Direct appeal from the decision of the Court of First Instance of Davao (the amount involved being more than P200,000) dismissing the plaintiffs-appellants' complaint.

From the stipulation of facts of the parties and the evidence on record, it would appear that on May 29, 1940, Tan Sin An and Antonio C. Goquiolay entered into a general commercial partnership under the partnership name "Tan Sin An and Antonio C. Goquiolay", for the purpose of dealing in real estate. The partnership had a capital of P30,000.00, P18,000.00 of which was contributed by Goquiolay and P12,000.00 by Tan Sin An. The agreement lodged upon Tan Sin An the sole management of the partnership affairs, stipulating that    

"III. The co-partnership shall be composed of said Tan Sin An as sole managing and partner (sic), and Antonio C. Goquiolay as co-partner.   

"VIII. The affairs of the co-partnership shall be managed exclusively by the managing and partner (sic) or by his authorized agent, and it is expressly stipulated that the managing and partner (sic) may delegate the entire management of the affairs of the co-partnership by irrevocable power of attorney to any person, firm or corporation he may select upon such terms as regards compensation as he may deem proper, and vest in such person, firm or corporation full power and authority, as the agent of the co-partnership and in his name, place and stead to do anything for it or on his behalf which he as such managing and partner (sic) might do or cause to be done.   

"IX. The co-partner shall have no voice or participation in the management, of the affairs, of the co-partnership; but he may examine its accounts once every six (6) months at any time during ordinary business hours, and in accordance with the provisions of the Code of Commerce." (Articles of Co-Partnership).

The lifetime of the partnership was fixed at ten (10) years and also that   

"In the event of the death of any of the partners at any time before the expiration of said term, the co-partnership shall not be dissolved but will have to be continued and the deceased partner shall be represented by his heirs or assigns in said co-partnership" (Art. XII, Articles of Co-Partnership).

However, the partnership could be dissolved and its affairs liquidated at any time upon mutual agreement in writing of the partners (Art. XIII, articles of Co-Partner ship).

On May 31, 1940, Antonio Goquiolay executed a general power of attorney to this effect: 

"That besides the powers and duties granted the said Tan Sin An by the articles of co-partnership of said co-partnership "Tan Sin An and Antonio Goquiolay", the said Tan Sin An should act as my Manager for said co-partnership for the full period of the term for which said co-partnership was organized or until the whole period that the said capital of P30,000.00 of the co-partnership should last, to carry on to the best advantage and interest of the Said co-partnership, to make and execute, sign, seal and deliver for the co-partnership, and in its name, all bills, bonds, notes, specialties, and trust receipts or other instruments or documents in writing whatsoever kind or nature which" shall be necessary to the proper conduction of the said businesses, including the power to mortgage and pledge real and personal properties, to secure the obligation of the co-partnership, to buy real or personal properties for cash or upon such terms as he may deem advisable, to sell personal or real properties, such as lands and buildings of the co-partnership in any manner he may deem advisable for the best interest of said co-partnership, to borrow money on behalf of the co-partnership and to issue promissory notes for the repayment thereof, to deposit the fund's of the co-partnership in any local bank or elsewhere and to draw checks against funds so deposited * * *.

On May 29, 1940, the plaintiff partnership "Tan Sin An and Goquiolay" purchased the three (3) parcels of land, known as Lots Nos. 526, 441 and 521 of the Cadastral Survey of Davao, subject-matter of the instant litigation, assuming the payment of a mortgage obligation of. P25.000.00, payable to "La Urbana Sociedad Mutua de Construction y Prestamos" for a period of ten (10) years, with 10% interest per annum. Another 46 parcels were purchased by Tan Sin An in his individual capacity, and he assumed payment of a mortgage debt thereon for P35,000.00, with interest. The down payment and the amortization were advanced by Yutivo and Co., for the account of the purchasers.

On September 25, 1940, the two separate obligations were consolidated in an instrument executed by the partnership and Tan Sin An, whereby the entire 49 lots were mortgaged in favor of the "Banco Hipotecario de Filipinas" (as successor to "La Urbana") and the covenantors bound themselves to pay, jointly and severally, the remaining balance of their unpaid accounts amounting to P52,282.80 within eight 8 years, with 8% annual interest, payable in 96 equal monthly installments.

