Goquiolay v Sycip| G.R. No. L-11840 | July 26, 1960| REYES, J. B. L., J.

Petitioner: ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SIN AN and ANTONIO C. GOQUIOLAY
Respondent : WASHINGTON Z. SYCIP, ET AL
SUMMARY: Tan Sin An and Goquiolay entered into a general commercial partnership under the partnership name “Tan Sin An and Antonio Goquiolay” for the
purpose of dealing in real estate. The agreement lodged upon Tan Sin An the sole management of the partnership affairs. The lifetime of the partnership was fixed
at ten years and the Articles of Co-partnership stipulated that in the event of death of any of the partners before the expiration of the term, the partnership will
not be dissolved but will be continued by the heirs or assigns of the deceased partner. But the partnership could be dissolved upon mutual agreement in writing of
the partners. The partnership had 49 lots. Tan Sin An died and his wife Kong Chai Pin subsequently become the administratrix of the estate. Unfortunately the
partnership had a lot of debt and Kong Chai Pin thus file a petition in the probate court for authority to sell all 49 lots. Being granted this authority, Kong Chai Pin
then sold all 49 lots to Sycip and Lee. When Goquiolay learned about the sale to Sycip and Lee, he filed a petition in the intestate proceedings to set aside the
order of the probate court approving the sale in so far as his interest over the parcels of land sold was concerned. He then filed a case against Sycip and Lee.
Goquiolay was basically asking that the sale be rescinded and the lands given back to the partnership because Kong Chai Pin did not have the authority to dispose
of the 49 lots because she was only a limited partner. The case then went all the way to the SC and the SC ruled in favor of Sycip. Petitioner Goquiolay now files
this motion for reconsideration of that case. The issue of whether or not the sale was valid hinges on the authority of Kong Chai Pin to alienate the properties.

FACTS:

 Tan Sin An and Antonio C. Goquiolay entered into a general commercial partnership under the partnership name "Tan
Sin An and Antonio C. Goquiolay", for the purpose in dealing in real state
o Capital: P30,000.00, (P18,000.00 fr. Goquiolay) +(P12,000.00 by Tan Sin An)
 The agreement stipulated Tan Sin An as sole managing and partner and Antonio C. Goquiolay as co-partner.
o Exclusively management by the managing and partner or by his authorized agent, 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
o The co-partner shall have no voice or participation in the management of the affairs of the co-partnership; but
he may examine its accounts once every six (6) months
o Fixed term of (10) years
o 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
o However, the partnership could be dissolved and its affairs liquidated at any time upon mutual agreement in
writing of the partners (Art. XIII, articles of Co-Partnership).
 Goquiolay executed a general power of attorney IFO of Tan
 The plaintiff partnership purchased 3 parcels of land which was mortgaged to “La Urbana” as payment of P25,000.
Another 46 parcels of land were purchased by Tan Sin An in his individual capacity which he assumed
payment of a mortgage debt for P35K. A downpayment and the amortization were advanced by Yutivo and Co.
 The two obligations were consolidated in an instrument executed by the partnership and Tan Sin An, whereby the entire
49 lots were mortgaged in favor of “Banco Hipotecario”
 
 Tan Sin An died leaving his widow, Kong Chai Pin and four minor children. The widow subsequently became the
administratrix of the estate.
 Repeated demands were made by Banco Hipotecario on the partnership and on Tan Sin An. 
 Defendant Sing Yee, upon
request of defendant Yutivo Son , paid the remaining balance of the mortgage debt, the mortgage was cancelled
 Yutivo Sons and Sing Yee filed their claim in the intestate proceedings of Tan Sin An for advances, interest and taxes paid
in amortizing and discharging their obligations to “La Urbana” and “Banco Hipotecario”
 Kong Chai Pin filed a petition with the probate court for authority to sell all the 49 parcels of land. She then sold it to Sycip
and Lee in consideration of P37K and of the vendees assuming payment of the claims filed by Yutivo Sons and Sing Yee.
 Later, Sycip and Lee executed in favor of Insular Development a deed of transfer covering the 49 parcels of land.

 When Goquiolay learned about the sale to Sycip and Lee, he filed a petition in the intestate proceedings to set aside the
order of the probate court approving the sale in so far as his interest over the parcels of land sold was concerned.
 Probate court annulled the sale executed by the administratrix w/ respect to the 60% interest of Goquiolay over the
properties Administratrix appealed.
 The decision of probate court was set aside for failure to include the indispensable
parties. New pleadings were filed
 The second amended complaint prays for the annulment of the sale in favor of Sycip and Lee and their subsequent
conveyance to Insular Development.
 The complaint was dismissed by the lower court hence this appeal.

 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.

 The defendant’s 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.

ISSUES + RULING:

Whether or not the lower court erred in holding that the widow, Kong Chai Pin, succeeded her husband, Tan Sin An, in the sole
management of the partnership, upon the latter's death Y

 The provision in the articles 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 related to the succession in the proprietary interest of each partner.
 The covenant that Antonio Goquiolay shall have no voice or participation in the management of the partnership, being
a limitation upon his right as a general partner, must be held coextensive only with Tan's right to manage the affairs,
the contrary not being clearly apparent.
 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 Tan's demise.
 Appellants : since the "new" members' liability in the partnership was limited merely to the value of the share or estate
left by the deceased Tan Sin An, they became no more than limited partners and, as such, were disqualified from the
management of the business under Article 148 of the Code of Commerce.
 SC: the widow Kong Chai Pin by her affirmative actions, manifested her intent to be bound by the partnership
agreement not only as a limited but as a general partner.
o Thus, she managed and retained possession of the partnership properties and was admittedly deriving income
therefrom up to and until the same were sold to Washington Sycip and Betty Lee.
o In fact, by executing the deed of sale of the parcels of land in dispute in the name of the partnership, she was
acting no less than as a managing partner.
o Having thus preferred to act as such, she could be held liable for the partnership debts and liabilities as a
general partner, beyond what she might have derived only from the estate of her deceased husband.
 By allowing her to retain control of the firm's property from 1942 to 1949, plaintiff estopped himself to deny her
legal representation of the partnership, with the power to bind it by the proper contracts.

