#5 PACIFIC COMMERCIAL CO. vs. ABOITIZ & MARTINEZ, et.al.

DOCTRINE: An industrial partner may be held liable by third persons but he may recover from the capitalist partners for after all, he is not liable for losses. FACTS: In 1919, Arnaldo de Silva, Guillermo Aboitiz, Vidal Aboitiz and Jose Martinez formed a partnership. De Silva, Guillermo, and Vidal were the capitalist partners while Martinez was the industrial partner. The articles of partnership contained, among others, that Martinez may also be liable for losses but only to the extent of his shares in the profits which was at 30%. The partnership incurred loans from Pacific Commercial Company which the partnership failed to pay. The partnerships property was exhausted but there remained an unpaid balance for which PCC sued the partnership. The trial court issued a judgment where it ordered that the deficiency should be satisfied by the properties of the three capitalist partners; that in the event the properties of the three will not be enough, the remaining balance shall issue against the property of Martinez. Martinez appealed the decision. ISSUE: Whether or not Martinez is liable for the said debt. HELD: YES. As held in the case of La Compaia Maritama vs Francisco Muoz et al, all the members of a general partnership 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. All the members of the general co-partnership, 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 transaction made in the name and for the account of the partnership. The Supreme Court also emphasized that liability for losses relates merely to the distribution of losses among the partners themselves in the settlement of the partnership affairs and has no reference to partnership obligations or liabilities to third parties. An industrial partner is not liable for losses. A provision exempting an industrial partner from losses is naturally valid but the same provision exempting a capitalist partner is void. A provision making an industrial partner liable for losses is permissible. An industrial partner may be held liable by third persons but he may recover from the capitalist partners for after all, he is not liable for losses.