Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 159333             July 31, 2006

ARSENIO T. MENDIOLA, petitioner, vs.COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, PACIFIC FOREST RESOURCES, PHILS., INC. and/or CELLMARK AB, respondents.

D E C I S I O N

PUNO, J.:

On appeal are the Decision1 and Resolution2 of the Court of Appeals, dated January 30, 2003 and July 30, 2003, respectively, in CA-G.R. SP No. 71028, affirming the ruling3 of the National Labor Relations Commission (NLRC), which in turn set aside the July 30, 2001 Decision4 of the labor arbiter. The labor arbiter declared illegal the dismissal of petitioner from employment and awarded separation pay, moral and exemplary damages, and attorney's fees.

The facts are as follows:

Private respondent Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation organized and existing under the laws of California, USA. It is a subsidiary of Cellulose Marketing International, a corporation duly organized under the laws of Sweden, with principal office in Gothenburg, Sweden.

Private respondent Pacfor entered into a "Side Agreement on Representative Office known as Pacific Forest Resources (Phils.), Inc."5 with petitioner Arsenio T. Mendiola (ATM), effective May 1, 1995, "assuming that Pacfor-Phils. is already approved by the Securities and Exchange Commission [SEC] on the said date."6 The Side Agreement outlines the business relationship of the parties with regard to the Philippine operations of Pacfor. Private respondent will establish a Pacfor representative office in the Philippines, to be known as Pacfor Phils, and petitioner ATM will be its President. Petitioner's base salary and the overhead expenditures of the company shall be borne by the representative office and funded by Pacfor/ATM, since Pacfor Phils. is equally owned on a 50-50 equity by ATM and Pacfor-usa.

On July 14, 1995, the SEC granted the application of private respondent Pacfor for a license to transact business in the Philippines under the name of Pacfor or Pacfor Phils.7 In its application, private respondent Pacfor proposed to establish its representative office in the Philippines with the purpose of monitoring and coordinating the market activities for paper products. It also designated petitioner as its resident agent in the Philippines, authorized to accept summons and processes in all legal proceedings, and all notices affecting the corporation.8

In March 1997, the Side Agreement was amended through a "Revised Operating and Profit Sharing Agreement for the Representative Office Known as Pacific Forest Resources (Philippines),"9 where the salary of petitioner was increased to $78,000 per annum. Both agreements show that the operational expenses will be borne by the representative office and funded by all parties "as equal partners," while the profits and commissions will be shared among them.

In July 2000, petitioner wrote Kevin Daley, Vice President for Asia of Pacfor, seeking confirmation of his 50% equity of Pacfor Phils.10 Private respondent Pacfor, through William Gleason, its President, replied that petitioner is not a part-owner of Pacfor Phils. because the latter is merely Pacfor-USA's representative office and not an entity separate and distinct from Pacfor-USA. "It's simply a 'theoretical company' with the purpose of dividing the income 50-50."11 Petitioner presumably knew of this arrangement from the start, having been the one to propose to private respondent Pacfor the setting up of a representative office, and "not a branch office" in the Philippines to save on taxes.12

Petitioner claimed that he was all along made to believe that he was in a joint venture with them. He alleged he would have been better off remaining as an independent agent or representative of Pacfor-USA as ATM Marketing Corp.13 Had he known that no joint venture existed, he would not have allowed Pacfor to take the profitable business of his own company, ATM Marketing Corp.14 Petitioner raised other issues, such as the rentals of office furniture, salary of the employees, company car, as well as commissions allegedly due him. The issues were not resolved, hence, in October 2000, petitioner wrote Pacfor-USA demanding payment of unpaid commissions and office furniture and equipment rentals, amounting to more than one million dollars.15

On November 27, 2000, private respondent Pacfor, through counsel, ordered petitioner to turn over to it all papers, documents, files, records, and other materials in his or ATM Marketing Corporation's possession that belong to Pacfor or Pacfor Phils. 16 On December 18, 2000, private respondent Pacfor also required petitioner to remit more than three hundred thousand-peso Christmas giveaway fund for clients of Pacfor Phils.17 Lastly, private respondent Pacfor withdrew all its offers of settlement and ordered petitioner to transfer title and turn over to it possession of the service car.18

Private respondent Pacfor likewise sent letters to its clients in the Philippines, advising them not to deal with Pacfor Phils. In its letter to Intercontinental Paper Industries, Inc., dated November 21, 2000, private respondent Pacfor stated:

Until further notice, please course all inquiries and communications for Pacific Forest Resources (Philippines) to:

Pacific Forest Resources200 Tamal Plaza, Suite 200Corte Madera, CA, USA 94925(415) 927 1700 phone(415) 381 4358 fax

Please do not send any communication to Mr. Arsenio "Boy" T. Mendiola or to the offices of ATM Marketing Corporation at Room 504, Concorde Building, Legaspi Village, Makati City, Philippines.19

In another letter addressed to Davao Corrugated Carton Corp. (DAVCOR), dated December 2000, private respondent directed said client "to please communicate directly with us on any further questions associated with these payments or any future business. Do not communicate with [Pacfor] and/or [ATM]."20

Petitioner construed these directives as a severance of the "unregistered partnership" between him and Pacfor, and the termination of his employment as resident manager of Pacfor Phils.21 In a memorandum to the employees of Pacfor Phils., dated January 29, 2001, he stated:

I received a letter from Pacific Forest Resources, Inc. demanding the turnover of all records to them effective December 19, 2000. The company records were turned over only on January 26, 2001. This means our jobs with Pacific Forest were terminated effective December 19, 2000. I am concerned about your welfare. I would like to help you by offering you to work with ATM Marketing Corporation.

Please let me know if you are interested.22

On the basis of the "Side Agreement," petitioner insisted that he and Pacfor equally own Pacfor Phils. Thus, it follows that he and Pacfor likewise own, on a 50/50 basis, Pacfor Phils.' office furniture and equipment and the service car. He also reiterated his demand for unpaid commissions, and proposed to offset these with the remaining Christmas giveaway fund in his possession.23 Furthermore, he did not renew the lease contract with Pulp and Paper, Inc., the lessor of the office premises of Pacfor Phils., wherein he was the signatory to the lease agreement.24

On February 2, 2001, private respondent Pacfor placed petitioner on preventive suspension and ordered him to show cause why no disciplinary action should be taken against him. Private respondent Pacfor charged petitioner with willful disobedience and serious misconduct for his refusal to turn over the service car and the Christmas giveaway fund which he applied to his alleged unpaid commissions. Private respondent also alleged loss of confidence and gross neglect of duty on the part of petitioner for allegedly allowing another corporation owned by petitioner's relatives, High End Products, Inc. (HEPI), to use the same telephone and facsimile numbers of Pacfor, to possibly steal and divert the sales and business of private respondent for HEPI's principal, International Forest Products, a competitor of private respondent.25

Petitioner denied the charges. He reiterated that he considered the import of Pacfor President William Gleason's letters as a "cessation of his position and of the existence of Pacfor Phils." He likewise informed private respondent Pacfor that ATM Marketing Corp. now occupies Pacfor Phils.' office premises,26 and demanded payment of his separation pay.27 On February 15, 2001, petitioner filed his complaint for illegal dismissal, recovery of separation pay, and payment of attorney's fees with the NLRC.28

In the meantime, private respondent Pacfor lodged fresh charges against petitioner. In a memorandum dated March 5, 2001, private respondent directed petitioner to explain why he should not be disciplined for serious misconduct and conflict of interest. Private respondent charged petitioner anew with serious misconduct for the latter's alleged act of fraud and misrepresentation in authorizing the release of an additional peso salary for himself, besides the dollar salary agreed upon by the parties. Private respondent also accused petitioner of disloyalty and representation of conflicting interests for having continued using the Pacfor Phils.' office for operations of HEPI. In addition, petitioner allegedly solicited business for HEPI from a competitor company of private respondent Pacfor.29

Labor Arbiter Felipe Pati ruled in favor of petitioner, finding there was constructive dismissal. By directing petitioner to turn over all office records and materials, regardless of whether he may have retained copies, private respondent Pacfor virtually deprived petitioner of his job by the gradual diminution of his authority as resident manager. Petitioner's position as resident manager whose duty, among others, was to maintain the security of its business transactions and communications was rendered meaningless. The dispositive portion of the decision of the Labor Arbiter reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering herein respondents Cellmark AB and Pacific Forest Resources, Inc., jointly and severally to compensate complainant Arsenio T. Mendiola separation pay equivalent to at least one month for every year of service, whichever is higher (sic), as reinstatement is no longer feasible by reason of the strained relations of the parties equivalent to five (5) months in the amount of $32,000.00 plus the sum of P250,000.00; pay complainant the sum of P500,000.00 as moral and exemplary damages and ten percent (10%) of the amounts awarded as and for attorney's fees.

All other claims are dismissed for lack of basis.

SO ORDERED.30

Private respondent Pacfor appealed to the NLRC which ruled in its favor. On December 20, 2001, the NLRC set aside the July 30, 2001 decision of the labor arbiter, for lack of jurisdiction and lack of merit.31 It held there was no employer-employee relationship between the parties. Based on the two agreements between the parties, it concluded that petitioner is not an employee of private respondent Pacfor, but a full co-owner (50/50 equity).

The NLRC denied petitioner's Motion for Reconsideration.32

Petitioner was not successful on his appeal to the Court of Appeals. The appellate court upheld the ruling of the NLRC.

Petitioner's Motion for Reconsideration33 of the decision of the Court of Appeals was denied.

Hence, this appeal.34

Petitioner assigns the following errors:

A. The Respondent Court of Appeals committed reversible error and abused its discretion in rendering judgment against petitioner since jurisdiction has been acquired over the subject matter of the case as there exists employer-employee relationship between the parties.

B. The Respondent Court of Appeals committed reversible error and abused its discretion in ruling that jurisdiction over the subject matter cannot be waived and may be alleged even for the first time on appeal or considered by the court motu prop[r]io.35

The first issue is whether an employer-employee relationship exists between petitioner and private respondent Pacfor.

Petitioner argues that he is an industrial partner of the partnership he formed with private respondent Pacfor, and also an employee of the partnership. Petitioner insists that an industrial partner may at the same time be an employee of the partnership, provided there is such an agreement, which, in this case, is the "Side Agreement" and the "Revised Operating and Profit Sharing Agreement." The Court of Appeals denied the appeal of petitioner, holding that "the legal basis of the complaint is not employment but perhaps partnership, co-ownership, or independent contractorship." Hence, the Labor Code cannot apply.

We hold that petitioner is an employee of private respondent Pacfor and that no partnership or co-ownership exists between the parties.

In a partnership, the members become co-owners of what is contributed to the firm capital and of all property that may be acquired thereby and through the efforts of the members.36 The property or stock of the partnership forms a community of goods, a common fund, in which each party has a proprietary interest.37 In fact, the New Civil Code regards a partner as a co-owner of specific partnership property.38 Each partner possesses a joint interest in the whole of partnership property. If the relation does not have this feature, it is not one of partnership.39 This essential element, the community of interest, or co-ownership of, or joint interest in partnership property is absent in the relations between petitioner and private respondent Pacfor. Petitioner is not a part-owner of Pacfor Phils. William Gleason, private respondent Pacfor's President established this fact when he said that Pacfor Phils. is simply a "theoretical company" for the purpose of dividing the income 50-50. He stressed that petitioner knew of this arrangement from the very start, having been the one to propose to private respondent Pacfor the setting up of a representative office, and "not a branch office" in the Philippines to save on taxes. Thus, the parties in this case, merely shared profits. This alone does not make a partnership.40

Besides, a corporation cannot become a member of a partnership in the absence of express authorization by statute or charter.41 This doctrine is based on the following considerations: (1) that the mutual agency between the partners, whereby the corporation would be bound by the acts of persons who are not its duly appointed and authorized agents and officers, would be inconsistent with the policy of the law that the corporation shall manage its own affairs separately and exclusively; and, (2) that such an arrangement would improperly allow corporate property to become subject to risks not contemplated by the stockholders when they originally invested in the corporation.42No such authorization has been proved in the case at bar.

Be that as it may, we hold that on the basis of the evidence, an employer-employee relationship is present in the case at bar. The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's conduct. The most important element is the employer's control of the employee's conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.43

In the instant case, all the foregoing elements are present. First, it was private respondent Pacfor which selected and engaged the services of petitioner as its resident agent in the Philippines. Second, as stipulated in their Side Agreement, private respondent Pacfor pays petitioner his salary amounting to $65,000 per annum which was later increased to $78,000. Third, private respondent Pacfor holds the power of dismissal, as may be gleaned through the various memoranda it issued against petitioner, placing the latter on preventive suspension while charging him with various offenses, including willful disobedience, serious misconduct, and gross neglect of duty, and ordering him to show cause why no disciplinary action should be taken against him.

