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G.R. No.

L-38498 August 10, 1989 ISAAC BAGNAS, ENCARNACION BAGNAS, SILVESTRE BAGNAS MAXIMINA BAGNAS, SIXTO BAGNAS and AGATONA ENCARNACION, petitioners, vs. HON. COURT OF APPEALS, ROSA L. RETONIL TEOFILO ENCARNACION, and JOSE B. NAMBAYANrespondents. Beltran, Beltran & Beltran for petitioners. Jose M. Legaspi for private respondents.

record does not disclose the assessed value of the tenth parcel, which has an area of 1,443 square meters. 7 In answer to the complaint, the defendants (respondents here) denied the alleged fictitious or fraudulent character of the sales in their favor, asserting that said sales were made for good and valuable consideration; that while "... they may have the effect of donations, yet the formalities and solemnities of donation are not required for their validity and effectivity, ... that defendants were collateral relatives of Hilario Mateum and had done many good things for him, nursing him in his last illness, which services constituted the bulk of the consideration of the sales; and (by way NARVASA, J.: of affirmative defense) that the plaintiffs could not question or seek annulment of The facts underlying this appeal by certiorari are not in dispute. Hilario Mateum of the sales because they were mere collateral relatives of the deceased vendor and Kawit, Cavite, died on March 11, 1964, single, without ascendants or descendants, were not bound, principally or subsidiarily, thereby. 8 and survived only by collateral relatives, of whom petitioners herein, his first After the plaintiffs had presented their evidence, the defendants filed a motion for cousins, were the nearest. Mateum left no will, no debts, and an estate consisting dismissal in effect, a demurrer to the evidence reasserting the defense set up in of twenty-nine parcels of land in Kawit and Imus, Cavite, ten of which are involved their answer that the plaintiffs, as mere collateral relatives of Hilario Mateum, had in this appeal. 1 no light to impugn the latter's disposition of his properties by means of the On April 3, 1964, the private respondents, themselves collateral relatives of questioned conveyances and submitting, additionally, that no evidence of fraud Mateum though more remote in degree than the petitioners, 2 registered with the maintaining said transfers had been presented. 9 Registry of Deeds for the Province of Cavite two deeds of sale purportedly The Trial Court granted the motion to dismiss, holding (a) on the authority of executed by Mateum in their (respondents') favor covering ten parcels of land. Armentia vs. Patriarca, 10 that the plaintiffs, as mere collateral relatives, not forced Both deeds were in Tagalog, save for the English descriptions of the lands heirs, of Hilario Mateum, could not legally question the disposition made by said conveyed under one of them; and each recited the reconsideration of the sale to deceased during his lifetime, regardless of whether, as a matter of objective reality, be" ... halagang ISANG PISO (Pl.00), salaping Pilipino, at mga naipaglingkod, said dispositions were valid or not; and (b) that the plaintiffs evidence of alleged ipinaglilingkod sa aking kapakanan ..." ("the sum of ONE PESO Pl.00), Philippine fraud was insufficient, the fact that the deeds of sale each stated a consideration of Currency, and services rendered, being rendered and to be rendered for my only Pl.00 not being in itself evidence of fraud or simulation. 11 benefit"). One deed was dated February 6,1963 and covered five parcels of land, On appeal by the plaintiffs to the Court of Appeals, that court affirmed, adverting and the other was dated March 4, 1963, covering five other parcels, both, with approval to the Trial Court's reliance on the Armentia ruling which, it would therefore, antedating Mateum's death by more than a year. 3 It is asserted by the appear, both courts saw as denying, without exception, to collaterals, of a petitioners, but denied by the respondents, that said sales notwithstanding, decedent, not forced heirs, the right to impugn the latter's dispositions inter vivos of Mateum continued in the possession of the lands purportedly conveyed until his his property. The Appellate Court also analyzed the testimony of the plaintiffs' death, that he remained the declared owner thereof and that the tax payments witnesses, declared that it failed to establish fraud of any kind or that Mateum had thereon continued to be paid in his name. 4 Whatever the truth, however, is not continued paying taxes on the lands in question even after executing the deeds crucial. What is not disputed is that on the strength of the deeds of sale, the conveying them to the defendants, and closed with the statement that "... since in respondents were able to secure title in their favor over three of the ten parcels of duly notarized and registered deeds of sale consideration is presumed, we do not land conveyed thereby. 5 and it necessary to rule on the alternative allegations of the appellants that the said On May 22,1964 the petitioners commenced suit against the respondents in the deed of sale were (sic) in reality donations. 12 Court of First Instance of Cavite, seeking annulment of the deeds of sale as One issue clearly predominates here. It is whether, in view of the fact that, for fictitious, fraudulent or falsified, or, alternatively, as donations void for want of properties assuredly worth in actual value many times over their total assessed acceptance embodied in a public instrument. Claiming ownership pro indiviso of valuation of more than P10,000.00, the questioned deeds of sale each state a the lands subject of the deeds by virtue of being intestate heirs of Hilario Mateum, price of only one peso (P1.00) plus unspecified past, present and future services to the petitioners prayed for recovery of ownership and possession of said lands, which no value is assigned, said deeds were void or inexistent from the beginning accounting of the fruits thereof and damages. Although the complaint originally ("nulo") or merely voidable, that is, valid until annulled. If they were only voidable, sought recovery of all the twenty-nine parcels of land left by Mateum, at the prethen it is a correct proposition that since the vendor Mateum had no forced heirs trial the parties agreed that the controversy be limited to the ten parcels subject of whose legitimes may have been impaired, and the petitioners, his collateral the questioned sales, and the Trial Court ordered the exclusion of the nineteen relatives, not being bound either principally or subsidiarily to the terms of said other parcels from the action. 6 Of the ten parcels which remained in litigation, nine deeds, the latter had and have no actionable right to question those transfers. were assessed for purposes of taxation at values aggregating P10,500 00. The On the other hand, if said deeds were void ab initio because to all intents and purposes without consideration, then a different legal situation arises, and quite

. or with a false. Without necessarily according all these assertions its full concurrence. 4. real and effective price. cite Manresa to the same effect: that true price. For under the Civil Code of the Philippines. at worst. that it is not the same as the concept of a just price which entails weighing and measuring. In observing that they ". In Armentia the Court determined that the conveyance questioned was merely annullable not void ab initio. price certain in money or its equivalent .L. disproportion between the stipulated price (in each deed) of P l.00 is so insignificant as to amount to no price at all. cause is that conveyances of property affected with such a vice cannot operate to divest and transfer ownership. No.00 for the sale of things worth at least P20. say. even if unimpugned. plaintiffs case is bottomed on fraud. do not correctly state the present law.. for economic equivalence. those rulings undoubtedly read and applied correctly the law extant in their time: Art. inadequacy of consideration does not imply total want of consideration. Ana. said heirs may bring an action to recover the property from the purported transferee. but on the premise that the property never leaves the estate of the transferor and is transmitted upon his death to heirs. means existent. The sum total of all these is that. Then again. Without more.e. advert to a decision of the Court of Appeals in Montinola vs. The same is true of contracts stating a false cause (consideration) unless the persons interested in upholding the contract should prove that there is another true and lawful consideration therefor. 1276 of the Civil Code of 1889 under which the statement of a false cause in a contract rendered it voidable only. i. and upon the latter's death without a testament. Reyes who. To be sure the quoted passage does not reject and is not to be construed as rejecting the Concepcion and Solisrulings 13 as outrightly erroneous. said: I . a check or draft. the parted acts of Marta Armentia after the sale did not indicate that the said sale was void from the being. or for a false and fictitious consideration. Art. 87 Phil.00 plus unspecified 2 . again citing Manresa 16 to the effect that services are not the equivalent of money insofar as said requirement is concerned and that a contract is not a true sale where the price consists of services or prestations. 