GEORGE LITTON, petitioner-appellant,

vs.
HILL & CERON, ET AL., respondents-appellees.

In its decision the Court of Appeals states:
But there is a stronger objection to the plaintiff's attempt to make the firm responsible to him.
According to the articles of copartnership of 'Hill & Ceron,' filed in the Bureau of Commerce.
Sixth. That the management of the business affairs of the copartnership shall be entrusted to
both copartners who shall jointly administer the business affairs, transactions and activities of
the copartnership, shall jointly open a current account or any other kind of account in any
bank or banks, shall jointly sign all checks for the withdrawal of funds and shall jointly or
singly sign, in the latter case, with the consent of the other partner. . . .
Under this stipulation, a written contract of the firm can only be signed by one of the partners
if the other partner consented. Without the consent of one partner, the other cannot bind the
firm by a written contract. Now, assuming for the moment that Ceron attempted to represent
the firm in this contract with the plaintiff (the plaintiff conceded that the firm name was not
mentioned at that time), the latter has failed to prove that Hill had consented to such
contract.
It follows from the sixth paragraph of the articles of partnership of Hill &n Ceron above quoted that
the management of the business of the partnership has been entrusted to both partners thereof, but
we dissent from the view of the Court of Appeals that for one of the partners to bind the partnership
the consent of the other is necessary. Third persons, like the plaintiff, are not bound in entering into
a contract with any of the two partners, to ascertain whether or not this partner with whom the
transaction is made has the consent of the other partner. The public need not make inquires as to
the agreements had between the partners. Its knowledge, is enough that it is contracting with the
partnership which is represented by one of the managing partners.
There is a general presumption that each individual partner is an authorized agent for the
firm and that he has authority to bind the firm in carrying on the partnership transactions.
(Mills vs. Riggle, 112 Pac., 617.)
The presumption is sufficient to permit third persons to hold the firm liable on transactions
entered into by one of members of the firm acting apparently in its behalf and within the
scope of his authority. (Le Roy vs.Johnson, 7 U. S. [Law. ed.], 391.





E. M. BACHRACH, plaintiff-appellee,
vs.
"LA PROTECTORA", ET AL., defendants-appellants.

The business conducted under the name of "La Protectora" was evidently that of a civil partnership;
and the liability of the partners to this association must be determined under the provisions of the
Civil Code. The authority of Marcelo Barba to bind the partnership, in the purchase of the trucks, is
fully established by the document executed by the four appellants upon June 12, 1913. The
transaction by which Barba secured these trucks was in conformity with the tenor of this document.
The promissory notes constitute the obligation exclusively of "La Protectora" and of Marcelo Barba;
and they do not in any sense constitute an obligation directly binding on the four appellants. Their
liability is based on the fact that they are members of the civil partnership and as such are liable for
its debts. It is true that article 1698 of the Civil Code declares that a member of a civil partnership is
not liable in solidum (solidariamente) with his fellows for its entire indebtedness; but it results from
this article, in connection with article 1137 of the Civil Code, that each is liable with the others
(mancomunadamente) for his aliquot part of such indebtedness. And so it has been held by this
court. (Co-Pitco vs. Yulo, 8 Phil. Rep., 544.)
The Court of First Instance seems to have founded its judgment against the appellants in part upon
the idea that the document executed by them constituted an authority for Marcelo Barba to bind
them personally, as contemplated in the second clause of article 1698 of the Civil Code. That cause
says that no member of the partnership can bind the others by a personal act if they have not given
him authority to do so. We think that the document referred to was intended merely as an authority
to enable Barba to bind the partnership and that the parties to that instrument did not intend thereby
to confer upon Barba an authority to bind them personally. It is obvious that the contract which Barba
in fact executed in pursuance of that authority did not by its terms profess to bind the appellants
personally at all, but only the partnership and himself. It follows that the four appellants cannot be
held to have been personally obligated by that instrument; but, as we have already seen, their
liability rests upon the general principles underlying partnership liability.
As to so much of the indebtedness as is based upon the claim for automobile supplies and
accessories, it is obvious that the document of June 12, 1913, affords no authority for holding the
appellants liable. Their liability upon this account is, however, no less obvious than upon the debt
incurred by the purchase of the trucks; and such liability is derived from the fact that the debt was
lawfully incurred in the prosecution of the partnership enterprise.
There is no proof in the record showing what the agreement, if any, was made with regard to the
form of management. Under these circumstances it is declared in article 1695 of the Civil Code that
all the partners are considered agents of the partnership. Barba therefore must be held to have had
authority to incur these expenses. But in addition to this he is shown to have been in fact the
president or manager, and there can be no doubt that he had actual authority to incur this obligation.
From what has been said it results that the appellants are severally liable for their respective shares
of the entire indebtedness found to be due; and the Court of First Instance committed no error in
giving judgment against them.


