EN BANC
G.R. No. L-11840 December 10, 1963ANTONIO C. GOQUIOLAY, ET AL., plaintiffs-appellants,
vs.
WASHINGTON Z. SYCIP, ET AL., defendants-appellees.
Norberto J. Quisumbing and Sycip, Salazar and Associates for defendants-appellees.
Jose C. Calayco for plaintiffs-appellants..
R E S O L U T I O N
REYES, J.B.L., J.:
The matter now pending is the appellant's motion for
reconsideration of our main decision, wherein we have upheld the
validity of the sale of the lands owned by the partnership Goquiolay
& Tan Sin An, made in 1949 by the widow of the managing partner, Tan
Sin An (Executed in her dual capacity as Administratrix of the
husband's estate and as partner in lieu of the husband), in favor of the
buyers Washington Sycip and Betty Lee for the following consideration:
| Cash paid | P37,000.00 |
| Debts assumed by purchaser: | |
| To Yutivo | 62,415.91 |
| To Sing Yee Cuan & Co., | 54,310.13 |
| T O T A L | P153,726.04 |
Appellant Goquiolay, in his motion for
reconsideration, insist that, contrary to our holding, Kong Chai Pin,
widow of the deceased partner Tan Sin An, never became more than a limited partner,
incapacitated by law to manage the affairs of partnership; that the
testimony of her witness Young and Lim belies that she took over the
administration of the partnership property; and that, in any event, the
sale should be set aside because it was executed with the intent to
defraud appellant of his share in the properties sold.
Three things must be always held in mind in the discussion of this motion to reconsider, being basic and beyond controversy:
(a) That we are dealing here with the transfer of partnership property by one partner, acting in behalf of the firm, to a stranger. There is no question between partners inter se, and this aspect to the case was expressly reserved in the main decision of 26 July 1960;
(b) That partnership was expressly organized: "to engage in real estate business, either by buying and selling real estate". The Articles of co-partnership, in fact, expressly provided that:
IV. The object and purpose of the copartnership are as follows:
1. To engage in real estate business, either by
buying and selling real estates; to subdivide real estates into lots for
the purpose of leasing and selling them.;
(c) That the properties sold were not part of the
contributed capital (which was in cash) but land precisely acquired to
be sold, although subject to a mortgage in favor of the original owners,
from whom the partnership had acquired them.
With these points firmly in mind, let us turn to the points insisted upon by appellant.
It is first averred that there is "not one iota of
evidence" that Kong Chai Pin managed and retained possession of the
partnership properties. Suffice it to point out that appellant Goquiolay
himself admitted that —
... Mr. Yu Eng Lai asked me if I can just let Mrs. Kong Chai Pin continue to manage the properties (as) she had no other means of income. Then I said, because I wanted to help Mrs. Kong Chai Pin, she could just do it and besides I am not interested in agricultural lands. 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.
Q — So the answer to my question is you did not take any steps?
A — I did not.
Q — And this conversation which you had with Mrs. Yu Eng Lai was few months after 1945?
A — In the year 1945. (Emphasis supplied).
The appellant subsequently ratified this testimony in his deposition of 30 June 1956, pages 8-9, wherein he stated:
that plantation was being occupied at that time by the widow, Mrs. Tan Sin An, and of course they are receiving quiet a lot benefit from the plantation.
Discarding the self-serving expressions, these
admissions of Goquiolay are certainly entitled to greater weight than
those of Hernando Young and Rufino Lim, having been made against the
party's own interest.
Moreover, the appellant's reference to the testimony
of Hernando Young, that the witness found the properties "abandoned and
undeveloped", omits to mention that said part of the testimony started
with the question:
Now, you said that about 1942 or 1943 you returned to Davao. Did you meet Mrs. Kong Chai Pin there in Davao at that time?
Similarly, the testimony of Rufino Lim, to the effect
that the properties of the partnership were undeveloped, and the family
of the widow (Kong Chai Pin) did not receive any income from the
partnership properties, was given in answer to the question:
According to Mr. Goquiolay, during the Japanese
occupation Tan Sin an and his family lived on the plantation of the
partnership and derived their subsistence from that plantation. What can
you say to that? (Dep. 19 July 1956, p. 8).
And also —
What can you say as to the development of these other properties of the partnership which you saw during the occupation? (Dep. p. 13, Emphasis supplied).
to which witness gave the following answer:
I saw the properties in Mamay still undeveloped. The
third property which is in Tigato is about eleven (11) hectares and
planted with abaca seedlings planted by Mr. Sin An. When I went there with Hernando Young we saw all the abaca destroyed. The place was occupied by the Japanese Army.
They planted camotes and vegetables to feed the Japanese Army. Of
course they never paid any money to Tan Sin An or his family. (Dep.,
Lim, pp. 13-14. Emphasis supplied).
