V. PARTNER’S OBLIGATION TO PERSONAL AND PARTNERSHIP CREDITORS; Article 1816.
Article 1816. All partners, including industrial ones, shall be liable pro rata with all their
THIRD PARTIES
A. To have his partnership interest charged for personal debts
Article 1814. Without prejudice to the preferred rights of partnership creditors under article
1827, on due application to a competent court by any judgment creditor of a partner, the
court which entered the judgment, 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.
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:
(1) With separate property, by any one or more of the partners; or
(2) 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.
Nothing in this Title shall be held to deprive a partner of his right, if any, under the
exemption laws, as regards his interest in the partnership. (n)
Article 1827. The creditors of the partnership shall be preferred to those of each partner as
regards the partnership property. Without prejudice to this right, the private creditors of each
partner may ask the attachment and public sale of the share of the latter in the partnership
assets. (n)
B. To be liable for partnership debts
property and after all the partnership assets have been exhausted, for the contracts which may
be entered into in the name and for the account of the partnership, under its signature and by
a person authorized to act for the partnership. However, any partner may enter into a separate
obligation to perform a partnership contract. (n)
Article 1817. Any stipulation against the liability laid down in the preceding article shall be
void, except as among the partners. (n)
Article 1835. The dissolution of the partnership does not of itself discharge the existing
liability of any partner.
A partner is discharged from any existing liability upon dissolution of the partnership by an
agreement to that effect between himself, the partnership creditor and the person or
partnership continuing the business; and such agreement may be inferred from the course of
dealing between the creditor having knowledge of the dissolution and the person or
partnership continuing the business.
The individual property of a deceased partner shall be liable for all obligations of the
partnership incurred while he was a partner, but subject to the prior payment of his separate
debts. (n)
C. Tort liability; breach of trust liability
Article 1822. 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 caused to any person, not being a partner in the partnership, or any penalty is
incurred, the partnership is liable therefor to the same extent as the partner so acting or
omitting to act. (n)
Article 1823. The partnership is bound to make good the loss:
(1) Where one partner acting within the scope of his apparent authority receives money or
property of a third person and misapplies it; and
(2) Where the partnership in the course of its business receives money or property of a third
person and the money or property so received is misapplied by any partner while it is in the
custody of the partnership. (n)
Article 1824. All partners are liable solidarily with the partnership for everything chargeable
to the partnership under articles 1822 and 1823. (n)
D. Liability in case of estoppel
Article 1825. When a person, by words spoken or written or by conduct, represents himself,
or consents to another representing him to anyone, as a partner in an existing partnership or
with one or more persons not actual partners, he is liable to any such persons to whom such
representation has been made, who has, on the faith of such representation, given credit to
the actual or apparent partnership, and if he has made such representation or consented to its
being made in a public manner he is liable to such person, whether the representation has or
has not been made or communicated to such person so giving credit by or with the
knowledge of the apparent partner making the representation or consenting to its being made:
(1) When a partnership liability results, he is liable as though he were an actual member of
the partnership;
(2) When no partnership liability results, he is liable pro rata with the other persons, if any,
so consenting to the contract or representation as to incur liability, otherwise separately.
When a person has been thus represented to be a partner in an existing partnership, or with
one or more persons not actual partners, he is an agent of the persons consenting to such
representation to bind them to the same extent and in the same manner as though he were a
partner in fact, with respect to persons who rely upon the representation. When all the
members of the existing partnership consent to the representation, a partnership act or
obligation results; but in all other cases it is the joint act or obligation of the person acting
and the persons consenting to the representation. (n)
E. Liability of new partners
Article 1826. A person admitted as a partner into an existing partnership is liable for all the
obligations of the partnership arising before his admission as though he had been a partner
when such obligations were incurred, except that this liability shall be satisfied only out of
partnership property, unless there is a stipulation to the contrary.
LITTON vs. HILL
DOCTRINE/TOPIC: There is a general presumption that each individual partner is an
authorized agent for the firm and that he has authority to bind the firm in carrying on the
partnership transactions.
