, las ganancias que le debiera corresponder durante dicho termino de tres aos.
Que los accionistas no podran extraer ni disponer en ningun tiempo cualesquiera cantidad o cantidades de la sociedad, que
haya sido aportado por los mismos, para atender sus gastos particulares ni aun pagando redito alguno sobre la cantidad que
intenen disponer o extraer de dicha sociedad.
El accionista Sr. Lim Yogsing tendra a su cargo, en union del Sr. Vicente Jocson Jo, la administracion de la Compaia,
quienes podran usar indistintamente la firma social, quedando por consiguiente autorizados amobs para hacer en nombre de
ella toda calse de operaciones, negocios y especulaciones mercantiles, practicando judicial y extra-judicialment cuantos actos
se requieran para el bien de la sociedad, nombrar procuradores o abogados para reclamaciones y cobro de creditos y proponer
ante los tribunales las demandas, convenios, transacciones y excepciones procdentes. En caso de ausencia, enfermedad o
cualquier otro impedimento del accionista administrador Sr. Lim Yogsing, este podra conferir poder general o especial al
accionista que crea conveniente para que en union del administrador auxiliar Sr. Vicente Jocson Jo, pudieran ambos
administrar convenientemente los negocios de la sociedad. Que los administradores podran tener los empleados necesarios
para el mejor que debieran percibir dichos empleados por servicios rendidos a la sociedad.
Que ambos administradores podran disponer de mil discientos pesos (P1,200) moneda filipina, anualmente, para sus gastos
particulares, siendo dicha cantidad de P1,200 la que corresponde a cada uno de dichos administradores, como emolumentos o
salarios que se les asigna a cas uno, por sus trabajos en la administracion de la sociedad. Entendiendose, que, los accionistas
podran disponer cada fin de aola gratificacion quese concedera a cada administrador, si los negocios del ao fueran boyantes
y justifiquen la concesion de una gratificacion especial, aparte del salario aqui dispuesto y especificado.
Que pasado el termino de seis aos, y es de la conveniencia de los accionistas la continuacion del negocio de esta sociedad,
dicho termino sera prorrogado por igual numero de aos, sin necesidas del otorgamiento de ulteriores escrituras, quedando la
presente en vigor hasta el termino dispuesto por todos los accionistas.
Que las diferencias que pudieran suscitarse entre los accionistas, bien sea por razon de lo estipulado en esta en ella
comprendidos, se procurara arreglar entre los mismos amistosa y extrajudicialmente, y si no se consiguiere un arreglo de este
modo, dichos accionistas nombraran un arbitro, cuya resolucion estan todos obligados y por la presente se comprometen y se
obligan a acatarla en todas sus partes, renunciando ulteriores recursos.
En cuyos terminos dejamos formalizada esta escritura de sociedad mercantillimitada, y prometemos cumplirla fiel y
estrictamente segun los pactos que hemos establecido.
En testimonio de todo lo cual, firmamos en la Ciudad de Cebu, Provincia de Cebu, Islas Filipinas, hoy 31 de octubre de mil
novecientos diez y nueve.
(Fdos.) "LIM YOGSING
"Jo YBec por Ho Seng Sian

"SANTIAGO JO CHUNG CANG

"GO TAYCO
"YAP GUECO
Firnando en presencia de:
(Fdos.) "ATILANO LEYSON
"JULIO DIAZ
"ESTADOS UNIDOS DE AMERCA
"ISLAS FILIPINAS
"PROVINCIA DE CEBU
En el Municipio de Cebu, de la Provincia antes mencionada, I.F., hoy 31 de octubre de 1919, A.D., ante mi, Notario Publico
que subscribe, comprecieron personalmente Santiago Jo Chung Cang, Go Tayco, Yap Gueco, Lim Yogsing y Jo Ybec,
representado este ultimo por Ho Seng Sian, segun autorizacion hecha en telegrama de fecha 27 de septiembre de 1919 que se
me ha presentado en este mismo acto, de quienes doy fe de que les conozco por ser las mismas personas que otorgaron el
preinserto documento, ratificando ant emi su contenido y manifestando ser el mismo un acto de su libre y voluntario
otorgamiento. El Sr. Santiago Jo Chung Cang me exhibio su cedula personal expedida en Cebu, Cebu, I.F. el dia 19 de
septiembre de 1919 bajo el No. H77742, Go Tayco tambien me exhibio la suya expedida en Cebu, Cebu, I.F., el dia 9 de
octubre de 1919 bajo el No. G2042490, Yap Gueco tambien me exhibio la suya expedida en Cebu, Cebu, I.F. el dia 20 de
enero de 1919 bajo el No. F1452296, Lim Yogsing tambien me exhibio la suya expedida en Cebu, Cebu, I.F., el dia 26 de
febrero de 1919 bajo el No. F1455662, y Ho Seng Sian representante de Jo Ybec, me exhibio su cedula personal expedida en
Cebu, Cebu, I.f. el dia 4 de febrero de 1919 bajo el No. F1453733.
Ante mi,
(Fdo.) "F.V.ARIAS
"Notario Publico
"Hasta el 1. de enero de 1920
"Asiento No. 157
Pagina No. 95 de mi
Registro Notarial
Serie 1919
Libro 2.
Presentado a las diez y cuarenta y tres minutos de la maana de hoy, segun el asiento No. 125, pagina 9 del Tomo 1. del
Libro Diario. Cebu, 11 de febrero de 1920.
(Fdo.) "QUIRICO ABETO
[SELLO] "Registrador Mercantil Ex-Officio"
Inscrito el documento que preced al folio 84 hoja No. 188, inscripcion 1.a del Tomo 3. del Libro Registro de Sociedades
Mercantiles. Cebu, 11 de febrero de 1920. Honorarios treinta pesos con cincuenta centavos. Art. 197, Ley No. 2711, Codigo
Administrativo.
(Fdo.) "QUIRICO ABETO
[SELLO] "Registrador Mercantil Ex-Officio"
Proceeding by process of elimination, it is self-evident that Teck Seing & Co., Ltd., is not a corporation. Neither is it contended by any
one that Teck Seing & Co., Ltd., is accidental partnership denominated cuenta en participacion(joint account association).
Counsel for the petitioner and appellee described his client in once place in his opposition to the motion of the creditors as "una
verdadera sociedad anonima" (a true sociedad anonima). The provisions of the Code of Commerce relating to sociedades
anonimas were, however, repealed by section 191 of the Corporation Law (Act No. 1459), with the exceptions the sociedades
anonimas lawfully organized at the time of the passage of the Corporation Law were recognized, which is not our case.
The document providing for the partnership contract purported to form "una sociedad mercantil limitada," and counsel for the
petitioner's first contention was that Teck Seing & Co., Ltd., was not "una sociedad regular colectiva, ni siquiera comanditaria, sino
una sociedad mercantil limitada." Let us see if the partnership contract created a "sociedad en comandita," or, as it is known in
English, and will hereafter be spoken of, "a limited partnership."
To establish a limited partnership there must be, at least, one general partner and the name of the least one of the general partners must
appear in the firm name. (Code of Commerce, arts. 122 [2], 146, 148.) But neither of these requirements have been fulfilled. The
general rule is, that those who seek to avail themselves of the protection of laws permitting the creation of limited partnerships must
show a substantially full compliance with such laws. A limited partnership that has not complied with the law of its creation is not
considered a limited partnership at all, but a general partnership in which all the members are liable. (Mechem, Elements of
Partnership, p. 412; Gilmore, Partnership, pp. 499, 595; 20 R C. L. 1064.)
The contention of the creditors and appellants is that the partnership contract established a general partnership.
Article 125 of the Code of Commerce provides that the articles of general copartnership must estate the names, surnames, and
domiciles of the partners; the firm name; the names, and surnames of the partners to whom the management of the firm and the use of
its signature is instrusted; the capital which each partner contributes in cash, credits, or property, stating the value given the latter or
the basis on which their appraisement is to be made; the duration of the copartnership; and the amounts which, in a proper case, are to
be given to each managing partner annually for his private expenses, while the succeeding article of the Code provides that the general
copartnership must transact business under the name of all its members, of several of them, or of one only. Turning to the document
before us, it will be noted that all of the requirements of the Code have been met, with the sole exception of that relating to the
composition of the firm name. We leave consideration of this phase of the case for later discussion.
The remaining possibility is the revised contention of counsel for the petitioners to the effect that Teck Seing & Co., Ltd., is "una
sociedad mercantil "de facto" solamente" (only a de facto commercial association), and that the decision of the Supreme court in the
case of Hung-Man-Yoc vs. Kieng-Chiong-Seng [1906], 6 Phil., 498), is controlling. It was this argument which convinced the trial
judge, who gave effect to his understanding of the case last cited and which here must be given serious attention.
The decision in Hung-Man-Yoc vs. Kieng-Chiong-Seng, supra, discloses that the firm Kieng-Chiong-Seng was not organized by
means of any public document; that the partnership had not been recorded in the mercantile registry; and that Kieng-Chiong-Seng was
not proven to be the firm name, but rather the designation of the partnership. The conclusion then was, that the partnership in question

was merely de facto and that, therefore, giving effect to the provisions of article 120 of the Code of Commerce, the right of action was
against the persons in charge of the management of the association.
Laying the facts of the case of Hung-Man-Yoc vs. Kieng-Chiong-Seng, supra, side by side with the facts before us, a marked
difference is at once disclosed. In the cited case, the organization of the partnership was not evidenced by any public document; here,
it is by a public document. In the cited case, the partnership naturally could not present a public instrument for record in the mercantile
registry; here, the contract of partnership has been duly registered. But the two cases are similar in that the firm name failed to include
the name of any of the partners.
We come then to the ultimate question, which is, whether we should follow the decision in Hung-Man-Yoc vs. Kieng-ChiongSeng, supra, or whether we should differentiate the two cases, holding Teck Seing & Co., Ltd., a general copartnership,
notwithstanding the failure of the firm name to include the name of one of the partners. Let us now notice this decisive point in the
case.
Article 119 of the Code of Commerce requires every commercial association before beginning its business to state its article,
agreements, and conditions in a public instrument, which shall be presented for record in the mercantile registry. Article 120, next
following, provides that the persons in charge of the management of the association who violate the provisions of the foregoing article
shall be responsible in solidum to the persons not members of the association with whom they may have transacted business in the
name of the association. Applied to the facts before us, it would seem that Teck Seing & Co., Ltd. has fulfilled the provisions of article
119. Moreover, to permit the creditors only to look to the person in charge of the management of the association, the partner Lim
Yogsing, would not prove very helpful to them.
What is said in article 126 of the Code of Commerce relating to the general copartnership transacting business under the name of all
its members or of several of them or of one only, is wisely included in our commercial law. It would appear, however, that this
provision was inserted more for the protection of the creditors than of the partners themselves. A distinction could well be drawn
between the right of the alleged partnership to institute action when failing to live up to the provisions of the law, or even the rights of
the partners as among themselves, and the right of a third person to hold responsible a general copartnership which merely lacks a
legal firm name in order to make it a partnership de jure.
The civil law and the common law alike seem to point to a difference between the rights of the partners who have failed to comply
with the law and the rights of third persons who have dealt with the partnership.
The supreme court of Spain has repeatedly held that notwithstanding the obligation of the members to register the articles of
association in the commercial registry, agreements containing all the essential requisites are valid as between the contracting parties,
whatever the form adopted, and that, while the failure to register in the commercial registry necessarily precludes the members from
enforcing rights acquired by them against third persons, such failure cannot prejudice the rights of third persons. (See decisions of
December 6, 1887, January 25, 1888, November 10, 1890, and January 26, 1900.) The same reasoning would be applicable to the less
formal requisite pertaining to the firm name.
The common law is to the same effect. The State of Michigan had a statute prohibiting the transaction of business under an assumed
name or any other than the real name of the individual conducting the same, unless such person shall file with the county clerk a
certificate setting forth the name under which the business is to be conducted and the real name of each of the partners, with their
residences and post-office addresses, and making a violation thereof a misdemeanor. The supreme Court of Michigan said:
The one object of the act is manifestly to protect the public against imposition and fraud, prohibiting persons from concealing
their identity by doing business under an assumed name, making it unlawful to use other than their real names in transacting
business without a public record of who they are, available for use in courts, and to punish those who violate the prohibition.
The object of this act is not limited to facilitating the collection of debts, or the protection of those giving credit to persons
doing business under an assumed name. It is not unilateral in its application. It applies to debtor and creditor, contractor and
contractee, alike. Parties doing business with those acting under an assumed name, whether they buy or sell, have a right,
under the law, to know who they are, and who to hold responsible, in case the question of damages for failure to perform or
breach of warranty should arise.
The general rule is well settled that, where statutes enacted to protect the public against fraud or imposition, or to safeguard
the public health or morals, contain a prohibition and impose a penalty, all contracts in violation thereof are void. . . .
As this act involves purely business transactions, and affects only money interests, we think it should be construed as
rendering contracts made in violation of it unlawful and unforceable at the instance of the offending party only, but not as
designed to take away the rights of innocent parties who may have dealt with the offenders in ignorance of their having
violated the statute. (Cashin vs. Pliter [1912], 168 Mich., 386; Ann. Cas. [1913-C, 697.)
The early decision of our Supreme Court in the case of Prautch Scholes & Co. vs. Hernandez [1903], 1 Phil., 705), contains the
following pertinent observations:
Another case may be supposed. A partnership is organized for commercial purposes. It fails to comply with the requirements
of article 119. A creditor sues the partnership for a debt contracted by it, claiming to hold the partners severally. They answer
that their failure to comply with the Code of Commerce makes them a civil partnership and that they are in accordance with
article 1698 of the Civil Code only liable jointly. To allow such liberty of action would be to permit the parties by a violation
of the Code to escape a liability which the law has seen fit to impose upon persons who organized commercial partnership;
"Because it would be contrary to all legal principles that the nonperformance of a duty should redound to the benefit of the
person in default either intentional or unintentional." (Mercantile Law, Eixala, fourth ed., p. 145.)" (See also Lichauco vs.
Lichauco [1916], 33 Phil., 350, 360.)
Dr. Jose de Echavarri y Vivanco, in his Codigo de Comercio, includes the following comment after articles 121 and 126 of the Code:
From the decisions cited in this and in the previous comments, the following is deduced: 1st. Defects in the organization
cannot affect relations with third persons. 2d. Members who contract with other persons before the association is lawfully
organized are liable to these persons. 3d. The intention to form an association is necessary, so that if the intention of mutual
participation in the profits and losses in a particular business is proved, and there are no articles of association, there is no
association. 4th. An association, the articles of which have not been registered, is valid in favor of third persons. 5th. The
private pact or agreement to form a commercial association is governed not by the commercial law but by the civil law. 6th.
Secret stipulationsexpressed in a public instrument, but not inserted in the articles of association, do not affect third persons,
but are binding on the parties themselves. 7th. An agreement made in a public instrument, other than the articles of
association, by means of which one of the partners guarantees to another certain profits or secures him from losses, is valid
between them, without affecting the association. 8th. Contracts entered into by commercial associations defectively
organized are valid when they are voluntarily executed by the parties, if the only controversy relates to whether or not they
complied with the agreement.
xxx
xxx
xxx

The name of the collective merchant is called firm name. By this name, the new being is distinguished from others, its sphere
of action fixed, and the juridical personality better determined, without constituting an exclusive character of the general
partnership to such an extent as to serve the purpose of giving a definition of said kind of a mercantile partnership, as is the
case in our Code.
Having in mind that these partnerships are prevailingly of a personal character, article 126 says that they must transact
business under the name of all its members, of some of them, or of one only, the words "and company" to be added in the
latter two cases.
It is rendered impossible for the general partnership to adopt a firm name appropriate to its commercial object; the law wants
to link, and does link, the solidary and unlimited responsibility of the members of this partnership with the formation of its
name, and imposes a limitation upon personal liberty in its selection, not only by prescribing the requisites, but also by
prohibiting persons not members of the company from including their names in its firm name under penalty of civil solidary
responsibility.
Of course, the form required by the Code for the adoption of the firm name does not prevent the addition thereto of any other
title connected with the commercial purpose of the association. The reader may see our commentaries on the mercantile
registry about the business names and firm names of associations, but it is proper to establish here that, while the business
name may be alienated by any of the means admitted by the law, it seems impossible to separate the firm names of general
partnerships from the juridical entity for the creation of which it was formed. (Vol. 2, pp. 197, 213.)
On the question of whether the fact that the firm name "Teck Seing & Co., Ltd." does not contain the name of all or any of the partners
as prescribed by the Code of Commerce prevents the creation of a general partnership, Professor Jose A. Espiritu, as amicus curi,
states:
My opinion is that such a fact alone cannot and will not be a sufficient cause of preventing the formation of a general
partnership, especially if the other requisites are present and the requisite regarding registration of the articles of association
in the Commercial Registry has been complied with, as in the present case. I do not believe that the adoption of a wrong
name is a material fact to be taken into consideration in this case; first, because the mere fact that a person uses a name not
his own does not prevent him from being bound in a contract or an obligation he voluntarily entered into; second, because
such a requirement of the law is merely a formal and not necessarily an essential one to the existence of the partnership, and
as long as the name adopted sufficiently identity the firm or partnership intended to use it, the acts and contracts done and
entered into under such a name bind the firm to third persons; and third, because the failure of the partners herein to adopt the
correct name prescribed by law cannot shield them from their personal liabilities, as neither law nor equity will permit them
to utilize their own mistake in order to put the blame on third persons, and much less, on the firm creditors in order to avoid
their personal possibility.
The legal intention deducible from the acts of the parties controls in determining the existence of a partnership. If they intend to do a
thing which in law constitutes a partnership, they are partners, although their purpose was to avoid the creation of such relation. Here,
the intention of the persons making up Teck Seing & co., Ltd. was to establish a partnership which they erroneously denominated a
limited partnership. If this was their purpose, all subterfuges resorted to in order to evade liability for possible losses, while assuming
their enjoyment of the advantages to be derived from the relation, must be disregarded. The partners who have disguised their identity
under a designation distinct from that of any of the members of the firm should be penalized, and not the creditors who presumably
have dealt with the partnership in good faith.
Articles 127 and 237 of the Code of Commerce make all the members of the general copartnership liable personally and in
solidum with all their property for the results of the transactions made in the name and for the account of the partnership. Section 51 of
the Insolvency Law, likewise, makes all the property of the partnership and also all the separate property of each of the partners liable.
In other words, if a firm be insolvent, but one or more partners thereof are solvent, the creditors may proceed both against the firm and
against the solvent partner or partners, first exhausting the assets of the firm before seizing the property of the partners. (Brandenburg
of Bankcruptcy, sec. 108; De los Reyes vs. Lukban and Borja [1916], 35 Phil., 757; Involuntary Insolvency of Campos Rueda &
Co. vs. Pacific Commercial Co. [1922], 44 Phil., 916).
We reach the conclusion that the contract of partnership found in the document hereinbefore quoted established a general partnership
or, to be more exact, a partnership as this word is used in the Insolvency Law.
Wherefore, the order appealed from is reversed, and the record shall be returned to the court of origin for further proceedings pursuant
to the motion presented by the creditors, in conformity with the provisions of the Insolvency Law. Without special findings as to the
costs in this instance, it is ordered.
Araullo, C.J., Johnson, Street, Avancea, Villamor, Johns and Romualdez, JJ., concur.
____________________________________________________________________________________________________________

Article 1816
ISLAND SALES, INC.,vs. UNITED PIONEERS GENERAL CONSTRUCTION COMPANY, ET. AL defendants. BENJAMIN
C. DACO,
G.R. No. L-22493 July 31, 1975

CONCEPCION JR., J.:

This is an appeal interposed by the defendant Benjamin C. Daco from the decision of the Court of First Instance of Manila, Branch
XVI, in Civil Case No. 50682, the dispositive portion of which reads:
WHEREFORE, the Court sentences defendant United Pioneer General Construction Company to pay plaintiff the
sum of P7,119.07 with interest at the rate of 12% per annum until it is fully paid, plus attorney's fees which the
Court fixes in the sum of Eight Hundred Pesos (P800.00) and costs.