Plainly, both Young and Lim's testimonies do not
belie, or contradict, Goquiolay's admission that he told Mr. Yu Eng Lai
that the widow "could just do it" (i.e., continue to manage the
properties). Witnesses Lim and Young referred to the period of Japanese occupation; but Goquiolay's authority was, in fact, given to the widow in 1945, after the occupation.
Again, the disputed sale by the widow took place in
1949. 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.
We thus find that Goquiolay did not merely rely on
reports from Lim and Young; he actually manifested his willingness that
the widow should manage the partnership properties. Whether or not she
complied with this authority is a question between her and the
appellant, and is not here involved. But the authority was given, and
she did have it when she made the questioned sale, because it was never
revoked.
It is argued that the authority given by Goquiolay to the widow Kong Chai Pin was only to manage the
property, and that it did not include the power to alienate, citing
Article 1713 of the Civil Code of 1889. What this argument overlooks is
that the widow was not a mere agent, because she had become a partner
upon her husband's death, as expressly provided by the articles of
copartnership. Even more, granting that by succession to her husband,
Tan Sin An, the widow only became a limited partner, Goquiolay's authorization to manage the partnership property was proof that he considered and recognized her as general partner,
at least since 1945. The reason is plain: Under the law (Article 148,
last paragraph, Code of Commerce), appellant could not empower the
widow, if she were only a limited partner, 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, not
even in the capacity of agents of the managing partners. (Emphasis
supplied).
By seeking authority to manage partnership property, Tan Sin An's widow showed that she desired to be considered a general partner.
By authorizing the widow to manage partnership property (which a
limited partner could not be authorized to do), Goquiolay recognized her
as such 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. But this statutory limitation of responsibility being
designed to protect the heir, the latter may disregard it and instead
elect to become a collective or general partner, with all the rights and
privileges of one, and answering for the debts of the firm not only
with the inheritance but also with the heir's personal fortune. This
choice pertains exclusively to the heir, and does not require the assent
of the surviving partner.
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, 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. XII, Articles of Co-Partnership).
The Articles did not provide that the heirs of the deceased would be merely limited partners; on the contrary, they expressly stipulated that in case of death of either partner "the co-partnership ... will have to be continued"
with the heirs or assigns. It certainly could not be continued if it
were to be converted from a general partnership into a limited
partnership, since the difference between the two kinds of associations
is fundamental; and specially because the conversion into a limited association
would have the heirs of the deceased partner without a share in the
management. Hence, the contractual stipulation does actually contemplate
that the heirs would become general partners rather than limited ones.
Of course, 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. The heirs, in
other words, can not be compelled to become general partners against
their wishes. But because they are not so compellable, it does not
legitimately follow that they may not voluntarily choose to become
general partners, waiving the protective mantle of the general laws of
succession. And in the latter event, it is pointless to discuss the
legality of any conversion of a limited partner into a general one. The
heir never was a limited partner, but chose to be, and became, a general
partner right at the start.
It is immaterial that the heir's name was not
included in the firm name, since no conversion of status is involved,
and the articles of co-partnership expressly contemplated the admission
of the partner's heirs into the partnership.
It must never be overlooked that this case involved
the rights acquired by strangers, and does not deal with the rights
existing between partners Goquiolay and the widow of Tan Sin An. The
issues between the partners inter se were expressly reserved in
our main decision. Now, in determining what kind of partner the widow of
partner Tan Sin an Had elected to become, strangers had to be guided by
her conduct and actuations and those of appellant Goquiolay. Knowing
that by law a limited partner is barred from managing the partnership
business or property, 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,
and, therefore, in negotiating with her as such a partner, having
authority to act for, and in behalf of the firm. This belief, be it
noted, was shared even by the probate court that approved the sale by
the widow of the real property standing in the partnership name. That
belief was fostered by the very inaction of appellant Goquiolay. Note
that for seven long years, from partner Tan Sin An's death in 1942 to
the sale in 1949, there was more than ample time for Goquiolay to take
up the management of these properties, or at least ascertain how its
affairs stood. For seven years Goquiolay could have asserted his alleged
rights, and by suitable notice in the commercial registry could have
warned strangers that they must deal with him alone, as sole general
partner. But he did nothing of the sort, because he was not interested (supra),
and he did not even take steps to pay, or settle the firm debts that
were overdue since before the outbreak of the last war. He did not even
take steps, after Tan Sin An died, to cancel, or modify, the provisions
of the partnership articles that he (Goquiolay) would have no intervention in the management of the partnership. This laches certainly
contributed to confirm the view that the widow of Tan Sin An had, or
was given, 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.
Hill and Ceron, et al., 67 Phil. 513; quoted in our main decision, p.
11).
