Property Rights of a Partner

G.R. No. L-13680             April 27, 1960MAURO LOZANA, plaintiff-appellee, -versus- SERAFIN DEPAKAKIBO, defendant-appellant

Facts:

plaintiff Mauro Lozana entered into a contract with defendant Serafin Depakakibo wherein they established a partnership capitalized at the sum of P30,000, plaintiff furnishing 60% thereof and the defendant, 40%, for the purpose of maintaining, operating and distributing electric light and power in the Municipality of Dumangas, Province of Iloilo, under a franchise issued to Mrs. Piadosa Buenaflor.

However, the franchise or certificate of public necessity and convenience in favor of the said Mrs. Piadosa Buenaflor was cancelled and revoked

because of the cancellation of the franchise, plaintiff Lozana sold a generator to the new grantee Olimpia D. Decolongon

Defendant Serafin Depakakibo, on the other hand, sold one Crossly Diesel Engine to the spouses Felix Jimenea and Felina Harder

plaintiff Lozana brought an action against the defendant, alleging that he is the owner of the Generator Buda (Diesel) and 70 wooden posts with the wires connecting the generator to the different houses supplied by electric current in the Municipality of Dumangas, and that he is entitled to the possession thereof, but that the defendant has wrongfully detained them

defendant denied that the subject properties belong to the plaintiff and alleged that the same had been contributed by the plaintiff to the partnership entered into between them in the same manner that defendant had contributed equipments also, and therefore that he is not unlawfully detaining them

→ he further alleged in his counterclaim that under the partnership agreement the parties were to contribute equipments, plaintiff contributing the generator and the defendant, the wires for the purpose of installing the main and delivery lines and that the plaintiff sold his contribution to the partnership, in violation of the terms of their agreement

The lower court declared that the contract of partnership was null and void, because by the contract of partnership, the parties thereto have become dummies of the owner of the franchise

Issue: Whether or not the Buda diesel engine contributed by the plaintiff had become the property of the partnership

Held: YES

as it is not stated therein that there has been a liquidation of the partnership assets at the time plaintiff sold the Buda Diesel Engine on October 15, 1955, and since the court below had found that the plaintiff had actually contributed one engine and 70 posts to the partnership, it necessarily follows that the Buda diesel engine contributed by the plaintiff had become the property of the partnership. As properties of the partnership, the same could not be disposed of by the party contributing the same without the consent or approval of the partnership or of the other partner.

The Anti-Dummy law has not been violated as parties plaintiff and defendant are not aliens but Filipinos. The Anti-Dummy law refers to aliens only

the court erred in declaring that the contract was illegal from the beginning and that parties to the partnership are not bound therefor, such that the contribution of the plaintiff to the partnership did not pass to it as its property

→ It also follows that the claim of the defendant in his counterclaim that the partnership be dissolved and its assets liquidated is the proper remedy, not for each contributing partner to claim back what he had contributed.

THE LEYTE-SAMAR SALES CO., and RAYMUNDO TOMASSI, petitioners, vs. SULPICIO V. CEA, in his capacity as Judge of the Court of First Instance of Leyte and OLEGARIO LASTRILLA, respondents.

FACTS

Fred Brown (like Arnold Hall and Jean Roxas) was a partner of the FELCO, was defendant in Civil Case No. 193 as such partner, and that the properties sold at auction actually belonged to the FELCO partnership and the partners.

We shall also assume that the sale made to Lastrilla on September 29, 1949, of all the shares of Fred Brown in the FELCO was valid. (Remember that judgment in this case was entered in the court of first instance a year before.)

The result then, is that on June 9, 1951 when the sale was effected of the properties of FELCO to Roberto Dorfe and Pepito Asturias, Lastrilla was already a partner of FELCO.

ISSUE: Does Lastrilla have any proper claim to the proceeds of the sale?

HELD: If he was a creditor of the FELCO, perhaps or maybe. But he was not. The partner of a partnership is not a creditor of such partnership for the amount of his shares.