The defendants Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim and Augusto Palisoc are sentenced to pay the
plaintiff in this case with the understanding that the judgment against these individual defendants shall be enforced
only if the defendant company has no more leviable properties with which to satisfy the judgment against it. .
The individual defendants shall also pay the costs.
On April 22, 1961, the defendant company, a general partnership duly registered under the laws of the Philippines, purchased from the
plaintiff a motor vehicle on the installment basis and for this purpose executed a promissory note for P9,440.00, payable in twelve (12)
equal monthly installments of P786.63, the first installment payable on or before May 22, 1961 and the subsequent installments on the
22nd day of every month thereafter, until fully paid, with the condition that failure to pay any of said installments as they fall due
would render the whole unpaid balance immediately due and demandable.
Having failed to receive the installment due on July 22, 1961, the plaintiff sued the defendant company for the unpaid balance
amounting to P7,119.07. Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc were
included as co-defendants in their capacity as general partners of the defendant company.
Daniel A. Guizona failed to file an answer and was consequently declared in default. 1
Subsequently, on motion of the plaintiff, the complaint was dismissed insofar as the defendant Romulo B. Lumauig is concerned. 2
When the case was called for hearing, the defendants and their counsels failed to appear notwithstanding the notices sent to them.
Consequently, the trial court authorized the plaintiff to present its evidence ex-parte 3 , after which the trial court rendered the decision
appealed from.
The defendants Benjamin C. Daco and Noel C. Sim moved to reconsider the decision claiming that since there are five (5) general
partners, the joint and subsidiary liability of each partner should not exceed one-fifth ( 1/ 5 ) of the obligations of the defendant
company. But the trial court denied the said motion notwithstanding the conformity of the plaintiff to limit the liability of the
defendants Daco and Sim to only one-fifth ( 1/ 5 ) of the obligations of the defendant company. 4Hence, this appeal.
The only issue for resolution is whether or not the dismissal of the complaint to favor one of the general partners of a partnership
increases the joint and subsidiary liability of each of the remaining partners for the obligations of the partnership.
Article 1816 of the Civil Code provides:
Art. 1816. All partners including industrial ones, shall be liable pro rata with all their property and after all the
partnership assets have been exhausted, for the contracts which may be entered into in the name and for the account
of the partnership, under its signature and by a person authorized to act for the partnership. However, any partner
may enter into a separate obligation to perform a partnership contract.
In the case of Co-Pitco vs. Yulo (8 Phil. 544) this Court held:
The partnership of Yulo and Palacios was engaged in the operation of a sugar estate in Negros. It was, therefore, a
civil partnership as distinguished from a mercantile partnership. Being a civil partnership, by the express provisions
of articles l698 and 1137 of the Civil Code, the partners are not liable each for the whole debt of the partnership. The
liability is pro rata and in this case Pedro Yulo is responsible to plaintiff for only one-half of the debt. The fact that
the other partner, Jaime Palacios, had left the country cannot increase the liability of Pedro Yulo.
In the instant case, there were five (5) general partners when the promissory note in question was executed for and in behalf of the
partnership. Since the liability of the partners is pro rata, the liability of the appellant Benjamin C. Daco shall be limited to only onefifth ( 1/ 5 ) of the obligations of the defendant company. The fact that the complaint against the defendant Romulo B. Lumauig was
dismissed, upon motion of the plaintiff, does not unmake the said Lumauig as a general partner in the defendant company. In so
moving to dismiss the complaint, the plaintiff merely condoned Lumauig's individual liability to the plaintiff.
WHEREFORE, the appealed decision as thus clarified is hereby AFFIRMED, without pronouncement as to costs.
SO ORDERED.
Makalintal, C.J., Fernando (Chairman), Barredo and Aquino, JJ., concur.
___________________________________________________________________________________________________________

ELMO MUASQUE, vs. COURT OF APPEALS,CELESTINO GALAN TROPICAL COMMERCIAL COMPANY and
RAMON PONS,
G.R. No. L-39780 November 11, 1985

GUTTIERREZ, JR., J.:

In this petition for certiorari, the petitioner seeks to annul and set added the decision of the Court of Appeals affirming the existence of
a partnership between petitioner and one of the respondents, Celestino Galan and holding both of them liable to the two intervenors
which extended credit to their partnership. The petitioner wants to be excluded from the liabilities of the partnership.
Petitioner Elmo Muasque filed a complaint for payment of sum of money and damages against respondents Celestino Galan, Tropical
Commercial, Co., Inc. (Tropical) and Ramon Pons, alleging that the petitioner entered into a contract with respondent Tropical through
its Cebu Branch Manager Pons for remodelling a portion of its building without exchanging or expecting any consideration from
Galan although the latter was casually named as partner in the contract; that by virtue of his having introduced the petitioner to the
employing company (Tropical). Galan would receive some kind of compensation in the form of some percentages or commission; that
Tropical, under the terms of the contract, agreed to give petitioner the amount of P7,000.00 soon after the construction began and
thereafter, the amount of P6,000.00 every fifteen (15) days during the construction to make a total sum of P25,000.00; that on January
9, 1967, Tropical and/or Pons delivered a check for P7,000.00 not to the plaintiff but to a stranger to the contract, Galan, who
succeeded in getting petitioner's indorsement on the same check persuading the latter that the same be deposited in a joint account;
that on January 26, 1967 when the second check for P6,000.00 was due, petitioner refused to indorse said cheek presented to him by
Galan but through later manipulations, respondent Pons succeeded in changing the payee's name from Elmo Muasque to Galan and
Associates, thus enabling Galan to cash the same at the Cebu Branch of the Philippine Commercial and Industrial Bank (PCIB)
placing the petitioner in great financial difficulty in his construction business and subjecting him to demands of creditors to pay' for
construction materials, the payment of which should have been made from the P13,000.00 received by Galan; that petitioner
undertook the construction at his own expense completing it prior to the March 16, 1967 deadline;that because of the unauthorized
disbursement by respondents Tropical and Pons of the sum of P13,000.00 to Galan petitioner demanded that said amount be paid to
him by respondents under the terms of the written contract between the petitioner and respondent company.
The respondents answered the complaint by denying some and admitting some of the material averments and setting up counterclaims.
During the pre-trial conference, the petitioners and respondents agreed that the issues to be resolved are:
(1) Whether or not there existed a partners between Celestino Galan and Elmo Muasque; and
(2) Whether or not there existed a justifiable cause on the part of respondent Tropical to disburse money to
respondent Galan.
The business firms Cebu Southern Hardware Company and Blue Diamond Glass Palace were allowed to intervene, both having legal
interest in the matter in litigation.
After trial, the court rendered judgment, the dispositive portion of which states:
IN VIEW WHEREOF, Judgment is hereby rendered:
(1) ordering plaintiff Muasque and defendant Galan to pay jointly and severally the intervenors Cebu and Southern
Hardware Company and Blue Diamond Glass Palace the amount of P6,229.34 and P2,213.51, respectively;
(2) absolving the defendants Tropical Commercial Company and Ramon Pons from any liability,
No damages awarded whatsoever.
The petitioner and intervenor Cebu Southern Company and its proprietor, Tan Siu filed motions for reconsideration.
On January 15, 197 1, the trial court issued 'another order amending its judgment to make it read as follows:
IN VIEW WHEREOF, Judgment is hereby rendered:
(1) ordering plaintiff Muasque and defendant Galan to pay jointly and severally the intervenors Cebu Southern
Hardware Company and Blue Diamond Glass Palace the amount of P6,229.34 and P2,213.51, respectively,

(2) ordering plaintiff and defendant Galan to pay Intervenor Cebu Southern Hardware Company and Tan Siu jointly
and severally interest at 12% per annum of the sum of P6,229.34 until the amount is fully paid;
(3) ordering plaintiff and defendant Galan to pay P500.00 representing attorney's fees jointly and severally to
Intervenor Cebu Southern Hardware Company:
(4) absolving the defendants Tropical Commercial Company and Ramon Pons from any liability,
No damages awarded whatsoever.
On appeal, the Court of Appeals affirmed the judgment of the trial court with the sole modification that the liability imposed in the
dispositive part of the decision on the credit of Cebu Southern Hardware and Blue Diamond Glass Palace was changed from "jointly
and severally" to "jointly."
Not satisfied, Mr. Muasque filed this petition.
The present controversy began when petitioner Muasque in behalf of the partnership of "Galan and Muasque" as Contractor entered
into a written contract with respondent Tropical for remodelling the respondent's Cebu branch building. A total amount of P25,000.00
was to be paid under the contract for the entire services of the Contractor. The terms of payment were as follows: thirty percent (30%)
of the whole amount upon the signing of the contract and the balance thereof divided into three equal installments at the lute of Six
Thousand Pesos (P6,000.00) every fifteen (15) working days.
The first payment made by respondent Tropical was in the form of a check for P7,000.00 in the name of the petitioner.Petitioner,
however, indorsed the check in favor of respondent Galan to enable the latter to deposit it in the bank and pay for the materials and
labor used in the project.
Petitioner alleged that Galan spent P6,183.37 out of the P7,000.00 for his personal use so that when the second check in the amount of
P6,000.00 came and Galan asked the petitioner to indorse it again, the petitioner refused.
The check was withheld from the petitioner. Since Galan informed the Cebu branch of Tropical that there was a"misunderstanding"
between him and petitioner, respondent Tropical changed the name of the payee in the second check from Muasque to "Galan and
Associates" which was the duly registered name of the partnership between Galan and petitioner and under which name a permit to do
construction business was issued by the mayor of Cebu City. This enabled Galan to encash the second check.
Meanwhile, as alleged by the petitioner, the construction continued through his sole efforts. He stated that he borrowed some
P12,000.00 from his friend, Mr. Espina and although the expenses had reached the amount of P29,000.00 because of the failure of
Galan to pay what was partly due the laborers and partly due for the materials, the construction work was finished ahead of schedule
with the total expenditure reaching P34,000.00.
The two remaining checks, each in the amount of P6,000.00,were subsequently given to the petitioner alone with the last check being
given pursuant to a court order.
As stated earlier, the petitioner filed a complaint for payment of sum of money and damages against the respondents,seeking to
recover the following: the amounts covered by the first and second checks which fell into the hands of respondent Galan, the
additional expenses that the petitioner incurred in the construction, moral and exemplary damages, and attorney's fees.
Both the trial and appellate courts not only absolved respondents Tropical and its Cebu Manager, Pons, from any liability but they also
held the petitioner together with respondent Galan, hable to the intervenors Cebu Southern Hardware Company and Blue Diamond
Glass Palace for the credit which the intervenors extended to the partnership of petitioner and Galan
In this petition the legal questions raised by the petitioner are as follows: (1) Whether or not the appellate court erred in holding that a
partnership existed between petitioner and respondent Galan. (2) Assuming that there was such a partnership, whether or not the court
erred in not finding Galan guilty of malversing the P13,000.00 covered by the first and second checks and therefore, accountable to
the petitioner for the said amount; and (3) Whether or not the court committed grave abuse of discretion in holding that the payment
made by Tropical through its manager Pons to Galan was "good payment, "
Petitioner contends that the appellate court erred in holding that he and respondent Galan were partners, the truth being that Galan was
a sham and a perfidious partner who misappropriated the amount of P13,000.00 due to the petitioner.Petitioner also contends that the
appellate court committed grave abuse of discretion in holding that the payment made by Tropical to Galan was "good" payment when
the same gave occasion for the latter to misappropriate the proceeds of such payment.
The contentions are without merit.

The records will show that the petitioner entered into a con-tract with Tropical for the renovation of the latter's building on behalf of
the partnership of "Galan and Muasque." This is readily seen in the first paragraph of the contract where it states:
This agreement made this 20th day of December in the year 1966 by Galan and Muasque hereinafter called the
Contractor, and Tropical Commercial Co., Inc., hereinafter called the owner do hereby for and in consideration agree
on the following: ... .
There is nothing in the records to indicate that the partner-ship organized by the two men was not a genuine one. If there was a falling
out or misunderstanding between the partners, such does not convert the partnership into a sham organization.
Likewise, when Muasque received the first payment of Tropical in the amount of P7,000.00 with a check made out in his name, he
indorsed the check in favor of Galan. Respondent Tropical therefore, had every right to presume that the petitioner and Galan were
true partners. If they were not partners as petitioner claims, then he has only himself to blame for making the relationship appear
otherwise, not only to Tropical but to their other creditors as well. The payments made to the partnership were, therefore, valid
payments.
In the case of Singsong v. Isabela Sawmill (88 SCRA 643),we ruled:
Although it may be presumed that Margarita G. Saldajeno had acted in good faith, the appellees also acted in good
faith in extending credit to the partnership. Where one of two innocent persons must suffer, that person who gave
occasion for the damages to be caused must bear the consequences.
No error was committed by the appellate court in holding that the payment made by Tropical to Galan was a good payment which
binds both Galan and the petitioner. Since the two were partners when the debts were incurred, they, are also both liable to third
persons who extended credit to their partnership. In the case of George Litton v. Hill and Ceron, et al, (67 Phil. 513, 514), we ruled:
There is a general presumption that each individual partner is an authorized agent for the firm and that he has
authority to bind the firm in carrying on the partnership transactions. (Mills vs. Riggle,112 Pan, 617).
The presumption is sufficient to permit third persons to hold the firm liable on transactions entered into by one of
members of the firm acting apparently in its behalf and within the scope of his authority. (Le Roy vs. Johnson, 7
U.S. (Law. ed.), 391.)
Petitioner also maintains that the appellate court committed grave abuse of discretion in not holding Galan liable for the amounts
which he "malversed" to the prejudice of the petitioner. He adds that although this was not one of the issues agreed upon by the parties
during the pretrial, he, nevertheless, alleged the same in his amended complaint which was, duly admitted by the court.
When the petitioner amended his complaint, it was only for the purpose of impleading Ramon Pons in his personal capacity. Although
the petitioner made allegations as to the alleged malversations of Galan, these were the same allegations in his original complaint. The
malversation by one partner was not an issue actually raised in the amended complaint but the alleged connivance of Pons with Galan
as a means to serve the latter's personal purposes.
The petitioner, therefore, should be bound by the delimitation of the issues during the pre-trial because he himself agreed to the same.
In Permanent Concrete Products, Inc. v. Teodoro, (26 SCRA 336), we ruled:
xxx xxx xxx
... The appellant is bound by the delimitation of the issues contained in the trial court's order issued on the very day
the pre-trial conference was held. Such an order controls the subsequent course of the action, unless modified before
trial to prevent manifest injustice.In the case at bar, modification of the pre-trial order was never sought at the
instance of any party.
Petitioner could have asked at least for a modification of the issues if he really wanted to include the determination of Galan's personal
liability to their partnership but he chose not to do so, as he vehemently denied the existence of the partnership. At any rate, the issue
raised in this petition is the contention of Muasque that the amounts payable to the intervenors should be shouldered exclusively by
Galan. We note that the petitioner is not solely burdened by the obligations of their illstarred partnership. The records show that there
is an existing judgment against respondent Galan, holding him liable for the total amount of P7,000.00 in favor of Eden Hardware
which extended credit to the partnership aside from the P2, 000. 00 he already paid to Universal Lumber.
We, however, take exception to the ruling of the appellate court that the trial court's ordering petitioner and Galan to pay the credits of
Blue Diamond and Cebu Southern Hardware"jointly and severally" is plain error since the liability of partners under the law to third
persons for contracts executed inconnection with partnership business is only pro rata under Art. 1816, of the Civil Code.

While it is true that under Article 1816 of the Civil Code,"All partners, including industrial ones, shall be liable prorate with all their
property and after all the partnership assets have been exhausted, for the contracts which may be entered into the name and fm the
account cd the partnership, under its signature and by a person authorized to act for the partner-ship. ...". this provision should be
construed together with Article 1824 which provides that: "All partners are liable solidarily with the partnership for everything
chargeable to the partnership under Articles 1822 and 1823." In short, while the liability of the partners are merely joint in transactions
entered into by the partnership, a third person who transacted with said partnership can hold the partners solidarily liable for the whole
obligation if the case of the third person falls under Articles 1822 or 1823.
Articles 1822 and 1823 of the Civil Code provide:
Art. 1822. Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the
partner-ship or with the authority of his co-partners, loss or injury is caused to any person, not being a partner in the
partnership or any penalty is incurred, the partnership is liable therefor to the same extent as the partner so acting or
omitting to act.
Art. 1823. The partnership is bound to make good:
(1) Where one partner acting within the scope of his apparent authority receives money or property of a third person
and misapplies it; and
(2) Where the partnership in the course of its business receives money or property of a third person and t he money
or property so received is misapplied by any partner while it is in the custody of the partnership.
The obligation is solidary, because the law protects him, who in good faith relied upon the authority of a partner, whether such
authority is real or apparent. That is why under Article 1824 of the Civil Code all partners, whether innocent or guilty, as well as the
legal entity which is the partnership, are solidarily liable.
In the case at bar the respondent Tropical had every reason to believe that a partnership existed between the petitioner and Galan and
no fault or error can be imputed against it for making payments to "Galan and Associates" and delivering the same to Galan because as
far as it was concerned, Galan was a true partner with real authority to transact on behalf of the partnership with which it was dealing.
This is even more true in the cases of Cebu Southern Hardware and Blue Diamond Glass Palace who supplied materials on credit to
the partnership. Thus, it is but fair that the consequences of any wrongful act committed by any of the partners therein should be
answered solidarily by all the partners and the partnership as a whole
However. as between the partners Muasque and Galan,justice also dictates that Muasque be reimbursed by Galan for the payments
made by the former representing the liability of their partnership to herein intervenors, as it was satisfactorily established that Galan
acted in bad faith in his dealings with Muasque as a partner.
WHEREFORE, the decision appealed from is hereby AFFIRMED with the MODIFICATION that the liability of petitioner and
respondent Galan to intervenors Blue Diamond Glass and Cebu Southern Hardware is declared to be joint and solidary. Petitioner may
recover from respondent Galan any amount that he pays, in his capacity as a partner, to the above intervenors,
___________________________________________________________________________________________________________

PHILIPPINE NATIONAL BANK, VS. SEVERO EUGENIO LO, ET AL. SEVERIO EUGENIO LO, NG KHEY LING and
YEP SENG,
G.R. No. L-26937
October 5, 1927
VILLAMOR, J.:
On September 29, 1916, the appellants Severo Eugenio Lo and Ng Khey Ling, together with J. A. Say Lian Ping, Ko Tiao Hun, On
Yem Ke Lam and Co Sieng Peng formed a commercial partnership under the name of "Tai Sing and Co.," with a capital of P40,000
contributed by said partners. In the articles of copartnership, Exhibit A, it appears that the partnership was to last for five years from
after the date of its organization, and that its purpose was to do business in the City of Iloilo, Province of Iloilo, or in any other part of
the Philippine Islands the partners might desire, under the name of "Tai Sing & Co.," for the purchase and sale of merchandise, goods,
and native, as well as Chinese and Japanese, products, and to carry on such business and speculations as they might consider
profitable. One of the partners, J. A. Say Lian Ping was appointed general manager of the partnership, with the appointed general
manager of the partnership, with the powers specified in said articles of copartnership.
On June 4, 1917, general manager A. Say Lian Ping executed a power of attorney (Exhibit C-1) in favor of A. Y. Kelam, authorizing
him to act in his stead as manager and administrator of "Tai Sing & Co.," on July 26, 1918, for, and obtained a loan of P8,000 in
current account from the plaintiff bank. (Exhibit C). As security for said loan, he mortgaged certain personal property of "Tai Sing &
Co., (Exhibit C.)
This credit was renew several times and on March 25, 1919, A. Y. Kelam, as attorney-in-fact of "Tai Sing & Co., executed a chattel
mortgage in favor of plaintiff bank as security for a loan of P20,000 with interest (Exhibit D). This mortgage was again renewed on
April 16, 1920 and A. Y. Kelam, as attorney-in-fact of "Tai Sing & Co., executed another chattel mortgage for the said sum of P20,000
in favor of plaintiff bank. (Exhibit E.) According to this mortgage contract, the P20,000 loan was to earn 9 per cent interest per annum.

On April 20, 1920, Yap Seng, Severo Eugenio Lo, A. Y. Kelam and Ng Khey Ling, the latter represented by M. Pineda Tayenko,
executed a power of attorney in favor of Sy Tit by virtue of which Sy Tit, representing "Tai Sing & Co., obtained a credit of P20,000
from plaintiff bank on January 7, 1921, executing a chattel mortgage on certain personal property belonging to "Tai Sing & Co.
Defendants had been using this commercial credit in a current account with the plaintiff bank, from the year 1918, to May 22, 1921,
and the debit balance of this account, with interest to December 31, 1924, is as follows:
TAI SING & CO.
To your outstanding account (C. O. D.) with us on June 30, 1922
Interest on same from June 30, 1922 to December 31,1924, at 9 per
cent per annum
Total

P16,518.74
3,720.86
20, 239.00
=========

This total is the sum claimed in the complaint, together with interest on the P16,518.74 debt, at 9 per cent per annum from January 1,
1925 until fully paid, with the costs of the trial.
Defendant Eugenio Lo sets up, as a general defense, that "Tai Sing & Co. was not a general partnership, and that the commercial credit
in current account which "Tai Sing & Co. obtained from the plaintiff bank had not been authorized by the board of directors of the
company, nor was the person who subscribed said contract authorized to make the same, under the article of copartnership. The other
defendants, Yap Sing and Ng Khey Ling, answered the complaint denying each and every one of the allegations contained therein.
After the hearing, the court found:
(1) That defendants Eugenio Lo, Ng Khey Ling and Yap Seng Co., Sieng Peng indebted to plaintiff Philippine National Bank
in sum of P22,595.26 to July 29, 1926, with a daily interest of P4.14 on the balance on account of the partnership "Tai Sing &
Co. for the sum of P16,518.74 until September 9, 1922;
(2) Said defendants are ordered jointly and severally to pay the Philippine National Bank the sum of P22,727.74 up to August
31, 1926, and from the date, P4.14 daily interest on the principal; and
(3) The defendants are furthermore ordered to pay the costs of the action.1awph!l.net
Defendants appealed, making the following assignments of error:
I. The trial court erred in finding that article 126 of the Code of Commerce at present in force is not mandatory.
II. The trial court erred in finding that the partnership agreement of "Tai Sing & Co., (Exhibit A), is in accordance with the
requirements of article 125 of the Code of Commerce for the organization of a regular partnership.
III. The trial court erred in not admitting J. A. Sai Lian Ping's death in China in November, 1917, as a proven fact.
IV. The trial court erred in finding that the death of J. A. Say Lian Ping cannot extinguish the defendants' obligation to the
plaintiff bank, because the last debt incurred by the commercial partnership "Tai Sing & Co., was that evidence by Exhibit F,
signed by Sy Tit as attorney-in-fact of the members of "Tai Sing & Co., by virtue of Exhibit G.
V. The trial court erred in not finding that plaintiff bank was not able to collect its credit from the goods of "Tai Sing & Co.,
given as security therefor through its own fault and negligence; and that the action brought by plaintiff is a manifest violation
of article 237 of the present Code of Commerce.
VI. The trial court erred in finding that the current account of "Tai Sing & Co. with plaintiff bank shows a debit balance of
P16,518.74, which in addition to interest at 9 per cent per annum from July 29, 1926, amount to P16,595.26, with a daily
interest of P4.14 on the sum of P16,518.74.
VII. The trial court erred in ordering the defendants appellants to pay jointly and severally to the Philippine National Bank
the sum of P22,727.74 up to August 31, 1926, and interest on P16,518.74 from that date until fully paid, with the costs of the
action.
VIII. The trial court erred in denying the motion for a new trial filed by defendants-appellants.
Appellants admit, and it appears from the context of Exhibit A, that the defendant association formed by the defendants is a general
partnership, as defined in article 126 of the Code Commerce. This partnership was registered in the mercantile register of the Province
of Iloilo. The only anomaly noted in its organization is that instead of adopting for their firm name the names of all of the partners, of
several of them, or only one of them, to be followed in the last two cases, by the words "and to be followed in the last two cases, by
the words "and company" the partners agreed upon "Tai Sing & Co." as the firm name.
In the case of Hung-Man-Yoc, under the name of Kwong-Wo-Sing vs. Kieng-Chiong-Seng, cited by appellants, this court held that, as
the company formed by defendants had existed in fact, though not in law due to the fact that it was not recorded in the register, and
having operated and contracted debts in favor of the plaintiff, the same must be paid by someone. This applies more strongly to the
obligations contracted by the defendants, for they formed a partnership which was registered in the mercantile register, and carried on
business contracting debts with the plaintiff bank. The anomalous adoption of the firm name above noted does not affect the liability
of the general partners to third parties under article 127 of the Code of Commerce. And the Supreme Court so held in the case of Jo
Chung Cang vs. Pacific Commercial Co., (45 Phil., 142), in which it said that the object of article 126 of the Code of Commerce in
requiring a general partnership to transact business under the name of all its members, of several of them, or of one only, is to protect
the public from imposition and fraud; and that the provision of said article 126 is for the protection of the creditors rather than of the
partners themselves. And consequently the doctrine was enunciated that the law must be unlawful and unenforceable only as between
the partners and at the instance of the violating party, but not in the sense of depriving innocent parties of their rights who may have
dealt with the offenders in ignorance of the latter having violated the law; and that contracts entered into by commercial associations
defectively organized are valid when voluntarily executed by the parties, and the only question is whether or not they complied with
the agreement. Therefore, the defendants cannot invoke in their defense the anomaly in the firm name which they themselves adopted.
As to the alleged death of the manager of the company, Say Lian Ping, before the attorney-in-fact Ou Yong Kelam executed Exhibits
C, D and E, the trial court did not find this fact proven at the hearing. But even supposing that the court had erred, such an error would
not justify the reversal of the judgment, for two reasons at least: (1) Because Ou Yong Kelam was a partner who contracted in the
name of the partnership, without any objection of the other partners; and (2) because it appears in the record that the appellant-partners
Severo Eugenio Lo, Ng Khey Ling and Yap Seng, appointed Sy Tit as manager, and he obtained from the plaintiff bank the credit in
current account, the debit balance of which is sought to be recovered in this action.
Appellants allege that such of their property as is not included in the partnership assets cannot-be seized for the payment of the debts
contracted by the partnership until after the partnership property has been exhausted. The court found that the partnership property
described in the mortgage Exhibit F no loner existed at the time of the filing of the herein complaint nor has its existence been proven,

nor was it offered to the plaintiff for sale. We find no just reason to reverse this conclusion of the trial court, and this being so, it
follows that article 237 of the Code of Commerce, invoked by the appellant, can in no way have any application here.
Appellants also assign error to the action of the trial court in ordering them to pay plaintiff, jointly and severally, the sums claimed
with 9 per cent interest on P16,518.74, owing from them.
The judgment against the appellants is in accordance with article 127 of the Code of Commerce which provides that all the members
of a general partnership, be they managing partners thereof or not, shall be personally and solidarily liable with all their property, for
the results of the transactions made in the name and for the account of the partnership, under the signature of the latter, and by a
person authorized to use it.
As to the amount of the interest suffice it to remember that the credit in current account sued on in this case as been renewed by the
parties in such a way that while it appears in the mortgage Exhibit D executed on March 25, 1919 by the attorney-in-fact Ou Yong
Kelam that the P20,000 credit would earn 8 per cent interest annually, yet from that executed on April 16, 1920, Exhibit E, it appears
that the P20,000 would earn 9 per cent interest per annum. The credit was renewed in January, 1921, and in the deed of pledge, Exhibit
F, executed by "Tai Sing & Co., represented by the attorney-in-fact Sy Tit, it appears that this security is for the payment of the sums
received by the partnership, not to exceed P20,000 with interest and collection fees. There can be no doubt that the parties agreed upon
the rate of interest fixed in the document Exhibit E, namely 9 per cent per annum.
The judgment appealed from is in accordance with the law, and must therefore be, as it is hereby, affirmed with costs against the
appellants. So ordered.
Avancea, C.J., Johnson, Street, Malcolm, Johns and Romualdez, JJ., concur.
____________________________________________________________________________________________________________

