MARITIMA vs.

MUNOZ
GR. L-3704 | December 12, 1907

Petitioner: Cia Maritima Respondent: Francisco Munoz, et al.

Topic: Liability for Partnership Debts

Facts:
The plaintiff initiated legal proceedings in Manila's Court of First Instance against
the partnership Francisco Muñoz & Sons, as well as individual defendants
Francisco Muñoz de Bustillo, Emilio Muñoz de Bustillo, and Rafael Naval. The
plaintiff sought to recover 26,828.30 pesos, plus interest and legal costs.

The lower court's verdict exonerated Emilio Muñoz de Bustillo and Rafael Naval.
However, it ruled in favor of the plaintiff against the defendant partnership
Francisco Muñoz & Sons and Francisco Muñoz de Bustillo personally. The
judgment ordered them to pay 26,828.30 pesos, with 8% annual interest starting
from March 31, 1905, as well as court costs.

The plaintiff, dissatisfied with this outcome, appealed the decision.

Issue: Whether or not the industrial partners should be held accountable for
partnership debts

Ruling:
Yes. According to Article 127 “All the members of the general copartnership, be
they or be they not managing partners of the same, are liable personally and in
solidum with all their property for the results of the transactions made in the name
and for the account of the partnership, under the signature of the latter, and by a
person authorized to make use thereof.”

If the phrase "all the partners" as found in the articles other than article 127
includes industrial partners, then article 127 must include them and they are liable
by the terms thereof for the debts of the firm. There is no injustice in imposing this
liability upon the industrial partners. They have a voice in the management of the
business, if no manager has been named in the articles; they share in the profits
and as to third persons it is no more than right that they should share in the
obligations.
 MUNASQUE vs. CA
GR. L-39780 | November 11, 1985

Petitioner: Elmo Munasque Respondent: CA

Topic: Liability for Misapplication of Money

Facts:
●​ Elmo Muñasque and Celestino Galan formed a partnership for a
construction project with Tropical Commercial Co., Inc.
●​ Muñasque filed a complaint against Galan, Tropical, and Ramon Pons
(Tropical's Cebu Branch Manager) for payment of money and damages.
●​ Muñasque alleged that Galan misappropriated funds from the first two
checks issued by Tropical for the project.
●​ Two business firms, Cebu Southern Hardware Company and Blue Diamond
Glass Palace, intervened as creditors of the partnership.

Issue: Whether or not Munasque should be held excluded from the partnership’s
liability

Ruling:
No. As per Article 1822, “Where, by any wrongful act or omission of any partner
acting in the ordinary course of the business of the partner-ship or with the
authority of his co-partners, loss or injury is caused to any person, not being a
partner in the partnership or any penalty is incurred, the partnership is liable
therefor to the same extent as the partner so acting or omitting to act.”

Furthermore, Article 1823. The partnership is bound to make good:

(1) Where one partner acting within the scope of his apparent authority receives
money or property of a third person and misapplies it; and

(2) Where the partnership in the course of its business receives money or property
of a third person and the money or property so received is misapplied by any
partner while it is in the custody of the partnership.

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. That is
why under Article 1824 of the Civil Code all partners, whether innocent or guilty, as
well as the legal entity which is the partnership, are solidarily liable.

However. as between the partners Muñasque and Galan,justice also dictates that
Muñasque be reimbursed by Galan for the payments made by the former
representing the liability of their partnership to herein intervenors, as it was
satisfactorily established that Galan acted in bad faith in his dealings with
Muñasque as a partner.
 ISLAND SALES vs. UNITED PIONEERS
GR. L-22493 | July 31, 1975

Petitioner: Island Sales, Inc. Respondent: United Pioneers, et. al

Topic: Liability for Partnership Debts: Pro Rata

Facts:
On April 22, 1961, a registered Philippine general partnership bought a vehicle
from the plaintiff through an installment plan. The partnership signed a promissory
note for P9,440.00, agreeing to pay in 12 monthly installments of P786.63 each.
The first payment was due by May 22, 1961, with subsequent payments due on
the 22nd of each following month. The agreement stipulated that if any payment
was missed, the entire remaining balance would become immediately due.

When the July 22, 1961 payment wasn't made, the plaintiff took legal action
against the partnership for the outstanding balance of P7,119.07. The lawsuit also
named the partnership's general partners - Benjamin C. Daco, Daniel A. Guizona,
Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc - as co-defendants. Later,
at the plaintiff's request, the complaint against Romulo B. Lumauig was dropped.

Issue: Whether or not the dismissal of the complaint favorable to Lumauig will
escalate the liability of the remaining partners

Ruling:
No. According to Article 1816 of the Civil Code, “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 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.
 TESTAE ESTATE OF MOTA vs. SERRA
GR. L-22825 | February 14, 1925

Petitioner: Testate Estate of Lazaro Respondent: Salvador Serra

Topic: Winding Up of a Partnership

Facts:
A legal dispute stemmed from a February 1, 1919 railroad construction
partnership. On January 29, 1920, the defendant sold his estate, including his
partnership stake, to new buyers who agreed to assume his obligations. On
January 8, 1921, the plaintiffs sold their share to these buyers, dissolving the
original partnership. When the new buyers defaulted on a P750,000 payment, the
defendant foreclosed on the property.

The plaintiffs then sued the defendant for P113,046.46 in unpaid construction
expenses from May 15, 1920. The lower court ruled for the defendant, citing
contract novation through debtor substitution, and ordered the plaintiffs to pay
costs. The plaintiffs appealed, challenging the court's interpretation of the
contracts, including the July 17, 1920 sale agreement and the December 16, 1920
partnership dissolution, and its decision to absolve the defendant of financial
responsibility.

Issue: Whether or not Serra be absolved from the complaint

Ruling:
No. No. The defendant sued out a writ of error alleging infringement of articles
1680 and 1700 of the Civil Code, on the proposition that all contracts are reputed
consummated and therefore extinguished, when the contracting parties fulfill all
the obligations arising therefrom and that by the payment of the money and the
granting and distribution of the lands without any opposition, the juridical relations
between the contracting parties become extinguished and none of the parties has
any right of action under the contract. The supreme court, holding that some
corrections and liquidations asked by the actor were still pending, denied the writ,
ruling that the articles cited were not infringed because a partnership cannot be
considered as extinguished until all the obligations pertaining to it are fulfilled. (11
Manresa, page 312.)

The dissolution of a firm does not relieve any of its members from liability for
existing obligations, although it does save them from new obligations to which they
have not expressly or impliedly assented, and any of them may be discharged
from old obligations by novation of other form of release. It is often said that a
partnership continues, even after dissolution, for the purpose of winding up its
affairs. (30 Cyc., page 659.)