EN BANC

[G.R. No. L-11840. December 10, 1963.]

ANTONIO C. GOQUIOLAY, ET AL., Plaintiffs-Appellants, v. WASHINGTON Z.

SYCIP, ET AL., Defendants-Appellees.

Norberto J. Quisumbing and Sycip, Salazar & Associates for Defendants-

Appellees.

Jose C. Calayco, for Plaintiffs-Appellants.

SYLLABUS

1. PARTNERSHIP; GENERAL PARTNER BY ESTOPPEL; WIDOW OF MANAGING PARTNER

AUTHORIZED BY OTHER PARTNER TO MANAGE PARTNERSHIP. — By authorizing the
widow of the managing partner to manage partnership property (which a limited
partner could not be authorized to do), the other general partner recognized her as a
general partner, and is now in estoppel to deny her position as a general partner, with
authority to administer and alienate partnership property.

2. ID.; HEIR OF PARTNER; STATUS ORDINARILY AS LIMITED PARTNER BUT MAY WAIVE
IT AND BECOME A GENERAL PARTNER. — Although the heir of a partner ordinarily
becomes a limited partner for his own protection, yet the heir may disregard it and
instead elect to become a collective or general partner, with all the rights and
obligations of one. This choice pertains exclusively to the heir, and does not require to
assent of the surviving partner.

3. ID.; PRESUMPTIONS; AUTHORITY OF PARTNER TO DEAL WITH PROPERTY. — A third

person has the right to presume that a general partner dealing with partnership
property has the requisite authority from his co- partners (Litton v. Hill and Ceron, Et
Al., 67 Phil. 513).

4. ID.; PROPERTY OF PARTNERSHIP; SALE OF IMMOVABLE, WHEN CONSIDERED

WITHIN THE ORDINARY POWERS OF A GENERAL PARTNER. — Where the express and
avowed purpose of the partnership is to buy and sell real estate (as in the present
case), the immovables thus acquired by the firm form part of its stock-in-trade, and the
sale thereof is in pursuance of partnership purposes, hence within the ordinary powers
of the partner.

5. ID.; SALE OF PARTNERSHIP PROPERTY; ACTION FOR RESCISSION ON GROUND OF

FRAUD; NO INADEQUACY OF PRICE; CASE AT BAR. — Appellant’s claim that the price
was inadequate, relies on the testimony of a realtor, who in 1955, six years after the
sale in question, asserted that the land was by then worth double the price for which it
was sold. But taking into account the continued rise of real estate values since
liberation, and the fact that the sale in question was practically a forced sale because
the partnership had no other means to pay its legitimate debts, this evidence certainly
does not show such "gross inadequacy" as to justify rescission of the sale.

6. ID.; ID.; ID.; RELATIONSHIP ALONE IS NO BADGE OF FRAUD. — The Supreme Court
has ruled that relationship alone is not a badge of fraud (Oria Hnos v. McMicking, 21
Phil. 243; Hermandad del Smo. Nombre de Jesus v. Sanchez, 40 Off. Gaz., 1685).

7. ID.; ID.; ID.; FRAUD OF CREDITORS DISTINGUISHED FROM FRAUD TO OBTAIN

CONSENT. — The fraud charged not being one used to obtain a party’s consent to a
contract (not being deceit or dolus in contrahendo) it can only be a fraud of creditors
that gives rise to a rescission of contract.

8. ID.; ID.; ID.; SUBSIDIARY NATURE; ALLEGATION OF NO OTHER MEANS TO OBTAIN

REPARATION, NECESSARY. — The action for rescission is subsidiary; it can not be
instituted except when the party suffering damage has no other legal means to obtain
reparation for the same. Hence, if there is no allegation or evidence that the plaintiff-
appellant can not obtain reparation from the widow and heirs of the deceased partner,
the suit to rescind the sale in question is not maintainable, even if the fraud charged
actually did exist.