Article 1818
ZENAIDA G. MENDOZA, VS. ENGR. EDUARDO PAULE, ENGR. ALEXANDER COLOMA and NATIONAL
IRRIGATION ADMINISTRATION (NIA MUOZ, NUEVA ECIJA),
G.R. No. 175885
MANUEL DELA CRUZ, VS. ENGR. EDUARDO M. PAULE, ENGR. ALEXANDER COLOMA and NATIONAL
IRRIGATION Promulgated: ADMINISTRATION (NIA MUOZ, NUEVA ECIJA),
G.R. No. 176271- . February 13, 2009
YNARE S-SANTIAGO, J.:
These consolidated petitions assail the August 28, 2006 Decision [1] of the Court of Appeals in CA-G.R. CV No. 80819
dismissing the complaint in Civil Case No. 18-SD (2000), [2] and its December 11, 2006 Resolution[3] denying the herein petitioners
motion for reconsideration.
Engineer Eduardo M. Paule (PAULE) is the proprietor of E.M. Paule Construction and Trading (EMPCT). On May 24, 1999,
PAULE executed a special power of attorney (SPA) authorizing Zenaida G. Mendoza (MENDOZA) to participate in the prequalification and bidding of a National Irrigation Administration (NIA) project and to represent him in all transactions related thereto,
to wit:
1. To represent E.M. PAULE CONSTRUCTION & TRADING of which I (PAULE) am the General Manager in all
my business transactions with National Irrigation Authority, Muoz, Nueva Ecija.
2. To participate in the bidding, to secure bid bonds and other documents pre-requisite in the bidding of Casicnan
Multi-Purpose Irrigation and Power Plant (CMIPPL 04-99), National Irrigation Authority, Muoz, Nueva
Ecija.
3. To receive and collect payment in check in behalf of E.M. PAULE CONSTRUCTION & TRADING.
4. To do and perform such acts and things that may be necessary and/or required to make the herein authority
effective.[4]
On September 29, 1999, EMPCT, through MENDOZA, participated in the bidding of the NIA-Casecnan Multi-Purpose
Irrigation and Power Project (NIA-CMIPP) and was awarded Packages A-10 and B-11 of the NIA-CMIPP Schedule A. On November
16, 1999, MENDOZA received the Notice of Award which was signed by Engineer Alexander M. Coloma (COLOMA), then Acting
Project Manager for the NIA-CMIPP. Packages A-10 and B-11 involved the construction of a road system, canal structures and
drainage box culverts with a project cost of P5,613,591.69.
When Manuel de la Cruz (CRUZ) learned that MENDOZA is in need of heavy equipment for use in the NIA project, he met
up with MENDOZA in Bayuga, Muoz, Nueva Ecija, in an apartment where the latter was holding office under an EMPCT
signboard. A series of meetings followed in said EMPCT office among CRUZ, MENDOZA and PAULE.
On December 2 and 20, 1999, MENDOZA and CRUZ signed two Job Orders/Agreements [5] for the lease of the latters heavy
equipment (dump trucks for hauling purposes) to EMPCT.
On April 27, 2000, PAULE revoked[6] the SPA he previously issued in favor of MENDOZA; consequently, NIA refused to
make payment to MENDOZA on her billings. CRUZ, therefore, could not be paid for the rent of the equipment. Upon advice of
MENDOZA, CRUZ addressed his demands for payment of lease rentals directly to NIA but the latter refused to acknowledge the
same and informed CRUZ that it would be remitting payment only to EMPCT as the winning contractor for the project.
In a letter dated April 5, 2000, CRUZ demanded from MENDOZA and/or EMPCT payment of the outstanding rentals which
amounted to P726,000.00 as of March 31, 2000.
On June 30, 2000, CRUZ filed Civil Case No. 18-SD (2000) with Branch 37 of the Regional Trial Court of Nueva Ecija, for
collection of sum of money with damages and a prayer for the issuance of a writ of preliminary injunction against PAULE, COLOMA

and the NIA. PAULE in turn filed a third-party complaint against MENDOZA, who filed her answer thereto, with a cross-claim
against PAULE.
MENDOZA alleged in her cross-claim that because of PAULEs whimsical revocation of the SPA, she was barred from
collecting payments from NIA, thus resulting in her inability to fund her checks which she had issued to suppliers of materials,
equipment and labor for the project. She claimed that estafa and B.P. Blg. 22 cases were filed against her; that she could no longer
finance her childrens education; that she was evicted from her home; that her vehicle was foreclosed upon; and that her reputation was
destroyed, thus entitling her to actual and moral damages in the respective amounts of P3 million and P1 million.
Meanwhile, on August 23, 2000, PAULE again constituted MENDOZA as his attorney-in-fact
1. To represent me (PAULE), in my capacity as General Manager of the E.M. PAULE CONSTRUCTION
AND TRADING, in all meetings, conferences and transactions exclusively for the construction of the projects
known as Package A-10 of Schedule A and Package No. B-11 Schedule B, which are 38.61% and 63.18% finished
as of June 21, 2000, per attached Accomplishment Reports x x x;
2. To implement, execute, administer and supervise the said projects in whatever stage they are in as of to
date, to collect checks and other payments due on said projects and act as the Project Manager for E.M. PAULE
CONSTRUCTION AND TRADING;
3. To do and perform such acts and things that may be necessary and required to make the herein power and
authority effective.[7]
At the pre-trial conference, the other parties were declared as in default and CRUZ was allowed to present his evidence ex
parte. Among the witnesses he presented was MENDOZA, who was impleaded as defendant in PAULEs third-party complaint.
On March 6, 2003, MENDOZA filed a motion to declare third-party plaintiff PAULE non-suited with prayer that she be
allowed to present her evidence ex parte.
However, without resolving MENDOZAs motion to declare PAULE non-suited, and without granting her the opportunity to
present her evidence ex parte, the trial court rendered its decision dated August 7, 2003, the dispositive portion of which states, as
follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff as follows:
1. Ordering defendant Paule to pay the plaintiff the sum of P726,000.00 by way of actual damages or
compensation for the services rendered by him;
2. Ordering defendant Paule to pay plaintiff the sum of P500,000.00 by way of moral damages;
3. Ordering defendant Paule to pay plaintiff the sum of P50,000.00 by way of reasonable attorneys fees;
4. Ordering defendant Paule to pay the costs of suit; and
5. Ordering defendant National Irrigation Administration (NIA) to withhold the balance still due from it to
defendant Paule/E.M. Paule Construction and Trading under NIA-CMIPP Contract Package A-10 and to pay
plaintiff therefrom to the extent of defendant Paules liability herein adjudged.
SO ORDERED.[8]
In holding PAULE liable, the trial court found that MENDOZA was duly constituted as EMPCTs agent for purposes of the
NIA project and that MENDOZA validly contracted with CRUZ for the rental of heavy equipment that was to be used therefor. It
found unavailing PAULEs assertion that MENDOZA merely borrowed and used his contractors license in exchange for a
consideration of 3% of the aggregate amount of the project. The trial court held that through the SPAs he executed, PAULE clothed
MENDOZA with apparent authority and held her out to the public as his agent; as principal, PAULE must comply with the obligations
which MENDOZA contracted within the scope of her authority and for his benefit. Furthermore, PAULE knew of the transactions
which MENDOZA entered into since at various times when she and CRUZ met at the EMPCT office, PAULE was present and offered
no objections. The trial court declared that it would be unfair to allow PAULE to enrich himself and disown his acts at the expense of
CRUZ.
PAULE and MENDOZA both appealed the trial courts decision to the Court of Appeals.
PAULE claimed that he did not receive a copy of the order of default; that it was improper for MENDOZA, as third-party
defendant, to have taken the stand as plaintiff CRUZs witness; and that the trial court erred in finding that an agency was created
between him and MENDOZA, and that he was liable as principal thereunder.
On the other hand, MENDOZA argued that the trial court erred in deciding the case without affording her the opportunity to
present evidence on her cross-claim against PAULE; that, as a result, her cross-claim against PAULE was not resolved, leaving her
unable to collect the amounts of P3,018,864.04, P500,000.00, and P839,450.88 which allegedly represent the unpaid costs of the
project and the amount PAULE received in excess of payments made by NIA.
On August 28, 2006, the Court of Appeals rendered the assailed Decision which dismissed CRUZs complaint, as well as
MENDOZAs appeal. The appellate court held that the SPAs issued in MENDOZAs favor did not grant the latter the authority to enter
into contract with CRUZ for hauling services; the SPAs limit MENDOZAs authority to only represent EMPCT in its business
transactions with NIA, to participate in the bidding of the project, to receive and collect payment in behalf of EMPCT, and to perform

such acts as may be necessary and/or required to make the said authority effective. Thus, the engagement of CRUZs hauling services
was done beyond the scope of MENDOZAs authority.
As for CRUZ, the Court of Appeals held that he knew the limits of MENDOZAs authority under the SPAs yet he still
transacted with her. Citing Manila Memorial Park Cemetery, Inc. v. Linsangan,[9] the appellate court declared that the principal
(PAULE) may not be bound by the acts of the agent (MENDOZA) where the third person (CRUZ) transacting with the agent knew
that the latter was acting beyond the scope of her power or authority under the agency.
With respect to MENDOZAs appeal, the Court of Appeals held that when the trial court rendered judgment, not only did it
rule on the plaintiffs complaint; in effect, it resolved the third-party complaint as well; [10] that the trial court correctly dismissed the
cross-claim and did not unduly ignore or disregard it; that MENDOZA may not claim, on appeal, the amounts of P3,018,864.04,
P500,000.00, and P839,450.88 which allegedly represent the unpaid costs of the project and the amount PAULE received in excess of
payments made by NIA, as these are not covered by her cross-claim in the court a quo, which seeks reimbursement only of the
amounts of P3 million and P1 million, respectively, for actual damages (debts to suppliers, laborers, lessors of heavy equipment, lost
personal property) and moral damages she claims she suffered as a result of PAULEs revocation of the SPAs; and that the revocation
of the SPAs is a prerogative that is allowed to PAULE under Article 1920[11] of the Civil Code.
CRUZ and MENDOZAs motions for reconsideration were denied; hence, these consolidated petitions:
G.R. No. 175885 (MENDOZA PETITION)
a) The Court of Appeals erred in sustaining the trial courts failure to resolve her motion praying that
PAULE be declared non-suited on his third-party complaint, as well as her motion seeking that she be allowed to
present evidence ex parte on her cross-claim;
b) The Court of Appeals erred when it sanctioned the trial courts failure to resolve her cross-claim against
PAULE; and,
c) The Court of Appeals erred in its application of Article 1920 of the Civil Code, and in adjudging that
MENDOZA had no right to claim actual damages from PAULE for debts incurred on account of the SPAs issued to
her.
G.R. No. 176271 (CRUZ PETITION)
CRUZ argues that the decision of the Court of Appeals is contrary to the provisions of law on agency, and
conflicts with the Resolution of the Court in G.R. No. 173275, which affirmed the Court of Appeals decision in CAG.R. CV No. 81175, finding the existence of an agency relation and where PAULE was declared as MENDOZAs
principal under the subject SPAs and, thus, liable for obligations (unpaid construction materials, fuel and heavy
equipment rentals) incurred by the latter for the purpose of implementing and carrying out the NIA project awarded
to EMPCT.
CRUZ argues that MENDOZA was acting within the scope of her authority when she hired his services as hauler of debris
because the NIA project (both Packages A-10 and B-11 of the NIA-CMIPP) consisted of construction of canal structures, which
involved the clearing and disposal of waste, acts that are necessary and incidental to PAULEs obligation under the NIA project; and
that the decision in a civil case involving the same SPAs, where PAULE was found liable as MENDOZAs principal already became
final and executory; that in Civil Case No. 90-SD filed by MENDOZA against PAULE, [12] the latter was adjudged liable to the former
for unpaid rentals of heavy equipment and for construction materials which MENDOZA obtained for use in the subject NIA
project. On September 15, 2003, judgment was rendered in said civil case against PAULE, to wit:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff (MENDOZA) and against the
defendant (PAULE) as follows:
1. Ordering defendant Paule to pay plaintiff the sum of P138,304.00 representing the obligation incurred by
the plaintiff with LGH Construction;
2. Ordering defendant Paule to pay plaintiff the sum of P200,000.00 representing the balance of the
obligation incurred by the plaintiff with Artemio Alejandrino;
3. Ordering defendant Paule to pay plaintiff the sum of P520,000.00 by way of moral damages, and further
sum of P100,000.00 by way of exemplary damages;
4. Ordering defendant Paule to pay plaintiff the sum of P25,000.00 as for attorneys fees; and
5. To pay the cost of suit.[13]
PAULE appealed[14] the above decision, but it was dismissed by the Court of Appeals in a Decision[15] which reads, in part:
As to the finding of the trial court that the principle of agency is applicable in this case, this Court agrees
therewith. It must be emphasized that appellant (PAULE) authorized appellee (MENDOZA) to perform any and all
acts necessary to make the business transaction of EMPCT with NIA effective. Needless to state, said business
transaction pertained to the construction of canal structures which necessitated the utilization of construction
materials and equipments. Having given said authority, appellant cannot be allowed to turn its back on the
transactions entered into by appellee in behalf of EMPCT.

The amount of moral damages and attorneys fees awarded by the trial court being justifiable and
commensurate to the damage suffered by appellee, this Court shall not disturb the same. It is well-settled that the
award of damages as well as attorneys fees lies upon the discretion of the court in the context of the facts and
circumstances of each case.
WHEREFORE, the appeal is DISMISSED and the appealed Decision is AFFIRMED.
SO ORDERED.[16]
PAULE filed a petition to this Court docketed as G.R. No. 173275 but it was denied with finality on September 13, 2006.
MENDOZA, for her part, claims that she has a right to be heard on her cause of action as stated in her cross-claim against
PAULE; that the trial courts failure to resolve the cross-claim was a violation of her constitutional right to be apprised of the facts or
the law on which the trial courts decision is based; that PAULE may not revoke her appointment as attorney-in-fact for and in behalf
of EMPCT because, as manager of their partnership in the NIA project, she was obligated to collect from NIA the funds to be used for
the payment of suppliers and contractors with whom she had earlier contracted for labor, materials and equipment.
PAULE, on the other hand, argues in his Comment that MENDOZAs authority under the SPAs was for the limited purpose of
securing the NIA project; that MENDOZA was not authorized to contract with other parties with regard to the works and services
required for the project, such as CRUZs hauling services; that MENDOZA acted beyond her authority in contracting with CRUZ, and
PAULE, as principal, should not be made civilly liable to CRUZ under the SPAs; and that MENDOZA has no cause of action against
him for actual and moral damages since the latter exceeded her authority under the agency.
We grant the consolidated petitions.
Records show that PAULE (or, more appropriately, EMPCT) and MENDOZA had entered into a partnership in regard to the
NIA project. PAULEs contribution thereto is his contractors license and expertise, while MENDOZA would provide and secure the
needed funds for labor, materials and services; deal with the suppliers and sub-contractors; and in general and together with PAULE,
oversee the effective implementation of the project. For this, PAULE would receive as his share three per cent (3%) of the project cost
while the rest of the profits shall go to MENDOZA. PAULE admits to this arrangement in all his pleadings. [17]
Although the SPAs limit MENDOZAs authority to such acts as representing EMPCT in its business transactions with NIA,
participating in the bidding of the project, receiving and collecting payment in behalf of EMPCT, and performing other acts in
furtherance thereof, the evidence shows that when MENDOZA and CRUZ met and discussed (at the EMPCT office in Bayuga, Muoz,
Nueva Ecija) the lease of the latters heavy equipment for use in the project, PAULE was present and interposed no objection to
MENDOZAs actuations. In his pleadings, PAULE does not even deny this. Quite the contrary, MENDOZAs actions were in accord
with what she and PAULE originally agreed upon, as to division of labor and delineation of functions within their partnership. Under
the Civil Code, every partner is an agent of the partnership for the purpose of its business; [18] each one may separately execute all acts
of administration, unless a specification of their respective duties has been agreed upon, or else it is stipulated that any one of them
shall not act without the consent of all the others.[19] At any rate, PAULE does not have any valid cause for opposition because his only
role in the partnership is to provide his contractors license and expertise, while the sourcing of funds, materials, labor and equipment
has been relegated to MENDOZA.
Moreover, it does not speak well for PAULE that he reinstated MENDOZA as his attorney-in-fact, this time with broader
powers to implement, execute, administer and supervise the NIA project, to collect checks and other payments due on said project, and
act as the Project Manager for EMPCT, even after CRUZ has already filed his complaint. Despite knowledge that he was already
being sued on the SPAs, he proceeded to execute another in MENDOZAs favor, and even granted her broader powers of
administration than in those being sued upon. If he truly believed that MENDOZA exceeded her authority with respect to the initial
SPA, then he would not have issued another SPA. If he thought that his trust had been violated, then he should not have executed
another SPA in favor of MENDOZA, much less grant her broader authority.
Given the present factual milieu, CRUZ has a cause of action against PAULE and MENDOZA. Thus, the Court of Appeals
erred in dismissing CRUZs complaint on a finding of exceeded agency. Besides, that PAULE could be held liable under the SPAs for
transactions entered into by MENDOZA with laborers, suppliers of materials and services for use in the NIA project, has been settled
with finality in G.R. No. 173275. What has been adjudged in said case as regards the SPAs should be made to apply to the instant
case. Although the said case involves different parties and transactions, it finally disposed of the matter regarding the SPAs
specifically their effect as among PAULE, MENDOZA and third parties with whom MENDOZA had contracted with by virtue of the
SPAs a disposition that should apply to CRUZ as well. If a particular point or question is in issue in the second action, and the
judgment will depend on the determination of that particular point or question, a former judgment between the same parties or their
privies will be final and conclusive in the second if that same point or question was in issue and adjudicated in the first suit. Identity of
cause of action is not required but merely identity of issues.[20]
There was no valid reason for PAULE to revoke MENDOZAs SPAs. Since MENDOZA took care of the funding and
sourcing of labor, materials and equipment for the project, it is only logical that she controls the finances, which means that the SPAs
issued to her were necessary for the proper performance of her role in the partnership, and to discharge the obligations she had already
contracted prior to revocation. Without the SPAs, she could not collect from NIA, because as far as it is concerned, EMPCT and not
the PAULE-MENDOZA partnership is the entity it had contracted with. Without these payments from NIA, there would be no source
of funds to complete the project and to pay off obligations incurred. As MENDOZA correctly argues, an agency cannot be revoked if a
bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed
manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. [21]
PAULEs revocation of the SPAs was done in evident bad faith. Admitting all throughout that his only entitlement in the
partnership with MENDOZA is his 3% royalty for the use of his contractors license, he knew that the rest of the amounts collected
from NIA was owing to MENDOZA and suppliers of materials and services, as well as the laborers. Yet, he deliberately revoked

