Island Sales, Inc., plaintiff-appellee.

United Pioneers General Construction Company, et al., defendants.

Benjamin C. Daco, defendant-appellant.
G.R. No. L-22493
July 31, 1975
Concepcion, Jr., J
Appeal from the decision of CFI Manila

Facts:
United Pioneers General Construction Company, a general partnership, purchased from
Island Sales, Inc. a motor vehicle and executed a promissory payable for twelve months. Having
failed to pay on the third installment, Island Sales, Inc. filed a suit against UPGCC. On the
motion of the plaintiff, the complaint was dismissed insofar as the defendant Romulo B.
Lumauig is concerned. The defendants and their counsel failed to appear during the hearing
despite notices and the plaintiff was able to present evidence ex-parte.
Two of the general partners moved for reconsideration claiming that since there are five
general partners, their liability should be one-fifth of the obligation. But the trial court denied the
MR.

Issue:
WON the dismissal of the complaint to favor one of the general partners of the
partnership increases the joint and subsidiary liability of each of the remaining partners.

Ruling:
No, Article 1816 of the Civil Code provides that all partners shall be liable pro rata of
their property after all the partnership assets have been exhausted for the contracts entered into
under the name of the partnership. Since there were five general partners when the promissory
note was executed, the liability of each partner shall be one-fifth of the obligation. The
condonation in favor of one of the partners did not alter the liability of the other partners.

Elmo Munasque, petitioner

Court of Appeals, Celestino Galan, Tropical Commercial Company and Ramon Pons,
respondents.
G.R. No. L-39780
November 11, 1985
Gutierrez, Jr., J
Petition for Certiorari

Facts:
Munasque (petitioner) entered into a partnership with Galan under the registered name
“Galan and Associates” as Contractor. They entered into a written contract with respondent
Tropical for remodeling the latter’s Cebu branch building. Under the contract, the project totaled
25,000 to be paid in installments; 7, 000 upon signing and 6, 000 every 15 working days.
Tropical made the first payment by check in the name of Munasque. Munasque indorsed the
check in favor of Galan to enable Galan to deposit it in the bank and pay for the materials and
labor used in the project. However, Galan allegedly spent P6, 183.37 for his personal use. When
the second check came, Munasque refused to indorse it again to
Galan.

Galan informed Tropical of the misunderstanding between him and Munasque as

partners. Hence upon second payment, Tropical changed the name of the payee on the second
check from Munasque to “Galan and Associates” which enabled Galan to encash the second
check.

Meanwhile, the construction was continued through Munasque’s sole efforts by incurring
debts from various suppliers. The construction work was finished ahead of schedule with the
total expenditure reaching P 34, 000 (note yung contract nila 25k lang).

Munasque filed a complaint for payment of sum of money and damages against Galan,
Tropical, and Tropical’s Cebu branch manager Pons. Cebu Southern Hardware Company and
Blue Diamond Glass Palace intervened in the case for the credit which they extended to the
partnership of Munasque and Galan for the construction project.

Both trial court and Court of Appeals absolved respondents Tropical and its Cebu
manager, Pons, from any liability. TC held Galvan and Munasque “jointly and severally” liable
to its creditors which decision was modified by CA and held them “jointly” liable.

Issues:
Whether the obligation of Munasque and Galan is joint or solidary?

Held:
Solidary. While it is true that under Article 1816 of CC, “All partners, including
industrial ones, shall be liable pro rate with all their property and after all the partnership assets
have been exhausted, for the contracts which may be entered into the name and for account of
the partnership, under its signature and by a person authorized to act for the partnership. xxx”,
this provision should be construed together with Article 1824 which provides that:

“All partners are liable solidarily with the partnership for everything chargeable to the
partnership under Articles 1822 and 1823.” While the liability of the partners are merely joint in
transactions entered into by the partnership, a third person who transacted with said partnership
can hold the partners solidarily liable for the whole obligation if the case of the third person falls
under Articles 1822 and 1823.

The obligation is solidary because the law protects him, who in good faith relied upon the
authority of a partner, whether such authority is real or apparent.

Tropical had every reason to believe that a partnership existed between Munasque and
Galan and no fault or error can be imputed against it for making payments to “Galan and
Associates” because as far as it was concerned, Galan was a true partner with real authority to
transact in behalf of the partnership it was dealing with (because in the first place they entered
into a duly registered partnership name and secondly, Munasque endorsed the first check
payment to Galan). This is even more true in the cases of the intervenors who supplied materials
on credit to the partnership. Thus, it is but fair that the consequences of any wrongful act
committed by any of the partners therein should be answered solidarily by all the partners and
the partnership as a whole.

However, as between Munasque and Galan, Galan must reimburse Munasque for the
payments made to the intervenors as it was satisfactorily established that Galan acted in bad faith
in his dealings with Munasque as a partner.

Michael C. Guy, petitioner.

Atty. Glenn C. Gacott, respondent.
G.R. No. 206147
January 13, 2016
Mendoza, J.
Petition for Review on Certiorari under Rule 45.

