DIETRICH V.

FREEMAN AND WHITCOMB

1911; Justice Trent
Digest by Christian Jay Millena
Topic: Joint Accounts
Quick Facts: Plaintiff sued to collect from the partners of Manila Steam Laundry. The trial
court held the defendants jointly and severally liable. The Court reversed holding that the
business was a partnership of cuentas en participacion and the liability of the partners is
pro-rata based on their interest in the business.
FACTS:
Plaintiff Dietrich was employed by defendants Freeman, and Whitcomb as owners and
operators of Manila Steam Laundry (Whitcomb obtained his interest in the business from
Pierce who sold his interests to him). He filed the action to collect from defendants the
balance due to him for the services he performed.
The trial court held Freeman and Whitcomb jointly and severally liable to Dietrich.
Whitcomb appealed the decision insisting that he should not be held jointly and severally
liable with Freeman. (Note: Freeman was the managing partner of the laundry and Whitcomb
barely had a hand on the operations of the business).
To avoid liability it appears that the theory of Whitcomb here is two layered. First, that the
partnership was a commercial partnership. Second that it is a partnership of cuentas en
participacion.
ISSUE:
WON Whitcomb is liable to Freeman.YES
What is the nature of liability? Pro rata based on his interest in the business.
RATIO:
In determining the liability of Freeman, the Court first identified the nature of the business.
Art 17 and 119 of the Code of Commerce then applicable, provide the requirements for the
constitution of a commercial partnership (i.e. recording of the business agreements in the
commercial registry.) The requirements were not complied with. The Court therefore held
that no formal partnership was entered into between Freeman and Whitcomb. As such, the
Civil Code and not the Code of Commerce must govern in determining the liability of the
partners.
Insisting that he is not liable, Whitcomb posits that the association was one of cuentas en
participation. A partnership of cuentas en participacion is constituted in such a manner that
its existence was only known to those who had an interest in the same, there being no
mutual agreement between the partners, and without a corporate name indicating to the
public in some way that there were other people besides the one who ostensibly managed
and conducted the business. under the provisions of article 242 of the Code of Commerce,
those who contract with the person in whose name the business of such a partnership was
conducted shall have only the right of action against such person and not against other
persons interested
However, a partnership of cuentas en participacion does not have a corporate name. Here,
the business is known as Manila Steam Laundry and Dietrich was employed by Manila steam
Laundry and not Freeman alone.

Since the artners were doing business under this name, and since it is not a commercial
partnership, Articles 1698 and 1137 of the Civil Code should govern and the partners are not
liable individually for the entire amount due the plaintiff. The liability is pro rata and in this
case the appellant is responsible to the plaintiff for only one-half of the debt.
DISPOSITIVE:
Judgment modified. Whitcomb liable only to half the balance due plaintiff.