Inasmuch as Lastrilla had acquired the shares of Brown in September, 1949, i.e., before the auction sale, and he was not a party to the litigation, such shares could not have been transferred to Dorfe and Asturias

Granting, arguendo that the auction sale did not include the interest or portion of the FELCO properties corresponding to the shares of Lastrilla in the same partnership (17%), the resulting situation would be - at most - that the purchasers Dorfe and Asturias will have to recognize dominion of Lastrilla over 17 per cent of the properties awarded to them., 2 So Lastrilla acquired no right to demand any part of the money paid by Dorfe and Asturias to the sheriff for the benefit of FELCO and Tomassi, the plaintiffs in that case, for the reason that, as he says, his shares (acquired from Brown) could not have been and were not auctioned off to Dorfe and Asturias.

ACTIONS; REMEDY OF OWNER OF PROPERTY WRONGFULLY SOLD — The remedy of the owner of a property wrongfully sold is to claim the property and not the proceeds of the sale.

Obligations of Partners as to Third Persons

G.R. No. L-26937             October 5, 1927

PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs.SEVERO EUGENIO LO, ET AL., defendants. SEVERIO EUGENIO LO, NG KHEY LING and YEP SENG, appellantsFacts:

On September 29, 1916, the appellants Severo Eugenio Lo and Ng Khey Ling, together with J. A. Say Lian Ping, Ko Tiao Hun, On Yem Ke Lam and Co Sieng Peng formed a commercial partnership under the name of "Tai Sing and Co.," with a capital of P40,000 contributed by said partnerso In the articles of copartnership: the partnership was to last

for five years, to do business in Iloilo and other parts of the Philippines under the name of "Tai Sing & Co.," for the purchase and sale of merchandise and goods as well as Chinese and Japanese, products

o One of the partners, J. A. Say Lian Ping was appointed general manager of the partnership

On June 4, 1917, general manager A. Say Lian Ping executed a power of attorney in favor of A. Y. Kelam, authorizing him to act in his stead as manager and administrator of "Tai Sing & Co.," for, and obtained a loan of P8,000 in current account from the plaintiff bank. o As security for said loan, he mortgaged certain personal

property of "Tai Sing & Co This credit was renewed several times

o executed a chattel mortgage in favor of plaintiff bank as security for a loan of P20,000 with interest

o again renewed and executed another chattel mortgage for the said sum of P20,000 in favor of plaintiff bank

Defendants had been using this commercial credit in a current account with the plaintiff bank, from the year 1918, to May 22, 1921

This total is the sum claimed in the complaint, together with interest on the P16,518.74 debt, at 9 per cent per annum

Defendant Eugenio Lo sets up, as a general defense, that "Tai Sing & Co. was not a general partnership, and that the commercial credit in current account which "Tai Sing & Co. obtained from the plaintiff bank had not been authorized by the board of directors of the company, nor was the person who subscribed said contract authorized to make the same, under the article of copartnership.

Issue: W/N they formed a general partnershipHeld: YesRatio:

Appellants admit, and it appears from the context of Exhibit A, that the defendant association formed by the defendants is a general partnership, as defined in article 126 of the Code Commerce. This partnership was registered in the mercantile register of the Province of Iloilo. The only anomaly noted in its organization is that instead of adopting for their firm name the names of all of the partners, of several of them, or only one of them, to be followed in the last two cases, by the words "and to be followed in the last two cases, by the words "and company" the partners agreed upon "Tai Sing & Co." as the firm name.

          In the case of Hung-Man-Yoc, under the name of Kwong-Wo-Sing vs. Kieng-Chiong-Seng, cited by appellants, this court held that, as the company formed by defendants had existed in fact, though not in law due to the fact that it was not recorded in the register, and having operated and contracted debts in favor of the plaintiff, the same must be paid by someone. This applies more strongly to the obligations contracted by the defendants, for they formed a partnership which was registered in the mercantile register, and carried on business contracting debts with the plaintiff bank. The anomalous adoption of the firm name above noted does

not affect the liability of the general partners to third parties under article 127 of the Code of CommerceJo Chung Cang vs. Pacific Commercial Co.

the object of article 126 of the Code of Commerce in requiring a general partnership to transact business under the name of all its members, of several of them, or of one only, is to protect the public from imposition and fraud; and that the provision of said article 126 is for the protection of the creditors rather than of the partners themselves

Therefore, the defendants cannot invoke in their defense the anomaly in the firm name which they themselves adoptedAs to the alleged death of the manager of the company, Say Lian PingThe trial court did not find this fact proven at the hearing. But even supposing that the court had erred, such an error would not justify the reversal of the judgment, for two reasons at least: (1) Because Ou Yong Kelam was a partner who contracted in the name of the partnership, without any objection of the other partners; and (2) because it appears in the record that the appellant-partners Severo Eugenio Lo, Ng Khey Ling and Yap Seng, appointed Sy Tit as manager, and he obtained from the plaintiff bank the credit in current account, the debit balance of which is sought to be recovered in this action

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

→ 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 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 

→ Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc were included as co-defendants in their capacity as general partners of the defendant company.

