Pacific Cmmercial V. Aboitiz.docx

PACIFIC CMMERCIAL v. ABOITIZ Partner’s Obligations to 3rd Parties | 2 March 1926 | J. Ostrand Digest maker: Africa SUMMARY: De Silva, Aboitiz, and Martinez formed a regular, collective, mercantile partnership, where the first two were capitalist partners while Martinez is an industrial partner. A complaint was filed by the Pacific Commercial to recover debt, where it was held that Martinez would be held liable, should the partnership and the capitalist partners be insolvent. He argued that he could not be responsible for debt against 3rd person. SC disagreed. DOCTRINE: The exemption of the industrial partner to pay losses relates exclusively to the settlement of the partnership affairs among the partners themselves and has nothing to do with the liabilities of the partners to third persons.

FACTS: 1. De Silva, Aboitiz, and Martinez formed a regular, collective, mercantile partnership with a capital of Php40,000, of which Aboitiz and De Silva furnished 1/3. Martinez was an industrial partner. 2. The partnership executed a promissory note in favour of petitioner for the sum of Php23,000, which was secured by a chattel mortgage. 3. For failure to pay, the chattel mortgage was foreclosed, but a balance remained, hence the present action for recovery of sum of money. Lower court held that execution should be issued against the properties of the partnership, and in the case of insolvency, the property of De Silva and Aboitiz, and then that of Martinez. 4. Martinez appealed, arguing that pursuant to Art. 141 of the Code of Commerce, he cannot be held responsible for partnership’s debt being a mere industrial partner. ISSUE/S & RATIO: 1. WON Martinez may be held liable. — YES

- All the members of a general copartnership are liable with all their property for the results of the duly authorized transactions made in the name and for the account of the partnership.

- Art. 141 merely refers to the distribution of losses among the partners themselves in the settlement of the partnership affairs and has no reference to partnership obligations to third parties.

- Inability to pay debt to 3rd party does not mean business is operating at loss. The partnership may have outstanding credits which for the moment may be unavailable for the payment of debts, but which eventually may be realized upon and yield profits more than sufficient to cover all losses.

RULING: Judgment appealed from is AFFIRMED. NOTE: • Art. 141: Losses shall be computed in the same proportion among the capitalist partners without including the industrial partners, unless by special agreement the latter have been constituted as participants therein.