Lastly and most important, private respondent Pacfor has the power of control over the means and method of petitioner in accomplishing his work.

The power of control refers merely to the existence of the power, and not to the actual exercise thereof. The principal consideration is whether the employer has the right to control the manner of doing the work, and it is not the actual exercise of the right by interfering with the work, but the right to control, which constitutes the test of the existence of an employer-employee relationship.44 In the case at bar, private respondent Pacfor, as employer, clearly possesses such right of control. Petitioner, as private respondent Pacfor's resident agent in the Philippines, is, exactly so, only an agent of the corporation, a representative of Pacfor, who transacts business, and accepts service on its behalf.

This right of control was exercised by private respondent Pacfor during the period of November to December 2000, when it directed petitioner to turn over to it all records of Pacfor Phils.; when it ordered petitioner to remit the Christmas giveaway fund intended for clients of Pacfor Phils.; and, when it withdrew all its offers of settlement and ordered petitioner to transfer title and turn over to it the possession of the service car. It was also during this period when private respondent Pacfor sent letters to its clients in the Philippines, particularly Intercontinental Paper Industries, Inc. and DAVCOR, advising them not to deal with petitioner and/or Pacfor Phils. In its letter to DAVCOR, private respondent Pacfor replied to the client's request for an invoice payment extension, and formulated a revised payment program for DAVCOR. This is one unmistakable proof that private respondent Pacfor exercises control over the petitioner.

Next, we shall determine if petitioner was constructively dismissed from employment.

The evidence shows that when petitioner insisted on his 50% equity in Pacfor Phils., and would not quit however, private respondent Pacfor began to systematically deprive petitioner of his duties and benefits to make him feel that his presence in the company was no longer wanted. First, private respondent Pacfor directed petitioner to turn over to it all records of Pacfor Phils. This would certainly make the work of petitioner very difficult, if not impossible. Second, private respondent Pacfor ordered petitioner to remit the Christmas giveaway fund intended for clients of Pacfor Phils. Then it ordered petitioner to transfer title and turn over to it the possession of the service car. It also advised its clients in the Philippines, particularly Intercontinental Paper Industries, Inc. and DAVCOR, not to deal with petitioner and/or Pacfor Phils. Lastly, private respondent Pacfor appointed a new resident agent for Pacfor Phils.45

Although there is no reduction of the salary of petitioner, constructive dismissal is still present because continued employment of petitioner is rendered, at the very least, unreasonable.46 There is an act of clear discrimination, insensibility or disdain by the employer that continued employment may become so unbearable on the part of the employee so as to foreclose any choice on his part except to resign from such employment.47

The harassing acts of the private respondent are unjustified. They were undertaken when petitioner sought clarification from the private respondent about his supposed 50% equity on Pacfor Phils. Private respondent Pacfor invokes its rights as an owner. Allegedly, its issuance of the foregoing directives against petitioner was a valid exercise of management prerogative. We remind private respondent Pacfor that the exercise of management prerogative is not absolute. "By its very nature, encompassing as it could be, management prerogative must be exercised in good faith and with due regard to the rights of labor – verily, with the principles of fair play at heart and justice in mind." The exercise of management prerogative cannot be utilized as an implement to circumvent our laws and oppress employees.48

As resident agent of private respondent corporation, petitioner occupied a position involving trust and confidence. In the light of the strained relations between the parties, the full restoration of an employment relationship based on trust and confidence is no longer possible. He should be awarded separation pay, in lieu of reinstatement.

IN VIEW WHEREOF, the petition is GRANTED. The Court of Appeals' January 30, 2003 Decision in CA-G.R. SP No. 71028 and July 30, 2003 Resolution, affirming the December 20, 2001 Decision of the National Labor Relations Commission,

are ANNULED and SET ASIDE. The July 30, 2001 Decision of the Labor Arbiter is REINSTATED with the MODIFICATION that the amount of P250,000.00 representing an alleged increase in petitioner's salary shall be deducted from the grant of separation pay for lack of evidence.

SO ORDERED.

Sandoval-Gutierrez, Corona, Azcuna, Garcia, J.J., concur.

FIRST DIVISION

G.R. No. 174149

 J. TIOSEJO INVESTMENT CORP.,

Petitioner,

- versus -

SPOUSES BENJAMIN AND ELEANOR ANG,Respondents. 

 

PEREZ, J.: 

Filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure, the petition for review at bench seeks the reversal of the 

Resolutions dated 23 May 2006 and 9 August 2006 issued by the Third Division of the Court of Appeals (CA) in CA-G.R. SP No. 

93841 which, respectively, dismissed the petition for review of petitioner J. Tiosejo Investment Corp. (JTIC) for having been filed 

out of time[1] and denied the motion for reconsideration of said dismissal.[2]

 

The Facts

 

On 28 December 1995 petitioner entered into a Joint Venture Agreement (JVA) with Primetown Property Group, Inc. (PPGI) for 

the development of a residential condominium project to be known as The Meditel on the formers 9,502 square meter property 

along Samat St., Highway Hills, Mandaluyong City.[3] With petitioner contributing the same property to the joint venture and PPGI 

undertaking to develop the condominium, the JVA provided, among other terms and conditions, that the developed units shall be 

shared by the former and the latter at a ratio of 17%-83%, respectively.[4] While both parties were allowed, at their own 

individual responsibility, to pre-sell the units pertaining to them,[5] PPGI further undertook to use all proceeds from the pre-

selling of its saleable units for the completion of the Condominium Project. [6]

 

On 17 June 1996, the Housing and Land Use Regulatory Board (HLURB) issued License to Sell No. 96-06-2854 in favor of petitioner 

and PPGI as project owners.[7] By virtue of said license, PPGI executedContract to Sell No. 0212 with Spouses Benjamin and 

Eleanor Ang on 5 February 1997, over the 35.45-square meter condominium unit denominated as Unit A-1006, for the agreed 

contract price of P52,597.88per square meter or a total P2,077,334.25.[8] On the same date PPGI and respondents also 

executed Contract to Sell No. 0214 over the 12.50 square meter parking space identified as Parking Slot No. 0405, for the 

stipulated consideration of P26,400.00 square meters or a total of P313,500.00.[9]

 

On 21 July 1999, respondents filed against petitioner and PPGI the complaint for the rescission of the aforesaid Contracts to Sell 

docketed before the HLURB as HLURB Case No. REM 072199-10567.Contending that they were assured by petitioner and PPGI 

that the subject condominium unit and parking space would be available for turn-over and occupancy in December 1998, 

respondents averred, among other matters, that in view of the non-completion of the project according to said representation, 

respondents instructed petitioner and PPGI to stop depositing the post-dated checks they issued and to cancel said Contracts to 

Sell; and, that despite several demands, petitioner and PPGI have failed and refused to refund the P611,519.52 they already paid 

under the circumstances. Together with the refund of said amount and interests thereon at the rate of 12% per annum, 

respondents prayed for the grant of their claims for moral and exemplary damages as well as attorneys fees and the costs.[10]

 

Specifically denying the material allegations of the foregoing complaint, PPGI filed its 7 September 1999 answer alleging that the 

delay in the completion of the project was attributable to the economic crisis which affected the country at the time; that the 

unexpected and unforeseen inflation as well as increase in interest rates and cost of building materials constitute force

majeure and were beyond its control; that aware of its responsibilities, it offered several alternatives to its buyers like 

respondents for a transfer of their investment to its other feasible projects and for the amounts they already paid to be 

considered as partial payment for the replacement unit/s; and, that the complaint was prematurely filed in view of the on-going 

negotiations it is undertaking with its buyers and prospective joint venture partners. Aside from the dismissal of the complaint, 

PPGI sought the readjustment of the contract price and the grant of its counterclaims for attorneys fees and litigation expenses.

[11]

 

Petitioner also specifically denied the material allegations of the complaint in separate answer dated 5 February 2002[12] which it 

amended on 20 May 2002. Calling attention to the fact that its prestation under the JVA consisted in contributing the property on 

which The Meditel was to be constructed, petitioner asseverated that, by the terms of the JVA, each party was individually 

responsible for the marketing and sale of the units pertaining to its share; that not being privy to the Contracts to Sell executed by 

PPGI and respondents, it did not receive any portion of the payments made by the latter; and, that without any contributory fault 

and negligence on its part, PPGI breached its undertakings under the JVA by failing to complete the condominium project. In 

addition to the dismissal of the complaint and the grant of its counterclaims for exemplary damages, attorneys fees, litigation 

expenses and the costs, petitioner interposed a cross-claim against PPGI for full reimbursement of any sum it may be adjudged 

liable to pay respondents.[13]

 

Acting on the position papers and draft decisions subsequently submitted by the parties,[14] Housing and Land Use (HLU) Arbiter 

Dunstan T. San Vicente went on to render the 30 July 2003 decision declaring the subject Contracts to Sell cancelled and rescinded 

on account of the non-completion of the condominium project. On the ground that the JVA created a partnership liability on their 

part, petitioner and PPGI, as co-owners of the condominium project, were ordered to pay: (a) respondents claim for refund of 

the P611,519.52 they paid, with interest at the rate of 12% per annum from 5 February 1997; (b) damages in the sum 

of P75,000.00; (c) attorneys fees in the sum of P30,000.00; (d) the costs; and, (e) an administrative fine in the sum of P10,000.00 

for violation of Sec. 20 in relation to Sec. 38 of Presidential Decree No. 957. [15] Elevated to the HLURB Board of Commissioners 

via the petition for review filed by petitioner,[16] the foregoing decision was modified to grant the latters cross-claim in the 14 

September 2004 decision rendered by said administrative bodys Second Division in HLURB Case No. REM-A-031007-0240,[17] to 

wit:

 

Wherefore, the petition for review of the respondent Corporation is dismissed. However, the decision of the Office below dated July 30, 2003 is modified, hence, its dispositive portion shall read: 

1. Declaring the contracts to sell, both dated February 5, 1997, as cancelled and rescinded, and ordering the respondents to immediately pay the complainants the following:

 a.       The amount of P611,519.52, with interest at the legal rate reckoned from February 5, 1997 until fully paid;b.      Damages of P75,000.00;c.       Attorneys fees equivalent to P30,000.00; andd.      The Cost of suit;

 2. Ordering respondents to pay this Office administrative fine of P10,000.00 for violation of Section 20 in relation to Section 38 of P.D. 957; and3. Ordering respondent Primetown to reimburse the entire amount which the respondent Corporation will be constrained to pay the complainants. So ordered.[18]

  

With the denial of its motion for reconsideration of the foregoing decision,[19] petitioner filed a Notice of Appeal dated 28 

February 2005 which was docketed before the Office of the President (OP) as O.P. Case No. 05-B-072.[20] On 3 March 2005, the 

OP issued an order directing petitioner to submit its appeal memorandum within 15 days from receipt thereof.[21] Acting on the 

motion therefor filed, the OP also issued another order on the same date, granting petitioner a period of 15 days from 28 

February 2005 or until 15 March 2005 within which to file its appeal memorandum.[22] In view of petitioners filing of a second 

motion for extension dated 15 March 2005,[23] the OP issued the 18 March 2005 order granting the former an additional 10 days 

from 15 March 2005 or until 25 March 2005 within which to file its appeal memorandum, provided no further extension shall be 

allowed.[24] Claiming to have received the aforesaid 3 March 2005 order only on 16 March 2005, however, petitioner filed its 31 

March 2005 motion seeking yet another extension of 10 days or until 10 April 2005 within which to file its appeal memorandum.

[25]

 

On 7 April 2005, respondents filed their opposition to the 31 March 2005 motion for extension of petitioner[26] which eventually 

filed its appeal memorandum by registered mail on 11 April 2005 in view of the fact that 10 April 2005 fell on a Sunday.[27] On 25 

October 2005, the OP rendered a decision dismissing petitioners appeal on the ground that the latters appeal memorandum was 

filed out of time and that the HLURB Board committed no grave abuse of discretion in rendering the appealed decision.

