[No. 19892.
September 6, 1923]
TECK SEING & Co., LTD., petitioner and appellee. SANTIAGO Jo CHUNG CANG ET AL.,
partners, vs.PACIFIC COMMERCIAL COMPANY ET AL., creditors and appellants.
1. MERCANTILE LAW; CONTRACTS; PARTNERSHIP; INSTANT CASE.—Held: That the mercantile
establishment which operated under the name of Teck Seing & Co., Ltd., and which was constituted
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Jo Chung Cang vs. Pacific Commercial Co.
by the document set forth in the decision, is not a corporation, nor a cuenta en participación (joint
account association), nor a sociedad anóníma, nor a sociedad en comandita (limited partnership), nor
a de factocommercial association, but is a general partnership.
2. ID.; ID.; ID.; LIMITED PARTNERSHIP.—Those who seek to avail themselves of the protection of
laws permitting the creation of limited partnerships must show a substantially full compliance with
such laws. A limited partnership that has not complied with the law of its creation is not considered
a limited partnership at all, but a general partnership in which all the members are liable.
3. ID.; ID.; ID.; ID.—To establish a limited partnership, there must be, at least, one general partner
and the name of at least one of the general partners must appear in the firm name. (Code of
Commerce, arts. 122 [2], 146, 148.)
4. ID.; ID.; ID.; DEFECTS IN THE ORGANIZATION; FIRM NAME; ARTICLE 126 OF THE CODE OF
COMMERCE, CONSTRUED.—Article 126 of the Code of Commerce requires the general
copartnership to transact business under the name of all its members, or of several of them, or of one
only. The object of the article is manifestly to protect the public against imposition and fraud.
5. ID.; ID.; ID.; ID.; ID.; ID.—Article 126 of the Code of Commerce was intended more for the protection
of the creditors than of the partners themselves. A distinction can be drawn between the right of the
alleged partnership to institute action when failing to live up to the provisions of the law, or even the
rights of the partners as among themselves, and the right of a third person to hold responsible a
general partnership which merely lacks a firm name, in order to make it a partnership de jure. The
law should be construed as rendering contracts made in violation of it unlawful and unenforceable at
the instance of the offending party only, but not as designed to take away the rights of innocent
parties who may have dealt with the offenders in ignorance of their having violated the law.
6. ID.; ID.; ID.; ID.; ID.; ID.—The civil law and the common law alike point to a difference between the
rights of the partners who have failed to comply with the law and the rights of third persons who
have dealt with the partnership.
7. ID.; ID.; ID.; ID.; ID.; ID.—According to the Spanish civil law, defects in the organization cannot
affect relations with third persons. Contracts entered into by commercial associations defectively
organized are valid when they are voluntarily executed by the parties, if the only controversy relates
to whether or not they complied with the agreement.
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Jo Chung Cang vs. Pacific Commercial Co.
8. ID.; ID.; ID.; ID.; ID.; ID.; FAILURE OF REGISTRY, EFFECT.—While the failure to register in the
commercial registry necessarily precludes the members from enforcing rights acquired by them
against third persons, such failure cannot prejudice the rights of third persons. (Decisions of the
supreme court of Spain of December 6, 1887, January 25, 1888, November 10, 1890, and January 26,
1900.)
9. ID.; ID.; ID.; ID.; ID.; ID.; DECISION IN HUNG-MAN-Yoc vs. KIENG-CHIONG-SENG,
DISTINGUISHED.—There is a marked difference between the facts of the case of Hung-Man-
Yoc vs. KiengChiong-Seng ([1906], 6 Phil., 498), and the facts of the instant case.
10 . ID.; ID.; ID.; ID.; ID.; ID.; TEST OF PARTNERSHIP.—The legal intention deducible from the acts
of the parties controls in determining the existence of a partnership. If they intend to do a thing
which in law constitutes a partnership, they are partners, although their purpose was to avoid the
creation of such relation.
11. ID.; ID.; ID.; ID.; ID.; ID.; BANKRUPTCY AND INSOLVENCY; LIABILITY OF PARTNERSHIP
AND PARTNERS.—If a firm be insolvent, but one or more partners thereof are solvent, the creditors
may proceed both against the firm and against the solvent partner or partners, first exhausting the
assets of the firm before seizing the property of the partners.
APPEAL from an order of the Court of First Instance of Cebu. Abeto, J.
