Professional Documents
Culture Documents
AMOUNT CONTRIBUTED
P 31, 000. 00
JOSE S. SY
205, 000. 00
JAYME S. SY
112, 000. 00
MARCIANO S. SY
143, 000. 00
WILLIE S. SY
85, 000. 00
VICENTE SY
85, 000. 00
JESUS SY
88, 000. 00
Partners Sy Yong Hu, Jose Sy, Vicente Sy, and Marciano Sy died on
May 18, 1978, August 12, 1978, December 30, 1979 and August 7,
1987, respectively. At present, the partnership has valuable assets
such as tracts of lands planted to sugar cane and commercial lots in
the business district of Bacolod City.
Sometime in September, 1977, during the lifetime of all the partners,
Keng Sian brought an action, docketed as Civil Case No. 13388 before
the then Court of First Instance of Negros Occidental, against the
partnership as well as against the individual partners for accounting of
all the properties allegedly owned in common by Sy Yong Hu and the
plaintiff (Keng Sian), and for the delivery or reconveyance of her onehalf (1/2) share in said properties and in the fruits thereof. Keng Sian
averred that she was the common law wife of partner Sy Yong Hu, that
Sy Yong Hu, together with his children, who were partners in the
partnership, connived to deprive her of her share in the properties
acquired during her cohabitation with Sy Yong Hu, by diverting such
properties to the partnership.
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WHEREFORE, in the interest of Justice and equity, substantive rights
of due process being paramount over the rules of procedure, and in
order to avoid multiplicity of suits; the order of the hearing officer below
dated May 9, 1986 denying the motion to intervene in SEC Case No.
1648 of appellant herein as well as the order dated December 2, 1986
denying the motion for reconsideration are hereby reversed and the
motion to intervene given due course. The instant case is hereby
remanded to the hearing officer below for further proceeding on the
aspect of partition and/or distribution of partnership assets. The urgent
motion for the issuance of a restraining order is likewise hereby
remanded to the hearing officer below for appropriate action.
The said decision of the SEC en banc reiterated that the Abello
decision of June 8, 1982, which upheld the order of dissolution of the
partnership, had long become final and executory. No further appeal
was taken from the Sulit Decision.
During the continuation of the proceedings in SEC Case No. 1648,
now presided over by Hearing Officer Felipe S. Tongco who had
substituted Hearing Officer Sison, the propriety of placing the
Partnership under receivership was taken up. The parties brought to
the attention of the Hearing Officer the fact of existence of Civil Case
No. 903 (formerly Civil Case No. 13388) pending before the Regional
Trial Court of Negros Occidental. They also agreed that during the
pendency of the aforesaid court case, there will be no disposition of the
partnership assets.On October 5, 1988, Hearing Officer Tongco came
out with an Order (Tongco Order) incorporating the above submissions
of the parties and placing the partnership under a receivership
committee, explaining that it is the most equitable fair and just manner
to preserve the assets of the partnership during the pendency of the
civil case in the Regional Trial Court of Bacolod City.
On October 22, 1988, a joint Notice of Appeal to the SEC en banc was
filed by herein petitioners Jayme Sy, Jesus Sy, Estate of Jose Sy,
Estate of Vicente Sy, Heirs of Marciano Sy (represented by Justina
Vda. de Sy), and Willie Sy, against the Intervenor (now private
respondent). In an order (Lopez Order) dated January 16, 1989, the
SEC en bancaffirmed the Tongco Order.
With the denial of their Motion for Reconsideration, petitioners filed a
special civil action for certiorari with the Court of Appeals.
On January 15, 1990, the Court of Appeals granted the petition and set
aside the Tongco and Lopez Orders, and remanded the case for
further execution of the 1982 Abello and 1988 Sulit Decisions, ordering
the partition and distribution of the partnership properties.
Private respondent seasonably interposed a motion for reconsideration
of such decision of the Court of Appeals.
Acting thereupon on June 27, 1990, the Court of Appeals issued its
assailed Resolution, reversing its Decision of January 15, 1990, and
remanding the case to the SEC for the formation of a receivership
committee, as envisioned in the Tongco Order.