PANG LIM and BENITO GALVEZ, plaintiffs-appellees,
vs.
LO SENG, defendant-appellant.

the question whether, admitting the lease to be so binding, it can be terminated by the plaintiffs

While yet a partner in the firm of Lo Seng and Co., Pang Lim participated in the creation of this
lease, and when he sold out his interest in that firm to Lo Seng this operated as a transfer to Lo
Seng of Pang Lim's interest in the firm assets, including the lease; and Pang Lim cannot now be
permitted, in the guise of a purchaser of the estate, to destroy an interest derived from himself, and
for which he has received full value.
The bad faith of the plaintiffs in seeking to deprive the defendant of this lease is strikingly revealed in
the circumstance that prior to the acquisition of this property Pang Lim had been partner with Lo
Seng and Benito Galvez an employee. Both therefore had been in relations of confidence with Lo
Seng and in that position had acquired knowledge of the possibilities of the property and possibly an
experience which would have enabled them, in case they had acquired possession, to exploit the
distillery with profit. On account of his status as partner in the firm of Lo Seng and Co., Pang Lim
knew that the original lease had been extended for fifteen years; and he knew the extent of valuable
improvements that had been made thereon. Certainly, as observed in the appellant's brief, it would
be shocking to the moral sense if the condition of the law were found to be such that Pang Lim, after
profiting by the sale of his interest in a business, worthless without the lease, could intervene as
purchaser of the property and confiscate for his own benefit the property which he had sold for a
valuable consideration to Lo Seng. The sense of justice recoils before the mere possibility of such
eventuality.
Above all other persons in business relations, partners are required to exhibit towards each other the
highest degree of good faith. In fact the relation between partners is essentially fiduciary, each being
considered in law, as he is in fact, the confidential agent of the other. It is therefore accepted as
fundamental in equity jurisprudence that one partner cannot, to the detriment of another, apply
exclusively to his own benefit the results of the knowledge and information gained in the character of
partner. Thus, it has been held that if one partner obtains in his own name and for his own benefit
the renewal of a lease on property used by the firm, to commence at a date subsequent to the
expiration of the firm's lease, the partner obtaining the renewal is held to be a constructive trustee of
the firm as to such lease. (20 R. C. L., 878-882.) And this rule has even been applied to a renewal
taken in the name of one partner after the dissolution of the firm and pending its liquidation. (16 R. C.
L., 906; Knapp vs.Reed, 88 Neb., 754; 32 L. R. A. [N. S.], 869; Mitchell vs. Reed 61 N. Y., 123; 19
Am. Rep., 252.)




DAN FUE LEUNG, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT and LEUNG YIU, respondents.
The petitioner raises the issue of prescription. He argues: The Hon. Respondent Intermediate
Appellate Court gravely erred in not resolving the issue of prescription in favor of petitioner. The
alleged receipt is dated October 1, 1955 and the complaint was filed only on July 13, 1978 or after
the lapse of twenty-two (22) years, nine (9) months and twelve (12) days. From October 1, 1955 to
July 13, 1978, no written demands were ever made by private respondent.
The petitioner's argument is based on Article 1144 of the Civil Code which provides:
Art. 1144. The following actions must be brought within ten years from the time the
right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
in relation to Article 1155 thereof which provides:
Art. 1155. The prescription of actions is interrupted when they are filed before the
court, when there is a written extra-judicial demand by the creditor, and when there is
any written acknowledgment of the debt by the debtor.'
The argument is not well-taken.
The private respondent is a partner of the petitioner in Sun Wah Panciteria. The requisites of a
partnership which are 1) two or more persons bind themselves to contribute money, property, or
industry to a common fund; and 2) intention on the part of the partners to divide the profits among
themselves (Article 1767, Civil Code; Yulo v. Yang Chiao Cheng, 106 Phil. 110)-have been
established. As stated by the respondent, a partner shares not only in profits but also in the losses of
the firm. If excellent relations exist among the partners at the start of business and all the partners
are more interested in seeing the firm grow rather than get immediate returns, a deferment of
sharing in the profits is perfectly plausible. It would be incorrect to state that if a partner does not
assert his rights anytime within ten years from the start of operations, such rights are irretrievably
lost. The private respondent's cause of action is premised upon the failure of the petitioner to give
him the agreed profits in the operation of Sun Wah Panciteria. In effect the private respondent was
asking for an accounting of his interests in the partnership.
It is Article 1842 of the Civil Code in conjunction with Articles 1144 and 1155 which is applicable.
Article 1842 states:
The right to an account of his interest shall accrue to any partner, or his legal
representative as against the winding up partners or the surviving partners or the
person or partnership continuing the business, at the date of dissolution, in the
absence or any agreement to the contrary.
Regarding the prescriptive period within which the private respondent may demand an accounting,
Articles 1806, 1807, and 1809 show that the right to demand an accounting exists as long as the
partnership exists. Prescription begins to run only upon the dissolution of the partnership when the
final accounting is done.