FACTS:
Petitioner George Litto sold and delivered to respondent Carlos Ceron, one of the managing
partners of Hill & Ceron, a certain number of mining claims. Resp. Ceron paid the petitioner
nut left an unpaid balance. Having been unable to collect either from Hill & Ceron or from
its surety (Visasyan Surety & Insurance Corp.), petitioner filed a complaint before the CFI
for recovery of unpaid balance. CFI ordered Ceron to personally pay the amount claimed and
absolve the partnership Ceron & Hill, which the CA affirmed in view that Ceron did not act
for the firm.
ISSUE: Whether or not the transaction made by Ceron is binding upon the firm.
RULING: Yes, the transaction made by Ceron with the plaintiff should be understood in law
as effected by Hill & Ceron and binding upon it. The respondents testified that during the
partnership, Hill and Ceron had the same power to buy and sell and that on the date of
transaction, partnership between the two was in existence. Hill claims that he advised the
petitioner not to deliver shares of sale/commission to Ceron because the partnership was
about to be dissolved, however at the time of the transaction, there was no formal dissolution
of the firm. Under article 226 of the Code of Commerce, the dissolution of a commercial
association shall not cause any prejudice to third parties until it has been recorded in the
commercial registry.
On the contention that the management of the business has been entrusted to both partners,
that for one of the partners to bind the partnership the consent of the other is necessary is not
untenable. Third persons, like the plaintiff, are not bound in entering into a contract with any
of the two partners, to ascertain whether or not this partner with whom the transaction is
made has the consent of the other partner. The public need not make inquiries as to the
agreements had between the partners. Its knowledge is enough that it is contracting
with the partnership which is represented by one of the managing partners.
"There is a general presumption that each individual partner is an authorized agent for the
firm and that he has authority to bind the firm in carrying on the partnership transactions."
(Mills vs. Riggle, 112 Pac., 617.) "The presumption is sufficient to permit third persons to
hold the firm liable on transactions entered into by one of members of the firm acting
apparently in its behalf and within the scope of his authority." (Le Roy vs. Johnson, 7 U. S.
[Law. ed.], 391.)
Ceron, therefore, could not have entered into the contract of sale of shares with Litton as a
private individual, but as a managing partner of Hill & Ceron.
GOQUILAY vs. SYCIP
Note: There were 2 decisions in this case because after appealing to the SC, Goquiolay filed
an MR of the SC’s decision. Both decisions were penned by REYES J.B.L., J.
FACTS:
The plaintiff-appellants in this case are Antonio C. Goquiolay and the partnership "Tan Sin
An and Antonio C. Goquiolay” which is a general commercial partnership entered into by
Tan Sin An and Antonio C. Goquiolay. The partnership had a capital of P30K, with P18K from
Goquiolay as co-partner and P12K from Tan as sole-managing partner. The Article of
Co-Partnership provided that the managing partner may delegate the entire management
of the affairs of the co-partnership by irrevocable power of attorney to any person, firm or
corporation, while the co-partner shall have no voice or participation in the management,
but he may examine its accounts once every six (6) months. The lifetime of the partnership
was fixed at ten (10) years, and in the event of death of any one of the partners within the
10-year term of the partnership, the deceased partner shall be represented by his heirs. On
top of the Article of Co-Partnership, Goquiolay granted Tan a general special power of
attorney.
The purchased the three (3) parcels of land in Davao, assuming the payment of a mortgage
obligation of P25K, payable to "La Urbana Sociedad Mutua de Construccion y Prestamos"
for a period of ten (10) years, with 10% interest/a. Another 46 parcels were purchased by
Tan in his individual capacity assuming payment of a mortgage debt thereon for P35K. The 2
separate obligations were consolidated in an instrument executed by the partnership and
Tan, mortgaging the 49 lots (3 + 46 parcels) to “Banco Hipotecario de Filipinas" (as
successor to "La Urbana"), binding themselves to pay, jointly and severally.