On June 26, 1942, Tan Sin An died, leaving as surviving heirs his widow, Kong Chai Pin, and four minor children, namely: Tan L. Cheng, Tan L. Hua, Tan C. Chiu and Tan K. Chuan". Defendant Kong Chai Pin was appointed administratrix of the intestate estate of her deceased husband.

In the meantime, repeated demands for payment were made by the Banco Hipotecario on the partnership and on Tan Sin An. In March, 1944, the defendant Sing Yee and Cuan, Co., Inc., upon request of defendant Yutivo Sons Hardware Co., paid the remaining balance of the mortgage debt, and the mortgage was cancelled.

Then in 1946, Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. filed their claims in the intestate proceedings of Tan Sin An for P62,415.91 and P54,310.13, respectively, as alleged obligations of the partnership "Tan Sin An and Antonio C. Goquiolay" and Tan Sin An, for advances, interests and taxes paid in amortizing and discharging their obligations to "La Urbana" and the "Banco Hipotecario". Disclaiming knowledge of said claims at first, Kong Chai Pin later admitted the claims in her amended answer and they were accordingly approved by the Court.

On March 29, 1949, Kong Chai Pin filed a petition with the probate court for authority to sell all the 49 parcels of land to Washington Z, Sycip and Betty Y. Lee, for the purpose primarily of settling the aforesaid debts of Tan Sin An and the partnership. Pursuant to a court order of April 2, 1949, the administratrix executed on April 4,1949, a deed of sale^[1] of the 49 parcels of land to the defendants Washington Sycip and Betty Lee in consideration of P37,000.00 and of vendees' assuming payment of the claims filed by Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. Later, in July, 1949, defendants Sycip and Betty Lee executed in favor of the Insular Development Co., Inc. a deed of transfer covering the said 49 parcels of land.

Learning about the sale to Sycip and Lee, the surviving partner Antonio Goquiolay filed, on or about July 25,1949, a petition in the intestate proceedings seeking to set aside the order of the probate court approving the sale in so far as his interest over the parcels of land sold was concerned. In its order of December 29, 1949, the probate court annulled the sale executed by the administratrix with respect to the 60% interest of Antonio Goquiolay over the properties sold. Kong Chai Pin appealed to the Court of Appeals, which court later certified the case to us (93 Phil., 413; 49 Off. Gaz. [7] 2307). On June 30, 1953, we rendered decision setting aside the orders of the probate court complained of and remanding the case for new trial, due to the non-inclusion of indispensable parties. Thereafter, new pleadings were filed.

The second amended complaint in the case at bar prays, among other things, for the annulment of the sale in favor of Washington Sycip and Betty Lee, and their subsequent conveyance in favor of the Insular Development Co., Inc., in so far as the three (3) lots owned by the plaintiff partnership are concerned. The answer averred the validity of the sale by Kong Chai Pin as successor partner, in lieu of the late Tan Sin An. After hearing, the complaint was dismissed by the lower court in its decision dated October 30, 1956; hence, this appeal taken directly to us by the plaintiffs, as the amount involved is more than P200,000.00. Plaintiffs-appellants assign as errors that  

"I. The lower court erred in holding that Kong Chai Pin became the managing partner of the partnership upon the death of her husband, Tan Sin An, by virtue of the articles of Partnership executed between. Tan Sin An and Antonio Goquiolay, and the general power of attorney granted by Antonio Goquiolay. 

II The lower court erred in holding that Kong Chai Pin could act alone as sole managing partner in view of the minority of the other heirs. 

III The lower court erred in holding that Kong Chai Pin was the only heir qualified to act as managing partner. 

IV The lower court erred in holding that Kong Chai Pin had authority to sell the partnership properties by virtue of the articles of partnership and the general power of attorney granted to Tan Sin An in order to pay the partnership indebtedness. 

V The lower court erred in finding that the partnership did not pay its obligation to the Banco Hipotecario. 

VI The lower court erred in holding that the consent of Antonio Goquiolay was not necessary to consummate the sale of the partnership properties. 

VII The lower court erred in finding that Kong Chai Pin managed the business of the partnership after the death of her husband, and that Antonio Goquiolay knew it. 

VIII The lower court erred in holding that the failure of Antonio Goquiolay to oppose the management of the partnership by Kong Chai Pin estops him now from attacking the validity of the sale of the partnership properties. 

IX The lower court erred in holding that the buyers of the partnership properties acted in good faith. 

X The lower court erred in holding that the sale was, not fraudulent against the partnership and Antonio Goquiolay. 