G. R. No. 100313 came about in view of the dismissal by the Court of
Appeals of the Petition for Certiorari with a Prayer for Preliminary
Injunction, docketed as CA-G. R. SP No. 24189, seeking to annul and
set aside the orders, dated January 24, 1991 and April 19, 1989,
respectively, in Civil Case No. 5326 before the Regional Trial Court of
Bacolod City.
The antecedent facts are as follows:
Sometime in June of 1988, petitioner Sy Yong Hu & Sons through its
Managing Partner, Jesus Sy, applied for a building permit to
reconstruct its building called Sy Yong Hu & Sons Building, located in
the central business district of Bacolod City, which had been destroyed
by fire in the late 70s. On July 5, 1988, respondent City Engineer
issued Building Permit No. 4936 for the reconstruction of the first two
floors of the building. Soon thereafter, reconstruction work began. In
January, 1989, upon completion of its reconstruction, the building was
occupied by the herein petitioners, Bacolod and Upholstery Supply
Company and Negros Isuzu Sales, which businesses are owned by
successors-in-interest of the deceased partners Jose Sy and Vicente
Sy. Petitioner John Tan, who is also an occupant of the reconstructed
building, is the brother-in-law of deceased partner Marciano Sy.
From the records on hand, it can be gleaned that the Tongco Order,
dated October 5, 1988, in SEC Case No. 1648, had, among others,
denied a similar petition of the intervenors therein (now private
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In an order issued on January 24, 1991 upon an Ex Parte Motion to
Have All Pending Incidents Resolved filed by respondent Intestate
Estate, Judge Bethel Katalbas-Moscardon issued an order modifying
the Writ of Preliminary Mandatory Injunction, and directing the
respondent City Engineer to:
x x x immediately order stoppage of any work affecting the
construction of the said building under Lot 259-A-2 located at Gonzaga
Street adjacent to the present Banco de Oro Building, BACOLOD City,
to cancel or cause to be cancelled the Building Permit it had issued; to
order the discontinuance of the occupancy or use of said building or
structure or portion thereof found to be occupied or used, the same
being contrary and violative of the provisions of the Code; and to desist
from issuing any certificate of Occupancy until the merits of this case
can finally be resolved by this Court. x x x
Again, it is emphasized that the issue involved is solely question of
law and the Court cannot see any logical reason that the intervenors
should be allowed to intervene as earlier granted in the Order of the
then Presiding Judge Porfirio A. Parian, of June 22, 1989. Much less
for said intervenors to move for presentation of additional parties, only
on the argument of Intervenors that any restraining order to be issued
by this Court upon the respondent would prejudice their present
occupancy which is self serving, whimsical and in fact immoral. It is
axiomatic that the means would not justify the end nor the end justify
the means. Assuming damage to the present occupants will occur and
assuming further that they are entitled, the same should be ventilated
in a different action against the lessor or landlord, and the present
petition cannot be the proper forum, otherwise, while it maybe argued
that there is a multiplicity of suit which actually is groundless, on the
other hand, there will be only confusion of the issues to be resolved by
the Court. Well valid enough is to reiterate that the present petition is
not the proper forum for the intervenors to shop for whatever relief.
In view of the above, the Order allowing the intervenors in this case is
likewise hereby withdrawn for the purposes above discussed.
Consequently, the Motion to present additional parties is deemed
denied, and the Motion to Strike Or Expunge From The Records the
Amended Answer In Intervention is deemed granted as in fact the
same become moot and academic with the elimination of the
Intervenors in this case.
Pursuant to the above Order of January 24, 1991, respondent City
Engineer served a notice upon petitioners revoking Building Permit No.
4936, ordering the stoppage of all construction work on the building,
and commanding discontinuance of the occupancy thereof.
On February 15, 1991, the aggrieved petitioners filed a Petition for
Certiorari with Prayer for Preliminary Injunction with the Court of
Appeals, docketed as CA-G. R. SP No. 24189.
