TAN LUA, PLAINTIFF AND APPELLANT, VS. S. W. O’BRIEN ET AL., DEFENDANTS AND APPELLEES.

This action was instituted in the Fourth Branch of the Court of First
Instance of the City of Manila on December 15, 1927, by Tan Lua, widow of
Eugenio Velasco Chua Eng Chay, deceased. The plaintiff was formerly a resident
of the City of Manila but since 1925 she has been a resident of Amoy, China. The
purpose of the action is to obtain the annulment, so far as pertains to herself,
of an order of the Sixth Branch of the Court of First Instance of the City of
Manila, dated March 17, 1927, declaring the plaintiff a general partner of the
insolvent firms of Mariano Velasco & Co. and Mariano Velasco Sons & Co.,
and as such, herself an insolvent, and for the purpose of securing an order
excluding the plaintiff’, Tan Lua, from the effects of the aforesaid
insolvency.

The cause was heard upon the answers of S. W. O’Brien and others, as
petitioning creditors in the insolvency proceeding, and of Vicente Nepomuceno,
assignee of the insolvent estate of Mariano Velasco & Co. et al., with the
result that the trial court dismissed the action, with costs against the
plaintiff. From this decision the plaintiff appealed.

For many years there was, in the City of Manila, a mercantile partnership,
known by the firm name of Mariano Velasco & Co., which was engaged in the
conduct of a commercial enterprise in said city. The name of this establishment
was subsequently changed to Mariano Velasco Sons &J Co., also a general
partnership, and later the business was incorporated under the corporate name of
Mariano Velasco & Co., Inc. Generally speaking, it may be said that in this
business were embarked the fortunes of the descendants of Mariano Velasco, the
original founder. The plaintiff, Tan Lua, is the widow of Eugenio Velasco Chua
Eng Chay a son of said founder.

On June 12, 1926, S. W. O’Brien and others instituted a proceeding in the
Sixth Branch of the Court of First Instance of Manila to have the entities
above-mentioned, consisting of two partnerships and the successor corporation,
declared insolvent, as well as the general partners in the two first mentioned
concerns. Among the persons thus proceeded against as general partners were Tan
Lua and her children and grandchildren, including a daughter-in-law, named
Valentina Bautista. At the time this proceeding was begun some of her children
were known to be living in Amoy, China, and for these publication was made in
usual course. Others of the defendants were known to be in Manila, and these
were either served or voluntarily appeared.

Among the defendants supposed to be in Manila was Tan Lua, but she was at the
time, and had been for a year, in Amoy, China, and when this fact was
discovered, the attorneys for the-petitioning creditors saw that it would be
necessary to effect service against her by publication. The necessity for
publication was, however, removed, as was supposed, by the fact that on June 23,
1926, thereafter, Gregorio Perfecto, a practicing attorney in the City of
Manila, filed in the insolvency proceeding (case No. 29955 of the Court of First
Instance of Manila) his general appearance in behalf of Tan Lua, her children,
grandchildren, and daughter-in-law, respondents in said proceeding. On the same
date, and in behalf of the same respondents, said attorney filed a petition in
the insolvency proceeding, asking for the discharge of the receiver appointed by
the court; and on July 2, 1926, the same attorney, acting in behalf, as was
supposed, of the same respondents, answered the original petition of involuntary
insolvency. This answer bore the affidavit of Chua Chitco, the oldest son of Tan
Lua, in which he asserted that said respondents had not committed any act of
insolvency and that they were not insolvent, and he furthermore asserted that
the respondents were not members or partners of either of the partnership
entities or of the corporation against which the petition of insolvency was
directed.

As a result of the interposition of this answer a legal combat ensued
extending over a period of several months, with the usual incidents of the
filing of various petitions, motions, and writings, including the briefs and
memoranda incident to such a contest. Finally, on March 17, 1927, his Honor,
Judge Anacleto Diaz, rendered a decision declaring all the respondents,
including Tan Lua, insolvent debtors under the Insolvency Law.

Returning for a moment to the incident of the making of publication for the
non-resident respondents, we note that, in addition to the necessary publication
in daily newspapers of Manila, copies of the petition for declaration of
involuntary insolvency and of the order to show cause in said proceeding, were
duly sent by registered mail to the respondent children of Tan Lua who were
living in Amoy, China. These communications were not returned, a circumstance
giving rise to the inference that they reached their destination and that they
probably came to the notice of Tan Lua, who was then living with her children in
Amoy, but against whom personally publication had not been directed.