July 30, 1979
PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME "SYCIP, SALAZAR,
FELICIANO, HERNANDEZ & CASTILLO." LUCIANO E. SALAZAR, FLORENTINO P.
FELICIANO, BENILDO G. HERNANDEZ. GREGORIO R. CASTILLO. ALBERTO P. SAN JUAN,
JUAN C. REYES. JR., ANDRES G. GATMAITAN, JUSTINO H. CACANINDIN, NOEL A. LAMAN,
ETHELWOLDO E. FERNANDEZ, ANGELITO C. IMPERIO, EDUARDO R. CENIZA, TRISTAN A.
CATINDIG, ANCHETA K. TAN, and ALICE V. PESIGAN, petitioners.
IN THE MATTER OF THE PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME
"OZAETA, ROMULO, DE LEON, MABANTA & REYES." RICARDO J. ROMULO, BENJAMIN M.
DE LEON, ROMAN MABANTA, JR., JOSE MA, REYES, JESUS S. J. SAYOC, EDUARDO DE
LOS ANGELES, and JOSE F. BUENAVENTURA, petitioners.
A. Inasmuch as "Sycip, Salazar, Feliciano, Hernandez and Castillo" and "Ozaeta, Romulo, De Leon,
Mabanta and Reyes" are partnerships, the use in their partnership names of the names of deceased
partners will run counter to Article 1815 of the Civil Code which provides: t.hqw
Art. 1815. Every partnership shall operate under a firm name, which may or may not
include the name of one or more of the partners.
Those who, not being members of the partnership, include their names in the firm
name, shall be subject to the liability, of a partner.
It is clearly tacit in the above provision that names in a firm name of a partnership must either be
those of living partners and. in the case of non-partners, should be living persons who can be
subjected to liability. In fact, Article 1825 of the Civil Code prohibits a third person from including his
name in the firm name under pain of assuming the liability of a partner. The heirs of a deceased
partner in a law firm cannot be held liable as the old members to the creditors of a firm particularly
where they are non-lawyers. Thus, Canon 34 of the Canons of Professional Ethics "prohibits an
agreement for the payment to the widow and heirs of a deceased lawyer of a percentage, either
gross or net, of the fees received from the future business of the deceased lawyer's clients, both
because the recipients of such division are not lawyers and because such payments will not
represent service or responsibility on the part of the recipient. " Accordingly, neither the widow nor
the heirs can be held liable for transactions entered into after the death of their lawyer-predecessor.
There being no benefits accruing, there ran be no corresponding liability.
Prescinding the law, there could be practical objections to allowing the use by law firms of the names
of deceased partners. The public relations value of the use of an old firm name can tend to create
undue advantages and disadvantages in the practice of the profession. An able lawyer without
connections will have to make a name for himself starting from scratch. Another able lawyer, who
can join an old firm, can initially ride on that old firm's reputation established by deceased partners.




G.R. No. L-3146 September 14, 1907
NICOLAS CO-PITCO, plaintiff-appellee,
vs.
PEDRO YULO, defendant-appellant.