XI The lower court erred in holding that the sale was not only necessary but beneficial to the partnership. 

XII The lower court erred in dismissing the complaint and,in ordering Antonio Goquiolay to pay the costs of suit."

There is merit in the contention that the lower court erred in holding that the widow, Kong Chai Pin, succeeded her husband, Tan Sin An, in the sole management of the partnership, upon the latter's death. While, as we previously stated in our narration of facts, the Articles of Co-Partnership and the power of attorney executed by Antonio Goquiolay conferred upon Tan Sin An the exclusive management of the business, such power, premised as it is upon trust and confidence, was a mere personal right that terminated upon Tan's demise. The provision in the articles stating that "in the event of death of any one of the partners within the 10-year term of the partnership, the deceased partner shall be represented by his heirs", could not have referred to the managerial right given to Tan Sin An; more appropriately, it related to the succession in the proprietary interest of each partner. The covenant that Antonio Goquiolay shall have no voice or participation in the management of the partnership, being a limitation upon his right as a general partner, must be held coextensive only with Tan's right to manage the affairs, the contrary not being clearly apparent.

Upon the other hand, consonant with the articles of co-partnership providing for the continuation of the firm notwithstanding the death of one of the partners, the heirs of the deceased, by never repudiating or refusing to be bound under the said provision in the articles, became individual partners with Antonio Goquiolay upon Tan's demise. The validity of like clauses in partnership agreements is expressly sanctioned under Article 222 of the Code of Commerce.^[1]

Appellants argue, however, that since the "new" members' liability in the partnership was limited merely to the value of the share or estate left by the deceased Tan Sin An, they became no more than limited partners and, as such, were disqualified from the management of the business under Article 148 of the Code of Commerce. Although ordinarily, this effect follows from the continuance of the heirs in the partnership,^[2] it was not so with respect to the widow Kong Chai Pin, who, by her affirmative actions, manifested her intent to be bound by the partnership agreement not only as a limited but as a general partner. Thus, she managed and retained possession of the partnership properties and was admittedly deriving income therefrom up to and until the same were sold to Washington Sycip and Betty Lee. In fact, by executing the deed of sale of the parcels of land in dispute in the name of the partnership, she was acting no less than as a managing partner. Having thus preferred to act as such, she could be held liable for the partnership debts and liabilities as a general partner, beyond what she might have derived only from the estate of her deceased husband. By allowing her to retain control of the firm's property from 1942 to 1949, plaintiff estopped himself to deny her legal representation of the partnership, with the power to bind it by proper contracts.

The question now arises as to whether or not the consent of the other partners was necessary to perfect the sale of the partnership properties to Washington Sycip and Betty Lee. The answer is, we believe, in the negative. Strangers dealing with a partnership have the right to assume, in the absence of restrictive clauses in the co-partnership agreement, that every general partner has power to bind the partnership, specially those partners acting with ostensible authority. And so, we held in one case: 

"* * * Third persons, like the plaintiff, are not bound in entering into a contract with any of the two partners, to ascertain whether or not this partner with whom the transaction is made has the consent of the other partner. The public need not make inquiries as to the agreements bad between the partners. Its knowledge is enough that it is contracting with the partnership which is represented by one of the managing partners. 

"There is a general presumption that each individual partner is an agent for the firm and that he has authority to bind the firm in carrying on the partnership transactions/ [Mills vs. Giggle, 112 Pac., 617]  

"The presumption is sufficient to permit third persons to hold the firm liable on transactions entered into by one of the members of the firm acting apparently in its behalf and within the scope of his authority.' [Le Roy vs. Johnson, 7 U.S. Law, Ed., 391] (George Litton vs. Hill & Ceron, et al., 67 Phil. 513-514)."

We are not unaware of the provision of Article 129 of the Code of Commerce to the effect that  

"If the management of the general partnership has not been limited by special agreement to any of the members, all shall have the power to take part in the direction and management of the common business, and the members present shall come to an agreement for all contracts or obligations which may concern the association." (Emphasis supplied)

but this obligation is one imposed by law on the partners among themselves, that does not necessarily affect the validity of the acts of a partner, while acting within the scope of the ordinary course of business of the partnership, as regards third persons without notice. The latter may rightfully assume that the contracting partner was duly authorized to contract for and in behalf of the firm and that, furthermore, he would not ordinarily act to the prejudice of his co-partners. The regular course of business procedure does not require that each time a third person contracts with one of the managing partners, he should inquire as to the latter's authority to do so, or that he should first ascertain whether or not the other partners had given their consent thereto. In fact, Article 180 of the same Code of Commerce provides that even if a new obligation was contracted against the express will of one of the managing partners, "it shall not be annulled for such reason, and it shall produce its effects without prejudice to the responsibility of the member or members who contracted it, for the damages they may have caused to the common fund."