On February 27, 1991, the Court of Appeals issued a Temporary
Restraining Order enjoining the respondent Judge from implementing
the questioned orders dated January 24, 1991 and April 19, 1989.
After the respondents had sent in their answer, petitioners filed a Reply
with a prayer for the issuance of a writ of mandamus directing the
respondent City Engineer to reissue the building permit previously
issued in favor of petitioner Sy Yong Hu & Sons, and to issue a
certificate of occupancy on the basis of the admission by respondent
City Engineer that petitioner had complied with the provisions of the
National Building Code.
On May 31, 1991, the Court of Appeals rendered its questioned
decision denying the petition.
From the Resolution of the Court of Appeals granting the motion for
reconsideration in CA-G. R. SP No. 17070 and the Decision in CA-G.
R. SP No. 24189, petitioners have come to this Court for relief.
In G. R. No. 94285, petitioners contend by way of assignment of
errors, that:
I. RESPONDENT COURT OF APPEALS ERRED IN REVERSING ITS
MAIN DECISION IN CA-G. R. No. 17070, WHICH DECISION HAD
REMANDED TO THE SEC THE CASE FOR THE PROPER
IMPLEMENTATION OF THE 1982 ABELLO AND 1988 SULIT
DECISIONS WHICH IN TURN ORDERED THE DISTRIBUTION AND
PARTITION OF THE PARTNERSHIP PROPERTIES.
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agreement by the parties and under the circumstances of the case. It
bears stressing that, like the appointment of a manager in charge of
the winding up of the affairs of the partnership, said appointment of a
receiver during the pendency of the dissolution is interlocutory in
nature, well within the jurisdiction of the SEC.
Furthermore, having agreed with the respondents not to dispose of the
partnership assets, petitioners effectively consented to the suspension
of the winding up or, more specifically, the partition and distribution of
subject assets. Petitioners are now estopped from questioning the
order of the Hearing Officer issued in accordance with the said
agreement.
Petitioners also assail the propriety of the receivership theorizing that
there was no necessity therefor, and that such remedy should be
granted only in extreme cases, with respondent being duty-bound to
adduce evidence of the grave and irremediable loss or damage which
it would suffer if the same was not granted. It is further theorized that,
at any rate, the rights of respondent Intestate Estate are adequately
protected since notices of lis pendens of the aforesaid civil case have
been annotated on the real properties of the partnership.
To bolster petitioners' contention, they maintain that they are the
majority partners of the partnership Sy Yong Hu & Sons controlling
Ninety Six per cent (96%) of its equity. As such, they have the greatest
interest in preserving the partnership properties for themselves and
therefore, keeping the said properties in their possession will not bring
about any feared damage or dissipation of such properties, petitioners
stressed.
Sec. (6) of Presidential Decree No. 902-A, as amended, reads:
SEC. 6. In order to effectively exercise such jurisdiction, the
Commission shall possess the following powers:
(c) To appoint one or more receivers of the property, real or personal,
which is the subject of the action pending before the commission in
accordance with the pertinent provisions of the Rules of Court, and in
such other cases, whenever necessary in order to preserve the rights
of parties-litigants and/or protect the interest of the investing public and
creditors; xxx.
The findings of the Court of Appeals accord with existing rules and
jurisprudence on receivership. Conformably, it stated that:
From a reexamination of the issues and the evidences involved, We
find merit in respondents motion for reconsideration.