Before February, 1903, Florencio Yulo and Jaime Palacios were partners in the operation of
a sugar estate in Victorias, Island of Negros, and had commercial dealings with a Chinaman
named Dy-Sianco, who furnished them with money and goods, and used to buy their crop of
sugar. In February, 1903, the defendant, Pedro Yulo, father of the said Florencio, took
charge of the latter's interest in the above-mentioned partnership, and he became a general
partner with the said Jaime Palacios in the same business, and he continued as such partner
until about the end of 1904, dealing with Dy-Sianco in the same manner as the old
partnership had dealt with the latter.
He then finds that the balance due from the firm Pedro Yulo and Jaime Palacios was 1,638.40
pesos, Philippine currency, and orders judgment against the defendant, Pedro Yulo, for the entire
amount, with interest.
The partnership of Yulo and Palacios was engaged in the operation of a sugar estate in Negros. It
was, therefore a civil partnership, as distinguished from a mercantile partnership. Being a civil
partnership, by the express provisions of articles 1698 and 1137 of the Civil Code, the partners are
not liable each for the whole debt of the partnership. The liability is pro rata and in this case Pedro
Yulo is responsible to plaintiff for only one-half of the debt. The fact that the other partner, Jaime
Palacios, had left the country can not increase the liability of Pedro Yulo.












PACIFIC COMMERCIAL COMPANY, plaintiff-appellee,
vs.
ABOITIZ & MARTINEZ, ET AL., defendants.
JOSE MARTINEZ, defendant-appellant.

In April, 1919 Arnaldo F. de Silva, Guillermo Aboitiz, Vidal Aboitiz and Jose Martinez formed a
"regular, collective, merchantile partnership" with a capital of P40,000 of which each of the partners
Aboitiz and De Silva furnished one-third. The partner Jose Martinez was an industrial partner and
furnished no capital; it was provided in the partnership article that he was to receive 30 per cent of
the profits and that his responsibility for losses should not exceed the amount of the profits received
by him.
For failure of the partnership to pay the debt the chattel mortgage was foreclosed the mortgages
property sold and the proceeds of the sale, P2,000 was paid over to the plaintiff on December 28,
1923. No further payment on the note appears to have been made and January 4, 1924, the present
action was brought for the recovery of the unpaid balance with interest. Upon trial the court below
rendered judgment in favor of the plaintiff and against the partnership for the sum of P27,951.68 and
for the payment of interest on the capital of P21,168.71 at the rate of 10 per cent per annum from the
31st October, 1924, until paid, together with 10 per cent on the amount due for fees for collection in
accordance with the terms of the aforesaid note. The judgment further provided that execution
should first issue against the property of the partnership should first issue against the insolvency of
the partnership, it might issue against the property of the partners De Silva and Aboitiz and in the
event of their insolvency, then against the property of the industrial partner Jose Martinez. From this
judgment Martinez appealed to this court and here maintains that under article 141 of the Code of
Commerce he, as a mere industrial partner, cannot be held responsible for the partnership's debt.
The case is practically identical with that of the Compania Maritima vs. Munoz (9 Phil., 326), in which
this court held the industrial partners secondarily liable for the debts of the partnership but on the
strength of the vigorous dissenting opinion of Chief Justice Arellano in that case, that appellant
argues that the decision therein was erroneous and should now be overruled. With all due respect
for the legal acumen of the first Chief Justice of this Court, we are still of the opinion that the case
was correctly decided. Article 127 of the Code of Commerce reads as follows:
All the members of the general copartnership, be they or be they not managing partners of
the same are liable personally and in solidum with all their property for the results of the
transaction made in the name and for the account of the partnership, under the signature of
the later, and by a person authorized to make use thereof.
The language of this article is clear and specific that all the members of a general copartnership are
liable with all their property for the results of the duly authorized transactions made in the name and
for the account of the partnership. On the other hand, article 141, upon which the appellants relies
and which provides that "losses shall be computed in the same proportion among the capitalist
partners without including the industrial partners, unless by special agreement the latter have been
constituted as participants therein," is susceptible of two different interpretations of which that given
it in the Compania Maritima case, supra, i. e., that it relates merely to the distribution of losses
among the partners themselves in the settlement of the partnership affairs and has no reference to
partnership obligations to third parties, appears to us to be the more logical.
There is a marked distinction between a liability and a loss and the inability of a partnership to pay a
debt to a third party at a particular time does not necessarily mean that the partnership business as
a whole, has been operated at a loss. The partnership may have outstanding credits which for the
moment may have be unavailable for the payment of debts, but which eventually may be realized
upon and yield profits more than sufficient to cover all losses. Bearing this in mind it will be found
that there in reality is no conflict between the two articles quoted; one speaks of liabilities, the other
of losses.
