Two years later, Tan died and his widow Kong Chai Pin was appointed administratrix. Banco
Hipotecario made repeated demands on the partnership for payment, which was later paid
by defendant Sing Yee and Cuan, Co., Inc, who in turn filed their claims in the intestate
proceedings of Tan. To settle the debts of Tan and the partnership, Widow Kong sold the 49
parcels of land for P37K to Washington Z. Sycip and Betty Y. Lee, who assumed payments of
the claims filed by Sing Yee and Cuan. Goquiolay filed to set aside the order of the probate
court approving the sale on the ground that it was executed without proper authority and
under fraudulent circumstances, which the court granted annulling the sale with regard to
the 60% interest of Goquiolay. Kong appealed to the CA, who forwarded it to the SC who
remanded the case for new trial for non-inclusion of indispensable parties. The CFI
dismissed the second amended complaint.
ISSUE/S:
1) WON Kong was a managing partner or general partner or a limited partner? – GENERAL
PARTNER
2) WON the consent of the other partners was necessary to perfect the sale of the
partnership properties? – NO
RULING OF THE SC UPON APPEAL FROM THE CFI
1) Kong is a general partner. Kong became an individual partner together with Tan’s other
heirs regardless of their minority upon Tan’s death. The Articles of Co-Partnership and the
power of attorney executed by Goquiolay, conferred upon Tan the exclusive management
of the business, such power, premised as it is upon trust and confidence, was a mere
personal right that terminated upon Tan's demise. However, Kong’s liability could not have
been limited to Tan’s share because by her affirmative actions, she manifested her intent to
be bound by the partnership agreement not only as a limited but as a general partner.
Having thus preferred to act as such, she could be held liable for the partnership debts and
liabilities as a general partner, beyond what she might have derived only from the estate of
her deceased husband.
2) By allowing Kong to retain control of the firm's property from 1942 to 1949, Goquiolay
estopped himself to deny Kong’s legal representation of the partnership, with the power to
bind it by the proper contracts. Moreover, trangers dealing with a partnership have the
right to assume, in the absence of restrictive clauses in the co-partnership agreement, that
every general partner has power to bind the partnership, specially those partners acting
with ostensible authority.
Citing jurisprudence, SC held that third persons are not bound in entering into a contract
with any of the two partners, to ascertain whether or not this partner with whom the
transaction is made has the consent of the other partner. The public need not make
inquiries as to the agreements had between the partners. Its knowledge is enough that it
is contracting with the partnership which is represented by one of the managing partners.
There is a general presumption that each individual partner is an agent for the firm and
that he has authority to bind the firm in carrying on the partnership transactions. The
presumption is sufficient to permit third persons to hold the firm liable on transactions.
Article 129 of the Code of Commerce which requires the members present to come to an
agreement for all contracts or obligations which may concern the association is one
imposed by law on the partners among themselves. It does not necessarily affect the
validity of the acts of a partner, while acting within the scope of the ordinary course of
business of the partnership, as regards third persons without notice. The third party may
rightfully assume that the contracting partner was duly authorized to contract for and in
behalf of the firm and that, furthermore, he would not ordinarily act to the prejudice of his
co-partners. In fact, Article 130 of the same Code of Commerce provides that even if a new
obligation was contracted against the express will of one of the managing partners, "it shall
not be annulled for such reason, and it shall produce its effects without prejudice to the
responsibility of the member or members who contracted it, for the damages they may
have caused to the common fund."
Although the partnership under consideration is a commercial partnership and, therefore,
to be governed by the Code of Commerce, the provisions of the old Civil Code may give us
some light on the right of one partner to bind the partnership under Art. 1695 (now Art.
1803 (1)).
With regard to the alleged “throwing into dissolution” of the partnership because its only
property was sold, the SC held that the firm was not organized to exploit these precise lots
but to engage in buying and selling real estate, and "in general real estate agency and
brokerage business".
RULING OF THE SC UPON MR OF SC’s FIRST DECISION
In this MR, Goquiolay insists that Kong never became more than a limited partner,
incapacitated by law to manage the affairs of the partnership and that the sale should be
set aside because it was executed with the intent to defraud Goquiolay of his share in the
properties sold.
1) The Court held that there is no question between partners inter se, but only with regard
to the transfer of partnership property by one partner, acting in behalf of the firm, to a
stranger, and that the properties sold were not part of the contributed capital (which was in
cash). Based on the testimonies, Goquiolay actually manifested his willingness that Kong
should manage the partnership properties. The authority was given, and Kong did have it
when she made the questioned sale, because it has never revoked.