1353). If afterwards the transferor dies the property descends to his heirs. requires that "equivalent" be something representative of money. assert that Art. the amount of price against all the factors that determine the value of the thing sold. annullable by them. 50 Phil. 15 3. Justice J.. the conclusion is irresistible that the sale is merely voidable. such property would pass to the transferor's heirs intestate and be recoverable by them or by the Administrator of the transferor's estate. It therefore seems clear that insofar as it may be considered as setting or reaffirming precedent. 2. far from it. stressing the obvious parallel between that case and the present one in stated price and actual value of the property sold. Because Marta Armentia executed the document. 787 and Sobs vs. though made under closely similar circumstances. as pointed out by the eminent civil law authority. In this particular regard... 3. and this is not controverted by plaintiff. or the causa is false and fictitious (and no true hidden causa is proved) the property allegedly conveyed never really leaves the patrimony of the transferor. 8101. not fictitious. 8118) holding that a price of P l. do not correctly state the present law and must be clarified. the unbelievable amount of which at once points out its inexistence. As pointed out. Armentia only ruled that transfers made by a decedent in his lifetime. cannot be posthumously impugned by collateral relatives succeeding to his estate who are not principally or subsidiarily bound by such transfers. merely voidable. in his concurring opinion in Armentia. but upon the consideration alone that the apparent gross. I think Concepcion vs. and must be clarified. and that the plaintiff s action was based on fraud vitiating said conveyance. that which does not consist in an insignificant amount as. while not requiring for the validity of a sale that the price be adequate.G. 47. not void ab initio.. Sta. or which are absolutely simulated or fictitious. Herbosa (59 O.. 1409. and without regard to the manner in which they are called to the succession..000. (lbid. If therefore the contract has no causa or consideration.. who would labor under no incapacity to maintain the action from the mere fact that they may be only collateral relatives and bound neither principally or subsidiarily under the deed or contract of conveyance. contracts with a cause that did not exist at the time of the transaction are inexistent and void from the beginning. Chua Pua Hermanos. cannot bring myself to agree to the proposition that the heirs intestate would have no legal standing to contest the conveyance made by the deceased if the same were made without any consideration. Art. They: 1. makes the contract. P. 14 A logical consequence of that change is the juridical status of contracts without. such an action is not founded on fraud. once more citing Manresa 17 also point out that the "services" mentioned in the questioned deeds of sale are not only vague and uncertain. 1458 of the Civil Code. not to say enormous. the fact that the vendees were minors.g. For the reasons already stated. par. 536. pp. On the contrary.another result obtains. Mr.B." Justice Reyes clearly had in mind the fact that the law as it is now (and already was in the time Armentia) no longer deems contracts with a false cause.. in essence. prescribes that it must be real. which renders the contract voidable. and does not satisfy the law which.20 for a house.. which is essential to the validity of a sale. Besides. but declares them void. e. but that there is no need of such a close examination when the immense disproportion between such economic values is patent a case of insignificant or ridiculous price. The petitioners here argue on a broad front that the very recitals of the questioned deeds of sale reveal such want or spuriousness of consideration and therefore the void character of said sales. are void ab initio for lack or falsity of consideration. but are unknown and not susceptible of determination without the necessity of a new agreement between the parties to said deeds. in prescribing that a sale be for a . The Court said: Hypothetically admitting the truth of these allegations (of plaintiffs complaint). that ruling is not extendible to transfers which. inexistent ("nulo") unless it is shown that they are supported by another true and lawful cause or consideration. which are voidable for having been fraudulently made or obtained.

they gambled their right to adduce evidence on a dismissal in the Trial Court and lost. valid.. whose status as such is not challenged. it is well-known. in an obvious reference to the services mentioned in the deeds.. the movant loses the right to present evidence in his behalf.and unquantified services and the undisputably valuable real estate allegedly sold worth at least P10." (pars. that burden was shifted to the private respondents when the petitioners presented the deeds which they claimed showed that defect on their face and it became the duty of said respondents to offer evidence of existent lawful consideration. Griñ. 20 The transfers in question being void.. not merely voidable. and future. 4.. In effect. nursed him during his ripe years and took care of him during his previous and last illness . SO ORDERED. attorney's fees or litigation expenses are awarded. of the character and value of the services. binding and effective ." an averment that the private respondents not only specifically denied. Gancayco. fictitious and/or falsified and (were) .. 3 . with which the Court fully agrees. there being no evidence thereof before the Court. the Court finds both said deeds. No damages.o-Aquino and Medialdea. were without right to the conveyances in question. and it is not denied by the respondents that there has been no such acceptance which they claim is not required. the petitioners herein. that the properties purportedly conveyed remained part of the estate of Hilario Mateum.. past. to be valid. but void ab initio. opting to rely on a demurrer to the petitioner's evidence and upon the thesis. the appealed Decision of the Court of Appeals is reversed. Neither can the validity of said conveyances be defended on the theory that their true causa is the liberality of the transferor and they may be considered in reality donations 18 because the law 19 also prescribes that donations of immovable property. being mere collateral relatives of the deceased transferor." and. proof. The private respondents have only themselves to blame for the lack of proof that might have saved the questioned transfers from the taint of invalidity as being fictitious and without ilicit cause.lâwphî1. recoverable by his intestate heirs. that petitioners.. their answer)..ñèt 22 The onus. The questioned transfers are declared void and of no force or effect..... for good and valuable consideration . 6. 16 and 17. had done many good things to (the transferor) during his lifetime.. and said respondents are ordered to return to the petitioners possession of an the properties involved in tills action.. which they have maintained all the way to this Court. 23 WHEREFORE. that they "... the respondents not only failed to offer any proof whatsoever.00 going only by assessments for tax purposes which. constituting according to the very terms of said transfers the principal consideration therefor. of showing the existence of valid and illicit consideration for the questioned conveyances rested on the private respondents. and no other true and lawful cause having been shown. JJ." but to which they also interposed the affirmative defenses that said transfers were ". But even on a contrary assumption. in reality donations of immovables ... therefore. Cruz. are notoriously low indicators of actual value plainly and unquestionably demonstrates that they state a false and fictitious consideration. said transfers notwithstanding. 6) 21 averred that the transfers were ". alleging that the transfers had been made ". As the record clearly demonstrates.500. it follows as a necessary consequence and conformably to the concurring opinion in Armentia.. it being the rule that when a dismissal thus obtained is reversed on appeal. insofar as they purport to be sales. to account to the petitioners for the fruits thereof during the period of their possession. Such certificates of title as the private respondents may have obtained over the properties subject of said transfers are hereby annulled. to be brief.. must be made and accepted in a public instrument. concur. and to pay the costs. fraudulent.. present... The petitioners' complaint (par. and positing that the petitioners initially had the burden of showing that the transfers lacked such consideration as they alleged in their complaint.

