G.R. No. 94285 & G.R. No. 100313, 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. 94285 )

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. (G.R. No. 100313)

FACTS

Sy Yong Hu & Sons is a partnership registered with the SEC on March 29, 1962, composed of Sy Yong Hu and his sons Jose Sy (managing partner), Jayme Sy, Marciano Sy, Willie Sy, Vicente Sy, and Jesus Sy. Several partners died: Sy Yong Hu (May 18, 1978), Jose Sy (August 12, 1978), Vicente Sy (December 30, 1979), and Marciano Sy (August 7, 1987). The partnership holds valuable assets.
In September 1977, Keng Sian (claiming to be Sy Yong Hu’s common-law wife) filed Civil Case No. 13388 against the partnership and individual partners for accounting and reconveyance of a one-half share in properties she claimed were co-owned with Sy Yong Hu but diverted to the partnership. The defendants, including Sy Yong Hu, countered that Keng Sian was merely a house helper and the properties were exclusively owned by the partnership.
On September 20, 1978, Marciano Sy filed SEC Case No. 1648 (petition for declaratory relief) against Vicente Sy, Jesus Sy, and Jayme Sy, seeking his appointment as managing partner following Jose Sy’s death. The respondents sought dissolution of the partnership and appointment of Vicente Sy as managing partner. Hearing Officer Emmanuel Sison dismissed the petition, dissolved the partnership, and named Jesus Sy (replacing the deceased Vicente Sy) as managing partner to wind up its affairs. The SEC en banc affirmed this in its Abello decision dated June 8, 1982, clarifying that the partnership was dissolved by the express will of the majority, not ipso facto by a partner’s death, and that Jesus Sy was to act as a manager in liquidation, required to submit an accounting and project of partition.
In 1982, the children of Keng Sian and Sy Yong Hu filed SEC Case No. 2338 to revoke the partnership’s registration and revert its assets to Sy Yong Hu’s estate. This was dismissed by Hearing Officer Bernardo T. Espejo on January 11, 1984, and the order became final. Their subsequent motion to intervene in SEC Case No. 1648 was denied on May 9, 1985, with no appeal.
Meanwhile, in Civil Case No. 13388, the RTC appointed Felix Ferrer as Special Administrator for the Intestate Estate of Sy Yong Hu. On August 30, 1985, Alex Ferrer moved to intervene in SEC Case No. 1648 on behalf of the Intestate Estate. In December 1985, Special Administrator Ferrer filed an Amended Complaint in Civil Case No. 13388, joining Keng Sian as plaintiff and adopting her theory that the partnership assets were co-owned by Keng Sian and Sy Yong Hu and wrongfully diverted.
The motion to intervene in SEC Case No. 1648 was denied by Hearing Officer Sison on May 9, 1986. The SEC en banc, in its Sulit decision, reversed this denial, allowing the intervention to avoid multiplicity of suits and in the interest of justice, and remanded the case for further proceedings on partition/distribution of partnership assets. This decision reiterated the finality of the Abello decision dissolving the partnership.
During subsequent proceedings in SEC Case No. 1648 before Hearing Officer Felipe S. Tongco, the parties agreed that no partnership assets would be disposed of pending Civil Case No. 903 (formerly 13388). On October 5, 1988, Hearing Officer Tongco issued an Order placing the partnership under a receivership committee to preserve its assets during the pendency of the civil case. Petitioners appealed this order to the SEC en banc, which affirmed it on January 16, 1989. The Court of Appeals initially affirmed the SEC en banc’s order but later granted a Motion for Reconsideration.
In a related proceeding (G.R. No. 100313), the RTC, Branch 51, Bacolod City, issued orders in Civil Case No. 903 for the turnover of partnership properties (specifically a building) to the Estate’s receiver. The Court of Appeals dismissed the petition challenging these orders.

ISSUE

The primary legal issue is the propriety of the SEC’s (and subsequently the Court of Appeals’) orders: 1) allowing the intervention of the Intestate Estate of Sy Yong Hu in the partnership dissolution and liquidation proceedings (SEC Case No. 1648), and 2) placing the partnership under receivership pending the resolution of a separate civil case (Civil Case No. 903/13388) claiming ownership over the partnership assets.

RULING

The Supreme Court DENIED the petitions and AFFIRMED the assailed resolutions and decisions of the Court of Appeals.
The Court held that the intervention by the Intestate Estate of Sy Yong Hu in SEC Case No. 1648 was proper. The Estate, through its Special Administrator, had a legal interest in the matter of litigation—the partition and distribution of the partnership assets—because it was claiming, in the pending civil case, that those assets actually belonged to the co-ownership of Sy Yong Hu and Keng Sian and were wrongfully registered in the partnership’s name. This claim constituted a “legal interest” in the subject of the SEC proceedings for liquidation and partition. Allowing intervention served the interests of justice and equity, prevented multiplicity of suits, and ensured due process by allowing the Estate to protect its alleged rights directly in the proceedings where the assets were being distributed.
Furthermore, the Court upheld the placement of the partnership under a receivership committee. The dissolution of the partnership had been decreed with finality in the Abello decision. Upon dissolution, a partnership continues only for the purpose of winding up its affairs. The appointment of a receiver to preserve the assets during the winding-up period, especially given the conflicting claims of ownership in a pending civil case, was a proper exercise of discretion to prevent dissipation or loss of the properties. The receivership was a conservatory measure to maintain the status quo and ensure that the assets would be available for distribution to the rightful parties once the ownership dispute was resolved.
The Court also found no merit in the challenge to the RTC orders in the related case (G.R. No. 100313), as the turnover of the property to the Estate’s receiver was in line with preserving the assets pending litigation.