The facts are stated in the opinion of the court.
Del Rosario & Del Rosario and Block, Johnston & Greenbaum for appellants.
F. V. Arias for appellees Jo Ibec and Go Tayco.
No appearance for petitioner and appellee.
Jose A. Espiritu and Felipe Ysmael as amici curiæ.
MALCOLM, J.:
Following the presentation of an application to be adjudged an insolvent by the "Sociedad
Mercantil, Teck Seing & Co., Ltd.," the creditors, the Pacific Commercial Company,
Piñol & Company, Riu Hermanos, and W. H. Anderson
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Jo Chung Cang vs. Pacific Commercial Co.
& Company, filed a motion in which the Court was prayed to enter an order: "(A) Declaring the
individual partners as described in paragraph 5 parties to this proceeding; (B) to require each of
said partners to file an inventory of his property in the manner required by section 51 of Act No.
1956; and (C) that each of said partners be adjudicated insolvent debtors in this proceeding." The
trial judge first granted the motion, but, subsequently, on opposition being renewed, denied it. It
is from this last order that an appeal was taken in accordance with section 82 of the Insolvency
Law.
There has been laid before us for consideration and decision a question of some importance
and of some intricacy. The issue in the case relates to a determination of the nature of the
mercantile establishment which operated under the name of Teck Seing & Co., Ltd., and this
issue requires us to look into, and analyze, the document constituting Teck Seing & Co., Ltd, It
reads:
"ESCRITURA DE SOCIEDAD MERCANTIL LIMITADA"
"Sepan todos por la presente:
"Que nosotros, Santiago Jo Chung Cang, mayor de edad, comerciante, vecino y residente del municipio de
Tabogon, Provincia de Cebú, Islas Filipinas, Go Tayco, mayor de edad, comerciante, vecino y residente del
municipio de Cebú, Provincia de Cebú, Islas Filipinas, Yap Gueco, mayor de edad, comerciante, vecino y
residente del municipio y Provincia de Cebú, Islas Filipinas, Lim Yogsing, mayor de edad, comerciante,
vecino y residente del municipio de Cebú, Provincia de Cebú, Islas Filipinas, y Jo Ybec, mayor de edad,
comerciante, vecino y residente del municipio de Jagna, Provincia de Bohol, Islas Filipinas, hacemos constar
por la presente, que constituimos y f ormamos una sociedad mercantil limitada, bajo las leyes vigentes en las
Islas Filipinas, y para ser registrada de acuerdo con los reglamentos vigentes del Código de Comercio en
Filipinas.
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146 PHILIPPINE REPORTS ANNOTATED
Jo Chung Cang vs. Pacific Commercial Co.
"Que la razón social se denominará "Teck Seing & Co., Ltd." ytendra su domicilio principal en la Calle
Magallanes No. 94, de la Ciudad de Cebú, Provincia de Cebú, Islas Filipinas.
"Que el capital social será de treinta mil pesos (P30,000) moneda legal de las Islas Filipinas, dividido en
cinco acciones de a P6,000 como sigue:
Santiago Jo Chung Cang P6,000.00
............................................
Go Tayco 6,000.00
..................................................................
Yap Gueco 6,000.00
................................................................
Jo Ybec 6,000.00
.....................................................................
Lim Yogsing 6,000.00
.............................................................
____________
Total 30,000.00
..........................................................
"Que la duración de la sociedad será la de seis oños, a contar de la fecha de esta escritura, pudiendo
prorrogarse este tiempo a discreción unánime de todos los accionistas.
"El objeto de la sociedad será la compra y venta de mercaderías en general.
"El administrador o administradores de la sociedad podrán, previa conformidad de los accionistas,
establecer cuantas sucursales o establecimientos considere necesarios para f acilitar sus negocios y el mayor
desarrollo del comercio a que se dedica la sociedad, verificando todas las operaciones que crean convenientes
para el fomento de su capital.
"Las ganancias o pérdidas que resultaren durante cada año comercial, se distribuirán proporcionalmente
entre los accionistas, de acuerdo con el capital aportado por cada uno de los mismos.