Cesar Vivante (2 Tratado de Derecho Mercantil, pp. 114115) points out: 

"367. Primera hipotesis. A falta de pactos especiales, la facultad de administrar corresponde a cada socio personalmente. No hay que esperar ciertamente concordia con tantas cabezas, y para cuando no vayan de acuerdo, la disciplina del Codigo no ofrece un sistema eficaz que evite los inconvenientes. Pero, ante el silencio del contrato, debia quiza el legislador privar de la administracion a uno de los socios en beneficio del otro? Seria una arbitrariedad. Debera quiza declarar nula la Sociedad que no haya elegido Administrador? El remedio seria peor que el mal. Deberd, tal vez, pretender que todos los socios concurran en todo acto de la Sociedad? Pero este concurso de todos habria reducido a la impotencia la administracion, que es asunto de todos los dias y de todas horas. Hubieran sido disposiciones menos oportunas que lo adoptado por el Codigo, el cual se confia al espiritu de reciproca confianza que deberia animar la colaboracion de los socios, y en la ley inflexible de responsabilidad que implies comunidad en los intereses de los mismos.
     
      En esta hipotesis, cada socio puede ejercer todos los negocios comprendidos en el contrato social sin dar de ello noticia a los otros, porque cada uno de ellos ejerce la administracion en la totalidad de sus relaciones, salvo su responsabilidad en el caso de una administracion culpable. Si debiera dar noticia, el beneficio de su simul^&nia actividad, frecuentemente distribuida en lugares y en tiempos diferentes, se echaria a perder. Se objetara el que de esta forma, el derecho de oposicidn de cada uno de los socios puede quedar frustrado. Pero se puede contestar que este derecho de oposicion concedido por la ley como un remedio excepcional, debe subordinate al derecho de ejercer el oficio de Administrador, que el Codigo concede sin limite: 'se presume que los socios se han concedido reciprocamente la facultad de administrar uno para otro.' Se harfa precipitar esta hipdtesis en la otra de una administracion colectiva (art. 1.721, Codigo Civil) y se acabaria con pedir el consentimiento, a lo menos tacito, de todos los socios lo que el Cddigo excluye.........., si se obligase al socio Administrador a dar noticia previa del negocio a los otros, a fin de que pudieran oponerse si no consintieran."

Commenting on the same subject, Gay de Montella (Codigo de Comercio, Tomo II, 147-148) opines: 

"Para obligar a las Companias enfrente de terceros (art. 128 del Codigo), no es bastante que los actos y contratos hayan sido ejecutados por un socio o varios en nombre colectivo, sino que es preciso el concurso de estos dos elementos, uno, que el socio o socios tengan reconocida la facultad de administrar la Companla, y otro, que el acto o contrato haya teido ejecutado en nombre de la Sociedad y usando de su fima social. Asi es que toda obligacidn contraida bajo la razon social, se presume contraida por la Companfa. Esta presuncion es impuesta por motivos de necesidad practica. El tercero no puede cada vez que trata con la Compania, inquirir si realmente el negocio concierne a la Sociedad. La presuncion es juris tantum y no juris et de jure, de modo que si el gerente suscribe bajo la razon social una obligacion que no interesa a la Sociedad, este podra rechazar la accion del tercero probando que el acreedor conocia que la obligacion no tenia ninguna relacion con ella. Si tales actos y contratos no comportasen la concurrencia de ambos elementos, serfan nulos y podria decretarse la responteabilidad civil o penal contra sus autores.

En el caso que tales actos o contratos hayan sido tacitamente aprobados por la Compania, o contabilizados en sus libros, si el acto o contrato ha sido convalidado sin protesta y se trata de acto o contrato que ha producido beneficio social, tendria plena validez, aun cuando le faltase algunos o ambos de aquellos requisitos antes senalados. 

