Case Summary (G.R. No. L-22493)
Factual Background
On April 22, 1961, United Pioneers General Construction Company, a general partnership, purchased a motor vehicle from Island Sales, Inc. on the installment plan. The partnership executed a promissory note for P9,440.00, payable in twelve monthly installments of P786.63, the first payable on or before May 22, 1961 and subsequent installments on the 22nd of each month. The note provided that failure to pay any installment when due would render the whole unpaid balance immediately due and demandable. The installment due on July 22, 1961 was not paid. The plaintiff sued for the unpaid balance totaling P7,119.07.
Trial Court Proceedings
The plaintiff named the partnership and its general partners, including Benjamin C. Daco, as defendants. Daniel A. Guizona failed to answer and was declared in default. Upon motion of the plaintiff, the complaint was dismissed as to Romulo B. Lumauig. When the case was called for hearing, the defendants and their counsel did not appear despite notice. The trial court permitted the plaintiff to present its evidence ex parte. The trial court rendered judgment against the partnership for P7,119.07 with interest at 12% per annum, attorney's fees of P800.00, and costs. The court adjudged that the individual partners would be subsidiarily liable only if the partnership had no more leviable property, and that the individual defendants would also pay costs.
Motion for Reconsideration and Parties' Contentions
Defendants Benjamin C. Daco and Noel C. Sim moved for reconsideration. They contended that, as there were five general partners when the promissory note was executed, the joint and subsidiary liability of each partner should not exceed one-fifth of the partnership obligation. The plaintiff assented to limiting the liability of Daco and Sim to one-fifth of the partnership's obligation. The trial court denied the motion for reconsideration.
Issue Presented
The sole legal question presented was whether dismissal of the complaint in favor of one of the general partners increases the joint and subsidiary liability of each of the remaining partners for the obligations of the partnership.
Applicable Law
The Court examined Art. 1816 of the Civil Code, which 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 Court also cited Co-Pitco vs. Yulo (8 Phil. 544) for the proposition that, in a civil partnership, partners are not each liable for the whole debt and that liability is pro rata.
Court's Analysis
The Court noted that five general partners existed when the promissory note was executed on behalf of the partnership. Applying Art. 1816, the Court reasoned that the partners' liability is pro rata and that individual liability of a partner cannot be i
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Case Syllabus (G.R. No. L-22493)
Parties and Procedural Posture
- ISLAND SALES, INC. was the plaintiff-appellee that sold a motor vehicle to the partnership and sued for the unpaid balance.
- UNITED PIONEERS GENERAL CONSTRUCTION COMPANY was the defendant partnership that purchased the motor vehicle.
- BENJAMIN C. DACO was a defendant-appellant sued in his capacity as a general partner.
- Other named defendants included Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc as general partners.
- The case proceeded to trial in the Court of First Instance of Manila, Branch XVI, as Civil Case No. 50682.
Key Factual Allegations
- On April 22, 1961, the defendant company, a general partnership duly registered in the Philippines, purchased a motor vehicle from ISLAND SALES, INC. on an installment basis.
- The partnership executed a promissory note for P9,440.00 payable in twelve equal monthly installments of P786.63, with the first installment due May 22, 1961.
- The promissory note contained a provision that failure to pay any installment when due would render the whole unpaid balance immediately due and demandable.
- The defendants failed to pay the installment due July 22, 1961, prompting the plaintiff to sue for an unpaid balance of P7,119.07.
Procedural History
- Daniel A. Guizona failed to file an answer and was declared in default.
- On motion of the plaintiff, the complaint was dismissed insofar as it concerned Romulo B. Lumauig.
- The defendants and their counsels failed to appear at trial despite notices, whereupon the trial court authorized the plaintiff to present its evidence ex parte.
- The trial court rendered judgment in favor of the plaintiff and against the partnership and the individual partners with special provisos on enforceability.
Trial Court Ruling
- The trial court ordered UNITED PIONEERS GENERAL CONSTRUCTION COMPANY to pay ISLAND SALES, INC. P7,119.07 with interest at twelve percent per annum until fully paid.
- The trial court awarded attorney’s fees of Eight Hundred Pesos (P800.00) and costs against the defendants.
- The trial court sentenced the individual defenda