This Court notes with special attention the order dated June 28, 1988
issued by Hearing Officer Felipe S. Tongco in SEC Case No. 1648
(Annex to Manifestation, June 16, 1990) wherein all the parties agreed
on the following:
1. That there is a pending case in court wherein the plaintiffs are
claiming in their complaint that all the assets of the partnership belong
to Sy Yong Hu;
2. That the parties likewise agreed that during the pendency of the
court case, there will be no disposition of the partnership assets and
further hearing is suspended. x x x
As observed by the SEC Commission (sic) in its Order dated January
16, 1989:
Ordinarily, appellants contention would be correct, except that the en
banc order of April 29th appears to have been overtaken, and
accordingly, rendered inappropriate, by subsequent developments in
SEC Case No. 1648, particularly the entry in that proceedings, as of
April 29, 1988, of an intervenor who claims a superior and exclusive
ownership right to all the partnership assets and property. This claim
of superior ownership right is presently pending adjudication before the
Regional Trial Court of Negros Occidental, And precisely because if
this supervening development, it would appear that the parties in SEC
Case No. 1648 agreed among themselves, as of June 28, 1988, that
during the pendency of the Negros Occidental case just mentioned,
there should be no disposition of partnership assets or property, and
further, that the proceedings in SEC Case No. 1648 should be
suspended in the meantime (p. 2, Order; p. 12, Rollo)
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In his Comment, the respondent City Engineer, relying on the validity of
the order of the trial court to padlock the building, denied any
impropriety in his compliance with the said order.
After a careful examination of the records on hand, the Court finds
merit in the petition.
In opposing the petition, respondent intestate estate anchors its stance
on the existence of violations of pertinent provisions of the aforesaid
Code. As regards due process, however, a distinction must be made
between matters of substance. In essence, procedural due process
refers to the method or manner by which the law is enforced, while
substantive due process requires that the law itself, not merely the
procedure by which the law would be enforced, is fair, reasonable, and
just. Although private respondent upholds the substantive aspect of
due process, it, in the same breath, brushes aside its procedural
aspect, which is just as important, if the constitutional injunction
against deprivation of property without due process is to be observed.
Settled is the rule that the essence of due process is the opportunity to
be heard. Thus, in Legarda vs. Court of Appeals et al., the Court held
that as long as a party was given the opportunity to defend her interest
in due course, he cannot be said to have been denied due process of
law.
Contrary to these basic tenets, the trial court gave due course to the
petition for mandamus, and granted the prayer for the issuance of a
writ of preliminary injunction on May 4, 1989, notwithstanding the fact
that the owner (herein petitioner Sy Yong Hu) of the building and its
occupants were not impleaded as parties in the case. Affirming the
same, the Court of Appeals acknowledged that the lower court came
out with the said order upon the testimony of the lone witness for the
respondent, in the person of the City Engineer, whose testimony was
not effectively traversed by the petitioners. This conclusion arrived at
by the Court of Appeals is erroneous in the face of the irrefutable fact
that the herein petitioners were not made parties in the said case and,
consequently, had absolutely no opportunity to cross examine the
witness of private respondent and to present contradicting evidence.
The trial court failed to give petitioners their day in court to be heard
before they were condemned for the alleged violation of certain
provisions of the Building Code. Being the owner of the building in
question and lessees thereon, petitioners possess property rights
entitled to be protected by law. Their property rights cannot be
arbitrarily interfered with without running afoul with the due process
rule enshrined in the Bill of Rights.
For failure to observe due process, the herein respondent court acted
without jurisdiction. As a result, petitioners cannot be bound by its
orders. Generally accepted is the principle that no man shall be
affected by any proceeding to which he is a stranger, and strangers to
a case are not bound by judgment rendered by the court.
In similar fashion, the respondent court acted with grave abuse of
discretion when it disallowed the intervention of petitioners in Civil
Case No. 5326. As it was, the issuance of the Writ of Preliminary
Injunction directing the padlocking of the building was improper for
non-conformity with the rudiments of due process.
Parenthetically, the trial court, in issuing the questioned order, ignored
established principles relative to the issuance of a Writ of Preliminary
Injunction. For the issuance of the writ of preliminary injunction to be
proper, it must be shown that the invasion of the right sought to be
protected is material and substantial, that the right of complainant is
clear and unmistakable and that there is an urgent and paramount
necessity for the writ to prevent serious damage.
Maglana (M) and Rojas (R) executed their Articles of Copartnership called Eastcoast Development Enterpises.
It had an indefinite term of existence and was registered with
the SEC and had a Timber License. Its PURPOSE was
to apply or secure timber and/or private forest lands and to
operate.
