THIRD DIVISION

[G.R. No. 94285. August 31, 1999]

JESUS SY, JAIME SY, ESTATE OF JOSE SY, ESTATE OF VICENTE SY, HEIR OF MARCIANO
SY represented by JUSTINA VDA. DE SY and WILLIE SY, petitioners, vs. THE COURT OF
APPEALS, INTESTATE ESTATE OF SY YONG HU, SEC. HEARING OFFICER FELIPE
TONGCO, SECURITIES AND EXCHANGE COMMISSION, respondents.
[G.R. No. 100313. August 31, 1999]
SY YONG HU & SONS, JOHN TAN, BACOLOD CANVAS AND UPHOLSTERY SUPPLY CO.,
AND NEGROS ISUZU SALES, petitioners, vs. HONORABLE COURT OF APPEALS (11th
Division), INTESTATE ESTATE OF THE LATE SY YONG HU, JOSE FALSIS, JR., AND HON.
BETHEL KATALBAS-MOSCARDON, RTC OF NEGROS OCCIDENTAL, Branch 51, respondents.
DECISION
PURISIMA, J.:
At bar are two consolidated petitions for review on certiorari under Rule 45 of the Revised Rules of
Court, docketed as G. R. Nos. 94285 and G.R. No. 100313, respectively, seeking to reinstate the
Resolution of the Court of Appeals in CA - G. R. SP No. 17070 and its Decision in CA-G. R. SP
No. 24189.
In G. R. No. 94285, the petitioners assail the Resolution[1] dated June 27, 1990 of the Court of
Appeals granting the Motion for Reconsideration interposed by the petitioners (now the private
respondents) of its Decision[2], promulgated on January 15, 1990, which affirmed the Order[3]
issued on January 16, 1989 by the Securities and Exchange Commission (SEC) en banc and the
Order[4] of SEC Hearing Officer Felipe Tongco, dated October 5, 1988,
The facts that matter are as follows:
Sy Yong Hu & Sons is a partnership of Sy Yong Hu and his sons, Jose Sy, Jayme Sy, Marciano Sy,
Willie Sy, Vicente Sy, and Jesus Sy, registered with the SEC on March 29, 1962, with Jose Sy as
managing partner. The partners and their respective shares are reflected in the Amended Articles
of Partnership[5] as follows:
NAMES AMOUNT CONTRIBUTED
SY YONG HU 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

properties allegedly owned in common by Sy Yong Hu and the plaintiff (Keng Sian), and for the
delivery or reconveyance of her one-half (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,[8] 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.[9]
In their answer dated November 3, 1977, the defendants, including Sy Yong Hu himself, countered
that Keng Sian is only a house helper of Sy Yong Hu and his wife, subject properties are
exclusively owned by defendant partnership, and plaintiff has absolutely no right to or interest
therein.[10]
On September 20, 1978, during the pendency of said civil case, Marciano Sy filed a petition for
declaratory relief against partners Vicente Sy, Jesus Sy and Jayme Sy, docketed as SEC Case
No. 1648, praying that he be appointed managing partner of the partnership, to replace Jose Sy
who died on August 12, 1978. Answering the petition, Vicente Sy, Jesus Sy and Jaime Sy, who
claim to represent the majority interest in the partnership, sought the dissolution of the partnership
and the appointment of Vicente Sy as managing partner. In due time, Hearing Officer Emmanuel
Sison came out with a decision[11] (Sison Decision) dismissing the petition, dissolving the
partnership and naming Jesus Sy, in lieu of Vicente Sy who had died earlier, as the managing
partner in charge of winding the affairs of the partnership.
The Sison decision was affirmed in toto by the SEC en banc in a decision[12] (Abello decision)
dated June 8, 1982, disposing thus:
WHEREFORE, the Commission en banc affirms the dispositive portion of the decision of the
Hearing Officer, but clarifies that: (1) the partnership was dissolved by express will of the majority
and not ipso facto because of the death of any partner in view of the stipulation of Articles of
Partnership and the provisions of the New Civil Code particularly Art. 1837 [2] and Art. 1841. (2)
The Managing Partner designated by the majority, namely Jesus Sy, vice Vicente Sy (deceased)
shall only act as a manager in liquidation and he shall submit to the Hearing Officer an accounting
and a project of partition, within 90 days from receipt of this decision. (3) The petitioner is also
required within the same period to submit his counter-project of partition, from date of receipt of
the Managing Partners project of partition. (4) The case is remanded to the Hearing Officer for
evaluation and approval of the accounting and project of partition.
On the basis of the above decision of the SEC en banc, Hearing Officer Sison approved a partial
partition of certain partnership assets in an order[13] dated December 2, 1986. Therefrom,
respondents seasonably appealed.
In 1982, the children of Keng Sian with Sy Yong Hu, namely, John Keng Seng, Carlos Keng Seng,
Tita Sy, Yolanda Sy and Lolita Sy, filed a petition, docketed as SEC Case No 2338, to revoke the
certificate of registration of Sy Yong Hu & Sons, and to have its assets reverted to the estate of the
late Sy Yong Hu. After hearings, the petition was dismissed by Hearing Officer Bernardo T. Espejo
in an Order, dated January 11, 1984, which Order became final since no appeal was taken
therefrom.[14]

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.[6] 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,
[7] 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

After the dismissal of SEC Case No. 2338, the children of Keng Sian sought to intervene in SEC
Case No. 1648 but their motion to so intervene was denied in an Order dated May 9, 1985. There
was no appeal from said order.[15]
In the meantime, Branch 43 of the Regional Trial Court of Negros Occidental appointed one Felix
Ferrer as a Special Administrator for the Intestate Estate of Sy Yong Hu in Civil Case No. 13388.
Then, on August 30, 1985, Alex Ferrer moved to intervene in the proceedings in SEC Case No.
1648, for the partition and distribution of the partnership assets, on behalf of the respondent
Intestate Estate.[16]
It appears that sometime in December, 1985, Special Administrator Ferrer filed an Amended

Complaint on behalf of respondent Intestate Estate in Civil Case No. 13388, wherein he joined
Keng Sian as plaintiff and thereby withdrew as defendant in the case. Special Administrator Ferrer
adopted the theory of Keng Sian that the assets of the partnership belong to Keng Sian and Sy
Yong Hu (now represented by the Estate of Sy Yong Hu) in co-ownership, which assets were
wrongfully diverted in favor of the defendants.[17]

G. R. No. 100313 came about in view of the dismissal by the Court of Appeals[27] 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:

The motion to intervene in SEC Case No. 1648, filed by Special Administrator Alex Ferrer on
behalf of the respondent Estate, was denied in the order issued on May 9, 1986 by Hearing Officer
Sison. With the denial of the motion for reconsideration, private respondent Intestate Estate of Sy
Yong Hu appealed to the Commission en banc.
In its decision (Sulit decision) on the aforesaid appeal from the Order dated May 9, 1986, and the
Order dated December 2, 1986, the SEC en banc[18] ruled:
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[19] 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.
[20]
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.[21] On October 5,
1988, Hearing Officer Tongco came out with an Order[22] (Tongco Order) incorporating the above
submissions of the parties and placing[23] 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 banc[24]affirmed the Tongco Order.
With the denial of their Motion for Reconsideration,[25] petitioners filed a special civil action for
certiorari with the Court of Appeals.

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.[28]
From the records on hand, it can be gleaned that the Tongco Order[29], dated October 5, 1988, in
SEC Case No. 1648, had, among others, denied a similar petition of the intervenors therein (now
private respondents) for a restraining order and/or injunction to enjoin the reconstruction of the
same building. However, on October 10, 1988, respondent Intestate Estate sent a letter to the City
Engineer claiming that Jesus Sy is not authorized to act for petitioners Sy Yong Hu & Sons with
respect to the reconstruction or renovation of the property of the partnership. This was followed by
a letter dated November 11, 1988, requesting the revocation of Building Permit No. 4936.
Respondent City Engineer inquired[30] later from Jesus Sy for an authority to sign for and on
behalf of Sy Yong Hu & Sons to justify the latters signature in the application for the building
permit, informing him that absent any proof of his authority, he would not be issued an occupancy
permit.[31] On December 27, 1988, respondent Intestate Estate reiterated its objection to the
authority of Jesus Sy to apply for a building permit and pointing out that in view of the creation of a
receivership committee, Jesus Sy no longer had any authority to act for the partnership.[32]
In reply, Jesus Sy informed the City Engineer that the Tongco Order had been elevated to the SEC
en banc, making him still the authorized manager of the partnership. He then requested that an
occupancy permit be issued as Sy Yong Hu & Sons had complied with the requirements of the City
Engineers Office and the National Building Code.[33]
Unable to convince the respondent City Engineer to revoke subject building permit, respondent
Intestate Estate brought a Petition for Mandamus with prayer for a Writ of Preliminary Injunction,
docketed as Civil Case No 5326 before the Regional Trial Court of Bacolod City and entitled
Intestate Estate of the Late Sy Yong Hu vs. Engineer Jose P. Falsis, Jr.[34] The Complaint
concluded with the following prayer:
WHEREFORE PREMISES CONSIDERED, it is respectfully prayed of the Honorable Court that:

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.[26]

1. A writ of Preliminary Injunction be issued to the respondent, after preliminary hearing is had.
compelling his office to padlock the premises occupied, without the requisite Certificate of
Occupancy; to stop all construction activities, and barricade the same premises so that the unwary
public will not be subject to undue hazards due to lack of requisite safety precaution;

Private respondent seasonably interposed a motion for reconsideration of such decision of the
Court of Appeals.

2. The Respondent be ordered to enforce without exemption every requisite provision of the
Building Code as so mandated by it.[35]

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.

