PACIFIC CMMERCIAL v.

ABOITIZ
Partner’s Obligations to 3rd Parties | 2 March 1926 | J. Ostrand RULING: Judgment appealed from is AFFIRMED.

Digest maker: Africa NOTE:

SUMMARY: De Silva, Aboitiz, and Martinez formed a regular, collective, mercantile • Art. 141: Losses shall be computed in the same proportion among the capitalist partners
partnership, where the first two were capitalist partners while Martinez is an industrial without including the industrial partners, unless by special agreement the latter have been
partner. A complaint was filed by the Pacific Commercial to recover debt, where it was held constituted as participants therein.
that Martinez would be held liable, should the partnership and the capitalist partners be
insolvent. He argued that he could not be responsible for debt against 3rd person. SC
disagreed.

DOCTRINE: The exemption of the industrial partner to pay losses relates exclusively to the
settlement of the partnership affairs among the partners themselves and has nothing to do
with the liabilities of the partners to third persons.

FACTS:
1. De Silva, Aboitiz, and Martinez formed a regular, collective, mercantile partnership with a
capital of Php40,000, of which Aboitiz and De Silva furnished 1/3. Martinez was an
industrial partner.
2. The partnership executed a promissory note in favour of petitioner for the sum of
Php23,000, which was secured by a chattel mortgage.
3. For failure to pay, the chattel mortgage was foreclosed, but a balance remained, hence the
present action for recovery of sum of money. Lower court held that execution should be
issued against the properties of the partnership, and in the case of insolvency, the property
of De Silva and Aboitiz, and then that of Martinez.
4. Martinez appealed, arguing that pursuant to Art. 141 of the Code of Commerce, he cannot
be held responsible for partnership’s debt being a mere industrial partner.

ISSUE/S & RATIO:

1. WON Martinez may be held liable. — YES
- 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.
- Art. 141 merely refers 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.
- Inability to pay debt to 3rd party does not mean business is operating at loss. The
partnership may have outstanding credits which for the moment may be unavailable for the
payment of debts, but which eventually may be realized upon and yield profits more than
sufficient to cover all losses.