The argument that Kong’s authority was only to manage the property, and that it did not
include the power to alienate, citing Article 1713, is untenable because Kong was not a
mere agent as she had become a partner upon Tan's death, as expressly provided by the
articles of co-partnership. Goquiolay's authorization to manage the partnership property
was proof that he considered and recognized her has general partner, and is now in
estoppel to deny her position as a general partner, with authority to administer and
alienate partnership property.
Besides, as we pointed out in our main decision, the heir ordinarily (and we did not say
"necessarily") becomes a limited partner for his own protection, because he would normally
prefer to avoid any liability in excess of the value of the estate inherited so as not to
jeopardize his personal assets.
2) The third parties (like Sycip) who found Kong possessing and managing the firm property
with the acquiescense (or at least without apparent opposition) of the surviving partners
(Goquiolay) were perfectly justified in assuming that she had become a general partner,
and, therefore, in negotiating with her as such a partner, having authority to act for, and in
behalf of, the firm. Moreover, Goquiolay never asserted his alleged rights for 7 years
because he was not interested and he did not even take steps to pay, or settle, the firm
debts.
Extra: Goquiolay’s contention of fraud was without direct evidence.
BAUTISTA ANGELO, J., dissenting
In this dissent, Justice Bautista argues that Kong never became a managing nor general
partner. Goquiolay’s testimony made it clear that he did not allow Kong to manage the
partnership when he refused to sign a general power of attorney for Kong with regard to
selling the properties. He merely allowed Kong to manage the land so he could help her
financially. Kong’s alleged acts, if at all, only refer to management of the properties and
not to management of the partnership, which are two different things. The alleged acts of
management, even if proven, could not give Kong the character of general manager for the
same is contrary to law and well-known authorities.
Assuming arguendo that the acts of management imputed to Kong are true, such acts could
not give her the character of general manager of the partnership because it is contrary to
law and precedents. Garrigues, a well-known commentator, is clearly of the opinion that
mere acceptance of the inheritance does not make the heir of a general partner a general
partner himself. He emphasized that the heir must declare that he is entering the
partnership as a general partner unless the deceased partner has made it an express
condition in his will that the heir accepts the condition of entering the partnership as a
prerequisite of inheritance, in which case acceptance of the inheritance is enough. But here
Tan Sin An died intestate.
As a general rule the heirs of a deceased partner succeed as limited partners only by
operation of law, it is obvious that the heir, upon entering the partnership, must make a
declaration of his character, otherwise he should be deemed as having succeeded as limited
partner by the mere acceptance of inheritance. And here Kong Chai Pin did not make such
declaration. Assuming arguendo that Kong really did become a general partner, she still
could not sell the partnership properties without authority from the other partners
pursuant to Article 129 of the Code of Commerce. Kong sold the partnership properties not
in line with the business of the partnership but to pay its obligation without first
obtaining the consent of the other partners, the sale is invalid being in excess of her
authority.
CO vs. PITCO
DOCTRINE/TOPIC: Being a civil partnership, by the express provisions of articles 1098
and 1137 of the Civil Code, the partners are not liable each for the whole debt of the
partnership. The liability is pro rata and in this case Pedro Yulo is responsible to plaintiff for
only one-half of the debt.
FACTS:
Florencio Yulo and Jaime Palacios were partners in the operation of sugar estate and had
commercial dealings with Dy-Sianco who furnished them with money and goods. Thereafter,
Pedro Yulo, father of Florencio, took charge of the latter’s interest in the partnership and
became a general partner with Jaime Palacio in the same business. He then finds that the
balance due from the firm of Pedro Yulo and Jaime Palacios was 1,638.40 pesos, Philippine
currency, and orders judgment against the defendant, Pedro Yulo, for the entire amount, with
interest.
ISSUE: Whether or not the entire amount of the debt should be paid solely by Pedro Yulo.