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, undoubtedly creates on
obligation between the two partners, which consists in asking the
other's consent before contracting for the partnership. This obligation of course is not imposed upon a third person who
contracts with the partnership. 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. A third person may and has a right to presume that the partner with whom he contracts has, in the ordinary and natural course of business, the consent of his copartner;
for otherwise he would not enter into the contract. The third person
would naturally not presume that the partner with whom he enters into
the transaction is violating the articles of partnership, but on the
contrary is acting in accordance therewith. And this finds support in
the legal presumption that the ordinary course of business has been
followed (No. 18, section 334, Code of Civil Procedure), and that the
law has been obeyed (No. 31, section 334). This last presumption is
equally applicable to contracts which have the force of law between the
parties. (Litton vs. Hill & Ceron, et al., 67 Phil. 409, 516).
(Emphasis supplied.)
It is next urged that the widow, even as a partner,
had no authority to sell the real estate of the firm. This argument is
lamentably superficial because it fails to differentiate between real
estate acquired and held as stock-in-trade and real estate held merely as business site (Vivante's
"taller o banco social") for the partnership. Where the partnership
business is to deal in merchandise and goods, i.e., movable property,
the sale of its real property (immovables) is not within the ordinary
powers of a partner, because it is not in line with the normal business
of the firm. But where the express and avowed purpose of the partnership
is to buy and sell real estate (as in the present case), the immovables
thus acquired by the firm from part of its stock-in-trade, and the sale
thereof is in pursuance of partnership purposes, hence within the
ordinary powers of the partner. This distinction is supported by the
opinion of Gay de Montella1 , in the very passage quoted in the appellant's motion for reconsideration:
La enajenacion puede entrar en las facultades del
gerante, cuando es conforme a los fines sociales. Pero esta facultad de
enajenar limitada a las ventas conforme a los fines sociales, viene
limitada a los objetos de comercio o a los productos de la fabrica para
explotacion de los cuales se ha constituido la Sociedad. Ocurrira una
cosa parecida cuando el objeto de la Sociedad fuese la compra y venta
de inmuebles, en cuyo caso el gerente estaria facultado para otorgar las
ventas que fuere necesario. (Montella) (Emphasis supplied).
The same rule obtains in American law.
In Rosen vs. Rosen, 212 N.Y. Supp. 405, 406, 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.
In Chester vs. Dickerson, 54 N. Y. 1, 13 Am. Rep. 550:
And hence, when the partnership business is to deal
in real estate, one partner has ample power, as a general agent of the
firm, to enter into an executory contract for the sale of real estate.
And in Revelsky vs. Brown, 92 Ala. 522, 9 South 182, 25 Am. St. Rep. 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, then they
are incapable of exercising the essential rights and powers of general
partners and their association is not really a partnership at all, but a
several agency.
Since the sale by the widow was in conformity with the express objective of the partnership, "to engage ... in buying and selling real
estate" (Art. IV, No. 1 Articles of Copartnership), it can not be
maintained that the sale was made in excess of her power as general
partner.
Considerable stress is laid by appellant in the ruling of the Supreme Court of Ohio in McGrath, et al., vs. Cowen, et al., 49
N.E., 338. But the facts of that case are vastly different from the one
before us. In the McGrath case, the Court expressly found that:
The firm was then, and for some time had been,
insolvent, in the sense that its property was insufficient to pay its
debts, though it still had good credit, and was actively engaged in the
prosecution of its business. On that day, which was Saturday, the
plaintiff caused to be prepared, ready for execution, the four chattel
mortgages in question, which cover all the tangible property then
belonging to the firm, including the counters, shelving, and other furnishings and fixtures necessary for, and used in carrying on, its business,
and signed the same in this form: "In witness whereof, the said Cowen
& McGrath, a firm, and Owen McGrath, surviving partner, of said
firm, and Owen McCrath, individually, have hereunto set their hands,
this 20th day of May, A.D. 1893. Cowen & Mcgrath, by Owen McGrath.
Owen McGrath, Surviving partner of Cowen & McGrath. Owen McGrath."
At the same time, the plaintiff had prepared, ready for filing, the petition for the dissolution of the partnership and appointment of a receiver
which he subsequently filed, as hereinafter stated. On the day the
mortgages were signed, they were placed in the hands of the mortgagees,
which was the first intimation to them that there was any intention to
make them. At the time none of the claims secured by the mortgages were due, except, it may be, a small part of one of them, and none of the creditors to whom the mortgages were made had requested security, or were pressing for the payment of their debts.
... The mortgages appear to be without a sufficient condition of
defiance, and contain a stipulation authorizing the mortgagees to take
immediate possession of the property, which they did as soon as the
mortgages were filed through the attorney who then represented them, as
well as the plaintiff; and the stores were at once closed, and possession delivered by them to the receiver appointed upon the filing of the petition. The avowed purposes of the plaintiff, in the course pursued by him, was to terminate the partnership, place its properly beyond the control of the firm, and insure the preference of the mortgagees, all of which was known to them at the time; .... (Cas cit., p. 343, Emphasis supplied).