BAUTISTA ANGELO, J., dissenting: chanrob1es virtual 1aw library

1. PARTNERSHIP; SALE OF PARTNERSHIP PROPERTY BY WIDOW OF MANAGING

PARTNER; NO ESTOPPEL; CASE AT BAR. — The sale of the partnership properties by
the widow of the managing partner cannot be upheld on the ground of estoppel, first,
because the alleged acts of management have not been clearly proven; second,
because the defendants, or the buyers, were not misled nor did they rely on the acts of
management, but instead they acted solely on the opinion of their counsel; and third
because the defendants were themselves estopped to invoke a defense which they tried
to dispute and repudiate.

2. ID.; ID.; ACCEPTANCE OF INHERITANCE BY HEIR DOES NOT MAKE HIM A GENERAL
PARTNER; CASE AT BAR. — Mere acceptance of the inheritance does not make the heir
of a general partner a general partner himself. The heir must declare that he is entering
the partnership as a general partner unless the deceased partner had made it an
express condition in his will that the requisite of inheritance, in which case acceptance
of the inheritance is enough. But in the case at bar, the deceased partner died
intestate.

3. ID.; ID.; NECESSITY OF HEIR MAKING A DECLARATION OF HIS CHARACTER AS

GENERAL PARTNER. — The heir upon entering the partnership must make a declaration
of his character, otherwise he should be deemed as having succeeded as limited
partner by the mere acceptance of the inheritance.

4. ID.; ID.; ID.; PROHIBITION ON LIMITED PARTNER TO PERFORM ACTS OF

ADMINISTRATION. — In the absence of declaration of the heir’s character of general
partner, the peremptory prohibition contained in Article 148 of the Code of Commerce
became binding upon such heir and she could not change her status as limited partner
by violating its provisions not only under the general principle that prohibited acts
cannot produce any legal effect, but also because Art. 147 of the same Code precludes
her from acquiring more rights than those pertaining to her as a limited partner. The
alleged acts of management, therefore, did not give said heir the character of general
partner to authorize her to bind the partnership.

5. ID.; ID.; GENERAL PARTNER CANNOT SELL PARTNERSHIP PROPERTIES WITHOUT

AUTHORITY FROM OTHER PARTNERS. — Assuming arguendo that the alleged acts of
management imputed to the heir of the deceased partner gave her the character of a
general partner, still she could not sell the partnership property to pay an obligation of
the partnership without authority from the other partners. Such a sale is invalid for
being in excess of her authority.

RESOLUTION

REYES, J.B.L., J.:

The matter now pending is the appellant’s motion for reconsideration of our main
decision, wherein we have upheld the validity of the sale of the lands owned by the
partnership Goquiolay & Tan Sin An, made in 1949 by the widow of the managing
partner, Tan Sin An (executed in her dual capacity as Administratrix of the husband’s
estate and as partner in lieu of the husband), in favor of buyers Washington Sycip and
Betty Lee for the following consideration: chanrob1es virtual 1aw library

Cash paid P 37,000.00

Debts assumed by purchaser: chanrob1es virtual 1aw library

To Yutivo 62,415.91

To Sing Yee Cuan & Co., 54,310.13

TOTAL P153,726.04.

Appellant Goquiolay, in his motion for reconsideration, insists that, contrary to our
holding, Kong Chai Pin, widow of the deceased partner Tan Sin an, never became more
than a limited partner, incapacitated by law to manage the affairs of the partnership;
that the testimony of her witnesses Young and Lim belies that she took over the
administration of the partnership property; and that, in any event, the sale should be
set aside because it was executed with the intent to defraud appellant of his share in
the properties sold.

Three things must be always held in mind in the discussion of this motion to reconsider,
being basic and beyond controversy: chanrob1es virtual 1aw library

(a) That we are dealing here with the transfer of partnership property by one partner,
acting in behalf of the firm, to a stranger. There is no question between partners inter
se, and this aspect of the case was expressly reserved in the main decision of 26 July
1960;

(b) That partnership was expressly organized "to engage in real estate business, either
by buying and selling real estate." The Articles of co-partnership, in fact, expressly
provided that: jgc:chanrobles.com.ph

"IV. The object and purpose of the copartnership are as follows: chanrob1es virtual 1aw library

1. To engage in real estate business, either by buying and selling real estates; to
subdivide real estates into lots for the purpose of leasing and selling them." ;

(c) That the properties sold were not part of the contributed capital (which was in cash)
but land precisely acquired to be sold, although subject to a mortgage in favor of the
original owners, from whom the partnership had acquired them.