GREGORIO MAGDUSA, ET AL., petitioners,
vs.
GERUNDIO ALBARAN, ET AL., respondents.
The main argument of appellant is that the appellees' action can not be entertained, because in the
distribution of all or part of a partnership's assets, all the partners have no interest and are
indispensable parties without whose intervention no decree of distribution can be validly entered.
This argument was considered and answered by the Court of Appeals in the following words:
We now come to the last issue involved. While finding that some amounts are due the
plaintiffs, the lower court withheld an award in their favor, reasoning that a judgment ordering
the defendant to pay might affect the rights of other partners who were not made parties in
this case. The reason cited by the lower court does not constitute a legal impediment to a
judgment for the plaintiffs in this case. This is not an action for a dissolution of a partnership
and winding up of its affairs or liquidation of its assets in which the interest of other partners
who are not brought into the case may be affected. The action of the plaintiffs is one for the
recovery of a sum of money with Gregorio Magdusa as the principal defendant. The
partnership, with Gregorio Magdusa as managing partner, was brought into the case as an
alternative defendant only. Plaintiffs' action was based on the allegation, substantiated in
evidence, that Gregorio Magdusa, having taken delivery of their shares, failed and refused
and still fails and refuses to pay them their claims. The liability, therefore, is personal to
Gregorio Magdusa, and the judgment should be against his sole interest, not against the
partnership's although the judgment creditors may satisfy the judgment against the interest
of Gregorio Magdusa in the partnership subject to the condition imposed by Article 1814 of
the Civil Code.
We do not find the preceding reasoning tenable. A partner's share can not be returned without first
dissolving and liquidating the partnership (Po Yeng Cheo vs. Lim Ka Yam, 44 Phil. 177), for the
return is dependent on the discharge of the creditors, whose claims enjoy preference over those of
the partners; and it is self-evident that all members of the partnership are interested in his assets
and business, and are entitled to be heard in the matter of the firm's liquidation and the distribution of
its property. The liquidation Exhibit "C" is not signed by the other members of the partnership
besides appellees and appellant; it does not appear that they have approved, authorized, or ratified
the same, and, therefore, it is not binding upon them. At the very least, they are entitled to be heard
upon its correctness.
In addition, unless a proper accounting and liquidation of the partnership affairs is first had, the
capital shares of the appellees, as retiring partners, can not be repaid, for the firm's outside creditors
have preference over the assets of the enterprise (Civ. Code, Art. 1839), and the firm's property can
not be diminished to their prejudice. Finally, the appellant can not be held liable in his personal
capacity for the payment of partners' shares for he does not hold them except as manager of, or
trustee for, the partnership. It is the latter that must refund their shares to the retiring partners. Since
not all the members of the partnership have been impleaded, no judgment for refund can be
rendered, and the action should have been dismissed.
IN VIEW OF THE FOREGOING, the decision of the Court of Appeals is reversed and the action
ordered dismissed, without prejudice to a proper proceeding for the dissolution and liquidation of the
common enterprise. Costs against appellees.