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, and that they were not within the
powers of McGrath as a partner. But there is no similarity between those
acts and the sale by the widow of Tan Sin An. In the McGrath case, the
sale included even the fixtures used in the business; in our case, the
lands sold were those acquired to be sold. In the McGrath case, none of
the creditors were pressing for payment; in our case, the creditors had
been unpaid for more than seven years, and their claims had been
approved by the probate court for payment. In the McGrath case, the
partnership received nothing beyond the discharge of its debts; in the
present case, not only were its debts assumed by the buyers, but the
latter paid, in addition, P37,000.00 in cash to the widow, to the profit
of the partnership. Clearly, the McGrath ruling is not applicable.
We will now turn to the question of fraud. No direct
evidence of it exists; but appellant point out, as indicia thereof, the
allegedly low price paid for the property, and the relationship between
the buyers, the creditors of the partnership, and the widow of Tan Sin
An.
First, as to the price: As already noted, this
property was actually sold for a total of P153,726.04, of which
P37,000.00 was in cash, and the rest in partnership debts assumed by the
purchaser. These debts (62,415.91 to Yutivo, and P54,310.13 to Sing Ye
Cuan & Co.) are not questioned; they were approved by the court, and
its approval is now final. The claims were, in fact, for the balance on
the original purchase price of the land sold (sue first to La Urbana,
later to the Banco Hipotecario) plus accrued interests and taxes,
redeemed by the two creditors-claimants. To show that the price was
inadquate, appellant relies on the testimony of the realtor Mata, who is
1955, six years after the sale in question, asserted that the
land was worth P312,000.00. Taking into account the continued rise of
real estate values since liberation, 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, this evidence certainly does
not show such "gross inadequacy" as to justify recission of the sale. If
at the time of the sale (1949) the price of P153,726.04 was really low,
how is it that appellant was not able to raise the amount, even if the
creditor's representative, Yu Khe Thai, had already warned him four
years before (1945) that the creditors wanted their money back, 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. But the lands were
already mortgaged, and had been mortgaged since 1940, first to La
Urbana, and then to the Banco Hipotecario. 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, 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, 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. Is he entitled now to cry fraud after the
debts were discharged with no help from him.
With regard to the relationship between the parties,
suffice it to say that the Supreme Court has ruled that relationship
alone is not a badge of fraud (Oria Hnos. vs. McMicking, 21 Phil. 243;
also Hermandad del Smo. Nombre de Jesus vs. Sanchez, 40 Off. Gaz.,
1685). There is no evidence that the original buyers, Washington Sycip
and Betty Lee, were without independent means to purchase the property.
That the Yutivos should be willing to extend credit to them, and not to
appellant, is neither illegal nor immoral; at the very least, these
buyers did not have a record of inveterate defaults like the partnership
"Tan Sin An & Goquiolay".
Appellant seeks to create the impression that he was
the victim of a conspiracy between the Yutivo firm and their component
members. But no proof is adduced. If he was such a victim, he could have
easily defeated the conspirators by raising money and paying off the
firm's debts between 1945 and 1949; but he did not; he did not even care
to look for a purchaser of the partnership assets. 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,
it is certainly strange that the conspirators should wait 4 years, until
1949, to have the sale effected by the widow of Tan Sin An, and that
the sale should have been routed through the probate court taking
cognizance of Tan Sin An's estate, all of which increased the risk that
the supposed fraud should be detected.
Neither was there any anomaly in the filing of the
claims of Yutivo and Sing Yee Cuan & Co., (as subrogees of the Banco
Hipotecario) in proceedings for the settlement of the estate of Tan Sin
An. This for two reasons: First, Tan Sin An and the partnership "Tan Sin An & Goquiolay" were solidary (Joint and several)debtors (Exhibits "N", mortgage to the Banco Hipotecario), and Rule 87, section 6 is the effect that:
Where the obligation of the decedent is joint and several with another debtor, the claim shall be filed against the decedent as if he were the only debtor, without prejudice to the right of the estate to recover contribution from the other debtor. (Emphasis supplied).
Secondly, the solidary obligation was
guaranteed by a mortgage on the properties of the partnership and those
of Tan Sim An personally, and a mortgage is indivisible, in the sense
that each and every parcel under mortgage answers for the totality of
the debt (Civ. Code of 1889, Article 1860; New Civil Code, Art. 2089).
A final and conclusive consideration: The fraud
charged not being one used to obtain a party's consent to a contract
(i.e., not being deceit or dolus in contrahendo), if there is fraud at al, it can only be a fraud of creditors that
gives rise to a rescission of the offending contract. But by express
provision of law (Article 1294, Civil Code of 1889; Article 1383, New
Civil Code) "the action for rescission is subsidiary; it can not be
instituted except when the party suffering damage has no other legal
means to obtain reparation for the same". Since there is no allegation,
or evidence, that Goquiolay can not obtain reparation from the widow and
heirs of Tan Sin An, the present suit to rescind the sale in question
is not maintainable, even if the fraud charged actually did exist.