MENDOZAs authority such that the latter could no longer collect from NIA the amounts necessary to proceed with the project and
settle outstanding obligations.
From the way he conducted himself, PAULE committed a willful and deliberate breach of his contractual duty to his partner
and those with whom the partnership had contracted. Thus, PAULE should be made liable for moral damages.
Bad faith does not simply connote bad judgment or negligence; it imputes a dishonest purpose or some
moral obliquity and conscious doing of a wrong; a breach of a sworn duty through some motive or intent or ill-will;
it partakes of the nature of fraud (Spiegel v. Beacon Participation, 8 NE 2nd Series, 895, 1007). It contemplates a
state of mind affirmatively operating with furtive design or some motive of self-interest or ill will for ulterior
purposes (Air France v. Carrascoso, 18 SCRA 155, 166-167). Evident bad faith connotes a manifest deliberate intent
on the part of the accused to do wrong or cause damage.[22]
Moreover, PAULE should be made civilly liable for abandoning the partnership, leaving MENDOZA to fend for her own,
and for unduly revoking her authority to collect payments from NIA, payments which were necessary for the settlement of obligations
contracted for and already owing to laborers and suppliers of materials and equipment like CRUZ, not to mention the agreed profits to
be derived from the venture that are owing to MENDOZA by reason of their partnership agreement.Thus, the trial court erred in
disregarding and dismissing MENDOZAs cross-claim which is properly a counterclaim, since it is a claim made by her as defendant
in a third-party complaint against PAULE, just as the appellate court erred in sustaining it on the justification that PAULEs revocation
of the SPAs was within the bounds of his discretion under Article 1920 of the Civil Code.
Where the defendant has interposed a counterclaim (whether compulsory or permissive) or is seeking affirmative relief by a
cross-complaint, the plaintiff cannot dismiss the action so as to affect the right of the defendant in his counterclaim or prayer for
affirmative relief. The reason for that exception is clear. When the answer sets up an independent action against the plaintiff, it then
becomes an action by the defendant against the plaintiff, and, of course, the plaintiff has no right to ask for a dismissal of the
defendants action. The present rule embodied in Sections 2 and 3 of Rule 17 of the 1997 Rules of Civil Procedure ordains a more
equitable disposition of the counterclaims by ensuring that any judgment thereon is based on the merit of the counterclaim itself and
not on the survival of the main complaint. Certainly, if the counterclaim is palpably without merit or suffers jurisdictional flaws which
stand independent of the complaint, the trial court is not precluded from dismissing it under the amended rules, provided that the
judgment or order dismissing the counterclaim is premised on those defects. At the same time, if the counterclaim is justified, the
amended rules now unequivocally protect such counterclaim from peremptory dismissal by reason of the dismissal of the complaint. [23]
Notwithstanding the immutable character of PAULEs liability to MENDOZA, however, the exact amount thereof is yet to be
determined by the trial court, after receiving evidence for and in behalf of MENDOZA on her counterclaim, which must be considered
pending and unresolved.
WHEREFORE, the petitions are GRANTED. The August 28, 2006 Decision of the Court of Appeals in CA-G.R. CV No.
80819 dismissing the complaint in Civil Case No. 18-SD (2000) and its December 11, 2006 Resolution denying the motion for
reconsideration are REVERSED and SET ASIDE. The August 7, 2003 Decision of the Regional Trial Court of Nueva Ecija, Branch
37 in Civil Case No. 18-SD (2000) finding PAULE liable is REINSTATED, with the MODIFICATIONthat the trial court
is ORDERED to receive evidence on the counterclaim of petitioner Zenaida G. Mendoza.
SO ORDERED
____________________________________________________________________________________________________________
ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SIN AN and ANTONIO C. GOQUIOLAY, vs.
WASHINGTON Z. SYCIP, ET AL
G.R. No. L-11840
July 26, 1960
.
REYES, J. B. L., J.:
Direct appeal from the decision of the Court of First Instance of Davao (the amount involved being more than P200,00) dismissing the
plaintiffs-appellants' complaint.
From the stipulation of facts of the parties and the evidence on record, it would appear that on May 29, 1940, Tan Sin An and Antonio
C. Goquiolay", entered into a general commercial partnership under the partnership name "Tan Sin An and Antonio C. Goquiolay", for
the purpose in dealing in real state. The partnership had a capital of P30,000.00, P18,000.00 of which was contributed by Goquiolay
and P12,000.00 by Tan Sin An. The agreement lodge upon Tan Sin An the sole management of the partnership affairs, stipulating that

III. The co-partnership shall be composed of said Tan Sin An as sole managing and partner (sic), andAntonio C. Goquiolay as
co-partner.
IV. Vhe affairs of co-partnership shall be managed exclusively by the managing and partner (sic) or by his authorized agent,
and it is expressly stipulated that the managing and partner (sic) may delegate the entire management of the affairs of the copartnership by irrevocable power of attorney to any person, firm or corporation he may select upon such terms as regards
compensation as he may deem proper, and vest in such persons, firm or corporation full power and authority, as the agent of
the co-partnership and in his name, place and stead to do anything for it or on his behalf which he as such managing and
partner (sic) might do or cause to be done.
V. The co-partner shall have no voice or participation in the management of the affairs of the co-partnership; but he may
examine its accounts once every six (6) months at any time during ordinary business hours, and in accordance with the
provisions of the Code of Commerce. (Article of Co-Partnership).
The lifetime of the partnership was fixed at ten (10) years and also that
In the event of the death of any of the partners at any time before the expiration of said term, the co-partnership shall not be
dissolved but will have to be continued and the deceased partner shall be represented by his heirs or assigns in said copartnership (Art. XII, Articles of Co-Partnership).
However, the partnership could be dissolved and its affairs liquidated at any time upon mutual agreement in writing of the partners
(Art. XIII, articles of Co-Partnership).

On May 31, 1940, Antonio Goquiolay executed a general power of attorney to this effect:
That besides the powers and duties granted the said Tan Sin An by the articles of co-partnership of said co-partnership
"Tan Sin An and Antonio Goquiolay", that said Tan Sin An should act as the Manager for said co-partnership for the full
period of the term for which said co-partnership was organized or until the whole period that the said capital of P30,000.00 of
the co-partnership should last, to carry on to the best advantage and interest of the said co-partnership, to make and execute,
sign, seal and deliver for the co-partnership, and in its name, all bills, bonds, notes, specialties, and trust receipts or other
instruments or documents in writing whatsoever kind or nature which shall be necessary to the proper conduction of the said
businesses, including the power to mortgage and pledge real and personal properties, to secure the obligation of the copartnership, to buy real or personal properties for cash or upon such terms as he may deem advisable, to sell personal or real
properties, such as lands and buildings of the co-partnership in any manner he may deem advisable for the best interest of
said co-partnership, to borrow money on behalf of the co-partnership and to issue promissory notes for the repayment thereof,
to deposit the funds of the co-partnership in any local bank or elsewhere and to draw checks against funds so deposited ... .
On May 29, 1940, the plaintiff partnership "Tan Sin An and Goquiolay" purchased the three (3) parcels of land, known as Lots Nos.
526, 441 and 521 of the Cadastral Survey of Davao, subject-matter of the instant litigation, assuming the payment of a mortgage
obligation of P25,000.00, payable to "La Urbana Sociedad Mutua de Construccion y Prestamos" for a period of ten (10) years, with
10% interest per annum. Another 46 parcels were purchased by Tan Sin An in his individual capacity, and he assumed payment of a
mortgage debt thereon for P35,000.00 with interest. The downpayment and the amortization were advanced by Yutivo and Co., for the
account of the purchasers.
On September 25, 1940, the two separate obligations were consolidated in an instrument executed by the partnership and Tan Sin An,
whereby the entire 49 lots were mortgaged in favor of the "Banco Hipotecario de Filipinas" (as successor to "La Urbana") and the
covenantors bound themselves to pay, jointly and severally, the remaining balance of their unpaid accounts amounting to P52,282.80
within eight 8 years, with 8% annual interest, payable in 96 equal monthly installments.
On June 26, 1942, Tan Sin An died, leaving as surviving heirs his widow, Kong Chai Pin, and four minor children, namely: Tan L.
Cheng, Tan L. Hua, Tan C. Chiu and Tan K. Chuan. Defendant Kong Chai Pin was appointed administratrix of the intestate estate of
her deceased husband.
In the meantime, repeated demands for payment were made by the Banco Hipotecario on the partnership and on Tan Sin An. In
March, 1944, the defendant Sing Yee and Cuan, Co., Inc., upon request of defendant Yutivo Sans Hardware Co., paid the remaining
balance of the mortgage debt, and the mortgage was cancelled.
Then in 1946, Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. filed their claims in the intestate proceedings of Tan Sin An
for P62,415.91 and P54,310.13, respectively, as alleged obligations of the partnership "Tan Sin An and Antonio C. Goquiolay" and Tan
Sin An, for advances, interest and taxes paid in amortizing and discharging their obligations to "La Urbana" and the "Banco
Hipotecario". Disclaiming knowledge of said claims at first, Kong Chai Pin later admitted the claims in her amended answer and they
were accordingly approved by the Court.
On March 29, 1949, Kong Chai Pin filed a petition with the probate court for authority to sell all the 49 parcels of land to Washington
Z, Sycip and Betty Y. Lee, for the purpose preliminary of settling the aforesaid debts of Tan Sin An and the partnership. Pursuant to a
court order of April 2, 1949, the administratrix executed on April 4, 1949, a deed of sale1 of the 49 parcels of land to the defendants
Washington Sycip and Betty Lee in consideration of P37,000.00 and of vendees' assuming payments of the claims filed by Yutivo
Sons Hardware Co. and Sing Yee and Cuan Co., Inc. Later, in July, 1949, defendants Sycip and Betty Lee executed in favor of the
Insular Development Co., Inc. a deed of transfer covering the said 49 parcels of land.
Learning about the sale to Sycip and Lee, the surviving partner Antonio Goquiolay filed, on or about July 25, 1949, a petition in the
intestate proceedings seeking to set aside the order of the probate court approving the sale in so far as his interest over the parcels of
land sold was concerned. In its order of December 29, 1949, the probate court annulled the sale executed by the administratrix with
respect to the 60% interest of Antonio Goquiolay over the properties sold. Kong Chai Pin appealed to the Court of Appeals, which
court later certified the case to us (93 Phil., 413; 49 Off. Gaz. [7] 2307). On June 30, 1953, we rendered decision setting aside the
orders of the probate court complained of and remanding the case for new trial, due to the non-inclusion of indispensableparties.
Thereafter, new pleadings were filed.
The second amended complaint in the case at bar prays, among other things, for the annulment of the sale in favor of Washington
Sycip and Betty Lee, and their subsequent conveyance in favor of Insular Development Co., Inc., in so far as the three (3) lots owned
by the plaintiff partnership are concerned. The answer averred the validity of the sale by Kong Chai Pin as successor partner, in lieu of
the late Tan Sin An. After hearing, the complaint was dismissed by the lower court in its decision dated October 30, 1956; hence, this
appeal taken directly to us by the plaintiffs, as the amount involved is more than P200,000.00. Plaintiffs-appellants assign as errors
that
I The lower court erred in holding that Kong Chai Pin became the managing partner of the partnership upon the death of
her husband, Tan Sin An, by virtue of the articles of Partnership executed between Tan Sin An and Antonio Goquiolay, and
the general power of attorney granted by Antonio Goquiolay.
II The lower court erred in holding that Kong Chai Pin could act alone as sole managing partner in view of the minority of
the other heirs.
III The lower court erred in holding that Kong Chai Pin was the only heir qualified to act as managing partner.
IV The lower court erred in holding that Kong Chai Pin had authority to sell the partnership properties by virtue of the
articles of partnership and the general power of attorney granted to Tan Sin An in order to pay the partnership indebtedness.
V The lower court erred in finding that the partnership did not pay its obligation to the Banco Hipotecario.
VI The lower court erred in holding that the consent of Antonio Goquiolay was not necessary to consummate the sale of
the partnership properties.
VII The lower court erred in finding that Kong Chai Pin managed the business of the partnership after the death of her
husband, and that Antonio Goquiolay knew it.
VIII The lower court erred in holding that the failure of Antonio Goquiolay to oppose the management of the partnership
by Kong Chai Pin estops him now from attacking the validity of the sale of the partnership properties.
IX The lower court erred in holding that the buyers of the partnership properties acted in good faith.
X The lower court erred in holding that the sale was not fraudulent against the partnership and Antonio Goquiolay.
XI The lower court erred in holding that the sale was not only necessary but beneficial to the partnership.
XII The lower court erred in dismissing the complaint and in ordering Antonio Goquiolay to pay the costs of suit.
There is a merit in the contention that the lower court erred in holding that the widow, Kong Chai Pin, succeeded her husband, Tan Sin
An, in the sole management of the partnership, upon the latter's death. While, as we previously stated in our narration of facts, the
Articles of Co-Partnership and the power of attorney executed by Antonio Goquiolay, conferred upon Tan Sin An the exclusive
management of the business, such power, premised as it is upon trust and confidence, was a mere personal right that terminated upon

Tan's demise. The provision in the articles 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 related to the succession in the proprietary interest of each partner. The covenant that Antonio Goquiolay
shall have no voice or participation in the management of the partnership, being a limitation upon his right as a general partner, must
be held coextensive only with Tan's right to manage the affairs, the contrary not being clearly apparent.
Upon the other hand, 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 Tan's demise. The validity of like clauses in partnership agreements is
expressly sanctioned under Article 222 of the Code of Commerce.2
Minority of the heirs is not a bar to the application of that clause in the articles of co-partnership (2 Vivante, Tratado de Derecho
Mercantil, 493; Planiol, Traite Elementaire de Droit Civil, English translation by the Louisiana State Law Institute, Vol. 2, Pt. 2, p.
177).
Appellants argue, however, that since the "new" members' liability in the partnership was limited merely to the value of the share or
estate left by the deceased Tan Sin An, they became no more than limited partners and, as such, were disqualified from the
management of the business under Article 148 of the Code of Commerce. Although ordinarily, this effect follows from the continuance
of the heirs in the partnership,3 it was not so with respect to the widow Kong Chai Pin, who, by her affirmative actions, manifested her
intent to be bound by the partnership agreement not only as a limited but as a general partner. Thus, she managed and retained
possession of the partnership properties and was admittedly deriving income therefrom up to and until the same were sold to
Washington Sycip and Betty Lee. In fact, by executing the deed of sale of the parcels of land in dispute in the name of the partnership,
she was acting no less than as a managing partner. Having thus preferred to act as such, she could be held liable for the partnership
debts and liabilities as a general partner, beyond what she might have derived only from the estate of her deceased husband. By
allowing her to retain control of the firm's property from 1942 to 1949, plaintiff estopped himself to deny her legal representation of
the partnership, with the power to bind it by the proper contracts.
The question now arises as to whether or not the consent of the other partners was necessary to perfect the sale of the partnership
properties to Washington Sycip and Betty Lee. The answer is, we believe, in the negative. 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, specially those partners acting with ostensible authority. And so, we held in one case:
. . . Third persons, like the plaintiff, are not bound in entering into a contract with any of the two partners, to ascertain
whether or not this partner with whom the transaction is made has the consent of the other partner. The public need not make
inquiries as to the agreements had between the partners. Its knowledge is enough that it is contracting with the partnership
which is represented by one of the managing partners.
"There is a general presumption that each individual partner is an agent for the firm and that he has authority to bind the firm
in carrying on the partnership transactions." [Mills vs. Riggle, 112 Pac., 617]
"The presumption is sufficient to permit third persons to hold the firm liable on transactions entered into by one of the
members of the firm acting apparently in its behalf and within the scope of his authority." [Le Royvs. Johnson, 7 U.S. Law,
Ed., 391] (George Litton vs. Hill & Ceron, et al., 67 Phil., 513-514).
We are not unaware of the provision of Article 129 of the Code of Commerce to the effect that
If the management of the general partnership has not been limited by special agreement to any of the members, all shall have
the power to take part in the direction and management of the common business, and the members present shall come to an
agreement for all contracts or obligations which may concern the association. (Emphasis supplied)
but this obligation is one imposed by law on the partners among themselves, that does not necessarily affect the validity of the acts of
a partner, while acting within the scope of the ordinary course of business of the partnership, as regards third persons without notice.
The latter may rightfully assume that the contracting partner was duly authorized to contract for and in behalf of the firm and that,
furthermore, he would not ordinarily act to the prejudice of his co-partners. The regular course of business procedure does not require
that each time a third person contracts with one of the managing partners, he should inquire as to the latter's authority to do so, or that
he should first ascertain whether or not the other partners had given their consent thereto. In fact, Article 130 of the same Code of
Commerce provides that even if a new obligation was contracted against the express will of one of the managing partners, "it shall not
be annulled for such reason, and it shall produce its effects without prejudice to the responsibility of the member or members who
contracted it, for the damages they may have caused to the common fund."
Cesar Vivante (2 Tratado de Derecho Mercantil, pp. 114-115) points out:
367. Primera hipotesis. A falta de pactos especiales, la facultad de administrar corresponde a cada socio personalmente.
No hay que esperar ciertamente concordia con tantas cabezas, y para cuando no vayan de acuerdo, la disciplina del Codigo no
ofrece un sistema eficaz que evite los inconvenientes. Pero, ante el silencio del contrato, debia quiza el legislador privar de la
administracion a uno de los socios en beneficio del otro? Seria una arbitrariedad. Debera quiza declarar nula la Sociedad que
no haya elegido Administrador? El remedio seria peor que el mal. Debera, tal vez, pretender que todos los socios concurran
en todo acto de la Sociedad? Pero este concurso de todos habria reducido a la impotencia la administracion, que es asunto d
todos los dias y de todas horas. Hubieran sido disposiciones menos oportunas que lo adoptado por el Codigo, el cual se confia
al espiritu de reciproca confianza que deberia animar la colaboracion de los socios, y en la ley inflexible de responsabilidad
que implica comunidad en los intereses de los mismos.
En esta hipotesis, cada socio puede ejercer todos los negocios comprendidos en el contrato social sin dar de ello noticia a los
otros, porque cada uno de ellos ejerce la administracion en la totalidad de sus relaciones, salvo su responsabilidad en el caso
de una administracion culpable. Si debiera dar noticia, el beneficio de su simultania actividad, frecuentemente distribuida en
lugares y en tiempos diferentes, se echaria a perder. Se objetara el que de esta forma, el derecho de oposicion de cada uno de
los socios puede quedar frustrado. Pero se puede contestar que este derecho de oposicion concedido por la ley como un
remedio excepcional, debe subordinarse al derecho de ejercer el oficio de Administrador, que el Codigo concede sin limite:
"se presume que los socios se han concedido reciprocamente la facultad de administrar uno para otro." Se haria precipitar
esta hipotesis en la otra de una administracion colectiva (art. 1,721, Codigo Civil) y se acabaria con pedir el consentimiento, a
lo menos tacito, de todos los socios lo que el Codigo excluye ........, si se obligase al socio Administrador a dar noticia
previa del negocio a los otros, a fin de que pudieran oponerse si no consintieran.
Commenting on the same subject, Gay de Montella (Codigo de Comercio, Tomo II, 147-148) opines:
Para obligar a las Compaias enfrente de terceros (art. 128 del Codigo), no es bastante que los actos y contratos hayan sido
ejecutados por un socio o varios en nombre colectivo, sino que es preciso el concurso de estos dos elementos, uno, que el
socio o socios tengan reconocida la facultad de administrar la Compaia, y otro, que el acto o contrato haya sido ejecutado en
nombre de la Sociedad y usando de su firma social. Asi se que toda obligacion contraida bajo la razon social, se presume
contraida por la Compaia. Esta presunion es impuesta por motivos de necesidad practica. El tercero no puede cada vez que

trata con la Compaia, inquirir si realmente el negocio concierne a la Sociedad. La presuncion es juris tantum y no juris et de
jure, de modo que si el gerente suscribe bajo la razon social una obligacion que no interesa a la Sociedad, este podra rechazar
la accion del tercero probando que el acreedor conocia que la obligacion no tenia ninguna relacion con ella. Si tales actos y
contratos no comportasen la concurrencia de ambos elementos, seria nulos y podria decretarse la responsabilidad civil o penal
contra sus autores.
En el caso que tales actos o contratos hayan sido tacitamente aprobados por la Compaia, o contabilizados en sus libros, si el
acto o contrato ha sido convalidado sin protesta y se trata de acto o contrato que ha producido beneficio social, tendria plena
validez, aun cuando le faltase algunos o ambos de aquellos requisitos antes sealados.
Cuando los Estatutos o la escritura social no contienen ninguna clausula relativa al nombramiento o designacion de uno o
mas de un socio para administrar la Compaia (art. 129 del Codigo) todos tienen por un igual el derecho de concurir a la
decision y manejo de los negocios comunes. . . .
Although the partnership under consideration is a commercial partnership and, therefore, to be governed by the Code of Commerce,
the provisions of the old Civil Code may give us some light on the right of one partner to bind the partnership. States Art. 1695
thereof:
Should no agreement have been made with respect to the form of management, the following rules shall be observed:
1. All the partners shall be considered agents, and whatever any one of the may do individually shall bind the partnership; but
each one may oppose any act of the others before it has become legally binding.
The records fail to disclose that appellant Goquiolay made any opposition to the sale of the partnership realty to Washington Z. Sycip
and Betty Lee; on the contrary, it appears that he (Goquiolay) only interposed his objections after the deed of conveyance was
executed and approved by the probate court, and, consequently, his opposition came too late to be effective.
Appellants assails the correctness of the amounts paid for the account of the partnership as found by the trial court. This question,
however, need not be resolved here, as in the deed of conveyance executed by Kong Chai Pin, the purchasers Washington Sycip and
Betty Lee assumed, as part consideration of the purchase, the full claims of the two creditors, Sing Yee and Cuan Co., Inc. and Yutivo
Sons Hardware Co.
Appellants also question the validity of the sale covering the entire firm realty, on the ground that it, in effect, threw the partnership
into dissolution, which requires consent of all the partners. This view is untenable. That the partnership was left without the real
property it originally had will not work its dissolution, since the firm was not organized to exploit these precise lots but to engage in
buying and selling real estate, and "in general real estate agency and brokerage business". Incidentally, it is to be noted that the
payment of the solidary obligation of both the partnership and the late Tan Sin An, leaves open the question of accounting and
contribution between the co-debtors, that should be ventilated separately.
Lastly, appellants point out that the sale of the partnership properties was only a fraudulent device by the appellees, with the
connivance of Kong Chai Pin, to ease out Antonio Goquiolay from the partnership. The "devise", according to the appellants, started
way back sometime in 1945, when one Yu Khe Thai sounded out Antonio Goquiolay on the possibility of selling his share in the
partnership; and upon his refusal to sell, was followed by the filing of the claims of Yutivo Sons Hardware Co. and Sing Yee and Cuan
Co., Inc. in the intestate estate proceedings of Tan Sin An. As creditors of Tan Sin An and the plaintiff partnership (whose liability was
alleged to be joint and several), Yutivo Sons Hardware Co., and Sing Yee Cuan Co., Inc. had every right to file their claims in the
intestate proceedings. The denial of the claims at first by Kong Chai Pin ( for lack of sufficient knowledge) negatives any conspiracy
on her part in the alleged fraudulent scheme, even if she subsequently decided to admit their validity after studying the claims and
finding it best to admit the same. It may not be amiss to remark that the probate court approved the questioned claims.
There is complete failure of proof, moreover, that the price for which the properties were sold was unreasonably low, or in any way
unfair, since appellants presented no evidence of the market value of the lots as of the time of their sale to appellees Sycip and Lee.
The alleged value of P31,056.58 in May of 1955 is no proof of the market value in 1949, specially because in the interval, the new
owners appear to have converted the land into a subdivision, which they could not do without opening roads and otherwise improving
the property at their own expense. Upon the other hand, Kong Chai Pin hardly had any choice but to execute the questioned sale, as it
appears that the partnership had neither cash nor other properties with which to pay its obligations. Anyway, we cannot consider
seriously the inferences freely indulged in by the appellants as allegedly indicating fraud in the questioned transactions, leading to the
conveyance of the lots in dispute to the appellee Insular Development Co., Inc.
Wherefore, finding no reversible error in the appealed judgment, we affirm the same, with costs against appellant Antonio Goquiolay.
Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia, Barrera, and Gutierrez David, JJ.,concur.
RESOLUTION
December 10, 1963
REYES, J. B. L., J.:
The matter now pending is the appellant's motion for reconsideration of our main decision, wherein we have upheld the validity of the
sale of the lands owned by the partnership Goquiolay & Tan Sin An, made in 1949 by the widow of the managing partner, Tan Sin An
(executed in her dual capacity of Administratrix of her husband's estate and as partner, in lieu of the husband), in favor of buyers
Washington Sycip and Betty Lee for the following consideration:
Cash paid
P37,000.00
Debts assumed by purchase:
To Yutivo

62,415.91

To Sing Yee Cuan & Co.

