GOQUIOLAY, ET. AL V. SYCIP, ET. AL. 108 PHIL 947

The right of exclusive management conferred upon a partner is a personal right and is premised on trust and confidence. It terminates upon the death of the partner.

Antonio C. Goquilay, ET AL. vs. Washington Z. Sycip, ET AL.Antonio C. Goquilay, ET AL. vs. Washington Z. Sycip, ET AL. GR NO. L-11840, December 10, 1963

FACTS: Tan Sin An and Goquiolay entered into a general commercial partnership under the partnershipname “Tan Sin An and Antonio Goquiolay” for the purpose of dealing in real estate. Theagreement lodged upon Tan Sin An the sole management of the partnership affairs. The lifetimeof the partnership was fixed at ten years and the Articles of Co-partnership stipulated that in theevent of death of any of the partners before the expiration of the term, the partnership will not bedissolved but will be continued by the heirs or assigns of the deceased partner. But thepartnership could be dissolved upon mutual agreement in writing of the partners. Goquiolayexecuted a GPA in favor of Tan Sin An. The plaintiff partnership purchased 3 parcels of landwhich was mortgaged to “La Urbana” as payment of P25,000. Another 46 parcels of land werepurchased by Tan Sin An in his individual capacity which he assumed payment of a mortgagedebt for P35K. A downpayment and the amortization were advanced by Yutivo and Co. The twoobligations were consolidated in an instrument executed by the partnership and Tan Sin An,whereby the entire 49 lots were mortgaged in favor of “Banco Hipotecario”Tan Sin An died leavinghis widow, Kong Chai Pin and four minor children. The widow subsequently became theadministratrix of the estate. Repeated demands were made by Banco Hipotecario on thepartnership and on Tan Sin An. Defendant Sing Yee, upon request of defendant Yutivo Sons ,paid the remaining balance of the mortgage debt, the mortgage was cancelled Yutivo Sons andSing Yee filed their claim in the intestate proceedings of Tan Sin An for advances, interest andtaxes paid in amortizing and discharging their obligations to “La Urbana” and “Banco Hipotecario.”Kong Chai Pin filed a petition with the probate court for authority to sell all the 49 parcels of land.She then sold it to Sycip and Lee in consideration of P37K and of the vendees assuming paymentof the claims filed by Yutivo Sons and Sing Yee. Later, Sycip and Lee executed in favor of InsularDevelopment a deed of transfer covering the 49 parcels of land.When Goquiolay learned aboutthe sale to Sycip and Lee, he filed a petition in the intestate proceedings to set aside the order ofthe probate court approving the sale in so far as his interest over the parcels of land sold wasconcerned. Probate court annulled the sale executed by the administratrix w/ respect to the 60%interest of Goquiolay over the properties Administratrix appealed.The decision of probate courtwas set aside for failure to include the indispensable parties. New pleadings were filed. Thesecond amended complaint prays for the annulment of the sale in favor of Sycip and Lee andtheir subsequent conveyance to Insular Development. The complaint was dismissed by the lowercourt hence this appeal.

ISSUE/S: Whether or not a widow or substitute become also a general partner or only a limitedpartner. Whether or not the lower court err in holding that the widow succeeded her husband TanSin An in the sole management of the partnership upon Tan’s death Whether or not the consent ofthe other partners was necessary to perfect the sale of the partnership properties to Sycip andLee? HELD: Kong Chai Pin became a mere general partner. By seeking authority to manage partnershipproperty, Tan Sin An’s widow showed that she desired to be considered a general partner. Byauthorizing the widow to manage partnership property (which a limited partner could not beauthorized to do), Goqulay recognized her as such partner, and is now in estoppel to deny herposition as a general partner, with authority to administer and alienate partnership property. Thearticles did not provide that the heirs of the deceased would be merely limited partners; on thecontrary, they expressly stipulated that in case of death of either partner, “the co partnership willhave to be continued” with the heirs or assignees. It certainly could not be continued if it were tobe converted from a general partnership into a limited partnership since the difference betweenthe two kinds of associations is fundamental, and specially because the conversion into a limitedassociation would leave the heirs of the deceased partner without a share in the management.Hence, the contractual stipulation actually contemplated that the heirs would become generalpartners rather than limited ones.

