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

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

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;

2. The Respondent be ordered to enforce without exemption every requisite provision

of the Building Code as so mandated by it. [35]

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 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.
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]
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]

On the two (2) issues raised in G. R. No. 94285, the Court rules for respondents.
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]
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.
Sec. (6) of Presidential Decree No. 902-A, as amended, reads:

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 parties-litigants 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.
Sound bases therefor must appear on record, and there should be a clear showing of its
[52]

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.

[G.R. No. 30616 : December 10, 1990.]

192 SCRA 110
EUFRACIO D. ROJAS, Plaintiff-Appellant, vs. CONSTANCIO B.
MAGLANA,Defendant-Appellee.

DECISION

PARAS, J.:
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.
As found by the trial court, the antecedent facts of the case are as follows:
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 Co-
Partnership (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).
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).
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).
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).
On February 4, 1957, Rojas withdrew his equipment from the partnership for use in the
newly acquired area (Decision, R.A. 948).
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. 138-143). 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;
(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:
"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 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;
"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.
The main issue in this case is the nature of the partnership and legal relationship of the
Maglana-Rojas 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).
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.
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.
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 Co-Partnership; 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 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).
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

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).
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.
Melencio-Herrera, Sarmiento and Regalado, JJ., concur.
Padilla, J., took no part.

EN BANC

G.R. No. 17024 March 24, 1922

DOMINGO BEARNEZA, plaintiff-appelle,

vs.
BALBINO DEQUILLA, defendant-appellant.

C. Lozano and Cecilio I. Lim for appellant.

Montinola, Montinola & Hontiveros for appellee.
ROMUALDEZ, J.:

In the year 1903, Balbino Dequilla, the herein defendant, and Perpetua Bearneza formed a
partnership for the purpose of exploiting a fish pond situated in the barrio of Talisay, municipality of
Barotac Nuevo, Province of Iloilo, Perpetua obligating herself to contribute to the payment of the
expenses of the business, which obligation she made good, and both agreeing to divide the profits
between themselves, which they had been doing until the death of the said Perpetua in the year
1912.

The deceased left a will in one of the clauses of which she appointed Domingo Bearnez, the herein
plaintiff, as her heir to succeed to all her rights and interests in the fish pond in question.

Demand having been made upon Balbino Dequilla by Domingo Bearneza for the delivery of the part
of the fish pond belonging to his decedent, Perpetua, and delivery having been refused, Domingo
Bearneza brought this action to recover said part of the fish pond belonging to his decedent,
Perpetua, and delivery having been refused, Domingo Bearneza brought this action recover said
part of the fish pond and one-half of the profits received by the defendant from the fish pond from the
year 1913 to 1919, as damages (the amended complaint was filed on April 12, 1920), amounting,
according to plaintiff, to the sum of thirteen thousand one hundred pesos (13,100).

In his answer, the defendant denies generally and specifically the allegations of the complaint, and
alleges, as special defense, that "the formation of the supposed partnership between the plaintiff and
the defendant for the exploitation of the aforesaid fish pond was not carried into effect, on account of
the plaintiff having refused to defray the expenses of reconstruction and exploitation of said fish
pond." As another special defense, the defendant alleges "that in the event that the court should hold
the plaintiff to be entitled to the undivided one-half of the fish pond, claimed in the complaint, the
plaintiff's action has prescribed, the time for bringing the same having elapsed."

Proceedings having been held as usual, the court below rendered judgment, declaring the plaintiff
owner of one-half of the fish pond, which was composed of the portions known as "Alimango" and
"Dalusan," but without awarding him any of the damages claimed by him, the same not having been
proven, in the opinion of the court, and ordering the defendant to pay the costs.

From this judgment the defendant appeals, making various assignments of error. The plaintiff did not
appeal from that part of the judgment denying his claim for damages; hence the only question we
are called upon to decide is whether or not the plaintiff has any right to maintain an action for the
recovery of one-half of the said fish pond.

The partnership formed by Perpetua Bearneza and Balbino Dequilla, as to the existence of which
the proof contained in the record is conclusive and there is no dispute, was of a civil nature. It was a
particular partnership, as defined in article 1678 of the Civil Code, it having had for its subject-matter
a specified thing, to with, the exploitation of the aforementioned fish pond. Although, as the trial court
says in its decision, the defendant, in his letters to Perpetua or her husband, makes reference to the
fish pond, calling it "our," or "your fish pond," this reference cannot be held to include the land on
which the said fish pond was built. It has not been proven that Perpetua Bearneza participated in the
ownership of said land, and Exhibits 2 and 3 of the defendant show that he has been paying, as
exclusive owner of the fish pond, the land tax thereon, although in Exhibit X he says that the said
land belongs to the State. The conclusion, therefore, from the evidence is that the land on which the
fish pond was constructed did not constitute a part of the subject- matter of the aforesaid
partnership.
Now, this partnership not having been organized in the form of a mercantile partnership, and,
therefore, the provisions of the Code of Commerce not being applicable thereto (article 1670 of the
Civil Code), it was dissolved by the death of Perpetua Bearneza, and falls under the provisions of
article 1700, subsection 3, of the same Code, and not under the exception established in the last
paragraph of said article 1700 of the Civil Code.

Neither can it be maintained that the partnership continued to exist after the death of Perpetua,
inasmuch as it does not appear that any stipulation to that effect has ever been made by her and the
defendant, pursuant to the provisions of article 1704 of the Code last cited.

The partnership having been dissolved by the death of Perpetua Bearneza, its subsequent legal
status was that of a partnership in liquidation, and the only rights inherited by her testamentary heir,
the herein plaintiff, were those resulting from the said liquidation in favor of the deceased partner,
and nothing more. Before this liquidation is made, which up to the present has not been effected, it is
impossible to determine what rights or interests, if any, the deceased had, the partnership bond
having been dissolved.

There is no sufficient ground for holding that a community of property existed between the plaintiff
and the defendant, it not being known whether the deceased still had any interest in the partnership
property which could have been transmitted by will to the plaintiff. There being no community of
property, article 395 of the Civil Code cited by the plaintiff in support of his contention can have no
application to the case at bar.

Neither can it be said that the partnership continued between the plaintiff and the defendant. It is true
that the latter's act in requiring the heirs of Perpetua to contribute to the payment of the expenses of
exploitation of the aforesaid fishing industry was an attempt to continue the partnership, but it is also
true that neither the said heirs collectively, nor the plaintiff individually, took any action in response to
that requirement, nor made any promise to that effect, and therefore no new contract of partnership
existed.

We find that the plaintiff has not sufficiently shown his right of action.

The judgment appealed from is modified, the same being affirmed insofar as it denies the plaintiff's
claim for damages, and reversed insofar as it declares the said plaintiff owner of one-half of the fish
pond, "Alimango" and "Dalusan," here in dispute.

No special finding as to costs is made. So ordered.

Araullo, C.J., Malcolm, Avancea, Villamor, Ostrand and Johns, JJ., concur.