Petitioners Sy Yong Hu & Sons, the owners of the building sought to be padlocked were not
impleaded as party to the petition dated February 22, 1989. Neither were the lessees-occupants
thereon so impleaded. Thus, they were not notified of the hearing scheduled for April 5, 1989, on
which date the Petition was heard. Subsequently, however, the Regional Trial Court issued an

order dated April 19, 1989 for the issuance of a Writ of Preliminary Mandatory Injunction ordering
the City Engineer to padlock the building.[36]
On May 9, 1989, upon learning of the issuance of the Writ of Preliminary Injunction, dated May 4,
1989, petitioners immediately filed the: (1) Motion for Intervention; (2) Answer in Intervention; and
(3) Motion to set aside order of mandatory injunction. In its order dated June 22, 1989, the Motion
for Intervention was granted by the lower court through Acting Presiding Judge Porfirio A. Parian.
On August 3, 1989, respondent Intestate Estate presented a Motion to cite Engineer Jose Falsis,
Jr. in contempt of court for failure to implement the injunctive relief.
On August 15, 1989, petitioners submitted an Amended Answer in Intervention. Reacting thereto,
respondent Intestate Estate filed a Motion to Strike or Expunge from the Record the Amended
Answer in Intervention.[37]

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.[40]
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.[41]
On May 31, 1991, the Court of Appeals rendered its questioned decision denying the petition.[42]

On January 25, 1990, petitioner Sy Yong Hu & Sons again wrote the respondent City Engineer to
reiterate its request for the immediate issuance of a certificate of occupancy, alleging that the
Court of Appeals in its Decision of January 15, 1990 in CA-G. R. No. 17070 had reversed the SEC
decision which approved the appointment of a receivership committee. However, the City Engineer
refused to issue the Occupancy Permit without the conformity of the respondent Intestate Estate
and one John Keng Seng who claims to be an Illegitimate son of the Late Sy Yong Hu.[38]
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.[39]
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.

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,[43] 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.
II
RESPONDENT COURT OF APPEALS ERRED IN REINSTATING THE TONGCO ORDER,
WHICH HAD SUSPENDED THE DISSOLUTION OF THE PARTNERSHIP AND THE
DISTRIBUTION OF ITS ASSETS, AND IN PLACING THE PARTNERSHIP PROPERTIES UNDER
RECEIVERSHIP PENDING THE RESOLUTION OF CIVIL CASE NO. 903 (13388), ON A
GROUND NOT MADE THE BASIS OF THE SEC RESOLUTION UNDER REVIEW, I. E., THE
DISPOSITION BY A PARTNER OF SMALL PROPERTIES ALREADY ADJUDICATED TO HIM BY
A FINAL SEC ORDER DATED DECEMBER 2, 1986 AND MADE LONG BEFORE THE
AGREEMENT OF JUNE 28, 1988 OF THE PETITIONERS NOT TO DISPOSE OF THE
PARTNERSHIP ASSETS.
In G. R. No. 100313, Petitioners assign as errors, that:[44]
I
THE HONORABLE COURT OF APPEALS (ELEVENTH DIVISION) ERRED IN HOLDING THAT
RESPONDENT JUDGE DID NOT ACT WITHOUT JURISDICTION AND WITH GRAVE ABUSE OF
JURISDICTION IN ISSUING THE WRIT OF PRELIMINARY MANDATORY INJUNCTION.
II
THE HONORABLE COURT OF APPEALS (ELEVENTH DIVISION) ERRED IN HOLDING THAT
THE RESPONDENT JUDGE DID NOT ACT WITHOUT JURISDICTION AND WITH GRAVE
ABUSE OF DISCRETION IN DISALLOWING THE INTERVENTION OF PETITIONERS IN CIVIL
CASE NO. 5326.
III

THE LOWER COURT ACTED WITH GRAVE ABUSE OF DISCRETION IN ISSUING AND
ORDERING THE IMPLEMENTATION OF THE WRIT OF PRELIMINARY MANDATORY
INJUNCTION DESPITE THE ABSENCE OR LACK OF AN INJUNCTION BOND.[45]

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,[50] and
therefore, keeping the said properties in their possession will not bring about any feared damage
or dissipation of such properties, petitioners stressed.

On the two (2) issues raised in G. R. No. 94285, the Court rules for respondents.
Sec. (6) of Presidential Decree No. 902-A, as amended, reads:
Petitioners fault the Court of Appeals for affirming the 1989 Decision of the SEC which approved
the appointment of a receivership committee as ordered by Hearing Officer Felipe Tongco. They
theorize that the 1988 Tongco Decision varied the 1982 Abello Decision affirming the dissolution of
the partnership, contrary to the final and executory tenor of the said judgment. To buttress their
theory, petitioners offer the 1988 Sulit Decision which, among others, expressly confirmed the
finality of the Abello Decision.
On the same premise, petitioners aver that when Hearing Officer Tongco took over from Hearing
Officer Sison, he was left with no course of action as far as the proceedings in the SEC Case were
concerned other than to continue with the partition and distribution of the partnership assets. Thus,
the Order placing the partnership under a receivership committee was erroneous and tainted with
excess of jurisdiction.
The contentions are untenable. Petitioners fail to recognize the basic distinctions underlying the
principles of dissolution, winding up and partition or distribution. The dissolution of a partnership is
the change in the relation of the parties caused by any partner ceasing to be associated in the
carrying on, as might be distinguished from the winding up, of its business. Upon its dissolution,
the partnership continues and its legal personality is retained until the complete winding up of its
business culminating in its termination.[46]
The dissolution of the partnership did not mean that the juridical entity was immediately terminated
and that the distribution of the assets to its partners should perfunctorily follow. On the contrary,
the dissolution simply effected a change in the relationship among the partners. The partnership,
although dissolved, continues to exist until its termination, at which time the winding up of its
affairs should have been completed and the net partnership assets are partitioned and distributed
to the partners.[47]
The error, therefore, ascribed to the Court of Appeals is devoid of any sustainable basis. The
Abello Decision though, indeed, final and executory, did not pose any obstacle to the Hearing
Officer to issue orders not inconsistent therewith. From the time a dissolution is ordered until the
actual termination of the partnership, the SEC retained jurisdiction to adjudicate all incidents
relative thereto. Thus, the disputed order placing the partnership under a receivership committee
cannot be said to have varied the final order of dissolution. Neither did it suspend the dissolution of
the partnership. If at all, it only suspended the partition and distribution of the partnership assets
pending disposition of Civil Case No. 903 on the basis of the 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.[48]
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.[49]

SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the
following powers:
xxx xxx xxx
(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 partieslitigants 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:[51]
x x x 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)
As alleged by the respondents and as shown by the records there is now pending civil case
entitled Keng Sian and Intestate of Sy Yong Hu vs. Jayme Sy, Jesus Sy, Marciano Sy, Willy Sy,
Intestate of Jose Sy, Intestate of Vicente Sy, Sy Yong Hu & co and Sy Yong Hu & Sons
denominated as Civil Case No. 903 before Branch 50 of the Regional Trial Court of Bacolod City.
Moreover, a review of the records reveal that certain properties in question have already been sold
as of 1987, as evidenced by deeds of absolute sale executed by Jesus in favor of Reynaldo
Navarro (p. 331, Rollo), among others.
To ensure that no further disposition shall be made of the questioned assets and in view of the
pending civil case in the lower court, there is a compelling necessity to place all these properties

and assets under the management of a receivership committee. The receivership committee,
which will provide active participation, through a designated representative, on the part of all
interested parties, can best protect the properties involved and assure fairness and equity for all.
Receivership, which is admittedly a harsh remedy, should be granted with extreme caution.[52]
Sound bases therefor must appear on record, and there should be a clear showing of its necessity.
[53] The need for a receivership in the case under consideration can be gleaned from the
aforecited disquisition by the Court of Appeals finding that the properties of the partnership were in
danger of being damaged or lost on account of certain acts of the appointed manager in
liquidation.
The dispositions of certain properties by the said manager, on the basis of an order of partial
partition, dated December 2, 1986, by Hearing Officer Sison, which was not yet final and
executory, indicated that the feared irreparable injury to the properties of the partnership might
happen again. So also, the failure of the manager in liquidation to submit to the SEC an
accounting of all the partnership assets as required in its order of April 29, 1988, justified the SEC
in placing the subject assets under receivership.
Moreover, it has been held by this Court that an order placing the partnership under receivership
so as to wind up its affairs in an orderly manner and to protect the interest of the plaintiff (herein
private respondent) was not tainted with grave abuse of discretion.[54] The allegation that
respondents rights are adequately protected by the notices of lis pendens in Civil Case 903 is
inaccurate. As pointed out in their Comment to the Petition, the private respondents claim that the
partnership assets include the income and fruits thereof. Therefore, protection of such rights and
preservation of the properties involved are best left to a receivership committee in which the
opposing parties are represented.
What is more, as held in Go Tecson vs. Macaraig: [55]
The power to appoint a receiver pendente lite is discretionary with the judge of the court of first
instance; and once the discretion is exercised, the appellate court will not interfere, except in a
clear case of abuse thereof, or an extra limitation of jurisdiction.
Here, no clear abuse of discretion in the appointment of a receiver in the case under consideration
can be discerned.
With respect to G. R. No. 100313.[56]
Petitioners argue in this case that the failure of the private respondents to implead them in Civil
Case No. 5326 constituted a violation of due process. It is their submission that the ex parte grant
of said petition by the trial court worked to their prejudice as they were deprived of an opportunity
to be heard on the allegations of the petition concerning subject property and assets. The recall of
the order granting their Motion to Intervene was done without the observance of due process and
consequently without jurisdiction on the part of the lower court.
Commenting on the Petition, private respondents maintain that the only issue in the present case
is whether or not there was a violation of the Building Code. They contend that after due and
proper hearing before the lower court, it was fully established that the provisions of the said Code
had been violated, warranting issuance of the Writ of Preliminary Injunction dated April 19, 1989.
They further asseverate that the petitioners, who are the owner and lessees in the building under
controversy, have nothing to do with the case for mandamus since it is directed against the
respondent building official to perform a specific duty mandated by the provisions of the Building
Code.
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.[57] 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.[58] 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.,[59] 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[60] 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.
To be sure, the petitioners are indispensable parties in Civil Case No. 5326, which sought to close
subject building. Such being the case, no final determination of the claims thereover could be had.
[61] That the petition for mandamus with a prayer for the issuance of a writ of preliminary
mandatory injunction was only directed against the City Engineer is of no moment. No matter how
private respondent justifies its failure to implead the petitioners, the alleged violation of the
provisions of the Building Code relative to the reconstruction of the building in question, by
petitioners, did not warrant an ex parte and summary resolution of the petition. The violation of a
substantive law should not be confused with punishment of the violator for such violation. The
former merely gives rise to a cause of action while the latter is its effect, after compliance with the
requirements of due process.
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.[62]
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.[63]

In light of the allegations supporting the prayer for the issuance of a writ of preliminary injunction,
the Court is at a loss as to the basis of the respondent judge in issuing the same. What is clear is
that complainant (now private respondent) therein, which happens to be a juridical person (Estate
of Sy Yong Hu), made general allegations of hazard and serious damage to the public due to
violations of various provisions of the Building Code, but without any showing of any grave
damage or injury it was bound to suffer should the writ not issue.
Finally, the Court notes, with disapproval, what the respondent court did in ordering the ejectment
of the lawful owner and the occupants of the building, and disposed of the case before him even
before it was heard on the merits by the simple expedient of issuing the said writ of preliminary
injunction. In Ortigas & Company Limited Partnership vs. Court of Appeals et al. this Court held
that courts should avoid issuing a writ of preliminary injunction which in effect disposes of the main
case without trial.[64]
Resolution of the third issue has become moot and academic in view of the Courts finding of grave
abuse of discretion tainting the issuance of the Writ of Preliminary Injunction in question.
WHEREFORE, the Resolution of the Court of Appeals in CA-G. R. No. 17070 is AFFIRMED and
its Decision in CA-G. R. No. 24189 REVERSED. No pronouncement as to costs.
SO ORDERED.
Melo, (Chairman), Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.

