G.R. No.

206147

MICHAEL C. GUY, Petitioner,

FACTS:
It appears from the records that Atty. Glenn Gacott (Gacott) from Palawan
purchased two (2) brand new transreceivers from Quantech Systems
Corporation (QSC) in Manila through its employee Rey
Medestomas (Medestomas). Due to major defects, Gacott personally
returned the transreceivers to QSC and requested that they be replaced.
Medestomas received the returned transreceivers and promised to send him
the replacement units.
Time passed and Gacott did not receive the replacement units as promised.
QSC informed him that there were no available units and that it could not
refund the purchased price. Gacott filed a complaint for damages. Summons
was served upon QSC and Medestomas, afterwhich they filed their Answer,
verified by Medestomas himself and a certain Elton Ong (Ong).
RTC found that the two (2) transreceivers were defective and that QSC and
Medestomas failed to replace the same or return Gacott's money.
The decision became final as QSC and Medestomas did not interpose an
appeal. Gacott then secured a Writ of Execution.
During the execution stage, Gacott learned that QSC was not a corporation,
but was in fact a general partnership registered with the Securities and
Exchange Commission (SEC). In the articles of partnership, Guy was
appointed as General Manager of QSC.
To execute the judgment, Branch Sheriff Ronnie L. Felizarte (Sheriff
Felizarte) went to the main office of the Department of Transportation and
Communications, Land Transportation Office (DOTC-LTO), Quezon City, and
verified whether Medestomas, QSC and Guy had personal properties
registered therein. Upon learning that Guy had vehicles registered in his
name, Gacott instructed the sheriff to proceed with the attachment of one of
the motor vehicles of Guy based on the certification issued by the DOTC-LTO.
Sheriff Felizarte attached Guy’s vehicle by virtue of the Notice of
Attachment/Levy upon Personalty served upon the record custodian of the
DOTC-LTO of Mandaluyong City. A similar notice was served to Guy through
his housemaid at his residence.
Thereafter, Guy filed his Motion to Lift Attachment, arguing that he was not a
judgment debtor and, therefore, his vehicle could not be attached.
RTC issued an order denying Guy’s motion. It explained that considering QSC
was not a corporation, but a registered partnership, Guy should be treated as
a general partner pursuant to Section 21 of the Corporation Code, and he
may be held jointly and severally liable with QSC and Medestomas.
CA rendered the assailed decision dismissing Guy’s appeal for the same
reasons given by the trial court.
ISSUE:
Whether the trial court’s jurisdiction over QSC extended to the person of Guy
insofar as holding him solidarily liable with the partnership.
HELD:
NO. Although a partnership is based on delectus personae or mutual agency,
whereby any partner can generally represent the partnership in its business
affairs, it is non sequitur that a suit against the partnership is necessarily a
suit impleading each and every partner. It must be remembered that a
partnership is a juridical entity that has a distinct and separate personality
from the persons composing it.
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 “co-defendant debtor” during the judgment
execution stage. It is a basic principle of law that money judgments are
enforceable only against the property incontrovertibly belonging to the
judgment debtor.

Article 1821 of the Civil Code does not state 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

A careful reading of the provision shows that notice to any partner, under
certain circumstances, operates as notice to or knowledge to the partnership
only. Evidently, it does not provide for the reverse situation, or that notice to
the partnership is notice to the partners. Unless there is an unequivocal law
which states that a partner is automatically charged in a complaint against
the partnership, the constitutional right to due process takes precedence and
a partner must first be impleaded before he can be considered as a
judgment debtor. To rule otherwise would be a dangerous precedent,
harping in favor of the deprivation of property without ample notice and
hearing, which the Court certainly cannot countenance.
OTHER MATTERS TACKLED BY THE COURT:

Granting that Guy was properly impleaded in the complaint, the execution of judgment
would be improper. Article 1816 of the Civil Code governs the liability of the partners to third
persons, which states that:

Article 1816. All partners, including industrial ones, shall be liable pro rata with all their
property and after all the partnership assets have been exhausted, for the contracts
which may be entered into in the name and for the account of the partnership, under its
signature and by a person authorized to act for the partnership. However, any partner may
enter into a separate obligation to perform a partnership contract.

In this case, had he been properly impleaded, Guy’s liability would only arise after the
properties of QSC would have been exhausted. The records, however, miserably failed to
show that the partnership’s properties were exhausted.

Clearly, no genuine efforts were made to locate the properties of QSC that could have been
attached to satisfy the judgment − contrary to the clear mandate of Article 1816. Being
subsidiarily liable, Guy could only be held personally liable if properly impleaded and after all
partnership assets had been exhausted.

Article 1824. All partners are liable solidarily with the partnership for everything
chargeable to the partnership under Articles 1822 and 1823.

In essence, 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 solidarily liable with the partnership
because of the words "any wrongful act or omission of any partner acting in the ordinary
course of the business," "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 bench, it was not shown that Guy or the other partners did a wrongful act or
misapplied the money or property he or the partnership received from Gacott. A third person
who transacted with said partnership can hold the partners solidarily liable for the whole
obligation if the case of the third person falls under Articles 1822 or 1823. Gacott’s
claim stemmed from the alleged defective transreceivers he bought from QSC, through the
latter's employee, Medestomas. 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 of the
partners. For said reason, it is the general rule under Article 1816 that governs the joint
liability of such breach, and not the exceptions under Articles 1822 to 1824. Thus, it was
improper to hold Guy solidarily liable for the obligation of the partnership.

Section 21 of the Corporation Code, as invoked by the RTC, cannot be applied to sustain
Guy's liability. The said provision states that a general partner shall be liable for all debts,
liabilities and damages incurred by an ostensible corporation. It must be read, however, in
conjunction with Article 1816 of the Civil Code, which governs the liabilities of partners
against third persons. Accordingly, whether QSC was an alleged ostensible corporation or a
duly registered partnership, the liability of Guy, if any, would remain to be joint and
subsidiary because, as previously stated, all partners shall be liable pro rata with all their
property and after all the partnership assets have been exhausted for the contracts which
may be entered into in the name and for the account of the partnership.