→ Subsequently, on motion of the plaintiff, the complaint was dismissed insofar as the defendant Romulo B. Lumauig is concerned.

→ The trial court rendered a decision in favor of plaintiff.→ 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.ISSUE: WoN 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.HELD: NO

Article 1816 of the Civil Code provides: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.

The partners are not liable each for the whole debt of the partnership. The liability is pro rata.

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.

PHILIPPINE NATIONAL BANK v. LO

FACTS:

The appellants Severo Eugenio Lo, etc. formed a commercial partnership under the name of "Tai Sing and Co.," with a capital of P40,000 contributed by said partners.

In the articles of copartnership, it appears that the partnership was to last for five years from after the date of its organization.

One of the partners, J. A. Say Lian Ping was appointed general manager of the partnership, with the powers specified in said articles of copartnership.

On June 4, 1917, general manager A. Say Lian Ping executed a power of attorney in favor of A. Y. Kelam, authorizing him to act in his stead as manager and administrator of "Tai Sing & Co.," for, and obtained a loan of P8,000 in current account from the plaintiff bank.

As security for said loan, he mortgaged certain personal property of "Tai Sing & Co.,

 This credit was renewed several times until its default. Defendant Eugenio Lo sets up, as a general defense, that "Tai

Sing & Co. was not a general partnership, and that the commercial credit in current account which "Tai Sing & Co. obtained from the plaintiff bank had not been authorized by the board of directors of the company, nor was the person who subscribed said contract authorized to make the same, under the article of copartnership.

After the hearing, the court found against the partners.

ISSUE: Whether all the members of a general partnership, be they managing partners thereof or not, shall be personally and solidarily liable with all their property

RULING: YES. The SC held that this partnership was registered in the mercantile register of the Province of Iloilo. The only anomaly noted in its organization is that instead of adopting for their firm name the names of all of the partners, of several of them, or only one of them, to be followed in the last two cases, by the words "and to be followed in the last two cases, by the words "and company" the partners agreed upon "Tai Sing & Co." as the firm name.

          In the case of Hung-Man-Yoc, under the name of Kwong-Wo-Sing vs. Kieng-Chiong-Seng, cited by appellants, this court held that, as the company formed by defendants had existed in fact, though not in law due to the fact that it was not recorded in the register, and having operated and contracted debts in favor of the plaintiff, the same must be paid by someone. This applies more strongly to the obligations contracted by the defendants, for they formed a partnership which was registered in the mercantile register, and carried on business contracting debts with the plaintiff bank. The anomalous adoption of the firm name above noted does not affect the liability of the general partners to third parties under article 127 of the Code of Commerce. And the Supreme Court so held in the case of Jo Chung Cang vs. Pacific Commercial Co., (45 Phil., 142), in which it said that the object of article 126 of the Code of Commerce in requiring a general partnership to transact business under the name of all its members, of several of them, or of one only, is to protect the public from imposition and fraud; and that the provision of said article 126 is for the protection of

the creditors rather than of the partners themselves. And consequently the doctrine was enunciated that the law must be unlawful and unenforceable only as between the partners and at the instance of the violating party, but not in the sense of depriving innocent parties of their rights who may have dealt with the offenders in ignorance of the latter having violated the law; and that contracts entered into by commercial associations defectively organized are valid when voluntarily executed by the parties, and the only question is whether or not they complied with the agreement. Therefore, the defendants cannot invoke in their defense the anomaly in the firm name which they themselves adopted.

          The court also found that the partnership property described in the mortgage Exhibit F no longer existed at the time of the filing of the herein complaint nor has its existence been proven, nor was it offered to the plaintiff for sale.

GEORGE LITTON, petitioner-appellant, vs.HILL & CERON, ET AL., respondents-appellees.