SECOND DIVISION
[G.R. No. 30616 : December 10, 1990.]
192 SCRA 110
EUFRACIO D. ROJAS, Plaintiff-Appellant, vs. CONSTANCIO B. MAGLANA, Defendant-Appellee.
DECISION

On October 25, 1956, Pahamotang, Maglana and Rojas executed a document entitled
"CONDITIONAL SALE OF INTEREST IN THE PARTNERSHIP, EASTCOAST DEVELOPMENT
ENTERPRISE" (Exhibits "C" and "D") agreeing among themselves that Maglana and Rojas shall
purchase the interest, share and participation in the Partnership of Pahamotang assessed in the
amount of P31,501.12. It was also agreed in the said instrument that after payment of the sum of
P31,501.12 to Pahamotang including the amount of loan secured by Pahamotang in favor of the
partnership, the two (Maglana and Rojas) shall become the owners of all equipment contributed by
Pahamotang and the EASTCOAST DEVELOPMENT ENTERPRISES, the name also given to the
second partnership, be dissolved. Pahamotang was paid in fun on August 31, 1957. No other
rights and obligations accrued in the name of the second partnership (R.A. 921).

PARAS, J.:

After the withdrawal of Pahamotang, the partnership was continued by Maglana and Rojas without
the benefit of any written agreement or reconstitution of their written Articles of Partnership
(Decision, R.A. 948).

This is a direct appeal to this Court from a decision ** of the then Court of First Instance of Davao,
Seventh Judicial District, Branch III, in Civil Case No. 3518, dismissing appellant's complaint.

On January 28, 1957, Rojas entered into a management contract with another logging enterprise,
the CMS Estate, Inc. He left and abandoned the partnership (Decision, R.A. 947).

As found by the trial court, the antecedent facts of the case are as follows:

On February 4, 1957, Rojas withdrew his equipment from the partnership for use in the newly
acquired area (Decision, R.A. 948).

On January 14, 1955, Maglana and Rojas executed their Articles of Co-Partnership (Exhibit "A")
called Eastcoast Development Enterprises (EDE) with only the two of them as partners. The
partnership EDE with an indefinite term of existence was duly registered on January 21, 1955 with
the Securities and Exchange Commission.
One of the purposes of the duly-registered partnership was to "apply or secure timber and/or
minor forests products licenses and concessions over public and/or private forest lands and to
operate, develop and promote such forests rights and concessions." (Rollo, p. 114).
A duly registered Articles of Co-Partnership was filed together with an application for a timber
concession covering the area located at Cateel and Baganga, Davao with the Bureau of Forestry
which was approved and Timber License No. 35-56 was duly issued and became the basis of
subsequent renewals made for and in behalf of the duly registered partnership EDE.
Under the said Articles of Co-Partnership, appellee Maglana shall manage the business affairs of
the partnership, including marketing and handling of cash and is authorized to sign all papers and
instruments relating to the partnership, while appellant Rojas shall be the logging superintendent
and shall manage the logging operations of the partnership. It is also provided in the said articles
of co-partnership that all profits and losses of the partnership shall be divided share and share
alike between the partners.
During the period from January 14, 1955 to April 30, 1956, there was no operation of said
partnership (Record on Appeal [R.A.] p. 946).
Because of the difficulties encountered, Rojas and Maglana decided to avail of the services of
Pahamotang as industrial partner.
On March 4, 1956, Maglana, Rojas and Agustin Pahamotang executed their Articles of CoPartnership (Exhibit "B" and Exhibit "C") under the firm name EASTCOAST DEVELOPMENT
ENTERPRISES (EDE). Aside from the slight difference in the purpose of the second partnership
which is to hold and secure renewal of timber license instead of to secure the license as in the first
partnership and the term of the second partnership is fixed to thirty (30) years, everything else is
the same.
The partnership formed by Maglana, Pahamotang and Rojas started operation on May 1, 1956,
and was able to ship logs and realize profits. An income was derived from the proceeds of the logs
in the sum of P643,633.07 (Decision, R.A. 919).

The equipment withdrawn were his supposed contributions to the first partnership and was
transferred to CMS Estate, Inc. by way of chattel mortgage (Decision, R.A. p. 948).
On March 17, 1957, Maglana wrote Rojas reminding the latter of his obligation to contribute, either
in cash or in equipment, to the capital investments of the partnership as well as his obligation to
perform his duties as logging superintendent.
Two weeks after March 17, 1957, Rojas told Maglana that he will not be able to comply with the
promised contributions and he will not work as logging superintendent. Maglana then told Rojas
that the latter's share will just be 20% of the net profits. Such was the sharing from 1957 to 1959
without complaint or dispute (Decision, R.A. 949).: nad
Meanwhile, Rojas took funds from the partnership more than his contribution. Thus, in a letter
dated February 21, 1961 (Exhibit "10") Maglana notified Rojas that he dissolved the partnership
(R.A. 949).
On April 7, 1961, Rojas filed an action before the Court of First Instance of Davao against Maglana
for the recovery of properties, accounting, receivership and damages, docketed as Civil Case No.
3518 (Record on Appeal, pp. 1-26).
Rojas' petition for appointment of a receiver was denied (R.A. 894).
Upon motion of Rojas on May 23, 1961, Judge Romero appointed commissioners to examine the
long and voluminous accounts of the Eastcoast Development Enterprises (Ibid., pp. 894-895).
The motion to dismiss the complaint filed by Maglana on June 21, 1961 (Ibid., pp. 102-114) was
denied by Judge Romero for want of merit (Ibid., p. 125). Judge Romero also required the
inclusion of the entire year 1961 in the report to be submitted by the commissioners (Ibid., pp. 138143). Accordingly, the commissioners started examining the records and supporting papers of the
partnership as well as the information furnished them by the parties, which were compiled in three
(3) volumes.
On May 11, 1964, Maglana filed his motion for leave of court to amend his answer with
counterclaim, attaching thereto the amended answer (Ibid., pp. 26-336), which was granted on
May 22, 1964 (Ibid., p. 336).

On May 27, 1964, Judge M.G. Reyes approved the submitted Commissioners' Report (Ibid., p.
337).
On June 29, 1965, Rojas filed his motion for reconsideration of the order dated May 27, 1964
approving the report of the commissioners which was opposed by the appellee.
On September 19, 1964, appellant's motion for reconsideration was denied (Ibid., pp. 446-451).
A mandatory pre-trial was conducted on September 8 and 9, 1964 and the following issues were
agreed upon to be submitted to the trial court:
(a) The nature of partnership and the legal relations of Maglana and Rojas after the dissolution of
the second partnership;
(b) Their sharing basis: whether in proportion to their contribution or share and share alike;

COURT DECLARES THE SAME AS NOT BELONGING TO THE PARTNERSHIP;

"7. That the alleged sale of forest concession Exhibit 9-B, executed by Pablo Angeles David is
VALID AND BINDING UPON THE PARTIES AND SHOULD BE CONSIDERED AS PART OF
MAGLANA'S CONTRIBUTION TO THE PARTNERSHIP;
"8. Further, the Court orders and directs plaintiff Rojas to pay or turn over to the partnership the
amount of P69,000.00 the profits he received from the CMS Estate, Inc. operated by him;
"9. The claim that plaintiff Rojas should be ordered to pay the further sum of P85,000.00 which
according to him he is still entitled to receive from the CMS Estate, Inc. is hereby denied
considering that it has not yet been actually received, and further the receipt is merely based upon
an expectancy and/or still speculative;
"10. The Court also directs and orders plaintiff Rojas to pay the sum of P62,988.19 his personal
account to the partnership;

(c) The ownership of properties bought by Maglana in his wife's name;

(d) The damages suffered and who should be liable for them; and
(e) The legal effect of the letter dated February 23, 1961 of Maglana dissolving the partnership
(Decision, R.A. pp. 895-896).- nad
After trial, the lower court rendered its decision on March 11, 1968, the dispositive portion of which
reads as follows:

"11. The Court also credits the defendant the amount of P85,000.00 the amount he should have
received as logging superintendent, and which was not paid to him, and this should be considered
as part of Maglana's contribution likewise to the partnership; and
"12. The complaint is hereby dismissed with costs against the plaintiff.: rd
"SO ORDERED." Decision, Record on Appeal, pp. 985-989).
Rojas interposed the instant appeal.

