ANTONIO C. GOQUIOLAY vs. WASHINGTON Z.

SYCIP (MOTION FOR

Facts: 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 of Administratrix of her husband's estate and as partner, in lieu of
the husband), in favor of buyers Washington Sycip and Betty Lee. Appellant Goquiolay, in his
motion for reconsideration, insists 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 the partnership; that the testimony of her witnesses Young and Lim
belies that she took over 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 aspects of the case was expressly reserved in
the main decision of 26 July 1960; (b) That the partnership was expressly organized "to engage
in real estate business, either by buying and selling real estate". (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 a mortgage in favor of the original owners, from whom the partnership
had acquired them. It is first averred that there is "not one iota 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 I wanted to help her. 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 fine
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.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.

Issue: W/N Goquiolay only gave authority to manage the property w/c does not include the
power to alienate to Kong Cha Pin

Held: 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 co-
partnership. Even more, granting that by succession to her husband, Tan Sin An, the widow only
a became the limited partner, Goquiolay's authorization to manage the partnership property was
proof that he considered and recognized her has 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 co-partnership, not even in the capacity 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. The Articles did not
provide that the heirs of the deceased would be merely limited partner; 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 leave 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. 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 powers as general partner.

NG CHO CIO ET AL. vs. NG DIONG

Facts:This action was begun in the Court of First Instance of Iloilo by Ng Cho Cio Ng Sian King
and Ng Due King to recover their three-fourths (3/4) pro-indiviso share on seven (7) parcels of
land situated in the City of Iloilo which were sold by Ng Diong as manager of the commercial
firm NG CHIN BENG HERMANOS in favor of C.N. Hodges. The latter had sold four of those
parcels of land to Jose C. Tayengcoand the other three parcels to Julian Go, and for that reason
these two were included as party defendants. As the original plaintiffs sold their rights, title and
interest in said partnership to Ng Be Chuat and Ng Feng Tuan, the latter two were allowed to
intervene as plaintiffs. Since Jose C. Tayengco had mortgaged three of the lands which he
purchased from C. N. Hodges in favor of the Bank of the Philippine Islands, the complaint was
amended so as to include the Bank also as party defendant. after trial had begun, defendant Ng
Diong died, whereupon his heirs were order to substitute him parties defendants. On May 23,
1925, Ng Diong, Ng Be Chuat, Ng Feng Tuan Ng Be Kian Ng Cho Cio, Ng Sian King and Ng
Due King entered into a contract of general co-partnership under the name NG CHIN BENG
HERMANOS. The partnership was to exist for a period of 10 years from May 23, 1925 and Ng
Diong was named as managing partner. On May 10, 1935, the articles of co-partnership were
amended by extending its life to 16 years more to be counted from May 23, 1925, or up to May
23, 1941. On January 5, 1938, the partnership obtained from the National Loan and Investment
Board a loan in the amount of P30,000.00, and to guarantee its payment it executed in its favor
a mortgage on Lots Nos. 236-B, 317-A, 233 and 540 of the cadastral survey of Iloilo. On the
same date, the partnership also obtained from the same entity another loan in the amount of
P50,000.00 to secure which it also executed in its favor a mortgage on Lots Nos. 386, 829 and
237 of the same cadastral survey. Sometime in 1938, the partnership was declared insolvent
upon petition of its creditors, wherein one CrispinoMelocoton was elected as assignee. As a
consequence, on June 21, 1939, the titles to the seven parcels of land abovementioned were
issued in his name as assignee. In due time, the creditors filed their claims in said proceeding
which totalled P192,901.12. On August 9, 1940, a majority of the creditors with claims
amounting to P139,704.81, and the partners of the firm, acting thru counsel, entered into a
composition agreement whereby it was agreed that said creditors would receive 20% of the
amount of their claims in full payment thereof. Prior to this agreement, however, defendant
Julian Go had already acquired the rights of 24 of the creditors of the insolvent whose total
claims amounted to P139,323.10. Said composition agreement was approved by the insolvency
court. On January 30, 1941, the Agricultural and Industrial Bank which had succeeded the
National Loan and Investment Board assigned its rights and interests in the loans obtained from
it by the partnership in the aggregate amount of P80,000.00 in favor of C.N. Hodges, together
with the right and interest in the mortgage executed to secure the loans. Since said loans
became due and no payment was forthcoming, Hodges asked permission from the insolvency
court to file a complaint against the assignee to foreclose he mortgage executed to secure the
same in a separate proceeding, and permission having been granted, Hodges filed a complaint
for that purpose. the partners of the insolvent firm and Julian Go, who acquired most of the
claims of the creditors, filed a petition with the insolvency court praying at the insolvency
proceedings be closed or terminated cause the composition agreement the creditors had
submitted relative to the settlement of the claims had already been approved on October 10,
1940. And on October 6, 1946, the court, acting favorably on the petition, ordered, closure of the
proceedings directing the assignee to turn and reconvey all the properties of the partnership
back to the latter as required by law. In accordance with this order of the court, the assignee
executed a deed of reconveyance of the properties to the partnership on April 2, 1946 and by
virtue thereof, the register of deeds cancelled the titles issued in the name of the assignee and
issued new ones in lieu thereof in the name of the partnership. 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.