54,310.13

TOTAL
P153,726.04
Appellant Goquiolay, in his motion for reconsideration, insists that, contrary to our holding, Kong Chai Pin, widow of the deceased
partner Tan Sin An, never became more than a limited partner, incapacitated by law to manage the affairs of the partnership; that the
testimony of her witnesses Young and Lim belies that she took over 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 appellant of his share in the properties sold.
Three things must be always held in mind in the discussion of this motion to reconsider, being basic and beyond controversy:
(a) That we are dealing here with the transfer of partnership property by one partner, acting in behalf of the firm, to a stranger. There
is no question between partners inter se, and this aspects of the case was expressly reserved in the main decision of 26 July 1960;
(b) That the partnership was expressly organized "to engage in real estate business, either by buying and sellingreal estate". The
Article of co-partnership, in fact, expressly provided that:
IV. The object and purpose of the co-partnership are as follows:

1. To engage in real estate business, either by buying and selling real estates; to subdivide real estates into lots for the purpose
of leasing and selling them.;
(c) That the properties sold were not part of the contributed capital (which was in cash) but land precisely acquired to be sold,
although subject a mortgage in favor of the original owners, from whom the partnership had acquired them.
With these points firmly in mind, let us turn to the points insisted upon by appellant.
It is first averred that there is "not one iota evidence" that Kong Chai Pin managed and retained possession of the partnership
properties. Suffice it to point out that appellant Goquiolay himself admitted that
. . . Mr. Yu Eng Lai asked me if I can just let Mrs. Kong Chai Pin continue to manage the properties (as) she had no other
means of income. Then I said, because I wanted to help Mrs. Kong Chai Pin, she could just do it and besides I am not
interested in agricultural lands. I allowed her to take care of the properties in order to help her and because I believe in God
and I wanted to help her.
Q. So the answer to my question is you did not take any steps?
A. I did not.
Q. And this conversation which you had with Mrs. Yu Eng Lai was few months after 1945?
A. In the year 1945. (Emphasis supplied)
The appellant subsequently ratified this testimony in his deposition of 30 June 1956, page 8-9, wherein he sated:
that plantation was being occupied at that time by the widow, Mrs. Tan Sin An, and of course they are receiving quite a lot of
benefit from that plantation.
Discarding the self-serving expressions, these admissions of Goquiolay are certainly entitled to greater weight than those of Hernando
Young and Rufino Lim, having been made against the party's own interest.
Moreover, the appellant's reference to the testimony of Hernando Young, that the witness found the properties "abandoned and
undeveloped", omits to mention that said part of the testimony started with the question:
Now, you said that about 1942 or 1943 you returned to Davao. Did you meet Mrs. Kong Chai Pin there in Davao at that
time?
Similarly, the testimony of Rufino Lim, to the effect that the properties of the partnership were undeveloped, and the family of the
widow (Kong Chai Pin) did not receive any income from the partnership properties, was given in answer to the question:
According to Mr. Goquiolay, during the Japanese occupation Tan Sin An and his family lived on the plantation of the
partnership and derived their subsistence from that plantation. What can you say to that? (Dep. 19 July 1956, p. 8)
And also
What can you say so to the development of these other properties of the partnership which you saw during the occupation?"
(Dep., p. 13, Emphasis supplied)
to which witness gave the following answer:
I saw the properties in Mamay still undeveloped. The third property which is in Tigatto is about eleven (11) hectares and
planted with abaca seedlings planted by Mr. Sin An. When I went there with Hernando Youngwe saw all the abaca
destroyed. The place was occupied by the Japanese Army. They planted camotes and vegetables to feed the Japanese Army.
Of course they never paid any money to Tan Sin An or his family. (Dep., Lim. pp. 13-14.) (Emphasis supplied)
Plainly, Both Young and Lim's testimonies do not belie, or contradict, Goquiolay's admission that he told Mr. Yu Eng Lai that the
widow "could just do it" (i e., continue to manage the properties. Witnesses Lim and Young referred to the period of Japanese
occupation; but Goquiolay's authority was, in fact, given to the widow in 1945,after the occupation.
Again, the disputed sale by the widow took place in 1949. That Kong Chai Pin carried out no acts of management during the Japanese
occupation (1942-1944) does not mean that she did not do so from 1945 to 1949.
We thus fine that Goquiolay did not merely rely on reports from Lim and Young; he actually manifested his willingness that the widow
should manage the partnership properties. Whether or not she complied with this authority is a question between her and the appellant,
and is not here involved. But the authority was given, and she did have it when she made the questioned sale, because it has never
revoked.
It is argued that the authority given by Goquiolay to the widow Kong Chai Pin was only to manage the property, and that it did not
include the power to alienate, citing Article 1713 of the Civil Code of 1889. What this argument overlooks is that the widow was not a
mere agent, because she had become a partner upon her husband's death, as expressly provided by the articles of co-partnership. Even
more, granting that by succession to her husband, Tan Sin An, the widow only a became the limited partner, Goquiolay's authorization
to manage the partnership property was proof that he considered and recognized her has general partner, at least since 1945. The
reason is plain: Under the law (Article 148, last paragraph, Code of Commerce), appellant could not empower the widow, if she were
only a limited partner, to administer the properties of the firm, even as a mere agent:
Limited partners may not perform any act of administration with respect to the interests of the co-partnership, not even in the
capacity agents of the managing partners.(Emphasis supplied)
By seeking authority to manage partnership property, Tan Sin An's widow showed that she desired to be considered a general partner.
By authorizing the widow to manage partnership property (which a limited partner could not be authorized to do), Goquiolay
recognized her as such partner, and is now in estoppel to deny her position as a general partner, with authority to administer and
alienate partnership property.
Besides, as we pointed out in our main decision, the heir ordinarily (and we did not say "necessarily") becomes a limited partner for
his own protection, because he would normally prefer to avoid any liability in excess of the value of the estate inherited so as not to
jeopardize his personal assets. But this statutory limitation of responsibility being designed to protect the heir, the latter may disregard
it and instead elect to become a collective or general partner, with all the rights and privileges of one, and answering for the debts of
the firm not only with the inheritance bud also with the heir's personal fortune. This choice pertains exclusively to the heir, and does
not require the assent of the surviving partner.
It must be remembered that the articles of co-partnership here involved expressly stipulated that:
In that event of the death of any of the partners at any time before the expiration of said term, the co-partnership shall not be
dissolved but will have to be continued and the deceased partner shall be represented by his heirs or assigns in said copartnership" (Art. XII, Articles of Co-Partnership).
The Articles did not provide that the heirs of the deceased would be merely limited partner; on the contrary they expressly stipulated
that in case of death of either partner "the co-partnership ... will have to be continued" with the heirs or assigns. It certainly could not
be continued if it were to be converted from a general partnership into a limited partnership, since the difference between the two
kinds of associations is fundamental; and specially because the conversion into a limited association would leave the heirs of the
deceased partner without a share in the management. Hence, the contractual stipulation does actually contemplate that the heirs would
becomegeneral partners rather than limited ones.

Of course, the stipulation would not bind the heirs of the deceased partner should they refuse to assume personal and unlimited
responsibility for the obligations of the firm. The heirs, in other words, can not be compelled to become general partners against their
wishes. But because they are not so compellable, it does not legitimately follow that they may not voluntarily choose to become
general partners, waiving the protective mantle of the general laws of succession. And in the latter event, it is pointless to discuss the
legality of any conversion of a limited partner into a general one. The heir never was a limited partner, but chose to be, and became, a
general partner right at the start.
It is immaterial that the heirs name was not included in the firm name, since no conversion of status is involved, and the articles of copartnership expressly contemplated the admission of the partner's heirs into the partnership.
It must never be overlooked that this case involves the rights acquired by strangers, and does not deal with the rights arising between
partners Goquiolay and the widow of Tan Sin An. The issues between the partners inter se were expressly reversed in our main
decision. Now, in determining what kind of partner the widow of partner Tan Sin An had elected to become, strangers had to be guided
by her conduct and actuations and those of appellant Goquiolay. Knowing that by law a limited partner is barred from managing the
partnership business or property, third parties (like the purchasers) who found the widow possessing and managing the firm property
with the acquiescense (or at least without apparent opposition) of the surviving partners were perfectly justified in assuming that she
had become a general partner, and, therefore, in negotiating with her as such a partner, having authority to act for, and in behalf of, the
firm. This belief, be it noted, was shared even by the probate court that approved the sale by the widow of the real property standing in
the partnership name. That belief was fostered by the very inaction of appellant Goquiolay. Note that for seven long years, from
partner Tan Sin An's death in 1942 to the sale in 1949, there was more than ample time for Goquiolay to take up the management of
these properties, or at least ascertain how its affairs stood. For seven years Goquiolay could have asserted his alleged rights, and by
suitable notice in the commercial registry could have warned strangers that they must deal with him alone, as sole general partner. But
he did nothing of the sort, because he was not interested (supra), and he did not even take steps to pay, or settle, the firm debts that
were overdue since before the outbreak of the last war. He did not even take steps, after Tan Sin An died, to cancel, or modify, the
provisions of the partnership articles that he (Goquiolay) would have no intervention in the management of the partnership. This
laches certainly contributed to confirm the view that the widow of Tan Sin An had, or was given, authority to manage and deal with
the firm's properties, apart from the presumption that a general partner dealing with partnership property has the requisite authority
from his co-partners (Litton vs. Hill and Ceron, et al., 67 Phil., 513; quoted in our main decision, p. 11).
The stipulation in the articles of partnership that any of the two managing partners may contract and sign in the name of the
partnership with the consent of the other, undoubtedly creates an obligation between the two partners, which consists in
asking the other's consent before contracting for the partnership. This obligation of course is not imposed upon a third
person who contracts with the partnership. Neither is it necessary for the third person to ascertain if the managing partner
with whom he contracts has previously obtained the consent of the other. A third person may and has a right to presume that
the partner with whom he contracts has, in the ordinary and natural course of business, the consent of his co-partner; for
otherwise he would not enter into the contract. The third person would naturally not presume that the partner with whom he
enters into the transaction is violating the articles of partnership, but on the contrary, is acting in accordance therewith. And
this finds support in the legal presumption that the ordinary course of business has been followed (No. 18, section 334, Code
of Civil Procedure), and that the law has been obeyed (No. 31, section 334). This last presumption is equally applicable to
contracts which have the force of law between the parties. (Litton vs. Hill & Ceron, et al., 67 Phil., 509, 516) (Emphasis
supplied)
It is next urged that the widow, even as a partner, had no authority to sell the real estate of the firm. This argument is lamentably
superficial because it fails to differentiate between real estate acquired and held as stock-in-tradeand real state held merely as business
site (Vivante's "taller o banco social") for the partnership. Where the partnership business is to deal in merchandise and goods, i.e.,
movable property, the sale of its real property (immovables) is not within the ordinary powers of a partner, because it is not in line
with the normal business of the firm. But where the express and avowed purpose of the partnership is to buy and sell real estate (as in
the present case), the immovables thus acquired by the firm 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. This distinction is supported by the opinion of Gay de
Montella1, in the very passage quoted in the appellant's motion for reconsideration:
La enajenacion puede entrar en las facultades del gerente: cuando es conforme a los fines sociales. Pero esta facultad de
enajenar limitada a las ventas conforme a los fines sociales, viene limitada a los objetos de comecio o a los productos de la
fabrica para explotacion de los cuales se ha constituido la Sociedad.Ocurrira una cosa parecida cuando el objeto de la
Sociedad fuese la compra y venta de inmuebles, en cuyo caso el gerente estaria facultado para otorgar las ventas que fuere
necesario. (Montella) (Emphasis supplied)
The same rule obtains in American law.
In Rosen vs. Rosen, 212 N. Y. Supp. 405, 406, it was held:
a partnership to deal in real estate may be created and either partner has the legal right to sell the firm real estate
In Chester vs. Dickerson, 54 N. Y. 1, 13 Am. Rep. 550:
And hence, when the partnership business is to deal in real estate, one partner has ample power, as a general agent of the
firm, to enter into an executory contract for the sale of real estate.
And in Rovelsky vs. Brown, 92 Ala. 522, 9 South 182, 25 Am. St., Rep. 83:
If the several partners engaged in the business of buying and selling real estate can not bind the firm by purchases or sales of
such property made in the regular course of business, then they are incapable of exercising the essential rights and powers of
general partners and their association is not really a partnership at all, but a several agency.
Since the sale by the widow was in conformity with the express objective of the partnership, "to engage * * * in buying
and selling real estate" (Art IV, No. 1, Articles of Copartnership), it can not be maintained that the sale was made in excess of her
powers as general partner.
Considerable stress is laid by appellant in the ruling of the Supreme Court of Ohio in McGrath, et al., vs. Cowen, et al., 49 N. E., 338.
But the facts of that case are vastly different from the one before us. In the McGrath case, the Court expressly found that:
The firm was then, and for some time had been, insolvent, in the sense that its property was insufficient to pay its debts,
though it still had good credit, and was actively engaged in the prosecution of its business. On that day, which was Saturday,
the plaintiff caused to be prepared, ready for execution, the four chattel mortgages in question, which cover all the tangible
property then belonging to the firm, including the counters, shelving, and other furnishings and fixtures necessary for, and
used in carrying on, its business, and signed the same in this form: "In witness whereof, the said Cowen & McGrath, a firm,
and Owen McGrath, surviving partner of said firm, and Owen McGrath, individually, have here-unto set their hands, this
20th day of May, A. D. 1893. Cowen & McGrath, by Owen McGrath. Owen McGrath, Surviving partner of Cowen &
McGrath. Owen McGrath" At the same time, the plaintiff had prepared, ready for filing, the petition for the dissolution of the
partnership and appointment of a receiver, which he subsequently filed, as hereinafter stated. On the day the mortgages were

signed, they were placed in the hands of the mortgagees, which was the first intimation to them that there was any intention
to make then. At that timenone of the claims secured by the mortgages were due, except, it may be, a small part of one of
them, andnone of the creditors to whom the mortgages were made had requested security, or were pressing for the payment
of their debts. ... The mortgages appear to be without a sufficient condition of defeasance, and contain a stipulation
authorizing the mortgagees to take immediate possession of the property, which they did as soon as the mortgages were filed,
through the attorney who then represented them, as well as the plaintiff; and the stores were at once closed, and possession
delivered by them to the receiver appointed upon the filing of the petition. The avowed purpose of the plaintiff in the course
pursued by him, was to terminate the partnership, place its property beyond the control of the firm, and insure the preference
of the mortgages, all of which was known to them at the time: ... . (Cas cit., p. 343, Emphasis supplied)
It is natural that from these facts the Supreme Court of Ohio should draw the conclusion that conveyances were made with intent to
terminate the partnership, and that they were not within the powers of McGrath as partner. But there is no similarly between those acts
and the sale by the widow of Tan Sin An. In the McGrath case, the sale included even the fixtures used in the business, in our case, the
lands sold were those acquired to be sold. In the McGrath case, none of the creditors were pressing for payment; in our case, the
creditors had been unpaid for more than seven years, and their claims had been approved by the probate court for payment. In the
McGrath case, the partnership received nothing beyond the discharge of its debts; in the present case, not only were its debts assumed
by the buyers, but the latter paid, in addition, P37,000.00 in cash to the widow, to the profit of the partnership. Clearly, the McGrath
ruling is not applicable.
We will now turn to the question to fraud. No direct evidence of it exists; but appellant points out, as indicia thereof, the allegedly low
price paid for the property, and the relationship between the buyers, the creditors of the partnership, and the widow of Tan Sin An.
First, as to the price: As already noted, this property was actually sold for a total of P153,726.04, of which P37,000.00 was in cash,
and the rest in partnership debts assumed by the purchaser. These debts (P62,415.91 to Yutivo, and P54,310.13 to Sing Yee Cuan &
Co.) are not questioned; they were approved by the Court, and its approval is now final. The claims were, in fact, for the balance on
the original purchase price of the land sold (due first to La Urbana, later to the Banco Hipotecario) plus accrued interests and taxes,
redeemed by the two creditors-claimants. To show that the price was inadequate, appellant relies on the testimony of the realtor Mata,
who in 1955, six years after the sale in question, asserted that the land was worth P312,000.00. Taking into account the continued rise
of real estate values since liberation, and the fact that the sale in question was practically a forced sale because the partnership had no
other means to pay its legitimate debts, this evidence certainly does not show such "gross inadequacy" as to justify rescission of the
sale. If at the time of the sale (1949 the price of P153,726.04 was really low, how is it that appellant was not able to raise the amount,
even if the creditor's representative, Yu Khe Thai, had already warned him four years before (1946) that the creditors wanted their
money back, as they were justly entitled to?
It is argued that the land could have been mortgaged to raise the sum needed to discharge the debts. But the lands were already
mortgaged, and had been mortgaged since 1940, first to La Urbana, and then to the Banco Hipotecario. Was it reasonable to expect
that other persons would loan money to the partnership when it was unable even to pay the taxes on the property, and the interest on
the principal since 1940? If it had been possible to find lenders willing to take a chance on such a bad financial record, would not
Goquiolay have taken advantage of it? But the fact is clear on the record that since liberation until 1949 Goquiolay never lifted a
finger to discharge the debts of the partnership. Is he entitled now to cry fraud after the debts were discharged with no help from him?
With regard to the relationship between the parties, suffice it to say that the Supreme Court has ruled that relationship alone is not a
badge of fraud (Oria Hnos. vs. McMicking, 21 Phil., 243; also Hermandad de Smo. Nombre de Jesus vs. Sanchez, 40 Off. Gaz., 1685).
There is no evidence that the original buyers, Washington Sycip and Betty Lee, were without independent means to purchase the
property. That the Yutivos should be willing to extend credit to them, and not to appellant, is neither illegal nor immoral; at the very
least, these buyers did not have a record of inveterate defaults like the partnership "Tan Sin An & Goquiolay".
Appellant seeks to create the impression that he was the victim of a conspiracy between the Yutivo firm and their component
members. But no proof is adduced. If he was such a victim, he could have easily defeated the conspirators by raising money and
paying off the firm's debts between 1945 and 1949; but he did; he did not even care to look for a purchaser of the partnership assets.
Were it true that the conspiracy to defraud him arose (as he claims) because of his refusal to sell the lands when in 1945 Yu Khe Thai
asked him to do so, it is certainly strange that the conspirators should wait 4 years, until 1949, to have the sale effected by the widow
of Tan Sin An, and that the sale should have been routed through the probate court taking cognizance of Tan Sin An's estate, all of
which increased the risk that the supposed fraud should be detected.
Neither was there any anomaly in the filing of the claims of Yutivo and Sing Yee Cuan & Co., (as subrogees of the Banco Hipotecario)
in proceedings for the settlement of the estate of Tan Sin An. This for two reasons: First, Tan Sin An and the partnership "Tan Sin An
& Goquiolay" were solidary (joint and several) debtors (Exhibit "N" mortgage to the Banco Hipotecario), and Rule 87, section 6, is to
the effect that:
Where the obligation of the decedent is joint and several with another debtor, the claim shall be filed against the decedent as
if he were the only debtor, without prejudice to the right of the estate to recover contribution from the other debtor. (Emphasis
supplied)
Secondly, the solidary obligation was guaranteed by a mortgage on the properties of the partnership and those of Tan Sin An
personally, and a mortgage in indivisible, in the sense that each and every parcel under mortgage answers for the totality of the debt
(Civ. Code of 1889, Article 1860; New Civil Code, Art. 2089).
A final and conclusive consideration. The fraud charged not being one used to obtain a party's consent to a contract (i.e., not being
deceit or dolus in contrahendo), if there is fraud at all, it can only be a fraud of creditorsthat gives rise to a rescission of the offending
contract. But by express provision of law (Article 1294, Civil Code of 1889; Article 1383, New Civil Code), "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". Since there is no allegation, or evidence, that Goquiolay can not obtain reparation from the widow and heirs of Tan Sin An, the
present suit to rescind the sale in question is not maintenable, even if the fraud charged actually did exist.
Premises considered, the motion for reconsideration is denied.
Bengzon, C. J., Padilla, Concepcion, Barrera, and Dizon, JJ., concur.
Separate Opinions
BAUTISTA ANGELO, J., dissenting:
This is an appeal from a decision of the Court of First Instance of Davao dismissing the complaint filed by Antonio C. Goquiolay, et
al., seeking to annul the sale made by Kong Chai Pin of three parcels of land to Washington Z. Sycip and Betty Y. Lee on the ground
that it was executed without proper authority and under fraudulent circumstances. In a decision rendered on July 26, 1960, we
affirmed this decision although on grounds different from those on which the latter is predicated. The case is once more before us on a
motion for reconsideration filed by appellants raising both questions of fact and of law.

