Article 1827.

The creditors of the partnership shall be preferred to those of each partner as

regards the partnership property. Without prejudice to this right, the private creditors of each
partner may ask the attachment and public sale of the share of the latter in the partnership assets.

Preference of Partnership creditors in partnership property

- This rule is based upon the theory that the partnership, treated as a legal entity distinct
and separate from the members composing it should apply its property to the payment of
its debts in preference to the claim of any partner or his creditors.
- Applies only in the event of the disposition of partnership property among its creditors to
pay partnership debts.
- Private property of the partners cannot be taken in payment of partnership debts until the
common property of the concern is exhausted.

Remedy of private creditors of a partner

- They may ask for the attachment and public sale of the share of the partner in the
partnership assets without prejudice to the right of preference of partnership creditors

Case:

LEONCIA VIUDA DE CHAN DIACO (alias LAO LIONG NAW)

vs.
JOSE S. Y. PENG

G.R. No. L-29182, October 24, 1928

Facts:

On June 13, 1925, the San Miguel Brewery, Porta Pueco & Co., and Ruiz and Rementaria S. en C,
instituted insolvency proceedings against Leoncia Vda. de Chan Diaco, alleged to be the owner of a
grocery store on Calle Nueva, Binondo, known as the store of La Viuda de G. G. Chan Diaco. The
above-mentioned firm alleged among other things that Leoncia was indebted to them in the sum of
P26,234.47. Lao Liong Naw & Co. On Aug. 4, 1926, Leoncia Vda. de Chan Diaco, the appellee,
filed a motion asking the court to dismiss the proceedings against her on the ground that they should
have been brought against the partnership Lao Liong Naw & Co. of which she was only a member.

Issue:

Is creditor entitled to collect individually from the partners the amount of the debt of the insolvent
partnership.

Ruling:

Yes.
All the members of the general co- partnership, be they are or be they not managing partners of the
same are personally and severally liable with all their properties for the results of the transactions
made in the name and for the account of the partnership, under the signature of the latter and by the
person authorized to make use thereof. It is further to be noted that both the partnership and the
separate partners thereof maybe joined in the same action though the private property of the lattet
cannot be taken in payment of the partnership debts until the common property of the concern is
exhausted.