Facts:
Atty. Glenn Gacott (Gacott) from Palawan purchased two (2) brand new transreceivers from
Quantech Systems Corporation (QSC) in Manila through its employee Rey Medestomas
(Medestomas), amounting to a total of P18,000.00. Due to major defects, Gacott personally
returned the transreceivers to QSC and requested that they be replaced. Medestomas received the
returned transreceivers and promised to send him the replacement units within two (2) weeks
from May 10, 1997.

Time passed and Gacott did not receive the replacement units as promised. QSC informed him
that there were no available units and that it could not refund the purchased price. Despite
several demands, both oral and written, Gacott was never given a replacement or a refund.

Thus, Gacott filed a complaint for damages. Summons was served upon QSC and Medestomas,
afterwhich they filed their Answer, verified by Medestomas himself and a certain Elton Ong
(Ong). QSC and Medestomas did not present any evidence during the trial.6

In a Decision,7 dated March 16, 2007, the RTC found that the two (2) transreceivers were
defective and that QSC and Medestomas failed to replace the same or return Gacott's money.

The decision became final as QSC and Medestomas did not interpose an appeal. Gacott then
secured a Writ of Execution,8 dated September 26, 2007.

During the execution stage, Gacott learned that QSC was not a corporation, but was in fact a
general partnership registered with the Securities and Exchange Commission (SEC). In the
articles of partnership,9 Guy was appointed as General Manager of QSC.
Upon learning that Guy had vehicles registered in his name, Gacott instructed the sheriff to
proceed with the attachment of one of the motor vehicles of Guy based on the certification issued
by the DOTC-LTO.11
On March 3, 2009, Sheriff Felizarte attached Guy’s vehicle by virtue of the Notice of
Attachment/Levy upon Personalty12 served upon the record custodian of the DOTC-LTO of
Mandaluyong City. A similar notice was served to Guy through his housemaid at his residence.

Thereafter, Guy filed his Motion to Lift Attachment Upon Personalty, arguing that he was not a
judgment debtor and, therefore, his vehicle could not be attached.13 Gacott filed an opposition to
the motion.

RTC: WHEREFORE, with the ample discussion of the matter, this Court finds and so holds that
the property of movant Michael Guy may be validly attached in satisfaction of the liabilities
adjudged by this Court against Quantech Co., the latter being an ostensible Corporation and the
movant being considered by this Court as a general partner therein in accordance with the order
of this court impressed in its decision to this case imposing joint and several liability to the
defendants. The Motion to Lift Attachment Upon Personalty submitted by the movant is
therefore DENIED for lack of merit.

CA: The CA stressed that Guy, being a partner in QSC, was bound by the summons served upon
QSC based on Article 1821 of the Civil Code. The CA further opined that the law did not require
a partner to be actually involved in a suit in order for him to be made liable. He remained
“solidarily liable whether he participated or not, whether he ratified it or not, or whether he had
knowledge of the act or omission.”19

Issue:
Whether or not Guy is solidarily liable with the partnership for damages arising from the breach
of contract of sale with Gacott.

Ruling:
No, Guy is not solidarily liable with the partnership.

A partner must be separately and distinctly impleaded before he can be bound by a judgment.
Although a partnership is based on delectus personae or mutual agency, whereby any partner can
generally represent the partnership in its business affairs, it is non sequitur that a suit against the
partnership is necessarily a suit impleading each and every partner. It must be remembered that a
partnership is a juridical entity that has a distinct and separate personality from the persons
composing it.28

Partners’ liability is subsidiary and generally joint; immediate levy upon the property of a partner
cannot be made. Art. 1816 clearly states that, first, the partners’ obligation with respect to the
partnership liabilities is subsidiary in nature. It provides that the partners shall only be liable with
their property after all the partnership assets have been exhausted. To say that one’s liability is
subsidiary means that it merely becomes secondary and only arises if the one primarily liable
fails to sufficiently satisfy the obligation. Resort to the properties of a partner may be made only
after efforts in exhausting partnership assets have failed or that such partnership assets are
insufficient to cover the entire obligation. The subsidiary nature of the partners’ liability with the
partnership is one of the valid defenses against a premature execution of judgment directed to a
partner.

In this case, had he been properly impleaded, Guy’s liability would only arise after the properties
of QSC would have been exhausted. The records, however, miserably failed to show that the
partnership’s properties were exhausted. The report37 of the sheriff showed that the latter went
to the main office of the DOTC-LTO in Quezon City and verified whether Medestomas, QSC
and Guy had personal properties registered therein. Gacott then instructed the sheriff to proceed
with the attachment of one of the motor vehicles of Guy.38 The sheriff then served the Notice of
Attachment/Levy upon Personalty to the record custodian of the DOTC-LTO of Mandaluyong
City. A similar notice was served to Guy through his housemaid at his residence.

Second, Article 1816 provides that the partners’ obligation to third persons with respect to the
partnership liability is pro rata or joint.