RULING: The partnership of Yulo and Palacios was engaged in the operation of a sugar
estate in Negros. It was, therefore, a civil partnership, as distinguished from a mercantile
partnership. Being a civil partnership, by the express provisions of articles 1098 and 1137 of
the Civil Code, the partners are not liable each for the whole debt of the partnership. The
liability is pro rata and in this case Pedro Yulo is responsible to plaintiff for only one-half of
the debt. The fact that the other partner, Jaime Palacios, had left the country can not increase
the liability of Pedro Yulo.
The judgment of the court below is- reversed and judgment is ordered in favor of the plaintiff
and against the defendant, Pedro Yulo, for the sum of 819.20 pesos, Philippine currency,
with interest thereon at the rate of 6 per cent per annum from the 12th day of January, 1905,
and the costs of the Court of First lnstance.
BACHRACH vs. LA PROTECTORA
DOCTRINE/TOPIC: Article 1698 of the Civil Code declares that a member of a civil
partnership is not liable in solidum (solidariamente) with his fellows for its entire
indebtedness; but it results from this article, in connection with article 1137 of the Civil Code,
that each is liable with the others (mancomunadamente) for his aliquot part of such
indebtedness.
FACTS: Herein defendants Segundo, Adiarte, Flores, and Serrano, formed a civil
partnership called La Protecta for the purpose of engaging in the business of transporting
passengers and freight. Marcelo Barba, acting as manager, negotiated the price of 2
automobile trucks from plaintiff E.M. Bachrach. Barba paid the sum of P3k in cash and
executed promissory notes for the remaining balance. The notes provided for the payment of
interest. Three of these PNs have been made the subject of this present action. As
preliminary to the purchase of these trucks, defendants executed a document declaring that
they are members of the firm and that they granted to its president full authority in the name
and representation of said partnership to contract for the purpose of two automobiles, which
was delivered to the plaintiff. To recover the remaining balance with the sum due for
additional purposes, plaintiff instituted the present action before CFI against respondents.
Judgement was rendered against all of the respondents. No appeal was taken in behalf of
either La Protecta or Marcelo Barba, but appeals were taken by other 4 respondents
(Segundo, Adiarte, Flores and Serrano).
ISSUE: Whether or not these 4 individuals are liable for the firm debts and if so to what
extent.
RULING: Yes they are liable, each of the four appellants shall be liable only for the
one-fifth part of the remainder unpaid. The business conducted under the name of "La
Protectora" was evidently that of a civil partnership; and the liability of the partners to this
association must be determined under the provisions of the Civil Code. The authority of
Marcelo Barba to bind the partnership, in the purchase of the trucks, is fully established by
the document executed by the four appellants. The promissory notes constitute the obligation
exclusively of "La Protectora" and of Marcelo Barba; and they do not in any sense constitute
an obligation directly binding on the four appellants. Their liability is based on the fact that
they are members of the civil partnership and as such are liable for its debts.
Article 1698 of the Civil Code declares that a member of a civil partnership is not liable in
solidum (solidariamente) with his fellows for its entire indebtedness; but it results from this
article, in connection with article 1137 of the Civil Code, that each is liable with the others
(mancomunadamente) for his aliquot part of such indebtedness.
The document referred to was intended merely as an authority to enable Barba to bind the
partnership and that the parties to that instrument did not intend thereby to confer upon Barba
an authority to bind them personally. It is obvious that the contract which Barba in fact
executed in pursuance of that authority did not by its terms profess to bind the appellants
personally at all, but only the partnership and himself. It follows that the four appellants
cannot be held to have been personally obligated by that instrument; but, as we have already
seen, their liability rests upon the general principles underlying partnership liability.
From what has been said it results that the appellants are severally liable for their respective
shares of the entire indebtedness found to be due; and the Court of First Instance committed
no error in giving judgment against them. However, it should be noted that any property
pertaining to "La Protectora" should first be applied to this indebtedness pursuant to the
judgment already entered in this case in the court below; and each of the four appellants shall
be liable only for the one-fifth part of the remainder unpaid.
ISLAND SALES, INC. vs. UNITED PIONEERS
DOCTRINE/TOPIC: Art. 1816. All partners including industrial ones, shall be liable pro
rata with all their property and after all the partnership assets have been exhausted, for the
contracts which may be entered into in the name and for the account of the partnership, under
its signature and by a person authorized to act for the partnership. However, any partner may
enter into a separate obligation to perform a partnership contract.