PREMISES CONSIDERED, the motion for reconsideration is denied.
Bengzon, C.J., Padilla, Concepcion, Barrera and Dizon, JJ., concur.
Regala, J., took no part.
Regala, J., took no part.
Separate Opinions
BAUTISTA ANGELO, J., dissenting:
This is an appeal from a decision of the Court of
First Instance of Davao dismissing the complaint filed by Antonio C.
Goquiolay, et al., seeking to annul the sale made Z. Sycip and Betty Y.
Lee on the ground that it was executed without proper authority and
under fraudulent circumstances. In a decision rendered on July 26, 1960
we affirmed this decision although on grounds different from those on
which the latter is predicted. The case is once more before us on a
motion for reconsideration filed by appellants raising both questions of
fact and of law.
On May 29, 1940, Tan Sin An and Antonio C. Goquiolay
executed in Davao City a commercial partnership for a period of ten
years with a capital of P30,000.00 of which Goquiolay contributed
P18,000.00 representing 60% while Tan Sin An P12,000.00 representing
40%. The business of the partnership was to engage in buying real estate
properties for subdivision, resale and lease. The partnership was duly
registered, 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, and (2) in the event of the death of
any of the partners the partnership would continue, the deceased to be
represented by his heirs. On May 31, 1940, 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.
On May 29, 1940, the partnership acquired three
parcels of land known as Lots Nos. 526, 441 and 521 of the cadastral
survey of Davao, the only assets of the partnership, with the capital
orginally invested, financing the balance of the purchase price with a
mortgage in favor of "La Urbana Sociedad Mutua de Construccion
Prestamos" in the amount of P25,000.00, payable in ten years. On the
same date, Tan Sin An, in his individual capacity, acquired 46 parcels
of land executing a mortgage thereon in favor of the same company for
the sum of P35,000.00. On September 25, 1940, these two mortgage
obligations were consolidated and transferred to the Banco Hipotecario
de Filipinas and as a result Tan Sin An, in his individual capacity, and
the partnership bound themselves to pay jointly and severally the total
amount of P52,282.80, 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 died on June 26, 1942 and was survived by
his widow, defendant Kong Chai Pin, and four children, all of whom are
minors of tender age. On March 18, 1944, Kong Chai Pin, was appointed
administratrix of the intestate estate of Tan Sin An. And on the same
date, Sing, Yee and Cuan Co., Inc. paid to the Banco Hipotecario the
remaining unpaid balance of the mortgage obligation of the partnership
amounting to P46,116.75 in Japanese currency.
Sometimes in 1945, after the liberation of Manila, Yu
Khe Thai, president and general manager of Yutivo Sons Hardware Co. and
Sing, Yee and Cuan Co., Inc., 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. In 1948, Kong Chai Pin,
the widow, sent her counsel, Atty. Dominador Zuño, to ask Goquiolay to
execute in her favor a power of attorney. Goquiolay refused both to sell
his interest in the partnership as well as to execute the power of
attorney.
Having failed to get Goquiolay to sell his share in
the partnership, Yutivo Sons Hardware Co. and Sing, Yee and Cuan Co.,
Inc. filed in November, 1946 a claim each in the intestate proceedings
of Tan Sin An for the sum of P84,705.48 and P66,529.91, respectively,
alleging that they represent obligations of both Tan Sin An and the
partnership. After first denying any knowledge of the claims, Kong Chai
Pin, as administratrix, admitted later without qualification the two
claims in an amended answer she filed on February 28, 1947. The
admission was predicted on the ground that she and the creditors were
closely related by blood, affinity and business ties. In due course,
these two claims were approved by the court.
On March 29, 1949, more than two years after the
approval of the claims, 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. Following approval by the court of the petition for authority
to sell, Kong Chai Pin, in her capacity as administratrix, and presuming
to act as managing partner of the partnership, executed on April 4,
1949 a deed of sale of the properties owned by Tan Sin An and by the
partnership in favor of Betty Y. Lee and Washington Z. Sycip in
consideration of the payment to Kong Chai Pin of the sum of P37,000.00,
and the assumption by the buyers of the claims filed by Yutivo &
Sons Hardware Co. and Sing, Yee and Cuan Co., Inc. in whose favor the
buyers executed a mortgage on the properties purchased. Betty Y. Lee and
Washington Z. Zycip subsequently executed a deed of sale of the same
properties in favor of their co-defendant Insular Development Company,
Inc. It should be noted that these transactions took place without the
knowledge of Goquiolay and it is admitted that Betty Lee and Washington
Z. Sycip bought the properties on behalf of the ultimate buyer, the
Insular Development Company, Inc., with money given by the latter.
Upon learning of the sale of the partnership
properties, Goquiolay filed on July 25, 1949 in the intestate
proceedings a petition to set aside the order of the court approving the
sale. The court granted the petition. While the order was pending
appeal in the Supreme Court, Goquiolay filed the present case on January
15, 1953 seeking to nullify the sale as stated in the early part of
this decision. In the meantime, the Supreme Court remanded the original
case to the probate court for rehearing due to lack of necessary
parties.