LA COMPAIA MARITIMA, plaintiff-appellant,
vs.
FRANCISCO MUOZ, ET AL., defendants-appellees.
Emilio Muoz was, therefore, a general partner, and the important question in the case is whether,
as such general partner, he is liable to third persons for the obligations contracted by the
partnership, or whether he relieved from such liability, either because he is an industrial partner or
because he was so relieved by the express terms of the articles of partnership.
Paragraph 12 of the articles of partnership is as follows:
Twelfth. All profits arising from mercantile transactions carried on, as well as such as may be
obtained from the sale of property and other assets which constitute the corporate capital,
shall be distributed, on completion of the term of five years agreed to for the continuation of
the partnership, in the following manner: Three-fourths thereof for the capitalist partner
Francisco Muoz de Bustillo and one-eighth thereof for the industrial partner Emilio Muoz
de Bustillo y Carpiso, and the remaining one-eighth thereof for the partner Rafael Naval y
Garcia. If, in lieu of profits, losses should result in the winding up of the partnership, the
same shall be for the sole and exclusive account of the capitalist partner Francisco Muoz
de Bustillo, without either of the two industrial partners participating in such losses.
Articles 140 and 141 of the Code of Commerce are as follows:
ART. 140. Should there not have been stated in the articles of copartnership the portion of
the profits to be received by each partner, said profits shall be divided pro rata, in
accordance with the interest each one has on the copartnership, partners who have not
contributed any capital, but giving their services, receiving in the distribution the same
amount as the partner who contributed the smallest capital.
ART. 141. Losses shall be charged in the same proportion among the partners who have
contributed capital, without including those who have not, unless by special agreement the
latter have been constituted as participants therein.
A comparison of these articles with the twelfth paragraph above quoted will show that the latter is
simply a statement of the rule laid down in the former. The article do not, therefore, change the rights
of the industrial partners as they are declared by the code, and the question may be reduced to the
very simple one namely, Is an industrial partner in an ordinary, general mercantile partnership liable
to third persons for the debts and obligations contracted by the partnership?
In limited partnership the Code of Commerce recognizes a difference between general and special
partners, but in a general partnership there is no such distinction-- all the members are general
partners. The fact that some may be industrial and some capitalist partners does not make the
members of either of these classes alone such general partners. There is nothing in the code which
says that the industrial partners shall be the only general partners, nor is there anything which says
that the capitalist partners shall be the only general partners.
Article 127 of the Code of Commerce is as follows:
All the members of the general copartnership, be they or be they not managing partners of
the same, are liable personally and in solidum with all their property for the results of the
transactions made in the name and for the account of the partnership, under the signature of
the latter, and by a person authorized to make use thereof.
Do the words "all the partners" found in this article include industrial partners? The same expression
is found in other articles of the code. In article 129 it is said that, if the management of the
partnership has not been limited by special act to one of the partners, all shall have the right to
participate in the management. Does this mean that the capitalist partners are the only ones who
have that right, or does it include also industrial partners? Article 132 provides that, when in the
articles of partnership the management has been intrusted to a particular person, he can not be
deprived of such management, but that in certain cases the remaining partners may appoint a
comanager. Does the phrase "remaining partners" include industrial partners, or is it limited to
capitalist partners, and do industrial partners have no right to participate in the selection of the
comanager? Article 133 provides that all the partners shall have the right to examine the books of
the partnership. Under this article are the capitalist partners the only ones who have such right?
Article 135 provides that the partners can not use the firm name in their private business. Does this
limitation apply only to capitalist partners or does it extend also to industrial partners? Article 222
provides that a general partnership shall be dissolve by the death of one of the general partners
unless it is otherwise provided in the articles. Would such a partnership continue if all the industrial
partners should die? Article 229 provides that upon a dissolution of a general partnership it shall be
liquidated by the former managers, but, if all the partners do not agree to this, a general meeting
shall be called, which shall determine to whom the settlement of the affairs shall be intrusted. Does
this phrase "all the partners" include industrial partners, or are the capitalist partners the only ones
who have a voice in the selection of a manager during a period of liquidation? Article 237 provides
that the private property of the general partners shall not be taken in payment of the obligations of
the partnership until its property has been exhausted. Does the phrase "the general partners" include
industrial partners?
In all of these articles the industrial partners must be included. It can not have been intended that, in
such a partnership as the one in question, where there were two industrial and only one capitalist
partner, the industrial partners should have no voice in the management of the business when the
articles of partnership were silent on that subject; that when the manager appointed mismanages the
business the industrial partners should have no right to appoint a comanager; that they should have
no right to examine the books; that they might use the firm name in their private business; or that
they have no voice in the liquidation of the business after dissolution. To give a person who
contributed no more than, say, P500, these rights and to take them away from a person who
contributed his services, worth, perhaps, infinitely more than P500, would be discriminate unfairly
against industrial partners.
If the phrase "all the partners" as found in the articles other than article 127 includes industrial
partners, then article 127 must include them and they are liable by the terms thereof for the debts of
the firm.
But it is said that article 141 expressly declares to the contrary. It is to be noticed in the first place
that this article does not say that they shall not be liable for losses. Article 140 declares how the
profits shall be divided amongthe partners. This article simply declares how the losses shall be
divided among the partners. The use of the words se imputaran is significant. The verb
means abonar una partida a alguno en su cuenta o deducirla de su debito. Article 141 says nothing
about third persons and nothing about the obligations of the partnership.
While in this section the word "losses" stand's alone, yet in other articles of the code, where it is
clearly intended to impose the liability to third persons, it is not considered sufficient, but the word
"obligations" is added. Thus article 148, in speaking of the liability of limited partners, uses the
phrase las obligaciones y perdidas. There is the same use of the two same words in article 153,
relating to anonymous partnership. In article 237 the word "obligations" is used and not the word
"losses."
The claim of the appellees is that this article 141 fixes the liability of the industrial partners to third
persons for the obligations of the company. If it does, then it also fixes the liability of the capitalist
partners to the same persons for the same obligations. If this article says that industrial partners are
not liable for the debts of the concern, it also says that the capitalist partners shall be only liable for
such debts in proportion to the amount of the money which they have contributed to the partnership;
that is to say, that if there are only two capitalist partners, one of whom has contributed two-thirds of
the capital and the other one-third, the latter is liable to a creditor of the company for only one-third
of the debt and the former for only two-thirds. It is apparent that, when given this construction, article
141 is directly in conflict with article 127. It is not disputed by the appellees that by the terms of
article 127 each one of the capitalist partners is liable for all of the debts, regardless of the amount of
his contribution, but the construction which they put upon article 141 makes such capitalist partners
liable for only a proportionate part of the debts.
There is no injustice in imposing this liability upon the industrial partners. They have a voice in the
management of the business, if no manager has been named in the articles; they share in the profits
and as to third persons it is no more than right that they should share in the obligations. It is admitted
that if in this case there had been a capitalist partner who had contributed only P100 he would be
liable for this entire debt of P26,000.
Our construction of the article is that it relates exclusively to the settlement of the partnership affairs
among the partners themselves and has nothing to do with the liability of the partners to third
persons; that each one of the industrial partners is liable to third persons for the debts of the firm;
that if he has paid such debts out of his private property during the life of the partnership, when its
affairs are settled he is entitled to credit for the amount so paid, and if it results that there is not
enough property in the partnership to pay him, then the capitalist partners must pay him. In this
particular case that view is strengthened by the provisions of article 12, above quoted. There it is
stated that if, when the affairs of the partnership are liquidated that is, at the end of five years it
turns out that there had been losses instead of gains, then the capitalist partner, Francisco Muoz,
shall pay such losses that is, pay them to the industrial partners if they have been compelled to
disburse their own money in payment of the debts of the partnership.
While this is a commercial partnership and must be governed therefore by the rules of the Code of
Commerce, yet an examination of the provisions of the Civil Code in reference to partnerships may
throw some light upon the question here to be resolved. Articles 1689 and 1691 contain, in
substance, the provisions of articles 140 and 141 of the Code of Commerce. It is to be noticed that
these articles are found in section 1 of Chapter II [Title VIII] of Book IV. That section treats of the
obligations of the partners between themselves. The liability of the partners as to third persons is
treated in a distinct section, namely, section 2, comprising articles from 1697 to 1699.