[28] Aggrieved by the denial of its motion for reconsideration of the foregoing decision in the 3 March 2006 order issued by the 

OP,[29] petitioner filed before the CA its 29 March 2006 motion for an extension of 15 days from 31 March 2006 or until 15 April 

2006 within which to file its petition for review.[30]Accordingly, a non-extendible period of 15 days to file its petition for review 

was granted petitioner in the 31 March 2006 resolution issued by the CA Third Division in CA-G.R, SP No. 93841.[31]

 

Maintaining that 15 April 2006 fell on a Saturday and that pressures of work prevented its counsel from finalizing its petition for 

review, petitioner filed a motion on 17 April 2006, seeking for an additional time of 10 days or until 27 April 2006 within which to 

file said pleading.[32] Although petitioner filed by registered mail a motion to admit its attached petition for review on 19 April 

2006,[33] the CA issued the herein assailed 23 May 2006 resolution,[34] disposing of the formers pending motion for extension as 

well as the petition itself in the following wise:

 We resolve to DENY the second extension motion and rule to DISMISS the petition for being filed late. Settled is that heavy workload is by no means excusable (Land Bank of the Philippines vs. Natividad, 458 SCRA 441 [2005]). If the failure of the petitioners counsel to cope up with heavy workload should be considered a valid justification to sidestep the reglementary period, there would be no end to litigations so long as counsel had not been sufficiently diligent or experienced (LTS Philippine Corporation vs. Maliwat, 448 SCRA 254, 259-260 [2005], citing Sublay vs. National Labor Relations Commission, 324 SCRA 188 [2000]). Moreover, lawyers should not assume that their motion for extension or postponement will be granted the length of time they pray for (Ramos vs. Dajoyag, 378 SCRA 229 [2002]). SO ORDERED.[35]

 

Petitioners motion for reconsideration of the foregoing resolution[36] was denied for lack of merit in the CAs second assailed 9 

August 2006 resolution,[37] hence, this petition.

The Issues

 

Petitioner seeks the reversal of the assailed resolutions on the following grounds, to wit:

 I. THE COURT OF APPEALS ERRED IN DISMISSING THE PETITION ON MERE TECHNICALITY; 

II. THE COURT OF APPEALS ERRED IN REFUSING TO RESOLVE THE PETITION ON THE MERITS THEREBY AFFIRMING THE OFFICE OF THE PRESIDENTS DECISION (A) DISMISSING JTICS APPEAL ON A MERE TECHNICALITY; (B) AFFIRMING THE HLURB BOARDS DECISION INSOFAR AS IT FOUND JTIC SOLIDARILY LIABLE WITH PRIMETOWN TO PAY SPOUSES ANG DAMAGES, ATTORNEYS FEES AND THE COST OF THE SUIT; AND (C) AFFIRMING THE HLURB BOARDS DECISION INSOFAR AS IT FAILED TO AWARD JITC ITS COUNTERCLAIMS AGAINST SPOUSES ANG.[38] 

The Courts Ruling

 

We find the petition bereft of merit.

 

While the dismissal of an appeal on purely technical grounds is concededly frowned upon,[39] it bears emphasizing that the 

procedural requirements of the rules on appeal are not harmless and trivial technicalities that litigants can just discard and 

disregard at will.[40] Neither being a natural right nor a part of due process, the rule is settled that the right to appeal is merely a 

statutory privilege which may be exercised only in the manner and in accordance with the provisions of the law.[41] The 

perfection of an appeal in the manner and within the period prescribed by law is, in fact, not only mandatory but jurisdictional.

[42] Considering that they are requirements which cannot be trifled with as mere technicality to suit the interest of a party,

[43] failure to perfect an appeal in the prescribed manner has the effect of rendering the judgment final and executory.[44]

 

Fealty to the foregoing principles impels us to discount the error petitioner imputes against the CA for denying its second motion 

for extension of time for lack of merit and dismissing its petition for review for having been filed out of time. Acting on the 29 

March 2006 motion filed for the purpose, after all, the CA had already granted petitioner an inextendible period of 15 days from 

31 March 2006 or until 15 April 2006 within which to file its petition for review. Sec. 4, Rule 43 of the 1997 Rules of Civil

Procedure provides as follows:

 Sec. 4. Period of appeal. The appeal shall be taken within fifteen (15) days from notice of the award, judgment, final order or resolution, or from the date of its last publication, if publication is required by law for its effectivity, or of the denial of petitioners motion for new trial or reconsideration duly filed in accordance with the governing law of the court or agency a quo. Only one (1) motion for reconsideration shall be allowed. Upon proper motion and payment of the full amount of the docket fee before the expiration of the reglementary period, the Court of Appeals may grant an additional period of fifteen (15) days only within which to file the petition for review.      No further extension shall be granted except for the most compelling reason and in no case    to exceed fifteen (15) days. (Underscoring supplied) 

The record shows that, having been granted the 15-day extension sought in its first motion, petitioner filed a second motion for 

extension praying for an additional 10 days from 17 April 2006 within which to file its petition for review, on the ground that 

pressures of work and the demands posed by equally important cases prevented its counsel from finalizing the same. As correctly 

ruled by the CA, however, heavy workload cannot be considered as a valid justification to sidestep the reglementary 

period[45] since to do so would only serve to encourage needless delays and interminable litigations. Indeed, rules prescribing 

the time for doing specific acts or for taking certain proceedings are considered absolutely indispensable to prevent needless 

delays and to orderly and promptly discharge judicial business.[46] Corollary to the principle that the allowance or denial of a 

motion for extension of time is addressed to the sound discretion of the court,[47] moreover, lawyers cannot expect that their 

motions for extension or postponement will be granted[48] as a matter of course.

 

Although technical rules of procedure are not ends in themselves, they are necessary for an effective and expeditious 

administration of justice and cannot, for said reason, be discarded with the mere expediency of claiming substantial merit.

[49] This holds particularly true in the case at bench where, prior to the filing of its petition for review before the CA, petitioners 

appeal before the OP was likewise dismissed in view of its failure to file its appeal memorandum within the extensions of time it 

had been granted by said office. After being granted an initial extension of 15 days to do the same, the records disclose that 

petitioner was granted by the OP a second extension of 10 days from 15 March 2005 or until 25 March 2005 within which to file 

its appeal memorandum, on the condition that no further extensions shall be allowed. Aside from not heeding said proviso, 

petitioner had, consequently, no more time to extend when it filed its 31 March 2005 motion seeking yet another extension of 10 

days or until 10 April 2005 within which to file its appeal memorandum.

 

With the foregoing procedural antecedents, the initial 15-day extension granted by the CA and the injunction under Sec. 4, Rule 

43 of the 1997 Rules of Civil Procedure against further extensions except for the most compelling reason, it was clearly 

inexcusable for petitioner to expediently plead its counsels heavy workload as ground for seeking an additional extension of 10 

days within which to file its petition for review. To our mind, petitioner would do well to remember that, rather than the low gate 

to which parties are unreasonably required to stoop, procedural rules are designed for the orderly conduct of proceedings and 

expeditious settlement of cases in the courts of law. Like all rules, they are required to be followed[50] and utter disregard of the 

same cannot be expediently rationalized by harping on the policy of liberal construction[51] which was never intended as an 

unfettered license to disregard the letter of the law or, for that matter, a convenient excuse to substitute substantial compliance 

for regular adherence thereto. When it comes to compliance with time rules, the Court cannot afford inexcusable delay.[52]

 

Even prescinding from the foregoing procedural considerations, we also find that the HLURB Arbiter and Board correctly held 

petitioner liable alongside PPGI for respondents claims and the P10,000.00 administrative fine imposed pursuant to Section 20 in 

relation to Section 38 of P.D. 957. By the express terms of the JVA, it appears that petitioner not only retained ownership of the 

property pending completion of the condominium project[53] but had also bound itself to answer liabilities proceeding from 

contracts entered into by PPGI with third parties. Article VIII, Section 1 of the JVA distinctly provides as follows:

Sec. 1. Rescission and damages. Non-performance by either party of its obligations under this Agreement shall be excused when the same is due to Force Majeure. In such cases, the defaulting party must exercise due diligence to minimize the breach and to remedy the same at the soonest possible time. In the event that either party defaults or breaches any of the provisions of this Agreement other than by reason of Force Majeure, the other party shall have the right to terminate this Agreement by giving notice to the defaulting party, without prejudice to the filing of a civil case for damages arising from the breach of the defaulting party. In the event that the Developer shall be rendered unable to complete the Condominium Project, and such failure is directly and solely attributable to the Developer, the Owner shall send written notice to the Developer to cause the completion of the Condominium Project. If the developer fails to comply within One Hundred Eighty (180) days from such notice or, within such time, indicates its incapacity to complete the Project, the Owner shall have the right to take over the construction and cause the completion thereof. If the Owner exercises its right to complete the Condominium Project under these circumstances, this Agreement shall be automatically rescinded upon written notice to the Developer and the latter shall hold the former free and harmless from any and all liabilities to third persons arising from such rescission. In any case, the Owner shall respect and strictly comply with any covenant entered into by the Developer and third parties with respect to any of its units in the Condominium Project.      To enable the owner to comply with this contingent liability, the    Developer shall furnish the Owner with a copy of its contracts with the said buyers on a month-to-month basis. Finally, in case the Owner would be constrained to assume the obligations of the Developer to its own buyers, the Developer shall lose its right to ask for indemnity for whatever it may have spent in the Development of the Project. Nevertheless, with respect to the buyers of the Developer for the First Phase, the area intended for the Second Phase shall not be bound and/or subjected to the said covenants and/or any other liability incurred by the Developer in connection with the development of the first phase. (Underscoring supplied)  

Viewed in the light of the foregoing provision of the JVA, petitioner cannot avoid liability by claiming that it was not in any way 

privy to the Contracts to Sell executed by PPGI and respondents. As correctly argued by the latter, moreover, a joint venture is 

considered in this jurisdiction as a form of partnership and is, accordingly, governed by the law of partnerships.[54] Under Article 

1824 of the Civil Code of the Philippines, all partners are solidarily liable with the partnership for everything chargeable to the 

partnership, including loss or injury caused to a third person or penalties incurred due to any wrongful act or omission of any 

partner acting in the ordinary course of the business of the partnership or with the authority of his co-partners.[55] Whether 

innocent or guilty, all the partners are solidarily liable with the partnership itself.[56]

WHEREFORE, premises considered, the petition for review is DENIED for lack of merit.

 SO ORDERED.

STRATEMEYER v. WEST

NO. 5-83-0639.

125 Ill. App.3d 597 (1984)

466 N.E.2d 306

EUGENE STRATEMEYER, Plaintiff-Appellee, v. LARRY WEST, Defendant-Appellant.

Appellate Court of Illinois — Fifth District.

Opinion filed June 14, 1984.

William F. Meehan, P.C., of Cairo, for appellant.

Law Offices of Guy M. Lahr III and Associates, of Metropolis, for appellee.

Judgment affirmed.

JUSTICE KARNS delivered the opinion of the court:

Plaintiff, Eugene Stratemeyer, brought this action for breach of contract against defendant, Larry West, to recover the amount allegedly owed on a contract to construct grain bins and related grain storage equipment on two farms owned by A & L Farms, a partnership of which West and Alan Falconer were sole members. The circuit court of Johnson County, sitting without a jury, entered judgment in favor of plaintiff for all sums due on the contract, interest and costs.

A & L Farms, dissolved in December 1980, was a partnership that dealt in the purchase and resale of farms in southern Illinois. West testified that he and Falconer entered into their business in 1978 or 1979. The farms were purchased together, owned jointly as partnership property, "cleaned up," farmed for a time, then resold for an even-split profit between the partners. West described himself as "landowner" and Falconer as the tenant farmer and "general manager" of the various farms purchased. West testified that Falconer managed the day-to-day activity of the farms but had no authority to incur "major expenses." West described the operation as "[p]retty much how a farm is run, you plant the seed and harvest it and sell it * * *."

In August 1980, plaintiff and Falconer consummated the contract whereby plaintiff would supply materials and labor for grain bins on the Kayser Farms and the Prater Farm, both of which were owned by the partnership at that time. The contract was signed by Alan Falconer. Stratemeyer testified that he dealt exclusively with Falconer in this instance and did not talk to West about these grain bins until after they were erected. Stratemeyer testified that it was his assumption at the time that Falconer was contracting for A & L Farms: "I had sold these people a bin before, I had no reason to believe that it was any other way. * * * Falconer had made the deal before and I got my money." Further, Stratemeyer testified that he had no knowledge in August of Falconer's alleged want of authority nor any knowledge of the eventual partnership dissolution.

