Articles 1816, 1821, 1822, 1823, 1824
Corporation by estoppel (general partners)
MICHAEL C. GUY, petitioner,
vs.
ATTY. GLENN C.GACOTT, respondent
Facts:
Respondent Gacott purchased two brand new transreceivers
from Quantech Systems Corporation through its employee
Medestomas. However, Gacott returned the transreceivers due
to major defects. They promised him of replacements.
Time passed but Gacott did not receive any replacement
as promised. He was informed that there were no available
units and that the purchase price is nonrefundable. Despite
several demands, he was never given a replacement or a
refund. Gacott then filed a complaint for damages in the
Regional Trial Court. Summons were served upon QSC and to
its employee Medestomas.
The RTC ruled in favor of Gacott and ordering the
defendants to pay jointly and severally pay Gacott.
However, during the execution stage, Gacott learned that
QSC was not a corporation but was in fact a general
partnership, and herein Petitioner Guy was its appointed
General Manager.
The branch Sherrif then went to the DOTC-LTO to verify
whether the QSC and Petitioner Guy had personal properties
that can be attached. Upon knowing that Guy had vehicles
registered under his name, Gacott instructed the sheriffs to
attach the personal property of Guy which is one of his motor
vehicles.
Petitioner Guy filed his Motion to Lift Attachment , arguing
that that he was not a judgment debtor and thus his vehicle
cannot be attached.
The RTC denied the motion and held that:
1. Guy should be treated as general partner since
QSC is not a corporation pursuant to Section 21 of
the Corporation Code, thus he must be held jointly
and severally liable with QSC and Medestomas.
Guy appealed before the Court of Appeals and argued:
1. That he was neither impleaded as defendant nor
validly served with summons
2. Granting that he was properly impleaded, he
however, still cannot be held solidarily liable since
partner may be solidarily liable only for the
partnership liability when it is stemmed from the acts
of the partners pursuant to Article 1822, 1823, and
1824. The proper provision therefore is Article
1816, which provides that liability of the partners in
partnership is merely jointly and subsidiary in nature.
He argued that the liability of the partner is subsidiary,
thus he could only be held liable (personal properties)
if all the partnership assets had first been
exhausted.
The Court of Appeals dismissed Guy’s appeal and held
that:
1. He was bound by the summons served upon
QSC based on Article 1821 of the Civil Code
2. The law did not require that a partner be actually
involved in a suit in order for him to be made
liable.
3. Partner is liable whether he participated or not,
ratified it or not, or he had knowledge of the act
or omission.
Hence, this petition.
Issues
1.) Whether or not Petitioner is bound by the judgment
against the partnership
2.) Whether or not the Petitioner is solidary liable.
3.) Whether or not the RTC is correct I invoking Section
21 of the Corporation Code to sustain Guy’s liability.
Held:
1.) Negative. Petitioner is not a judgment debtor. A
partner must be separately and distinctly impleaded
before he can be bound by a judgment.
It must be remembered that partnership is a juridical
entity that has a distinct and separate personality
from the persons composing it.
A decision rendered on a complaint in a civil
proceeding does not bind or prejudice a person
not impleaded therein, for no person shall be
adversely affected by the outcome of a civil action or
proceeding in which he is not a party.
Here Guy was never made a party to the case. He
did not have any participation in the entire proceeding
until his vehicle was levied upon and he suddenly
became QSC’s codefendant debtor during the
execution of the judgment.
A partner must first be impleaded before he could
be prejudiced by the judgment against the
partnership.
In addition, Article 1821 of the Civil Code, does not
sate that there is no need to implead a partner in
order to be bound by the partnership liability. It
provides that:
Notice to any partner of any matter relating to
partnership affairs, and the knowledge of the
partner acting in the particular matter, acquired
while a partner or then present to his mind, and
the knowledge of any other partner who
reasonably could and should have communicated
it to the acting partner, operate as notice to or
knowledge of the partnership, except in the
case of fraud on the partnership, committed by or
with the consent of that partner.
Articles 1816, 1821, 1822, 1823, 1824
Corporation by estoppel (general partners)

It shows that notice to any partner, under certain 3. Negative.

circumstances, operates as notice to or knowledge to
the partnership only. Evidently, it does not provide for the Section 21 of the Corporation Code, 42 as invoked by
reverse situation or that notice to the partnership is notice the RTC, cannot be applied to sustain Guy’s liability.
to the partners.
The said provision states that a general partner shall be liable
for all debts, liabilities and damages incurred by an ostensible
corporation.
2.) Negative. Granting that petitioner was properly
It must be read, however, in conjunction with Article 1816
pleaded, his liability is subsidiary and generally joint
of the Civil Code, which governs the liabilities of partners
thus immediate levy upon his property cannot be against third persons. Accordingly, whether QSC was an
made. alleged ostensible corporation or a duly registered partnership,
the liability of Guy, if any, would remain to be joint and
Partners are solidary liable only in exceptional subsidiary because, as previously stated, all partners shall be
circumstances as provided for under Article 1822, liable pro rata with all their property and after all the
1823, and 1824. partnership assets have been exhausted for the contracts
which may been entered into in the name and for the account
of the partnership.
These provisions articulate that it is the act of a
partner which caused loss or injury to a third person
that makes all other partners solidary liable
because of the words “any wrongful act or omission
of any partner acting in the ordinary course of the
business, and “one partner acting within the scope
of his apparent authority and misapplied by any
partner while it is in the custody of the partnership.

The obligation is solidary because the law protects

the third person, who in good faith relied upon the
authority of a partner, whether such authority is real or
apparent.

In the case at bar, it was not shown that Guy or the

other partners did a wrongful act or misapplied the
money or property or the partnership received
from Gacott. A third person can hold the partners
solidarily for the whole obligation if the case of third
person falls under Articles 1822 or 1823.

Gacott’s claim stemmed from the alleged defective

transreceivers be bought from QSC, through the
latter’s employee, Madestomas. It was for a breach
of warranty in a contractual obligation entered into
in the name and for the account of QSC, not due to
the acts of any other partners.

Given the aforementioned, granting that Guy was

properly impleaded, the Article 1816 of the Civil
Code governs the liability of the partners to third
persons. Pursuant to this provision, the liability is pro
rata or joint and such liability would only arise after
the properties of QSC would have been
exhausted. However, it was shown that there were
no genuine efforts made to locate the properties
of QSC that could have been attached to satisfy the
judgment. Being subsidiarily liable, Guy could only
be held personally liable if properly impleaded
and after all the partnership assets had been
exhausted.