M shall manage the business affairs while R shall be the
logging superintendent. All profits and losses shall be divided
share and share alike.
The two availed the services of Pahamotangas (P) industrial
partner and executed another articles of co-partnership.
M and R purchase the interest, share and participation in
thepartnership of P. They shall become owners of all
equipment contributed by P.
Subsequently, R entered into a management contract with
CMS Estate Inc.
M wrote him: his contribution to the capital investments as
well as his duties as logging superintendent. R replied: he
will not be able to comply with both.
M then told R that the latters share will just be 20% of the
net profits. R took funds from the partnership more than his
contribution. M notified R that he dissolved the partnership.
R filed an action against M for the recovery of properties and
accounting of the partnership and damages.
Issue:
1.
2.
3.
4.
5.
Rule:
1. Under the circumstances, the relationship of Rojas and Maglana
after the withdrawal of Pahamotang can neither be considered as a De
Facto Partnership, nor a Partnership at Will, for as stressed, there is an
existing partnership, duly registered. The second partnership was
dissolved by common consent. Said dissolution did not affect the first
partnership which continued to exist.
2. Yes. Article 1830, par. 2 of the Civil Code, even if there is a specified
term, one partner can cause its dissolution by expressly withdrawing
even before the expiration of the period, with or without justifiable
cause. Of course, if the cause is not justified or no cause was given,
the withdrawing partner is liable for damages.
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3. No. In the given situation Maglana cannot be said to be in bad faith
nor can he be liable for damages. The records show that Rojas not
only abandoned the partnership but also took funds in an amount more
than his contribution prior to the dissolution.
4. Articles of Co-Partnership; that is, all profits and losses of the
partnership shall be divided "share and share alike" between the
partners but an accounting must first be made.
5. No. He failed to give theamount he had undertaken to contribute
thus, had become a debtor of the partnership (Art. 1786 of NCC). On
50-50% basis, Rojas will be liable in the amount of P131,166.00; on
80-20%, he will be liable for P40,092.96 and finally on the basis of
actual capital contribution, he will be liable for P52,040.31.
Bearneza v. Dequilla
Facts:
Issue: W/N the plaintiff has any right to maintain an action for recovery
of the said one-half of the fishpond?
Rule:
Yu v. NLRC
None.
Facts:
Therefore, the land on which the fish pond was constructed did not
constitute part of thesubject-matter of the partnership.
This partnership was dissolved by the death of Perpetua Bearneza.
Neither can it be maintained that the partnership continued to exist
after the death of Perpetua, inasmuch as it does not appear that any
stipulation to that effect has ever beenmade by her and the defendantThe partnership having been dissolved by the death of
P e r p e t u a B e a r n e z a , i t s s u b s e q u e n t l e g a l status was that of
a partnership in liquidation, and the only rights inherited by her
testamentaryheir, the herein plaintiff, were those resulting from the said
liquidation in favor of the deceasedpartner, and nothing more.
Issues:
Lichauco v. Lichauco
Facts:
1.
2.
3.
Held:
1. Yes. Changes in the membership of the partnership resulted in the
dissolution of the old partnership.
(Legal Basis: Art. 1828; 1830)
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2. Yes. The new partnership simply took over the business enterprise
owned by the old partnership. Without winding up the business affairs
of the old partnership, paying off its debts,liquidating and distributing its
net assets, and then re-assembling the said assets or mostof them and
opening a new business enterprise. (Art. 1829)
3. Yes. the new partnership is liable for the debts of the old partnership.
(Art. 1840)
Yu is entitled to enforce his claim for unpaid salaries, as well as other
claims relating to his employment with the previous partnership,
against the new partnership.
But Yu is not entitled to reinstatement. Reason: new partnership was
entitled to appoint and hire a new gen. Or asst. Mgr. to run the affairs
of the business enterprise. An asst. gen. manager belongs to the most
senior ranks of management and anew partnership is entitled to
appoint a top manager of its own choice and confidence. The nonretention of Yu did not constitute unlawful termination.