Falconer testified that he contacted Stratemeyer to supply and build the bins on the Kayser and Prater Farms as an incident of the partnership business. He stated that he spoke with West about the bins on several occasions before making arrangements with Stratemeyer. Falconer testified that he and West had made a decision that additional storage was needed, so they priced out grain bins and obtained

[125 Ill. App.3d 600]

quotes or estimates from other providers. "[W]e were going to take the best deal that was offered for the quality of structure and for the type and [sic] would meet the operation." Falconer added, "Mr. Stratemeyer had the best deal so Mr. Stratemeyer was the one that got the contract." Falconer further testified that West did not specifically instruct him not to place the bins on the properties and that West did nothing to indicate that Falconer had no authority to do so. In fact, Falconer testified that West knew that the bins were ordered and were to be put on the properties. Finally, Falconer testified that the agreement with Stratemeyer was made before negotiations for dissolution of the partnership commenced.

West testified that he had no reason to obtain the bins since in August he was in the process of dissolving the partnership. He denied ever talking to Falconer about building the bins. He testified that the first time he saw or heard about the bins was after they were erected. He stated that he considered the partnership dissolved in April 1980, but it was not formally dissolved until December 1980. West further testified that the partnership previously owned the farms in question but that he had acquired ownership following Falconer's bankruptcy, which occurred after the bins had been built.

• 1 First, defendant contends that plaintiff's complaint failed to allege a necessary element of his cause of action: performance of the contract pleaded. We do not agree. Count II of plaintiff's second amended complaint recites the following:

3. On or about August 1, 1980, at the special instance and request of defendant, or defendant's agent, plaintiff performed labor, to wit: Installation of grain bins and equipment incidental thereto and delivered materials, to wit: Bins, metal, motors, wiring, sand, fill, concrete, on and at said premises; an account of which labor and materials is attached * * *.

This averment specifically states that plaintiff performed labor, delivery and installation according to the account attached to the complaint. Defendant answered the allegation with a general denial but not until the close of plaintiff's case did he move for judgment on the pleadings. Even then, he asserted only generally that there was no allegation of performance of conditions precedent. Nor in his post-trial motion did he point out specifically the defects complained of. For the first time, on appeal, he argues specifically that the complaint fails to allege compliance with the contractual term requiring "[a]ll work and delivery to be completed in a workmanlike manner according to standard practices." We think that plaintiff's allegation of performance and supporting facts was sufficient under Supreme Court Rule 133(c) (87

[125 Ill. App.3d 601]

Ill.2d R. 133(c)). Facts supporting defendant's general denial were not advanced in the answer nor upon motion showing wherein there was a failure to perform, and we will not consider his novel argument on appeal. Moreover, the record considered entirely establishes full performance on plaintiff's part.

• 2 Next, defendant contends that plaintiff's pleading and proof were at fatal variance since the complaint alleged a contract with defendant and the proof related to a contract with either A & L Farms or Falconer. Plaintiff sued defendant individually for a debt allegedly resulting from the "request of defendant, or defendant's agent" to provide labor and materials. The evidence established a contract with Falconer, and West admitted that a partnership with Falconer existed. Plaintiff's pleading of agency in this regard and of a contract formed pursuant to the alleged agency is sufficient pleading of partnership upon which, if established by the proof, West could be found liable as a joint debtor. (See Ill. Rev. Stat. 1983, ch. 110, par. 2-410.) Thus, plaintiff's proof may have related to a contract with West, his agent or the partnership. Since the partnership was dissolved at the time suit was commenced and since Falconer was declared bankrupt, West was the only solvent debtor left and a proper party to sue for the dissolved partnership obligation. We are not persuaded that plaintiff's pleading and proof were at fatal variance.

• 3 Next, defendant contends that the evidence is insufficient to sustain recovery on the theory of a contract between plaintiff and the partnership. Defendant cites section 9 of the Uniform Partnership Act (Ill. Rev. Stat. 1983, ch. 106 1/2, par. 9) for the proposition that absent proof of express authority, contracts made by a partner are not binding on the firm unless the contract is made in the ordinary course of partnership business. He concludes that since there is no evidence of Falconer's express authority to contract with plaintiff and no evidence that he ever held Falconer out as having such authority, plaintiff's claim must fail.

We do not accept this reasoning. Section 9 provides:

(1) Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority. (Ill. Rev. Stat. 1983, ch. 106 1/2, par. 9(1).)

[125 Ill. App.3d 602]

Thus, an act of a partner in apparently carrying on in the usual way the business of the partnership binds the partnership unless he has no authority and the third party has knowledge that he has no authority. The existence of the partnership having been admitted, proof of express authority was unnecessary. Rather, it was defendant's burden to establish no authority and plaintiff's knowledge. Plaintiff, of course, must have established that Falconer's act was apparently done in carrying on the business of the partnership in the usual way.

Here the record establishes conflicting accounts of the extent of Falconer's partnership authority. West testified that Falconer did not have authority to contract for "major expenses" and that he told Falconer this long ago. Yet, Falconer did have authority to generally manage the farms purchased, and no other evidence of restricted authority was offered. Falconer testified that West knew about the attempts to procure bins and had discussed and participated in the matter several times himself. Stratemeyer testified that based on past experience he assumed Falconer had authority and was unaware of his lack of authority. Where the evidence is conflicting, we must defer to the trier of fact, who had a superior opportunity to observe the witnesses and assess their testimony and credibility. (Schulenburg v. Signatrol, Inc. (1967), 37 Ill.2d 352, 356, 226 N.E.2d 624, 626.) We will not upset the trial court's implicit finding that Falconer was authorized to transact the instant business for and on behalf of the partnership, as it does not appear contrary to the evidence and indeed has support in the record. West need not have been aware of the contract to be held liable on it. See, e.g., Gardenhire v. Ray (1939), 302 Ill.App. 268, 23 N.E.2d 927.

• 4 Regarding defendant's contention that Falconer's act of contracting was not within the partnership's ordinary course of business, there was no specific finding made by the trial court on this issue. The record, however, contains sufficient indicia from which it may be reasonably concluded that, as general manager of the farming aspect of the partnership, Falconer was responsible for planting, harvesting, storing and selling the crops. As an incident of this farming business he contracted with Stratemeyer for the erection of grain storage bins. We think this act was within the scope of the partnership business. Moreover, Stratemeyer could rightfully assume that the contract was within the scope of the partnership's business. Finally, it is important to note that West testified that he had grain stored in the bins. That he has accepted a benefit from the contract makes his argument inappropriate.

• 5 Finally, defendant contends that the trial court improperly[125 Ill. App.3d 603]

struck the evidence deposition testimony of defendant's former attorney. It was offered for purposes of supporting defendant's own testimony regarding his prior testimony given in an ancillary action against Falconer in a bankruptcy proceeding. Defendant had been called as an adverse witness in the instant case and was impeached by prior inconsistent statements concerning the nature of the debt for which Stratemeyer sued him. His prior testimony included statements admitting that Stratemeyer had liens on the two subject farms, that the grain bins were purchased by the partnership and represented partnership debts and that he would be personally liable for the obligations to Stratemeyer should Falconer default in bankruptcy. Defendant was given ample opportunity to qualify his prior testimony and in fact, when called by his own counsel, fully explained that he did not understand the meaning of "partnership debt" and "lien." Defendant further explained that his prior testimony with reference to these terms was premised on the assumption that he would pay the debts in question only if they were proven to be valid.

Defendant argues that his former attorney's testimony was proper evidence for corroborating defendant's explanation of his prior testimony and for establishing the meaning he had ascribed to the legal terminology used and the circumstances surrounding his prior testimony.

In striking the proffered testimony the trial court reasoned that the defendant was available to explain or contradict his own former testimony. Since the court found that the proffered testimony established only what his former attorney thought or what he thought West thought and what pretrial preparation had been made in the former proceeding, the court further found the proffered testimony was irrelevant.

We find no reversible error in this regard. The trial court had previously admitted into evidence the transcript of the former proceeding. The court indicated that it would weigh the import of defendant's prior testimony and consider it for its worth. The court undoubtedly was aware of the nature of that proceeding and the context of defendant's testimony therein. We do not view defendant's admissions in the prior proceeding to be properly qualified or explained by his former attorney's interpretation of defendant's knowledge and understanding. This is true especially since the former testimony was elicited from West by his own attorney and it was motivated precisely for the contrary purpose then of establishing as true what West now denies. The proffered testimony is not so much irrelevant as incompetent evidence. Inasmuch as defendant testified to precisely the same issues as

[125 Ill. App.3d 604]

those for which the deposition was offered in corroboration, we cannot say he was prejudiced by its exclusion.

For all of the foregoing reasons the judgment of the circuit court of Johnson County is affirmed.

Affirmed.

HARRISON and KASSERMAN, JJ., concur.

COOK v. BRUNDIDGE, FOUNTAIN, ELLIOTT & CHURCHILL

NO. B-5371.

533 S.W.2d 751 (1976)

Betty L. COOK et al., Petitioners, v. BRUNDIDGE, FOUNTAIN, ELLIOTT & CHURCHILL, a Partnership for the Practice of Law, Respondents.

Supreme Court of Texas.

Rehearing Denied March 24, 1976.

Mary Neal Sisk, Dallas, for petitioners.

Jackson, Walker, Winstead, Cantwell & Miller, Donald L. Case and Jack Pew, Jr., Dallas, for respondents.

STEAKLEY, Justice.

As this case reaches us, it is a suit by Betty L. Cook, et al, against Brundidge,[533 S.W.2d 752]

Fountain, Elliott & Churchill, a partnership for the practice of law.1 The suit sought to recover actual and exemplary damages against the law firm arising from alleged breaches of fiduciary duty in the attorney-client relationship, and from alleged fraudulent acts. The breaches and fraudulent acts were alleged to have been committed by Warren C. Lyon, a partner in the firm at the times in question. The motion of the law firm for summary judgment was granted by the trial court and this has been affirmed by the Court of Civil Appeals. 522 S.W.2d 740. The question for decision is whether the law firm established conclusively that it is not liable for the acts of Lyon. We hold that it did not and so reverse the judgments below and remand the cause for trial.

We learn the following from the summary judgment record. Brundidge, Fountain, Elliott & Churchill is a partnership engaged in the practice of law in Dallas, Texas. Warren C. Lyon was a partner of the law firm at the times in question. As such, in 1969, he represented the plaintiff Betty L. Cook in a divorce proceeding; he also prepared a will for her and for Isabelle Griffin, another plaintiff. Fees were charged by the law firm for these services and paid by Betty L. Cook and Isabelle Griffin. Lyon was also engaged in the real estate business and was an officer and stockholder in Texas Yummers, a Texas corporation. He also owned stock in a California company known as United States Franchise Corporation which assisted with the organization of Texas Yummers. Fees were also paid to the law firm by Texas Yummers.

Sometime in 1969, during a conference with Lyon concerning her divorce, Betty L. Cook informed Lyon that she, together with her aunt, Mrs. Isabelle Griffin, and her sister, Winifred Baker, were receiving approximately $60,000 from the sale of some property which had come to them from an estate in Illinois. Betty L. Cook asked Lyon if he knew of someone with whom they could consult concerning the investment of this money in some real estate in Texas. Lyon told her he was a silent partner in a real estate firm and might be able to help her. He suggested several investments and then told her about Yummers, a fast-food franchise operation based in California, in which he had invested at, he said, substantial profit. Lyon said he had obtained a Yummers franchise and was in the process of forming a Texas corporation to handle it.

Betty L. Cook, et al, decided to invest in Yummers. They directed their attorney in Illinois to send Lyon a check for the proceeds of the sale of the land in Illinois, which he did. The check was dated July 3, 1969, and was in the sum of $60,343.25; it was made payable to "Warren Lyon as Attorney for Isabelle M. Griffin, Winifred Baker and Betty Cook." The check was mailed to and received by Lyon at the office of the law firm but there is no showing that the funds were deposited in or handled by or through any account of the law firm.

On July 9, 1969, Betty L. Cook, et al, conferred with Lyon in the law firm's office. A contract was executed whereby they loaned to Texas Yummers Corporation a minimum of $50,000 to be used in the construction of a Yummers store in Dallas. Lyon signed the contract as president of Texas Yummers. Betty L. Cook, et al, alleged under oath that Lyon represented to Plaintiff Cook, Mrs. Griffin and Mrs. Baker that he had prepared the contract, that it was a good and valid mortgage contract and that as their attorney he could assure them that their interests were well-protected. Betty L. Cook testified that Lyon represented to them that their funds had been placed in a trust account until it could be invested in the new store: "The money was

[533 S.W.2d 753]

going to be held until actually the property was bought and the building begun and the pay back started, which was September 15.... It was to be paid back to us at one thousand dollars a month to be divided equally between the three of us for fifteen years."

The payment due September 15, 1969, under the July 9 contract was not made. On October 16, at Betty L. Cook's request, Lyon sent Isabelle Griffin a check for $250 from Texas Yummers Corporation to cover her living expenses.

