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G.R. No.

L-22825
February 14, 1925
TESTATE ESTATE OF LAZARO MOTA, deceased, ET AL.,
plaintiffs-appellants,
vs. SALVADOR SERRA, defendant-appellee.
VILLAMOR, J.:
FACTS:
Ps and D entered into a contract of partnership for the
construction & exploitation of a railroad line from
the "San Isidro" and "Palma" centrals to the place
known as "Nandong."
The original capital stipulated was P150,000.
It was covenanted that the parties should pay this
amount in equal parts & the plaintiffs were
entrusted w/ the administration of the partnership.
However, the agreed capital of P150,000 did not prove
sufficient since the expenses reached P 226, 092
So D entered into a contract of sale with Venancio
Concepcion, Phil. C. Whitaker, and Eusebio R. de
Luzuriaga, whereby he sold to the latter the estate
and central known as "Palma" with its running
business, all the improvements, machineries &
buildings.
Before delivery of the haciendato the purchasers, de
Luzuriaga renounced all his rights under the
contract of Messrs. Concepcion & Whitaker.
This gave rise to the fact that Concepcion, Whitaker &
Def executed another deed of absolute sale of the
said
"Palma"
Estate
for
the
amount
of
P1,695,961.90, of which the vendor received at the
time of executing the deed the amount of
P945,861.90, & the balance was payable by
installments in the form and manner stipulated in
the contract.
The purchasers guaranteed the unpaid balance of the
purchase price by a first & special mortgage in favor
of the vendor upon the hacienda & the central with
all the improvements, buildings, machineries, and
appurtenances then existing on the said hacienda.
Messrs. Phil. C. Whitaker and Venancio Concepcion, in
Clause 6 of the deed, expressed awareness of
contract of partnership and their willingness to
subrogate themselves into the obligations therefor.
Thereafter, Concepcion & Whitaker also bought from
Mota et al. the of the railroad line and they
agreed that the partnership "Palma" and "San
Isidro," formed between Serra & Mota et al, should
be totally cancelled and of no force and effect
whatever.
The price of this sale was P237,722.15, excluding any
amount which the D might be owing to the Ps.

Of the purchase price of of the railroad, Concepcion


&Whitaker paid the sum of P47,544.43 only.
So it results that the "Hacienda Palma," with the entire
railroad (the subject-matter of the contract of
partnership between Ps and D) became the property
of Whitaker & Concepcion.
However, Whitaker & Concepcion failed to pay to the D
a part of the purchase price (P750,000), so the
vendor/defendant, foreclosed the mortgage upon
the said hacienda, which was adjudicated to him at
the public sale held by the sheriff for the amount of
P500,000, and D put in possession thereof, including
what was planted at the time, together with all the
improvements made by Whitaker &Concepcion.
Since D, Whitaker & Concepcion failed to pay 1/2 of the
amount (P113,046.46) expended by the Ps upon the
construction of the railroad line,the plaintiffs
instituted the present action praying:
(1) That the deed of February 1, 1919 (contract of
partnership), be declared valid and binding;
(2) that the defendant be sentenced to pay plaintiffs
the aforesaid sum of P113,046.46, with the
stipulated interest at 10 per cent per annum
beginning June 4, 1920, until full payment thereof,
with the costs of the present action.

Defendant pointed out that he is now relieved


from the obligation because of the novation of the
contract by the substitution of the debtor with the
conformity of the creditors;
TRIAL COURT ->ruled in favor of the defendant
The court a quo in its decision held that there was
a novation of the contract by the substitution of
the debtor, and therefore absolved the defendant
from the complaint with costs against the
plaintiffs. With regard to the prayer that the said
contract be declared valid and binding, the court
held that there was no way of reviving the
contract which the parties themselves in interest
had spontaneously and voluntarily extinguished.
Hence, this petition for review.

ISSUE:
W/N Defendant is exempt from his obligation from
the partnership on the ground that the partnership
was dissolved?

Ruling:

The dissolution of a firm does not relieve


any of its members from liability for existing

obligations, although it does save them from


new obligations to which they have not
expressly or impliedly assented, and any of
them may be discharged from old obligations
by novation or other form of release. A
partnership
continues,
even
after
dissolution, for the purpose of winding
up its affairs. At the termination of the
object for which it was created the partnership
is extinguished, pending the winding up of
some incidents and obligations of the
partnership, but in such case, the partnership
will be reputed as existing until the juridical
relations arising out of the contract are
dissolved. A partnership cannot be
considered as extinguished until all the
obligations pertaining to it are fulfilled.

the "Hacienda Palma" in connection


with the railroad line "Palma-San IsidroNandong."
Mota et al. were not a party to the Contract of
Sale between Serra, Whittaker, Concepcion &
Luzuriaga.
No
stipulation
whereby
the
obligation of the Serra was novated with the
consent of the creditor
MERGING OF DEBTOR & CREDITOR

Serra: There was a merger of the rights of


debtor and creditor, whereby the fulfillment of
the obligation became extinguished.
o Debt of Serra was transferred to
Whitaker & Concepcion by the Contract
of
Sale
bet.
Serra,
Whittaker,
Concepcion & Luzuriaga.
o These in turn acquired the credit of the
Testate Estate of Lazaro Mota et al. by
virtue of the debt (Contract of Sale on
of the railroad); thus the rights of the
debtor and creditor were merged in
one person.

SC: No. The rights and titles which Mota et al.


sold to Whitaker & Concepcion refer only to
one-half of the railroad line. The credit which
they had against Serra for of the cost of
construction of the said line was not included in
the sale contained in the Contract of Sale on
of the railroad.

