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. (Article 1768 of the Civil Code)
It is elementary that a judgment of a court is conclusive and binding only upon the parties and their successors-in-interest after the commencement of the action in court. (Villanueva v. Velasco, 399 Phil. 664, 673 ) A decision rendered on a complaint in a civil action or 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. (Dare Adventure Farm Corporation v. CA, G.R. No. 161122, September 24, 2012, 681 SCRA 580, 583) The principle that a person cannot be prejudiced by a ruling rendered in an action or proceeding in which he has not been made a party conforms to the constitutional guarantee of due process of law.
In Muñoz v. Yabut, Jr., 665 Phil. 488 (2011), it was said that a person not impleaded and given the opportunity to take part in the proceedings was not bound by the decision declaring as null and void the title from which his title to the property had been derived. The effect of a judgment could not be extended to non-parties by simply issuing an alias writ of execution against them, for no man should be prejudiced by any proceeding to which he was a stranger.
In Aguila v. Court of Appeals, 377 Phil. 257, 267 , the complainant had a cause of action against the partnership. Nevertheless, it was the partners themselves that were impleaded in the complaint. The Court dismissed the complaint and held that it was the partnership, not its partners, officers or agents, which should be impleaded for a cause of action against the partnership itself. The partners could not be held liable for the obligations of the partnership unless it was shown that the legal fiction of a different juridical personality was being used for fraudulent, unfair, or illegal purposes. (See McConnel v. Court of Appeals, 111 Phil. 310 )
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 “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. Indeed, the power of the court in executing judgments extends only to properties unquestionably belonging to the judgment debtor alone. An execution can be issued only against a party and not against one who did not have his day in court. The duty of the sheriff is to levy the property of the judgment debtor not that of a third person. For, as the saying goes, one man's goods shall not be sold for another man's debts.
In the spirit of fair play, it is a better rule that a partner must first be impleaded before he could be prejudiced by the judgment against the partnership. A partner may raise several defenses during the trial to avoid or mitigate his obligation to the partnership liability. Necessarily, before he could present evidence during the trial, he must first be impleaded and informed of the case against him. It would be the height of injustice to rob an innocent partner of his hard-earned personal belongings without giving him an opportunity to be heard. Without any showing that Guy himself acted maliciously on behalf of the company partnership causing damage or injury to the complainant, then he and his personal properties cannot be made directly and solely accountable for the liability of the partnership, the judgment debtor, because he was not a party to the case.
Further, 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 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.
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.