Cuando los Estatutos o la escritura social no contienen ninguna clausula relativa al nombramiento o designacion de uno o mas de un socio para administrar la Companfa (art. 129 del Codigo) todos tienen por un igual el derecho de concurir a la decision y manejo de los negocios comunes. * * *"

Although the partnership under consideration is a commercial partnership and, therefore, to be governed by the Code of Commerce, the provisions of the old Civil Code may give us some light on the right of one partner to bind the partnership. States Art. 1695 thereof: 

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

1. All the partners shall be considered agents, and whatever any one of them may do individually shall bind, the partnership; but each one may oppose any act of the others before it has become legally binding."

The records fail to disclose that appellant Goquiolay made any opposition to the sale of the partnership realty to Washington Z. Sycip and Betty Lee; on the contrary, it appears that he (Goquiolay) only interposed his objections after the deed of conveyance was executed and approved by the probate court, and, consequently, his opposition came too late to be effective.

Appellants assail the correctness of the amounts paid for the account of the partnership as found by the trial court. This question, however, need not be resolved here, as in the deed of conveyance executed by Kong Chai Pin, the purchasers Washington Sycip and Betty Lee assumed, as part consideration of the purchase, the full claims of the two creditors, Sing Yee and Cuan Co., Inc. and Yutivo Sons Hardware Co.

Appellants also question the validity of the sale covering the entire firm realty, on the ground that it, in effect, threw the partnership into dissolution, which requires consent of all the partners. This view is untenable. That the partnership was left without the real property it originally had will not work its dissolution, since the firm was not organized to exploit these precise lots but to engage in buying and selling real estate, and "in general real estate agency and brokerage business". Incidentally, it is to be noted that the payment of the solidary obligation of both the partnership and the late Tan Sin An, leaves open the question of accounting and contribution between the co-debtors, that should be ventilated separately.

Lastly, appellants point out that the sale of the partnership properties was only a fraudulent device by the appellees, with the connivance of Kong Chai Pin, to ease out Antonio Goquiolay from the partnership. The "devise", according to the appellants, started way back sometime in 1945, when one Yu Khe Thai sounded out Antonio Goquiolay on the possibility of selling his share in the partnership; and upon his refusal to sell, was followed by the filing of the claims of Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. in the intestate estate proceedings of Tan Sin An. As creditors of Tan Sin An and the plaintiff partnership (whose liability was alleged to be joint and several), Yutivo Sons Hardware Co. and Sing Yee and Guan Co., Inc. had every right to file their claims in the intestate proceedings. The denial of the claims at first by Kong Chai Pin (for lack of sufficient knowledge) negatives any conspiracy on her part in the alleged fraudulent scheme, even if she subsequently decided to admit their validity after studying the claims and finding it best to admit the same. It may not be amiss to remark that the probate court approved the questioned claims.

There is complete failure of proof, moreover, that the price for which the properties were sold was unreasonably low, or in any way unfair, since appellants presented no' evidence of the market value of the lots as of the time of their sale to appellees Sycip and Lee. The alleged value of P31,056,58 in May of 1955 is no proof of the market value in 1949, specially because in the interval, the new owners appear to have converted the land into a subdivision, which they could not do without opening roads and otherwise improving the property at their own expense. Upon the other hand, Kong Chai Pin hardly had any choice but to execute the questioned sale, as it appears that the partnership had neither cash nor other properties with which to pay its obligations. Anyway, we cannot consider seriously the inferences freely indulged in by the appellants as allegedly indicating fraud in the questioned transactions, leading to the conveyance of the lots in dispute to the appellee Insular Development Co., Inc.

Wherefore, finding no reversible error in the appealed judgment, we affirm the same, with costs against appellant Antonio doquiolay.

Padilla, Montemayor, Baustista Angelo, Labrador, Concepcion, Endeneia, Barrera, and Gutierrez-David, JJ.,  concur.

Judgment affirmed.

---

^[1] In her capacity as administratrix of the intestate estate and as a managing partner of the plaintiff partnership (Exh. "AA-6").

^[1] "General and limited partnership shall furthermore be dissolved by reason of the following cases: (1) The death of one of the general partners, if the partnership contract does not contain an express provision for the continuation of the heirs of the deceased partner in the partnership or for the continuation of the partnership among the surviving partners". (See also Codigo Civil, Manresa, Vol XI, pp. 423-424, 1950 ed.)

^[2] Gay de Montella, Tratado Practico de Sociedades Mercantiles, Vol. II, p. 289; Tratado de Derecho Mercantil, Vivante, Vol. II, pp. 493-494.

RESOLUTION

December 10, 1963

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