2. Whether or not the consent of the other partners was necessary to perfect the sale of the partnership properties to
Washington Sycip and Betty Lee NO

 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, specially those partners acting
with ostensible authority.
o "There is a general presumption that each individual partner is an agent for the firm and that he has authority
to bind the firm in carrying on the partnership transactions
o The presumption is sufficient to permit third persons to hold the firm liable on transactions entered into by
one of the members of the firm acting apparently in its behalf and within the scope of his authority
 Third persons may rightfully assume that the contracting partner was duly authorized to contract for and in behalf of
the firm and that, furthermore, he would not ordinarily act to the prejudice of his co-partners.
 The regular course of business procedure does not require that each time a third person contracts with one of the
managing partners, he should inquire as to the latter's authority to do so, or that he should first ascertain whether or
not the other partners had given their consent thereto
 Although the partnership under consideration is a commercial partnership and, therefore, to be governed by the Code
of Commerce, the provisions of the old Civil Code may give us some light on the right of one partner to bind the
partnership. States Art. 1695 thereof:

Should no agreement have been made with respect to the form of management, the following rules shall be observed:

1. All the partners shall be considered agents, and whatever any one of the may do individually shall bind the
partnership; but each one may oppose any act of the others before it has become legally binding.
 records fail to disclose that appellant Goquiolay made any opposition to the sale of the partnership realty to Sycip and
Lee. Goq only objected after deed of conveyance was was executed and approved
W/N the sale of the partnership properties was only a fraudulent device by the appellees, with the connivance of Kong Chai Pin,
to ease out Antonio Goquiolay from the partnership.  NO

 appellants : the devise was when Yu Khe Thai told Antonio Goquiolay the possibility of selling his share in the
partnership; and upon his refusal to sell, was followed by the filing of the claims of Yutivo Sons Hardware Co. and Sing
Yee and Cuan Co., Inc. in the intestate estate proceedings of Tan Sin An.
 Court: As creditors of Tan Sin An and the plaintiff partnership Yutivo Sons Hardware Co., and Sing Yee Cuan Co., Inc.
had every right to file their claims in the intestate proceedings.
 The denial of the claims at first by Kong Chai Pin ( for lack of sufficient knowledge) negatives any conspiracy on her part
in the alleged fraudulent scheme, even if she subsequently decided to admit their validity after studying the claims and
finding it best to admit the same
 There is no proof that the price for which the properties were sold was unreasonably low, or in any way unfair, since
appellants presented no evidence of the market value of the lots as of the time of their sale to Sycip and Lee.
 Kong Chai Pin hardly had any choice but to execute the questioned sale, as it appears that the partnership had neither
cash nor other properties with which to pay its obligations.

DISPOSITION: JUDGMENT AFFIRMED against appellant Antonio Goquiolay.

RESOLUTION

Petitioner's arguments:

1. The authority gien by Goqiolay to 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.
2. Kong Chai Pin even if she was a general partner did not have the right to alienate the real estate
properties of the partnership

Issue + Ruling

WON the sale was valid. / WON she was a limited or general Partner  The sale was valid, Kong
Chai Pin was a general partner who had authority to sell the lots.

 Kong Chai Pin 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.
 in the main decision the heir ordinarily 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 remembered 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.

 Furthermore, the sale was valid as to third persons (I.e Sycip) because “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."

WON she had the right to alienate Real propoerties of the partnershipYes. She had authority to sell even
the Real properties of the partnership.

 it is important to differentiate between real estate acquired and held as “stock-in-trade” and real estate held
merely as “business site” 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.
 In Chester vs. Dickerson: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.
 Since the sale by the widow was in conformity with the express objective of the partnership, "to engage ...
inbuying 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.

Dispositive: The motion for reconsideration is DENIED.

Separate Opinion: Justice Angelo Bautista

The court affirmed the decision but on different grounds, among which are: (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; (2) the
alleged acts of management, even if proven, could not give Kong Chai Pin the character of general manager for the
same is contrary to law and well- known authorities; (3) even if Kong Chai Pin acted as general manager she has 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.

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. Moreover, mere acceptance of the inheritance does not
make 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. But here Tan Sin An died intestate.

Kong Chai Pin cannot be deemed to have declared her intention to become a general partner by exercising acts of
management because as a general rule the heirs of a deceased partner succeed as limited partners only by operation
of law, it is obvious that the heir, upon entering the partnership, must make a declaration of his character, otherwise
he should be deemed as having succeeded as limited partner by the mere acceptance of 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 148 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 147 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 authorize her to bind the
partnership.

Kong Chain Pin could not sell the partnership properties without authority from the other partners. the relationship
between a managing partner and the partnership is substantially the same as that of the agent and his principal, 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 administration, but with
regard to the power to compromise, sell mortgage, and other acts of strict ownership, an express power of attorney
is required. Here Kong Chai Pin did not have such power when she told the properties of the partnership.

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 being in excess of her authority.

Upon the strength of the foregoing considerations, the court grant the motion for reconsideration.