MUÑASQUE v. CAG.R. No. L-39780; November 11, 1985

Ponente: J. Gutierrez. JrFACTS:

Elmo Muñasque filed a complaint for payment of sum of money anddamages against respondents Celestino Galan, Tropical Commercial,

Co., Inc. (Tropical) and Ramon Pons, alleging that the petitioner enteredinto a contract with respondent Tropical through its Cebu Branch

Manager Pons for remodeling a portion of its building withoutexchanging or expecting any consideration from Galan although the

latter was casually named as partner in the contract; that by virtue ofhis having introduced the petitioner to the employing company

(Tropical), Galan would receive some kind of compensation in the formof some percentages or commission.

Tropical agreed to give petitioner the amount of P7,000.00 soon afterthe construction began and thereafter the amount of P6,000.00 every

fifteen (15) days during the construction to make a total sum ofP25,000.00.

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.

On January 26, 1967, when the second check for P6,000.00 was due,petitioner refused to indorse said check presented to him by Galan butthrough later manipulations, respondent Pons succeeded in changing

the payee's name to Galan and Associates, thus enabling Galan to cashthe same at the Cebu Branch of the Philippine Commercial and

Industrial Bank (PCIB) placing the petitioner in great financial difficultyin his construction business and subjecting him to demands of

creditors to pay for construction materials, the payment of whichshould have been made from the P13,000.00 received by Galan.

Due to the unauthorized disbursement by respondents Tropical andPons of the sum of P13,000.00 to Galan, petitioner demanded that saidamount be paid to him by respondents under the terms of the written

contract between the petitioner and respondent company.

ISSUE: Whether there was a breach of trust when Tropical disbursed the money to Galan instead of Muñasque

HELD:

No, there was no breach of trust when Tropical disbursed the money toGalan instead of Muñasque.

The Supreme Court held that there is nothing in the records to indicate that the partnership organized by the two men was not a genuine one. A falling out or misunderstanding between the partners does not convert the partnership into a sham organization.

In the case at bar the respondent Tropical had every reason to believe

that a partnership existed between the petitioner and Galan and nofault or error can be imputed against it for making payments to "Galanand Associates" and delivering the same to Galan because as far as it

was concerned, Galan was a true partner with real authority to transacton behalf of the partnership with which it was dealing.

Island Sales vs. General Construction Company

United Pioneers General Construction Company is a general partnershipformed by Benjamin Daco, Daniel Guizona, Noel Sim, Augusto Palisoc andRomulo Lumauig. In 1961, United Pioneers purchased by installment amotor vehicle from Island Sales, Inc. United Pioneers defaulted in itspayment hence it was sued and the 5 partners were impleaded as co-defendants.

Upon motion of Island Sales, Lumauig was removed as a defendant.

United Pioneers lost the civil case and the trial court rendered judgmentordering United Pioneers to pay the outstanding balance plus interest andcosts. It further decreed that the remaining 4 co-defendants shall payIsland Sales in case United Pioneers’ property will not be enough to satisfyits indebtedness to Island Sales.

ISSUE: What is the extent of the liability of the partners considering thatone partner was removed as a co-defendant on motion of Island Sales?

HELD: Their liability is pro-rata pursuant to Article 1816 of the Civil Code.But is should be noted that since there were 5 partners when thepurchase was made in behalf of the partnership, the liability of eachpartner should be 1/5th (of the company’s obligation) each. The fact thatthe complaint against Lumauig was dismissed, upon motion of the IslandSales, does not unmake Lumauig as a general partner in the company. Inso moving to dismiss the complaint, Island Sales merely condonedLumauig’s individual liability to them.

SY vs. COURT OF APPEALS

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

Facts: Sy Yong Hu & Sons is a partnership. In September, 1977, Keng Sian, Sy Yong

Hu’s common-law wife sued the partnership for the reconveyance of ½ of its properties

and the fruits thereof.