Kong Chai Pin continue to manage the properties (as) she had no other means of income. Mrs. acting in behalf of the firm. in favor of the buyers Washington Sycip and Betty Lee for the following consideration: With these points firmly in mind. either by buying and selling real seedlings planted by Mr. The appellant subsequently ratified this testimony in his deposition of 30 June 1956. When I went there with Hernando estates. to the effect that the properties of the partnership.726. Did you holding. in his motion for reconsideration. that the witness found the properties "abandoned and undeveloped". favor of the original owners. the appellant's reference to the testimony of Hernando Young. that the testimony of her witness Young and Lim belies that she took partnership were undeveloped. and this aspect to the case was expressly reserved in the main What can you say as to the development of these other properties of the decision of 26 July 1960. to which witness gave the following answer: expressly provided that: I saw the properties in Mamay still undeveloped... Lim. 54. insist that. To engage in real estate business. to subdivide real estates into lots for the purpose of leasing and Youngwe saw all the abaca destroyed. Debts assumed by purchaser: Discarding the self-serving expressions. RESOLUTION REYES. J. wherein he stated: Cash paid P37. was given in answer to the should be set aside because it was executed with the intent to defraud appellant of question: his share in the properties sold.310. p. (Dep. because I wanted to help Mrs.L. contrary to our Now. Salazar and Associates for defendantsappellees. Norberto J. It is first averred that there is "not one iota of evidence" that Kong Chai Pin managed and retained possession of the partnership properties. The third property which IV. having been made against the party's own interest. these admissions of Goquiolay are To Yutivo 62. Yu Eng Lai asked me if I can just let Mrs. Emphasis supplied). They planted camotes and vegetables to feed the (c) That the properties sold were not part of the contributed capital (which was in Japanese Army. 1963 ANTONIO C. never became meet Mrs.. SYCIP. L-11840 December 10. in any event. widow of the deceased partner Tan Sin An. 8). Suffice it to point out that appellant Goquiolay himself admitted that — . plaintiffs-appellants.00 that plantation was being occupied at that time by the widow. Jose C. supplied). she could just do it and besides I am not interested in agricultural lands. 4 .R.. 13-14. during the Japanese occupation Tan Sin an Three things must be always held in mind in the discussion of this motion to and his family lived on the plantation of the partnership and derived their reconsider. Goquiolay. Q — And this conversation which you had with Mrs. ET AL. being basic and beyond controversy: subsistence from that plantation. pages 8-9.. in fact. Japanese Army. Q — So the answer to my question is you did not take any steps? A — I did not. from whom the partnership had acquired them. Quisumbing and Sycip. defendants-appellees. Kong Chai Pin.B. There is no question between And also — partners inter se. the testimony of Rufino Lim. wherein we have upheld the validity of the sale of the lands owned by the partnership Goquiolay & Tan Sin An. although subject to a mortgage in his family.. The Articles of co-partnership. Of course they never paid any money to Tan Sin An or cash) but land precisely acquired to be sold..: The matter now pending is the appellant's motion for reconsideration of our main decision. (Emphasis supplied). The object and purpose of the copartnership are as follows: is in Tigato is about eleven (11) hectares and planted with abaca 1. No. incapacitated by law to manage the affairs of Similarly. 19 July (a) That we are dealing here with the transfer of partnership property by one 1956. omits to mention that TOTAL P153.415. and that. made in 1949 by the widow of the managing partner. partnership which you saw during the occupation? (Dep. pp. the sale receive any income from the partnership properties.04 said part of the testimony started with the question: Appellant Goquiolay. you said that about 1942 or 1943 you returned to Davao. GOQUIOLAY. I allowed her to take care of the properties in order to help her and because I believe in God and — wanted to help her. According to Mr. Kong Chai Pin. Emphasis (b) That partnership was expressly organized: "to engage in real estate business.13 Moreover.EN BANC G. Mr. let us turn to the points insisted upon by appellant. 13. to a stranger. partner. ET AL. The place was occupied by the selling them. either by buying and selling real estate". Sin An.. and the family of the widow (Kong Chai Pin) did not over the administration of the partnership property.000. Tan Sin An (Executed in her dual capacity as Administratrix of the husband's estate and as partner in lieu of the husband). What can you say to that? (Dep.91 certainly entitled to greater weight than those of Hernando Young and Rufino Lim. To Sing Yee Cuan & Co. Tan Sin An. Yu Eng Lai was few months after 1945? A — In the year 1945. Kong Chai Pin there in Davao at that time? more than a limited partner.. Calayco for plaintiffs-appellants. and of course they are receiving quiet a lot benefit from the plantation. WASHINGTON Z. J. p. vs. Then I said.

and he did not even take steps to pay. The issues between the partners inter sewere expressly reserved in our main decision. be it noted. as expressly provided by the articles of copartnership. or modify. The heir never was a limited partner. and does not deal with the rights existing between partners Goquiolay and the widow of Tan Sin An. granting that by succession to her husband. Whether or not she complied with this authority is a question between her and the appellant. because he was not interested (supra). as sole general partner. But the authority was given. since no conversion of status is involved. Code of Commerce). to administer the properties of the firm. even as a mere agent: Limited partners may not perform any act of administration with respect to the interests of the copartnership. 5 . or at least ascertain how its affairs stood. and the articles of co-partnership expressly contemplated the admission of the partner's heirs into the partnership. Knowing that by law a limited partner is barred from managing the partnership business or property. continue to manage the properties). and is now in estoppel to deny her position as a general partner. and by suitable notice in the commercial registry could have warned strangers that they must deal with him alone. Even more. and specially because the conversion into a limited association would have the heirs of the deceased partner without a share in the management. It is immaterial that the heir's name was not included in the firm name. both Young and Lim's testimonies do not belie. or contradict. appellant could not empower the widow. waiving the protective mantle of the general laws of succession. in fact. the contractual stipulation does actually contemplate that the heirs would becomegeneral partners rather than limited ones. 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. This choice pertains exclusively to the heir. the stipulation would not bind the heirs of the deceased partner should they refuse to assume personal and unlimited responsibility for the obligations of the firm. third parties (like the purchasers) who found the widow possessing and managing the firm property with the acquiescence (or at least without apparent opposition) of the surviving partners were perfectly justified in assuming that she had become a general partner. but Goquiolay's authority was. By seeking authority to manage partnership property. last paragraph. It must be remember that the articles of co-partnership here involved expressly stipulated that: In the event of the death of any of the partners at any time before the expiration of said term. and in behalf of the firm. on the contrary.. What this argument overlooks is that the widow was not a mere agent. and answering for the debts of the firm not only with the inheritance but also with the heir's personal fortune. not even in the capacity of agents of the managing partners. It is argued that the authority given by Goquiolay to the widow Kong Chai Pin was only to manage the property. Hence. the disputed sale by the widow took place in 1949. The Articles did not provide that the heirs of the deceased would be merely limited partners. Besides.after the occupation.e. will have to be continued" with the heirs or assigns. given to the widow in 1945.. or settle the firm debts that were overdue since before the outbreak of the last war. For seven years Goquiolay could have asserted his alleged rights. It certainly could not be continued if it were to be converted from a general partnership into a limited partnership. We thus find that Goquiolay did not merely rely on reports from Lim and Young. and is not here involved. from partner Tan Sin An's death in 1942 to the sale in 1949. Witnesses Lim and Young referred to the period of Japanese occupation. XII. with all the rights and privileges of one. the provisions of the partnership articles that he (Goquiolay) would have no intervention in the management of the partnership. By authorizing the widow to manage partnership property (which a limited partner could not be authorized to do). This belief. Goquiolay's admission that he told Mr. and became. (Emphasis supplied). because it was never revoked. Now. after Tan Sin An died. the widow only became a limited partner.. in