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?

Held: 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. 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." In stressing his point, counsel contends that the lands in
question, which are located in a commercial section of the City of Iloilo, were frittered away only
for a "pittance of P124,580.00" when, borrowing his words they could have been sold like hot
cakes to any resident of the city of regular financial standing upon proper approaches and
representations, because at that time those properties were fairly worth onehalf of a million
pesos." This claim may be true, but the same is unsupported. Appellants have failed to
introduce any evidence to show that they could have secured better offers for the properties if
given a chance to do so and that they advance now is a mere speculation or conjecture which
had no place in our judicial system. Since every claim must be substantiated by sufficient
evidence, and this appellants have failed to do, their pretense cannot be entertained. Neither
can we give any value to the claim that the action for the foreclosure of the mortgage executed
by the partnership in favor of C. N. Hodges has already prescribed not only because the same
is immaterial but because it is an issue that appellants are raising for the first time in this appeal.
Such issue has never been raised in their pleadings, nor in the trial court. Verily, this claim has
no merit. With regard to the appeal taken by the heirs of defendant Ng Diong whose main claim
is that the trial court failed to adjudicate to the partnership the properties which were bought by
Julian Go from C. N. Hodges, suffice it to say that the same could not be done, firstly, because
no such claim was made by them in their pleadings in the trial court, and, secondly, because the
evidence shows that said properties were bought by Julian Go by virtue of the option given to
him by the partnership for a valuable consideration in full payment of the credits assigned to him
by a good number of creditors of said partnership. There is no evidence that he promised to
reconvey the same to the partnership.

EUGENIA LICHAUCO, ET AL. vs. FAUSTINO LICHAUCO

Facts: In October, 1901, a notarial instrument was executed in Manila, by the terms of which a
partnership was duly organized for the purpose of carrying on a rice-cleaning business at
Dagupan, and for the purchase and sale of "palay" and rice.The articles disclose that the capital
invested in the enterprise was fixed at P100,000, of which amount P60,000 was contributed by
the defendant and his brothers in the form of machinery in a mill at Dagupan and the good will
of the milling business formerly conducted at the place, the balance of the capital being
contributed by the plaintiffs and others in cash, in the following proportions: Eugenia Lichauco,
P13,000; CatalinoArevalo, P8,000; Mariano Nable Jose, P5,000; Tomas Roux, P4,000;
JulitaLichauco, P10,000. The business thus organized was carried on until May, 1904, when it
was found to be unprofitable and discontinued by the defendant manager (gestor); and
thereafter, the machinery of the rice mil was dismantled by his orders, and offered for sale. No
accounting ever was made to his associates by the defendant until this action was instituted in
October, 1912, although it appears that in the year 1905, Mariano Limjap, one of the participants
in the venture, demanded a rendition of accounts; and that Eugenia Lichauco, one of the
plaintiffs in this action, made repeated unsuccessful demands for the return of her share of the
capital invested in the enterprise. And yet it further appears that during all that time the
defendant manager of the defunct enterprise had in his possession not less than P20,000, the
cash balance on hand, over and above all claims of indebtedness after suspending operations
in 1904; and that since that time he received or should have received substantial sums of
money from the sale of the machinery of the dismantled mill.

Issue: Whether or not Eugenia et al can demand an accounting.

Held: These contentions of counsels for the defendant take no account of the provisions of both
the Civil and Commercial Codes for the dissolution and liquidation of the different classes of
partnerships and mercantile associations upon the occurrence of certain contingencies not
within the control of the partners. The provisions of paragraph 10 of the articles of partnership
prohibiting the dissolution of the association under review, except by the consent and
agreement of two-thirds of its partners, denied the right to a less number of the partners to effect
a dissolution of the partnership through judicial intervention or otherwise; but in no wise limited
or restricted the rights of the individual partners in the event the dissolution of the association
was effected, not by any act of theirs, but by the express mandate of statutory law. It would be
absurd and unreasonable to hold that such an association could never be dissolved and
liquidated without the consent and agreement of two-thirds of its partners notwithstanding that it
had lost all its capital, or had become bankrupt, or that the enterprise for which it had been
organized had been concluded or utterly abandoned. Upon the dissolution of the association in
1904 it became the duty of the defendant to liquidate its affairs and account to his associates for
their respective shares in the capital invested this not merely from the very nature of his
relation to the enterprise and of his duties to those associated with him as partners, but also by
the express mandate of the law. The association having been dissolved by the termination and
abandonment of the enterprise for which it was organized, he owed this duty to liquidate and
account to all and to each of his associates, and upon his failure to perform that duty, all or any
of them had a clear legal right to compel him to fulfill it. Each of his associates had a perfect
right to demand for himself a full, complete and satisfactory accounting, and in the event that he
conceived himself aggrieved in this regard, to institute the appropriate judicial proceedings to
secure relief. The duty of the defendant to liquidate the affairs of the enterprise and to account
to his associates promptly upon the dissolution of the association in the year 1904 is expressly
prescribed in the Commercial Code, whether we regard the association, so far as it affects the
mutual rights and obligations of the partners, as clothed with the forms of a "sociedad de
cuentas en participacion" (joint account partnership) or a "sociedad en comindata."