With these points firmly in mind, let us turn to the points insisted upon by Appellant.

It is first averred that there is "not one iota of evidence" that Kong Chai Pin managed
and retained possession of the partnership properties. Suffice it to point out that
appellant Goquiolay himself admitted that —

". . . Mr. Yun Eng Lai asked me if I can just let Mrs. Kong Chai Pin continue to manage
the properties (as) she had no other means of income. Then I said, because I wanted to
help Mrs. Kong Chai Pin, she could just do it and besides I am not interested in
agricultural lands. I allowed her to take care of the properties in order to help her and
because I believe in God and — wanted to help her." cralaw virtua1aw library

Q So the answer to my question is you did not take any steps?

A I did not.

Q And this conversation which you had with Mrs. Yu Eng Lai was few months after
1945?

A In the year 1945." (Italics supplied)

The appellant subsequently ratified this testimony in his deposition of 30 June 1956,
pages 8-9, wherein he stated: jgc:chanrobles.com.ph

"that plantation was being occupied at that time by the widow, Mrs. Tan Sin An, and of
course they are receiving quite a lot of benefit from that plantation." cralaw virtua1aw library

Discarding the self-serving expressions, these admissions of Goquiolay are certainly

entitled to greater weight than those of Hernando Young and Rufino Lim, having been
made against the party’s own interest.

Moreover, the appellant’s reference to the testimony of Hernando Young, that the
witness found the properties "abandoned and undeveloped", omits to mention that said
part of the testimony started with the question: jgc:chanrobles.com.ph
"Now, you said that about 1942 or 1943 you returned to Davao. Did you meet Mrs.
Kong Chai Pin there in Davao at that time?"

Similarly, the testimony of Rufino Lim, to the effect that the properties of the
partnership were undeveloped, and the family of the widow (Kong Chai Pin) did not
receive any income from the partnership properties, was given in answer to the
question:jgc:chanrobles.com.ph

"According to Mr. Goquiolay, during the Japanese occupation Tan Sin An and his family
lived on the plantation of the partnership and derived their subsistence from that
plantation. What can you say to that?" (Dep. 19 July 1956, p. 8).

And also —

"What can you say as to the development of these other properties of the partnership
which you saw during the occupation?" (Dep. p. 13, Italics supplied)

to which witness gave the following answer: chanrob1es virtual 1aw library

I saw the properties in Mamay still undeveloped. The third property which is in Tigatto
is about eleven (11) hectares and planted with abaca seedlings planted by Mr. Sin An.
When I went there with Hernando Young we saw all the abaca destroyed. The place was
occupied by the Japanese Army. They planted camotes and vegetables to feed the
Japanese Army. Of course they never paid any money to Tan Sin An or his family."
(Dep., Lim, pp. 13-14. Italics supplied)

Plainly, both Young and Lim’s testimonies do not belie, or contradict, Goquiolay’s
admission that he told Mr. Yu Eng Lai that the window "could just do it" (i.e., continue
to manage the properties). Witnesses Lim and Young referred to the period of Japanese
occupation; but Goquiolay’s authority was, in fact, given to the widow in 1945, after the
occupation.

Again, the disputed sale by the widow took place in 1949. That Kong Chai Pin carried
out no acts of management during the Japanese occupation (1942-1944) does not
mean that she did not do so from 1945 to 1949.

We thus find that Goquiolay did not merely rely on reports from Lim and Young; he
actually manifested his willingness that the widow should manage the partnership
properties. Whether or not she complied with this authority is a question between her
and the appellant, and is not here involved. But the authority was given, and she did
have it when she made the questioned sale, because it was never revoked.