Facts: On February 14, 1934, the plaintiff sold and delivered to

Carlos Ceron, who is one of the managing partners of Hill & Ceron, a certain number of mining claims, and by virtue of said transaction, the defendant Carlos Ceron delivered to the plaintiff a document reading as follows:

1. “Received from Mr. George Litton share certificates Nos. 4428, 4429 and 6699 for 5,000, 5,000 and 7,000 shares respectively — total 17,000 shares of Big Wedge Mining Company, which we have sold at P0.11 (eleven centavos) per share or P1,870.00 less 1/2 per cent brokerage.”

HILL & CERON 

By: (Sgd.) CARLOS CERON Ceron paid to the plaintiff the sum or P1,150 leaving an unpaid

balance of P720 Unable to collect this sum either from Hill & Ceron or from its

surety Visayan Surety & Insurance Corporation, Litton filed a complaint in the Court of First Instance of Manila against the said defendants for the recovery of the said balance

The court ordered Carlos Ceron personally to pay the amount claimed and absolved the partnership Hill & Ceron, Robert Hill and the Visayan Surety & Insurance Corporation

CA affirmed the decision of the court having reached the conclusion that Ceron did not intend to represent and did not act for the firm Hill & Ceron in the transaction involved in this litigation

Issue/Held: W/N the transaction is binding on the partnership / YES

Ratio: The transaction made by Ceron with the plaintiff should be

understood in law as effected by Hill & Ceron and binding upon it

In the first place, it is an admitted fact by Robert Hill when he testified at the trial that he and Ceron, during the partnership, had the same power to buy and sell and that on the date of the transaction, February 14, 1934, the partnership between Hill and Ceron was in existence

1. After this date, or on February 19th, Hill & Ceron sold shares of the Big Wedge; and when the transaction was entered into with Litton, it was neither published in the newspapers nor stated in the commercial registry that the partnership Hill & Ceron had been dissolved

Under article 226 of the Code of Commerce, the dissolution of a commercial association shall not cause any prejudice to third parties until it has been recorded in the commercial registry

Moreover, Respondents assert that by virtue of paragraph 6 of the articles of partnership of Hill & Ceron, he consent of the other is necessary to bind the partnership as it is stipulated in the said paragraph that that the management of the business of the partnership has been entrusted to both partners thereof

However, 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

1. 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

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

Also, the 2nd paragraph of the articles of partnership reads:1. Second:  That the purpose or object for which this

copartnership is organized is to engage in the business of brokerage in general, such as stock and bond brokers, real brokers, investment security brokers, shipping brokers, and other activities pertaining to the business of brokers in general

The kind of business in which the partnership Hill & Ceron is to engage being thus determined, none of the two partners, under article 130 of the Code of Commerce, may legally engage in the business of brokerage in general as stock brokers, security brokers and other activities pertaining to the business of the partnership.

1. Ceron, therefore, could not have entered into the contract of sale of shares with Litton as a private individual, but as a managing partner of Hill & Ceron

The respondent argues in its brief that even admitting that one of the partners could not, in his individual capacity, engage in a transaction similar to that in which the partnership is engaged without binding the latter

1. Nevertheless there is no law which prohibits a partner in the stock brokerage business for engaging in other transactions different from those of the partnership, as it happens in the present case, because the transaction made by Ceron is a mere personal loan, and this argument, so it is said, is corroborated by the Court of Appeals. We do not find this alleged corroboration because the only finding of fact made by the Court of Appeals is to the effect that the transaction made by Ceron with the plaintiff was in his individual capacity

G.R. No. L-11840   July 26, 1960ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SIN AN and ANTONIO C. GOQUIOLAY, plaintiffs-appellants,  vs. WASHINGTON Z. SYCIP, ET AL., defendants-appellees

(and)

G.R. No. L-11840          December 10, 1963

ANTONIO C. GOQUIOLAY, ET AL., plaintiffs-appellants, vs.WASHINGTON Z. SYCIP, ET AL., defendants-appellees.