On May 29, 1940, Tan Sin An and Antonio C. Goquiolay executed in Davao City a commercial partnership for a period of ten years
with a capital of P30,000.00 of which Goquiolay contributed P18,000.00 representing 60% while Tan Sin An P12,000.00 representing
40%. The business of the partnership was to engage in buying real estate properties for subdivision, resale and lease. The partnership
was duly registered, and among the conditions agreed upon in the partnership agreement which are material to this case are: (1) that
Tan Sin An would be the exclusive managing partner, and (2) in the event of the death of any of the partners the partnership would
continue, the deceased to be represented by his heirs. On May 31, 1940, Goquiolay executed a general power of attorney in favor of
Tan Sin An appointing the latter manager of the partnership and conferring upon him the usual powers of management.
On May 29, 1940, the partnership acquired three parcels of land known as Lots Nos. 526, 441 and 521 of the cadastral survey of
Davao, the only assets of the partnership, with the capital originally invested, financing the balance of the purchase price with a
mortgage in favor of "La Urbana Sociedad Mutua de Construccion Prestamos" in the amount of P25,000.00 payable in ten years. On
the same date, Tan Sin An, in his individual capacity, acquired 46 parcels of land executing a mortgage thereon in favor of the same
company for the sum of P35,000.00. On September 25, 1940, these two mortgage obligations were consolidated and transferred to the
Banco Hipotecario de Filipinas and as a result Tan Sin An, in his individual capacity, and the partnership bound themselves to pay
jointly and severally the total amount of P52,282.80, with 8% annual interest thereon within the period of eight years mortgaging in
favor of said entity the 3 parcels of land belonging to the partnership to Tan Sin An.
Tan Sin An died on June 26, 1942 and was survived by his widow, defendant Kong Chai Pin, and four children, all of whom are
minors of tender age. On March 18, 1944, Kong Chai Pin was appointed administratrix of the intestate estate of Tan Sin An. And on
the same date, Sing, Yee and Cuan Co., Inc. paid to the Banco Hipotecario the remaining unpaid balance of the mortgage obligation of
the partnership amounting to P46,116.75 in Japanese currency.
Sometime in 1945, after the liberation of Manila, Yu Khe Thai, president and general manager of Yutivo Sons Hardware Co. and Sing,
Yee and Cuan Co., Inc., called for Goquiolay and the two had a conference in the office of the former during which he offered to buy
the interest of Goquiolay in the partnership. In 1948, Kong Chai Pin, the widow, sent her counsel, Atty. Dominador Zuo, to ask
Goquiolay to execute in her favor a power of attorney. Goquiolay refused both to sell his interest in the partnership as well as to
execute the power of attorney.
Having failed to get Goquiolay to sell his share in the partnership, Yutivo Sons Hardware Co., and Sing, Yee and Cuan Co., Inc. filed
in November, 1946 a claim each in the intestate proceedings of Tan Sin An for the sum of P84,705.48 and P66,529.91, respectively,
alleging that they represent obligations of both Tan Sin An and the partnership. After first denying any knowledge of the claims, Kong
Chai Pin, as administratrix, admitted later without qualification the two claims in an amended answer she filed on February 28, 1947.
The admission was predicated on the ground that she and the creditors were closely related by blood, affinity and business ties. On due
course, these two claims were approved by the court.
On March 29, 1949, more than two years after the approval of the claims, Kong Chai Pin filed a petition in the probate court to sell all
the properties of the partnership as well as some of the conjugal properties left by Tan Sin An for the purpose of paying the claims.
Following approval by the court of the petition for authority to sell, Kong Chai Pin, in her capacity as administratrix, and presuming to
act as managing partner of the partnership, executed on April 4, 1949 a deed of sale of the properties owned by Tan Sin An and by the
partnership in favor of Betty Y. Lee and Washington Z. Sycip in consideration of the payment to Kong Chai Pin of the sum of
P37,000.00, and the assumption by the buyers of the claims filed by Yutivo Sons Hardware Co. and Sing, Yee and Cuan Co., Inc. in
whose favor the buyers executed a mortgage on the properties purchased. Betty Y. Lee and Washington Z. Sycip subsequently
executed a deed of sale of the same properties in favor of their co-defendant Insular Development Company, Inc. It should be noted
that these transactions took place without the knowledge of Goquiolay and it is admitted that Betty Y. Lee and Washington Z. Sycip
bought the properties on behalf of the ultimate buyer, the Insular Development Company, Inc., with money given by the latter.
Upon learning of the sale of the partnership properties, Goquiolay filed on July 25, 1949 in the intestate proceedings a petition to set
aside the order of the court approving the sale. The court granted the petition. While the order was pending appeal in the Supreme
Court, Goquiolay filed the present case on January 15, 1953 seeking to nullify the sale as stated in the early part of this decision. In the
meantime, the Supreme Court remanded the original case to the probate court for rehearing due to lack of necessary parties.
The plaintiffs in their complaint challenged the authority of Kong Chai Pin to sell the partnership properties on the ground that she had
no authority to sell because even granting that she became a partner upon the death of Tan Sin An the power of attorney granted in
favor of the latter expired after his death.
Defendants, on the other hand, defended the validity of the sale on the theory that she succeeded to all the rights and prerogatives of
Tan Sin An as managing partner.
The trial court sustained the validity of the sale on the ground that under the provisions of the articles of partnership allowing the heirs
of the deceased partner to represent him in the partnership after hid death Kong Chai Pin became a managing partner, this being the
capacity held by Tan Sin An when he died.
In the decision rendered by this Court on July 26, 1960, we affirmed this decision but on different grounds, among which the salient
points are: (1) the power of attorney given by Goquiolay to Tan Sin An as manager of the partnership expired after his death; (2) his
widow Kong Chai Pin did not inherit the management of the partnership, it being a personal right; (3) as a general rule, the heirs of a
deceased general partner come into the partnership in the capacity only of limited partners; (4) Kong Chai Pin, however, became a
general partner because she exercised certain alleged acts of management; and (5) the sale being necessary to pay the obligations of
the partnership, she was therefore authorized to sell the partnership properties without the consent of Goquiolay under the principle of
estoppel, the buyers having the right to rely on her acts of management and to believe her to be in fact the managing partner.
Considering that some of the above findings of fact and conclusions of law are without legal or factual basis, appellants have in due
course filed a motion for reconsideration which because of the importance of the issues therein raised has been the subject of mature
deliberation.
In support of said motion, appellants advanced the following arguments:
1. If the conclusion of the Court is that heirs as a general rule enter the partnership as limited partners only, therefore Kong
Chai Pin, who must necessarily have entered the partnership as a limited partner originally, could have not chosen to be a
general partner by exercising the alleged acts of management, because under Article 148 of the Code of Commerce a limited
partner cannot intervene in the management of the partnership even if given a power of attorney by the general partners. An
Act prohibited by law cannot give rise to any right and is void under the express provisions of the Civil Code.
2. The buyers were not strangers to Kong Chai Pin, all of them being members of the Yu (Yutivo) family, the rest, members
of the law firm which handles the Yutivo interests and handled the papers of sale. They did not rely on the alleged acts of
management they believed (this was the opinion of their lawyers) that Kong Chai Pin succeeded her husband as a
managing partner and it was on this theory alone that they submitted the case in the lower court.
3. The alleged acts of management were denied and repudiated by the very witnesses presented by the defendants
themselves.

The arguments advanced by appellants are in our opinion well-taken and furnish sufficient basis to reconsider our decision if we want
to do justice to Antonio C. Goquiolay. And to justify this conclusion, it is enough that we lay stress on the following points: (1) there is
no sufficient factual basis to conclude that Kong Chai Pin executed acts of management to give her the character of general manager
of the partnership, or to serve as basis for estoppel that may benefit the purchasers of the partnership properties; (2) the alleged acts of
management, even if proven, could not give Kong Chai Pin the character of general manager for the same is contrary to law and wellknown authorities; (3) even if Kong Chai Pin acted as general manager she had no authority to sell the partnership properties as to
make it legal and valid; and (4) Kong Chai Pin had no necessity to sell the properties to pay the obligation of the partnership and if she
did so it was merely to favor the purchasers who were close relatives to the prejudice of Goquiolay.
1. This point is pivotal for if Kong Chai Pin did not execute the acts of management imputed to her our ruling we apparently gave
particular importance to the fact that it was Goquiolay himself who tried to prove the acts of management. Appellants, however, have
emphasized the fact, and with reason, that the appellees themselves are the ones who denied and refuted the so-called acts of
management imputed to Kong Chai Pin. To have a clear view of this factual situation, it becomes necessary that we analyze the
evidence of record.
Plaintiff Goquiolay, it is intimated, testified on cross-examination that he had a conversation with one Hernando Young in Manila in
the year 1945 who informed him that Kong Chai Pin "was attending to the properties and deriving some income therefrom and she
had no other means of livelihood except those properties and some rentals derived from the properties." He went on to say by way of
remark that she could continue doing this because he wanted to help her. On point that he emphasized was that he was "not interested
in agricultural lands."
On the other hand, defendants presented Hernando Young, the same person referred to by Goquiolay, who was a close friend of the
family of Kong Chai Pin, for the purpose of denying the testimony of Goquiolay. Young testified that in 1945 he was still in Davao,
and insisted no less than six times during his testimony that he was not in Manila in 1945, the year when he allegedly gave the
information to Goquiolay, stating that he arrived in Manila for the first time in 1947. He testified further that he had visited the
partnership properties during the period covered by the alleged information given by him to Goquiolay and that he found them
"abandoned and underdeveloped," and that Kong Chai Pin was not deriving any income from them.
The other witness for the defendants, Rufino Lim, also testified that he had seen the partnership properties and corroborated the
testimony of Hernando Young in all respects: "the properties in Mamay were underdeveloped, the shacks were destroyed in Tigato,
and the family of Kong Chai Pin did not receive any income from the partnership properties." He specifically rebutted the testimony
of Goquiolay in his deposition given on June 30, 1956 that Kong Chai Pin and her family were living in the partnership properties and
stated that the 'family never actually lived in the properties of the partnership even before the war or after the war."
It is unquestionable that Goquiolay was merely repeating an information given to him by a third person, Hernando Young he
stressed this point twice. A careful analysis of the substance of Goquiolay's testimony will show that he merely had no objection to
allowing Kong Chai Pin to continue attending to the properties in order to give her some means of livelihood, because, according to
the information given him by Hernando Young, which he assumed to be true, Kong Chai Pin had no other means of livelihood. But
certainly he made it very clear that he did not allow her to manage the partnership when he explained his reason for refusing to sign a
general power of attorney for Kong Chai Pin which her counsel, Atty. Zuo, brought with him to his house in 1948. He said:
. . . Then Mr. Yu Eng Lai told me that he brought with him Atty. Zuo and he asked me if I could execute a general power of
attorney for Mrs. Kong Chai Pin. Then I told Atty. Zuo what is the use of executing a general power of attorney for Mrs.
Kong Chai Pin when Mrs. Kong Chai Pin had already got that plantation for agricultural purposes, I said for agricultural
purposes she can use that plantation ... (T.s.n., p. 9, Hearing on May 5, 1955)
It must be noted that in his testimony Goquiolay was categorically stating his opposition to the management of the partnership by
Kong Chai Pin and carefully made the distinction that his conformity was for her to attend to the partnership properties in order to
give her merely a means of livelihood. It should be stated that the period covered by the testimony refers to the period of occupation
when living condition was difficult and precarious. And Atty. Zuo, it should also be stated, did not deny the statement of Goquiolay.
It can therefore be seen that the question as to whether Kong Chai Pin exercised certain acts of management of the partnership
properties is highly controverted. The most that we can say is that the alleged acts are doubtful more so when they are disputed by the
defendants themselves who later became the purchasers of the properties, and yet these alleged acts, if at all, only refer
to management of the properties and not to management of the partnership, which are two different things.
In resume, we may conclude that the sale of the partnership properties by Kong Chai Pin cannot be upheld on the ground of estoppel,
first, because the alleged acts of management have not been clearly proven; second, because the record clearly shows that the
defendants, or the buyers, were not misled nor did they rely on the acts of management, but instead they acted solely on the opinion of
their counsel, Atty. Quisumbing, to the effect that she succeeded her husband in the partnership as managing partner by operation of
law; and third, because the defendants are themselves estopped to invoke a defense which they tried to dispute and repudiate.
2. Assuming arguendo that the acts of management imputed to Kong Chai Pin are true, could such acts give her the character of
general manager of the partnership as we have concluded in our decision?
Out answer is in the negative because it is contrary to law and precedents. Garrigues, a well-known commentator, is clearly of the
opinion that mere acceptance of the inheritance does not make the heir of a general partner a general partner himself. He emphasized
that the heir must declare that he is entering the partnership as a general partner unless the deceased partner has made it an express
condition in his will that the heir accepts the condition of entering the partnership as a prerequisite of inheritance, in which case
acceptance of the inheritance is enough.1 But here Tan Sin An died intestate.
Now, could Kong Chai Pin be deemed to have declared her intention to become general partner by exercising acts of management? We
believe not, for, in consonance with out ruling that as a general rule the heirs of a deceased partner succeed as limited partners only by
operation of law, it is obvious that the heir, upon entering the partnership, must make a declaration of his character, otherwise he
should be deemed as having succeeded as limited partner by the mere acceptance of inheritance. And here Kong Chai Pin did not
make such declaration. Being then a limited partner upon the death of Tan Sin An by operation of law, the peremptory prohibition
contained in Article 1482 of the Code of Commerce became binding upon her and as a result she could not change her status by
violating its provisions not only under the general principle that prohibited acts cannot produce any legal effect, but also because under
the provisions of Article 1473 of the same Code she was precluded from acquiring more rights than those pertaining to her as a limited
partner. The alleged acts of management, therefore, did not give Kong Chai Pin the character of general manager to authorize her to
bind the partnership.
Assuming also arguendo that the alleged acts of management imputed to Kong Chai Pin gave her the character of a general partner,
could she sell the partnership properties without authority from the other partners?
Our answer is also in the negative in the light of the provisions of the articles of partnership and the pertinent provisions of the Code
of Commerce and the Civil Code. Thus, Article 129 of the Code of Commerce says:

If the management of the general partnership has not been limited by special agreement to any of the members, all shall have
the power to take part in the direction and management of the common business, and the members present shall come to an
agreement for all contracts or obligations which may concern the association.
And the pertinent portions of the Articles of partnership provides:
VII. The affairs of the co-partnership shall be managed exclusively by the managing partner or by his authorized agent, and it
is expressly stipulated that the managing partner may delegate the entire management of the affairs of the co-partnership by
irrevocable power of attorney to any person, firm or corporation he may select, upon such terms as regards compensation as
he may deem proper, and vest in such person, firm or corporation full power and authority, as the agent of the co-partnership
and in his name, place and stead to do anything for it or on his behalf which he as such managing partner might do or cause
to be done. (Page 23, Record on Appeal)
It would thus be seen that the powers of the managing partner are not defined either under the provisions of the Code of Commerce or
in the articles of partnership, a situation which, under Article 2 of the same Code, renders applicable herein the provisions of the Civil
Code, And since, according to well-known authorities, the relationship between a managing partner and the partnership is substantially
the same as that of the agent and his principal,4the extent of the power of Kong Chai Pin must, therefore, be determined under the
general principles governing agency. And, on this point, the law says that an agency created in general terms includes only acts of
administration, but with regard to the power to compromise, sell, mortgage, and other acts of strict ownership, an express power of
attorney is required.5 Here Kong Chai Pin did not have such power when she sold the properties of the partnership.
Of course, there is authority to the effect that a managing partner, even without express power of attorney, may perform acts affecting
ownership if the same are necessary to promote or accomplish a declared object of the partnership, but here the transaction is not for
this purpose. It was effected not to promote any avowed object of the partnership. 6 Rather, the sale was effected to pay an obligation of
the partnership by selling its real properties which Kong Chai Pin could not do without express authority. The authorities supporting
this view are overwhelming.
La enajenacion puede entrar en las facultades del gerente, cuando es conforme a los fines sociales. Pero esta facultad de
enajenar limitada a las ventas conforme a los fines sociales, viene limitada a los objetos de comercio, o los productos de la
fabrica para explotacion de los cuales se ha constituido la Sociedad. Ocurrira una cosa parecida cuando el objeto de la
Sociedad fuese la compra y venta de inmuebles, en cuyo caso el gerente estaria facultado para otorgar las ventas que fuere
necesario. Por el contrario, el gerente no tiene atribuciones para vender las instalaciones del comercio ni la fabrica, ni las
maquinarias, vehiculos de transporte, etc., que forman parte de la explotacion social. En todos estas casos, igualmente que si
tratase de la venta de una marca o procedimiento mecanico o quimico, etc., siendo actos de disposicion seria necesario
contar con la conformidad expresa de todos los socios. (R. Gay de Montella, id., pp. 223-224, Emphasis supplied)
Los poderes de los Administradores no tienen ante el silencio del contrato otros limites que los sealados por el objeto de la
Sociedad y, por consiguiente, pueden llevar a cabo todas las operaciones que sirven para aquel ejercicio, incluso cambiando
repetidas veces los propios acuerdos segun el interes convenido de la Sociedad. Pueden contratar y despedir a los empleados,
tomar en arriendo almacenas y tiendas, expedir cambiales, girarlas, avalarlas, dar en prenda o en hipoteca los bienes de la
sociedad y adquirir inmuebles destinados a su explotacion o al empleo estable de sus capitales. Pero no podran ejecutar los
actos que estan en contradiccion con la explotacion que les fue confiada no podran cambiar el objeto, el domicilio la razon
social; fundir a la Sociedad en otra; ceder la accion, y por tanto, el uso de la firma social a otro renunciar definitivamente el
ejercicio de uno de otro ramo comercio que se les haya confiado y enajenar o piqnorar el taller o el banco social excepto que
la venta o piqnoracion tengan por el objeto procurar los medios necesarios para la continuacion de la empresa social.
(Cesar Vivante, Tratado de Derecho Mercantil, pp. 124-125, Vol II, la. ed.; Emphasis supplied)
The act of one partner to bind the firm, must be necessary for the carrying on of its business. If all that can be said of it was
that it was convenient, or that it facilitated the transaction of the business of the firm, that is not sufficient, in the absence of
evidence of saction by other partners. Nor, it seems, will necessity itself be sufficient if it be an extraordinary necessity. What
is necessary for carrying on the business of the firm under ordinary circumstances and in the usual way, is the test. Lindl.
Partn. Sec. 126. While, within this rule, one member of a partnership may, in the usual and ordinary course of its business,
make a valid sale or pledge, by way of mortgage or otherwise, of all or part of its effects intended for sale, to a bona fide
purchaser or mortgage, without the consent of the other members of the firm, it is not within the scope of his implied
authority to make a final disposition of all of its effects, including those employed as the means of carrying on its business,
the object and effect of which is to immediately terminate the partnership, and place its property beyond its control. Such a
disposition, instead of being within the scope of the partnership business, or in the usual and ordinary way of carrying it on, is
necessarily subversive of the object of the partnership, and contrary to the presumed intention of the partnership in its
formation. (McGrath, et al. vs. Cowen, et al., 49 N.F. 338, 343; Emphasis supplied)
Since Kong Chai Pin sold the partnership properties not in line with the business of the partnership but to pay its obligation without
first obtaining the consent of the other partners, the sale is invalid being in excess of her authority.
4. Finally, the same under consideration was effected in a suspicious manner as may be gleaned from the following circumstances:
(a) The properties subject of the instant sale which consist of three parcels of land situated in the City of Davao have an area of 200
hectares more or less, or 2,000,000 square meters. These properties were purchased by the partnership for purposes of subdivision.
According to realtor Mata, who testified in court, these properties could command at the time he testified a value of not less than
P312,000.00, and according to Dalton Chen, manager of the firm which took over the administration, since the date of sale no
improvement was ever made thereon precisely because of this litigation. And yet, for said properties, aside from the sum of
P37,000.00 which was paid for the properties of the deceased and the partnership, only the paltry sum of P66,529.91 was paid as a
consideration therefor, of which the sum of P46,116.75 was even paid in Japanese currency.
(b) Considering the area of the properties Kong Chai Pin had no valid reason to sell them if her purpose was only to pay the
partnership's obligation. She could have negotiated a loan if she wanted to pay it by placing the properties as security, but preferred to
sell them even at such low prices because of her close relationship with the purchasers and creditors who conveniently organized a
partnership to exploit them, as may be seen from the following relationship of their pedigree:
KONG CHAI PIN, the administratrix, was a granddaughter of Jose P. Yutivo, founder of the defendant Yutivo Sons Hardware
Co. YUTIVO SONS HARDWARE CO, and SIN YEE CUAN CO, INC., alleged creditors, are owned by the heirs of Jose P.
Yutivo (Sing, Yee & Cuan are the three children of Jose). YU KHE THAI is a grandson of the same Jose P. Yutivo, and
president of the two alleged creditors. He is the acknowledged head of the Yu families. WASHINGTON Z. SYCIP, one of the
original buyers, is married to Ana Yu, a daughter of Yu Khe Thai, BETTY Y. LEE, the other original buyer is also a daughter
of Yu Khe Thai. The INSULAR DEVELOPMENT CO., the ultimate buyer, was organized for the specific purpose of buying
the partnership properties. Its incorporators were: Ana Yu and Betty V. Lee, Atty. Quisumbing and Salazar the lawyers who
studied the papers of sale and have been counsel for the Yutivo interests; Dalton Chen a brother-in-law of Yu Khe Thai and an

executive of Sing Yee & Cuan Co; Lillian Yu, daughter of Yu Eng Poh, an executive of Yutivo Sons Hardware, and Simeon
Daguiwag, a trusted employee of the Yutivos.
(c) Lastly, even since Tan Sin An died in 1942 the creditors, who were close relatives of Kong Chai Pin, have already conceived the
idea of possessing the lands for purposes of subdivision, excluding Goquiolay from their plan, and this is evident from the following
sequence of events:
Tan Sin An died in 1942 and intestate proceedings were opened in 1944. In 1946, the creditors of the partnership filed their
claim against the partnership in the intestate proceedings. The creditors studied ways and means of liquidating the obligation
of the partnership, leading to the formation of the defendant Insular Development Co., composed of members of the Yutivo
family and the counsel of record of the defendants, which subsequently bought the properties of the partnership and assumed
the obligation of the latter in favor of the creditors of the partnership, Yutivo Sons Hardware and Sing, Yee & Cuan, also of
the Yutivo family. The buyers took time to study the commercial potentialities of the partnership properties and their lawyers
carefully studied the document and other papers involved in the transaction. All these steps led finally to the sale of the three
partnership properties.
Upon the strength of the foregoing considerations, I vote to grant motion for reconsideration.
Labrador, Paredes, and Makalintal, JJ., concur.
Footnotes
1

In her capacity as administratrix of the intestate estate and as a managing partner of the plaintiff partnership (Exh. "AA-6").
"General and limited partnership shall furthermore be dissolved by reason of the following cases: (1) The death of one of
the general partners, if the partnership contract does not contain an express provision for the continuation of the heirs of the
deceased partner in the partnership or for the continuation of the partnership among the surviving partners". (See also Codigo
Civil, Manresa, Vol XI, pp. 423-424, 1950 ed.)
3
Gay de Montella, Tratado Practico de Sociedades Mercantiles, Vol. II, p. 289; Tratado de Derecho Mercantil, Vivante, Vol.
II, pp. 493-494.
RESOLUTION
2

______________________________________________________________________________________________________________________________________________________________________

Article 1819
SANTIAGO SYJUCO, INC.vs.HON. JOSE P. CASTRO, AS PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF
THE NATIONAL CAPITAL JUDICIAL REGION, BRANCH LXXXV, QUEZON CITY, THE CITY SHERIFF OF THE
CITY OF MANILA, THE CITY REGISTER OF DEEDS OF THE CITY OF MANILA, EUGENIO LIM, ARAMIS LIM,
MARIO LIM, PAULINO LIM, LORENZO LIM, NILA LIM and/ or THE PARTNERSHIP OF THE HEIRS OF HUGO LIM
and ATTORNEY PATERNO P. CANLAS
G.R. No. 70403 July 7, 1989