It is argued that the authority given by Goquiolay to the widow Kong Chai Pin was only
to manage the property, and that it did not include the power to alienate, citing Article
1713 of the Civil Code of 1889. What this argument overlooks is that the widow was not
a mere agent, because she had become a partner upon her husband’s death, as
expressly provided by the articles of co-partnership. Even more, granting that by
succession to her husband, Tan Sin An, the widow only became a limited partner,
Goquiolay’s authorization to manage the partnership property was proof that he
considered and recognized her as general partner, at least since 1945. The reason is
plain: Under the law (Article 148, last paragraph, Code of Commerce), appellant could
not empower the widow, if she were only a limited partner, to administer the properties
of the firm, even as a mere agent: jgc:chanrobles.com.ph

"Limited partners may not reform any act of administration with respect to the interest
of the co-partnership, not even in the capacity of agents of the managing partners."
(Italics supplied).

By seeking authority to manage partnership property, Tan Sin An’s widow showed that
she desired to be considered a general partner. By authorizing the widow to manage
partnership property (which a limited partner could not be authorized to do), Goquiolay
recognized her as such partner, and is now in estoppel to deny her position as a general
partner, with authority to administer and alienate partnership property.

Besides, as we pointed out in our main decision, the heir ordinarily (and we did not say
"necessarily") becomes a limited partner for his own protection, because he would
normally prefer to avoid any liability in excess of the value of the estate inherited so as
not to jeopardize hid personal assets. But this statutory limitation of responsibility being
designed to protect the heir, the latter may disregard it and instead elect to become a
collective or general partner, with all the rights and privileges of one, and answering for
the debts of the firm not only with the inheritance but also with the heir’s personal
fortune. This choice pertains exclusively to the heir, and does not require the assent of
the surviving partner.

It must be remembered that the articles of co-partnership here involved expressly

stipulated that:jgc:chanrobles.com.ph

"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).

The Articles did not provide that the heirs of the deceased would be merely limited
partners; on the contrary, they expressly stipulated that in case of death of either
partner "the co-partnership . . . will have to be continued" with the heirs or assigns. It
certainly could not be continued if it were to be converted from a general partnership
into a limited partnership, since the difference between the two kinds of associations is
fundamental; and specially because the conversion into a limited association would
leave the heirs of the deceased partner without a share in the management. Hence, the
contractual stipulation does actually contemplate that the heirs would become general
partners rather than limited ones.

Of course, the stipulation would not bind the heirs of the deceased partner should they
refuse to assume personal and unlimited responsibility for the obligations of the firm.
The heirs, in other words, can not be compelled to become general partners against
their wishes. But because they are not so compellable, it does not legitimately follow
that they may not voluntarily choose to become general partners, waiving the
protective mantle of the general laws of succession. And in the latter event, it is
pointless to discuss the legality of any conversion of a limited partner into a general
one. The heir never was a limited partner, but chose to be, and became, a general
partner right at the start.

It is immaterial that the heir’s name was not included in the firm name, since no
conversion of status is involved, and the articles of co-partnership expressly
contemplated the admission of the partner’s heirs into the partnership.

It must never be overlooked that this case involves the rights acquired by strangers,
and does not deal with the rights existing between partners Goquiolay and the widow of
Tan Sin An. The issues between the partners inter se were expressly reserved in our
main decision. Now, in determining what kind of partner the widow of partner Tan Sin
An had elected to become, strangers had to be guided by her conduct and actuations
and those of appellant Goquiolay. Knowing that by law a limited partner is barred from
managing the partnership business or property, third parties (like the purchasers) who
found the widow possessing and managing the firm property with the acquiescence (or
at least without apparent opposition) of the surviving partners were perfectly justified in
assuming that she had become a general partner, and, therefore, in negotiating with
her as such a partner, having authority to act for, and in behalf of the firm. This belief,
be it noted, was shared even by the probate court that approved the sale by the widow
of the real property standing in the partnership name. That belief was fostered by the
very inaction of appellant Goquiolay. Note that for seven long years, from partner Tan
Sin An’s death in 1942 to the sale in 1949, there was more than ample time for
Goquiolay to take up the management of these properties, or at least ascertain how its
affairs stood. For seven years Goquiolay could have asserted his registry could have
warned strangers that they must deal with him alone, as sole general partner. But he
did nothing of the sort, because he was not interested (supra), and he did not even
take steps to pay, or settle, the firm debts that were overdue since before the outbreak
of the last war. He did not even take steps, after Tan sin An died, to cancel, or modify,
the provisions of the partnership articles that he (Goquiolay) would have no
intervention in the management of the partnership. This laches certainly contributed to
confirm the view that the widow of Tan Sin An had, or was given, authority to manage
and deal with the firm’s properties apart from the presumption that a general partner
dealing with partnership property has the requisite authority from his co-partners
(Litton v. Hill and Ceron, Et Al., 67 Phil. 513; quoted in our main decision, p. 11).