The new partnership had its own new Gen. Mgr. Yus old position thus
became superfluous or redundant.
Yu is entitled to separation pay at the rate of one months pay for each
year of service thathe had rendered to the old partnership, a fraction of
at least 6 months being considered asa whole year.
Goquiolay v. Sycip(108 Phil 947)
Syllabus:
1. PARTNERSHIP; MANAGEMENT, RIGHT OF EXCLUSIVE;
PERSONAL RIGHT; TERMINATION UPON MANAGER-PARTNERS
DEATH. The right of exclusive management conferred upon Tan Sin
An, being premised upon trust and confidence, was a mere personal
right
that
terminated
upon
Tans
demise.
2. ARTICLES OF CO-PARTNERSHIP; RIGHT OF HEIRS TO
REPRESENT DECEASED PARTNER; MANAGERIAL RIGHT;
PROPRIETARY INTEREST. The provision in the Articles of CoPartnership stating that "in the event of death of any one of the
partners within the 10-year term of the partnership, the deceased
partner shall be represented by his heirs", could not have referred to
the managerial right given to Tan Sin An; more appropriately, it relates
to the succession in the proprietary interest of each partner.
3. ID.; ID.; EFFECT OF HEIRS FAILURE TO REPUDIATE; HEIRS
BECOME INDIVIDUAL PARTNERS; MINORITY OF HEIRS.
Consonant with the articles of co-partnership providing for the
continuation of the firm notwithstanding the death of one of the
partners, the heirs of the deceased, by never repudiating or refusing to
be bound under the said provision in the articles, became individual
partners with Antonio Goquiolay upon Tans demise. Minority of the
heirs is not a bar to the application of that clause in the articles of copartnership. Heirs liability in the partnership being limited to the value
of their importance, they become no more than limited partners, when
they manifest their intent to be bound as general partners.
4. ID.; SALE OF PARTNERSHIP PROPERTIES; CONSENT OF ALL
PARTNERS UNNECESSARY; STRANGERS DEALING WITH
PARTNERSHIPS; POWER TO BIND PARTNERSHIP. As to whether
or not the consent of the other partners was necessary to perfect the
sale of the partnership properties, the Court believes that it is not.
Strangers dealing with a partnership have the right to assume, in the
absence of restrictive clauses in the co- partnership agreement, that
every general partner has power to bind the partnership.
5. ID.; ID.; ESTOPPEL. By allowing defendant Kong Chai Pin to
retain control of the partnership properties from 1942 to 1949, plaintiff
Goquiolay estopped himself from denying her (Kong Chai Pins) legal
representation of the partnership, with the power to bind it by proper
contracts.
6. PARTNERSHIP; GENERAL PARTNER BY ESTOPPEL; WIDOW OF
MANAGING PARTNER AUTHORIZED BY OTHER PARTNER TO
MANAGE PARTNERSHIP. By authorizing the widow of the
managing partner to manage partnership property (which a limited
partner could not be authorized to do), the other general partner
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CASE DIGEST 1828-1842
DEFENSE: Goquiolay insists that Kong Chai Pin never became
more than alimited partner, incapacitated by law to manage the
affairs of partnership; that the testimony of Kongs witnesses
belie 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 Goquiolay of
his share in the properties sold.
Issue: W/N Tan Sin Ans widow, Kong Chai Pin, became partner when
her husband died, allowing her to validly sell the property that belongs
to the partnership?
Rule: Yes.
The heir ordinarilybecomes a limited partner for his own protection,
because hewould normally prefer to avoid any liability in excess of the
value of the estate inherited so as not to jeopardize his personal
assets, however, he may also elect to become general partner
instead.
The Articles did not provide that the heirs of the deceasedwould be
merely
limited partners; on the contrary, theyexpressly stipulated that in case
of death of either partner "theco-partnership ... will have to be
continued " with the heirs or assigns.
Also, Goquiolay is estopped from saying that Kong Chai Pin is not
ageneral partner because he granted her the authority to manage the
partnership properties.