"WHEREFORE, the above facts and issues duly considered, judgment is hereby rendered by the
Court declaring that:
"1. The nature of the partnership and the legal relations of Maglana and Rojas after Pahamotang
retired from the second partnership, that is, after August 31, 1957, when Pahamotang was finally
paid his share the partnership of the defendant and the plaintiff is one of a de facto and at will;
"2. Whether the sharing of partnership profits should be on the basis of computation, that is the
ratio and proportion of their respective contributions, or on the basis of share and share alike
this covered by actual contributions of the plaintiff and the defendant and by their verbal
agreement; that the sharing of profits and losses is on the basis of actual contributions; that from
1957 to 1959, the sharing is on the basis of 80% for the defendant and 20% for the plaintiff of the
profits, but from 1960 to the date of dissolution, February 23, 1961, the plaintiff's share will be on
the basis of his actual contribution and, considering his indebtedness to the partnership, the
plaintiff is not entitled to any share in the profits of the said partnership;
"3. As to whether the properties which were bought by the defendant and placed in his or in his
wife's name were acquired with partnership funds or with funds of the defendant and the Court
declares that there is no evidence that these properties were acquired by the partnership funds,
and therefore the same should not belong to the partnership;
"4. As to whether damages were suffered and, if so, how much, and who caused them and who
should be liable for them the Court declares that neither parties is entitled to damages, for as
already stated above it is not a wise policy to place a price on the right of a person to litigate
and/or to come to Court for the assertion of the rights they believe they are entitled to;
"5. As to what is the legal effect of the letter of defendant to the plaintiff dated February 23, 1961;
did it dissolve the partnership or not the Court declares that the letter of the defendant to the
plaintiff dated February 23, 1961, in effect dissolved the partnership;
"6. Further, the Court relative to the canteen, which sells foodstuffs, supplies, and other
merchandise to the laborers and employees of the Eastcoast Development Enterprises, the

The main issue in this case is the nature of the partnership and legal relationship of the MaglanaRojas after Pahamotang retired from the second partnership.
The lower court is of the view that the second partnership superseded the first, so that when the
second partnership was dissolved there was no written contract of co-partnership; there was no
reconstitution as provided for in the Maglana, Rojas and Pahamotang partnership contract. Hence,
the partnership which was carried on by Rojas and Maglana after the dissolution of the second
partnership was a de facto partnership and at will. It was considered as a partnership at will
because there was no term, express or implied; no period was fixed, expressly or impliedly
(Decision, R.A. pp. 962-963).
On the other hand, Rojas insists that the registered partnership under the firm name of Eastcoast
Development Enterprises (EDE) evidenced by the Articles of Co-Partnership dated January 14,
1955 (Exhibit "A") has not been novated, superseded and/or dissolved by the unregistered articles
of co-partnership among appellant Rojas, appellee Maglana and Agustin Pahamotang, dated
March 4, 1956 (Exhibit "C") and accordingly, the terms and stipulations of said registered Articles
of Co-Partnership (Exhibit "A") should govern the relations between him and Maglana. Upon
withdrawal of Agustin Pahamotang from the unregistered partnership (Exhibit "C"), the legally
constituted partnership EDE (Exhibit "A") continues to govern the relations between them and it
was legal error to consider a de facto partnership between said two partners or a partnership at
will. Hence, the letter of appellee Maglana dated February 23, 1961, did not legally dissolve the
registered partnership between them, being in contravention of the partnership agreement agreed
upon and stipulated in their Articles of Co-Partnership (Exhibit "A"). Rather, appellant is entitled to
the rights enumerated in Article 1837 of the Civil Code and to the sharing profits between them of
"share and share alike" as stipulated in the registered Articles of Co-Partnership (Exhibit "A").
After a careful study of the records as against the conflicting claims of Rojas and Maglana, it
appears evident that it was not the intention of the partners to dissolve the first partnership, upon
the constitution of the second one, which they unmistakably called an "Additional Agreement"
(Exhibit "9-B") (Brief for Defendant-Appellee, pp. 24-25). Except for the fact that they took in one
industrial partner; gave him an equal share in the profits and fixed the term of the second

partnership to thirty (30) years, everything else was the same. Thus, they adopted the same
name, EASTCOAST DEVELOPMENT ENTERPRISES, they pursued the same purposes and the
capital contributions of Rojas and Maglana as stipulated in both partnerships call for the same
amounts. Just as important is the fact that all subsequent renewals of Timber License No. 35-36
were secured in favor of the First Partnership, the original licensee. To all intents and purposes
therefore, the First Articles of Partnership were only amended, in the form of Supplementary
Articles of Co-Partnership (Exhibit "C") which was never registered (Brief for Plaintiff-Appellant, p.
5). Otherwise stated, even during the existence of the second partnership, all business
transactions were carried out under the duly registered articles. As found by the trial court, it is an
admitted fact that even up to now, there are still subsisting obligations and contracts of the latter
(Decision, R.A. pp. 950-957). No rights and obligations accrued in the name of the second
partnership except in favor of Pahamotang which was fully paid by the duly registered partnership
(Decision, R.A., pp. 919-921).

Appeals, 133 SCRA 94 [1984]). Being a contract of partnership, each partner must share in the
profits and losses of the venture. That is the essence of a partnership (Ibid., p. 95).

On the other hand, there is no dispute that the second partnership was dissolved by common
consent. Said dissolution did not affect the first partnership which continued to exist. Significantly,
Maglana and Rojas agreed to purchase the interest, share and participation in the second
partnership of Pahamotang and that thereafter, the two (Maglana and Rojas) became the owners
of equipment contributed by Pahamotang. Even more convincing, is the fact that Maglana on
March 17, 1957, wrote Rojas, reminding the latter of his obligation to contribute either in cash or in
equipment, to the capital investment of the partnership as well as his obligation to perform his
duties as logging superintendent. This reminder cannot refer to any other but to the provisions of
the duly registered Articles of Co-Partnership. As earlier stated, Rojas replied that he will not be
able to comply with the promised contributions and he will not work as logging superintendent. By
such statements, it is obvious that Roxas understood what Maglana was referring to and left no
room for doubt that both considered themselves governed by the articles of the duly registered
partnership.

As to whether Maglana is liable for damages because of such withdrawal, it will be recalled that
after the withdrawal of Pahamotang, Rojas entered into a management contract with another
logging enterprise, the CMS Estate, Inc., a company engaged in the same business as the
partnership. He withdrew his equipment, refused to contribute either in cash or in equipment to the
capital investment and to perform his duties as logging superintendent, as stipulated in their
partnership agreement. The records also show that Rojas not only abandoned the partnership but
also took funds in an amount more than his contribution (Decision, R.A., p. 949).

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.

Thus, as reported in the Commissioners' Report, Rojas is not entitled to any profits. In their
voluminous reports which was approved by the trial court, they showed that 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.
Consequently, except as to the legal relationship of the partners after the withdrawal of
Pahamotang which is unquestionably a continuation of the duly registered partnership and the
sharing of profits and losses which should be on the basis of share and share alike as provided for
in the duly registered Articles of Co-Partnership, no plausible reason could be found to disturb the
findings and conclusions of the trial court.: nad

In the given situation Maglana cannot be said to be in bad faith nor can he be liable for damages.
PREMISES CONSIDERED, the assailed decision of the Court of First Instance of Davao, Branch
III, is hereby MODIFIED in the sense that the duly registered partnership of Eastcoast
Development Enterprises continued to exist until liquidated and that the sharing basis of the
partners should be on share and share alike as provided for in its Articles of Partnership, in
accordance with the computation of the commissioners. We also hereby AFFIRM the decision of
the trial court in all other respects.: nad
SO ORDERED.

As to the question of whether or not Maglana can unilaterally dissolve the partnership in the case
at bar, the answer is in the affirmative.
Hence, as there are only two parties when Maglana notified Rojas that he dissolved the
partnership, it is in effect a notice of withdrawal.
Under 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 but in no case can he be compelled to remain in the firm.
With his withdrawal, the number of members is decreased, hence, the dissolution. And in whatever
way he may view the situation, the conclusion is inevitable that Rojas and Maglana shall be guided
in the liquidation of the partnership by the provisions of its duly registered Articles of CoPartnership; 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 and which in fact was ordered by the trial court and
accomplished by the commissioners appointed for the purpose.
On the basis of the Commissioners' Report, the corresponding contribution of the partners from
1956-1961 are as follows: Eufracio Rojas who should have contributed P158,158.00, contributed
only P18,750.00 while Maglana who should have contributed P160,984.00, contributed
P267,541.44 (Decision, R.A. p. 976). It is a settled rule that when a partner who has undertaken to
contribute a sum of money fails to do so, he becomes a debtor of the partnership for whatever he
may have promised to contribute (Article 1786, Civil Code) and for interests and damages from the
time he should have complied with his obligation (Article 1788, Civil Code) (Moran, Jr. v. Court of

Melencio-Herrera, Sarmiento and Regalado, JJ., concur.

Padilla, J., took no part.

G.R. No. L-5242

August 6, 1910

ALDECOA & CO., plaintiff-appellant,

vs.
WARNER, BARNES & CO., LTD., defendant-appellee.
Rosado, Sanz and Opisso, for appellant.
Haussermann, Ortigas, Cohn and Fisher, for appellee.
TORRES, J.:
By a complaint filed on September 26, 1907, the legal representative of Aldecoa and Co., in
liquidation, filed suit in the Court of First Instance of Manila against Warner, Barnes and Co., Ltd.,
alleging in the first three paragraphs of their complaint, as a cause of action, that the plaintiff is a
regular collective mercantile association organized in accordance with the laws of these islands,
duly registered in the mercantile registry, and at present in liquidation; that the defendant is a joint
stock mercantile firm organized in accordance with the laws of England, registered in the
mercantile registry of Manila, and has done and is still doing business in these Islands under the
name of Warner, Barnes and Co., Ltd., which required the business that was conducted in these
Islands by Warner, Barnes and Co., the assets, liabilities, and all the obligations of which were
assumed by the defendant.
In other paragraphs of the complaint, from the fourth to the twelfth, the plaintiff set forth that, prior
to December 1, 1898, Warner, Barnes and Co. were conducting a business in Albay, the principal
object of which was the purchase of hemp in the pueblos of Legaspi and Tobacco for the purpose
of bringing it to Manila, here to sell if for exportation, and that on the said date of December 1,
1898, the plaintiff company became interested in the said business of Warner, Barnes and Co., in
Albay and formed therewith a joint-account partnership whereby Aldecoa and Co., were to share
equally in the gains and losses of the business in Albay; that the defendant is the successor to all
the rights and obligations of Warner, Barnes and Co., among which is that of being manager of the
said joint-account partnership with Aldecoa and Co.; that the defendant acted, and continues to act
as such manager, and is obliged to render accounts supported by proofs, and to liquidate the
business, which defendant not only has not done, in spite of the demand made upon it, but it has
expressly denied the right of plaintiff to examine the vouchers, contenting itself with forwarding
copies of the entries in its books, which entries contain errors and omissions that hereinafter will
be mentioned.
Said entries moreover, whereas its operations should have commenced and did commence on
December 1, 1898, on which date the joint-account partnership commenced; that, with respect to
the liquidation of the business, the operations having been closed on December 31, 1903, Warner,
Barnes and Co., Ltd., the defendant, has not realized upon the assets of the firm by selling the
property which constitutes its capital; that the persons who were the managers and general
partners of Warner, Barnes and Co., Ltd., and are the managers and directors of that firm in the
Philippine Islands and are the ones who, under the previous firm name of Warner, Barnes and
Co., admitted Aldecoa and Co. as a participant in one-half of the said business, on the 1st day of
December, 1898; that the said directors of the defendant company, unlawfully, maliciously, and
criminally conspired with the persons who were managing the commercial firm of Aldecoa and Co.
during the years 1899, 1900, 1901, 1902, and 1903, to defraud the latter of its interest in the said
joint-account partnership, buying the silence of the said managers with respect to the operations of
the joint-account partnership during the time comprised between the 1st of December, 1898, and
the 30th of June, 1899, and also with respect to the errors and omission in the accounts relating to
the second semester of 1899, and those relating to 1900, 1901, 1902, and 1903.
That the said fraudulent acts were not known to the partners of the plaintiff firm until the managers,
in collusion with the managers of the defendant firm to defraud and injure the plaintiff firm, had