negotiating with her as such a partner. Note that for seven long years. they expressly stipulated that in case of death of either partner "the co-partnership .Plainly. Tan Sin An. Of course. The heirs. it does not legitimately follow that they may not voluntarily choose to become general partners. Goquiolay recognized her as such partner. He did not even take steps. there was more than ample time for Goquiolay to take up the management of these properties. in determining what kind of partner the widow of partner Tan Sin an Had elected to become. Tan Sin An's widow showed that she desired to be considered a general partner. since the difference between the two kinds of associations is fundamental. and. But this statutory limitation of responsibility being designed to protect the heir. to cancel. having authority to act for. It must never be overlooked that this case involved the rights acquired by strangers. That Kong Chai Pin carried out no acts of management during the Japanese occupation (1942-1944) does not mean that she did not do so from 1945 to 1949. And in the latter event. But because they are not so compellable. because she had become a partner upon her husband's death. Again. and she did have it when she made the questioned sale. citing Article 1713 of the Civil Code of 1889. but chose to be. at least since 1945. therefore. the co-partnership shall not be dissolved but will have to be continued and the deceased partner shall be represented by his heirs or assigns in said co-partnership (Art. can not be compelled to become general partners against their wishes. was shared even by the probate court that approved the sale by the widow of the real property standing in the partnership name. the heir ordinarily (and we did not say "necessarily") becomes a limited partner for his own protection. in other words. Goquiolay's authorization to manage the partnership property was proof that he considered and recognized her as general partner. and that it did not include the power to alienate. if she were only a limited partner. the latter may disregard it and instead elect to become a collective or general partner. with authority to administer and alienate partnership property. it is pointless to discuss the legality of any conversion of a limited partner into a general one. Yu Eng Lai that the widow "could just do it" (i. The reason is plain: Under the law (Article 148. That belief was fostered by the very inaction of appellant Goquiolay. and does not require the assent of the surviving partner. as we pointed out in our main decision. Articles of CoPartnership). strangers had to be guided by her conduct and actuations and those of appellant Goquiolay. a general partner right at the start. he actually manifested his willingness that the widow should manage the partnership properties. But he did nothing of the sort.

the Court expressly found that: The firm was then. en cuyo caso el gerente estaria facultado para otorgar las ventas que fuere necesario. of said firm. The third person would naturally not presume that the partner with whom he enters into the transaction is violating the articles of partnership. 92 Ala. hence within the ordinary powers of the partner. et al. as a general agent of the firm. as well as the plaintiff. And this finds support in the legal presumption that the ordinary course of business has been followed (No. 25 Am.) It is next urged that the widow.Ocurrira una cosa parecida cuando el objeto de la Sociedad fuese la compra y venta de inmuebles.D. 83: If the several partners engaged in the business of buying and selling real estate can not bind the firm by purchases or sales of such property made in the regular course of business. i. 522. Y. section 334.Y. place its 6 . Since the sale by the widow was in conformity with the express objective of the partnership. On that day. as hereinafter stated. Rep.. Hill and Ceron. in the course pursued by him. it may be. 550: And hence. individually. though it still had good credit. 31. 1 Articles of Copartnership). Cowen & Mcgrath. Owen McGrath. . a firm. "to engage . and Owen McGrath. 1893. which consists in asking the other's consent before contracting for the partnership.. was to terminate the partnership. this 20th day of May. and was actively engaged in the prosecution of its business. when the partnership business is to deal in real estate. vs. for otherwise he would not enter into the contract. This distinction is supported by the opinion of Gay de Montella1 . to enter into an executory contract for the sale of real estate. 11). and used in carrying on. in the very passage quoted in the appellant's motion for reconsideration: La enajenacion puede entrar en las facultades del gerante. or were pressing for the payment of their debts. et al. and signed the same in this form: "In witness whereof. (Emphasis supplied. Dickerson. shelving.e.. it can not be maintained that the sale was made in excess of her power as general partner. 212 N. But the facts of that case are vastly different from the one before us. its business. Pero esta facultad de enajenar limitada a las ventas conforme a los fines sociales. The avowed purposes of the plaintiff. the immovables thus acquired by the firm from part of its stock-in-trade. This argument is lamentably superficial because it fails to differentiate between real estate acquired and held as stock-in-tradeand real estate held merely as business site (Vivante's "taller o banco social") for the partnership. and the sale thereof is in pursuance of partnership purposes. insolvent. which was Saturday. et al. St. ready for execution. No. 516). Owen McGrath. or was given. andnone of the creditors to whom the mortgages were made had requested security. This obligation of course is not imposed upon a third person who contracts with the partnership. IV.. 409. and for some time had been. undoubtedly creates on obligation between the two partners. Hill & Ceron. but a several agency. had no authority to sell the real estate of the firm. the said Cowen & McGrath. have hereunto set their hands. In Rosen vs. the four chattel mortgages in question. 54 N. surviving partner. Brown. it was held: a partnership to deal in real estate may be created and either partner has the legal right to sell the firm real estate. section 334). Considerable stress is laid by appellant in the ruling of the Supreme Court of Ohio in McGrath. 513. Supp. in the ordinary and natural course of business. And in Revelsky vs. 18. the sale of its real property (immovables) is not within the ordinary powers of a partner. A third person may and has a right to presume that the partner with whom he contracts has. Rosen. movable property. et al. Code of Civil Procedure). At the timenone of the claims secured by the mortgages were due. by Owen McGrath. the petitionfor the dissolution of the partnership and appointment of a receiver which he subsequently filed. which was the first intimation to them that there was any intention to make them.E. 49 N. The mortgages appear to be without a sufficient condition of defiance.. 1.. Where the partnership business is to deal in merchandise and goods. and contain a stipulation authorizing the mortgagees to take immediate possession of the property. Surviving partner of Cowen & McGrath." At the same time. but on the contrary is acting in accordance therewith. and that the law has been obeyed (No. they were placed in the hands of the mortgagees. one partner has ample power. the plaintiff caused to be prepared. 13 Am. except. even as a partner. authority to manage and deal with the firm's properties apart from the presumption that a general partner dealing with partnership property has to requisite authority from his co-partners (Litton vs. then they are incapable of exercising the essential rights and powers of general partners and their association is not really a partnership at all. cuando es conforme a los fines sociales. in the sense that its property was insufficient to pay its debts. (Litton vs. and possession delivered by them to the receiver appointed upon the filing of the petition. including the counters.. because it is not in line with the normal business of the firm. In Chester vs. ready for filing. 67 Phil. viene limitada a los objetos de comercio o a los productos de la fabrica para explotacion de los cuales se ha constituido la Sociedad. 67 Phil. But where the express and avowed purpose of the partnership is to buy and sell real estate (as in the present case). the plaintiff had prepared.. the consent of his copartner. a small part of one of them. and the stores were at once closed.. p. 405. 9 South 182.This laches certainly contributed to confirm the view that the widow of Tan Sin An had. and other furnishings and fixtures necessary for. 406. A. which cover all the tangible property then belonging to the firm. which they did as soon as the mortgages were filed through the attorney who then represented them. Cowen. (Montella) (Emphasis supplied). and Owen McCrath. The same rule obtains in American law. Neither it is necessary for the third person to ascertain if the managing partner with whom he contracts has previously obtained the consent of the other. 338. in buying and selling real estate" (Art. This last presumption is equally applicable to contracts which have the force of law between the parties. Rep. On the day the mortgages were signed. The stipulation in the articles of partnership that any of the two managing partners may contract and sign in the name of the partnership with the consent of the other. In the McGrath case.. quoted in our main decision.

