Island Sales, Inc. vs. United Pioneers Gen. Const. Co.

,
65 SCRA 554,
No. L-22493 July 31, 1975

FACTS:

- On April 22, 1961, the defendant company, a general partnership duly

registered under the laws of the Philippines, purchased from the plaintiff a
motor vehicle on the installment basis and for this purpose executed a
promissory note for P9,440.00, payable in twelve (12) equal monthly
installments of P786.63, the first installment payable on or before May 22,
1961 and the subsequent installments on the 22nd day of every month
thereafter, until fully paid, with the condition that failure to pay any of said
installments as they fall due would render the whole unpaid balance
immediately due and demandable.

- Having failed to receive the installment due on July 22, 1961, the plaintiff
sued the defendant company for the unpaid balance amounting to P7,119.07.
Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim, Romulo R. Lumauig,
and Augusto Palisoc were included as co-defendants in their capacity as
general partners of the defendant company.

- Guizona failed to file an answer and was consequently declared in default.

Subsequently, on motion of the plaintiff, the complaint was dismissed
insofar as the defendant Romulo B. Lumauig is concerned. When the case
was called for hearing, the defendants and their counsels failed to appear
notwithstanding the notices sent to them. Consequently, the trial court
authorized the plaintiff to present its evidence ex-parte, after which the trial
court rendered the decision appealed from.

- The defendants Daco and Sim moved to reconsider the decision claiming
that since there are five (5) general partners, the joint and subsidiary liability
of each partner should not exceed one-fifth (1/5) of the obligations of the
defendant company. But the trial court denied the said motion
notwithstanding the conformity of the plaintiff to limit the liability of the
defendants Daco and Sim to only one-fifth (1/5) of the obligations of the
defendant company. Hence, this appeal.

ISSUE:
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.

RULING:

NO. 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 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 cannot increase the liability of Pedro Yulo.” 

In the instant case, there were five general partners when the promissory note in
question was executed for and on behalf of the partnerships. Since the liability of
the partners in pro rata, the liability of the appellant Benjamin C. Daco shall be
limited to only ⅕ 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.

ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SIN AN and

ANTONIO C. GOQUIOLAY” v. WASHINGTON Z. SYCIP, ET AL.,
G.R. No. L-11840
July 26, 1960.
FACTS:
 
- Tan Sin An and Goquiolay entered into a general commercial partnership
under the partnership name “Tan Sin An and Antonio Goquiolay '' for the
purpose of dealing in real estate. The agreement was lodged upon Tan Sin
An the sole management of the partnership affairs. The lifetime of the
partnership was fixed at ten years and the Articles of Co-partnership
stipulated that in the event of death of any of the partners before the
expiration of the term, the partnership will not be dissolved but will be
continued by the heirs or assigns of the deceased partner. But the partnership
could be dissolved upon mutual agreement in writing of the partners.

- Goquiolay executed a GPA in favor of Tan Sin An. The plaintiff partnership
purchased 3 parcels of land which was mortgaged to “La Urbana '' as
payment of P25,000. Another 46 parcels of land were purchased by Tan Sin
An in his individual capacity which he assumed payment of a mortgage debt
for P35K. A downpayment and the amortization were advanced by Yutivo
and Co. The two obligations were consolidated in an instrument executed by
the partnership and Tan Sin An, whereby the entire 49 lots were mortgaged
in favor of “Banco Hipotecario '' Tan Sin An died leaving his widow, Kong
Chai Pin and four minor children. The widow subsequently became the
administratrix of the estate. Repeated demands were made by Banco
Hipotecario on the partnership and on Tan Sin An. 

- Defendant Sing Yee, upon request of defendant Yutivo Sons, paid the
remaining balance of the mortgage debt, the mortgage was cancelled Yutivo
Sons and Sing Yee filed their claim in the intestate proceedings of Tan Sin
An for advances, interest and taxes paid in amortizing and discharging their
obligations to “La Urbana” and “Banco Hipotecario.” Kong Chai Pin filed a
petition with the probate court for authority to sell all the 49 parcels of land.
She then sold it to Sycip and Lee in consideration of P37K and of the
vendees assuming payment of the claims filed by Yutivo Sons and Sing Yee.
Later, Sycip and Lee executed in favor of Insular Development a deed of
transfer covering the 49 parcels of land.

- When Goquiolay learned about the sale to Sycip and Lee, he filed a petition
in the intestate proceedings to set aside the order of the probate court
approving the sale in so far as his interest over the parcels of land sold was
concerned. Probate court annulled the sale executed by the administratrix w/
 respect to the 60% interest of Goquiolay over the properties Administratrix
appealed. The decision of probate court was set aside for failure to include
the indispensable parties. New pleadings were filed. The second amended
complaint prays for the annulment of the sale in favor of Sycip and Lee and
their subsequent conveyance to Insular Development. The complaint was
dismissed by the lower court hence this appeal.
 
ISSUE: 

Whether or not a widow or substitute is also a general partner.

 
HELD:
 
YES. Kong Chai Pin became a mere general partner. By seeking authority to
manage partnership property, Tan Sin An’s widow showed that she desired to be
considered a general partner. By authorizing the widow to manage partnership
property (which a limited partner could not be authorized to do), Goqulay
recognized her as such partner, and is now in estoppel to deny her position as a
general partner, with authority to administer and alienate partnership property.

The articles did not provide that the heirs of the deceased would be merely limited
partners; on the contrary, they expressly stipulated that in case of death of either
partner, “the co-partnership will have to be continued” with the heirs or assignees.
It certainly could not be continued if it were to be converted from a general
partnership into a limited partnership since the difference between the two kinds of
associations is fundamental, and especially because the conversion into a limited
association would leave the heirs of the deceased partner without a share in the
management. Hence, the contractual stipulation contemplated that the heirs would
become general partners rather than limited ones.