"The stipulation in the articles of partnership that any of the two managing partners
may contract and sign in the name of the partnership with the consent of the others,
undoubtedly creates an obligation between the two partners, which consists in asking
the other’s consent before contracting for the partnership. This obligation of course is
not imposed upon a third person who contracts with the partnership. Neither is it
necessary for the third person to ascertain if the managing partner with whom he
contracts has previously obtained the consent of the other. A third person may and has
a right to presume that the partner with whom he contracts has, in the ordinary and
natural course of business, the consent of his copartner; for otherwise he would not
enter into the contract. The third person would naturally not presume that the partner
with whom he enters into the transaction is violating the articles of partnership, but on
the contrary is acting in accordance therewith. And this finds support in the legal
presumption that the ordinary course of business has been followed (No. 18, section
334). This last presumption is equally applicable to contracts which have the force of
law between the parties." (Litton v. Hill & Ceron, Et Al., 67 Phil. 409, 516). (Italics
supplied.)

It is next urged that the widow, even as a partner, had no authority to sell the real
estate of the firm. This argument is lamentably superficial because it fails to
differentiate between real estate acquired and held as stock-in-trade and real estate
held merely as business site (Vivante’s "taller o banco social") for the partnership.
Where the partnership business is to deal in merchandise and goods, i.e., movable
property, the sale of its real property (immovables) is not within the ordinary powers of
a partner, because it is not in line with the normal business of the firm. But where the
express and avowed purpose of the partnership is to buy and sell real estate (as in the
present case), the immovables thus acquired by the firm from part of its stock-in-trade,
and the sale thereof is in pursuance of partnership purposes, hence within the ordinary
powers of the partner. This distinction is supported by the opinion of Gay de Montella1 ,
in the very passage quoted in the appellant’s motion for reconsideration: jgc:chanrobles.com.ph

"La enjenacion puede entrar en la facultades del gerente, cuando es conforme a los
fines sociales. Pero esta facultad de enajenar limitada a las ventas conforme a los fines
sociales, viene limitada a los objetos de comercio o a los productos de la fabrica para
explotacion de los cuales se ha constituido la Sociedad. Ocurrira una cosa parecida
cuando el objecto de la Sociedad fuese la compra y venta de inmuebles, en cuyo caso el
gerente estaria facultado para otorgar las ventas que fuere necesario." (Montella)
(Italics supplied)

The same rule obtains in American law.

In Rosen v. Rosen, 212 N.Y. Supp. 405, 406, it was held: jgc:chanrobles.com.ph

"a partnership to deal in real estate may be created and either partner has the legal
right to sell the firm real estate." cralaw virtua1aw library

In Chester v. Dickerson, 54 N.Y. 1, 13 Am. Rep. 550: jgc:chanrobles.com.ph

"And hence, when the partnership business is to deal in real estate, one partner has
ample power, as a general agent of the firm, to enter into an executory contract for the
sale of real estate." cralaw virtua1aw library

And in Revelsky v. Brown, 92 Ala. 522, 9 South 182, 25 Am. St. Rep. 83: jgc:chanrobles.com.ph

"If the several partners engaged in the business of buying and selling real estate can
not bind the firm by purchases or sales of such property made in the regular course of
business, then they are incapable of exercising the essential rights and powers of
general partners and their association is not really a partnership at all, but a several
agency." cralaw virtua1aw library

Since the sale by the widow was in conformity with the express objective of the
partnership, "to engage . . . in buying and selling real estate" (Art. IV, No. 1, Articles of
Copartnership), it can not be maintained that the sale was made in excess of her
powers as general partner.

