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ISLAND SALES v. United Pioneers
ISLAND SALES v. United Pioneers
DOCTRINE: Condonation by a creditor of a share in partnership debt of one partner does not
increase the pro-rata liability of other partners.
FACTS:
UNITED PIONEERS GENERAL CONSTRUCTION COMPANY ET.AL (defendant), a general
partnership duly registered under the laws of the Philippines, purchased from ISLAND SALES,
INC. (plaintiff) a motor vehicle on an installment basis and for this purpose executed a
promissory note payable in twelve (12) equal monthly installments, with the condition that
failure to pay any of said installments as they fall due would render the whole unpaid balance
immediately due and demandable.
Upon failure of United Pioneers to pay an installment, Island Sales sued it for the unpaid
balance. Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig, and Augusto
Palisoc were included in their capacity as general partners of the said company.
Daniel A. Guizona failed to file an answer and was consequently declared in default.
Subsequently, on motion of Island Sales, the complaint was dismissed insofar as the defendant
Romulo B. Lumauig is concerned. The rest of the defendants failed to appear at the hearing and
were declared in default.
Judgment was rendered against the partnership and the four (4) partners, excluding Lumauig
whose case was dismissed at the motion of Island Sales.
The defendants Benjamin C. Daco and Noel C. Sim moved to reconsider the decision claiming
that since there are five (5) general partners, the joint and subsidiary liability of each partner
should not exceed one-fifth (1/5) of the obligations of the United Pioneers company.
The lower court denied the said motion, hence, this appeal.
ISSUE: Whether the condonation of a partner’s share in the debts of the company increases
the remaining partners’ liability.
RULING:
No. In the instant case, there were five (5) general partners when the promissory note in
question was executed for and in behalf of the partnership. Since the liability of the partners is
pro rata, the liability of each partner shall be limited to only one-fifth ( 1/ 5 ) of the obligations
of the united Pioneers. The fact that the complaint against the defendant Romulo B. Lumauig
was dismissed, upon motion of the Island Sales, does not unmake the said Lumauig as a general
partner in the United Pioneers company. In so moving to dismiss the complaint, Island Sales
merely condoned Lumauig's individual liability to it.
“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”