We note further that when Judge Diaz declared all of the respondents to be
insolvent, notice of the decision was given, on March 24, 1927, to attorney
Gregorio Perfecto. About eighteen days thereafter the same attorney excepted to
the order adjudging the defendants insolvent, moved for a new trial, and gave
notice of an intended appeal; but as the notice of appeal was found to have been
given after the time for appeal had expired, Judge Diaz denied the appeal and
refused to sign the bill of exceptions. This action resulted in the filing of
various fruitless motions for reconsideration, and in the end the attorney
applied to the Supreme Court for a writ of certiorari, designed to secure a
review of the decision by said court. To this writ was annexed an affidavit of
Chua Chitco, oldest son of Tan Lua, wherein he stated that the application for
the writ was prepared and presented at the instance of the petitioners therein.
Upon being heard in the Supreme Court the application was denied.^[1]

Before disaster overtook the Velasco store Eugenio Velasco Chua Eng Chay, the
husband of Tan Lua, had been a general partner in the partnership entities; and
upon his death his estate consisted chiefly of his interest in the Velasco
property. In addition to this he possessed two parcels of real estate, with
improvements thereon, in the City of Manila. Upon the death of said husband, his
oldest son, Chua Chitco, secured the services of the then existing law firm of
Crossfield & O’Brien, to attend to the administration of the estate. In
connection with these proceedings Tan Lua, on October 8, 1924, cabled her son
Chua Chitco to the effect that he was authorized to arrange matters relating to
his father’s will. This authority of course cannot be interpreted as authority
to employ an attorney to represent Tan Lua in the later insolvency proceedings,
but it shows that Chua Chitco, as oldest son, and pursuant to Chinese custom,
was at the helm in Manila; and it was the same Chua Chitco who later employed
Gregorio Perfecto to represent his mother and her various descendants in the
insolvency proceeding. During the course of the administration of the estate of
Eugenio Velasco Chua Eng Chay the two parcels of land in Manila, with their
improvements, that had pertained to him were set aside for Tan Lua, by the
consent of all the heirs, as her own property. In these proceedings Chua Chitco,
acting for Tan Lua, employed Eugenio Angeles to appear for her as attorney.

From the time that Tan Lua left the Philippine Islands, in October, 1925,
until April 14, 1927, she had an attorney-in-fact in Manila, one Chan Hoan Lai,
but upon the date mentioned Tan Lua superseded this power with another general
power of attorney in the name of another of her sons, Chua Yoc Ten; and on June
15,1927, thereafter, Chua Yoc Ten mortgaged to one Enrique Brias de Coya of
Manila one of the two parcels of property belonging to Tan Lua in the City of
Manila for the sum of P16,000. It is interesting to note that Tan Lua
immediately defaulted in her obligations under this mortgage, thereby giving
rise to a foreclosure proceeding instituted by Enrique Brias de Coya, a
proceeding now pending final disposition in this court. Again, on June 28, 1927,
the same Chua Yoc Ten, as attorney-in-fact of Tan Lua, executed in favor of the
Manila Compafiia de Seguros another mortgage to secure the sum of P20,000
advanced by the creditor upon said property. This proceeding is also now pending
for final disposition in this court, and of its existence we take judicial
notice.

Having in view the fact that on March 17, 1927, the Court of First Instance
of the City of Manila had adjudged the Velasco entities insolvent and that Tan
Lua was included in said declaration as an insolvent partner, it is evident and
even transparent that the power of attorney executed by Tan Lua in favor of her
son Chua Yoc Ten and his subsequent action thereunder, in mortgaging the
aforesaid two parcels of property to innocent purchasers for the large sums of
money advanced upon the faith of said mortgages, was motivated by no other
purpose than to defraud the creditors of the Velasco entities, by placing the
property under the dominion of innocent purchasers, to the much peril, be it
said, of the latter. Nor will the diligence shown in the taking of these steps
escape attention, as compared with the tardiness of the effort taken by Tan Lua
in the matter of obtaining relief from the declaration of insolvency.