"Las ganancias que resultaren en cada año comercial, si resultaren algunas ganancias, no podrán ser
retiradas por los accionistas hasta dentro del término de tres años, a contar de la fecha del primer balance
anual del negocio, quedando por tanto estas ganancias en reserva, para ampliar el capital aportado por los
accionistas y ampliar por
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VOL. 45, SEPTEMBER 6, 1923 147
Jo Chung Cang vs. Pacific Commercial Co.
tanto la esfera de acción emprendida por la misma sociedad. Al pasar o expirar el término de tres años, cada
accionista podrá retirar o depositar en poder de la sociedad, las ganancias que le debieran corresponder
durante dicho término de tres años.
"Que los accionistas no podrán extraer ni disponer en ningún tiempo cualesquiera cantidad o cantidades
de la sociedad, que haya sido aportado por los mismos, para atender sus gastos particulares ni aun pagando
rédito alguno sobre la cantidad que intenten disponer o extraer de dicha sociedad.
"El accionista Sr. Lim Yogsing tendrá a su cargo, en union del Sr. Vicente Jocson Jo, la administración de
la Compañía, quienes podrán usar indistintamente la firma social, quedando por consiguiente autorizados
ambos para hacer en nombre de ella toda clase de operaciones, negocios y especulaciones mercantiles,
practicando judicial y extrajudicialmente cuantos actos se requieran para el bien de la sociedad, nombrar
procuradores o abogados para reclamaciones y cobro de créditos y proponer ante los tribunales las
demandas, convenios, transacciones y excepciones procedentes. En caso de ausencia, enfermedad o cualquier
otro impedimento del accionista administrador Sr. Lim Yogsing, este podrá conferir poder general o especial
al accionista que crea conveniente para que en union del administrador auxiliar Sr. Vicente Jocson Jo,
pudieran ambos administrar convenientemente los negocios de la sociedad. Que los administradores podrán
tener los empleados necesarios para el mejor manejo de los negocios de la sociedad, y fijarán los sueldos que
debieran percibir dichos empleados por servicios rendidos a la sociedad.
"Que ambos administradores podrán disponer de mil doscientos pesos (P1,200) moneda filipina,
anualmente, para sus gastos particulares, siendo dicha cantidad de P1,200 la que corresponde a cada uno de
dichos administradores, como emolumentos b salarios que se les asigna a cada uno,
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148 PHILIPPINE REPORTS ANNOTATED
Jo Chung Cang vs. Pacific Commercial Co.
por sus trabajos en la administración de la sociedad. Entendiéndose, que, los accionistas podrán disponer
cada fin de año la gratificación que se concederá a cada administrador, si los negocios del año fueran
boyantes y justifiquen la concesión de una gratificación especial, aparte del salario aquí dispuesto y
especificado.
"Que pasado el término de seis años, y es de la conveniencia de los accionistas la continuación del negocio
de esta sociedad, dicho término será prorrogado por igual número de años, sin necesidad del otorgamiento de
ulteriores escrituras, quedando la presente en vigor hasta el término dispuesto por todos los accionistas.
"Que las diferencias que pudieran suscitarse entre los accionistas, bien sea por razón de lo estipulado en
esta escritura, ya por actos en el curso y dirección de los negocios en ella comprendidos, se procurará
arreglar entre los mismos amistosa y extrajudicialmente, y si no se consiguiere un arreglo de este modo,
dichos accionistas nombrarán un árbitro, cuya resolución están todos obligados y por la presente se
comprometen y se obligan a acatarla en todas sus partes, renunciando ulteriores recursos.
"En cuyos términos dejamos formalizada esta escritura de sociedad mercantil limitada, y prometemos
cumplirla fiel y estrictamente según los pactos que hemos establecido.
"En testimonio de todo lo cual, firmamos en la Ciudad de Cebú, Provincia de Cebú, Islas Filipinas, hoy 31
de octubre de mil novecientos diez y nueve.
(Fdos.) "LlM YOGSING
"Jo YBEC por Ho SENG SIAN
"SANTIAGO Jo CHUNG CANG
"Go TAYCO
"YAP GUECO
Firmado en presencia de:
(Fdos.) "ATILANO LEYSON
"JULIO DÍAZ
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Jo Chung Cang vs. Pacific Commercial Co.