FACTS: Defendant company, a general partnership, purchased from the plaintiff a motor
vehicle on the installment basis and executed a PN payable in 12 months. It was provided in
the note that failure to pay any of said installments would render the whole unpaid balance
immediately due and demandable. Having failed to receive the installment, plaintiff sued the
defendant company for the unpaind balance. Benjamin Dacao, Daniel Guizona, Noel Sim,
Romulo Lumauig and Agustin Palisoc were included as co-defendants in their capacity as
general partners. Guizona was declared in default, while complaint against Lumauig was
dismissed upon the motion of the plaintiff. Trial court ruled against the defendants.
Defendants Dacao and Sim moved to reconsider the decision claiming that since there are 5
general partners, the joint and subsidiary liability of each partner should not exceed one-fifth
(1/5) of the obligations of the defendant company. Hence, this appeal.
ISSUE: Whether or not the dismissal of the complaint to favor one of the general partners of
a partnership increases the joint and subsidiary liability of each of the remaining partners for
the obligations of the partnership.
RULING: No. Since the liability of the partners is pro rata, the liability of the appellant
Benjamin C. Daco shall be limited to only one-fifth (1/5) of the obligations of the defendant
company. The fact that the complaint against the defendant Romulo B. Lumauig was
dismissed, upon motion of the plaintiff, does not unmake the said Lumauig as a general
partner in the defendant company. In so moving to dismiss the complaint, the
plaintiff merely condoned Lumauig’s individual liability to the plaintiff.
LIM TONG LIM vs. PHILIPPINE FISHING GEAR INDUSTRIES
DOCTRINE/TOPIC: Under the law on estoppel, those acting on behalf of a corporation
and those benefited by it, knowing it to be without valid existence, are held liable as general
partners. Technically, it is true that petitioner did not directly act on behalf of the corporation.
However, having reaped the benefits of the contract entered into by persons with whom he
previously had an existing relationship, he is deemed to be part of said association and is
covered by the scope of the doctrine of corporation by estoppel.
FACTS:
ISSUE:
RULING:
MUNASQUE vs. COURT OF APPEALS
DOCTRINE/TOPIC:
FACTS:
ISSUE:
RULING:
VI. RIGHTS OF A PARTNER
US vs. CLARIN
DOCTRINE/TOPIC:
FACTS: Pedro Larin delivered to Pedro Tarug, who is in company with Eusebio Clarin and
Carlos de Guzman, P172 in order for them to buy and sell mangoes. Larin made an
agreement with the three men by which the profits were to be divided equally between him
and them. Tarug, Clarin, and de Guzman did in fact trade in mangoes and obtained P203
from the business, but did not comply with the terms of the contract by delivering to Larin
his half of the profits; neither did they render him any account of the capital. Larin charged
them with Estafa but the fiscal filed an information only against Clarin, while Tarug and de
Guzman appeared as witnesses. Trial Court ruled against Clarin ordering him to return to
Larin the assailed amount. Hence this appeal.
ISSUE: Whether or not Larin should be held liable for estafa.
RULING: No. The P172 having been received by the partnership, the business commenced
and profits accrued, the action that lies with the partner who furnished the capital for the
recovery of his money is not a criminal action for estafa, but a civil one arising from the
partnership contract for a liquidation of the partnership and a levy on its assets if there should
be any.
No. 5 of article 535 of the Penal Code, according to which those are guilty of estafa “who, to
the prejudice of another, shall appropriate or misapply any money, goods, or any kind of
personal property which they may have received as a deposit on commission for
administration or in any other character producing the obligation to deliver or return the
same,” (as, for example, in commodatum, precarium, and other unilateral contracts which
require the return of the same thing received) does not include money received for a
partnership; otherwise the result would be that, if the partnership, instead of obtaining profits,
suffered losses, as it could not be held liable civilly for the share of the capitalist partner who
reserved the ownership of the money brought in by him, it would have to answer to the
charge of estafa, for which it would be sufficient to argue that the partnership had received
the money under obligation to return it.