During October and November of 1969, Lyon persuaded Betty L. Cook, et al, to exchange their rights under the July 9 contract for stock in Texas Yummers. Betty L. Cook, et al, agreed to take 12,000 shares each, at $1.00 per share, plus a $19,000 note from Texas Yummers. Betty L. Cook also gave Lyon $5,000 for 5,000 more shares on November 14. On December 4, Lyon and Weaver executed and Betty L. Cook, et al, received the $19,000 note from Texas Yummers. On December 23, Betty L. Cook signed an "investment letter" promissing to purchase

17,000 shares; Isabelle Griffin and Winifred Baker signed similar letters for 12,000 shares each. In February of 1970, Betty L. Cook, et al, received what purported to be stock certificates for Texas Yummers.

The facts regarding Texas Yummers Corporation were these: a Texas Yummers Corporation was incorporated on February 27, 1969; Lyon was designated as an incorporator and director. The law firm was retained by United States Franchise Corporation, a California corporation which owned and operated "Yummers" stores in California, to set up this Texas corporation. On March 3, 1969, Texas Yummers paid the law firm $500 as a retainer; the check was signed by Lyon. $50,000 of the funds of Betty L. Cook, et al, was deposited in an account of Texas Yummers.

On December 2, 1969, Texas Yummers was dissolved, and a new Texas Yummers Corporation was formed; Lyon was again an incorporator and director. On July 21, 1972, a Petition for Involuntary Bankruptcy of Texas Yummers was filed; on August 11, the corporation was adjudged bankrupt. On September 12, a meeting of the creditors of the corporation was held. Soon thereafter, this suit was instituted.

As indicated in the forepart of this opinion, the severed proceeding before us seeks the recovery of damages against the partnership law firm upon the theory of vicarious liability for the acts of Lyon, a partner. We are concerned at this stage with the motion of the law firm for summary judgment that was sustained by the trial court and upheld by the Court of Civil Appeals upon the stated conclusion:

... that the summary judgment proof established as a matter of law that Lyon had neither the actual authority nor the apparent authority to represent the law firm in the fraud perpetrated upon plaintiff. Such proof shows the fraudulent acts by Lyon were not consented to, authorized, ratified, or adopted by the other members of this law firm. 522 S.W.2d 740, 742.

This holding of the Court of Civil Appeals states the essential position of the law firm.

It should also be stated that the problem at hand does not involve in any respect the question of the personal liability of a lawyer who defrauds a client, whatever the circumstances.

The motion of the law firm for summary judgment relied for support on its filed answer, on the affidavits of Lyon, and of Ralph D. Churchill, a senior member of the firm; and upon the deposition testimony of Betty L. Cook, a plaintiff, and Charles A. Girand, a licensed Texas attorney engaged in the practice of law in Dallas.

The answer of the law firm admitted that Lyon was a partner in the practice of law but denied that he was a partner, or that he was acting in the capacity of a partner, "in giving the advice, performing the services and doing or omitting to do the acts complained

[533 S.W.2d 754]

of by plaintiffs." As to such, he was, the law firm alleged, acting in his individual capacity.

The affidavit of Lyon was to the same effect, i. e., that in all transactions with Betty L. Cook, other than with respect to the divorce proceeding and the preparation of a will for her, he was acting in his individual and personal capacity, for which the law firm received no fee or payment from Betty L. Cook.

The affidavit of Churchill was to the effect that the firm is engaged exclusively in the practice of law; that Lyon as a partner was not authorized to act as an investment counselor, securities broker or dealer, or to act as a real estate broker, dealer or agent, and that Lyon was not a partner in the performance of any such services performed for Betty L. Cook; that the only service Lyon performed as a partner was the handling of a divorce for Betty L. Cook and the preparation of a will for her and perhaps a will for one of the other plaintiffs; that Lyon was acting in his individual capacity with respect to his real estate business and as a stockholder in United States Franchise Corporation, and in the corporation known as Yummers; and that "this firm received no fee, payment, commission, or profit in any of such transactions."

The deposition testimony of Girand was directed to the reasons for the dissolution of the original incorporation of Yummers and the formation of the second corporation.

The deposition of Betty L. Cook, who was deposed as a witness on behalf of the defendants, Lyon and Weaver, dealt principally with the sequence of events in her relationship with Lyon. She also filed an affidavit in support of her response to the motion of the law firm for summary judgment. In this she stated:

At no time in my dealings with Defendant Lyon did he indicate that he was acting in any capacity other than as my attorney at law or separate from the law firm of which he was a partner. Stuart L. Mamer, an attorney of Champaign, Illinois had represented members of my family and me for several years and he acted as attorney for me, Mrs. Baker, Mrs. Griffin and my father, Professor B. F. Timmons, with regard to the sale of the Illinois property. Based on my conversations with Defendant Lyon, Mr. Mamer was told by me, Mrs. Griffin and Mrs. Baker that we had retained Defendant law firm through its partner, Defendant Lyon, to represent us in Texas, and had been accepted as clients by the Defendant law firm through its partner, Defendant Lyon. Mr. Mamer made the check for $60,343.25 payable to "Warren Lyon, as Attorney for Isabelle M. Griffin, Winifred Baker and Betty Cook" because Defendant Lyon had assured us that as our attorney he would protect and hold the funds for us pending their investment.

There was also filed by Betty L. Cook, et al, the affidavit of Stuart M. Mamer, their attorney in Champaign, Illinois. His activities, with particular reference to the law firm in Texas, were described as follows:

In the Spring of 1969, I was retained by Professor Timmons and Mmes. Cook, Baker and Griffin to represent them in the sale of Champaign property and was informed that Mmes. Cook, Baker and Griffin desired to re-invest the proceeds in real estate in Dallas, Texas. I was informed by telephone calls and correspondence from

each of the three Plaintiffs herein that they were represented by counsel in Dallas, Texas. They informed me that their attorney was Warren C. Lyon, a member of the Dallas law firm of Brundidge, Fountain, Elliott & Churchill.

After the sale of the Illinois property was consummated, I deposited the proceeds therefrom in the separate Trust Account maintained by our law firm in the First National Bank of Champaign, Illinois, for the purpose of segregating our clients' funds. On July 3, 1969, I

[533 S.W.2d 755]

drew a check on this Trust Account to the order of "Warren Lyon, as Attorney for Isabelle M. Griffin, Winifred Baker and Betty Cook."

I received a letter dated July 14, 1969, from the law firm of Brundidge, Fountain, Elliott & Churchill bearing the signature "Warren Lyon." I received a letter dated August 12, 1969, in the same style. The first of these letters showed that copies thereof had been sent to Mmes. Cook, Baker, and Griffin.

As requested in the law firm's letter of July 14, 1969, I did indeed compute the capital gains taxes and prepared the necessary schedules for the 1969 income tax returns of Mmes. Cook, Baker, and Griffin.

The July 3, 1969, check on our Trust Account in the amount of Sixty-Thousand Three Hundred Forty Three and 25/100 Dollars ($60,343.25) was subsequently paid by our bank. It was endorsed "Warren Lyon, Attorney for Isabelle Griffin, Winifred Baker & Betty Cook."

Vicarious liability of the law firm for the alleged damages suffered by Betty L. Cook, et al, is not claimed on the basis of any negligence or breach of duty on the part of the other members of the law firm; nor is it claimed that the other members of the law firm became cognizant of the acts of Lyon, or in anywise consented to or ratified his course of dealings with Betty L. Cook, et al. Cf. Kelsey-Seybold Clinic v. Maclay, 466 S.W.2d 716(Tex.1971). There is no claim, on the other hand, that Lyon or the law firm gave notice to Betty L. Cook, et al, that Lyon's authority as a partner was limited in any respect, or, more specifically, that any act of Lyon for his individual profit, or in which he had a personal interest, would be outside his authority as a member of the partnership.

The question of the liability of a professional partnership of attorneys for the acts of a partner not strictly legal in nature, but which occur during the existence of the attorney-client relationship in recognized legal matters, is of first impression in our jurisdiction. Other jurisdictions have dealt with the problem of determining the scope of business of a professional partnership in various ways. In Rouse v. Pollard, 130 N.J.Eq. 204, 21 A.2d 801 (Ct.Err. & App. 1941), the partner of a law firm persuaded a client whom he was representing in a divorce to entrust him with some of her money for investment with "the firm." The client sued the partner and the partnership to recover her funds, and the trial court dismissed the suit as to the partnership on the ground that the partner's actions were not within the normal scope of business of a law practice. Affirming the trial court's dismissal, the New Jersey Court of Errors and Appeals relied on a distinction developed in England:

The English cases sustain the principle that where money is received by one member of a law partnership for the expressed purpose of a special investment,... there may be liability by one partner for the misconduct of another in the misapplication of the fund, but that if one of the partners receives money indefinitely, to lay out when a proper security may be found, he is not acting within the character of an attorney and does not thereby make his partner liable. 21 A.2d at 804.

In Douglas Reservoirs Water Users Ass'n v. Maurer & Garst, 398 P.2d 74 (Wyo.1965), Maurer, a partner in the law firm, misappropriated a $10,000 check given to him by the Water Users Association, of which he was a member and the treasurer; the funds were supposed to be used to purchase a bond in the name of the association. The Wyoming Supreme Court affirmed a summary judgment in favor of the law partnership, holding that Maurer was not acting within the ordinary scope of the partnership business as a matter of law when he misappropriated the funds:

There is nothing to indicate that legal work had been involved in collecting money from the United States for Douglas Reservoirs Water Users Association, or that the $10,000 check had been entrusted to Maurer for a transaction ordinarily performed by lawyers. 398 P.2d at 77.

In Blackmon v. Hale, 1 Cal.3d 548, 83 Cal.Rptr. 194, 463 P.2d 418 (1970), the plaintiff gave an attorney a check payable to the attorney's partnership trust account, in order that funds would be available to the attorney in negotiations for plaintiff's purchase of a note and mortgage on some real property. The partner misappropriated the funds, and plaintiff sued the partnership for their recovery. Reversing the trial court's judgment in favor of the partnership, the California Supreme Court held that the partnership was liable for the partner's malfeasance on the ground that the partner was acting within the scope of his apparent authority in accepting plaintiff's funds.

The Court stated, at 83 Cal.Rptr. 194, 199, 463 P.2d 423, 424:

Although the firm's records indicate that Adams and Hale regarded plaintiff as a client of Adams only, there is no evidence whatever that either Adams or Hale ever informed plaintiff that Adams was not representing plaintiff as a member of the firm. Moreover, Adams and Hale held themselves out to the public and to plaintiff as partners. The partnership displayed a sign viewable from the street reading Adams and Hale, Attorneys at Law. Such signs are commonly used by law firms to indicate a partnership. (See Fletcher v. Pullen (1889) 70 Md. 205, 213, 16 A. 887, 888.) Plaintiff testified that he knew that the firm was called Adams and Hale and that he dealt with Adams in the firm's offices. Furthermore, Adams instructed plaintiff to make his check payable to the Adams and Hale Trust Account. In the absence of other evidence these facts would justify a reasonable man in believing that he was dealing with a partnership.

In Zimmerman v. Hogg & Allen, P. A., 286 N.C. 24, 209 S.E.2d 795 (1974), Greene, who was a principal shareholder in Hogg & Allen, a professional association for the practice of law, represented Zimmerman, who was an officer and employee of a company which had engaged Hogg & Allen as its general counsel, in some personal legal matters. Zimmerman sent Greene $24,000 to be used in the purchase of shares of Kentucky Fried Chicken. Zimmerman sued Greene and Hogg & Allen for misappropriation of his money. Reversing the trial court's summary judgment in favor of Hogg & Allen, the North Carolina Supreme Court held that there was a fact question whether, in accepting Zimmerman's money, Greene was acting within the normal scope of business of the professional association. The court stated its conclusions as follows:

Under these particular circumstances, we are of the opinion that plaintiff's evidence was sufficient to justify a reasonable and prudent belief by plaintiff Sam Zimmerman that the Professional Association had conferred authority upon Greene to receive the funds from him for investment while acting as its agent. Thus plaintiff's evidence raised a genuine material issue for trial as to whether Greene acted within the scope of his authority and as agent for the Professional Association at the times complained of. The issue so raised was material because without establishing agency, plaintiff could not recover .... 209 S.E.2d at 804, 805.