"ESTADOS UNIDOS DE AMÉRICA
"ISLAS FlLIPINAS
"PROVINCIA DE CEBÚ
"En el Municipio de Cebú, de la Provincia antes mencionada, I. F., hoy 31 de octubre de 1919, A. D., ante mí,
Notario Público que subscribe, comparecieron personalmente Santiago Jo Chung Cang, Go Tayco, Yap
Gueco, Lim Yogsing y Jo Ybec, representado este último por Ho Seng Sian, según autorización hecha en
telegrama de fecha 27 de septiembre de 1919 que se me ha presentado en este mismo acto, de quienes doy f e
de que les conozco por ser las mismas personas que otorgaron el preinserto documento, ratificando ante mí
su contenido y manifestando ser el mismo un acto de su libre y voluntario otorgamiento. El Sr. Santiago Jo
Chung Cang me exhibió su cédula personal expedida en Cebú, Cebú, I. F. el día 19 de septiembre de 1919
bajo el No. H77742, Go Tayco también me exhibió la suya expedida en Cebú, Cebú, I. F., el día 9 de octubre
de 1919 bajo el No. G2042490, Yap Gueco también me exhibió la suya expedida en Cebú, Cebú, I. F. el día 20
de enero de 1919 bajo el No. F1452296, Lim Yogsing también me exhibió la suya expedida en Cebú, Cebú, I.
F., el día 26 de febrero de 1919 bajo el No. F1455662, y Ho Seng Sian representante de Jo Ybec, me exhibió
su cédula personal expedida en Cebú, Cebú, I. F. el día 4 de febrero de 1919 bajo el No. F1453733.
"Ante mí,
(Fdo.) "F. V. ARIAS
"Notario Público
"Hasta el 1.° de enero de 1920
"Asiento No. 157
Página No. 95 de mi
Registro Notarial
Serie 1919
Libro 2.°.
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Jo Chung Cang vs. Pacific Commercial Co.
"Presentado a las diez y cuarenta y tres minutos de la mañana de hoy, según el asiento No. 125, página 9 del
Tomo 1.° del Libro Diario. Cebú, 11 de febrero de 1920.
(Fdo.) "QUIRICO
[SELLO] "Registrador Mercantil Ex-Officio
"Inscrito el documento que precede al folio 84 hoja No. 188, inscripción 1.a del Tomo 3.° del Libro Registro
de Sociedades Mercantiles. Cebú, 11 de febrero de 1920. Honorarios treinta pesos con cincuenta centavos.
Art. 197, Ley No. 2711, Código Administrativo.
(Fdo.) "QUIRICO ABETO
[SELLO] "Registrador Mercantil Ex-Officio"
Proceeding by process of elimination, it is self-evident that Teck Seing & Co., Ltd., is not a
corporation. Neither is it contended by any one that Teck Seing & Co., Ltd., is the accidental
partnership denominated cuenta en participación (joint account association).
Counsel for the petitioner and appellee described his client in one place in his opposition to the
motion of the creditors, as "una verdadera sociedad anónima," (a true sociedad anóníma). The
provisions of the Code of Commerce relating to sociedades anónimas were, however, repealed by
section 191 of the Corporation Law (Act No. 1459), with the exceptions that sociedades
anónimaslawfully organized at the time of the passage of the Corporation Law were recognized,
which is not our case.
The document providing for the partnership contract purported to form "una sociedad
mercantil limitada," and counsel for the petitioner's first contention was that Teck Seing & Co.,
Ltd. was not "una sociedad regular colectiva, ni siquiera comanditaria, sino una sociedad
mercantil limitada " Let us see if the partnership contract created a "sociedad en comandita," or,
as it is known in English, and will hereafter be spoken of, "a limited partnership.
To establish a limited partnership there must be, at least, one general partner and the name of
at least one of the
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Jo Chung Cang vs. Pacific Commercial Co.
general partners must appear in the firm name. (Code of Commerce, arts. 122 [2], 146, 148.) But
neither of these requirements have been fulfilled. The general rule is, that those who seek to
avail themselves of the protection of laws permitting the creation of limited partnerships must
show a substantially full compliance with such laws. A limited partnership that has not complied
with the law of its creation is not considered a limited partnership at all, but a general
partnership in which all the members are liable. (Mechem, Elements of Partnership, p. 412;
Gilmore, Partnership, pp. 499, 595; 20 R. C. L., 1064.)
The contention of the creditors and appellants is that the partnership contract established a
general partnership.