ceased to hold their positions, to wit, until after the 31st of December, 1906, and that by reason of
this conspiracy to defraud the plaintiffs, the defendants have been benefited; that the errors and
omissions found in the entries of the books kept by the defendant firm as manager of the jointaccount partnership are those expressed in details here below:
(a) It appears that between the 10th of July and the 26th of December, 1899, 43,934 piculs of
hemp arrived in Manila for the joint-account partnership, which were purchased in Legaspi and
Tobacco at 13 pesos per picul, and, after charging against this hemp excessive expenses for
collection, storage, freight, fire, marine, and war insurance, personnel, etc., the defendants,
Warner, Barnes and Co., as managers of the joint-account partnership and commission agents of
their joint-account partners, claim that they purchased the said hemp for themselves, but do not
give the price received from the sale thereof and merely credit it at 13 pesos a picul, when the
average market price at that time was 16.50 pesos a picul; said defendants thereby injuring
plaintiffs to the amount of P76,884.50.
(b) Striking a balance from the amount of hemp debited and that credited, there results a
difference of 4,332.96 piculs not credited which, at 24 pesos a picul, the market price at the time,
represents an injury to plaintiffs to the extent of P51,995.52, the said deficit, with respect to the
hemp, pertaining to the period beginning with December 31, 1899, in the manner shown by the
following table:
Invoices & Cr. Dr.
Piculs Piculs
1899 Dec. 31 ....................................... 86,534.18 43,934
1900 Apr. 30 ...................................... 13,069.97 50,261.78
1900 Dec. 31 ...................................... 67,892.56 71,277
1901 Dec. 31 ...................................... 101,253.31 100,342
1902 Dec. 31 ...................................... 98,074.52 94,279.20
1903 Dec. 31 ...................................... 66,482.49 68,880.09 433,307.03
428,974.07 4,332.96
Lacking .............................................. 433,307.03
433,307.03
(c) In 1900, on April 30, Messrs. Warner, Barnes and Co. Ltd., give credit for 5,485 piculs of
hemp, at 16 pesos a picul, when the market price at that time, according to themselves, was
P23.78; thereby injuring plaintiffs in the sum of P21,350.36.
(d) In 1901, on the date of January 31, Messrs. Warner, Barnes and Co., Ltd give credit for
4,600 piculs of hemp, at 8.93 pesos a picul, when, according to themselves, the market price at
that time was 11.50 pesos a picul; thereby injuring plaintiffs in the sum of P5,911.
(e) One of the sources of profit of the joint-account partnership between Aldecoa and Co. and
Warner, Barnes and Co., Ltd., was from the pressing of hemp, which profit is to be credited to the
partnership joint-accounts, when the hemp is realized in Manila, and from this source there are
due to the plaintiffs P149,084.12, in which sum they have been injured by the defendants. The
said credit for pressing is omitted from the books of Warner, Barnes and Co., Ltd., and should be
entered as follows:
1899 ............................................. 21,968 bales, at P1.25 ................................. P27,460 1900 to
April 30 ......................... 25,130 bales, at P1.25 ................................. 31,412.50 1900 May 10 to
Dec.
31
............
35,639
bales,
at
P1.25
.................................
44,548.75
1901.............................................. 50,151 bales, at P1.25 ................................. 62,688.75 1902 to

July 31 ........................... 26,825 bales, at P1.25 ................................. 33,531.25

Aug. 1 to Dec. 31 ............. 20,314 bales, at P1.75 ................................. 35,549.50
1903 ............................................. 34,440 bales, at P1.75 ................................. 60,270
214,467 bales ................................................. 295,460.75 2,166 bales, lacking,
at P1.25 2,707.50

(h) On the date of December 26, 1899, Messrs. Warner, Barnes and Co., Ltd., deduct from the
profits which they show as belonging to Aldecoa and Co., the sum of P7,400, under the
appearance of the insurance premium, and they delivered that sum to the plaintiffs' managers with
whom they conspired, for the purposes of the collusion alleged in Paragraph VII of the complaint,
in the manner failing to observe the truth in their statement of the facts. Aldecoa and Co.,
therefore, claim for themselves this amount, P7,400.

216,633 bales .................................................. 298,168.25 20 loose.

216,653 bales.
(f)
Another error found in the books of Warner, Barnes, and Co., Ltd., is in connection with the
outstanding accounts, which are debited in the sum of P52,510.36, while only P2,769.24 are
credited in the manner set out in the following statement:
DR.
1899 July 31. W.B. and Co., Tobacco, transferred to net
account their account sale 92.25 piculs hides
by Kongsee ............................................................................. P1,149.46
1899 Dec. 31. For transfer account to cover business this
semester without statement .................................................. 16,100.57

(i)
On December 31, 1903, on a capital of P50,000 brought in by Aldecoa and Co., and to
whom it should bear 5 per cent interest from the 8th of June, 1900, the interest is unduly credited
to the joint-account, thereby injuring the plaintiffs in the sum of P8,750.
(j)
On December 31, 1902, Aldecoa and Co. are charged with six months' interest, amounting
to P736.46, on a balance debited against them for alleged losses, and on June 30, 1903, they are
charged with P1,818.58 for a like reason. These two items should be stricken out, because the
accounts when correctly made to show no losses, but profits. By such debits the plaintiffs have
been injured in the sum of P1,277.52.
(k) In the entries corresponding to the years 1902 and 1903, Warner, Barnes and Co., Ltd., give
the price of "corriente buena" (currect good), to the grade which, according to the mark, was
classified as "abaca superior" (superior hemp); the price of "corriente ordinario" (current ordinary),
to the hemp marked under the classification of "corriente buena" (current good); the price of
"segunda superior" (second superior), to what is "corriente" or "current," and so on successively;
whence results a difference of price to the value of P233,102.18, in 1902, and P74,274.90, in
1903, one-half of which differences should be credited to Aldecoa and Co., that is P153,688.54.
(l)
The value of the properties brought in by Warner, Barnes and Co., Ltd., to the joint-account,
instead of cash capital, is omitted from the accounts. These properties are the following:

1900 Feb. 28. As transferred account items noted page

114 day-book .......................................................................... 18,635.08
1900 Feb. 28. To cover war insurance, January ................................................. 4,000
1900 Feb. 28. To cover outstanding accounts ................................................... 2,625.25
52,510.36
CR.
1900 Feb. 28. As transferred account items noted page

Those purchased from Mariano Roisa, consisting of one galvanized-iron-roofed warehouse, with
hemp press; one house of strong materials and the lot on which it stands, in Tobacco, P12,000.
That purchased from Juana Roisa, which is one small warehouse of strong materials, in Tobacco,
worth about P2,500.
Those purchased from D. Manuel Zalvidea situated in Tobacco, which are: One warehouse of
strong materials, with press; another warehouse of strong materials; and two houses of strong
materials, together with the lots on which they are built, P22,000.
Those purchased from D. Marcos Zubeldia, in Legaspi, which are: Four warehouses with three
hemp presses, and one house of strong materials, with their corresponding lots, P50,000.

113 day-book .......................................................................... 2,769.24

Total cost, P86,500.
There remain, therefore ......................................................... 49,741.12 of which onehalf, that is ...................................................... 24,870.56 belongs to the plaintiffs.
(g) In 1900, there is unduly included an item of net account which should be stricken out, as it
does not pertain to this business. This item is the following:
1900
June 30. To Miguel Estela. For transfer made to his account
of 5 per cent commission on his hemp, which should
not be paid according to agreement ..................................... P870.75
Half of this sum, P435.37, must be credited to the plaintiffs.

The complaint further sets forth that if the entries made by the defendant in its books show in
themselves the foregoing errors and omissions, the plaintiff has good grounds for believing that, if
the vouchers were examined, still greater errors would be found, as to which the plaintiff can not
formulate its claims with exactness until the defendant renders it an account, accompanied by
vouchers; that the defendant, as manager of the joint-account partnership with Alcodea & Co.,
neglected to comply with what is especially prescribed in article 243 of the Code of Commerce, as
a duty to inherent to its position as manager of the joint-account partnership, which is that of
rendering an account with vouchers, and that of liquidating the said business, for it refuses to
furnish the plaintiff the documents required for their examination and verification, and also refuses
to realize the firm assets by selling the warehouses, houses, and other property which constitute
the capital; that, as the defendant refuses to do the things above related, the plaintiff has no other
easy, expeditious and suitable remedy than to petition the court for a writ of mandamus, wherefore
it prays the court to protect it in its rights and to issue the said mandamus against the defendant,
ordering it, within a date set for this purpose, to render to the court an account, accompanied by