In Croisant v. Watrud, 248 Or. 234, 432 P.2d 799 (1967), plaintiff had engaged an accounting firm to advise her on tax matters and to prepare tax returns for her business enterprises. After selling one of her businesses, she made arrangements with a member of the accounting firm, who had handled the business of plaintiff for the firm previously, to collect payments under the contract of sale, as well as some collection of rents from other property, and to make various disbursements of the money. The funds collected were deposited in an

[533 S.W.2d 757]

account of plaintiff, from which the accountant had authority to make withdrawals. The accountant misapplied some of the funds, and plaintiff sued the accountant's partnership to recover the loss. The Oregon Supreme Court, reversing a judgment in favor of the partnership, held that the partnership was liable for plaintiff's loss, even though the accountant's services to plaintiff were not services ordinarily performed by accounting firms:

If a third person reasonably believes that the services he has requested of a member of an accounting partnership is [sic] undertaken as a part of the partnership business, the partnership should be bound for a breach of trust incident to that employment even though those engaged in the practice of accountancy would regard as unusual the performance of such service by an accounting firm.

The reasonableness of a third person's belief that a partner is acting within the scope of the partnership should not be tested by the profession's own description of the function of its members. Those who seek accounting services may not understand the refinements made by accountants in defining the services they offer to the public. Whether a third person's belief is reasonable in assuming that the service he seeks is within the domain of the profession is a question which must be answered upon the basis of the facts in the particular case. 432 P.2d at 803.

It is doubtful if the treatment of the problem by these various jurisdictions, and the rationale applied for solutions, can be harmonized; or that an accepted rule can be said to appear. A stricter view against the liability of a professional partnership for the misdeeds of a partner with a client is indicated in Rouse and Douglas Reservoirs; a more liberal view is indicated in Blackmon, Zimmerman and Croisant. Surprisingly, also, only two of the jurisdictions, California and Wyoming, considered the problem in the light of their respective uniform partnership acts which, in our view are particularly relevant, if not controlling. Indeed, the conclusions we reach, later stated, rest in great measure upon the provisions of the Texas Uniform Partnership Act, Vernon's Ann.Civ.St. art. 6132b.

Prior to the enactment of the Texas Act in 1961, there did not exist a comprehensive corpus of substantive law governing the partnership form of business association. See Sher and Bromberg, Texas Partnership Law in the 20th Century, 12 Sw.L.J. 263 (1958). Application of the Act to a professional partnership has not been invoked as yet although the dissenting opinion in Kelsey-Seybold, supra, involving a medical partnership, recognized that the Uniform Partnership Act, art. 6132b, "provides for liability of the partnership for wrongful acts of a partner `acting in the ordinary course of the business of the partnership.'" In Kelsey-Seybold, supra, however, it was assumed in the writing for the majority that in engaging in the acts in question the doctor-partner was not acting in the ordinary course of the business of the medical partnership; whereas, this is the problem now at hand.

There are, admittedly, compelling and unique considerations with respect to partners engaged in the practice of law. The fiducial obligations of a law partnership set it apart from commercial partnerships. For a discussion of the high obligations of a fiduciary seeKinzbach Tool Co. v. Corbett-Wallace Corp., 138 Tex. 565, 160 S.W.2d 509 (1942). These characteristics and obligations inherent in the practice of law are universally understood and acknowledged by the legal profession. Nevertheless, the provisions of art. 6132b are expressly applicable to a professional partnership such as one of law. Section 6 of the Act defines a partnership as "an association of two or more persons to carry on as co-owners a business for profit." Section 2 defines "business" as including "every trade, occupation, or profession." Governing the issue at hand, i. e., the conditions to liability of a partnership for the acts of a partner, Sections 9, 13 and 14 of the Act provide:

Sec. 9. (1) Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member binds the

partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority. (Emphasis added)

(2) An act of a partner which is not apparently for the carrying on of the business of the partnership in the usual way does not bind the partnership unless authorized by the other partners.

Sec. 13. Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of his co-partners, loss or injury is cause[d] 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. (Emphasis added)

Sec. 14. The partnership is bound to make good the loss:

(a) Where one partner acting within the scope of his apparent authority receives money or property of a third person and misapplies it; and

(b) Where the partnership in the course of its business receives money or property of a third person and the money or property so received is misapplied by any partner while it is in the custody of the partnership.

We have recently spoken of apparent authority in terms of estoppel, and have said that one seeking to charge a principal through apparent authority of an agent must prove such conduct on the part of the principal as would lead a reasonable prudent person to suppose that the agent had the authority he purports to exercise. Douglass v. Panama, Inc., 504 S.W.2d 776 (Tex.1974). The extent of authority of a partner is determined essentially by the same principles as those measuring the scope of the authority of an agent. In Randall v. Meredith, 76 Tex. 669, 13 S.W. 576 (1890), this Court wrote of the implied powers possessed by a partner:

Between partners themselves, and between the firm and persons dealing with the firm, it must be presumed that each partner is the agent of the firm, empowered to carry out its objects, and to transact the business for which the partnership was formed, in the usual and customary way pursued by other firms engaged in a like business; and, in the absence of restrictions on this power, rights must be adjusted in view of its existence. Third persons dealing with a member of a firm in reference to partnership matters, in the absence of power expressly conferred, must recognize the fact that the partner's power to bind his firm is restricted to the doing of such things as are within the scope of the particular business. Between the partners themselves, and between the firm and persons dealing with it through a partner, there is no doubt that the usages of firms engaged in the same character of business in the same country, as well as the general usage of the firm in the conduct of its business, may be looked to to ascertain the implied powers possessed by a partner. If the power exercised in a given case be one usually exercised by partners in a like business, all the members of the firm must be supposed to have intended to confer a like power on each other. If the power be habitually exercised by a partner, and acquiesced in by the other members of the firm, it is but fair to conclude that the members of the firm intended it to be exercised. 13 S.W. at 581, 582.

As stated before, it is not claimed either that Lyon was authorized by the partnership to act as he did in the Yummers matter or that Betty L. Cook, et al, had

[533 S.W.2d 759]

notice or knowledge that Lyon had no authority to act for the partnership in what he did. Assuming misapplication of the funds, the crucial consideration in determining whether the law firm is bound by the acts of Lyon by force of the statutory provisions is whether in receiving the funds of Betty L. Cook, et al, in the sum of $60,343.25, Lyon was "apparently carrying on in the usual way the business of the partnership" (Sec. 9); or, as also expressed, whether he was "acting in the ordinary course of the business of the partnership" (Sec. 13). If so, it would follow that Lyon was "acting within the scope of his apparent authority" when he received the money and property of Betty L. Cook, et al; and that the law firm is "bound to make good the loss" from his misapplication of the funds (Sec. 14).

It was the burden of the law firm as the defendant-movant for summary judgment to establish as a matter of law that no fact issue stands in the way of judgment in its favor. Cf. Burns v. Gonzalez, 439 S.W.2d 128 (Tex.Civ.App. — 1969, writ ref'd n. r. e.) with respect to the burden in trial on the merits. The summary judgment burden was that of establishing the negative of the statutory issues, namely, that Lyon was not apparently carrying on in the usual way the business of the law firm, i. e., was not acting in the ordinary course of its business and hence was not acting within the scope of apparent authority by force of statute. See Torres v. Western Casualty & Surety Co., 457 S.W.2d 50 (Tex.1970); Gibbs v. General Motors Corp., 450 S.W.2d 827 (Tex.1970). The defendant is required to meet the plaintiff's case as pleaded and to demonstrate that the plaintiff cannot prevail. Glenn v. Prestegord, 456 S.W.2d 901 (Tex.1970); Guidry v. Neches Butane Products Co., 476 S.W.2d 666 (Tex.1972). There can be no further burden upon the plaintiff if the requisite facts for summary judgment are not established by the summary judgment record. See Torres, supra, and Box v. Bates, 162 Tex. 184,346 S.W.2d 317 (1961).

As noted earlier, the thrust of the affidavits of Churchill and Lyon in support of the motion for summary judgment was that the law firm is engaged exclusively in the practice of law, and that Lyon was not acting for the partnership in performing the services in question. But at the least, the acceptance by Lyon of the check of

$60,343.25 payable to "Warren Lyon as Attorney for" Betty L. Cook, et al, together with the deposition testimony of Betty L. Cook upon which the motion of the law firm for summary judgment also relied for support, and, further, the affidavit of Betty L. Cook and that of the Illinois attorney, demonstrate the existence of fact issues with respect to the statutory conditions to liability of the partnership. This being so, the record does not establish conclusively that the law firm is not accountable to Betty L. Cook, et al, for the acts of Lyon.

The judgments of the trial court and of the Court of Civil Appeals are reversed and the cause is remanded for trial.

Dissenting opinion by McGEE, J., in which GREENHILL, C. J., joins.

McGEE, Justice.

I respectfully dissent. I would hold that in this case the summary judgment proof established as a matter of law that Lyon had neither the actual nor the apparent authority to represent the law firm in the fraud perpetrated upon the petitioners. Further, no liability should rest upon the law firm under any of the controlling provisions of the Texas Uniform Partnership Act. Tex.Rev.Civ.Stat.Ann. art. 6132b (1970).

The record clearly reveals that Mrs. Cook initially asked Lyon whether he knew of someone to whom she could speak concerning the possible investment of certain monies in Texas properties. Thus, aside from her legal problems Mrs. Cook inquired of Lyon whether he knew of someone she could discuss investments with — apparently realizing that any discussion relative to legal matters had ceased. She specifically

[533 S.W.2d 760]

inquired as to whether he knew of "either an investment counselor or a real estate person." Lyon's answer was that he was a silent partner in a different field — a real estate firm, and that he could therefore he of some service to her in that separate capacity. It is undisputed that no member of the law firm other than Lyon played any part in, or received any benefit from, Lyon's alleged misapplication of funds. The funds were not deposited in, nor handled by, or through any account of the law firm. Thus, it is clear that the investment counseling by Lyon was done without the knowledge of anyone else in the law firm and that the firm neither received a fee, nor profited in any way by Lyon's actions. The end result is that the pleadings, affidavits and depositions reveal that the activities out of which the defalcations arose did not constitute a partnership endeavor.

In Randall v. Meredith, 76 Tex. 669, 13 S.W. 576, 581 (1890), the court stated:

Third persons dealing with a member of a firm in reference to partnership matters, in the absence of power expressly conferred, must recognize the fact that the partner's power to bind his firm is restricted to the doing of such things as are within the scope of the particular business.

Nevertheless, the majority has held that the liability of the law firm may ultimately be established under the applicable provisions of the Texas Uniform Partnership Act. Section 4(3) of the Act expressly states that "[t]he law of agency shall apply under this Act." Upon recognizing this fact the majority states that assuming misapplication of the funds, the crucial questions determinative of whether the law firm is to be held liable for Lyon's misdeeds are: "... whether in receiving the funds of Betty L. Cook, et al, in the sum of $60,343.25, Lyon was `apparently carrying on in the usual way the business of the partnership,' (Sec. 9); or, as also expressed, whether he was `acting in the ordinary course of the business of the partnership'. (Sec. 13). If so, it would follow that Lyon was `acting within the scope of his apparent authority' when he received the money and property of Betty L. Cook, et al; and that the law firm is `bound to make good the loss' from his misapplication of the funds. (Sec. 14)."

Thus, as viewed by the majority, the key is obviously the receipt of the funds. Though I would not limit the construction of the Act simply to the mere receipt of the funds, and aside from the confusion inherent in the majority's statement, I maintain that the liability provisions of the act are clear and well defined. In the present case, it is not claimed that Lyon had been authorized by the partnership to act as he did with reference to the Yummers investment. Nor does anyone claim that Betty Cook, et al, had notice or knowledge that Lyon had no authority to act as he did. Thus, the key questions that must be answered in order to determine whether the law firm is to be held liable are whether Lyon was "acting in the ordinary course of the business of the partnership." (Sec. 13); or, whether he was "apparently carrying on in the usual way the business of the partnership." (Sec. 9). Further, liability may also attach to the law firm if Lyon was "acting within the scope of his apparent authority." (Sec. 14).

Based on my construction of the statutory liability provisions set out in the Texas Uniform Partnership Act as they apply to the present fact situation, I would uphold the summary judgment entered in favor of the law firm. I would hold that the law firm met its summary judgment burden and established that Lyon was not acting in the ordinary course of the partnership business. I would further hold that Lyon was not acting within the scope of his apparent authority, nor was he apparently carrying on in the usual way the business of the partnership within the meaning of the Texas Uniform Partnership Act. The authority of a partner to act as an agent for his partnership is limited to such transactions as are within the scope of the partnership business; and neither the partnership nor the other partners are bound by the unauthorized

[533 S.W.2d 761]

acts of one partner in a matter not within the usual or apparent scope of business of the partnership. Neither a partnership nor its innocent partners are liable for a conversion which is not effected in the course of the firm's business. Similarly, as was revealed in theRandall case, supra, third persons dealing with a member of a firm must recognize that the partner's power to bind his firm is restricted to doing things that are within the scope of the particular business. Perhaps the initial respect which Mrs. Cook entertained for Lyon's business sagacity and investment acumen was seeded in the fact that he was a member of that particular law firm; but he was a

member of that firm for the practice of law, and that membership did not per se create liability by his partners for his acts outside the general scope of the practice of law. Rouse v. Pollard, 130 N.J.Eq. 204, 21 A.2d 801 (1941).