Article 125 of the Code of Commerce provides that the articles of general copartnership must
state the names, surnames, and domiciles of the partners; the firm name; the names, and
surnames of the partners to whom the management of the firm and the use of its signature is
intrusted; the capital which each partner contributes in cash, credits, or property, stating the
value given the latter or the basis on which their appraisement is to be made; the duration of the
copartnership; and the amounts which, in a proper case, are to be given to each managing
partner annually for his private expenses, while the succeeding article of the Code provides that
the general copartnership must transact business under the name of all its members, of several of
them, or of one only. Turning to the document before us, it will be noted that all of the
requirements of the Code have been met, with the sole exception of that relating to the
composition of the firm name. We leave consideration of this phase of the case for later
discussion.
The remaining possibility is the revised contention of counsel for the petitioners to the effect
that Teck Seing & Co., Ltd. is "una sociedad mercantil 'de facto' solamente"(only a de
facto commercial association), and that the decision of the Supreme Court in the case of Hung-
Man-Yoc vs. Kieng-Chiong-Seng [1906], 6 Phil., 498), is controlling.
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Jo Chung Cang vs. Pacific Commercial Co.
It was this argument which convinced the trial judge, who gave effect to his understanding of the
case last cited and which here must be given serious attention.
The decision in Hung-Man-Yoc vs. Kieng-Chiong-Seng, supra, discloses that the firm Kieng-
Chiong-Seng was not organized by means of any public document; that the partnership had not
been recorded in the mercantile registry; and that Kieng-Chiong-Seng was not proven to be the
firm name, but rather the designation of the partnership. The conclusion then was, that the
partnership in question was merely de facto and that, therefore, giving effect to the provisions of
article 120 of the Code of Commerce, the right of action was against the persons in charge of the
management of the association.
Laying the facts of the case of Hung-Man-Yoc vs.KiengChiong-Seng, supra, side by side with
the facts before us, a marked difference is at once disclosed. In the cited case, the organization of
the partnership was not evidenced by any public document; here, it is by a public document. In
the cited case, the partnership naturally could not present a public instrument for record in the
mercantile registry; here, the contract of partnership has been duly registered. But the two cases
are similar in that the firm name failed to include the name of any of the partners.
We come then to the ultimate question, which is, whether we should follow the decision
in Hung-Man-Yoc vs.KiengChiong-Seng, supra, or whether we should differentiate the two cases,
holding Teck Seing & Co., Ltd., a general copartnership, notwithstanding the failure of the firm
name to include the name of one of the partners. Let us now notice this decisive point in the case.
Article 119 of the Code of Commerce requires every commercial association before beginning
its business to state its articles, agreements, and conditions in a public instrument, which shall
be presented for record in the mercantile registry. Article 120, next following, provides that the
persons in charge of the management of the association who
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Jo Chung Cang vs, Pacific Commercial Co.
violate the provisions of the foregoing article shall be responsible in solidum to the persons not
members of the association with whom they may have transacted business in the name of the
association. Applied to the facts before us, it would seem that Teck Seing & Co., Ltd. has fulfilled
the provisions of article 119. Moreover, to permit the creditors only to look to the person in charge
of the management of the association, the partner Lim Yogsing, would not prove very helpful to
them.
What is said in article 126 of the Code of Commerce relating to the general copartnership
transacting business under the name of all its members or of several of them or of one only, is
wisely included in our commercial law. It would appear, however, that this provision was inserted
more f or the protection of the creditors than of the partners themselves. A distinction could well
be drawn between the right of the alleged partnership to institute action when failing to live up
to the provisions of the law, or even the rights of the partners as among themselves, and the right
of a third person to hold responsible a general copartnership which merely lacks a legal firm
name in order to make it a partnership de jure.
The civil law and the common law alike seem to point to a difference between the rights of the
partners who have failed to comply with the law and the rights of third persons who have dealt
with the partnership.
The supreme court of Spain has repeatedly held that notwithstanding the obligation of the
members to register the articles of association in the commercial registry, agreements containing
all the essential requisites are valid as between the contracting parties, whatever the form
adopted, and that, while the failure to register in the commercial registry necessarily precludes
the members from enforcing rights acquired by them against third persons, such failure cannot
prejudice the rights of third persons. (See decisions of December 6, 1887, January 25, 1888,
November 10, 1890, and January 26, 1900.) The same reasoning would be
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Jo Chung Cang vs. Pacific Commercial Co.
applicable to the less formal requisite pertaining to the firm name.