and a mortgage is indivisible. the partnership received nothing beyond the discharge of its debts. and the relationship between the buyers. (as subrogees of the Banco Hipotecario) in proceedings for the settlement of the estate of Tan Sin An.. mortgage to the Banco Hipotecario). six years after the sale in question. in the sense that each and every parcel under mortgage answers for the totality of the debt (Civ. Gaz. not being deceit or dolus in contrahendo). in our case. concur. but he did not. Regala. the creditors of the partnership. that Goquiolay can not obtain reparation from the widow and heirs of Tan Sin An. Clearly. to have the sale effected by the widow of Tan Sin An. Is he entitled now to cry fraud after the debts were discharged with no help from him. all of which increased the risk that the supposed fraud should be detected. this evidence certainly does not show such "gross inadequacy" as to justify recission of the sale. We will now turn to the question of fraud. took no part. Emphasis supplied). P37. also Hermandad del Smo. Sanchez. and not to appellant. McMicking.00 in cash to the widow. he did not even care to look for a purchaser of the partnership assets. Article 1860.. Was it reasonable to expect that other persons would loan money to the partnership when it was unable even to pay the taxes on the property.. To show that the price was inadquate. even if the fraud charged actually did exist. had already warned him four years before (1945) that the creditors wanted their money back. There is no evidence that the original buyers. and P54. No direct evidence of it exists. Padilla. But by express provision of law (Article 1294. the McGrath ruling is not applicable.J.415. Washington Sycip and Betty Lee. Bengzon. If at the time of the sale (1949) the price of P153. and insure the preference of the mortgagees. Taking into account the continued rise of real estate values since liberation. not only were its debts assumed by the buyers. as to the price: As already noted. even if the creditor's representative.. 343. the claim shall be filed against the decedent as if he were the only debtor. C. In the McGrath case.726. A final and conclusive consideration: The fraud charged not being one used to obtain a party's consent to a contract (i.000. asserted that the land was worth P312.000. it can not be instituted except when the party suffering damage has no other legal means to obtain reparation for the same". 21 Phil.310. Art. and the interest on the principal since 1940? If it had been possible to find lenders willing to take a chance on such a bad financial record. in addition. Barrera and Dizon. they were approved by the court. Secondly. to the profit of the partnership. New Civil Code. suffice it to say that the Supreme Court has ruled that relationship alone is not a badge of fraud (Oria Hnos. would not Goquiolay have taken advantage of it? But the fact is clear on the record that since liberation until 1949 Goquiolay never lifted a finger to discharge the debts of the partnership. section 6 is the effect that: Where the obligation of the decedent is joint and several with another debtor. in the present case. at the very least. but the latter paid. Were it true that the conspiracy to defraud him arose (as he claims) because of his refusal to sell the lands when in 1945 Yu Khe Thai asked him to do so. the allegedly low price paid for the property. But there is no similarity between those acts and the sale by the widow of Tan Sin An. none of the creditors were pressing for payment. the creditors had been unpaid for more than seven years. of which P37. and that the sale should have been routed through the probate court taking cognizance of Tan Sin An's estate. in our case. vs.04. J. how is it that appellant was not able to raise the amount. and had been mortgaged since 1940.. Article 1383. It is natural that form these facts the Supreme Court of Ohio should draw the conclusion that the conveyances were made with intent to terminate the partnership. it can only be a fraud of creditorsthat gives rise to a rescission of the offending contract.. without prejudice to the right of the estate to recover contribution from the other debtor. p. First. Code of 1889. Since there is no allegation. were without independent means to purchase the property. 243. until 1949.726. . In the McGrath case.. If he was such a victim. Civil Code of 1889. or evidence.) are not questioned. and the rest in partnership debts assumed by the purchaser. Concepcion. the lands sold were those acquired to be sold.04 was really low. 1685). Yu Khe Thai. all of which was known to them at the time. Appellant seeks to create the impression that he was the victim of a conspiracy between the Yutivo firm and their component members. for the balance on the original purchase price of the land sold (sue first to La Urbana. these buyers did not have a record of inveterate defaults like the partnership "Tan Sin An & Goquiolay". New Civil Code) "the action for rescission is subsidiary. (Cas cit. who is 1955. and Rule 87. In the McGrath case. the present suit to rescind the sale in question is not maintainable. Nombre de Jesus vs. Neither was there any anomaly in the filing of the claims of Yutivo and Sing Yee Cuan & Co. This for two reasons: First. and that they were not within the powers of McGrath as a partner. That the Yutivos should be willing to extend credit to them. Tan Sin An and the partnership "Tan Sin An & Goquiolay" were solidary (Joint and several)debtors (Exhibits "N". but appellant point out. and the fact that the sale in question was practically a forced sale because the partnership had no other means to pay its legitimate debts.e. But no proof is adduced. These debts (62. redeemed by the two creditorsclaimants.properly beyond the control of the firm. if there is fraud at al.00 was in cash.000. as indicia thereof. this property was actually sold for a total of P153. With regard to the relationship between the parties.91 to Yutivo. 40 Off. first to La Urbana. the motion for reconsideration is denied. appellant relies on the testimony of the realtor Mata. in fact.. and their claims had been approved by the probate court for payment. (Emphasis supplied). 7 . and the widow of Tan Sin An. and its approval is now final. PREMISES CONSIDERED. as they were justly entitled to? It is argued that the land could have been mortgaged to raise the sum needed to discharge the debts.. the sale included even the fixtures used in the business.13 to Sing Ye Cuan & Co. But the lands were already mortgaged. and then to the Banco Hipotecario. 2089). he could have easily defeated the conspirators by raising money and paying off the firm's debts between 1945 and 1949. is neither illegal nor immoral. JJ. the solidary obligation was guaranteed by a mortgage on the properties of the partnership and those of Tan Sim An personally. The claims were.00. it is certainly strange that the conspirators should wait 4 years. later to the Banco Hipotecario) plus accrued interests and taxes..