Facts:

Tan Sin An and Antonio C. Goquiolay", entered into a general commercial partnership

In the agreement it was stipulated that 1) that Tan Sin An would be the exclusive managing partner, and (2) in the event of the death of any of the partners the partnership would continue, the deceased to be represented by his heirs

On May 29, 1940, the partnership acquired three parcels of land executing a mortgage in favor of "La Urbana Sociedad Mutua de Construccion Prestamos"

On the same date, Tan Sin An, in his individual capacity, acquired 46 parcels of land executing a mortgage thereon in favor of the same company

these two mortgage obligations and as a result Tan Sin An, in his individual capacity, and the partnership bound themselves to pay jointly and severally the total amount

on June 26, 1942, Tan Sin An died and was survived by his widow, defendant Kong Chai Pin, and four children

Kong Chai Pin filed a petition in the probate court to sell all the properties of the partnership as well as some of the conjugal properties left by Tan Sin An for the purpose of paying the claims of creditors which the court approved

Following approval by the court of the petition for authority to sell, Kong Chai Pin, in her capacity as administratrix, and presuming to act as managing partner of the partnership, sold the properties owned by Tan Sin An and by the partnership in favor of third persons

these transactions took place without the knowledge of Goquiolay

→ Goquiolay sought to nullify the sale challenging the authority of Kong Chai Pin to sell the partnership properties on the ground that she had no authority because even granting that she became a partner upon the death of Tan Sin An the power of attorney granted in favor of the latter expired after his death.

He also insists that, Kong Chai Pin, widow of the deceased partner Tan Sin An, never became more than a limited partner, incapacitated by law to manage the affairs of the partnership

→ Defendants, on the other hand, defended the validity of the sale on the theory that she succeeded to all the rights and prerogatives of Tan Sin An as managing partner

→ The trial court sustained the validity of the sale on the ground that under the provisions of the articles of partnership allowing the heirs of the deceased partner to represent him in the partnership after his death, Kong Chai Pin became a managing partner, this being the capacity held by Tan Sin An when he died

Issues: 1) whether or not the sale of the properties of the partnership to third persons made by the widow of a deceased partner was valid

2) whether or not the widow of the deceased partner became a partner herself after the latter’s death pursuant to the existing partnership agreement

Held:

YES

Strangers dealing with a partnership have the right to assume, in the absence of restrictive clauses in the co-partnership agreement, that every general partner has power to bind the partnership, specially those partners acting with ostensible authority

The third person may rightfully assume that the contracting partner was duly authorized to contract for and in behalf of the firm and that, furthermore, he would not ordinarily act to the prejudice of his co-partners. The regular course of business procedure does not require that each time a third person contracts with one of the managing partners, he should inquire as to the latter's authority to do so, or that he should first ascertain whether or not the other partners had given their consent thereto

The records fail to disclose that appellant Goquiolay made any opposition to the sale of the partnership realty to Washington Z. Sycip and Betty Lee; on the contrary, it appears that he (Goquiolay) only interposed his objections after the deed of conveyance was executed and approved by the probate court, and, consequently, his opposition came too late to be effective

The contract made between the plaintiff and the then manager of the defendant partnership did not in any way vary or modify this provision of the articles of partnership. The profits of the business could not be determined until all of the expenses had been paid. A part of the expenses to be paid for the year 1902 was the salary of the plaintiff. That salary had to be deducted before the net profits of the business, which were to be divided among the partners, could be ascertained. It was undoubtedly necessary in order to determine what the salary of the plaintiff was, to determine what the profits of the business were, after paying all of the expenses except his, but that determination was not the final determination of the net profits of the business. It was made for the purpose of fixing the basis upon which his compensation should be determined.

YES (Resolution December 10, 1963 - G.R. No. L-11840)

the widow was not a mere agent, because she had become a partner upon her husband's death, as expressly provided by the articles of co-partnership. Even more, granting that by succession to her husband, Tan Sin An, the widow only a became the limited partner, Goquiolay's authorization to manage the partnership property was proof that he considered and recognized her has general partner, at least since 1945.

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), Goquiolay 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 partner; 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 assigns

ELMO MUÑASQUE, petitioner,vs.COURT OF APPEALS,CELESTINO GALAN TROPICAL COMMERCIALCOMPANY and RAMON PONS,respondents.

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 every15 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 encashthe 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 Cebumanager, 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 caseof the third person falls under Articles 1822 and 1823.The obligation is solidary because the law protects him, who in good faith relied upon theauthority 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.

MACDONALD v. THE NATIONAL CITY BANK OF NEW YORK

FACTS:

“STASIKINOCEY is a partnership doing business in San Juan, Rizal.

This partnership was denied registration in the SEC. The CARDINAL RATTAN, sometimes called the CARDINAL

RATTAN FACTORY, is treated as a copartnership, of which Defendants Gorcey and da Costa are considered general partners, we are satisfied that, as alleged in various instruments appearing of record, said Cardinal Rattan is merely the business name or style used by the partnership Stasikinocey.