The common law is to the same effect. The State of Michigan had a statute prohibiting the
transaction of business under an assumed name or any other than the real name of the individual
conducting the same, unless such person shall file with the county clerk a certificate setting forth
the name under which the business is to be conducted and the real name of each of the partners,
with their residences and post-office addresses, and making a violation thereof a misdemeanor.
The Supreme Court of Michigan said:
"The one object of the act is manifestly to protect the public against imposition and fraud, prohibiting
persons from concealing their identity by doing business under an assumed name, making it unlawful to use
other than their real names in transacting business without a public record of who they are, available for
use in courts, and to punish those who violate the prohibition. The object of this act is not limited to
facilitating the collection of debts, or the protection of those giving credit to persons doing business under an
assumed name. It is not unilateral in its application. It applies to debtor and creditor, contractor and
contractee, alike. Parties doing business with those acting under an assumed name, whether they buy or
sell, have a right, under the law, to know who they are, and who to hold responsible, in case the question of
damages for failure to perform or breach of warranty should arise.
"The general rule is well settled that, where statutes enacted to protect the public against fraud or
imposition, or to safeguard the public health or morals, contain a prohibition and impose a penalty, all
contracts in violation thereof are void. * * *
"As this act involves purely business transactions, and affects only money interests, we think it should be
construed as rendering contracts made in violation of it unlawful and unenforceable at the instance of the
offending party only.
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Jo Chung Cang vs. Pacific Commercial Co.
but not as designed to take away the rights of innocent parties who may have dealt with the offenders in
ignorance of their having violated the statute." (Cashin vs. Pliter [1912], 168 Mich., 386; Ann. Cas. [1913-C],
697.)
The early decision of our Supreme Court in the case of Prautch, Scholes &
Co. vs. Hernandez ([1903], 1 Phil., 705), contains the following pertinent observations:
"Another case may be supposed. A partnership is organized for commercial purposes. It fails to comply with
the requirements of article 119. A creditor sues the part nership for a debt contracted by it, claiming to hold
the partners severally. They answer that their failure to comply with the Code of Commerce makes them a
civil part-nership and that they are in accordance with article 1698 of the Civil Code only liable jointly. To
allow such liberty of action would be to permit the parties by a violation of the Code to escape a liability
which the law has seen fit to impose upon persons who organized commercial partnerships; 'Because it
would be contrary to all legal principles that the nonperformance of a duty should redound to the benefit of
the person in default either intentional or unintentional.' (Mercantile Law, Eixalá, fourth ed., p. 145.)" (See
also Lichauco vs. Lichauco [1916], 33 Phil., 350, 360.)
Dr. Jose de Echavarri y Vivanco, in his Código de Comercio,includes the following comment after
articles 121 and 126 of the Code:
"From the decisions cited in this and in the previous comments, the following is deduced: 1st. Defects in the
organization cannot affect relations with third persons. 2d. Members who contract with other persons before
the association is lawfully ully organized are liable to these persons. 3d. The intention to form an association
is necessary, so that if the intention of mutual participation in the profits and losses in a particular business
is proved, and there are no articles of association, there is no association. 4th. An association, the articles of
which have not been registered,
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156 PHILIPPINE REPORTS ANNOTATED
Jo Chung Cang vs. Pacific Commercial Co.
is valid in favor of third persons. 5th. The private pact or agreement to form a commercial association is
governed not by the commercial law but by the civil law. 6th. Secret stipulations expressed in a public
instrument, but not inserted in the articles of association, do not affect third persons, but are binding on the
parties themselves. 7th. An agreement made in a public instrument, other than the articles of association,
by means of which one of the partners guarantees to another certain profits or secures him from losses, is
valid between them, without affecting the association. 8th. Contracts entered into by commercial associations
defectively organized are valid when they are voluntarily executed by the parties, if the only controversy
relates to whether or not they complied with the agreement.
* * * * * * *
"The name of the collective merchant is called firm name. By this name, the new being is distinguished
from others, its sphere of action fixed, and the juridical personality better determined, without constituting
an exclusive character of the general partnership to such an extent as to serve the purpose of giving a
definition of said kind of a mercantile partnership, as is the case in our Code.
"Having in mind that these partnerships are prevailingly of a personal character, article 126- says that
they must transact business under the name of all its members, of some of them, or of one only, the words
'and company' to be added in the latter two cases.