alleging that they represent obligations of both Tan Sin An and the partnership. Goquiolay filed on July 25. and Sing. It should be noted that these transactions took place without the knowledge of Goquiolay and it is admitted that Betty Lee and Washington Z. the partnership acquired three parcels of land known as Lots Nos. 1940. payable in ten years. The plaintiffs in their complaint challenged the authority of Kong Chai Pin to sell the partnership properties on the ground that she had no authority to sell because even granting that she became a partner upon the death of Tan Sin An the power of attorney granted in favor of the latter expired after his death. sent her counsel. Inc. Goquiolay.000. Goquiolay refused both to sell his interest in the partnership as well as to execute the power of attorney..000. dissenting: This is an appeal from a decision of the Court of First Instance of Davao dismissing the complaint filed by Antonio C. Following approval by the court of the petition for authority to sell. 1940. Yee and Cuan Co.. the widow. 1944. The business of the partnership was to engage in buying real estate properties for subdivision. 1947. Zycip subsequently executed a deed of sale of the same properties in favor of their co-defendant Insular Development Company. 1949 in the intestate proceedings a petition to set aside the order of the court approving the sale. with money given by the latter. On the same date. (2) his widow Kong Chai Pin did not inherit the management of the 8 . and presuming to act as managing partner of the partnership. 1946 a claim each in the intestate proceedings of Tan Sin An for the sum of P84. Dominador Zuño. 441 and 521 of the cadastral survey of Davao. Sing. seeking to annul the sale made Z. In 1948. Yee and Cuan Co. all of whom are minors of tender age.. While the order was pending appeal in the Supreme Court. 1940. the deceased to be represented by his heirs. executed on April 4.. Yee and Cuan Co. the Supreme Court remanded the original case to the probate court for rehearing due to lack of necessary parties. Inc. Inc.. Sycip in consideration of the payment to Kong Chai Pin of the sum of P37. 526. these two claims were approved by the court. et al. defended the validity of the sale on the theory that she succeeded to all the rights and prerogatives of Tan Sin an as managing partner. Having failed to get Goquiolay to sell his share in the partnership. Inc. The admission was predicted on the ground that she and the creditors were closely related by blood.. respectively. Lee on the ground that it was executed without proper authority and under fraudulent circumstances.00 representing 40%. Lee and Washington Z. in his individual capacity. The trial court sustained the validity of the sale on the ground that under the provisions of the articles of partnership allowing the heirs of the deceased partner to represent him in the partnership after his death Kong Chai Pin became a managing partner.116. on the other hand. financing the balance of the purchase price with a mortgage in favor of "La Urbana Sociedad Mutua de Construccion Prestamos" in the amount of P25. Kong Chai Pin. resale and lease. Upon learning of the sale of the partnership properties. Tan Sin An and Antonio C.00. On March 18.91. On May 29. On May 29.529. 1960. and among the conditions agreed upon in the partnership agreement which are material to this case are: (1) that Tan Sin An would be the exclusive managing partner. On March 29. president and general manager of Yutivo Sons Hardware Co. with the capital orginally invested. we affirmed this decision but on different grounds. and Sing. filed in November. and (2) in the event of the death of any of the partners the partnership would continue. On May 31. Kong Chai Pin. The partnership was duly registered. admitted later without qualification the two claims in an amended answer she filed on February 28. Sometimes in 1945. more than two years after the approval of the claims. affinity and business ties. in whose favor the buyers executed a mortgage on the properties purchased. Goquiolay filed the present case on January 15. Tan Sin An died on June 26. Yu Khe Thai. the Insular Development Company. defendant Kong Chai Pin. Goquiolay executed in Davao City a commercial partnership for a period of ten years with a capital of P30. to ask Goquiolay to execute in her favor a power of attorney. 1949. Goquiolay executed a general power of attorney in favor of Tan Sin An appointing the latter manager of the partnership and conferring upon him the usual powers of management. and the assumption by the buyers of the claims filed by Yutivo & Sons Hardware Co. and four children.282. Sycip bought the properties on behalf of the ultimate buyer. in her capacity as administratrix.705.Separate Opinions BAUTISTA ANGELO.. was appointed administratrix of the intestate estate of Tan Sin An. paid to the Banco Hipotecario the remaining unpaid balance of the mortgage obligation of the partnership amounting to P46. 1949 a deed of sale of the properties owned by Tan Sin An and by the partnership in favor of Betty Y.75 in Japanese currency. On September 25. Kong Chai Pin. Yutivo Sons Hardware Co. this being the capacity held by Tan Sin an when he died. J.000. In a decision rendered on July 26. Lee and Washington Z. acquired 46 parcels of land executing a mortgage thereon in favor of the same company for the sum of P35. among which the salient points are: (1) the power of attorney given by Goquiloay to Tan Sin An as manager of the partnership expired after his death. 1960 we affirmed this decision although on grounds different from those on which the latter is predicted. After first denying any knowledge of the claims. after the liberation of Manila. The case is once more before us on a motion for reconsideration filed by appellants raising both questions of fact and of law. Betty Y.000. In due course. in his individual capacity. the only assets of the partnership.80.000. as administratrix. 1953 seeking to nullify the sale as stated in the early part of this decision. Inc. 1942 and was survived by his widow. In the decision rendered by this Court on July 26.000. Kong Chai Pin. and the partnership bound themselves to pay jointly and severally the total amount of P52. Sycip and Betty Y. called for Goquiolay and the two had a conference in the office of the former during which he offered to buy the interest of Goquiolay in the partnership. Atty. 1940.00.00.48 and P66.00 representing 60% while Tan Sin An P12. Yee and Cuan Co. and Sing. And on the same date.00 of which Goquiolay contributed P18. with 8% annual interest thereon within a period of eight years mortgaging in favor of said entity the 3 parcels of land belonging to the partnership and the 46 parcels of land belonging individually to Tan Sin An. Tan Sin An.. these two mortgage obligations were consolidated and transferred to the Banco Hipotecario de Filipinas and as a result Tan Sin An. The court granted the petition. Defendants. In the meantime. Kong Chai Pin filed a petition in the probate court to sell all the properties of the partnership as well as some of the conjugal properties left by Tan Sin An for the purpose of paying the claims. Inc.

S.N. however. To have a clear view of this factual situation. (92) the alleged acts of management. it becomes necessary that we analyze the evidence of record. according to the information given him by Hernando Young." and that Kong Chai Pin was not deriving any income from them. In making our aforesaid ruling we apparently gave particular importance to the fact that it was Goquiolay himself who tried to prove the acts of management. If the conclusion of the Court is that heirs as a general rule enter the partnership as limited partners only. 1. p. The buyers were not strangers to Kong Chai Pin. could have not chosen to be a general partner by exercising the alleged acts of management.." It is unquestionable that Goquiolay was merely repeating an information given to him by a third person. Then I told Atty. An Act prohibited by law cannot given rise to any right and is void under the express provisions of the Civil Code. and (5) the sale being necessary to pay the obligations of the partnership properties without the consent of Goquiolay under the principle of estoppel the buyers having the right to rely on her acts of management and to believe her to be in fact the managing partner. Zuño and he asked me if I could execute a general power of attorney for Mrs. I said for agricultural purposes she can use that plantation . appellants have in due course filed a motion for reconsideration which because of the importance of the issues therein raised has been the subject of mature deliberation. Kong Chai Pin had no other means of livelihood. in his deposition given on June 30. In support of said motion. testified on cross-examination that he had a conversation with one Hernando Young in Manila in the year 1945 who informed him that Kong Chai Pin "was attending to the properties and deriving some income therefrom and she had no other means of livelihood except those properties and some rentals derived from the properties. Atty. brought with him to his house in 1948. it is intimated. the appellees themselves are the ones who denied and refuted the so-called acts of management imputed to Kong Chai Pin. it being a personal right. who was a close friend of the family of Kong Chai Pin. even if proven. Goquiolay. Zuño what is the use of executing a general power of attorney for Mrs. it is enough that we lay stress on the following points: (1) there is no sufficient factual basis to conclude that Kong Chai Pin executed acts of management to give her the character of general manager of the partnership.. Zuño. A careful analysis of the substance of Goquiolay's testimony will show that he merely had no objection to allowing Kong Chai Pin to continue attending to the properties in order to give her some means of livelihood. for the purpose of denying the testimony of Goquiolay. Yu Eng Lai told me that he brought with him Atty. or to serve as basis for estoppel that may benefit the purchasers of the partnership properties. (3) even if Kong Chai Pin acted as general manager she had no authority to sell the partnership properties as to make it legal and valid. But certainly he made it very clear that he did not allow her to manage the partnership when he explained his reason for refusing to sign a general power of attorney for Kong Chai Pin which her counsel. the heirs of a deceased general partner come into the partnership in the capacity only of limited partners. 