During the pendency of the suit, one of the partners. Marciano Sy, filed a petition

against his partners with the SEC asking that he be appointed managing partner to

replace Jose Sy who earlier died. SC hearing officer Sison dismissed the petition and

declared the partnership dissolved and named one of the remaining partners as the

managing partner.

The SEC en banc affirmed Sison’s decision, ordering the distribution and

partition of partnership assets.

However, before the same can be implemented, Keng Sian’s children with Sy

Yong Hu were allowed by the SEC to intervene. The intervenors contend that their civil

suit against the partnership is still pending and that no petition for distribution should be

commenced.

SEC Hearing Officer Tongco who replaced Sison placed the partnership under

receivership thereby preventing the partition and distribution of partnership assets. This

was affirmed by the SEC en banc.

The remaining partners of the firm appealed.

The CA ultimately affirmed the Tongco ruling.

Issue: Is the preservation of the partnership assets through receivership inconsistent

with the earlier decision declaring the partnership’s dissolution?

Held: The Sison decision declaring the partnership’s dissolution did not pose any

obstacle to the hearing officer to issue orders not inconsistent therewith. From the time

the dissolution is ordered until the actual termination of the partnership the SEC retained

jurisdiction to adjudicate all incidents relative thereto. Thus, the Tongco order cannot be

said to have varied the final order of dissolution. Neither did it suspend the dissolution of

the partnership. It only suspended the partition and distribution of the partnership

assets. Further, the dissolution of a partnership is the change in relation of the parties

caused by any partner ceasing to be associated in the carrying on, as might be

distinguished from the winding up, of its business. Upon its dissolution, the partnership

continues and its legal personality is retained until the complete winding up of its

business culminating in its termination.

The dissolution of the partnership did not mean that the juridical entity was

immediately terminated and that the distribution of the assets to its partners should

perfunctorily follow. On the contrary, the dissolution simply effected a change in the

relationship among the partners. The partnership, although dissolved, continues to exist

until its termination, at which time the winding up of its affairs should have been

completed and the net partnership assets are partitioned and distributed to the partners.

Idos v. CA G.R. NO. 110782, September 25, 1998, Quisumbing, J.

Facts: In 1985, Eddie Alarilla and Irma Idos formed a partnership which they decided to terminate after ayear. To pay Alarilla’s share of the asset, Idos issued 4 post dated checks. Alarilla was able toencash the first, second and fourth checks but the third was dishonored for insufficiency of funds.He demanded payment but Idos failed to pay. She claimed that the checks were issued asassurance of Alarilla’s share in the assets of the partnership and that it was supposed to bedeposited until the stocks were sold. He filed an information for violation of BP blg. 22 againstIdos in which she was found guilty by the trial court. Issue: Did the court confused and merged into one the legal concepts of dissolution, liquidationand termination of a partnership? Ruling: The partners agreement to terminate the partnership did not automatically dissolved thepartnership. They were in the process of winding-up when the check in question was issued. Thebest evidenceof the existence of the partnership, which was not yet terminated were the unsoldgoods and uncollected receivables which were presented to the trial court. Article 1829 of theCivil Code provides that “on dissolution the partnership is not terminated but continues until thewinding-up of partnership affairs is completed. Since the partnership has not been terminated,Idos and Alarilla remained co-partners. The check was issued by petitioner to respondent aswould a partner to another and not as a payment by debtor to creditor. Thus, absent the firstelement of the complained offense, the act is not punishable by the statute.

Lichauco vs. Lichauco

33 Phil 350 – Business Organization – Partnership, Agency, Trust –Dissolution

In 1901, F. Lichauco Hermanos partnership was formed. It was provided,among others, in the partnership agreement that Faustino Lichauco will bethe managing partner; and that the firm cannot be dissolved except uponthe 2/3 vote of all the partners. In 1904, the firm wasn’t performing welland was unprofitable and so its machineries were dismantled. In 1905,Eugenia and one other partner demanded Faustino to make an accountingof the firm’s assets but Faustino refused to do so. Belatedly in 1912,Eugenia et al filed a civil suit against Faustino to compel the latter toperform ac accounting. Faustino, in his defense, argued that the firm wasnot dissolved pursuant to the partnership agreement there being no 2/3vote from all the members (Faustino et al are only 1/5 of the firm).