That Mota et al. sold their rights and titles over


of the line, is evident from the very Contract
of Sale. The purchasers, Whitaker and
Concepcion, to secure the payment of the
price, executed a mortgage in favor of Mota et
al. on the same rights and titles that they had
bought and also upon what they had purchased
from Serra.

In other words, Whitaker & Concepcion


mortgaged unto Mota et al. what they had
bought from Mota et al. and also what they had
bought from Serra.

The rights and titles transferred by Mota et al.


to Whitaker & Concepcion were only those they
had over the other half of the railroad line.

No novation of the contract between Mota et


al. and Serra, as regards the obligation of the
latter to pay the former of the cost of the
construction of the said railroad line, and since
Mota et al. did not include in the sale,
evidenced by Contract of Sale, the credit that
they had against the Serra.

That the obligation of the Serra became


extinguished by the merger of the rights of
creditor and debtor by the purchase of
Whitaker and Concepcion is wholly untenable.

Side notes:

NOVATION
Serra: By the substitution of the debtor with
the consent of the creditor, the obligation of
Serra to pay his obligation under the contract
of partnership was extinguished since there
was a novation of the contract
SC: There was no novation. There was none
intended; Mota et. al have not expressly
consented to the substitution of Serra.
It should be noted that in order to give
novation its legal effect, the law requires that
the creditor should consent to the substitution
of a new debtor. This consent must be given
expressly for the reason that, since novation
extinguishes the personality of the first debtor
who is to be substituted by new one, it implies
on the part of the creditor a waiver of the right
that he had before the novation which waiver
must be express
The fact that Phil. C. Whitaker and Venancio
Concepcion were willing to assume the Serra's
obligation to Mota et al. is of no avail, if the
latter have not expressly consented to the
substitution of the first debtor.
Letter presented as proof of alleged consent of
Mota et. al to the substitution of Whitaker &
Concepcion only shows that they asked the two
to be their new partners (not substituted). It
is natural that Mota et al. should have done
this. Still, there was nothing to show the
express consent, the manifest and deliberate
intention of Estate of Mota et al. to exempt
Serra from his obligation and to transfer it to
his successors in interest, Whitaker &
Concepcion.
o Serra transferred his hacienda to C.
Whitaker & Concepcion and made it
known to Mota et al. that the new
owners would hold themselves liable
for the cost of constructing the said
railroad line. Mota et al. could not
prevent the Serra from selling to them
his "Hacienda Palma" with the rights
that he had over the railroad in
question.
o Serra ceased to be a partner in
said line and, therefore, Mota et
al. had to take the vendees as
their new partners.
o Mota et al. had to come to an
understanding with the new owners of

G.R. No. L-11840 July 26, 1960


ANTONIO C. GOQUIOLAY and THE PARTNERSHIP
"TAN SIN AN and ANTONIO C.
GOQUIOLAY,Plaintiffs-Appellants, vs. WASHINGTON
Z. SYCIP, ET AL.,Defendants-Appellees.

FACTS:

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.
Goquiolay executed a GPA in favor of Tan
Sin An.
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
HipotecarioTan 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 Sons , 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.

PLAINTIFFS ARGUMENTS: 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 ARGUMENTS: The defendants
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.
DECISIONS OF -
LOWER COURT: 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:
1)

W/N Kong Chai Pin became the managing partner


of the partnership upon the death of her husband,
Tan Sin An, by virtue of the articles of Partnership?
NO.

2)

Whether the heirs of deceased partner became a


limited partner and was disqualified from the
management of the business of the partnership?

3)

W/N the consent of the other partners was


necessary to perfect the sale of the partnership
properties to Washington Sycip and Betty Lee. NO.
Ruling:
1. The exclusive management of the business
conferred upon Tan Sin An (by virtue of the
Articles of Co-Partnership & Power of Atty) was
premised upon trust and confidence and it was
a mere personal right that terminated upon
Tan's demise.
The provision (Articles) ->"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" -> it related to the succession in the
proprietary interest of each partner and NOT to the
managerial right given to Tan Sin An.

2.

Although ordinarily, this effect follows from the


continuance of heirs in the partnership, but not
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.
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.
Hence, 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.
And the plaintiff was estopped to deny her
legal representation of the partnership, with the
power to bind it by the proper contracts ->
when he allowed her to retain control of the
firm's property from 1942 to 1949.

3.

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.

G.R. No. L-11840

December 10, 1963

ANTONIO C. GOQUIOLAY, ET AL., plaintiffsappellants,


vs. WASHINGTON Z. SYCIP, ET AL.,
defendants-appellees.

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 Case
Appellant's MR of SCS main decision w/c
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:

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.

OPTIONAL

ISSUE:

4) As to validity of the sale covering the entire firm


realty, on the ground that it threw the
partnership into dissolution, which requires
consent of all the partners. UNTENABLE.

Whether 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 partnership was left without


the real property it originally had will not work
its dissolution, since the firm was not organized
to exploit these precise lots but to engage in
buying and selling real estate, and "in general
real estate agency and brokerage business".

HELD:
(1) The widow became more than a limited partner.
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. By succession
to her husband, Tan Sin An, the widow only
became a limited partner, BUT Goquiolay's
authorization to manage the partnership

property was proof that he considered and


recognized her as general partner, at least
since 1945.
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 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.

In this case, 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,
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.
The heir here never was a limited partner, but
chose to be, and became, a general partner right
at the start.

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