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.
Defendants, on the other hand, 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.
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,
this being the capacity held by Tan Sin an when he died.
In the decision rendered by this Court on July 26,
1960, we affirmed this decision but on different grounds, 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; (2)
his widow Kong Chai Pin did not inherit the management of the
partnership, it being a personal right; (3) as a general rule, the heirs
of a deceased general partner come into the partnership in the capacity
only of limited partners; (4) Kong Chai Pin, however, became a general
partner because she exercised certain alleged acts of management; 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.
Considering that some of the above findings of fact
and conclusions of law are without legal or factual basis, 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.
In support of said motion, appellants advanced the following arguments:
1. If the conclusion of the Court is that heirs as a
general rule enter the partnership as limited partners only, therefore
Kong Chai Pin, who must necessarily have entered the partnership as a
limited partner originally, could have not chosen to be a general
partner by exercising the alleged acts of management, because under
Article 148 of the Code of Commerce a limited partner cannot intervene
in the management of the partnership, even if given a power of attorney
by the general partners. An Act prohibited by law cannot given rise to
any right and is void under the express provisions of the Civil Code.
2. The buyers were not strangers to Kong Chai Pin,
all of them being members of the Yu (Yutivo) family, the rest, members
of the law firm which handles the Yutivo interests and handled the
papers of sale. 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.
3. The alleged acts of management were denied and repudiated by the very witnesses presented by the defendants themselves.
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. Goquiolay. And to justify this
conclusion, 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, or to serve as basis for estoppel that may benefit
the purchasers of the partnership properties; (92) the alleged acts of
management, even if proven, could not give Kong Chai Pin the character
of general manager for the same contrary to law and well-known
authorities; (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; 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.
1. This point is pivotal for if Kong Chai Pin did not
execute the acts of management imputed to her our ruling cannot be
sustained. 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. Appellants, however, have emphasized the fact,
and with reason, the appellees themselves are the ones who denied
and refuted the so-called acts of management imputed to Kong Chai Pin.
To have a clear view of this factual situation, it becomes necessary
that we analyze the evidence of record.
Plaintiff Goquiolay, it is intimated, 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." He went on to say by way of remark
that she could continue doing this because he wanted to help her. One
point that he emphasized was that he was "no interested in agricultural
lands."
On the other hand, defendants presented Hernando
Young, the same person referred to by Goquiolay, who was a close friend
of the family of Kong Chai Pin, for the purpose of denying the testimony
of Goquiolay. Young testified that in 1945 he was still in Davao, and
insisted no less than six times during his testimony that he was not in
Manila in 1945, the year when he allegedly gave the information to
Goquiolay, stating that he arrived in Manila for the first time in 1947.
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
that Kong Chai Pin was not deriving any income from them.
The other witness for the defendants, Rufino Lim,
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, the shacks were destroyed in
Tigato, and the family of Kong Chai Pin did not receive my income from
the partnership properties." He specifically rebutted the testimony of
Goquiolay, in his deposition given on June 30, 1956 that Kong Chai Pin
and her family were living in the partnership properties, and stated
that the "family never actually lived in the properties of the
partnership even before the war or after the war."
It is unquestionable that Goquiolay was merely
repeating an information given to him by a third person, Hernando Young —
he stressed this point twice. 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, because, according to the
information given him by Hernando Young, which he assumed to be true,
Kong Chai Pin had no other means of livelihood. 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, Atty. Zuño, brought with
him to his house in 1948. He said:
... Then Mr. Yu Eng Lai told me that he brought with
him Atty. Zuño and he asked me if I could execute a general power of
attorney for Mrs. Kong Chai Pin. Then I told Atty. Zuño what is the use
of executing a general power of attorney for Mrs. Kong Chai Pin when
Mrs. Kong Chai Pin had already got that plantation for agricultural
purposes, I said for agricultural purposes she can use that plantation
... (T.S.N. p. 9, Hearing on May 5, 1955).
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 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. It should be stated that the
period covered by the testimony refers to the period of occupation when
living condition was difficult and precarious. And Atty. Zuño, it should
also be stated, did not deny the statement of Goquiolay.
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. 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, and yet these alleged acts, if at all, only refer to management of the properties and not to management of the partnership, which are two different things.
In resume, we may conclude that the sale of
the partnership properties by Kong Chai Pin cannot be upheld on the
ground of estoppel, first, because the alleged acts of management have
not been clearly proven; second, because the record clearly shows that
the defendants, or the buyers, were not misled nor did they rely on the
acts of management, but instead they acted solely on the opinion of
their counsel, Atty. Quisumbing, to the effect that she succeeded her
husband in the partnership as managing partner by operation of law; and
third, because the defendants are themselves estopped to invoke a
defense which they tried to dispute and repudiate.