ISLAND SALES, INC., plaintiff-appellee,
vs.
UNITED PIONEERS GENERAL CONSTRUCTION COMPANY, ET. AL defendants. BENJAMIN C.
DACO,defendant-appellant.

The only issue for resolution is whether or not the dismissal of the complaint to favor one of the
general partners of a partnership increases the joint and subsidiary liability of each of the remaining
partners for the obligations of the partnership.
Article 1816 of the Civil Code provides:
Art. 1816. All partners including industrial ones, shall be liable pro rata with all their
property and after all the partnership assets have been exhausted, for the contracts
which may be entered into in the name and for the account of the partnership, under
its signature and by a person authorized to act for the partnership. However, any
partner may enter into a separate obligation to perform a partnership contract.
In the case of Co-Pitco vs. Yulo (8 Phil. 544) this Court held:
The partnership of Yulo and Palacios was engaged in the operation of a sugar estate
in Negros. It was, therefore, a civil partnership as distinguished from a mercantile
partnership. Being a civil partnership, by the express provisions of articles l698 and
1137 of the Civil Code, the partners are not liable each for the whole debt of the
partnership. The liability is pro rata and in this case Pedro Yulo is responsible to
plaintiff for only one-half of the debt. The fact that the other partner, Jaime Palacios,
had left the country cannot increase the liability of Pedro Yulo.
In the instant case, there were five (5) general partners when the promissory note in question was
executed for and in behalf of the partnership. Since the liability of the partners is pro rata, the liability
of the appellant Benjamin C. Daco shall be limited to only one-fifth (
1
/
5
) of the obligations of the
defendant company. The fact that the complaint against the defendant Romulo B. Lumauig was
dismissed, upon motion of the plaintiff, does not unmake the said Lumauig as a general partner in the
defendant company. In so moving to dismiss the complaint, the plaintiff merely condoned Lumauig's
individual liability to the plaintiff.