Defendant Stasikinocey had an overdraft account with The National City Bank of New York, a foreign banking association duly licensed to do business in the Philippines.

The overdraft showed a balance of P6,134.92 against the Defendant Stasikinocey or the Cardinal Rattan.

Due to the failure of the partnership to make the required payment, was converted into an ordinary loan for which the corresponding promissory ‘joint note non-negotiable’ was executed on June 3, 1949, by Louis F. da Costa for and in the name of the Cardinal Rattan, Louis F. da Costa and Alan Gorcey (Exhibit D).

This promissory note was secured by a chattel mortgage executed by Louis F. da Costa, Jr., General Partner for and in the name of Stasikinocey, alleged to be a duly registered Philippine partnership, doing business under the name and style of Cardinal Rattan.

The mortgage deed was fully registered by the mortgagee in the Office of the Register of Deeds for the province of Rizal.

“While the said loan was still unpaid and the chattel mortgage subsisting, Defendant partnership, through Defendants Gorcey and Da Costa transferred to Defendant McDonald the Fargo truck and Plymouth sedan.

Paul Mcdonald, notwithstanding Plaintiff’s existing mortgage lien, in turn transferred the Fargo truck and the Plymouth sedan to Benjamin Gonzales.”

The National City Bank of New York, Respondent herein, upon learning of the transfers made by the partnership Stasikinocey to William Shaeffer, from the latter to Paul McDonald, and from Paul McDonald to Benjamin Gonzales, of the vehicles previously pledged by Stasikinocey to the Respondent, filed an action against Stasikinocey and its alleged partners Gorcey and Da Costa, as well as Paul McDonald and Benjamin Gonzales, to recover its credit and to foreclose the corresponding chattel mortgage.

McDonald and Gonzales were made Defendants because they claimed to have a better right over the pledged vehicle.

The CFI annulled the sale of the vehicles in question to Benjamin Gonzales.

The CA modified the CFI’s decision, relieving Appellant William Shaeffer of the obligation of paying, jointly and severally, together with Alan W. Gorcey and Louis F. da Costa, Jr., any deficiency that may remain unpaid after applying the proceeds of the sale of the said motor vehicles, hence this appeal.

ISSUE: Whether partners herein are already stopped in denying that they are partners of the partnership Stasikinocey

RULING: YES. While an unregistered commercial partnership has no juridical personality, nevertheless, where two or more persons attempt to create a partnership failing to comply with all the legal formalities, the law considers them as partners and the association is a partnership in so far as it is a favorable to third persons, by reason of the equitable principle of estoppel. In Jo Chung Chang vs. Pacific Commercial Co., 45 Phil., 145, it was held “that although the partnership with the firm name of ‘Teck Seing and Co. Ltd.,’ could not be regarded as a partnership de jure, yet with respect to third persons it will be considered a partnership with all the consequent obligations for the purpose of enforcing the rights of such third persons.” Da Costa and Gorcey cannot deny that they are partners of the partnership Stasikinocey, because in all their transactions with the Respondent they represented themselves as such. Petitioner McDonald cannot disclaim knowledge of the partnership Stasikinocey because he dealt with said entity in purchasing two of the vehicles in question through Gorcey and Da Costa. As was held in Behn Meyer & Co. vs. Rosatzin, 5 Phil., 660, where a partnership not duly organized has been recognized as such in its dealings with certain persons, it shall be considered as “partnership by estoppel” and the persons dealing with it are estopped from denying its partnership existence. The sale of the vehicles in question being void as to Petitioner McDonald, the transfer from the latter to Petitioner Benjamin Gonzales is also void, as the buyer cannot have a better right than the seller.

It results that if the law recognizes a defectively organized partnership as de facto as far as third persons are concerned, for purposes of its de facto existence it should have such attribute of a partnership as domicile. In Hung-Man Yoc vs. Kieng-Chiong-Seng, 6 Phil., 498, it was held that although “it has no legal standing, it is a partnership de facto and the general provisions of the Code applicable to all partnerships apply to it.” The registration of the chattel mortgage in question with the Office of the Register of Deeds of Rizal, the residence or place of business of the partnership Stasikinocey being San Juan, Rizal, was therefore in accordance with section 4 of the Chattel Mortgage Law.