G.R. No. L-11624; January 21, 1918
E. M. BACHRACH, plaintiff-appellee, vs. “LA PROTECTORA,” ET AL., defendants-appellants.

FACTS:
In 1913, defendants formed a civil partnership named “La Protectora” to operate a passenger and freight transport business in Laoag, Ilocos Norte. Marcelo Barba, acting as manager, purchased two automobile trucks from plaintiff E. M. Bachrach for P16,500, paying P3,000 in cash and executing promissory notes for the balance. The notes, signed by Barba in the name of “La Protectora” and himself, provided for 10% annual interest and a 25% attorney’s fee clause if placed for collection. Prior to the purchase, four defendants (Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and Modesto Serrano) executed a document authorizing Barba to purchase the trucks on behalf of the partnership. Barba later incurred additional debts with Bachrach for automobile supplies and accessories amounting to P2,916.57. After Bachrach foreclosed on the chattel mortgage securing the trucks, a deficiency balance remained. Bachrach sued “La Protectora” and the individual partners. The trial court held all defendants liable. Only the four authorizing partners appealed, contesting their personal liability.

ISSUE:
Whether the four appellant partners are personally liable for the partnership debts incurred by Marcelo Barba for the purchase of the trucks and the subsequent acquisition of supplies and accessories.

RULING:
Yes, the four appellant partners are liable, but only for their proportionate shares of the partnership debts, not jointly and severally (in solidum).

The Court held that:
1. The document executed by the four appellants authorized Barba to bind the partnership, not to incur personal obligations on their behalf. Thus, they are not personally bound by the promissory notes, which were signed only by Barba and the partnership.
2. As members of a civil partnership, their liability arises from general partnership principles under the Civil Code. Article 1698, in relation to Article 1137, provides that partners are liable mancomunadamente (jointly) for their aliquot shares of partnership debts, not solidariamente (jointly and severally).
3. The debt for supplies and accessories was lawfully incurred by Barba in the partnership’s business. Under Article 1695, all partners are considered agents of the partnership in the absence of a management agreement, and Barba, as manager, had actual authority to incur such obligations.
4. The partnership property must first be exhausted to pay the debt. Each of the four appellants is liable only for one-fifth of any remaining unpaid balance, plus stipulated interest and attorney’s fees.

The trial court’s judgment was affirmed with modification regarding the extent of liability.

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