Considerable stress is laid by appellant in the ruling of the Supreme court of Ohio in
McGrath, Et. Al. v. Cowen, Et Al., 49 N.E., 338. But the facts of that case are vastly
different from the one before us. In the McGrath case, the Court expressly found
that:jgc:chanrobles.com.ph

"The firm was then, and for some time had been, insolvent, in the sense that its
property was insufficient to pay its debts, though it still had good credit, and was
actively engaged in the prosecution of its business. On that day, which was Saturday,
the plaintiff caused to be prepared, ready for execution, the four chattel mortgages in
question, which cover all the tangible property then belonging to the firm, including the
counters, shelving, and other furnishings and fixtures necessary for, and used in
carrying on, its business, and signed the same in this form: "In witness whereof, the
said Cowen & McGrath, a firm, and Owen McGrath, surviving partner, of said firm, and
Owen McGrath, individually, have hereunto set their hands, this 20th day of May, A.D.
1893. Cowen & Mcgrath, by Owen McGrath. Owen McGrath, Surviving partner of Cowen
& McGrath. Owen & McGrath." At the same time, the plaintiff had prepared, ready for
filing, the petition for the dissolution of the partnership and appointment of a receiver
which he subsequently filed, as hereinafter stated. On the day the mortgages were
signed, they were placed in the hands of the mortgages, which was the first intimation
to them that there was any intention to make them. At the time none of the claims
secured by the mortgages were due, except, it may be, a small part of one of the, and
none of the creditors to whom the mortgages were made had requested security, or
were pressing for the payment of their debts. . . . The mortgages appear to be without
a sufficient condition of defeasance, and contain a stipulation authorizing the
mortgagees to take immediate possession of the property, which they did as soon as
the mortgages were filed through the attorney who then represented them, as well as
the plaintiff; and the stores were at once closed, and possession delivered by them to
the receiver appointed upon the filing of the petition. The avowed purpose of the
plaintiff, in the course pursued by him, was to terminate the partnership, place its
property beyond the control of the firm, and insure the preference of the mortgagees,
all of which was known to them at the time; . . ." (Cas cit., p. 343, Italics supplied).

It is natural that from these facts the Supreme Court of Ohio should draw the
conclusion that the conveyances were made with intent to terminate the partnership,
and that they were not within the powers of McGrath as partner. But there is no
similarity between those acts and the sale by the widow of Tan Sin An. In the McGrath
case, the sale included even the fixtures used in the business; in our case, the lands
sold were those acquired to be sold. In the McGrath case, none of the creditors were
pressing for payment; in our case, the creditors had been unpaid for more than seven
years, and their claims had been approved by the probate court for payment. In the
McGrath case, the partnership received nothing beyond the discharge of its debts; in
the present case, not only were its debts assumed by the buyers, but the latter paid, in
addition, P37,000.00 in cash to the widow, to the profit of the partnership. Clearly, the
McGrath ruling is not applicable.

We will now turn to the question of fraud. No direct evidence of it exists; but appellant
points out, as indicia thereof, the allegedly low price paid for the property, and the
relationship between the buyers, the creditors of the partnership, and the widow of Tan
Sin An.

First, as to the price: As already noted, this property was actually sold for a total of
P153,726.04, of which P37,000.00 was in cash, and the rest in partnership debts
assumed by the purchaser. These debts (P62,415.91 to Yutivo, and P54,310.13 to Sing
Ye Cuan & Co.) are not questioned; they were approved by the Court, and its approval
is now final. The claims were, in fact, for the balance on the original purchase price of
the land sold (due first to La Urbana, later to the Banco Hipotecario) plus accrued
interests and taxes, redeemed by the two creditors-claimants. To show that the price
was inadequate, appellant relies on the testimony of the realtor Mata, who in 1955, six
years after the sale in question, asserted that the land was worth P312,000.00. Taking
into account the continued rise of real estate values since liberation, and the fact that
the sale in question was practically a forced sale because the partnership had no other
means to pay its legitimate debts, this evidence certainly does not show such "gross
inadequacy" as to justify rescission of the sale. If at the time of the sale (1949) the
price of P153,726.04 was really low, how is it that appellant was not able to raise the
amount, even if the creditor’s representative, Yu Khe Thai, had already warned him four
years before 91945) that the creditors wanted their money back, as they were justly
entitled to?