In addition to this authority, the Court had yet again stressed the fact
that he had 7 years between the death of his partner and the sale
made by his partners widow to take up the management of the
properties himself, which he clearly failed to do.
Goquiolay v Sycip 9 SCRA 663
The case was previously affirmed. (CHECK FOR DIFFERENCE KAI
GALIBOG KO :D)
In re Sycip92 SCRA 1
Facts:
Two separate Petitions were filed before this Court 1) by the surviving
partners of Atty. Alexander Sycip, who died on May5, 1975, and 2) by
the surviving partners of Atty. Herminio Ozaeta, who died on February
14, 1976, praying that they be allowed to continue using, in the names
of their firms, the names of partners who had passed away.
Jurisprudence:
the Deen case: the matter was resolved with this Court advising the
firm to desist from including in their firm designation the name of C. D.
Johnston, who has long been dead.
Register of Deeds of Manila vs. China Banking Corporation: inview of
the personal and confidential nature of the relations between attorney
and client, and the high standards demanded in the canons of
professional ethics, no practice should be allowed which even in a
remote degree could give rise to the possibility of deception. Said
attorneys are accordingly advised to drop the name "PERKINS" from
their firm name.
Issue:
Petitioners seek a re-examination of the policy thus farenunciated by
the Court.
Held:
The Court finds no sufficient reason to depart from the rulings thus laid
down. The petitions filed herein are denied and petitioners advised to
drop the names "SYCIP" and "OZAETA" from their respective firm
names. Those names may, however, be included in the listing of
individuals who have been partners in their firms indicating the years
during which they served as such.
Ratio: Arguments of Petitioners Court
Petitioners arguments:
1.Under the law, a partnership is not prohibited from continuing its
business under a firm name which includes the name of a deceased
partner; in fact, Article 1840 of the Civil Code explicitly sanctions the
practice the use in their partnership names of the names of deceased
partners will run counter to Article 1815 of the Civil Code
1. The heirs of a deceased partner in a law firm cannot be held liable
as the old members to the creditors of a firm particularly where they
are non-lawyers.
Accordingly, neither the widow nor the heirs can beheld liable for
transactions entered into after the deathof their lawyer-predecessor.
There being no benefitsa ccruing, there ran be no
Art. 1815. Every partnership shall operate under a firm name, which
may or may not include the name of one or more of the partners.
Those who, not being members of the partnership, include their names
in the firm name, shall be subject to the liability, of a partner.
corresponding liability.
The public relations value of the use of an old firm name can tend to
create undue advantages and disadvantages in the practice of the
profession. An able lawyer without connections will have to make a
name for himself starting from scratch. Another able lawyer, who can
join an old firm, can initially ride on that oldf irm's reputation
established by deceased partners.
In regards to the last paragraph of Article 1840 of the Civil Code cited
by petitioners:
1)The Article primarily deals with the exemption from liability in cases
of a dissolved partnership,of the individual property of the deceased
partner for debtscontracted by the person or partnership which
continues the
Business using the partnership name or the name of the deceased
partner as part thereof. What the law contemplates therein is a holdover situation preparatory to formal reorganization.
2) Article 1840 treats more of a
commercial partnership with a goodwill to protect rather than of
a professional partnership, with no saleable good will but whose
reputation depends on the personal qualifications of its individual
members. Thus, it has been held that a saleable goodwill can exist
only in a commercial partnership and cannot arise in a professional
partnership consisting of lawyers
2. the legislative authorization given to those engaged in the practice of
accountancy
a profession
A partnership for the practice of law cannot be likened to partnerships
formed by other professionals or for
requiring the same degree of trust and confidence in respect of clients
as that implicit in the relationship of attorney and client
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that Courts can rely on the same for purposes of adjudication as a
juridical custom. Juridical custom must be differentiated from social
custom. The former can supplement statutory law or be applied in the
absence of such statute. Not so with the latter.
