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Sy vs. Court of Appeals

*
G.R. No. 94285. August 31, 1999.

JESUS SY, JAIME SY, ESTATE OF JOSE SY, ESTATE

OF VICENTE SY, HEIR OF MARCIANO SY represented
by JUSTINA VDA. DE SY and WILLIE SY, petitioners,
vs.THE COURT OF APPEALS, INTESTATE ESTATE OF
SY YONG HU, SEC. HEARING OFFICER FELIPE
TONGCO, SECURITIES AND EXCHANGE
COMMISSION, respondents.
*
G.R. No. 100313. August 31, 1999.

SY YONG HU & SONS, JOHN TAN, BACOLOD CANVAS

AND UPHOLSTERY SUPPLY CO., AND NEGROS ISUZU
SALES, petitioners, vs. HONORABLE COURT OF
APPEALS (11th Division), INTESTATE ESTATE OF THE
LATE SY YONG HU, JOSE FALSIS, JR., AND HON.
BETHEL KATALBAS-MOSCARDON, RTC OF NEGROS
OCCIDENTAL, Branch 51, respondents.

Partnerships; Dissolutions; Words and Phrases; Dissolution of

a partnership is the change in the relation of the parties caused by
any partner ceasing to be associated in the carrying on, as might
be distinguished from the winding up, of its business.—The
contentions are untenable. Petitioners fail to recognize the basic
distinctions underlying the principles of dissolution, winding up
and partition or distribution. The dissolution of a partnership is
the change in the relation of the parties caused by any partner
ceasing to be associated in the carrying on, as might be
distinguished from the winding up, of its business. Upon its
dissolution, the partnership continues and its legal personality is
retained until the complete winding up of its business
culminating in its termination.
Same; Same; The partnership, although dissolved, continues
to exist until its termination, at which time the winding up of its
affairs should have been completed and the net partnership assets
are partitioned and distributed to the partners.—The dissolution

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of the partnership did not mean that the juridical entity was
immediately

__________________

* THIRD DIVISION.

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Sy vs. Court of Appeals

terminated and that the distribution of the assets to its partners

should perfunctorily follow. On the contrary, the dissolution
simply effected a change in the relationship among the partners.
The partnership, although dissolved, continues to exist until its
termination, at which time the winding up of its affairs should
have been completed and the net partnership assets are
partitioned and distributed to the partners.
Same; Same; Securities and Exchange Commission;
Jurisdiction; From the time a dissolution is ordered until the
actual termination of the partnership, the Securities and Exchange
Commission retains jurisdiction to adjudicate all incidents
relative thereto; Like the appointment of a manager in charge of
the winding up of the affairs of the partnership, the appointment
of a receiver during the pendency of the dissolution is interlocutory
in nature, well within the jurisdiction of the Securities and
Exchange Commission.—The error, therefore, ascribed to the
Court of Appeals is devoid of any sustainable basis. The Abello
Decision though, indeed, final and executory, did not pose any
obstacle to the Hearing Officer to issue orders not inconsistent
therewith. From the time a dissolution is ordered until the actual
termination of the partnership, the SEC retained jurisdiction to
adjudicate all incidents relative thereto. Thus, the disputed order
placing the partnership under a receivership committee cannot be
said to have varied the final order of dissolution. Neither did it
suspend the dissolution of the partnership. If at all, it only
suspended the partition and distribution of the partnership assets
pending disposition of Civil Case No. 903 on the basis of the
agreement by the parties and under the circumstances of the case.
It bears stressing that, like the appointment of a manager in
charge of the winding up of the affairs of the partnership, said
appointment of a receiver during the pendency of the dissolution
is interlocutory in nature, well within the jurisdiction of the SEC.