NARVASA, J.:
This case may well serve as a textbook example of how judicial processes, designed to promote the swift and efficient disposition of
disputes at law, can be so grossly abused and manipulated as to produce precisely the opposite result; how they can be utilized by
parties with small scruples to forestall for an unconscionably long time so essentially simple a matter as making the security given for
a just debt answer for its payment.
The records of the present proceedings and of two other cases already decided by this Court expose how indeed the routine procedure
of an extrajudicial foreclosure came by dint of brazen forum shopping and other devious maneuvering to grow into a veritable thicket
of litigation from which the mortgagee has been trying to extricate itself for the last twenty years.
Back in November 1964, Eugenio Lim, for and in his own behalf and as attorney-in-fact of his mother, the widow Maria Moreno (now
deceased) and of his brother Lorenzo, together with his other brothers, Aramis, Mario and Paulino, and his sister, Nila, all hereinafter
collectively called the Lims, borrowed from petitioner Santiago Syjuco, Inc. (hereinafter, Syjuco only) the sum of P800,000.00. The
loan was given on the security of a first mortgage on property registered in the names of said borrowers as owners in common under
Transfer Certificates of Title Numbered 75413 and 75415 of the Registry of Deeds of Manila. Thereafter additional loans on the same
security were obtained by the Lims from Syjuco, so that as of May 8, 1967, the aggregate of the loans stood at P2,460,000.00,
exclusive of interest, and the security had been augmented by bringing into the mortgage other property, also registered as owned pro
indiviso by the Lims under two titles: TCT Nos. 75416 and 75418 of the Manila Registry.
There is no dispute about these facts, nor about the additional circumstance that as stipulated in the mortgage deed the obligation
matured on November 8, 1967; that the Lims failed to pay it despite demands therefor; that Syjuco consequently caused extra-judicial
proceedings for the foreclosure of the mortgage to be commenced by the Sheriff of Manila; and that the latter scheduled the auction
sale of the mortgaged property on December 27, 1968. 1 The attempt to foreclose triggered off a legal battle that has dragged on for

more than twenty years now, fought through five (5) cases in the trial courts, 2 two (2) in the Court of Appeals, 3 and three (3) more in
this Court, 4 with the end only now in sight.
1. CIVIL CASE NO. 75180, CFI MANILA, BR.5; CA-G.R. NO. 00242-R; G.R. NO. L-34683
To stop the foreclosure, the Lims through Atty. Marcial G. Mendiola, who was later joined by Atty. Raul Correa filed Civil Case
No. 75180 on December 24,1968 in the Court of First Instance of Manila (Branch 5). In their complaint they alleged that their
mortgage was void, being usurious for stipulating interest of 23% on top of 11 % that they had been required to pay as "kickback." An
order restraining the auction sale was issued two days later, on December 26,1968, premised inter alia on the Lims' express waiver of
"their rights to the notice and re-publication of the notice of sale which may be conducted at some future date." 5
On November 25,1970, the Court of First Instance (then presided over by Judge Conrado M. Vasquez 6 rendered judgment finding that
usury tained the mortgage without, however, rendering it void, declaring the amount due to be only Pl,136,235.00 and allowing the
foreclosure to proceed for satisfaction of the obligation reckoned at only said amount . 7
Syjuco moved for new trial to enable it to present additional evidence to overthrow the finding of usury, and the Court ordered the
case reopened for that purpose. The Lims tried to negate that order of reopening in the Court of Appeals, the proceedings being
docketed as CA-G.R. No. 00242-R. They failed. The Court of Appeals upheld the Trial Court. The Lims then sought to nullify this
action of the Appellate Court; towards that end, they filed with this Court a petition for certiorari and prohibition, docketed as G.R.
No. L-34683. But here, too, they failed; their petition was dismissed. 8
Thereafter, and on the basis of the additional evidence adduced by Syjuco on remand of the case from this Court, the Trial Court
promulgated an amended decision on August 16, 1972, reversing its previous holding that usury had flawed the Lims' loan obligation.
It declared that the principal of said obligation indeed amounted to P2,460,000.00, exclusive of interest at the rate of 12% per annum
from November 8, 1967, and, that obligation being already due, the defendants (Syjuco and the Sheriff of Manila) could proceed with
the extrajudicial foreclosure of the mortgage given to secure its satisfaction. 9
2. APPEAL FROM CIVIL CASE NO. 75180; CA-G.R. NO. 51752; G.R. NO. L-45752
On September 9, 1972, Atty. Paterno R. Canlas entered his appearance in Civil Case No. 75180 as counsel for the Lims in
collaboration with Atty. Raul Correa, and on the same date appealed to the Court of Appeals from the amended decision of August 16,
1972. 10 In that appeal, which was docketed as CA G.R. No. 51752, Messrs. Canlas and Correa prayed that the loans be declared
usurious; that the principal of the loans be found to be in the total amount of Pl,269,505.00 only, and the interest thereon fixed at only
6% per annum from the filing of the complaint; and that the mortgage be also pronounced void ab initio. 11
The appeal met with no success. In a decision promulgated on October 25,1976, the Court of Appeals affirmed in toto the Trial Court's
amended decision. 12
The Lims came to this Court seeking reversal of the appellate Court's decision. However, their petition for review-filed in their behalf
by Canlas, and Atty. Pio R. Marcos, and docketed as G.R. No. L-45752-was denied for lack of merit in a minute resolution dated
August 5, 1977. The Lims' motion for reconsideration was denied and entry of judgment was made on September 24,1977. 13 Here the
matter should have ended; it marked only the beginning of Syjuco's travails.
3. CIVIL CASE NO.112762, CFI MANILA BRANCH 9
Syjuco then resumed its efforts to proceed with the foreclosure. It caused the auction sale of the mortgaged property to be scheduled
on December 20, 1977, only to be frustrated again by another action filed by the Lims on December 19, 1977, docketed as Civil Case
No. 112762 of the Court of First Instance of Manila. 14 The action sought to stop the sale on the ground that the notice of foreclosure
had not been republished; this, notwithstanding that as earlier stressed, the restraining order of December 26, 1968 issued in Civil
Case No 75180 explicitly declared itself to be predicated on the Lims' waiver of "their rights to the notice and republication of the
notice of sale which may be conducted at some future date." 15 An order restraining the sale issued in the case, although the petition for
preliminary injunction was subsequently denied. A supplemental complaint was also filed by the Lims seeking recovery of some Pl
million in damages allegedly suffered by reason of said lack of republication. 16
4. CIVIL CASE NO. 75180
That very same claim that there had been no republication of the notice of sale, which was the foundation of the Lims' action in
Civil Case No. 112762 as aforesaid was made by the Lims the basis of an urgent motion filed on December 15, 1977 in Civil Case
No. 75180, in which, as earlier narrated, the judgement authorizing the foreclosure had been affirmed by both the Court of Appeals
and this Court, and had become final and executory. And that motion sought exactly the same remedy prayed for in Civil Case No.
112762 (filed by the Lims four [4] days later, on December 19, 1977), i.e., the prevention of the auction sale. The Court -- Branch 5,
then presided over by Judge Jose H. Tecson granted the restraining order on December 19, 1977, 17 the very same day that the Lims
commenced Civil Case No. 112762 in the same Court and in which subsequent action they asked for and obtained a similar restraining
order.

The Lims' counsel thus brought about the anomalous situation of two (2) restraining orders directed against the same auction sale,
based on the same ground, issued by different courts having cognizance of two (2) separate proceedings instituted for identical
objectives. This situation lasted for all of three (3) years, despite the republication of the notice of sale caused by Syjuco in January,
1978 in an effort to end all dispute about the matter, and despite Judge Tecson's having been made aware of Civil Case No. 112762. It
should have been apparent to Judge Tecson that there was nothing more to be done in Civil Case No. 75180 except to enforce the
judgment, already final and executory, authorizing the extrajudicial foreclosure of the mortgage, a judgment sanctioned, to repeat, by
both the Court of Appeals and the Supreme Court; that there was in truth no need for another publication of the notice since the Lims
had precisely waived such republication, this waiver having been the condition under which they had earlier obtained an order
restraining the first scheduled sale; that, in any event, the republication effected by Syjuco had removed the only asserted impediment
to the holding of the same; and that, finally, the Lims were acting in bad faith: they were maintaining proceedings in two (2) different
courts for essentially the same relief. 18 Incredibly, not only did Judge Tecson refuse to allow the holding of the auction sale, as was the
only just and lawful course indicated by the circumstances, 19 he authorized the Lims to sell the mortgaged property in a private
sale, 20 with the evident intention that the proceeds of the sale, which he directed to be deposited in court, would be divided between
Syjuco and the Lims; this, in line with the patently specious theory advocated by the Lims' counsel that the bond flied by them for the
postponement of the sale, set at P6 million by the Court (later increased by P 3 million) had superseded and caused novation of the
mortgage. 21 The case lay fallow for a year, certain other, incidents arising and remaining unresolved on account of numerous
postponements.
5. G.R. No. L-56014
Finally, on January 28, 1981, Syjuco betook itself to this Court, presumably no longer disposed to await Judge Tecson's pleasure or the
Lims' convenience. It filed a petition for certiorari and prohibition, docketed as G.R. No. L-56014, alleging that in Civil Case No.
75180, Judge Tecson had gravely abused discretion in:
(1) unreasonably delaying the foreclosure of the mortgage;
(2) entertaining the Lims' motion to discharge said mortgage grounded on the theory that it had been superseded and
novated by the Lims' act of filing the bond required by Judge Tecson in connection with the postponement of the
foreclosure sale, and unreasonably delaying resolution of the issue; and
(3) authorizing the Lims to negotiate and consummate the private sale of the mortgaged property and motu proprio
extending the period granted the Lims for the purpose, in disregard of the final and executory judgment rendered in
the case.
By judgment rendered on September 21, 1982, after due proceedings, this Court 22 issued the writ prayed for and
nullified the orders and actuations of Judge Tecson in Civil Case No. 75180. The judgment declared that:
(1) the republication by Syjuco of the notice of foreclosure sale rendered the complaint in Civil Case No. 112762
moot and academic; hence, said case could not operate to bar the sale;
(2) the Lims' bonds (of P 6 million and P 3 million), having by the terms thereof been given to guarantee payment of
damages to Syjuco and the Sheriff of Manila resulting from the suspension of the auction sale, could not in any
sense and from any aspect have the effect of superseding the mortgage or novating it;
(3) in fact, the bonds had become worthless when, as shown by the record, the bondsman's authority to transact nonlife insurance business in the Philippines was not renewed, for cause, as of July 1, 1981.
The decision consequently decreed that the Sheriff of Manila should proceed with the mortgage sale, there being no further
impediment thereto. 23
Notice of the decision was served on the Lims, through Atty. Canlas, on October 2, 1982. A motion for reconsideration was filed, 24 but
the same was denied with finality for lack of merit and entry of final judgment was made on March 22,1983. 25
6. THE SECRET ACTION CIVIL CASE NO. Q-36845 OF THE REGIONAL TRIAL COURT,
QUEZON CITY, JUDGE JOSE P. CASTRO, PRESIDING
Twelve (12) days after the Lims were served, as above mentioned, with notice of this Court's judgment in G.R. No. 56014, or on
October 14,1982, they caused the filing with the Regional Trial Court of Quezon City of still another action, the third, also designed,
like the first two, to preclude enforcement of the mortgage held by Syjuco.
This time the complaint was presented, not in their individual names, but in the name of a partnership of which they themselves were
the only partners: "Heirs of Hugo Lim." The complaint advocated the theory that the mortgage which they, together with their mother,
had individually constituted (and thereafter amended during the period from 1964 to 1967) over lands standing in their names in the
Property Registry as owners pro indiviso, in fact no longer belonged to them at that time, having been earlier deeded over by them to

the partnership, "Heirs of Hugo Lim", more precisely, on March 30, 1959, hence, said mortgage was void because executed by them
without authority from the partnership.
The complaint was signed by a lawyer other than Atty. Canlas, but the records disclose that Atty. Canlas took over as counsel as of
November 4,1982. The case, docketed as Civil Case No. Q-39295, was assigned to Branch 35 of the Quezon City Regional Trial
Court, then presided over by Judge Jose P. Castro.
Judge Castro issued a restraining order on October 15, 1982. Then, Sheriff Perfecto G. Dalangin submitted a return of summons to the
effect that on December 6, 1982 he
.. served personally and left a copy of summons together with a copy of Complaint and its annexes x x upon
defendant's office formerly at 313 Quirino Ave., Paranaque, Metro-Manila and now at 407 Dona Felisa Syjuco
Building, Remedios St., corner Taft Avenue, Manila, through the Manager, a person of sufficient age and discretion
duly authorized to receive service of such nature, but who refused to accept service and signed receipt thereof. 26
A vaguer return will be hard to find. It is impossible to discern from it where precisely the summons was served, whether at Quirino
Avenue, Paranaque, or Taft Avenue, Manila; and it is inexplicable that the name of the person that the sheriff had been able to identify
as the manager is not stated, the latter being described merely as "a person of sufficient age and discretion." In any event, as it was to
claim later, Syjuco asserts that it was never so served with summons, or with any other notice, pleading, or motion relative to the case,
for that matter.
On February 10, 1983, Atty. Canlas filed an ex-parte motion to declare Syjuco in default. The order of default issued the next day, also
directing the plaintiff partnership to present evidence ex parte within three (3) days. On February 22, 1983, judgment by default was
rendered, declaring void the mortgage in question because executed by the Lims without authority from the partnership which was and
had been since March 30,1959 the exclusive owner of the mortgaged property, and making permanent an injunction against the
foreclosure sale that had issued on January 14,1983. 27 Service of notice of the default judgment was, according to the return of the
same Sheriff Perfecto Dalangin, effected on the following day, February 23, 1983. His return is a virtual copy of his earlier one
regarding service of summons: it also states the place of service as the defendant's office, either at its former location, 313 Quirino
Avenue, Paranaque, or at the later address, 407 Dona Felisa, Syjuco Building, Taft Avenue, Manila; and it also fails to identify the
person on whom service was made, describing him only as "the clerk or person in charge" of the office. 28
Unaccountably, and contrary to what might be expected from the rapidity with which it was decided-twelve (12) days from February
10, 1983, when the motion to declare defendant Syjuco in default was filed-the case was afterwards allowed by Atty. Canlas to remain
dormant for seventeen (17) months. He made no effort to have the judgment executed, or to avail of it in other actions instituted by
him against Syjuco. The judgment was not to be invoked until sometime in or after July, 1984, again to stop the extrajudicial mortgage
sale scheduled at or about that time at the instance of Syjuco, as shall presently be recounted.
7. Other Actions in the Interim:
a. CIVIL CASE No. 83-19018, RTC MANILA
While the Lims, through their partnership ("Heirs of Hugo Lim"), were prosecuting their action in the sala of Judge Castro, as above
narrated, Syjuco once again tried to proceed with the foreclosure after entry of judgment had been made in G.R. No. 56014 on March
22, 1983. It scheduled the auction sale on July 30, 1983. But once again it was frustrated. Another obstacle was put up by the Lims and
their counsel, Atty. Canlas. This was Civil Case No. 83-19018 of the Manila Regional Trial Court. The case was filed to stop the sale
on the theory that what was sought to be realized from the sale was much in excess of the judgment in Civil Case No. 75180, and that
there was absence of the requisite notice. It is significant that the judgment by default rendered by Judge Castro in Civil Case No. Q36485 was not asserted as additional ground to support the cause of action. Be this as it may, a restraining order was issued on July
20,1983 in said Civil Case No. 83-9018. 29
b. CIVIL CASE NO. Q-32924, RTC QUEZON CITY
What the outcome of this case, No. 83-19018, is not clear. What is certain is (1) that the auction sale was re-scheduled for September
20, 1983, (2) that it was aborted because the Lims managed to obtain still another restraining order in another case commenced by
their lawyer, Atty. Canlas: Civil Case No. Q-32924 of the Court of First Instance of Quezon City, grounded on the proposition that the
publication of the notice of sale was defective; and (3) that the action was dismissed by the Regional Trial Court on February 3,
1984. 30
No other salient details about these two (2) cases are available in the voluminous records before the Court, except that it was Atty.
Canlas who had filed them. He admits having done so unequivocally: "Thus, the undersigned counsel filed injunction cases in Civil
Case No. 83-19018 and Civil Case No. 39294, Regional Trial Courts of Manila and Quezon City. ... " 31
7. RE-ACTIVATION OF CIVIL CASE NO. Q-36485, RTC, Q QUEZON CITY, BRANCH
XXXV

Upon the dismissal of Civil Case No. 39294, Syjuco once more resumed its efforts to effect the mortgage sale which had already been
stymied for more than fifteen (15) years. At its instance, the sheriff once again set a date for the auction sale. But on the date of the
sale, a letter of Atty. Canlas was handed to the sheriff drawing attention to the permanent injunction of the sale embodied in the
judgment by default rendered by Judge Castro in Civil Case No. Q- 36485. 32 Syjuco lost no time in inquiring about Civil Case No. Q36485, and was very quickly made aware of the judgment by default therein promulgated and the antecedent events leading thereto. It
was also made known that on July 9, 1984, Judge Castro had ordered execution of the judgment; that Judge Castro had on July 16,
1984 granted Atty. Canlas' motion to declare cancelled the titles to the Lims' mortgaged properties and as nun and void the annotation
of the mortgage and its amendments on said titles, and to direct the Register of Deeds of Manila to issue new titles, in lieu of the old,
in the name of the partnership, "Heirs of Hugo Lim." 33
On July 17,1984, Syjuco filed in said Civil Case No. Q-36485 a motion for reconsideration of the decision and for dismissal of the
action, alleging that it had never been served with summons; that granting arguendo that service had somehow been made, it had never
received notice of the decision and therefore the same had not and could not have become final; and that the action should be
dismissed on the ground of bar by prior judgment premised on the final decisions of the Supreme Court in G.R. No. L-45752 and G.R.
No. 56014.
Two other motions by Syjuco quickly followed. The first, dated July 20, 1984, prayed for abatement of Judge Castro's order decreeing
the issuance of new certificates of title over the mortgaged lands in the name of the plaintiff partnership. 34 The second, filed on July
24, 1984, was a supplement to the motion to dismiss earlier filed, asserting another ground for the dismissal of the action, i.e., failure
to state a cause of action, it appearing that the mortgaged property remained registered in the names of the individual members of the
Lim family notwithstanding that the property had supposedly been conveyed to the plaintiff partnership long before the execution of
the mortgage and its amendments,-and that even assuming ownership of the property by the partnership, the mortgage executed by all
the partners was valid and binding under Articles 1811 and 1819 of the Civil Code. 35
The motions having been opposed in due course by the plaintiff partnership, they remained pending until January 31, 1985 when
Syjuco moved for their immediate resolution. Syjuco now claims that Judge Castro never acted on the motions. The latter however
states that that he did issue an order on February 22, 1985 declaring that he had lost jurisdiction to act thereon because, petitio
principii, his decision had already become final and executory.
8. G.R.NO.L-70403; THE PROCEEDING AT BAR
For the third time Syjuco is now before this Court on the same matter. It filed on April 3, 1985 the instant petition for certiorari,
prohibition and mandamus. It prays in its petition that the default judgment rendered against it by Judge Castro in said Civil Case No.
Q-36485 be annulled on the ground of lack of service of summons, res judicata and laches, and failure of the complaint to state a cause
of action; that the sheriff be commanded to proceed with the foreclosure of the mortgage on the property covered by Transfer
Certificates of Title Numbered 75413, 75415, 75416 and 75418 of the Manila Registry; and that the respondents the Lims, Judge
Castro, the Sheriff and the Register of Deeds of Manila, the partnership known as "Heirs of Hugo Lim," and Atty. Paterno R. Canlas,
counsel for-the Lims and their partnership-be perpetually enjoined from taking any further steps to prevent the foreclosure.
The comment filed for the respondents by Atty. Canlas in substance alleged that (a) Syjuco was validly served with summons in Civil
Case No. Q-36485, hence, that the decision rendered by default therein was also valid and, having been also duly served on said
petitioner, became final by operation of law after the lapse of the reglementary appeal period; (b) finality of said decision removed the
case from the jurisdiction of the trial court, which was powerless to entertain and act on the motion for reconsideration and motion to
dismiss; (c) the petition was in effect an action to annul a judgment, a proceeding within the original jurisdiction of the Court of
Appeals; (d) the plea of res judicata came too late because raised after the decision had already become final; moreover, no Identity of
parties existed between the cases invoked, on the one hand, and Civil Case No. Q-36485, on the other, the parties in the former being
the Lims in their personal capacities and in the latter, the Lim Partnership, a separate and distinct juridical entity; and the pleaded
causes of action being different, usury in the earlier cases and authority of the parties to encumber partnership property in the case
under review; (e) the plea of laches also came too late, not having been invoked in the lower court; and (f) the property involved
constituted assets of the Lim partnership, being registered as such with the Securities and Exchange Commission. 36
On his own behalf Atty. Canlas submitted that he had no knowledge of the institution of Civil Case No. Q-36485 (though he admitted
being collaborating counsel in said case); that he did not represent the Lims in all their cases against Syjuco, having been counsel for
the former only since 1977, not for the last seventeen years as claimed by Syjuco; and that he had no duty to inform opposing counsel
of the pendency of Civil Case No. Q-36485. 37
Respondent Judge Castro also filed a comment 38 disclaiming knowledge of previous controversies regarding the mortgaged property.
He asserted that Syjuco had been properly declared in default for having failed to answer the complaint despite service of summons
upon it, and that his decision in said case which was also properly served on Syjuco became final when it was not timely appealed,
after which he lost jurisdiction to entertain the motion for reconsideration and motion to dismiss. He also denied having failed to act
on said motions, adverting to an alleged order of February 22, 1985 where he declared his lack of jurisdiction to act thereon.
The respondent Register of Deeds for his part presented a comment wherein he stated that by virtue of an order of execution in Civil
Case No. Q-36485, he had cancelled TCTs Nos. 75413, 75415, 75416 and 75418 of his Registry and prepared new certificates of title
in lieu thereof, but that cancellation had been held in abeyance for lack of certain registration requirements and by reason also of the