ISSUE: Whether or not Eugenia et al can demand an accounting.

HELD: Yes. The firm was already dissolved in 1904 when its machinerieswere dismantled – this was a sign that the firm abandoned and concludedthe purpose for it was formed (rice cleaning business). Upon saiddissolution, it was the duty of Faustino to liquidate the assets and informhis partners. The provision which requires a 2/3 votes of all the partners todissolve the firm cannot be given effect because the same denied theright of a less number of partners to effect the dissolution especiallywhere the firm has already sustained huge losses. It would be absurd andunreasonable to hold that such an association could never be dissolvedand liquidated without the consent and agreement of two-thirds of itspartners, notwithstanding that it had lost all its capital, or had becomebankrupt, or that the enterprise for which it had been organized had beenconcluded or utterly abandoned.

Soncuya v. de Luna G.R. No. L-45464, April 28, 1939, Villa-Real, J.

Facts: Petitioner filed a complaint against respondent for damages as a result of the fraudulentadministration of the partnership, “Centro Escolar de Senoritas” of which petitioner and thedeceased Avelino Librada were members. For the purpose of adjudicating to plaintiff damageswhich he alleges to have suffered as a partner, it is necessary that a liquidation of the businessbe made that the end profits and losses maybe known and the causes of the latter and the

responsibility of the defendant as well as the damages in which each partner may have suffered,maybe determined. Issue: Whether the petitioner is entitled to damages. Ruling: According to the Supreme Court the complaint is not sufficient to constitute a cause of action onthe part of the plaintiff as member of the partnership to collect damages from defendant asmanaging partner thereof, without previous liquidation. Thus, for a partner to be able to claimfrom another partner who manages the general co-partnership, allegedly suffered by him byreason of the fraudulent administration of the latter, a previous liquidation of said partnership isnecessary.

Primelink vs. Lazatin-Magat

In 1994, Primelink Properties and the Lazatin siblings entered into a jointventure agreement whereby the Lazatins shall contribute a huge parcelof land and Primelink shall develop the same into a subdivision. For 4years however, Primelink failed to develop the said land. So in 1998, theLazatins filed a complaint to rescind the joint venture agreement withprayer for preliminary injunction. In said case, Primelink was declared indefault or failing to file an answer and for asking multiple motions forextension. The trial court eventually ruled in favor of the Lazatins and itordered Primelink to return the possession of said land to the Lazatins aswell as some improvements which Primelink had so far over the propertywithout the Lazatins paying for said improvements. This decision wasaffirmed by the Court of Appeals. Primelink is now assailing the order; thatturning over improvements to the Lazatins without reimbursement isunjust; that the Lazatins did not ask the properties to be placed undertheir possession but they merely asked for rescission.

ISSUE: Whether or not the improvements made by Primelink should alsobe turned over under the possession of the Lazatins.

HELD: Yes. In the first place, even though the Lazatins did specificallypray for possession the same (placing of improvements under theirpossession) is incidental in the relief they prayed for. They are therefore

entitled possession over the parcel of land plus the improvements madethereon made by Primelink.

In this jurisdiction, joint ventures are governed by the laws of partnership.Under the laws of partnership, when a partnership is dissolved, as in thiscase when the trial court rescinded the joint venture agreement, theinnocent party has the right to wind up the partnership affairs.

With the rescission of the JVA on account of petitioners’ fraudulent acts, allauthority of any partner to act for the partnership is terminated except sofar as may be necessary to wind up the partnership affairs or to completetransactions begun but not yet finished. On dissolution, the partnership isnot terminated but continues until the winding up of partnership affairs iscompleted. Winding up means the administration of the assets of thepartnership for the purpose of terminating the business and dischargingthe obligations of the partnership.

