Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 70403 July 7, 1989
SANTIAGO SYJUCO, INC., petitioner,
vs.
HON. JOSE P. CASTRO, AS PRESIDING JUDGE OF THE REGIONAL TRIAL COURT
OF THE NATIONAL CAPITAL JUDICIAL REGION, BRANCH LXXXV, QUEZON CITY,
THE CITY SHERIFF OF THE CITY OF MANILA, THE CITY REGISTER OF DEEDS OF
THE CITY OF MANILA, EUGENIO LIM, ARAMIS LIM, MARIO LIM, PAULINO LIM,
LORENZO LIM, NILA LIM and/ or THE PARTNERSHIP OF THE HEIRS OF HUGO LIM
and ATTORNEY PATERNO P. CANLAS, respondents.
Doroteo B. Daguna and Felix D. Carao for petitioner.
Paterno Canlas for private respondents.
Facts:
Eugenio Lim, along with his brothers, all hereinafter collectively called the Lims,
borrowed from petitioner Santiago Syjuco, Inc. (hereinafter, Syjuco only) the sum of
800,000.00. The loan was given on the security of a first mortgage on property
registered in the names of said borrowers as owners in common.Thereafter, additional
loans on the same security were obtained by the Lims from Syjuco, so that the
aggregate of the loans stood at 2,460,000.00, exclusive of interest.
When the obligation matured, the Lims failed to pay it despite demands therefor
and consequently, Syjuco caused extra-judicialproceedings for the foreclosure of the
mortgage.
The attempt to foreclose triggered off a legal battle that has dragged on for 20 years,
through 5 cases in the courts.
DEFENSE: The respondents advocated the theory that the mortgage,which they had
individually constituted, in fact no longer belonged to them,having been earlier deeded
over by them to the partnership, Heirs of Hugo Lim, making the said mortgage void
because it was executed by them without authority from the partnership.
Issue:
W/N the Lims are estop from to asserting the existence of the partnership?
Held:
Yes. The Lims are estop from to asserting the existance of the partnership

The court holds that the respondent partnership was inescapably chargeable with
knowledge of the mortgage executed by all the partners thereof, and therefore its silence
and failure to impugn said mortgage within a reasonable time, let alone a space of more
than 17 years, brought into play thedoctrine of estoppel to preclude any attempt to avoid
the mortgage as allegedly unauthorized.
Also, Art. 1819 states that, where the title to real property is in the names of all the
partners, a conveyance executed by all the partners passes all their rights in such
property. Consequently, those members' acts, declarations and omissions cannot be
deemed to be simply the individual acts of said members, but infact and in law, those of
the partnership.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-22493 July 31, 1975
ISLAND SALES, INC., plaintiff-appellee,
vs.
UNITED PIONEERS GENERAL CONSTRUCTION COMPANY, ET. AL defendants.
BENJAMIN C. DACO, defendant-appellant.
Grey, Buenaventura and Santiago for plaintiff-appellee.
Anacleto D. Badoy, Jr. for defendant-appellant.

Facts:
United Pioneers General Construction Company is a general partnership formed by
Benjamin Daco, Daniel Guizona, Noel Sim, Augusto Palisoc and Romulo Lumauig. In
1961, United Pioneers purchased by installment a motor vehicle from Island Sales, Inc.
United Pioneers defaulted in its payment hence it was sued and the 5 partners were
impleaded as co-defendants.
Upon motion of Island Sales, Lumauig was removed as a defendant.
United Pioneers lost the civil case and the trial court rendered judgment ordering United
Pioneers to pay the outstanding balance plus interest and costs. It further decreed that

the remaining 4 co-defendants shall pay Island Sales in case United Pioneers property
will not be enough to satisfy its indebtedness to Island Sales.
ISSUE: What is the extent of the liability of the partners considering that one partner was
removed as a co-defendant on motion of Island Sales?
HELD: Their liability is pro-rata pursuant to Article 1816 of the Civil Code. But is should
be noted that since there were 5 partners when the purchase was made in behalf of the
partnership, the liability of each partner should be 1/5 th (of the companys obligation)
each. The fact that the complaint against Lumauig was dismissed, upon motion of the
Island Sales, does not unmake Lumauig as a general partner in the company. In so
moving to dismiss the complaint, Island Sales merely condoned Lumauigs individual
liability to them.