In essence, these provisions (Arts. 1822, 1823, & 1824) articulate that it is the act of a partner
which caused loss or injury to a third person that makes all other partners solidarily liable with
the partnership because of the words "any wrongful act or omission of any partner acting in the
ordinary course of the business," "one partner acting within the scope of his apparent authority"
and "misapplied by any partner while it is in the custody of the partnership." The obligation is
solidary because the law protects the third person, who in good faith relied upon the authority of
a partner, whether such authority is real or apparent.40

In the case at bench, it was not shown that Guy or the other partners did a wrongful act or
misapplied the money or property he or the partnership received from Gacott. A third person
who transacted with said partnership can hold the partners solidarily liable for the whole
obligation if the case of the third person falls under Articles 1822 or 1823.41 Gacott’s claim
stemmed from the alleged defective transreceivers he bought from QSC, through the latter's
employee, Medestomas. It was for a breach of warranty in a contractual obligation entered into
in the name and for the account of QSC, not due to the acts of any of the partners. For said
reason, it is the general rule under Article 1816 that governs the joint liability of such breach, and
not the exceptions under Articles 1822 to 1824. Thus, it was improper to hold Guy solidarily
liable for the obligation of the partnership.

Petition is granted. The decision of the CA is reversed.

Aniceto G. Saludo Jr., petitioner.

Philippine National Bank, respondent.
G.R. No. 193138
August 20, 2018
Jardeleza, J.
Petition for Review on Certiorari
FACTS:
SAFA Law Office entered into a Contract of Lease with PNB. When the Contract of
Lease expired, SAFA Law Office continued to occupy the leased premises but were remiss in
paying its monthly rental obligations. Consequently, PNB sent a demand letter for SAFA Law
Office to pay its outstanding unpaid rents. SAFA Law Office then asked PNB to review and
discuss its billings, evaluate the improvements in the area and agree on a compensatory sum to
be applied to the unpaid rents. Saludo, in his capacity as managing partner of SAFA Law Office,
filed a complaintfor accounting and/or recomputation of unpaid rentals and damages against
PNB in relation to the Contract of Lease. PNB filed its answer. By way of compulsory
counterclaim, it sought payment from SAFA Law Office in the sum of money representing
overdue rentals. PNB argued that as a matter of right and equity, it can claim that amount from
SAFA Law Office in solidum with Saludo. Saludo filed his motion to dismiss counterclaims,
mainly arguing that SAFA Law Office is neither a legal entity nor party litigant. As it is only a
relationship or association of lawyers in the practice of law and a single proprietorship which
may only be sued through its owner or proprietor, no valid counterclaims may be asserted against
it. Saludo asserts that SAFA Law Office is a sole proprietorship on the basis of the Memorandum
of Understanding (MOU) executed by the partners of the firm.

ISSUE:
Whether or not the SAFA Law Office is a sole proprietorship.

RULING:
No. SAFA Law Office is a partnership and not a sole proprietorship. Article 1767 of the
Civil Code provides that by a contract of partnership, two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of dividing the
profits among themselves. Two or more persons may also form a partnership for the exercise of a
profession. Under Article 1771, a partnership may be constituted in any form, except where
immovable property or real rights are contributed thereto, in which case a public instrument shall
be necessary. Article 1784, on the other hand, provides that a partnership begins from the
moment of the execution of the contract, unless it is otherwise stipulated.

Here, absent evidence of an earlier agreement, SAFA Law Office was constituted as a
partnership at the time its partners signed the Articles of Partnershipwherein they bound
themselves to establish a partnership for the practice of law, contribute capital and industry for
the purpose, and receive compensation and benefits in the course of its operation. The opening
paragraph of the Articles of Partnership reveals the unequivocal intention of its signatories to
form a partnership. This MOU, however, does not serve to convert SAFA Law Office into a sole
proprietorship. As discussed, SAFA Law Office was manifestly established as a partnership
based on the Articles of Partnership. The MOU, from its tenor, reinforces this fact. It did not
change the nature of the organization of SAFA Law Office but only excused the industrial
partners from liability.

The law, in its wisdom, recognized the possibility that partners in a partnership may
decide to place a limit on their individual accountability. Consequently, to protect third persons
dealing with the partnership, the law provides a rule, embodied in Article 1816 of the Civil Code,
which states:
 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 contract 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.

The foregoing provision does not prevent partners from agreeing to limit their liability,
but such agreement may only be valid as among them. Thus, Article 1817 of the Civil Code
provides:

Art. 1817. Any stipulation against the liability laid down in the preceding article shall be
void, except as among the partners.

Considering that the MOU is sanctioned by the law on partnership, it cannot change the
nature of a duly-constituted partnership. Hence, we cannot sustain Saludo’s position that SAFA
Law Office is a sole proprietorship. Having that settled SAFA Law Office is a partnership, we
hold that it acquired juridical personality by operation of law. The perfection and validity of a
contract of partnership brings about the creation of a juridical person separate and distinct from
the individuals comprising the partnership. Thus, Article 1768 of the Civil Code provides:

Art. 1768. The partnership has a juridical personality separate and distinct from that of
each of the partners, even in case of failure to comply with the requirements of Article 1772, first
paragraph.