Bachrach vs. "La Protectora"

Members of a civil partnership are not liable in solidum for the partnership's entire indebtedness, but each is liable with the others (mancomunadamente) for his aliquot part of such indebtedness. A document authorizing a partner to bind the partnership does not, by itself, confer authority to bind the partners personally, and the partners' liability rests on general principles of partnership liability rather than on the terms of the contract executed by the managing partner.

The defendants formed a civil partnership called "La Protectora" in 1913 for the purpose of transporting passengers and freight at Laoag, Ilocos Norte. The partnership's liability was to be determined under the provisions of the Civil Code, specifically articles 1697, 1698, and 1695, which govern the authority of partners to bind the partnership and the nature of partners' liability for partnership debts.

In 1913, the individuals named as defendants formed a civil partnership called "La Protectora" for the purpose of engaging in the business of transporting passengers and freight at Laoag, Ilocos Norte. Marcelo Barba, acting as manager, came to Manila and on June 23, 1913, negotiated the purchase of two automobile trucks from the plaintiff, E.M. Bachrach, for the agreed price of P16,500. He paid P3,000 in cash and executed promissory notes for the balance, which provided for interest at 10 percent per annum from the date of the notes and for payment of 25 percent of the amount due if the notes were placed in the hands of an attorney for collection. Three of these notes, for P3,375 each, were made the subject of the present action. One was signed by Marcelo Barba as "P. P. La Protectora / By Marcelo Barba / Marcelo Barba," and the other two were signed in the same way with the word "By" omitted. In the body of the notes, the word "I" (yo) instead of "we" (nosotros) was used before the words "promise to pay," and the Court found it plain that the singular pronoun had all the force of the plural.

As preliminary to the purchase, the defendants Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and Modesto Serrano, on June 12, 1913, executed a document declaring that they were members of the firm "La Protectora" and that they had granted to its president full authority "in the name and representation of said partnership to contract for the purchase of two automobiles." This document was apparently executed in obedience to the requirements of subsection 2 of article 1697 of the Civil Code, for the purpose of evidencing the authority of Marcelo Barba to bind the partnership by the purchase, and was delivered by him to Bachrach at the time the automobiles were purchased.

From time to time after this purchase, Marcelo Barba purchased various automobile effects and accessories from the plaintiff to be used in the business of "La Protectora." By May 21, 1914, the indebtedness from these additional purchases amounted to P2,916.57. In May 1914, the plaintiff foreclosed a chattel mortgage he had retained on the trucks to secure the purchase price, realizing P1,000 from the sale, which was credited to the unpaid balance. To recover this balance, together with the sum due for additional purchases, the present action was instituted in the Court of First Instance of Manila on May 29, 1914, against "La Protectora" and the five individuals. The amount of indebtedness owing to the plaintiff was not in dispute, as the principal of the debt was agreed to be P7,037, of which the unpaid balance of the notes amounted to P4,121 and the remainder (P2,916) represented the amount due for automobile supplies and accessories.

N/A — The decision does not recount the arguments of the plaintiff-appellee.

N/A — The decision does not recount the specific arguments of the appellants beyond the assignment of errors, which is not detailed in the text.

• Liability of Partners for Firm Debts: Whether the four individuals who signed the document authorizing Barba to purchase the trucks are liable for the firm's debts, and if so, to what extent.

• Liability of Partners for Firm Debts: Yes, but only for their respective aliquot shares. The four appellants are severally liable for their respective shares of the entire indebtedness found to be due, with any property pertaining to "La Protectora" first applied to the indebtedness, and each appellant liable only for the one-fifth part of the remainder unpaid.