Benjamin Yu v. National Labor Relations Commission & Jade Mountain

ProductsCo. Ltd., Willy Co, Rhodora Bendal, Lea Bendal, Chiu Shian Jeng and
Chen Ho-Fu
G.R. No. 97212 June 30, 1993
Feliciano, J.
Facts:
Yu ex-Assistant General Manager of the marble quarrying and export business
operatedby a registered partnership called Jade Mountain Products Co. Ltd. The
partnership was originally organized with Bendals as general partners and Chin Shian
Jeng,Chen Ho-Fu and Yu Chang as limited partners; partnership business consisted of
exploitinga marble deposit in Bulacan.
Yu as Assistant General Manager had a monthly salary of 4000. Yu however
received only half of his stipulated salary since the head accepted the
promise of the partners that the balance would be paid when the firm shall
have secured additional operating funds from abroad. Yu Actually managed
the operations and finances of the business he had overall supervision of the
workeers at the marble quary of bulacan and took charge of the preparation
of papers relating to exportation of the firms products.
The general partners Bendals sold and transferred their interests in the partnership to
Co andEmmanuel Zapanta
Said partnership was constituted solely by Co and Zapanta; it continued to
use the old firmname of Jade Mountain. Yu was then dismissed by the new partners.

Issues:

Whether or not the partnership which had hired Yu as the Assistant General
Manager which had been extingusihed and replaced by a new partnership
composed of co and zapanta?
Whether or not Yu could assert his rights under his employment contract with the
old partnership on the new partnership?

Held:
Yes. Changes in the membership of the partnership resulted in the dissolution
of the old partnership which had hired Yu and the emergence of a new partnership
composedof Co and Zapanta.
Article 1828. The dissolution of a partnership is the change in the relation between
partners caused by any parner ceasing to be associated in the carrying on as
distingushed from winding up of business.
Art. 1830. Dissolution is caused:(1) without violation of the agreement between the
partners;(b) by the express will of any partner, who must act in good faith, when no
definite termor particular undertaking is specified;(2) in contravention of the agreement
between the partners, where the circumstances donot permit a dissolution under any
other provision of this article, by the express will of anypartner at any time;
No winding up of affairs in this case as contemplayed in Article 1829: on dissolution the
partnership is not terminated but continues until the winding up of partners affairs is
completed.
The new partnership simply took over the busines enterprise owned by the old
partnership and continued using the old name of Jade Mountain Products limited ,
without winding up the business affairs of the old partnership, paying off its
debts,liquidating and distributing its net assets, and then re-assembling the said assets
or mostof them and opening a new business enterprise.
Yes. the new partnership is liable for the debts of the old partnership
Legal basis: Art. 1840 (see codal)
ARTICLE 1840. In the following cases creditors of the dissolved partnership are
also creditors of the person or partnership continuing the business:
(1) When any new partner is admitted into an existing partnership, or when any
partner retires and assigns (or the representative of the deceased partner assigns)
his rights in partnership property to two or more of the partners, or to one or more
of the partners and one or more third persons, if the business is continued
without liquidation of the partnership affairs;
(2) When all but one partner retire and assign (or the representative of a deceased
partner assigns) their rights in partnership property to the remaining partner, who

continues the business without liquidation of partnership affairs, either alone or