1955). 9. Appellants. (4) Kong Chai Pin. have emphasized the fact. however. the rest. because under Article 148 of the Code of Commerce a limited partner cannot intervene in the management of the partnership. Rufino Lim. The arguments advanced by appellants are in our opinion well-taken and furnish sufficient to reconsider our decision if we want to do justice to Antonio C. The alleged acts of management were denied and repudiated by the very witnesses presented by the defendants themselves. This point is pivotal for if Kong Chai Pin did not execute the acts of management imputed to her our ruling cannot be sustained. Hearing on May 5. Considering that some of the above findings of fact and conclusions of law are without legal or factual basis. which he assumed to be true. who must necessarily have entered the partnership as a limited partner originally. also testified that he had seen the partnership properties and corroborated the testimony of Hernando Young in all respects: "the properties in Mamay were underdeveloped. all of them being members of the Yu (Yutivo) family. 1956 that Kong Chai Pin and her family were living in the partnership properties. even if given a power of attorney by the general partners. Kong Chai Pin when Mrs. And to justify this conclusion.. One point that he emphasized was that he was "no interested in agricultural lands. Kong Chai Pin had already got that plantation for agricultural purposes. and stated that the "family never actually lived in the properties of the partnership even before the war or after the war.partnership. therefore Kong Chai Pin. Young testified that in 1945 he was still in Davao. the shacks were destroyed in Tigato. It must be noted that in his testimony Goquiolay was categorically stating his opposition to the management of the partnership by Kong Chai Pin and carefully 9 . Then Mr." He went on to say by way of remark that she could continue doing this because he wanted to help her. and (4) Kong Chai Pin had no necessity to sell the properties to pay the obligation of the partnership and if she did so it was merely to favor the purchasers who were close relatives to the prejudice of Goquiolay. Hernando Young — he stressed this point twice. stating that he arrived in Manila for the first time in 1947. appellants advanced the following arguments: 1. 2. defendants presented Hernando Young. because. became a general partner because she exercised certain alleged acts of management.. 3. The other witness for the defendants. He said: . the same person referred to by Goquiolay. and with reason. They did not rely on the alleged acts of management — they believed (this was the opinion of their lawyers) that Kong Chai Pin succeeded her husband as a managing partner and it was on this theory alone that they submitted the case in the lower court. Kong Chai Pin." He specifically rebutted the testimony of Goquiolay. Plaintiff Goquiolay. the year when he allegedly gave the information to Goquiolay. He testified further that he had visited the partnership properties during the period covered by the alleged information given by him to Goquiolay and that he found them "abandoned and underdeveloped. and the family of Kong Chai Pin did not receive my income from the partnership properties." On the other hand. (T. (3) as a general rule. members of the law firm which handles the Yutivo interests and handled the papers of sale. and insisted no less than six times during his testimony that he was not in Manila in 1945. could not give Kong Chai Pin the character of general manager for the same contrary to law and well-known authorities.

upon such terms as regards compensation as he may deem proper. did not give Kong Chai Pin the character of general manager to authorized her to bind the partnership. The most that we can say is that the alleged acts are doubtful more so when they are disputed by the defendants themselves who later became the purchasers of the properties. The alleged acts of management. or the buyers. Garrigues. according to wellknown authorities. La enajenacion puede entrar en las facultades del gerente. 2. is clearly of the opinion that mere acceptance of the inheritance does not maked the heir of a general partner a general partner himself. Being then a limited partner upon the death of Tan Sin An by operation of law. Thus. Assuming also arguendo that the alleged acts of management imputed to Kong Chai Pin gave her the character of a general partner.5 Here Kong Chai Pin did not have such power when she sold the properties of the partnership. Now. but instead they acted solely on the opinion of their counsel. en cuyo caso el gerente estaria facultado para otorgar las ventas que fuere 10 . cuando es conforme a los fines sociales. upon entering the partnership. It was effected not to promote any avowed object of the partnership. must make a declaration of his characters. and it is expressly stipulated that the managing partner may delegate the entire management of the affairs of the co-partnership by irrevocable power of attorney to any person. firm or corporation full power and authority. Ocurrira una cosa parecida cuando el objeto de la Sociedad fuese la compra y venta de inmuebles. Zuño. it should also be stated. The affairs of the co-partnership shall be managed exclusively by the managing partner or by his authorized agent. second. It can therefore be seen that the question as to whether Kong Chai Pin exercised certain acts of management of the partnership properties is highly controverted. Of course.1 But here Tan Sin An died intestate. an express power of attorney is required. in which case acceptance of the inheritance is enough. in consonance with our ruling that as a general rule the heirs of a deceased partner succeed as limited partners only by operation of law. were not misled nor did they rely on the acts of management. and yet these alleged acts. all shall have the power to take part in the direction and management of the common business. to the effect that she succeeded her husband in the partnership as managing partner by operation of law. only refer to management of the properties and not to management of the partnership. which are two different things. but also because under the provisions of Article 1473 of the same Code she was precluded from acquiring more rights than those pertaining to her as a limited partner. a well-known commentator. And. Atty. it is obvious that the heirs. we may conclude that the sale of the partnership properties by Kong Chai Pin cannot be upheld on the ground of estoppel. otherwise he should be deemed as having succeeded as limited partner by the mere acceptance of the inheritance. therefore. the sale was affected to pay an obligation of the partnership by selling its real properties which Kong Chai Pin could not do without express authority. but here the transaction is not for this purpose. Record on Appeal). could she sell the partnership properties without authority from the other partners? Our answer is also in the negative in the light of the provisions of the articles of partnership and the pertinent provisions of the Code of Commerce and the Civil Code. on this point. the law says that an agency created in general terms includes only acts of administrations. And since. In resume. and other acts of strict ownership. And here Kong Chai Pin did not make such declaration. It would thus be seen that the powers of the managing partner are not defined either under the provisions of the Code of Commerce or in the articles of partnership. firm or corporation he may select. Assuming arguendo that the acts of management imputed to Kong Chai Pin are true. if at all. first. because the alleged acts of management have not been clearly proven. as the agent of the co-partnership and in his name. because the defendants are themselves estopped to invoke a defense which they tried to dispute and repudiate. under Article 2 of the same Code. renders applicable herein the provisions of the Civil Code. could Kong Chai Pin be deemed to have declared her intention to become a general partner by exercising acts of management? We believe not. be determined under the general principles governing agency.made the distinction that his conformity was for her to attend to the partnership properties in order to give her merely a means of livelihood. The authorities supporting this view are overwhelming. and third. a situation which. the relationship between a managing partner and the partnership is substantially the same as that of the agent and his principal. Quisumbing. o a los productos de la fabrica para explotacion de los cauale se ha constituido la Sociedad.4the extent of the power of Kong Chai Pin must.6 Rather. And Atty. even without express power of attorney may perform acts affecting ownership if the same are necessary to promote or accomplish a declared object of the partnership. Article 129 of the Code of Commerce says: — If the management of the general partnership has not been limited by special agreement to any of the members. did not deny the statement of Goquiolay. could such acts give as we have concluded in our decision? Our answer is in the negative because it is contrary to law and precedents. He emphasized that 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. Pero esta facultad de enajenar limitada a las ventas conforme a los fines sociales. therefore. for. and vest in such person. place and stead to do anything for it or on his behalf which he as such managing partner might do or cause to be done. because the record clearly shows that the defendants. (Page 23. but with regard to the power to compromise. viene limitada a los objetos de comercio. and the members present shall come to an agreement for all contracts or obligations which may concern the association. the peremptory prohibition contained in Article 1482 of the Code of Commerce became binding upon her and as a result she could not change her status by violating its provisions not only under the general principle that prohibited acts cannot produce any legal effect. It should be stated that the period covered by the testimony refers to the period of occupation when living condition was difficult and precarious. sell mortgage. And the pertinent portions of the articles of partnership provides: VII. there is authority to the effect that a managing partner.