On May 23, 1947, the partnership had not yet paid its indebtedness to
Julian Go in he amount of P24,864.62 under the composition
agreement, nor did it have any money to repurchase Lots Nos. 237,
386 and 829 and so Ng Diong, in behalf of the partnership, transferred
the right of the latter to repurchase the same from Hodges to Julian Go
in full payment of the partnership's indebtedness to him. And having
Julian Go exercised the option January 6, 1948, Hodges executed a
deed of sale of the properties in his favor, and pursuant thereto the
register of deeds issued new titles' in his name covering said lots. On
May 29, 1948, Hodges executed another deed of sale covering Lots
Nos. 317-A, 236-B, 233 and 540 for the sum of P119,067.79 in favor of
Jose C. Tayengco. And on August 31, 1948, Tayengco mortgaged said
lots, together with three other lots of his, to the Bank of the Philippine
Islands to secure a loan of P126,000.00 to be used in the construction
of a commercial building on said lots.
Page 9 of 10
PARTNERSHIP
CASE DIGEST 1828-1842
Hodges on April 2, 1946 is null and void because at that time said
parcels were still in the custody of the assignee of the insolvency
proceedings, or in custodia legis, and, hence, the same is null and
void; (2) said sale is also null and void "because of the disparity,
irrationality and unreasonableness between the consideration and the
real value of the properties when sold"; and (3) the lower court erred in
not finding that the two deeds of mortgage executed by he partnership
in favor of the National Loan and Investment Board which were later
assigned to C. N. Hodges can no longer be enforced because the
action to foreclose the same has already prescribed.
Anent the first issue, it would be well to state the following facts by way
of clarification: It should be recalled that on August 8, 1940 the majority
of the creditors of the partnership, as well as the representatives of the
latter, submitted to the court taking cognizance of the insolvency
proceedings a composition agreement whereby it was agreed that said
creditors would receive 20% of the amount of their claims in full
payment thereof. This agreement was approved on October 10, 1940
which, in contemplation of law, has the effect of putting an end to the
insolvency proceedings. However, no further step was taken thereon
because of the outbreak of the war. Later, the record of the case was
reconstituted and the parties on August 15, 1945 filed a petition with
the court praying for the dismissal and closure of the proceedings in
view of the approval of the aforesaid composition agreement, and
acting favorably thereon, the court on October 6, 1945, issued an order
declaring the proceedings terminated and ordering the assignee to
return and reconvey the properties the partnership. The actual
reconveyance was done by a assignee on April 2, 1946.
It would, therefore, appear that for legal and practical purposes the
insolvency ended on said date. Since then partnership became,
restored to its status quo. It again reacquired its personality as such
with Ng Diong as its general manager. From that date on its properties
ceased to be in custodia legis. Such being the case, it is obvious that
when Ng Diong as manager of the partnership sold the seven parcels
of land to C. N. Hodges on April 2, 1946 by virtue of a deed of sale
acknowledged before a notary public on April 6, 1946, the properties
were already was at liberty to do what it may deem convenient and
proper to protect its interest. And acting accordingly, Ng Diong made
the sale in the exercise of the power granted to him by the partnership
in its articles of co-partnership. We do not, therefore, find anything
irregular in this actuation of Ng Diong.
Since at the time of the sale the life of the partnership had already
expired, the question may be fixed: Who shall wind up it business
affairs? May its manager still execute the sale of its properties to C. N.
Hodges as was done by Ng Diong? The answer to this question cannot
but be in the affirmative because Ng Diong was still the managing
partner of the partnership and he had the necessary authority to
liquidate its affairs under its articles of co-partnership. And considering
that war had intervened and the affairs of the partnership were placed
under receivership up to October 6, 1945, we are of the opinion that
Ng Diong could still exercise his power as liquidator when he executed
the sale in question in favor of C. N. Hodges. This is sanctioned by
Article 228 of the Code of Commerce which was the law in force at the
time.1
With regard to the second issue, it is contended that the trial court
should have declared the sale of the lots made to C. N. Hodges null
and void "because of the disparity, irrationality and unreasonableness
between the consideration and real value of the properties when sold."
Page 10 of 10