with others;
(3) When any partner retires or dies and the business of the dissolved partnership
is continued as set forth in Nos. 1 and 2 of this article, with the consent of the
retired partners or the representative of the deceased partner, but without any
assignment of his right in partnership property;
(4) When all the partners or their representatives assign their rights in partnership
property to one or more third persons who promise to pay the debts and who
continue
the
business
of
the
dissolved
partnership;
(5) When any partner wrongfully causes a dissolution and the remaining partners
continue the business under the provisions of article 1837, second paragraph, No.
2, either alone or with others, and without liquidation of the partnership affairs;
(6) When a partner is expelled and the remaining partners continue the business
either alone or with others without liquidation of the partnership affairs.
The liability of a third person becoming a partner in the partnership continuing the
business, under this article, to the creditors of the dissolved partnership shall be
satisfied out of the partnership property only, unless there is a stipulation to the
contrary.
When the business of a partnership after dissolution is continued under any
conditions set forth in this article the creditors of the dissolved partnership, as
against the separate creditors of the retiring or deceased partner or the
representative of the deceased partner, have a prior right to any claim of the
retired partner or the representative of the deceased partner against the person or
partnership continuing the business, on account of the retired or deceased
partner's interest in the dissolved partnership or on account of any consideration
promised for such interest or for his right in partnership property.
Nothing in this article shall be held to modify any right of creditors to set aside
any assignment on the ground of fraud.
The use by the person or partnership continuing the business of the partnership
name, or the name of a deceased partner as part thereof, shall not of itself make
the individual property of the deceased partner liable for any debts contracted by
such person or partnership. (n)

Yu is entitled to enforce his claim for unpaid salaries, as well as other claims relating to
hisemployment with the previous partnership, against the new partnership
But Yu is not entitled to reinstatement. Reason: new partnership was entitled to
appointand hire a new gen. or asst. gen. manager to run the affairs of the
business enterprisetake over. An asst. gen. manager belongs to the most senior
ranks of management and anew partnership is entitled to appoint a top manager of
its own choice and confidence. Thenon-retention of Yu did not constitute unlawful
termination.

The new partnership had itsown new General Manager, Co, the principal new
owner himself. Yus old position thus became superfluous or redundant.
Yu is entitled to separation pay at the rate of one months pay for each year of service
thathe had rendered to the old partnership, a fraction of at least 6 months being
considered asa whole year.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-27343 February 28, 1979
MANUEL G. SINGSONG, JOSE BELZUNCE, AGUSTIN E. TONSAY, JOSE L.
ESPINOS, BACOLOD SOUTHERN LUMBER YARD, and OPPEN, ESTEBAN, INC.,
plaintiffs-appellees,
vs.
ISABELA SAWMILL, MARGARITA G. SALDAJENO and her husband CECILIO
SALDAJENO LEON GARIBAY, TIMOTEO TUBUNGBANUA, and THE PROVINCIAL
SHERIFF OF NEGROS OCCIDENTAL, defendants, MARGARITA G. SALDAJENO
and her husband CECILIO SALDAJENO, defendants-appellants.
FERNANDEZ, J.:

Facts: In 1951, defendants entered into a contract of partnership under the firm name
Isabela Sawmill. In 1956 the plaintiff sold to the partnership a motor truck and two
tractors. The partnership was not able to pay their whole balance even after demand
was made. One of the partners withdrew from the partnership but instead of terminating
the said partnership it was continued by the two remaining partners under the same firm
name. Plaintiffs also seek the annulment of the assignment of right with chattel mortgage
entered into by the withdrawing partner and the remaining partners. The appellants
contend that the chattel mortgage may no longer be nullified because it had been
judicially approved and said chattel mortgage had been judicially foreclosed.
Issue: Whether the withdrawal of one of the partners dissolved the partnership.
Ruling:
It does not appear that the withdrawal of the partner was not published in the
newspapers. The appellees and the public in general had a right to expect that whatever,
credit they extended to the remaining partners could be enforced against the properties
of the partnership. The withdrawing partner cannot be relieved from her liability to the
creditor of the partnership due to her own fault by not insisting on the liquidation of the
partnership. Though she had acted in good faith, the appellees also acted in good faith
in extending credit to the partnership. Where one of two innocent persons must suffer,
that person who gave occasion for the damages to be caused must bear the

consequences. Technically, the partnership was dissolved by the withdrawal of one of

the partners. Through her acts of entering into a memorandum with the remaining
partners misled the creditors that they were doing business with the partnership. Hence,
from the order of the lower court ordering the withdrawing partner to pay the plaintiffs,
she is thus entitled for reimbursement from the remaining partners.