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Same; Same; Receivership; Receivership, which is admittedly

a harsh remedy, should be granted with extreme caution, such as
when properties of a partnership are in danger of being damaged
or lost on account of certain acts of the appointed manager in
liquidation.—Receivership, which is admittedly a harsh remedy,
should be granted with extreme caution. Sound bases therefor
must appear on record, and there should be a clear showing of its
necessity. The need for a receivership in the case under
consideration can be gleaned from the aforecited disquisition by
the Court of Appeals

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Sy vs. Court of Appeals

finding that the properties of the partnership were in danger of

being damaged or lost on account of certain acts of the appointed
manager in liquidation.
Same; Same; Same; Protection of the parties’ rights and
preservation of the properties involved are best left to a
receivership committee in which the opposing parties are
represented.—Moreover, it has been held by this Court that an
order placing the partnership under receivership so as to wind up
its affairs in an orderly manner and to protect the interest of the
plaintiff (herein private respondent) was not tainted with grave
abuse of discretion. The allegation that re-spondents’ rights are
adequately protected by the notices of lis pen-dens in Civil Case
903 is inaccurate. As pointed out in their Comment to the
Petition, the private respondents claim that the partnership
assets include the income and fruits thereof. Therefore, protection
of such rights and preservation of the properties involved are best
left to a receivership committee in which the opposing parties are
represented.
Same; Same; Same; The power to appoint a receiver pendente
lite is discretionary with the judge, and once the discretion is
exercised, the appellate court will not interfere, except in a clear
case of abuse thereof, or an extra limitation of jurisdiction.—What
is more, as held in Go Tecson vs. Macadaeg: “The power to appoint
a receiver pendente lite is discretionary with the judge of the court
of first instance; and once the discretion is exercised, the appellate
court will not interfere, except in a clear case of abuse thereof, or
an extra limitation of jurisdiction.”

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Due Process; The procedural aspect of due process is just as

important as its substantive aspect, if the constitutional injunction
against deprivation of property without due process is to be
observed.—In opposing the petition, respondent intestate estate
anchors its stance on the existence of violations of pertinent
provisions of the aforesaid Code. As regards due process, however,
a distinction must be made between matters of substance. In
essence, procedural due process “refers to the method or manner
by which the law is enforced,” while substantive due process
“requires that the law itself, not merely the procedure by which
the law would be enforced, is fair, reasonable, and just.” Although
private respondent upholds the substantive aspect of due process,
it, in the same breath, brushes aside its procedural aspect, which
is just as important, if the

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constitutional injunction against deprivation of property without

due process is to be observed.
Same; Settled is the rule that the essence of due process is the
opportunity to be heard.—Settled is the rule that the essence of
due process is the opportunity to be heard. Thus, in Legarda vs.
Court of Appeals, et al.,the Court held that as long as a party was
given the opportunity to defend her interest in due course, he
cannot be said to have been denied due process of law.
Same; The violation of a substantive law should not be
confused with punishment of the violator for such violation—the
former merely gives rise to a cause of action while the latter is its
effect, after compliance with the requirements of due process.—To
be sure, the petitioners are indispensable parties in Civil Case No.
5326, which sought to close subject building. Such being the case,
no final determination of the claims thereover could be had. That
the petition for mandamus with a prayer for the issuance of a writ
of preliminary mandatory injunction was only directed against
the City Engineer is of no moment. No matter how private
respondent justifies its failure to implead the petitioners, the
alleged violation of the provisions of the Building Code relative to
the reconstruction of the building in question, by petitioners, did
not warrant an ex parte and summary resolution of the petition.
The violation of a substantive law should not be confused with
punishment of the violator for such violation. The former merely

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gives rise to a cause of action while the latter is its effect, after
compliance with the requirements of due process.
Same; Building Code; The property rights of the owners of the
building and the lessees thereon cannot be arbitrarily interfered
with without running afoul with the due process rule enshrined in
the Bill of Rights.—The trial court failed to give petitioners their
day in court to be heard before they were condemned for the
alleged violation of certain provisions of the Building Code. Being
the owner of the building in question and lessees thereon,
petitioners possess property rights entitled to be protected by law.
Their property rights cannot be arbitrarily interfered with
without running afoul with the due process rule enshrined in the
Bill of Rights.

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