We note that Tan Lua, in her deposition taken in Amoy, denies emphatically
that she gave authority to anybody to represent her in the insolvency
proceedings; but we also note that the deposition of Chua Chitco, the person by
whom Gregorio Perfecto was employed, was not taken, though this witness was
equally as accessible as his mother. The failure to take the testimony of this
witness of course weakens materially the statements of Tan Lua with respect to
the lack of authority for the appearance of Gregorio Perfecto, as her attorney,
in the insolvency proceedings.

Our conclusion, after reviewing the evidence, is that Tan Lua had full
knowledge of the insolvency proceedings and of the danger, in which she, as a
partner, was involved, of being sucked down personally into the abyss. The
circumstances strongly indicate also that she was aware of the fact that she was
a party to the insolvency proceedings, and if she did not authorize the
employment of Gregorio Perfeeto to represent her, she must have known of the
fact of his employment and acquiesced therein. The action before us was not
begun until December 15, 1927, long after the complete failure of every step
taken by the attorney to set aside the declaration of insolvency and many months
after she had executed a power of attorney in favor of Chua Yoc Ten under which
he had conveyed away the two parcels of land belonging to her in the City of
Manila. If there had been, in fact, an unauthorized appearance for her by the
attorney in the insolvency proceedings, she could have caused a special
appearance to be entered in her behalf for the purpose of making a motion in the
insolvency proceeding, looking to her relief, under section 113 of the Code of
Civil Procedure. Instead of this she permitted the battle to go on and only
instituted this action in December, after the six months had passed during which
she could have extricated herself under section 113 of the Code of Civil
Procedure, supposing the authority of the attorney was non-existent. In fine, we
are of the opinion that if the attorney chosen by her son. had no authority to
represent her in the insolvency proceedings, she should at least have acted with
as much diligence as she did in executing the power of attorney under which her
individual properties in Manila were mortgaged to innocent purchasers, with the
certain result of defrauding” either the mortgagees or the insolvent estate; and
by not acting with this diligence, Tan Lua must be taken to have acquiesced in
the employment of the attorney, Gregorio Perfecto. By so doing she must also be
said to have ratified the act. It must be remembered that authority to employ an
attorney does not have to be proved by a public document, nor even by a paper
writing. Its existence may be inferred from circumstantial evidence, and in law
it is even assumed prima facie that every attorney who appears in court does so
with sufficient authority. Of course this is not a conclusive presumption, and
in a timely direct attack upon the judgment a person may undoubtedly establish
that, in a particular case, the authority did not in fact exist. But the
security of judicial proceedings requires that the evasions and tergiversations
of unsuccessful litigants should not be received in such a matter with undue
favor.

Another fact to which the trial court attributed importance, but which is
perhaps undecisive, is the attitude taken by Tan Lua, through her attorney, in
the action for foreclosure instituted by Enrique Brias de Coya on the mortgage
already referred to. In this connection it may be observed that in the Court of
First Instance judgment was given in favor of De Coya for the foreclosure of the
mortgage in ordinary course, and Tan Lua, as mortgagor, was formally ordered to
pay the mortgage debt. Upon appeal to this court, however, it was insisted for
Tan Lua, as appellant, that she had been declared insolvent and that therefore
she could not be expected or required to satisfy the mortgage debt. The position
thus taken was based upon the assumption that Tan Lua would be held bound by the
adjudication of insolvency; and although technically it cannot be said that the
taking of this position amounted to a ratification of the adjudication of
insolvency, it is evident that the attitude assumed is not exactly consistent
with the position taken by the litigant in this case.

In the briefs in the case before us much has been said on the question
whether the remedy of the appellant, supposing that she had not been properly
made a party in the insolvency case, is by independent action as here, or should
have been sought through a motion under section 113 of the Code of Civil
Procedure. Into this question it is not necessary here to enter, since we are of
the opinion that the evidence shows that Gregorio Perfecto, who appeared for Tan
Lua in the insolvency case, was employed by proper authority, and even assuming
that formal authority had not been given beforehand, Tan Lua had knowledge of
her implication in the insolvency proceeding and knew that her interest was
being represented therein by an attorney employed by her son and, finally, that
she is bound from her acquiescence in the act.

The judgment appealed from will be affirmed, and it is so ordered, with costs
against the appellant.

Avanceña, C. J., Villamor, Ostrand, Johns and Romualdez, JJ.,
concur.

Villa-Real, J.: dissents.