invoices, receipts, and vouchers of the Albay business, beginning the said account as of
December 1, 1898, the date on which the partnership was formed, and correcting in it errors and
omissions related in paragraph 9 of this complaint; that the defendant credit and pay to the plaintiff
the sums alleged in that paragraph to be due to the plaintiff, with interest at the legal rate upon the
sums of omitted for the difference between the amounts incorrectly debited and credited, from the
respective dates on which they should appear, if correctly entered; that after the said accounts
have been rendered and discussed, judgment be entered for any balance which may appear in
favor of the plaintiff, including the sums claimed, and legal interest thereon. The plaintiff also prays
that the writ of mandamus fix a term within which the defendant is to liquidate the business, selling
the properties aforementioned and distributing the proceeds between both the litigants, and that
the defendant be adjudged liable for costs of suit, and plaintiff be granted such other and further
relief as may be found just and equitable.
On November 11, 1907, the defendant filed a written answer an counterclaim against the
defendant, and, notwithstanding the overruling of the demurrer filed by the latter to the
counterclaim, the court by writ of December 4, 1907, ordered that the defendant should, within a
period of five days, make its allegations more specific with respect to certain particulars mentioned
in the order of the court, and both parties being notified thereof, the defendant, on January 24,
1908 prayed the court to authorize it to file the attached amended answer instead of the original
one.
In the said amended answer the firm of Warner, Barnes & Co. Ltd., the defendant, states that it
denies each and every one of the allegations of the complaint, with the exception of those which
are expressly admitted in its answer, and admit the allegations of paragraphs 1, 2, and 3 of the
complaint. In answer to the allegations of paragraphs 4 to 12 of the complaint, it admits that on
June 30, 1899, a joint-account partnership was formed between the plaintiff and the defendant
transactions of which were the purchase of hemp in Legaspi and Tobacco, of which business onehalf of the results, whether losses or gains, appertained to the plaintiff. Defendant also admits that
the said business continued under the management of the defendant company, as manager of the
said joint-account partnership, until December 31, 1903; but it denies all the other allegations
contained in the said paragraphs. For its first special defense, the defendant alleges that during
the period that the said joint-account partnership existed, the manager thereof, the defendant,
rendered to the plaintiff just and true accounts of its transaction as manager of the said
partnership, which accounts have been approved by the plaintiff, with the exception of those
relating to the year 1903, and as to the latter, that the same were objected to by plaintiff firm solely
upon the grounds mentioned in clause (k) of paragraph 9 of the complaint, which objections are
wholly unfounded. As its second special defense, the defendant alleges that more than four years
have expired between the time the alleged right of action accrued to the plaintiff and the date of
the filing of the complaint. For all the reasons set forth in this amended answer, the defendant
prayed that it be absolved from the complaint, with the costs against the plaintiff.
On the subsequent to the 14th of August, 1908, the trial of this cause was held and oral evidence
was introduced by the plaintiff, but no witnesses were offered by the defendant, which finally
moved for a dismissal of the case, and the court, on December 26 of the same year, 1908,
rendered judgment, dismissing the complaint with respect to the petition for the rendering of an
account, verified by invoices, receipts and vouchers, of the said Albay business, pertaining to the
period comprised from the beginning of the business to the 31st of December, 1902, inclusive,
assessing the costs against the plaintiff, and opening the second period of the trial with respect to
the account for the whole year 1903, in accordance with the ruling of the court made at the
commencement of the hearing. The plaintiff on being notified of this judgment filed a written
exception thereto and announced his intention to forward through regular channels a bill of
exceptions, and by another writing moved for a new trial on the ground that the evidence did not
justify the judgment rendered, which it alleged it was openly and manifestly contrary to the weight
of the evidence and to law. This motion being denied, to which exception was taken by the plaintiff,
the latter duly filed a proper bill of exceptions which was certified to and forwarded to this court,
together with all the documentary and oral evidence produced at the trial.
This litigation concerns the rendering of accounts pertaining to the management of the business of

a joint-account partnership formed between the two litigants companies.

Both the plaintiff and the defendant are in accord that, through verbal agreement, the said
partnership was established, whereby they should share equally the profits and losses of the
business of gathering and storing hemp in Albay and selling it in Manila for exportation, and that
the commercial firm of Warner, Barnes and Co., Ltd., was the manager of the said joint-account
partnership.
The disagreement between the parties consists in the following points: First, as to the date when
the partnership was formed and began business in the province mentioned; second, whether the
managing firm did render accounts, duly verified by vouchers, of its management from the date of
the organization of the partnership; third, whether errors and omission, prejudicial to the plaintiff,
Aldecoa and Co., exist in the partnership books and in its accounts, and whether, in the
management of the said business, fraudulent acts were committed also to the plaintiff's injury; and,
fourth, whether the partnership property should be included in the liquidation of the said business
and in the accounts appertaining to the year 1903, when the existence of the partnership came to
an end.
With respect to the date on which the said partnership began, the plaintiff, Aldecoa and Co.,
submitted evidence unrebutted by that of the defendant, Warner, Barnes and Co., Ltd., and
although the latter averred that the joint-account partnership began on June 30, 1899, denying that
it was commenced, or was formed, on December 1, 1898, as the plaintiff says that it was, it is
certain that the defendant has not proved its averment; and if, on the opening of this case de novo
it shall not have done so within such period as the court may see fit to determine, it will be proper
to find in accordance with the value of the evidence adduced by the plaintiff and to advise the
defendant to render, within a fixed period, accounts, verified by vouchers, of the management of
the partnership business and pertaining to the seven months from December 1, 1898, to June 29,
1899; and, in view of the evidence adduced by the plaintiff in proof of the aforesaid first point, if the
defendant does not produce other evidence in rebuttal, they must, for some reason, be expressly
rejected in the judgment, if they are not to be taken into account in reaching the conclusions or in
considering the case upon the merits.
As regards the second point, we agree with the opinion expressed by the lower court and find that
the firm of Warner, Barnes and Co., Ltd., did render accounts from June 30, 1899, to December
31, 1902, inasmuch as the very evidence introduced by the plaintiff showed that the said accounts
had been rendered and were approved by it, according to the context of its own letters of the dates
of July 27, 1907, and February 19, 1903. Therefore, the plaintiff is in nowise entitled, and has no
right of action to compel the defendant to render the accounts pertaining to that period, they
having already been rendered and duly approved.
It is a rule of law generally observed that he who takes charge of the management of another's
property is bound immediately thereafter to render accounts covering his transactions; and that it
is always to be understood that all accounts rendered must be duly substantiated by vouchers.
It is a fact admitted by both litigating parties that Warner, Barnes and Co., Ltd., was the manager
of the business of the joint-account partnership formed between it and Aldecoa and Co., it is
unquestionable that it was and is the defendant's duty to render accounts of the management of
the business, as it partially has done. Although the defendant has not proved, as it should have
done, that it complied with its duty of rendering accounts of its management, since the letters
themselves exhibited by the plaintiff, and duly authenticated as being written by the latter, prove
that the defendant did render accounts from June 30, 1899, to December 31, 1902, no legal
reason whatever exists for not accepting the finding of the lower court which decided that it had
been proved that accounts were rendered pertaining to the period mentioned and that the said
accounts were approved by the plaintiff.
The procedure of the plaintiff is truly inexplicable in accepting and approving accounts that were
rendered to it, and which only begin with June 30, 1899, inasmuch as such approval would appear
to indicate that it agreed to the claim made by the defendant that the partnership commenced on

the said date; but even so, once that it is proved that the actual date on which the partnership was
formed was December 1, 1898, and that it is not shown that the defendant has rendered accounts
corresponding to the seven months subsequent to the said date of December 1, the acceptation
and approval of accounts rendered since the 30th of June 1899, does not excuse nor release the
manager of the partnership, the defendant, from complying with its unquestionable duty of
rendering accounts covering the aforesaid seven months. The presumption must be sustained
until proof to the contrary is presented.
Moreover, the approval of accounts corresponding to the years from June 30, 1899, to December
31, 1902, does not imply that the said approved accounts comprise those pertaining that the
seven months mentioned, December 1, 1899, to June 29, 1899, because the defendant, the
accountant, denied that the partnership commenced on the aforesaid date of December 1st,
asserting it began on June 30, 1899; wherefore, on defendant's rendering those accounts, it is to
be presumed that it did so from the date which it avers was that of the information of the
partnership and the beginning of the business, and it is therefore evident that it has not rendered
accounts pertaining to the seven months mentioned.
With respect to the third point relative to whether errors and omissions prejudicial to the plaintiff,
Aldecoa & Co., exist in the partnership books and in its accounts, and whether, in the
management of the said business, fraudulent acts were committed to plaintiff's injury, it must be
borne in mind that once accounts have been approved which were rendered by the managing firm
of Warner, Barnes & Co., Ltd., the plaintiff, Aldecoa & Co., is not entitled afterwards to claim a
revision of the same, unless it shows that there was fraud, deceit, error, or mistake in the approval
of the said accounts.
Under these hypothesis, Alcodea & Co. are strictly obliged to prove the errors, omissions, and
fraudulent acts attributed to the defendant, in connection with the accounts already rendered, and
approved by them, in order that the same may be revised in accordance with law and the
jurisprudence of the courts. (Pastor vs. Nicasio, 6 Phil. Rep., 152.)
The approval of an account does not prevent its subsequent revision, or at least its correction, if it
is proved in a satisfactory manner that there was deceit and fraud or error and omission in it. (Arts.
1265, 1266, Civil Code.)
Law 30, title 11, 5th Partida, provides, among other things, the following:
That is precisely what we say should be observed, in all other accounts that men make among
themselves, in connection with the things which belong to them. Notwithstanding that they may
acknowledge the settlement of the accounts between them and promise never to bring them up
again, if it had be known in truth that he who gave the account or had the things in his keeping,
concealed anything deceitfully, or committed other fraud against those who have a share in such
thing, then neither the suit, nor such previous status and promise shall avail; on the contrary, we
say that they may sue him to compel him to remedy the deceit he committed against them, and to
pay all the damages and losses that have accrued to them by reason thereof; provided, however,
he especially shall not have repaired the deceit that he committed.
So that it does not matter that the accounts pertaining to the years comprised between the 30th of
June, 1899, and the 31st of December, 1902, may have been approved by Aldecoa & Co.
Whenever this firm shall succeed in proving that there was error, omission, fraud, or deceit in
these accounts, they may be duly revised, according to the law.
With regard to the last point in controversy, the defendant agrees that the plaintiff has not yet
approved the accounts that the former rendered, pertaining to 1903, the last years of the existence
of the joint-account partnership; and, for this reason, it was provided in the judgment appealed
from that the trial should continue with respect to the said accounts corresponding to the year
1903, in order that the plaintiff might take such objections and statements in regard to the same as
he deemed proper, and adduce the evidence conducive to prove his claim, in accordance with law.