motion of Syjuco's Atty. Formoso to hold in abeyance enforcement of the trial court's order of July 16, 1984 as well as of the
temporary restraining order subsequently issued by the Court. 39
It is time to write finis to this unedifying narrative which is notable chiefly for the deception, deviousness and trickery which have
marked the private respondents' thus far successful attempts to avoid the payment of a just obligation. The record of the present
proceeding and the other records already referred to, which the Court has examined at length, make it clear that the dispute should
have been laid to rest more than eleven years ago, with entry of judgment of this Court (on September 24, 1977) in G.R. No. L-45752
sealing the fate of the Lims' appeal against the amended decision in Civil Case No. 75180 where they had originally questioned the
validity of the mortgage and its foreclosure. That result, the records also show, had itself been nine (9) years in coming, Civil Case No.
75180 having been instituted in December 1968 and, after trial and judgment, gone through the Court of Appeals (in CA-G.R. No.
00242-R) and this Court (in G.R. No. 34683), both at the instance of the Lims, on the question of reopening before the amended
decision could be issued.
Unwilling, however, to concede defeat, the Lims moved (in Civil Case No. 75180) to stop the foreclosure sale on the ground of lack of
republication. On December 19,1977 they obtained a restraining order in said case, but this notwithstanding, on the very same date
they filed another action (Civil Case No. 117262) in a different branch of the same Court of First Instance of Manila to enjoin the
foreclosure sale on the same ground of alleged lack of republication. At about this time, Syjuco republished the notice of sale in order,
as it was later to manifest, to end all further dispute.
That move met with no success. The Lims managed to persuade the judge in Civil Case No. 75180, notwithstanding his conviction
that the amended decision in said case had already become final, not only to halt the foreclosure sale but also to authorize said
respondents to dispose of the mortgaged property at a private sale upon posting a bond of P6,000,000.00 (later increased by
P3,000,000.00) to guarantee payment of Syjuco's mortgage credit. This gave the Lims a convenient excuse for further suspension of
the foreclosure sale by introducing a new wrinkle into their contentions-that the bond superseded the mortgage which should, they
claimed, therefore be discharged instead of foreclosed.
Thus from the final months of 1977 until the end of 1980, a period of three years, Syjuco found itself fighting a legal battle on two
fronts: in the already finally decided Civil Case No. 75180 and in Civil Case No. 117262, upon the single issue of alleged lack of
republication, an issue already mooted by the Lims' earlier waiver of republication as a condition for the issuance of the original
restraining order of December 26,1968 in Civil Case No. 75180, not to mention the fact that said petitioner had also tried to put an end
to it by actually republishing the notice of sale.
With the advent of 1981, its pleas for early resolution having apparently fallen on deaf ears, Syjuco went to this Court (in G.R. No. L56014) from which, on September 21, 1982, it obtained the decision already referred to holding, in fine, that there existed no further
impediment to the foreclosure sale and that the sheriff could proceed with the same.
Said decision, instead of deterring further attempts to derail the foreclosure, apparently gave the signal for the clandestine filing this
time by the Partnership of the Heirs of Hugo Lim -on October 14,1982 of Civil Case No. Q-36485, the subject of the present
petition, which for the first time asserted the claim that the mortgaged property had been contributed to the plaintiff partnership long
before the execution of the Syjuco's mortgage in order to defeat the foreclosure.
Syjuco now maintains that it had no actual knowledge of the existence and pendency of Civil Case No. Q-36485 until confronted, in
the manner already adverted to, with the fait accompli of a "final" judgment with permanent injunction therein, and nothing in the
record disabuses the Court about the truth of this disclaimer. Indeed, considering what had transpired up to that denouement, it
becomes quite evident that actuations of the Lims and their lawyer had been geared to keeping Syjuco in the dark about said case.
Their filing of two other cases also seeking to enjoin the foreclosure sale (Civil Case No. 83-19018, Regional Trial Court of Manila in
July 1983, and Civil Case No. Q-32924, Regional Trial Court of Quezon City in September of the same year) after said sale had
already been permanently enjoined by default judgment in Civil Case No. Q-36485, appears in retrospect to be nothing but a brace of
feints calculated to keep Syjuco in that state of ignorance and to lull any apprehensions it mat may have harbored about encountering
further surprises from any other quarter.
Further credence is lent to this appraisal by the unusually rapid movement of Civil Case No. Q-36485 itself in its earlier stages, which
saw the motion to declare Syjuco in default filed, an order of default issued, evidence ex parte for the plaintiffs received and judgment
by default rendered, all within the brief span of twelve days, February 10-22, 1983. Notice of said judgment was "served" on February
23, 1983, the day after it was handed down, only to be followed by an unaccountable lull of well over a year before it was ordered
executed on July 9, 1984 unaccountable, considering that previous flurry of activity, except in the context of a plan to rush the case
to judgment and then divert Syjuco's attention to the Lims' moves in other directions so as to prevent discovery of the existence of the
case until it was too late.
The Court cannot but condemn in the strongest terms this trifling with the judicial process which degrades the administration of
justice, mocks, subverts and misuses that process for purely dilatory purposes, thus tending to bring it into disrepute, and seriously
erodes public confidence in the will and competence of the courts to dispense swift justice.

Upon the facts, the only defense to the foreclosure that could possibly have merited the full-blown trial and appeal proceedings it
actually went through was that of alleged usury pleaded in Civil Case No. 75180 and finally decided against the respondent Lims in
G.R. No. L-45752 in September 1977. The other issues of failure to republish and discharge of mortgage by guarantee set up in
succeeding actions were sham issues, questions without substance raised only for purposes of delay by the private respondents, in
which they succeeded only too well. The claim urged in this latest case: that the mortgaged property had been contributed to the
respondent partnership and was already property of said partnership when the individual Lims unauthorizedly mortgaged it to Syjuco,
is of no better stripe, and this, too, is clear from the undisputed facts and the legal conclusions to be drawn therefrom.
The record shows that the respondent partnership is composed exclusively of the individual Lims in whose name all the cases herein
referred to, with the sole exception of Civil Case No. Q-36485, were brought and prosecuted, their contribution to the partnership
consisting chiefly, if not solely, of the property subject of the Syjuco mortgage. It is also a fact that despite its having been contributed
to the partnership, allegedly on March 30, 1959, the property was never registered with the Register of Deeds in the name of the
partnership, but to this date remains registered in the names of the Lims as owners in common. The original mortgage deed of
November 14,1964 was executed by the Lims as such owners, as were all subsequent amendments of the mortgage. There can be no
dispute that in those circumstances, the respondent partnership was chargeable with knowledge of the mortgage from the moment of
its execution. The legal fiction of a separate juridical personality and existence will not shield it from the conclusion of having such
knowledge which naturally and irresistibly flows from the undenied facts. It would violate all precepts of reason, ordinary experience
and common sense to propose that a partnership, as commonly known to all the partners or of acts in which all of the latter, without
exception, have taken part, where such matters or acts affect property claimed as its own by said partnership.
If, therefore, the respondent partnership was inescapably chargeable with knowledge of the mortgage executed by all the partners
thereof, its silence and failure to impugn said mortgage within a reasonable time, let alone a space of more than seventeen years,
brought into play the doctrine of estoppel to preclude any attempt to avoid the mortgage as allegedly unauthorized.
The principles of equitable estoppel, sometimes called estoppel in pais, are made part of our law by Art. 1432 of the Civil Code.
Coming under this class is estoppel by silence, which obtains here and as to which it has been held that:
... an estoppel may arise from silence as well as from words. 'Estoppel by silence' arises where a person, who by
force of circumstances is under a duty to another to speak, refrains from doing so and thereby leads the other to
believe in the existence of a state of facts in reliance on which he acts to his prejudice. Silence may support an
estoppel whether the failure to speak is intentional or negligent.
Inaction or silence may under some circumstances amount to a misrepresentation and concealment of the facts, so as
to raise an equitable estoppel. When the silence is of such a character and under such circumstances that it would
become a fraud on the other party to permit the party who has kept silent to deny what his silence has induced the
other to believe and act on, it will operate as an estoppel. This doctrine rests on the principle that if one maintains
silence, when in conscience he ought to speak, equity will debar him from speaking when in conscience he ought to
remain silent. He who remains silent when he ought to speak cannot be heard to speak when he should be silent. 40
And more to the point:
A property owner who knowingly permits another to sell or encumber the property, without disclosing his title or
objecting to the transaction, is estopped to set up his title or interest as against a person who has been thereby misled
to his injury.
xxx
An owner of real property who stands by and sees a third person selling or mortgaging it under claim of title without
asserting his own title or giving the purchaser or mortgagee any notice thereof is estopped, as against such purchaser
or mortgagee, afterward to assert his title; and, although title does not pass under these circumstances, a conveyance
will be decreed by a court of equity. Especially is the rule applicable where the party against whom the estoppel is
claimed, in addition to standing by, takes part in malting the sale or mortgage. 41
More specifically, the concept to which that species of estoppel which results from the non-disclosure of an estate or
interest in real property has ordinarily been referred is fraud, actual or constructive. ... Although fraud is not an
essential element of the original conduct working the estoppel, it may with perfect property be said that it would be
fraudulent for the party to repudiate his conduct, and to assert a right or claim in contravention thereof. 42
Equally or even more preclusive of the respondent partnership's claim to the mortgaged property is the last paragraph of Article 1819
of the Civil Code, which contemplates a situation duplicating the circumstances that attended the execution of the mortgage in favor of
Syjuco and therefore applies foursquare thereto:
Where the title to real property is in the names of all the partners a conveyance executed by all the partners passes
all their rights in such property.

The term "conveyance" used in said provision, which is taken from Section 10 of the American Uniform Partnership Act, includes a
mortgage.
Interpreting Sec. 10 of the Uniform Partnership Act, it has been held that the right to mortgage is included in the
right to convey. This is different from the rule in agency that a special power to sell excludes the power to mortgage
(Art. 1879). 43
As indisputable as the propositions and principles just stated is that the cause of action in Civil Case No. Q-36485 is barred by prior
judgment. The right subsumed in that cause is the negation of the mortgage, postulated on the claim that the parcels of land mortgaged
by the Lims to Syjuco did not in truth belong to them but to the partnership. Assuming this to be so, the right could have been asserted
at the time that the Lims instituted their first action on December 24, 1968 in the Manila Court of First Instance, Civil Case No. 75180,
or when they filed their subsequent actions: Civil Case No. 112762, on December 19, 1977; Civil Case No. 83-19018, in 1983, and
Civil Case No. Q-39294, also in 1983. The claim could have been set up by the Lims, as members composing the partnership, "Heirs
of Hugo Lim." It could very well have been put forth by the partnership itself, as co-plaintiff in the corresponding complaints,
considering that the actions involved property supposedly belonging to it and were being prosecuted by the entire membership of the
partnership, and therefore, the partnership was in actuality, the real party in interest. In fact, consistently with the Lims' theory, they
should be regarded, in all the actions presented by them, as having sued for vindication, not of their individual rights over the property
mortgaged, but those of the partnership. There is thus no reason to distinguish between the Lims, as individuals, and the partnership
itself, since the former constituted the entire membership of the latter. In other words, despite the concealment of the existence of the
partnership, for all intents and purposes and consistently with the Lims' own theory, it was that partnership which was the real party in
interest in all the actions; it was actually represented in said actions by all the individual members thereof, and consequently, those
members' acts, declarations and omissions cannot be deemed to be simply the individual acts of said members, but in fact and in law,
those of the partnership.
What was done by the Lims or by the partnership of which they were the only members-was to split their cause of action in
violation of the well known rule that only one suit may be instituted for a single cause of action. 44 The right sought to be enforced by
them in all their actions was, at bottom, to strike down the mortgage constituted in favor of Syjuco, a right which, in their view,
resulted from several circumstances, namely that the mortgage was constituted over property belonging to the partnership without the
latter's authority; that the principal obligation thereby secured was usurious; that the publication of the notice of foreclosure sale was
fatally defective, circumstances which had already taken place at the time of the institution of the actions. They instituted four (4)
actions for the same purpose on one ground or the other, making each ground the subject of a separate action. Upon these premises,
application of the sanction indicated by law is caned for, i.e., the judgment on the merits in any one is available as a bar in the
others. 45
The first judgment-rendered in Civil Case No. 75180 and affirmed by both the Court of Appeals (CA-G.R. No. 51752) and this Court
(G.R. No. L-45752) should therefore have barred all the others, all the requisites of res judicata being present. The judgment was a
final and executory judgment; it had been rendered by a competent court; and there was, between the first and subsequent cases, not
only identity of subject-matter and of cause of action, but also of parties. As already pointed out, the plaintiffs in the first four (4)
actions, the Lims, were representing exactly the same claims as those of the partnership, the plaintiff in the fifth and last action, of
which partnership they were the only members, and there was hence no substantial difference as regards the parties plaintiff in all the
actions. Under the doctrine of res judicata, the judgment in the first was and should have been regarded as conclusive in all other,
actions not only "with respect to the matter directly adjudged," but also "as to any other matter that could have been raised in relation
thereto. " 46 It being indisputable that the matter of the partnership's being the owner of the mortgaged properties "could have been
raised in relation" to those expressly made issuable in the first action, it follows that that matter could not be re-litigated in the last
action, the fifth.
Though confronted with the facts thus precluding the respondent partnership's claim to the property under both the principle of
estoppel and the provisions of Article 1819, last paragraph, of the Civil Code, as well as the familiar doctrine of res judicata, the
respondent Judge refused to act on Syjuco's motions on the ground that he no longer had jurisdiction to do so because they were filed
after judgment by default against Syjuco, which failed to answer the complaint despite valid service of summons, had been rendered
and become final. The sheriffs return, however, creates grave doubts about the correctness of the Judge's basic premise that summons
had been validly served on Syjuco. For one thing, the return 47 is unspecific about where service was effected. No safe conclusion
about the place of service can be made from its reference to a former and a present office of Syjuco in widely separate locations, with
nothing to indicate whether service was effected at one address or the other, or even at both. A more serious defect is the failure to
name the person served who is, with equal ambiguity, identified only as "the Manager" of the defendant corporation (petitioner
herein). Since the sheriffs return constitutes primary evidence of the manner and incidents of personal service of a summons, the Rules
are quite specific about what such a document should contain:
SEC. 20. Proof of service. The proof of service of a summons shall be made in writing by the server and shall set
forth the manner, place and date of service; shall specify any papers which have been served with the process and
the name of the person who received the same; and shall be sworn to when made by a person other than a sheriff or
his deputy. 48
In the case of Delta Motor Sales Corporation vs. Mangosing 49 it was held that:"

(a) strict compliance with the mode of service is necessary to confer jurisdiction of the court over a corporation. The officer upon
whom service is made must be one who is named in the statute; otherwise the service is insufficient. So, where the statute requires that
in the case of a domestic corporation summons should be served on 'the president or head of the corporation, secretary, treasurer,
cashier or managing agent thereof, service of summons on the secretary's wife did not confer jurisdiction over the corporation in the
foreclosure proceeding against it. Hence, the decree of foreclosure and the deficiency judgment were void and should be vacated
(Reader vs. District Court, 94 Pacific 2nd 858).
The purpose is to render it reasonably certain that the corporation will receive prompt and proper notice in an action
against it or to insure that the summons be served on a representative so integrated with the corporation that such
person will know what to do with the legal papers served on him. In other words, 'to bring home to the corporation
notice of the filing of the action'. (35 A C.J.S. 288 citing Jenkins vs. Lykes Bros. S.S. Co., 48 F. Supp. 848;
MacCarthy vs. Langston, D.C. Fla., 23 F.R.D. 249).
The liberal construction rule cannot be invoked and utilized as a substitute for the plain legal requirements as to the
manner in which summons should be served on a domestic corporation (U.S. vs. Mollenhauer Laboratories, Inc.,
267 Fed. Rep. 2nd 260).'
The rule cannot be any less exacting as regards adherence to the requirements of proof of service, it being usually by such proof that
sufficiency of compliance with the prescribed mode of service is measured. Here the only proof of service of summons is the
questioned sheriff's return which, as already pointed out, is not only vague and unspecific as to the place of service, but also neglects
to Identify by name the recipient of the summons as required by Rule 20, Section 14, of the Rules of Court. Where the sheriffs return
is defective the presumption of regularity in the performance of official functions will not lie. 50 The defective sheriffs return thus
being insufficient and incompetent to prove that summons was served in the manner prescribed for service upon corporations, there is
no alternative to affirming the petitioner's claim that it had not been validly summoned in Civil Case No. Q-36485. It goes without
saying that lacking such valid service, the Trial Court did not acquire jurisdiction over the petitioner Syjuco, rendering null and void
all subsequent proceedings and issuances in the action from the order of default up to and including the judgment by default and the
order for its execution. 51
The respondents' contention that the petition is in effect an action to annul a judgment which is within the exclusive original
jurisdiction of the Court of Appeals 52 has already been answered in Matanguihan vs. Tengco 53 where, by declaring that an action for
annulment of judgment is not a plain, speedy and adequate remedy, this Court in effect affirmed that certiorari is an appropriate
remedy against judgments or proceedings alleged to have been rendered or had without valid service of summons. 54
Respondent Judge Castro begged the question when, instead of resolving on the merits the issue of the invalidity of his default
judgment and of the proceedings leading thereto because of absence of valid service of summons on the defendant, which had been
expressly raised in the defendant's motion for reconsideration, he simply refused to do so on the excuse that he had lost jurisdiction
over the case. This refusal was, in the premises, a grave abuse of judicial discretion which must be rectified.
What has been said makes unnecessary any further proceedings in the Court below, which might otherwise be indicated by the
consideration that two of the postulates of petitioner's unresolved motions which the Court considers equally as decisive as res
judicata, to wit: estoppel by silence and Article 1819, last paragraph, of the Civil Code, do not constitute grounds for a motion to
dismiss under rule 16, of the Rules of Court. Such a step would only cause further delay. And delay has been the bane of petitioner's
cause, defying through all these years all its efforts to collect on a just debt.
The undenied and undisputable facts make it perfectly clear that the claim to the mortgaged property belatedly and in apparent bad
faith pressed by the respondent partnership is foreclosed by both law and equity. Further proceedings will not make this any clearer
than it already is. The Court is clothed with ample authority, in such a case, to call a halt to all further proceedings and pronounce
judgment on the basis of what is already manifestly of record.
So much for the merits; the consequences that should attend the inexcusable and indefensible conduct of the respondents Lims, the
respondent partnership and their counsel, Atty. Paterno R. Canlas, should now be addressed. That the Lims and their partnership acted
in bad faith and with intent to defraud is manifest in the record of their actuations, presenting as they did, piecemeal and in one case
after another, defenses to the foreclosure or claims in derogation thereof that were available to them from the very beginning
actuations that were to stave off the liquidation of an undenied debt for more than twenty years and culminated in the clandestine
filing and prosecution of the action subject of the present petition.
What has happened here, it bears repeating, is nothing less than an abuse of process, a trifling with the courts and with the rights of
access thereto, for which Atty. Canlas must share responsibility equally with his clients. The latter could not have succeeded so well in
obstructing the course of justice without his aid and advice and his tireless espousal of their claims and pretensions made in the
various cases chronicled here. That the cause to which he lent his advocacy was less than just or worthy could not have escaped him, if
not at the start of his engagement, in the years that followed when with his willing assistance, if not instigation, it was shuttled from
one forum to another after each setback. This Court merely stated what is obvious and cannot be gainsaid when, inSurigao Mineral
Reservation Board vs. Cloribel, 55 it held that a party's lawyer of record has control of the proceedings and that '(w)hatever steps his
client takes should be within his knowledge and responsibility."

In Prudential Bank vs. Castro, 56 strikingly similar actuations in a case, which are described in the following paragraph taken from this
Court's decision therein:
Respondents' foregoing actuations reveal an 'unholy alliance' between them and a clear indication of partiality for
the party represented by the other to the detriment of the objective dispensation of justice. Writs of Attachment and
Execution were issued and implemented with lightning speed; the case itself was railroaded to a swift conclusion
through a similar judgment; astronomical sums were awarded as damages and attorney's fees; and topping it all, the
right to appeal was foreclosed by clever maneuvers," and which, the Court found, followed a pattern of conduct in
other cases of which judicial notice was taken, were deemed sufficient cause for disbarment.
Atty. Canlas even tried to mislead this Court by claiming that he became the Lims' lawyer only in 1977, 57 when the record indubitably
shows that he has represented them since September 9, 1972 when he first appeared for them to prosecute their appeal in Civil Case
No. 75180. 58 He has also quite impenitently disclaimed a duty to inform opposing counsel in Civil Case No. Q-39294 of the existence
of Civil Case No. Q-36485, as plaintiffs' counsel in both actions, even while the former, which involved the same mortgage, was
already being litigated when the latter was filed, although in the circumstances such disclosure was required by the ethics of his
profession, if not indeed by his lawyer's oath.
A clear case also exists for awarding at least nominal damages to petitioner, though damages are not expressly prayed for, under the
general prayer of the petition for "such other reliefs as may be just and equitable under the premises," and the action being not only of
certiorari and prohibition, but also of mandamus-in which the payment of "damages sustained by the petitioner by reason of the
wrongful acts of the defendant' is expressly authorized.59
There is no question in the Court's mind that such interests as may have accumulated on the mortgage loan will not offset the prejudice
visited upon the petitioner by the excruciatingly long delay in the satisfaction of said debt that the private respondents have engineered
and fomented.
These very same considerations dictate the imposition of exemplary damages in accordance with Art. 2229 of the Civil Code.
WHEREFORE, so that complete justice may be dispensed here and, as far as consistent with that end, all the matters and incidents
with which these proceedings are concerned may be brought to a swift conclusion:
(1) the assailed judgment by default in Civil Case No.Q-36485, the writ of execution and all other orders issued in
implementation thereof, and all proceedings in the case leading to said judgment after the filing of the complaint are
DECLARED null and void and are hereby SET ASIDE; and the complaint in said case is DISMISSED for being
barred by prior judgment and estoppel, and for lack of merit;
(2) the City Sheriff of Manila is ORDERED, upon receipt of this Decision, to schedule forthwith and thereafter
conduct with all due dispatch the sale at public auction of the mortgaged property in question for the satisfaction of
the mortgage debt of the respondents Lims to petitioner, in the principal amount of P2,460,000.00 as found in the
amended decision in Civil Case No. 75180 of the Court of First Instance of Manila, interests thereon at the rate of
twelve (12%) percent per annum from November 8, 1967 until the date of sale, plus such other and additional sums
for commissions, expenses, fees, etc. as may be lawfully chargeable in extrajudicial foreclosure and sale
proceedings;
(3) the private respondents, their successors and assigns, are PERPETUALLY ENJOINED from taking any action
whatsoever to obstruct, delay or prevent said auction sale;
(4) the private respondents (the Lims, the Partnership of the Heirs of Hugo Lim and Atty. Paterno R. Canlas) are
sentenced, jointly and severally, to pay the petitioner P25,000.00 as nominal damages and P100,000.00 as exemplary
damages, as well as treble costs; and
(5) let this matter be referred to the Integrated Bar of the Philippines for investigation, report, and recommendation
insofar as the conduct of Atty. Canlas as counsel in this case and in the other cases hereinabove referred to is
concerned.
SO ORDERED.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.