ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SIN AN and ANTONIO C.

GOQUIOLAY
vs.
WASHINGTON Z. SYCIP, ET AL.
G.R. No. L-11840, July 26, 1960

A third person has the right to presume that a general partner dealing with partnership property
has the requisite authority from his co-partners. 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.

FACTS:
On May 29, 1940, 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. The partnership had a capital of P30,000.00, P18,000.00 of
which was contributed by Goquiolay and P12,000.00 by Tan Sin An. The agreement lodge 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.
On May 29, 1940, the plaintiff partnership "Tan Sin An and Goquiolay" purchased the
three (3) parcels of land, known as Lots Nos. 526, 441 and 521 of the Cadastral Survey of
Davao, subject-matter of the instant litigation, assuming the payment of a mortgage obligation of
P25,000.00, payable to "La Urbana Sociedad Mutua de Construccion y Prestamos" for a period
of ten (10) years, with 10% interest per annum. Another 46 parcels were purchased by Tan Sin
An in his individual capacity, and he assumed payment of a mortgage debt thereon for
P35,000.00 with interest. The downpayment and the amortization were advanced by Yutivo and
Co., for the account of the purchasers.
On September 25, 1940, the two separate obligations were consolidated in an instrument
executed by the partnership and Tan Sin An, whereby the entire 49 lots were mortgaged in favor
of the "Banco Hipotecario de Filipinas" (as successor to "La Urbana") and the covenantors
bound themselves to pay, jointly and severally, the remaining balance of their unpaid accounts
amounting to P52,282.80 within eight 8 years, with 8% annual interest, payable in 96 equal
monthly installments.
On June 26, 1942, Tan Sin An died, leaving as surviving heirs his widow, Kong Chai Pin,
and four minor children. Defendant Kong Chai Pin was appointed administratrix of the intestate
estate of her deceased husband.
In the meantime, repeated demands for payment were made by the Banco Hipotecario on
the partnership and on Tan Sin An. In March, 1944, the defendant Sing Yee and Cuan, Co., Inc.,
upon request of defendant Yutivo Sans Hardware Co., paid the remaining balance of the
mortgage debt, and the mortgage was cancelled.
Yutivo Sans 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”
 On March 29, 1949, Kong Chai Pin filed a petition with the probate court for authority to
sell all the 49 parcels of land to Washington Z, Sycip and Betty Y. Lee, for the purpose
preliminary of settling the aforesaid debts of Tan Sin An and the partnership. Pursuant to a court
order of April 2, 1949, the administratrix executed on April 4, 1949, a deed of sale1 of the 49
parcels of land to the defendants Washington Sycip and Betty Lee in consideration of P37,000.00
and of vendees' assuming payments of the claims filed by Yutivo Sons Hardware Co. and Sing
Yee and Cuan Co., Inc.
Later, in July, 1949, defendants Sycip and Betty Lee executed in favor of the Insular
Development Co., Inc. a deed of transfer covering the said 49 parcels of land.
Learning about the sale to Sycip and Lee, the surviving partner Antonio Goquiolay filed, on or
about July 25, 1949, a petition in the intestate proceedings seeking 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. In its order of December 29, 1949, the probate court annulled the sale executed by the
administratrix with respect to the 60% interest of Antonio Goquiolay over the properties sold.
However, the decision of probate court was set aside for failure to include the indispensable
parties. Hence, new pleadings were filed. The second amended complaint prays, among other
things, for the annulment of the sale in favor of Washington Sycip and Betty Lee, and their
subsequent conveyance in favor of Insular Development Co., Inc., in so far as the three (3) lots
owned by the plaintiff partnership are concerned. 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.

ISSUES:
1. Whether the widow or substitute became a general partner.
2. Whether the consent of the other partners was necessary to perfect the sale of the partnership
properties to Sycip and Lee.

RULING:
1. YES. Appellants argue, however, that 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. Although ordinarily, this effect follows
from the continuance of the heirs in the partnership, it was not so with respect to the widow
Kong Chai Pin, who, by her affirmative actions, manifested her intent to be bound by the
partnership agreement not only as a limited but as a general partner. 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. 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. 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. 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, especially those partners acting with ostensible authority. The latter 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.

ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SIN AN and ANTONIO C.

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 recognized her as a
general partner, and is now in estoppel to deny her position as a general partner, with authority
to administer and alienate partnership property.
Although the heir of a partner ordinarily becomes a limited partner for his own protection, yet
the heir may disregard it and instead elect to become a collective or general partner, with all the
rights and obligations of one. This choice pertains exclusively to the heir, and does not require
the assent of the surviving partner.

FACTS:
The matter now pending is the appellant's motion for reconsideration of the main decision
dated July 26, 1960 wherein the Supreme Court 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, 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.

ISSUE:

Whether Kong Chai Pin, widow of the deceased partner Tan Sin An, became a general Partner.
RULING:

YES. 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 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.
Besides, as pointed out in the 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 bud 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 that 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 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, cannot 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.
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

THE MOTION FOR RECOSIDERATION WAS DENIED.