It is one of the duties of the manager of a joint-account partnership, to liquidate the assets that
form the common property, and to state the result obtained therefrom in the final rendering of the
accounts which he is to present at the conclusion of the partnership.
Article 243 of the Code of Commerce says;
The liquidation shall be effected by the manager, and after the transactions have been concluded
he shall render a proper account of its results.
It is a recognized fact, and one admitted by both parties that the partnership herein concerned
concluded its transactions on December 31, 1903; wherefore the firm of Warner, Barnes & Co.
Ltd., the manager of the partnership, in declaring the latter's transactions concluded and in
rendering duly verified accounts of its results, owes the duty to include therein the property and
effects belonging to the partnership in common. This rule was established by the supreme court of
Spain in applying a similar precept of the mercantile code, in its decision on an appeal in causation
of the 1st of July, 1870, setting up the following doctrine:
In case of the liquidation of a company of this kind (denominated joint-account partnership),
inasmuch as the sale of the firm assets is necessarily uncertain and eventual, considering the
greater or lesser selling price that may be obtained from the property and effects which comprise
such assets, the price received should be alloted in the same proportion as that fixed in the
contract for the division of the profits and losses, for otherwise one of the partners would be
benefited to the detriment and loss of his copartners.
This doctrine is perfectly legal and in accord with justice, as no person should enrich himself
wrongfully at the expense of another; and, in the case under review, should it be duly and fully
proved that the managing firm acquired realty in the name and at the expense of the joint-account
partnership with the plaintiff firm, it is just that, in liquidating the property of common ownership,
such realty should be divided between the partners in the same manner as were the profits and
losses during the existence of the business, from the beginning of the partnership to the date of its
dissolution.
By the facts herein above set forth, it has been shown that in the present state of this cause
resulting from the rendering of the judgment appealed from, it has not been possible to decide in a
final manner the various issues brought up and controverted by the litigants, for, though it be
granted as proved that the defendant firm, the manager of the said partnership, has in fact
rendered accounts pertaining to the years from June 30, 1899, to December 31, 1902, as found in
the said judgment, there still remain to be decided the four points or questions of fact before
specified. Wherefore, and in accordance with section 496 of the Code of Civil Procedure, a new
trial should be held For the purpose of a final decision of all the questions involved in this litigation,
and accordingly the judgment appealed from is set aside and this cause shall be returned to the
court below, accompanied by a certified copy of this decision, for the holding of a new trial, for
which purpose, first, the defendant shall be advised that it must, within a fixed period, render an
account, verified by vouchers, of its management of the business of the joint-account partnership
with the plaintiff, pertaining to the months from December 1, 1898, to June 29, 1899, and to the
twelve months of the year 1903, unless it shall prove in a satisfactory manner that the said
partnership began on June 30, 1899, contrary to the averment of the plaintiff supported by
evidence that it commenced on December 1, 1898, in which case the said rendering of account
shall be restricted to the twelve months of the year 1903, in the accounts of which last period must
be included all the property that is found to belong to the said partnership; second, in the
examination of the accounts that may be found to have been rendered, the parties may allege and
prove facts conducive to their revision or approval besides availing themselves of the evidence
already adduced at trial; and, third, with respect to the accounts corresponding to the period from
June 30, 1899, to December 31, 1902, already approved, the trial court shall be proceed in
accordance with law, duly considering the errors, omissions, mistakes and fraudulent or deceitful
acts that have been alleged or may specifically be alleged in rejecting the said approved accounts,
as well as the evidence introduced by both parties, and it shall be careful to decide in its final
judgment all the issues raised between the parties in the course of this litigation and to provide

such remedies as are proper in regard to their respective claims. So ordered.

Company, of Manila.

Johnson, Moreland and Trent, JJ., concur.

In the year 1910 (exact date unstated) Kwong Cheong Tay ceased to do business, owing
principally to the fact that the plaintiff ceased at that time to transmit merchandise from Hongkong,
where he then resided. Lim Ka Yam appears at no time to have submitted to the partners any
formal liquidation of the business, though repeated demands to that effect have been made upon
him by the plaintiff.

G.R. No. L-18707December 9, 1922

PO YENG CHEO, plaintiff-appellee,
vs.
LIM KA YAM, defendant-appellant.
F. R. Feria and Romualdez Bros. for appellant.
Quintin Llorente and Carlos C. Viana for appellee.

STREET, J.:
By the amended complaint in this action, the present plaintiff, Po Yeng Cheo, alleged sole owner
of a business formerly conducted in the City of Manila under the style of Kwong Cheong, as
managing partner in said business and to recover from him its properties and assets. The
defendant having died during the pendency of the cause in the court below and the death
suggested of record, his administrator, one Lim Yock Tock, was required to appear and make
defense.
In a decision dated July 1, 1921, the Honorable C. A. Imperial, presiding in the court below, found
that the plaintiff was entitled to an accounting from Lim Ka Yam, the original defendant, as
manager of the business already reffered to, and he accordingly required Lim Yock Tock, as
administrator, to present a liquidation of said business within a stated time. This order bore no
substantial fruit, for the reason that Lim Yock Tock personally knew nothing about the aforesaid
business (which had ceased operation more than ten years previously) and was apparently unable
to find any books or documents that could shed any real light on its transaction. However, he did
submit to the court a paper written by Lim Ka Yam in life purporting to give, with vague and
uncertain details, a history of the formation of the Kwong Cheong Tay and some account of its
disruption and cessation from business in 1910. To this narrative was appended a statement of
assets and liabilities, purporting to show that after the business was liquidate, it was actually
debtor to Lim Ka Yam to the extent of several thousand pesos. Appreciating the worthlessness of
this so-called statement, and all parties apparently realizing that nothing more was likely to be
discovered by further insisting on an accounting, the court proceeded, on December 27, 1921, to
render final judgment in favor of the plaintiff.
The decision made on this occasion takes as its basis the fact stated by the court in its earlier
decision of July 1, 1921, which may be briefly set fourth as follows:lawphil.net
The plaintiff, Po Yeng Cheo, is the sole heir of one Po Gui Yao, deceased, and as such Po Yeng
Cheo inherited the interest left by Po Gui Yao in a business conducted in Manila under the style of
Kwong Cheong Tay. This business had been in existence in Manila for many years prior to 1903,
as a mercantile partnership, with a capitalization of P160,000, engaged in the import and export
trade; and after the death of Po Gui Yao the following seven persons were interested therein as
partners in the amounts set opposite their respective names, to wit: Po Yeng Cheo, P60,000; Chua
Chi Yek, P50,000; Lim Ka Yam, P10,000; Lee Kom Chuen, P10,000; Ley Wing Kwong, P10,000;
Chan Liong Chao, P10,000; Lee Ho Yuen, P10,000. The manager of Kwong Cheong Tay, for many
years prior of its complete cessation from business in 1910, was Lim Ka Yam, the original
defendant herein.
Among the properties pertaining to Kwong Cheong Tay and consisting part of its assets were ten
shares of a total par value of P10,000 in an enterprise conducted under the name of Yut Siong
Chyip Konski and certain shares to the among of P1,000 in the Manila Electric Railroad and Light

In view of the facts above stated, the trial judge rendered judgment in favor of the plaintiff, Po Yeng
Cheo, to recover of the defendant Lim Yock Tock, as administrator of Lim Ka Yam, the sum of sixty
thousand pesos (P60,000), constituting the interest of the plaintiff in the capital of Kwong Cheong
Tay, plus the plaintiff's proportional interest in shares of the Yut Siong Chyip Konski and Manila
Electric Railroad and Light Company, estimated at P11,000, together with the costs. From this
judgment the defendant appealed.
In beginning our comment on the case, it is to be observed that this court finds itself strictly
circumscribed so far as our power of review is concerned, to the facts found by the trial judge, for
the plaintiff did not appeal from the decision of the court below in so far as it was unfavorable to
him, and the defendant, as appellant, has not caused a great part of the oral testimony to be
brought up. It results, as stated, that we must accept the facts as found by the trial judge; and our
review must be limited to the error, or errors, if any, which may be apparent upon the face of the
appealed decision, in relation with the pleadings of record.
Proceeding then to consider the appealed decision in relation with the facts therein stated and
other facts appearing in the orders and proceedings in the cause, it is quite apparent that the
judgment cannot be sustained. In the first place, it was erroneous in any event to give judgment in
favor of the plaintiff to the extent of his share of the capital of Kwong Cheong Tay. The managing
partner of a mercantile enterprise is not a debtor to the shareholders for the capital embarked by
them in the business; and he can only be made liable for the capital when, upon liquidation of the
business, there are found to be assets in his hands applicable to capital account. That the sum of
one hundred and sixty thousand pesos (P160,000) was embarked in this business many years
ago reveals nothing as to the condition of the capital account at the time the concern ceased to do
business; and even supposing--as the court possibly did--that the capital was intact in 1908, this
would not prove it was intact in 1910 when the business ceased to be a going concern; for in that
precise interval of time the capital may have been diminished or dissipated from causes in no wise
chargeable to the negligence or misfeasance of the manager.
Again, so far as appears from the appealed decision, the only property pertaining to Kwong
Cheong Tay at the time this action was brought consisted of shares in the two concerns already
mentioned of the total par value of P11,000. Of course, if these shares had been sold and
converted into money, the proceeds, if not needed to pay debts, would have been distributable
among the various persons in interest, that is, among the various shareholders, in their respective
proportions. But under the circumstances revealed in this case, it was erroneous to give judgment
in favor of the plaintiff for his aliquot part of the par value of said shares. It is elementary that one
partner, suing alone, cannot recover of the managing partner the value of such partner's individual
interest; and a liquidation of the business is an essential prerequisite. It is true that in Lichauco vs.
Lichauco (33 Phil., 350), this court permitted one partner to recover of the manager the plaintiff's
aliquot part of the proceeds of the business, then long since closed; but in that case the affairs of
the defunct concern had been actually liquidate by the manager to the extent that he had
apparently converted all its properties into money and had pocketed the same--which was
admitted;--and nothing remained to be done except to compel him to pay over the money to the
persons in interest. In the present case, the shares referred to--constituting the only assets of
Kwong Cheong Tay--have not been converted into ready money and doubtless still remain in the
name of Kwong Cheong Tay as owner. Under these circumstances it is impossible to sustain a
judgment in favor of the plaintiff for his aliquot part of the par value of said shares, which would be
equivalent to allowing one of several coowners to recover from another, without process of
division, a part of an undivided property.

