Subject

La Compania Maritima v. Munoz (1907)

Willard, J.
Under what topic: To be liable pro rata for partnership debts
Plaintiff-appellant: La Compania Maritima
Defendant-appellees: Francisco Munoz, et al.

Synopsis: Francisco Muoz, Emilio Muoz, and Rafael Naval formed an ordinary general
commercial partnership, Francisco Muoz & Sons, for the purpose of carrying a mercantile
business. Francis was a capitalist partner while Emilio and Rafael were industrial partners.
Plaintiff La Compania Maritima brought an action to recover a sum of money against the
partnership and the partners in their own individual capacity. Emilio and Rafael were absolved
from liability.
In their brief, it is claimed that it is not an ordinary general commercial partnership while
in their article of partnership it is expressly stated that they have agreed and do form an
ordinary general commercial partnership. The object of the partnership is purely mercantile
and all requirements under the Code of Commerce were complied with. The articles of
partnership were even recorded in the mercantile registry of Albay. There is no doubt that
there is a partnership.
Appellees claimed that Emilio is not a partner because 1) he contributed nothing to the
partnership, 2) he has no salary and 3) he is excluded from the management. The Supreme
court in upholding that he is a partner stated that 1) he contributed as much as Rafael, 2) he
receives a salary, the only difference between him and Rafael is that the latter was entitled to
a fixed salary while he is not and 3) that the partners can validly do the exclusion from
management in accordance with the provision of Art. 125 of the Code of Commerce.

Doctrine: In an ordinary general partnership an industrial partner is liable to third parties for
debts and obligations of partnership. The construction of the law should be avoided which
would enable two persons, each with a large amount of private property, to form and carry on
a partnership and, upon the bankruptcy of the latter, to say to its creditors that they
contributed no capital to the company but only their services, and that their private property is
not, therefore, liable for its debts.
It should be noted, however, that the execution of the judgment should not issue against
the private property of the partners until the property of the partnership is exhausted.

Facts:
March 1905: Defendants Francis,
Emilio, and Rafael formed an ordinary
general mercantile partnership under
the name of Francisco Munoz & Sons
for the purpose of carrying a
mercantile business in Albay. Francisco
was a capitalist partner and the two
were industrial partners.
La Compania Maritima brough this
action in the CFI of Manila against the
partnership and against the partners

in their individual capacity to recover a

sum of P26,828.30.
CFI: Emilio and Rafael were acquitted.
Judgment was rendered only against
Francisco Munoz & Sons and Francisco
Munoz. Hence, this appeal.

Appellees Defense:
It is not an ordinary, general
partnership.
That Emilio is not a general partner
because:

Subject
o
o

SC:

He contributed nothing to the

partnership.
He had no yearly or monthly
salary unlike Rafael who was
receiving a fixed salary of
P2,500.
He was entirely excluded from
the
management
of
the
business.

Emilio is a general partner.

o He contributed as much as
Rafael.
o He was receiving a salary too,
but Rafaels was fixed.
o Emilio excluded himself from
management for he signed the
articles of partnership the terms
of which management was
expressly conferred by him to
the others. Art. 125 and Art.
132 of the Code of Commerce
recognize this right.

Losses shall be charged in the same

proportion among the partners who
have contributed capital, without
including those who have not, unless
by special agreement the latter have
been constituted as participants
therein.

The controlling law is Article 127.

There is no injustice in imposing this
liability upon the industrial partners.
They have a voice in the management
of the business, if no manager has
been named in the articles; they share
in the profits and as to third persons it
is no more than right that they should
share in the obligations.

Article 141 relates exclusively to

the settlement of the partnership
affairs
among
the
partners
themselves and has nothing to do
with the liability of the partners
to third persons; that each one of
the industrial partners is liable to
third persons for the debts of the
firm; that if he has paid such debts
out of his private property during the
life of the partnership, when its affairs
are settled he is entitled to credit for
the amount so paid, and if it results
that there is not enough property in
the partnership to pay him, then the
capitalist partners must pay him.

In relation to this, the Supreme Court

noted that partnerships under the Civil
Code provides for a scenario where all
partners are industrial partners (like
when it is a partnership for the
exercise of a profession). In such case,
if it is permitted that industrial
partners are not liable to third persons
then such third persons would get

Issue/s - Holding:
Knowing now that Emilio is a general partner,
can he be held liable to third persons for the
obligations contracted by the partnership
despite his status as an industrial partner in
an ordinary, general mercantile partnership?
YES!
Ratio:
Courts basis:
Art. 127 of the Code of Commerce
All the members of the general copartnership, 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
transactions made in the name and for
the account of the partnership, under
the signature of the latter, and by a
person authorized to make use
thereof.

Appellees basis:
Art. 141 of the Code of Commerce

Subject
practically
nothing
from
such
partnerships if the latter is indebted.
Dispositive:
Judgment of the court below reversed and
judgment is ordered against all of the
respondents for the sum of P26,828.30.
However, execution of such judgment shall

not issue against the private property of the

defendants Francisco, Emilio, and Rafael until
the property of the defendant Francisco
Munoz & Sons is exhausted.