2. Assuming arguendo that the acts of management imputed to Kong Chai Pin are true, 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. Garrigues, a well-known commentator, is clearly
of the opinion that mere acceptance of the inheritance does not maked
the heir of a general partner a general partner himself. 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, in which case
acceptance of the inheritance is enough.1 But here Tan Sin An died intestate.
Now, could Kong Chai Pin be deemed to have declared
her intention to become a general partner by exercising acts of
management? We believe not, for, 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, it is obvious that the heirs, upon
entering the partnership, must make a declaration of his characters,
otherwise he should be deemed as having succeeded as limited partner by
the mere acceptance of the inheritance. And here Kong Chai Pin did not
make such declaration. Being then a limited partner upon the death of
Tan Sin An by operation of law, 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, 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. The alleged acts of management, therefore, did not give Kong
Chai Pin the character of general manager to authorized her to bind the
partnership.
Assuming also arguendo that the alleged acts
of management imputed to Kong Chai Pin gave her the character of a
general partner, 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. Thus, 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, all shall have
the power to take part in the direction and management of the common
business, and the members present shall come to an agreement for all
contracts or obligations which may concern the association.
And the pertinent portions of the articles of partnership provides:
VII. The affairs of the co-partnership shall be
managed exclusively by the managing partner or by his authorized agent,
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 he may
select, upon such terms as regards compensation as he may deem proper,
and vest in such person, firm or corporation full power and authority,
as the agent of the co-partnership and in his name, 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. (Page 23, Record on Appeal).
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, a situation which, under
Article 2 of the same Code, renders applicable herein the provisions of
the Civil Code. And since, according to well-known authorities, the
relationship between a managing partner and the partnership is
substantially the same as that of the agent and his principal,4 the
extent of the power of Kong Chai Pin must, therefore, be determined
under the general principles governing agency. And, on this point, the
law says that an agency created in general terms includes only acts of
administrations, but with regard to the power to compromise, sell
mortgage, and other acts of strict ownership, an express power of
attorney is required.5 Here Kong Chai Pin did not have such power when she sold the properties of the partnership.
Of course, there is authority to the effect that a
managing partner, 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, but here the
transaction is not for this purpose. It was effected not to promote any
avowed object of the partnership.6 Rather, 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.
The authorities supporting this view are overwhelming.
La enajenacion puede entrar en las facultades del gerente, cuando es conforme a los fines sociales. Pero esta facultad de enajenar limitada a las ventas conforme a
los fines sociales, viene limitada a los objetos de comercio, o a los
productos de la fabrica para explotacion de los cauale se ha constituido
la Sociedad. Ocurrira una cosa parecida cuando el objeto de la Sociedad
fuese la compra y venta de inmuebles, en cuyo caso el gerente estaria
facultado para otorgar las ventas que fuere necesario. Por el
contrario el generente no tiene attribuciones para vender las
instalaciones del comercio, ni la fabrica, ni las maquinarias, vehiculos
de transporte, etc. que forman parte de la explotacion social. En todos estas casos, equalmente que sisse tratase de la venta de una marca o procedimiento mecanico o quimico, etc., siendo actos de disposicion, seria necesario contar con la conformidad expresa de todos los socios. (R. Gay de Montella, id., pp. 223-224; Emphasis supplied).
Los poderes de los Administradores no tienen ante el silencio del contrato otros limites que los señalados por el objeto de la Sociedad y, por consiguiente, pueden llevar a cabo todas las operaciones que sirven para aquel ejercicio,
incluso cambiando repetidas veces los propios acuerdos segun el
interest convenido de la Sociedad. Pueden contratar y despedir a los
empleados. tomar en arriendo almacenes y tiendas; expedir cambiales,
girarlas, avalarlas, dar en prenda o en hipoteca los bienes de la
sociedad y adquirir inmuebles destinados a su explotacion o al empleo,
estable de sus capitales. Pero no podran ejecutar los actos que esten
en contradiccion con la explotacion que les fue confiada; no podran
cambiar el objeto, el domicilio, la razon social; fundir a la
Sociedad en otro; ceder la accion, y por tanto, el uso de la firma
social a otro, renunciar definitivamente el ejercicio de uno de otro
ramo comercio que se les haya confiado y enajenar o pignorar el
taller o el banco social, excepto que la venta o pignoracion tengan por
el objeto procurar los medios necesarios para la continuacion de la
empresa social. (Cesar Vivante, Tratado de Derecho Mercantil, pp. 124-125, Vol. II, 1a. ed.; Emphasis supplied).
The act of one partner, to bind the firm, must be
necessary for the carrying one of its business. If all that can be said
of it was that it was convenient, or that it facilitated the transaction
of the business of the firm, that is not sufficient, in the absence of
evidence of sanction by other partners. Nor, it, seems, will necessity
itself be sufficient if it be an extraordinary necessity. What is
necessary for carrying on the business of the firm under ordinary
circumstances and in the usual way, is the test. Lindl. Partn. Sec. 126.