Another condition will be noted as present in this case which in our opinion is fatal to the
maintenance of the appealed judgment. This is that, after the death of the original defendant, Lim
Ka Yam, the trial court allowed the action to proceed against Lim Yock Tock, as his administrator,
and entered judgment for a sum of money against said administrator as the accounting party,-notwithstanding the insistence of the attorneys for the latter that the action should be discontinued
in the form in which it was then being prosecuted. The error of the trial court in so doing can be
readily demonstrated from more than one point of view.
In the first place, it is well settled that when a member of a mercantile partnership dies, the duty of
liquidating its affair devolves upon the surviving member, or members, of the firm, not upon the
legal representative of the deceased partner. (Wahl vs. Donaldson Sim & Co., 5 Phil., 11; Sugo
and Shibata vs. Green, 6 Phil., 744) And the same rule must be equally applicable to a civil
partnership clothed with the form of a commercial association (art. 1670, Civil Code; Lichauco vs.
Lichauco, 33 Phil., 350) Upon the death of Lim Ka Yam it therefore became the duty of his
surviving associates to take the proper steps to settle the affairs of the firm, and any claim against
him, or his estate, for a sum of money due to the partnership by reason of any misappropriation of
its funds by him, or for damages resulting from his wrongful acts as manager, should be
prosecuted against his estate in administration in the manner pointed out in sections 686 to 701,
inclusive, of the Code of Civil Procedure. Moreover, when it appears, as here, that the property
pertaining to Kwong Cheong Tay, like the shares in the Yut Siong Chyip Konski and the Manila
Electric Railroad and Light Company, are in the possession of the deceased partner, the proper
step for the surviving associates to take would be to make application to the court having charge
to the administration to require the administrator to surrender such property.
But, in the second place, as already indicated, the proceedings in this cause, considered in the
character of an action for an accounting, were futile; and the court, abandoning entirely the effort
to obtain an accounting, gave judgment against the administrator upon the supposed liability of his
intestate to respond for the plaintiff's proportionate share of the capital and assets. But of course
the action was not maintainable in this aspect after the death of the defendant; and the motion to
discontinue the action as against the administrator should have been granted.
The judgment must be reversed, and the defendant will be absolved from the complaint; but it will
be understood that this order is without prejudice to any proceeding which may be undertaken by
the proper person or persons in interest to settle the affairs of Kwong Cheong Tay and in
connection therewith to recover from the administrator of Lim Ka Yam the shares in the two
concerns mentioned above. No special pronouncement will be made as to costs of either. So
ordered.
Araullo, C. J., Johnson, Malcolm, Avancea, and Villamor, JJ., concur.
Ostrand, J., concurs in the result.
Johns, and Romualdez, JJ., took no part in the decision of this case.

status of the partnership was as follows:

G.R. No. L-28920

October 24, 1928

MAXIMO GUIDOTE, plaintiff-appellant,

vs.
ROMANA BORJA, as administratrix of the estate of Narciso Santos, deceased, defendantappellee.
Francisco, Lualhati and Lopez for appellant.
M. G. Goyena for appellee.

OSTRAND, J.:
On March 4, 1921, the plaintiff brought an action against the administratrix of the estate of Narciso
Santos, deceased, to recover the sum of P9,534.14, a part of which was alleged to be the net
profits due the plaintiff in a partnership business conducted under the name of "Taller Sinukuan,"
in which the deceased was the capitalist partner and the plaintiff the industrial partner, the rest of
the sum consisting of advances alleged to have been made to said partnership by the plaintiff. The
defendant in her answer admitted the existence of the partnership and in a cross-complaint and
counter-claim prayed that the plaintiff be ordered to render an accounting of the partnership
business and to pay to the estate of the deceased the sum of P25,000 as net profits, credits, and
property pertaining to said deceased.
In the first trial of the case the plaintiff called several witnesses and introduced a so-called
accounting and a mass of documentary evidence consisting of books, bills, and alleged vouchers,
which documentary evidence was so hopelessly and inextricably confused that the court, as stated
in its decision, could not consider it of much probative value. It was, however, fund as facts that
the aforesaid partnership had been formed, on or about June 15, 1918; that Narciso Santos died
on April 6, 1920, leaving the plaintiff as the surviving partner; and that plaintiff failed to liquidate the
affairs of the partnership and to render an account thereof to the administratrix of Santos' estate.
The court, therefore, dismissed the plaintiff's complaint and absolved the defendant therefrom, and
ordered the plaintiff to render a full and complete accounting, verified by vouchers, of the
partnership business from June 15, 1918, until September 1, 1922. To this decision and order the
plaintiff duly excepted.
The plaintiff thereupon rendered an account prepared by one Tomas Alfonso, a public accountant.
Numerous objections to said account were presented by the defendant, and the court, upon
hearing, disapproved the account and ordered that the defendant submit to the court an
accounting of the partnership business from the date of the commencement of the partnership,
June 15, 1918, up to the time the business was closed. 1awph!l.net
On January 25, 1924, the defendant presented an account and liquidation prepared by a public
accountant, Santiago A. Lindaya, showing a balance of P29,088.95 in favor of the defendant. The
account was set down for hearing upon the question of its approval or disapproval by the court, at
which hearing the defendant introduced the public accountant Jose Turiano Santiago to testify as
to the results of an audit made by him of the accounts of the partnership. Santiago testified that he
had been a public accountant for over 20 years, having appeared in court as such on several
occasions; that he had examined the exhibits offered in evidence of the case by both parties; that
he had prepared a separate accounting or liquidation similar in results to that prepared by Lindaya,
but with a few differences in the sums total; and that according to his examination, the financial

Narciso Santos is a creditor of the Taller Sinukuan in the sum of P26,020.89 consisting as follows:
For his capital ..................................
P12,588.53
For his credit ...................................
10,348.30
For his share of the profits ............ 3,068.06
Total ...................................................
26,020.89
Maximo Guidote is a debtor to the Taller Sinukuan in the sum of P20,020.89, consisting as follows:
For his debt (debito) .........................
P29,088.95
Less his share of the profits ........... 3,068.06
Total balance ......................................
26.020.89
In order to contradict the conclusions of Lindaya and Jose Turiano Santiago, the plaintiff presented
Tomas Alfonso and the bookkeeper, Pio Gaudier, as witnesses in his favor. In regard to the
character of the testimony of these witnesses, His Honor, the trial judge, says:
The testimony of these two witnesses is so unreliable that the court can place no reliance thereon.
Mr. Tomas Alfonso is the same public accountant who filed the liquidation Exhibit O on behalf of
the plaintiff, in relation to the partnership business, which liquidation was disapproved by this court
in its decision of August 20, 1923. It is also to be noted that Mr. Alfonso would have this court
believe the proposition that the plaintiff, a mere industrial partner, notwithstanding his having
received the sum of P21,649.61 on the various jobs and contracts of the "Taller Sinukuan," had
actually expended and paid out the sum of P63,360.27, of P44,710.66 in excess of the gross
receipts of the business. This proposition is not only improbable on its face, but it materially
contradicts the allegations of plaintiff's complaint to the effect that the advances made by the
plaintiff only the amount to P2,017.50.
Mr. Pio Gaudier is the same bookkeeper who prepared three entirely separate and distinct
liquidation for the same partnership business all of which were repeated by the court in its
decisions of September 1, 1922 and the court finds that the testimony given by him at the last
hearing is confusing, contradictory and unreliable.1awph!l.net
As to the other witnesses for the plaintiff His Honor further says:
The testimony of the other witnesses for the plaintiff deserves but scant consideration as evidence
to overcome the testimony of Mr. Santiago, as a whole particularly that of the witness Chua Chak,
who, after identifying and testifying as to a certain exhibit shown him by counsel for plaintiff,
showed that he could neither read nor write English, Spanish, or Tagalog, and that of the witness
Mr. Claro Reyes, who, after positively assuring the court that a certain exhibit tendered him for
identification was an original document, was forced to admit that it was but a mere copy.
The court therefore, found that the conclusions reached by Santiago A. Lindaya as modified by
Jose Turinao Santiago were just and correct and ordered the plaintiff to pay the defendant the sum
of P26,020.89, Philippine currency, with legal interest thereon from April 2, 1921, the date of the
defendant's answer, and to pay the costs. From this judgment the plaintiff appealed to this court
and presents the following assignments of error:
(1) That the court erred in dismissing the plaintiff's complaint and ordering him to present a
liquidation of the operations and accounts of the partnership formed with the deceased Narciso
Santos, from the beginning of the partnership until September 1, 1922.
(2) That the court erred in approving the liquidation made by the public accountant Santiago A.
Lindaya, with the modification introduced by the witness Jose Turiano Santiago.
(3) That the court erred in ordering the plaintiff and appellant to pay to the defendant and appellee
the sum of P26,020.89.

As to the first assignment of error there may be some merit in the appellant's contention that the
dismissal of his complaint was premature. The better practise would, perhaps, have been to let the
complaint stand until the result of the liquidation of the partnership affairs was known. But under
the circumstances of this case no harm was done by the dismissal of the complaint, and the error,
if any there be, is not reversible.
Under the same assignment of error the plaintiff argues that as the deceased up to the time of his
death generally took care of the payments and collections of the partnership, his legal
representatives were under the obligation to render accounts of the operations of the partnership,
notwithstanding the fact that the plaintiff was in charge of the business subsequent to the death of
Santos. This argument is without merit. In the case of Wahl vs. Donaldson Sim & Co. (5 Phil., 11,
14), it was held that the death of one of the partners dissolves the partnership, but that the
liquidation of its affairs is by law intrusted, not to the executors of the deceased partner, but to the
surviving partners or the liquidators appointed by them (citing article 229 of the Code of
Commerce and secs. 664 and 665 of the Code of Civil Procedure). The same rule is laid down by
the Supreme Court of Spain in sentence of October 12, 1870.
The other assignments of error have reference only to questions of fact in regard to which the
findings of the court below seem to be as nearly correct as possible upon the evidence presented.
There may be errors in the interpretation of the accounts, and it is possible that the amount of
P26,020.89 charged against the plaintiff is excessive, but the evidence presented by him is so
confusing and unreliable as to be practically of no weight and cannot serve as a basis for a
readjustment of the accounts prepared by the accountant Lindaya and the apparently reliable
witness, Jose Turiano Santiago.
We should, perhaps, have been more inclined to question the conclusions of Lindaya and
Santiago if the plaintiff had shown a disposition to render an honest account of the business and to
effect a fair liquidation of the partnership but instead of doing so, he has by means of very
questionable, and apparently false, evidence sought to mulct his deceased partner's estate to the
extent of over P9,000. The rule for the conduct of a surviving partner is thus stated in 20 R. C. L.,
1003:
In equity surviving partners are treated as trustees of the representatives of the deceased partner,
in regard to the interest of the deceased partner in the firm. As a consequence of this trusteeship,
surviving partners are held in their dealings with the firm assets and the representatives of the
deceased to that nicety of dealing and that strictness of accountability required of and incident to
the position of one occupying a confidential relation. It is the duty of surviving partners to render an
account of the performance of their trust to the personal representatives of the deceased partner,
and to pay over to them the share of such deceased member in the surplus of firm property,
whether it consists of real or personal assets.
The appellant has completely failed to observe the rule quoted, and he is not in position to
complain if his testimony and that of his witnesses is discredited.
The appealed judgment is affirmed with the costs against the appellant. So ordered.
Avancea, C. J., Johnson, Street, Malcolm, Villamor, Romualdez, and Villa-Real, JJ., concur.