• Liability of Partners for Firm Debts: The authority of Marcelo Barba to bind the partnership in the purchase of the trucks was fully established by the document executed by the four appellants on June 12, 1913, and the transaction was in conformity with the tenor of this document. The promissory notes constituted the obligation exclusively of "La Protectora" and of Marcelo Barba, and did not in any sense constitute an obligation directly binding on the four appellants. Their liability was based on the fact that they were members of the civil partnership and as such were liable for its debts. Article 1698 of the Civil Code declares that a member of a civil partnership is not liable in solidum (solidariamente) with his fellows for its entire indebtedness; but it results from this article, in connection with article 1137 of the Civil Code, that each is liable with the others (mancomunadamente) for his aliquot part of such indebtedness, as held in Co-Pitco vs. Yulo. The Court of First Instance founded its judgment in part upon the idea that the document constituted authority for Barba to bind the appellants personally, as contemplated in the second clause of article 1698, but the Court found that the document was intended merely as an authority to enable Barba to bind the partnership, and the parties did not intend to confer upon Barba authority to bind them personally. The contract Barba executed did not by its terms profess to bind the appellants personally at all, but only the partnership and himself. As to the indebtedness for automobile supplies and accessories, the document of June 12, 1913, afforded no authority for holding the appellants liable, but their liability was no less obvious, derived from the fact that the debt was lawfully incurred in the prosecution of the partnership enterprise. There was no proof of any agreement regarding the form of management, and under article 1695 of the Civil Code, all the partners are considered agents of the partnership; Barba therefore must be held to have had authority to incur these expenses, and he was also shown to be in fact the president or manager with actual authority to incur the obligation.

• Civil Partnership Liability (Pro Rata, Not Solidary) — Under articles 1698 and 1137 of the Civil Code, a member of a civil partnership is not liable in solidum with his fellows for the partnership's entire indebtedness, but each is liable with the others (mancomunadamente) for his aliquot part of such indebtedness. The Court applied this doctrine to hold the four appellants severally liable for their respective shares of the partnership's debts, with partnership property first applied to the indebtedness and each appellant liable only for his proportionate share of the remainder.

• Authority to Bind Partnership vs. Personal Liability — A document authorizing a partner to bind the partnership does not, by itself, constitute authority to bind the partners personally. The Court found that the document executed by the appellants was intended merely as an authority to enable Barba to bind the partnership, and the contract he executed did not profess to bind the appellants personally, but only the partnership and himself.

• Partners as Agents of the Partnership — Under article 1695 of the Civil Code, where there is no agreement regarding the form of management, all partners are considered agents of the partnership. The Court applied this to hold that Barba had authority to incur expenses for automobile supplies and accessories in the prosecution of the partnership enterprise.

• "It is true that article 1698 of the Civil Code declares that a member of a civil partnership is not liable in solidum (solidariamente) with his fellows for its entire indebtedness; but it results from this article, in connection with article 1137 of the Civil Code, that each is liable with the others (mancomunadamente) for his aliquot part of such indebtedness." — This passage states the ratio decidendi: the canonical formulation of civil partnership liability as pro rata rather than solidary.

• "We think that the document referred to was intended merely as an authority to enable Barba to bind the partnership and that the parties to that instrument did not intend thereby to confer upon Barba an authority to bind them personally." — This passage defines the scope of the authorization document and distinguishes authority to bind the partnership from personal liability of the partners.

• "It is obvious that the contract which Barba in fact executed in pursuance of that authority did not by its terms profess to bind the appellants personally at all, but only the partnership and himself." — This passage confirms that the promissory notes bound only the partnership and Barba, not the four appellants directly.

• Co-Pitco vs. Yulo, 8 Phil. Rep., 544 — Cited as controlling precedent for the proposition that under articles 1698 and 1137 of the Civil Code, each member of a civil partnership is liable with the others (mancomunadamente) for his aliquot part of the partnership's indebtedness.

• Article 1698, Civil Code — Declares that a member of a civil partnership is not liable in solidum with his fellows for the partnership's entire indebtedness. The Court applied this to hold the appellants liable only for their aliquot shares, not in solidum.

• Article 1137, Civil Code — Provides that each partner is liable with the others (mancomunadamente) for his aliquot part of the partnership's indebtedness. The Court read this in connection with article 1698 to establish the pro rata nature of civil partnership liability.

• Article 1697, Civil Code — Governs the authority of partners to bind the partnership. The document executed by the appellants was apparently executed in obedience to subsection 2 of this article, to evidence Barba's authority to bind the partnership by the purchase.

• Article 1695, Civil Code — Provides that where there is no agreement regarding the form of management, all partners are considered agents of the partnership. The Court applied this to hold that Barba had authority to incur expenses for supplies and accessories.

Arellano, C.J., Torres, Araullo, Malcolm, and Avanceña, JJ., concurred.

N/A — No dissenting opinions are noted in the case text.