GR L L 22493; (July 1975) (Digest)
G.R. No. L-22493 July 31, 1975
ISLAND SALES, INC., plaintiff-appellee, vs. UNITED PIONEERS GENERAL CONSTRUCTION COMPANY, ET. AL., defendants. BENJAMIN C. DACO, defendant-appellant.
FACTS
Island Sales, Inc. sold a motor vehicle on installment to United Pioneers General Construction Company, a registered general partnership. The partnership executed a promissory note for the amount. Upon the partnership’s failure to pay the installments, Island Sales filed a suit for the unpaid balance. The complaint named the partnership as the principal defendant and included its five general partners—Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc—as co-defendants, alleging their joint and subsidiary liability.
During the proceedings, defendant Guizona was declared in default for failure to answer. Subsequently, upon motion by Island Sales, the complaint was dismissed as to defendant Lumauig. The remaining defendants failed to appear at the hearing, leading the trial court to allow Island Sales to present evidence ex-parte. The court rendered a judgment holding the partnership liable for the debt and the individual partners subsidiarily liable, enforceable only if partnership assets were insufficient. Defendants Daco and Sim moved for reconsideration, arguing their individual liability should not exceed one-fifth of the partnership’s obligation, a proposition to which Island Sales conformed. The trial court denied the motion, prompting Daco’s appeal.
ISSUE
Whether the dismissal of the complaint against one general partner increases the pro rata liability of the remaining partners for the partnership obligations.
RULING
The Supreme Court ruled that the dismissal does not increase the pro rata liability of the remaining partners. The Court clarified the nature of partner liability under Article 1816 of the Civil Code, which states that partners are liable pro rata with their property after partnership assets are exhausted. This provision establishes a proportionate, not joint and several, liability among general partners for partnership contracts.
The Court cited the precedent in Co-Pitco vs. Yulo, which held that in a civil partnership, partners are not liable each for the whole debt; liability is pro rata. The fact that one partner left the country did not increase the other partner’s share of liability. Applying this principle, the Court found that since there were five general partners when the obligation was incurred, the appellant Daco’s liability is limited to one-fifth of the partnership’s debt. The dismissal of the complaint against partner Lumauig constituted merely a condonation of his individual liability by the creditor, Island Sales. It did not alter Lumauig’s status as a general partner or reconfigure the foundational pro rata distribution of liability among the partners as it existed at the time the contract was executed. Therefore, the liability of appellant Daco remains limited to his one-fifth share. The decision of the lower court was affirmed with this clarification.