Mrs. Cook's inquiry related to whether Lyon knew of an individual who could serve in the distinct capacity of an investment counselor. Lyon's answer clearly indicated to her that he would be acting in her behalf in a separate, nonlegal capacity. It therefore may not be said that Lyon was "apparently carrying on in the usual way the business of the partnership." Such representations and financial failure arose out of Lyon's own private deal and not in the course of the partnership business. Where a person deals with one of the partners in a matter not within the scope of the partnership, the intendment of the law is that he deals with him on his own private account.

When Mrs. Cook went to the offices of Brundidge, Fountain, Elliott & Churchill in reliance upon their reputation as a law firm to obtain legal advice and met with Lyon as a member of the firm who would render the desired service, she had no justification therein for relying upon the responsibility of the partnership for any disconnected service assumed by Lyon outside one that was characteristically within the practice of law. When Lyon volunteered himself as a real estate and investment counselor in the present case due to Mrs. Cook's instigating inquiry he was not "apparently carrying on in the usual way the business of the partnership," nor was he "acting in the ordinary course of the business of the partnership" within the meaning of the Partnership Act. In this case Lyon was acting in a private, nonlegal advisory capacity, and he was therefore entirely outside the scope of his authority and without the scope of the business carried on by this law firm. Such actions were not incidental to the business of a firm engaged exclusively in the practice of law. Because of these conclusions, it is clear that Lyon was also not "acting within the scope of his apparent authority" when he received the monies of Betty Cook, et al.

This court described "apparent authority" in Douglass v. Panama, Inc., 504 S.W.2d 776, 778 (Tex.1974), as follows:

Apparent authority is based on estoppel, and one seeking to charge a principal through apparent authority of an agent to bind the principal must prove such conduct on the part of the principal as would lead a reasonably prudent person to suppose that the agent had the authority he purports to exercise. [Emphasis added].

Since apparent authority is based on estoppel, it cannot be established by the acts of the agent; "it must arise from words or conduct of the principal." Custom Leasing, Inc. v. Texas Bank and Trust Company of Dallas, 516 S.W.2d 138, 144 (Tex.1974); Rourke v. Garza, 19 Tex.Sup.Ct.J. 36, 530 S.W.2d 794 (Tex.1975). Further, apparent authority in such cases exists only as to those things ordinarily entrusted to one occupying such a position. Rourke, supra. In the instant case we find no actions by the principal law firm that would induce Mrs. Cook to believe that Lyon was authorized to act for the firm as a real estate broker or investment counselor. The firm did nothing to indicate to Mrs. Cook that Lyon was authorized to act in their behalf outside of the practice of law. Mrs. Cook herself stated

[533 S.W.2d 762]

in her affidavit and deposition that she had no contact with any other member of the law firm beyond greeting Mr. Churchill briefly on a few occasions. The mere fact that the law firm had conferred upon Lyon the authority to practice law within the scope of their partnership would not create the apparent authority to engage in investment counseling transactions as a service disconnected from the practice of law. See, Great American Casualty Co. v. Eichelberger, 37 S.W.2d 1050 (Tex.Civ.App. — Waco 1931, writ ref'd).

As a final note, I maintain that it is clearly evident that the majority has failed in its duty to lend a guiding hand to the trial court below. For instance, in what fashion do the three statutory liability provisions interrelate so as to possibly affix liability to the law firm? Since the ultimate outcome is dependent upon these pertinent liability provisions, what are the special issues that should be submitted in such cases? Whose viewpoint or actions determine the existence or nonexistence of liability? What does "apparently carrying on in the usual way the business of the partnership" mean? It is inevitable that the jury will require some form of instruction as to these matters. And, since the term "apparent authority" as set out in the statute has obviously not received its traditional interpretation, that concept will also require further specification and delineation. That problems and confusion are created is evident. The questions which arise call for and deserve answers. This case presents the initial instance in which the partnership liability provisions have been directly confronted and analyzed in such a fashion, and therefore, further guidance is essential.

Nevertheless, as I view the Texas Uniform Partnership Act, even under the petitioners' version of the facts there was no genuine issue as to any material fact, and the matters before the court failed to show any liability on the part of the law firm. Accordingly, summary judgment was properly entered and the judgment of the court of civil appeals should be affirmed.

GREENHILL, C. J., joins in this dissent.

Bohonus v. AmercoAnnotate this Case

124 Ariz. 88 (1979)

602 P.2d 469

Jerry R. BOHONUS, Appellant, v. AMERCO, a Nevada Corporation; Amerco, Inc., an Oregon Corporation; Ponderosa Insurance Agency, Inc., an Arizona Corporation; Oxford Life Insurance Co., an Arizona Corporation; Republic Western Life Insurance

Company, an Arizona Corporation, and Republic Western Insurance Company, an Arizona Corporation, Appellees.

No. 14445.

Supreme Court of Arizona, En Banc.

October 5, 1979.

Rehearing Denied November 14, 1979.

Jerry R. Bohonus, in pro per.

Mariscal, Weeks, McIntyre & Friedlander by Richard A. Friedlander, Phoenix, for appellees.

HAYS, Justice.

Appellee Amerco, plaintiff below, secured a judgment against appellant Bohonus, defendant *89 below, and sought to enforce that judgment by judicial sale of Bohonus' interest in a partnership. The initial litigation involved numerous parties and was prolonged. At the time summary judgment was entered against Bohonus, his attorney had withdrawn and he was acting as his own attorney. He attempted to appeal from the summary judgment and from the judgment enforcement proceedings. Before the case was transferred to this court pursuant to Rule 19(e) of the Rules of Civil Appellate Procedure, the Court of Appeals ruled that his appeal from the initial summary judgment was not timely. We concur in this ruling.

The first issue before us is: May the trial court order the sale of partnership property to satisfy the individual debt of a partner?

The appellee, Amerco, after it secured a judgment against the appellant, Bohonus, sought a charging order from the court pursuant to A.R.S. § 29-228, a provision embodied in the Uniform Partnership Act. The court granted the request for a charging order and as a part of that order mandated the sale of appellant's interest in the assets and property of the partnership business, including a spiritous liquor license. The sheriff proceeded with the sale and filed his return.

We now look at the partnership statute. A.R.S. § 29-225(B)(3) says:

"A partner's right in specific partnership property is not subject to attachment or execution, except on a claim against the partnership...."

A.R.S. § 29-224 sets forth the extent of the property rights of the partner:

"The property rights of a partner are: 1. His rights in specific partnership property. 2. His interest in the partnership. 3. His right to participate in the management."

A.R.S. § 29-226 defines "a partner's interest":

"A partner's interest in the partnership is his share of the profits and surplus, and the same is personal property."

A.R.S. § 29-228 reads, in pertinent part, as follows:

"A. On due application to a competent court by any judgment creditor of a partner, the court which entered the judgment, order, or decree, or any other court, may charge the interest of the debtor partner with payment of the unsatisfied amount of such judgment debt with interest thereon; and may then or later appoint a receiver of his share of the profits, and of any other money due or to fall due to him in respect of the partnership, and make all other orders, directions, accounts and inquiries which the debtor partner might have made, or which the circumstances of the case may require."

With the foregoing statutes in mind, we note that it is only a partner's interest in the partnership which may be charged and, in some jurisdictions, sold. It cannot be overemphasized that "interest in the partnership" has a special limited meaning in the context of the Uniform Partnership Act and hence in the Arizona statutes.

The appellee urges that somehow A.R.S. § 29-228(A), supra, authorizes the sale of partnership assets and property. We note that the record reflects that pursuant to the provisions of the same statute a receiver was appointed in this case. The fact of the receivership provision enforces the conclusion that only the "interest in the partnership" may be charged and we find no provision therein for sale of assets or property of the partnership.

Appellee seeks aid and comfort in the language of A.R.S. § 29-232(B) which provides for dissolution of the partnership upon application of the purchaser of a partner's interest under §§ 29-227 or 29-228. No decree of dissolution however has been asked for here.

We concur with appellee's position that the charged interest of a debtor-partner can be sold, but further enforcement of the creditor's rights must be pursuant to statute. See A.R.S. § 29-232(B) and Tupper v. Kroc, 88 Nev. 146, 494 P.2d 1275 (1972). *90 However, this in nowise makes the sale of the partnership assets valid.

Appellee next contends that even if partnership property is not subject to judicial sale, since appellant never raised this issue at the trial level he may not now raise it for the first time on appeal.

Although appellee correctly states the generally accepted rule [Bible v. First National Bank of Rawlins, 21 Ariz. App. 54, 515 P.2d 351 (1973); National Car Rental v. Fox, 18 Ariz. App. 160, 500 P.2d 1148 (1972)], this court has previously held that "... to this rule there are many exceptions." Town of South Tucson v. Board of Supervisors of Pima County, 52 Ariz. 575, 582, 84 P.2d 581, 584 (1938).

One of these exceptions was cited in Rubens v. Costello, 75 Ariz. 5, 9, 251 P.2d 306, 308 (1952), where we held that,

"[A] legal principle, although not suggested by either party at the trial (and we include on appeal) should be adopted in order to finally dispose of a cause on appeal if this impels the speedy enforcement of a right, or redress of a wrong, and, as a correct exposition of the law, is appropriate to the facts involved." See also Hormel v. Helvering, 312 U.S. 552, 61 S. Ct. 719, 85 L. Ed. 1037 (1941).

In the instant case, there is clearly a wrong to be redressed. The Uniform Partnership Act, which, as we have stated, prohibits the sale of partnership property in order to satisfy the nonpartnership debts of individual partners, has been contravened by the lower court's order. This error must be rectified.

Appellee's final contention requires a chronology of procedural events. Partial summary judgment was entered against appellant on July 27, 1977. On September 22, 1977 the lower court issued one order (1) denying appellant's motion for reconsideration, (2) garnishing appellant's bank account, and (3) ordering the sale of appellant's "partnership interest" as well as a separate "Order for Sale of Partnership Interest." A writ of execution was entered pursuant thereto one week later. On October 13, 1977, appellant filed a notice of appeal "from the judgment entered in the above-entitled action on the 25th [sic] of July, 1977...." Appellant served appellee with a motion to quash the writ of execution on October 18, 1977 and on November 18, 1977 filed an amended notice of appeal from the September 22 judgment "... and from the whole thereof." At the November 28, 1977 hearing on appellant's Motion to Quash, appellee, apparently concerned that the pending appeal deprived the trial court of jurisdiction, questioned the appellant regarding precisely which judgment(s) were included in his appeals. Appellant responded:

"The notice of appeal was directed to the Court's decision to reaffirm the original judgment that was entered into against me, which was reaffirmed on or about September 21st or 22nd, whatever."

Appellee contends that appellant thus represented that his appeal was directed not at the order for the sale of his partnership interest, but instead at the July 27 summary judgment entered against him and that appellant should thus be estopped from now asserting that the instant appeal concerns the Order of Sale.

Appellee relies on the doctrine of judicial estoppel.

"Generally, the doctrine states that a party who has assumed a particular position in one judicial proceeding will not be allowed to assume an inconsistent position in a subsequent proceeding." Standage Ventures, Inc. v. State, 114 Ariz. 480, 483, 562 P.2d 360, 363 (1977).

Although the doctrine appears applicable, appellee's claim is without merit. As a general rule, it is essential to the existence of an estoppel that the representation be relied upon and that such reliance be justifiable. Joy Enterprises, Inc. v. Reppel, 112 Ariz. 42, 537 P.2d 591 (1975); Graham v. Asbury, 112 Ariz. 184, 540 P.2d 656 (1975). Reliance is not justified where knowledge to the contrary exists. See Hobbs v. McLean, 117 U.S. 567, 6 S. Ct. 870, 29 L. Ed. 940 (1886). Here, appellant's Amended Notice of Appeal, by its terms, *91 was from the September 22, 1977 judgment "... and from the whole thereof" and was not limited merely to the denial of the reconsideration. Appellee clearly knew the appeal included the sale of appellant's partnership interest and cannot now be heard to argue otherwise.

For the foregoing reasons, we reverse and remand to the trial court for proceedings consistent with this opinion.