a trusted employee of the Yutivos.000 square meters. that is not sufficient. aside from the sum of P37. in the absence of evidence of sanction by other partners. instead of being within the scope of the partnership business.. ceder la accion. What is necessary for carrying on the business of the firm under ordinary circumstances and in the usual way. vs. and place its property beyond its control. a brother-in-law of Yu Khe Thai and an executive of Sing. II. etc. was a grandaughter of Jose P. Yutivo (Sing. and Simeon Daguiwag. Emphasis supplied). Emphasis supplied).91 was paid as a consideration therefor.E. for said properties. a daughter of Yu Khe Thai. seems.00. YUTIVO SONS HARDWARE CO.necesario. the creditors of the partnership filed their claim against the partnership in the intestate proceedings. to bind the firm. (b) Considering the area of the properties Kong Chai Pin had no valid reason to sell them if her purpose was only to pay the partnership obligation. pp. no podran cambiar el objeto. these properties could command at the time he testified a value of not less than P312. incluso cambiando repetidas veces los propios acuerdos segun el interest convenido de la Sociedad. excepto que la venta o pignoracion tengan por el objeto procurar los medios necesarios para la continuacion de la empresa social. Partn. composed of members of the Yutivo family and the counsel of record of the defendants. pueden llevar a cabo todas las operaciones que sirven para aquel ejercicio. INC. Yutivo. According to realtor Mata. por consiguiente. 343. the other original buyer is also a daughter of Yu Khe Thai. (McGrath. et al. who were close relatives of Kong Chai Pin.116. la razon social. Yee & Cuan Co. Pueden contratar y despedir a los empleados. including those employed as the means of carrying on its business. will necessity itself be sufficient if it be an extraordinary necessity. Pero no podran ejecutar los actos que esten en contradiccion con la explotacion que les fue confiada. Finally. ed. The act of one partner.000. the sale under consideration was effected in a suspicious manner as may be gleaned from the following circumstances: (a) The properties subject of the instant sale which consist of three parcels of land situated in the City of Davao have an area of 200 hectares more or less. Vol. que forman parte de la explotacion social. BETTY Y. by way of mortgage or otherwise. without the consent of the other members of the firm. Emphasis supplied). 124-125. daughter of Yu Eng Poh. was organized for the specific purpose of buying the partnership properties. Since Kong Chai Pin sold the partnership properties not in line with the business of the partnership but to pay its obligation without first obtaining the consent of the other partners the sale is invalid in excess of her authority. 4.000. which subsequently bought the properties of the partnership and assumed the obligation of the latter in favor of the creditors of the partnership. or that it facilitated the transaction of the business of the firm.. since the date of sale no improvement was ever made thereon precisely because of this litigation. expedir cambiales. If all that can be said of it was that it was convenient. Lillian Yu. She could have negotiated a loan if she wanted to pay it by placing the properties as security. only the paltry sum of P66. (R. ni la fabrica. (Cesar Vivante. YU KHE THAI is a grandson of the same Jose P. el uso de la firma social a otro. While. one member of a partnership may. Dalton Chen. avalarlas. of which the sum of P46. (c) Lastly. founder of the defendant Yutivo Sons Hardware Co.. These properties were purchased by the partnership for purposes of subdivision. manager of the firm which took over the administration. 338. have already conceived the idea of possessing the lands for purposes of subdivision. Por el contrario el generente no tiene attribuciones para vender las instalaciones del comercio. or in the usual and ordinary way of carrying it on. within this rule. excluding Goquilolay from their plan. 1a. in the usual and ordinary course of its business. Such a disposition. Attys. the object and effect of which is to immediately terminate the partnership. el domicilio. Quisumbing and Salazar.. the ultimate buyer. one of the original buyers. ni las maquinarias. fundir a la Sociedad en otro. et al. Yutivo. 223-224. 11 . y por tanto. id.. 49 N. Lindl. equalmente que sisse tratase de la venta de una marca o procedimiento mecanico o quimico. to a bona fidepurchaser of mortgagee. Yee & Cuan are the three children of Jose). LEE. Tratado de Derecho Mercantil. is necessarily subversive of the object of the partnership. the administratrix. Sec. Nor.. Its incorporators were: Ana Yu and Betty Y. tomar en arriendo almacenes y tiendas. the lawyers who studied the papers of the sale and have been counsel for the Yutivo interests. alleged creditors. and SING. etc. it. seria necesario contar con la conformidad expresa de todos los socios. are owned by the heirs of Jose P. vehiculos de transporte.75 was even paid in Japanese currency. The creditors studied ways and means of liquidating the obligation of the partnership. In 1946.. of all or part of its effects intended for sale. girarlas. Los poderes de los Administradores no tienen ante el silencio del contrato otros limites que los señalados por el objeto de la Sociedad y. is married to Ana Yu. make a valid sale or pledge. Lee. 126. and according to Dalton Chen. an executive of Yutivo Sons Hardware. dar en prenda o en hipoteca los bienes de la sociedad y adquirir inmuebles destinados a su explotacion o al empleo. as may be seen from the following relationship of their pedigree: KONG CHAI PIN. estable de sus capitales. siendo actos de disposicion.529. renunciar definitivamente el ejercicio de uno de otro ramo comercio que se les haya confiado yenajenar o pignorar el taller o el banco social. must be necessary for the carrying one of its business. or 2. Cowen. WASHINGTON Z. who testified in court. YEE & CUAN CO.00 which was paid for the properties of the deceased and the partnership. The INSULAR DEVELOPMENT CO. leading to the formation of the defendant Insular Development Co. it is not within the scope of his implied authority to make a final disposition of al of its Tan Sin An died in 1942 and intestate proceedings were opened in 1944. and president of the two alleged creditors.lawphil. and this is evident from the following sequence of events. is the test. even since Tan Sin An died in 1942 the creditors.. He is the acknowledged head of the Yu families. En todos estas casos. And yet. but preferred to sell them even at such low price because of her close relationship with the purchasers and creditors who conveniently organized a partnership to exploit them. Gay de Montella. SYCIP. and contrary to the presumed intention of the partnership in its formation..000. pp.

The buyers took time to study the commercial potentialities of the partnership properties and their lawyers carefully studied the document and other papers involved in the transaction. concur.Yutivo Sons Hardware and Sing. Paredes. I vote to grant the motion for reconsideration.. Yee & Cuan. All these steps led finally to the sale of the three partnership properties. and Makalintal. JJ. UPON THE STRENGTH OF THE FOREGOING CONSIDERATIONS. Labrador. also of the Yutivo family. 12 .