It is argued that the land could have been mortgaged to raise the sum needed to
discharge the debts. But the lands were already mortgaged, and had been mortgaged
since 1940, first to La Urbana, and then to the Banco Hipotecario. Was it reasonable to
expect that other persons would loan money to the partnership when it was unable
even to pay the taxes on the property, and the interest on the principal since 1940? If it
had been possible to find lenders willing to take a chance on such a bad financial
record, would not Goquiolay have taken advantage of it? But the fact is clear on the
record that since liberation until 1949 Goquiolay never lifted a finger to discharge the
debts of the partnership. Is he entitled now to cry fraud after the debts were discharged
with no help from him.

With regard to the relationship between the parties, suffice it to say that the Supreme
Court has ruled that relationship alone is not a badge of fraud. (Oria Hnos. v.
McMicking, 21 Phil. 243; also Hermandad del Smo. Nombre de Jesus v. Sanchez, 40 off.
Gaz., 1685). There is no evidence that the original buyers, Washington Sycip and Betty
Lee, were without independent means to purchase the property. That the Yutivos
should be willing to extend credit to them, and not to appellant, is either illegal nor
immoral; at the very least, these buyers did not have a record of inveterate defaults
like the partnership "Tan Sin An & Goquiolay."

Appellant seeks to create the impression that he was the victim of a conspiracy
between the Yutivo firm and their component members. But no proof is adduced. If he
was such a victim, he could have easily defeated the conspirators by raising money and
paying off the firm’s debts between 1945 to 1949; but he did not; he did not even care
to look for a purchaser of the partnership assets. Were it true that the conspiracy to
defraud him arose (as he claims) because of his refusal to sell the lands when in 1945
Yu Khe Thai asked him to do so, it is certainly strange that the conspirators should wait
4 years, until 1949, to have the sale effected by the widow of Tan sin An, and that the
sale should have been routed through the probate court taking cognizance of Tan Sin
An’s estate, all of which increased the risk that the supposed fraud should be detected.

Neither was there any anomaly in the filing of the claims of Yutivo and Sing Yee Cuan &
Co., (as subrogees of the Banco Hipotecario) in proceedings for the settlement of the
estate of Tan Sin An. This for two reasons: First, Tan Sin An and the partnership "Tan
Sin An & Goquiolay" were solidary (joint and several) debtors (Exhibit "N", mortgage to
the Banco Hipotecario), and Rule 87, section 6 is to the effect that: jgc:chanrobles.com.ph

"Where the obligation of the decedent is joint and several with another debtor, the
claim shall be filed against the decedent as if he were the only debtor, without
prejudice to the right of the estate to recover contribution from the other debtor.
(Italics supplied).

Secondly, the solidary obligation was guaranteed by a mortgage on the properties of

the partnership and those of Tan Sin An personally, and a mortgage is indivisible, in the
sense that each and every parcel under mortgage answers for the totality of the debt
(Civ. Code of 1889, Article 1860; New Civil Code, Art. 2089).

A final and conclusive consideration: The fraud charged not being one used to obtain a
party’s consent to a contract (i.e., not being deceit or dolus in contrahendo), if there is
fraud at all, it can only be a fraud of creditors that gives rise to a rescission of the
offending contract. But express provision of law (Article 1294, Civil Code of 1889;
Article 1383, New Civil Code), "the action for rescission is subsidiary; it can not be
instituted except when the party suffering damage has no other legal means to obtain
reparation for the same." Since there is no allegation, or evidence, that Goquiolay can
not obtain reparation from the widow and heirs of Tan sin An, the present suit to
rescind the sale in question is not maintainable, even if the fraud charged actually did
exist.

PREMISES CONSIDERED, the motion for reconsideration is denied.

Bengzon, C.J., Padilla, Concepcion, Barrera and Dizon, JJ., concur.

Regala, J., did not take part.