CAMERON, C.J., STRUCKMEYER, V.C.J., and HOLOHAN and GORDON, JJ., concurring.

FIRST NAT'L BANK V. DIST. CT

THE FIRST NATIONAL BANK OF DENVER, A NATIONAL BANKING ASSOCIATION, PETITIONER, V. THE DISTRICT COURT IN AND FOR THE CITY AND COUNTY OF DENVER, STATE OF COLORADO, AND THE HONORABLE ROGER CISNEROS, ONE OF THE JUDGES

THEREOF, RESPONDENTS. NO. 82SA65 SUPREME COURT OF COLORADO. DECIDED OCTOBER 18, 1982. ORIGINAL PROCEEDING *614614

John Mason, Jr., for petitioner.

Norman D. Johnson, Cogswell and Wehrle, for respondents.

Bernard H. Thorn, Mellman Thorn, for respondents.

En Banc.

JUSTICE LEE delivered the opinion of the Court.

In this original proceeding the petitioner First National Bank of Denver (bank), plaintiff in the trial court, claims that the district court has exceeded its jurisdiction and abused its discretion in refusing to allow the petitioner to execute on its final judgment. The petitioner requests that we *615615 issue a writ of prohibition ordering the respondent court to vacate its stay of execution granted in Civil Action No. C-68753 in favor of the defendants in the trial court, Robert Sanders, Paul L. Sanders, Lawrence Sanders, J.W. Skinner, and Michael J. Bellamy. We issued our rule to show cause and we now discharge the rule.

The facts were as follows. In December of 1976, the bank brought suit on a demand promissory note executed by the five defendants. In subsequent proceedings a judgment in the amount of $182,530.55 was rendered against the defendants, jointly and severally, including $91,000 principal, $91,405.55 interest, and $125 costs, based upon a stipulation and payment schedule into which the parties had entered. Attorneys' fees were to be determined at a later date.

On September 21, 1979, after a hearing on the bank's motion, the district court entered orders charging partnership interests of the judgment debtors in three partnerships with payment of the unsatisfied portion of the judgment debt, costs, and interest. The orders charged the partnership interests of the named defendants in Quadrangle, Ltd., and the partnership interests of Robert Sanders, Paul L. Sanders, and Lawrence Sanders in the partnerships known as Saddleback, Ltd. and Grassroots Co.

The charging orders directed the partnerships to pay the bank all present and future shares of all distributions, credits, drawings, or payments which would have been paid to the respective named defendants for their interests in the partnerships, and further directed that such payments should continue until the judgment, including interest and costs, was satisfied in full. Until that time, the partnerships were ordered not to make capital acquisitions of property of the judgment debtors, not to loan money to nor pay any creditor of the judgment debtors, and not to make a sale or modification of partnership interests unless approval of the court or the judgment creditor was first obtained. In addition, all documents or partnership reports were to be sent to the judgment creditor, and the partnerships were instructed to make available a copy of the partnership agreements and amendments, income tax returns for the past two years, any balance sheet and profit and loss statements, and all books and records. The order charging the partnership property excluded property claimed to be exempt from execution. Section 13-54-101, et seq., C.R.S. 1973 (1981 Supp.).

The order provided that: "Upon due application, any party may apply to this Court for a further modification of this Order, and the Court retains jurisdiction."

No payments were made by the partnerships, and after approximately two years the bank orally moved the court, in an ex parte hearing, for execution and sale of the partnership interests charged in the September 1979 orders, and asked in addition for an order restraining the judgment debtors from alienating the property pending the sale. The court granted the motion and entered its order on December 1, 1981. The order provided in part as follows:

"The sheriff of the City and County of Denver, State of Colorado, is ordered to execute upon property of Robert Sanders, Lawrence Sanders, Paul Sanders, J. W Skinner, and Michael Bellamy, being all of said Judgment Debtors' right, title and interest in and to the following Colorado partnership, to wit:

Saddleback, Ltd.: (Robert, Lawrence and Paul Sanders only)

Grassroots Co.: (Robert, Lawrence and Paul Sanders only)

Quadrangle, Ltd.: (all Defendants)

and to sell the interests of such Judgment Debtors in the above-listed partnerships at public sale in accordance with Colorado Law pertaining to such sales and to file with this Court a report of such sale within thirty (30) days after all sales are completed."

The partnerships were restrained from assigning, transferring, or encumbering their property until the public sale was held.

On December 16, 1981, the defendants filed a motion for a stay of the execution, citing as grounds that the bank had *616616 assigned its judgment to a party-opponent in another lawsuit in which Quadrangle, Ltd. was a defendant and a counterclaim plaintiff (Civil Action No. C-61262), and that the two actions were so related that the execution on the present case should be stayed pending the outcome of the other case.

On January 12, 1982, the court granted the motion and stayed execution, without hearing evidence or making findings. The bank now seeks an order from this court prohibiting the district court from staying execution against the defendants.

It is a general rule in Colorado that a court may not stay execution and thereby impair or destroy the statutory right of a judgment creditor to enforce collection of its judgment against nonexempt property of the judgment debtor. Jones v. District Court for the City and County of Denver, 135 Colo. 468, 312 P.2d 503 (1957). The petitioner argues that, since there is no allegation that the partnership interests are exempt from execution, the district court was without power to impair the judgment creditor's rights, regardless of circumstances claimed by the debtors.

The judgment debtors, on the other hand, argue that this case may be distinguished from Jones v. District Court, supra, because sale of the partnership interests would affect the partnerships themselves as well as other partners which are not parties to this action. Because the judge ordered the sale without first providing notice and hearing to those who would be affected, they argue that the sale was void under the notice requirements of the Uniform Partnership Law, section 7-60-128(1), C.R.S. 1973, which provides:

"7-60-128. Interest subject to charging order. (1) On due application to a court of competent jurisdiction by any judgment creditor of a partner, the court which entered the judgment, order, or decree, or any other court, may charge the interest of the debtor partner with payment of the unsatisfied amount of the judgment with interest thereon; and may then or later appoint a receiver of his share of the profits and of any other money due or to fall due to him in respect of the partnership and make all other orders, directions, accounts, and inquiries which the debtor partner might have made, or which the circumstances of the case may require.

"(2) The interest charged may be redeemed at any time before foreclosure or, in case of a sale being directed by the court, may be purchased without thereby causing a dissolution:

(a) With separate property by any one or more of the partners; or

(b) With partnership property by any one or more of the partners with the consent of all the partners whose interests are not so charged or sold.

"(3) Nothing in this article shall be held to deprive a partner of his right, if any, under the exemption laws, as regards his interest in the partnership."

The judgment debtors contend that "due application" must be made to the court upon adequate notice to persons whose rights might be adversely affected by the granting of the relief sought. Phillips v. Phillips,155 Colo. 538, 400 P.2d 450 (1964).

I.

Once a judgment has been entered, a judgment creditor is entitled to have a writ of execution issued, subject to: the statutory provisions creating an automatic stay for a period of 15 days, C.R.C.P. 62(a); the provisions concerning stay during appeal, C.R.C.P. 62(b), (c), (d), (e), and (g); and other provisions limiting the right to execute against the debtors' property. Section 13-52-102(1), C.R.S. 1973, provides:

"All goods and chattels, lands, tenements, and real estate of every person against whom any judgment is obtained in any court of record, either at law or in equity, for any debt, damages, costs or any other sum of money are liable to be sold on execution to be issued upon such judgment. . . ."

C.R.C.P. 69(a) in effect at the time judgment was rendered provided in pertinent part: *617617

"Rule 69. Execution and Proceedings Subsequent to Judgment.

(a) In General. Process to enforce a judgment for the payment of money shall be a writ of execution, unless the court directs otherwise."1

1.

C.R.C.P. 69(a) was amended effective July 1, 1981, and now provides as follows: "Rule 69. Execution and Proceedings Subsequent to Judgment. (a) In General. Except as provided in Rule 103 herein, process to enforce a judgment for the payment of money shall be a writ of execution, unless the court directs otherwise.

Issuance of a writ of execution however is not an exclusive remedy, and the plaintiff was therefore also entitled to employ supplemental proceedings in aid of execution to collect the judgment from the defendants' property. C.R.C.P. 69(f) provides that the court may order that certain nonexempt property of the judgment debtor in the hands of the debtor or any other person be applied towards satisfaction of the judgment. This was accomplished when the court, pursuant to the Uniform Partnership Law, section 7-60-128, C.R.S. 1973, charged the partnership property of the defendants.

The order charging the partnership interests with the judgment and directing the payment of the partners' shares of profits to the judgment creditor, was entered by the court after hearing and notice to all parties. The order was subject to later modification "upon due application." This wording tracks the language of section 7-60-128. We have interpreted that term to mean an application made to the court upon adequate notice to the persons whose rights might be adversely affected by the grant of the relief sought. Phillips v. Phillips, supra.

The defendants point out that they had no notice of either the oral motion for execution or the hearing, and that the order for execution and sheriff's sale was entered without an opportunity for them to be heard. The defendants argue that the lack of notice renders the judge's order void, and therefore the stay of the sale proceedings was properly entered.

The plaintiffs argue that the issuance of the writ of execution was a ministerial act, that no notice to the defendants was required before the issuance of the order, and that the execution order was valid as issued. Furthermore, it is argued that once the valid execution had issued, it could not later be stayed by the judge without allegation that the property to be sold was exempt, or without some other statutory basis for the stay.2

2.

The plaintiffs also point out that the defendants have raised for the first time in this court the issue of the validity of the writ of execution based upon lack of notice to them in the trial court. Instead, the defendants asked the trial judge for a stay of the execution sale until another and allegedly related case was resolved. The defect in the ex parte proceedings was violative of the court's charging order and execution was properly stayed by the court.

We agree with the defendants that the ex parte order for execution and sheriff's sale was improperly entered because it was issued without due application to modify the court's earlier order charging the partnership interests. Because of the nature of partnership property and the possible adverse impact that this sale could have upon the nondefendant partners, if any, the court should have conducted another hearing under section 7-60-128 with proper notice to the affected parties, to determine the propriety of allowing an execution sale of the partnership interests in lieu of payments of the debtor partners' share of partnership profits to the judgment creditor.3

3.

Although the court ordered the sale, it did not make the findings necessary to support a court ordered dissolution of the partnership pursuant to sections 7-60-131 and 7-60-132, C.R.S. 1973. Section7-60-128(2) specifies certain remedies to prevent the dissolution of a partnership when partnership interests are to be sold or foreclosed pursuant to a charging order. Those remedies include the right to redeem at any time before foreclosure, and the partners' right to purchase at the sale with their separate property or, if all partners whose interests are not charged agree, to purchase the sale property with other partnership property. That these remedies are available, however, does not excuse the failure to provide notice of the subsequent charging proceeding.

Section 13-52-102, supra, states the rule that all property of the debtor is *618618 subject to execution and sale pursuant to a writ in order to satisfy the judgment debt. In Jones v. District Court, supra, that section was broadly interpreted to mean that the district court was without power to limit the substantive right granted by the legislature to a judgment creditor to collect the judgment by execution against property of the judgment debtor. As that case held:

"The statute above quoted [the predecessor statute to section13-52-102, supra] creates a substantive right in a judgment creditor to enforce collection of his judgment against any and all property of the debtor, not exempt from execution and attachment and 

not otherwise in custodia legis, as in bankruptcy, receivership, or in the hands of a trustee under a general assignment for the benefit of creditors as controlled by pertinent legislation." 135 Colo. at 471-472,312 P.2d at 504.

Although we do not disagree with this statement, the substantive right of a judgment creditor to enforce collection of the judgment may be statutorily limited, as in this case. Thus, partnership property may only be charged with payment of the judgment debt after "due application" with notice and hearing pursuant to section 7-60-128, supra. In this setting the charging order required payment of the partnership profits to the judgment creditor. Further modification of the order as applied to the partnership interests was only available upon due application to the trial court, which retained jurisdiction for that purpose. Due application required notice and hearing pursuant to the directives of section 7-60-128. Thus, the order of court entered on the ex parte motion for execution and sale of the partnership property was improper.4

4.

If the execution and sale were approved by the court following a valid procedure including notice and hearing, the partnership would be entitled to protect its interests and avoid dissolution by the application of the provisions in section 7-60-128(2). See supra n. 3.

Accordingly, we direct the district court to vacate its ex parte order authorizing the execution sale. Further proceedings to enforce the collection of plaintiffs' judgment from the defendants' partnership interests shall be conducted in accordance with the court's charging order and the provisions of the Uniform Partnership Law.

Rule discharged.

ContactFeaturesTermsPrivacyAboutJobsPressStudents