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Obligations of Partners: To act as managers and agents of partnership

37 Phil 441 (1918)


Bachrach v La Protectora
Street J.

Defendants formed a partnership. Four of the partners executed a document granting the president
full authority to contract for the purchase of two automobile trucks. Barba the manager purchased
two automobile trucks and also various effects and accessories thus incurring a debt of P7,137.
Bachrach foreclosed the chattel mortgage on the trucks and filed an action to collect the sum. CFI
ruled in favor of plaintiff Bachrach. The four partners appealed to SC questioning the extent of their
liability. SC affirmed CFI holding them severally liable for the debts and considered Barba as one
having authority to incur the expenses since as a partner he is considered as an agent of the
partnership.

DOCTRINE

Article 1695 (Old CC now 1804): all the partners are considered agents of the partnership.
Barba thus must be held to have had authority to incur these expenses. Barba as president
or manager, can be no doubt had actual authority to incur this obligation.

The liability of the appellants is that because they are members of the civil partnership and
as such are liable for its debts. Although article 1698 (old CC) declares that a member of a
civil partnership is not liable in solidum with his fellows for its entire indebtedness; Article
1137 however declares that each is liable with the others his aliquot part of such
indebtedness (thus severally liable)

IMPORTANT PEOPLE
[Plaintiff-appellee] E. M. BACHRACH
[Defendant] "LA PROTECTORA", ET AL. (Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and
Modesto Serrano appealed)

Members of partnership: Marcelo Barba, Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and
Modesto Serrano
FACTS

1. In 1913: Defendants in this action formed civil partnership "La Protectora" to engage in the
business of transporting passengers and freight at Laoag, Ilocos Norte.

a. Marcelo Barba (Manager) went to Manila and negotiated the purchase of two automobile
trucks from the plaintiff, E. M. Bachrach, for P16,500. He paid 3k in cash and executed
promissory notes with payment of interest at 10%/annum and 25% of the amount due if
it should be necessary to place the notes in the hands of an attorney for collection.

b. Three of the PNs (P3,375 each), is the subject of the present action, one of which is
signed is signed in his name PP La Protectora By Marcelo Barba, while the other two
without the word By only Marcelo Barba. By doing so, Barba intended to bind both
partnership and himself.

i. Also In the body of the note the word "I" (yo) instead of "we" (nosotros) is used
before the words "promise to pay" (prometemos) used in the printed form meaning
that the singular pronoun here has all the force of the plural.

2. Defendants Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and Modesto Serrano executed a
document declaring that they were members of "La Protectora" and had granted its president
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full authority "in the name and representation of said partnership to contract for the purchase
of two automobiles". This document was for the purpose of evidencing the authority of
Marcelo Barba to bind the partnership by the purchase.

a. From time to time, Barba purchased from Bachrach various automobile effects and
accessories to be used in the business of "La Protectora" resulting in indebtedness of
P2,916.57.

3. Plaintiff Bachrach then foreclosed a chattel mortgage which he retained on the trucks to
secure the purchase price. To recover unpaid balance, together with the sum due for
additional purchases, plaintiff Bachrach filed this action in the CFI of Manila, against "La
Protectora" and the five individuals Marcelo Barba, Nicolas Segundo, Antonio Adiarte, Ignacio
Flores, and Modesto Serrano.

a. CFI ruled in favor of Bachrach. No appeal on behalf of La Protectora nor from Barba.

4. The four other individuals however, appealed to SC questioning whether or not they liable for
the firm debts and if so to what extent.

a. In this case, indebtedness is agreed to be P7,037. The unpaid balance of the notes
amounts to P4,121, while the remainder (P2,916) represents the amount due for
automobile supplies and accessories.

RELATED ISSUE with HOLDING


W/N the appellants are liable for the debts of La Protectora? YES following the law on partnerships

The authority of Marcelo Barba to bind the partnership is fully established by the document
executed by the four appellants (#2 fact). The transaction of Barba on the trucks are in
tenor of this document. However the PNs constituted the obligation exclusively of "La
Protectora" and of Marcelo Barba, not an obligation directly binding on the four appellants.

o Their liability however is that they are members of the civil partnership and
as such are liable for its debts. Although article 1698 (old CC) declares that a
member of a civil partnership is not liable in solidum with his fellows for its entire
indebtedness; Article 1137 however declares that each is liable with the others his
aliquot part of such indebtedness (thus severally liable)

W/N Barba had the authority to make the expenses for the partnership? YES

Article 1695 (Old CC now 1804): all the partners are considered agents of the partnership.
Barba thus must be held to have had authority to incur these expenses. Barba as
president or manager, can be no doubt had actual authority to incur this obligation.

o Therefore they are severally liable for their respective shares of the entire
indebtedness found to be due.

The property pertaining to "La Protectora" should first be applied to this indebtedness
pursuant to the judgment already entered in this case in the court below; and each of the
four appellants shall be liable only for the one-fifth part of the remainder unpaid.
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(Obiter Court considered the document executed not to bind them personally but to confer
authority)

SC disagrees with the CFI which founded its judgment against the appellants upon the
document executed by them constituted an authority for Marcelo Barba to bind them
personally following Article 1698 (no member of the partnership can bind the others by a
personal act if they have not given him authority to do so). Said document was only
intended as authority to enable Barba to bind the partnership and that the parties to that
instrument and not to confer upon Barba an authority to bind them personally.

o The contract which Barba executed did not by its terms bind the appellants
personally at all, but only the partnership and himself. Thus the four appellants
cannot be held to have been personally obligated by that instrument; their liability
rests upon the general principles underlying partnership liability.

DISPOSITIVE PORTION
Affirmed - The amount for which judgment should be entered is P7,037, to which shall be added (1)
interest at 10 per cent per annum from June 23, 1913, to be calculated upon the sum of P4.121; (2)
interest at 6 per cent per annum from July 21, 1915, to be calculated upon the sum of P2,961; (3)
the further sum of P1,030.25, this being the amount stipulated to be paid by way of attorney's fees.