While, within this rule, one member of a partnership may, in the usual
and ordinary course of its business, make a valid sale or pledge, by way
of mortgage or otherwise, of all or part of its effects intended for
sale, to a bona fide purchaser of mortgagee, without the consent of the other members of the firm, it
is not within the scope of his implied authority to make a final
disposition of al of its effects, including those employed as the means
of carrying on its business, the object and effect of which is to
immediately terminate the partnership, and place its property beyond its
control. Such a disposition, instead of being within the scope of
the partnership business, or in the usual and ordinary way of carrying
it on, is necessarily subversive of the object of the partnership, and
contrary to the presumed intention of the partnership in its formation.
(McGrath, et al. vs. Cowen, et al., 49 N.E., 338, 343; Emphasis
supplied).
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. Finally, 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, or 2,000,000 square meters. These
properties were purchased by the partnership for purposes of
subdivision. According to realtor Mata, who testified in court, these
properties could command at the time he testified a value of not less
than P312,000.00, and according to Dalton Chen, manager of the firm
which took over the administration, since the date of sale no
improvement was ever made thereon precisely because of this litigation.
And yet, for said properties, aside from the sum of P37,000.00 which was
paid for the properties of the deceased and the partnership, only the
paltry sum of P66,529.91 was paid as a consideration therefor, of which
the sum of P46,116.75 was even paid in Japanese currency.
(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. She could have negotiated a loan if she wanted
to pay it by placing the properties as security, 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, as may be seen from the following relationship of their
pedigree:
KONG CHAI PIN, the administratrix, was a grandaughter
of Jose P. Yutivo, founder of the defendant Yutivo Sons Hardware Co.
YUTIVO SONS HARDWARE CO. and SING, YEE & CUAN CO., INC., alleged
creditors, are owned by the heirs of Jose P. Yutivo (Sing, Yee &
Cuan are the three children of Jose). YU KHE THAI is a grandson of the
same Jose P. Yutivo, and president of the two alleged creditors. He is
the acknowledged head of the Yu families. WASHINGTON Z. SYCIP, one of
the original buyers, is married to Ana Yu, a daughter of Yu Khe Thai.
BETTY Y. LEE, the other original buyer is also a daughter of Yu Khe
Thai. The INSULAR DEVELOPMENT CO., the ultimate buyer, was organized for
the specific purpose of buying the partnership properties. Its
incorporators were: Ana Yu and Betty Y. Lee, Attys. Quisumbing and
Salazar, the lawyers who studied the papers of the sale and have been
counsel for the Yutivo interests; Dalton Chen, a brother-in-law of Yu
Khe Thai and an executive of Sing, Yee & Cuan Co; Lillian Yu,
daughter of Yu Eng Poh, an executive of Yutivo Sons Hardware, and Simeon
Daguiwag, a trusted employee of the Yutivos.
(c) Lastly, even since Tan Sin An died in 1942 the
creditors, who were close relatives of Kong Chai Pin, have already
conceived the idea of possessing the lands for purposes of subdivision,
excluding Goquilolay from their plan, and this is evident from the
following sequence of events;lawphil.net
Tan Sin An died in 1942 and intestate proceedings
were opened in 1944. In 1946, the creditors of the partnership filed
their claim against the partnership in the intestate proceedings. The
creditors studied ways and means of liquidating the obligation of the
partnership, leading to the formation of the defendant Insular
Development Co., composed of members of the Yutivo family and the
counsel of record of the defendants, which subsequently bought the
properties of the partnership and assumed the obligation of the latter
in favor of the creditors of the partnership, Yutivo Sons Hardware and
Sing, Yee & Cuan, also of the Yutivo family. 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. All these steps led finally to the sale of the three
partnership properties.
UPON THE STRENGTH OF THE FOREGOING CONSIDERATIONS, I vote to grant the motion for reconsideration.
Labrador, Paredes, and Makalintal, JJ., concur.
Footnotes
1 Tratado de Derecho Mercantil, Tomo I, Vol. 38, pp. 1211-1212.
2 ... The limited partner may not perform any act in
the administration of the interests of the company, even in the capacity
of attorney-in-fact of the managing partners.
3 Should any limited partner include his name or
allow its inclusion in the firm name, he shall be subject, with respect
to person not members, without acquiring more rights than those
corresponding to his character as limited partner. (Emphasis supplied).
4 Derecho Mercanti, David Supino, 4a ed., p. 179;
Cesar Vivante, Tratado de Derecho Mercantil, pp. 124-125, Vol. II, 1a.
ed., R. Gay de Montella, Tratado Practico de Sociedades Mercantiles, pp.
223-224, Tomo I, 3a. ed.
5 Article 1713, Spanish Civil Code.
6 The main business of the partnership is to engage
in real estate business in general, particularly in buying and selling
real estate. (Page 23, Record on Appeal)
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