VI. RIGHTS OF A PARTNER
EMNACE v. CA
FACTS: Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divina-gracia were
partners in a business concern known as Ma. Nelma Fishing Industry. However, January of
1986, petitioners decided to dissolve their partnership and executed an agreement of partition
and distribution consequent to jacinto Divinagracia’s withdrawal.
Throughout the existence of the partnership, and even after Vicente Tabanao's untimely
demise, petitioner failed to submit to Tabanao's heirs any statement of assets and liabilities of
the partnership, and to render an accounting of the partnership's finances. Consequently,
Tabanao' s heirs, respondents herein, filed against petitioner an action for accounting,
payment of shares, division of assets and damages. Petitioner filed a motion to dismiss the
complaint on the grounds of improper venue, lack of jurisdiction over the nature of the action
or suit, and lack of capacity of the estate of Tabanao to sue.
The trial court denied the motion to dismiss. It held that venue was properly laid because,
while realties were involved, the action was directed against a particular person on the basis
of his personal liability. Finally, the trial court held that the heirs of Tabanao had a right to
sue in their own names, in view of the provision of Article 777 of the Civil Code, which
states that the rights to the succession are transmitted from the moment of the death of the
decedent. Petitioner filed a petition for certiorari before the Court of Appeals which was
dismissed.
Respondents filed an amended complaint,7 incorporating the additional prayer that petitioner
be ordered to “sell all (the partnership’s) assets and thereafter
pay/remit/deliver/surrender/yield to the plaintiffs” their corresponding share in the proceeds
thereof. In due time, petitioner filed a manifestation and motion to dismiss, arguing that the
trial court did not acquire jurisdiction over the case due to the plaintiffs’ failure to pay the
proper docket fees. Further, in a supplement to his motion to dismiss, petitioner also raised
prescription as an additional ground warranting the outright dismissal of the complaint. To
which the trial court likewise dismissed.
Upon appeal to the CA via Certiorari, CA dismissed the petition grounded on the petitioner’s
failure to pay the proper docket fee; that the Parcel of land subject of the case pending before
the trial court is outside the said court's territorial jurisdiction; the lack of capacity to sue on
the part of plaintiff heirs of Vicente Tabanao.
ISSUE: Whether the surviving spouse of Vicente Tabanao has legal capacity to sue since she
was never appointed as administratrix or executrix of his estate. YES
HELD: Vicente tabanao has legal capacity to sue. Though petitioner asserts that the
surviving spouse of Vicente Tabanao has no legal capacity to sue since she was never
appointed as administratrix or executrix of his estate. Petitioner’s objection in this regard is
misplaced. The surviving spouse does not need to be appointed as executrix or administratrix
of the estate before she can file the action. She and her children are complain ants in their
own right as successors of Vicente Tabanao.
From the very moment of Vicente Tabanao’s death, his rights insofar as the partnership was
concerned were transmitted to his heirs, for rights to the succession are transmitted from the
moment of death of the decedent.
Whatever claims and rights Vicente Tabanao had against the partnership and petitioner were
transmitted to respondents by operation of law, more particularly by succession, which is a
mode of acquisition by virtue of which the property, rights and obligations to the extent of
the value of the inheritance of a person are transmitted.
Moreover, respondents became owners of their respective hereditary shares from the moment
Vicente Tabanao died. A prior settlement of the estate, or even the appointment of Salvacion
Tabanao as executrix or administratrix, is not necessary for any of the heirs to acquire legal
capacity to sue. As successors who stepped into the shoes of their decedent upon his death,
they can commence any action originally pertaining to the decedent
The surviving spouse does not need to be appointed as executrix or administratrix of the
estate before she can file the action. She and her children are complainants in their own right
as successors of Vicente Tabanao. From the very moment of Vicente Tabanao's death, his
rights insofar as the partnership was concerned were transmitted to his heirs, for rights to the
succession are transmitted from the moment of death of the decedent. Whatever claims and
rights Vicente Tabanao had against the partnership and petitioner were transmitted to
respondents by operation of law, more particularly by succession, which is a mode of
acquisition by virtue of which the property, rights and obligations to the extent of the value
of the inheritance of a person are transmitted. Moreover, respondents became owners of their
respective hereditary shares from the moment Vicente Tabanao died.