It must be stressed, too, that although the Lazatins acquired possession ofthe lands and the improvements thereon, the said lands andimprovements remained partnership property, subject to the rights andobligations of the parties, inter se, of the creditors and of third parties andsubject to the outcome of the settlement of the accounts between theparties, absent any agreement of the parties in their JVA to the contrary(here no agreement in the JVA as to winding up). Until the partnershipaccounts are determined, it cannot be ascertained how much any of theparties is entitled to, if at all.

EMILIO EMNACE vs. COURT OF APPEALS, ESTATE OF VICENTE TABANAO, SHERWIN TABANAO, VICENTE WILLIAM TABANAO, JANETTETABANAO DEPOSOY, VICENTA MAY 

TABANAO VARELA, ROSELA TABANAO and VINCENT TABANAO

G.R. No. 126334 November 23, 2001

FACTSPetitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia

were partners in a business concern known as Ma. Nelma FishingIndustry. Sometime in January of 1986, they decided to dissolve theirpartnership and executed an agreement of partition and distribution of thepartnership properties among them, consequent to Jacinto Divinagracia'swithdrawal from the partnership. Among the assets to be distributed were5 fishing boats, 6 vehicles, 2 parcels of land located at Sto. Niño andTalisay, Negros Occidental, and cash deposits in the local branches of theBank of the Philippine Islands and Prudential Bank.

Throughout the existence of the partnership, and even after VicenteTabanao's untimely demise, petitioner failed to submit to Tabanao's heirsany statement of assets and liabilities of the partnership, and to render anaccounting of the partnership's finances. Consequently, Tabanao' s heirs,respondents herein, filed against petitioner an action for accounting,payment of shares, division of assets and damages.Petitioner filed amotion to dismiss the complaint on the grounds of improper venue, lack ofjurisdiction over the nature of the action or suit, and lack of capacity ofthe estate of Tabanao to sue.

The trial court denied the motion to dismiss. It held that venue wasproperly laid because, while realties were involved, the action wasdirected against a particular person on the basis of his personal liability.Finally, the trial court held that the heirs of Tabanao had a right to sue intheir own names, in view of the provision of Article 777 of the Civil Code,which states that the rights to the succession are transmitted from themoment of the death of the decedent. Petitioner filed a petition forcertiorari before the Court of Appeals which was dismissed.

ISSUE1. Whether the venue was improperly laid since the action is a realaction involving a parcel of land that is located outside the territorialjurisdiction of the court a quo2. Whether the surviving spouse of Vicente Tabanao has legal capacityto sue since she was never appointed as administratrix or executrix of hisestate

RULING1. No. The records indubitably show that respondents are asking thatthe assets of the partnership be accounted for, sold and distributed

according to the agreement of the partners. The fact that two of theassets of the partnership are parcels of land does not materially changethe nature of the action. It is an action in personam because it is an actionagainst a person, namely, petitioner, on the basis of his personal liabilityand not an action in rem where the action is against the thing itselfinstead of against the person. In fact, it is only incidental that part of theassets of the partnership under liquidation happen to be parcels of land.

It also seeks the enforcement of, and petitioner's compliance with,the contract that the partners executed to formalize the partnership'sdissolution, as well as to implement the liquidation and partition of thepartnership's assets. Clearly, it is a personal action that, in effect, claims adebt from petitioner and seeks the performance of a personal duty on hispart. In fine, respondents' complaint seeking the liquidation and partitionof the assets of the partnership with damages is a personal action whichmay be filed in the proper court where any of the parties reside. As it is,venue in this case was properly laid and the trial court correctly ruled so.

2. Yes. The surviving spouse does not need to be appointed as executrixor administratrix of the estate before she can file the action. She and herchildren are complainants in their own right as successors of VicenteTabanao. From the very moment of Vicente Tabanao's death, his rightsinsofar as the partnership was concerned were transmitted to his heirs, forrights to the succession are transmitted from the moment of death of thedecedent. Whatever claims and rights Vicente Tabanao had against thepartnership and petitioner were transmitted to respondents by operationof law, more particularly by succession, which is a mode of acquisition byvirtue of which the property, rights and obligations to the extent of thevalue of the inheritance of a person are transmitted. Moreover,respondents became owners of their respective hereditary shares fromthe moment Vicente Tabanao died.