"It is rendered impossible for the general partnership to adopt a firm name appropriate to its commercial
object; the law wants to link, and does link, the solidary and unlimited responsibility of the members of this
partnership with the formation of its name, and imposes a limitation upon personal liberty in its selection,
not only by prescribing the requisites, but also by prohibiting persons not members of the company from
including their names in its firm name under penalty of civil solidary responsibility.
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Jo Chung Cang vs. Pacific Commercial Co.
"Of course, the form required by the Code for the adoption of the firm name does not prevent the addition
thereto of any other title connected with the commercial purpose of the association. The reader may see our
commentaries on the mercantile registry about the business names and firm names of associations, but it is
proper to establish here that, while the business name may be alienated by any of the means admitted by
the law, it seems impossible to separate the firm names of general partnerships from the juridical entity for
the creation of which it was formed." (Vol. 2, pp. 197, 213.) ,
On the question of whether the fact that the firm name "Teck Seing & Co., Ltd." does not contain
the name of all or any of the partners as prescribed by the Code of Commerce prevents the
creation of a general partnership, Professor Jose A. Espiritu, as amicus curiæ, states:
"My opinion is that such a fact alone cannot and will not be a sufficient cause of preventing the
formation of a general partnership, especially if the other requisites are present and the requisite
regarding registration of the articles of association in the Commercial Registry has been complied
with, as in the present case. I do not believe that the adoption of a wrong name is a material fact
to be taken into consideration in this case; first, because the mere fact that a person uses a name
not his own does not prevent him from being bound in a contract or an obligation he voluntarily
entered into; second, because such a requirement of the law is merely a formal and not
necessarily an essential one to the existence of the partnership, and as long as the name adopted
sufficiently identify the firm or partnership intended to use it, the acts and contracts done and
entered into under such a name bind the firm to third persons; and third, because the failure of
the partners herein to adopt the correct name prescribed by law cannot shield them from their
personal liabilities, as neither law nor equity will permit them to utilize their own mistake in
158
158 PHILIPPINE REPORTS ANNOTATED
Jo Chung Cang vs. Pacific Commercial Co.
order to put the blame on third persons, and much less, on the firm creditors in order to avoid
their personal responsibility."
The legal intention deducible from the acts of the parties controls in determining the existence
of a partnership. If they intend to do a thing which in law constitutes a partnership, they are
partners, although their purpose was to avoid the creation of such relation. Here, the intention of
the persons making up Teck Seing & Co., Ltd. was to establish a partnership which they
erroneously denominated a limited partnership. If this was their purpose, all subterfuges
resorted to in order to evade liability for possible losses, while assuming their enjoyment of the
advantages to be derived from the relation, must be disregarded. The partners who have
disguised their identity under a designation distinct from that of any of the members of the firm
should be penalized, and not the creditors who presumably have dealt with the partnership in
good faith.
Articles 127 and 237 of the Code of Commerce make all the members of the general
copartnership liable personally and in solidum with all their property for the results of the
transactions made in the name and for the account of the partnership, Section 51 of the
Insolvency Law, likewise, makes all the property of the partnership and also all the separate
property of each of the partners liable. In other words, if a firm be insolvent, but one or more
partners thereof are solvent, the creditors may proceed both against the firm and against the
solvent partner or partners, first exhausting the assets of the firm before seizing the property of
the partners. (Brandenburg on Bankruptcy, sec. 108; De los Reyes vs. Lukban and Borja [1916],
35 Phil., 757; Involuntary Insolvency of Campos Rueda & Co. vs.Pacific Commercial Co. [1922],
44 Phil., 916.) We reach the conclusion that the contract of partnership found in the document
hereinbefore quoted established a
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VOL. 45, SEPTEMBER 11, 1923 159
People vs. Bustos
general partnership or, to be more exact, a partnership as this word is used in the Insolvency
Law.
Wherefore, the order appealed from is reversed, and the record shall be returned to the court
of origin for further proceedings pursuant to the motion presented by the creditors, in conformity
with the provisions of the Insolvency Law. Without special finding as to the costs in this instance,
it is so ordered.
Araullo, C. J., Johnson, Street, Avanceña, Villamor, Johns, and Romualdez, JJ., concur.
Order reversed and record remanded with instructions.
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