Vous êtes sur la page 1sur 12

PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME SYCIP, SALAZAR,

FELICIANO, HERNANDEZ & CASTILLO.

Facts:
Petitions were filed by the surviving partners of Atty. Alexander Sycip, who died on May 5, 1975
and by the surviving partners of Atty. Herminio Ozaeta, who died on February 14, 1976, praying
that they be allowed to continue using, in the names of their firms, the names of partners who had
passed away.

Petitioners contend that the continued use of the name of a deceased or former partner when
permissible by local custom, is not unethical but care should be taken that no imposition or
deception is practiced through this use. They also contend that no local custom prohibits the
continued use of a deceased partners name in a professional firms name; there is no custom or
usage in the Philippines, or at least in the Greater Manila Area, which recognizes that the name of
a law firm necessarily identifies the individual members of the firm.

Issue:
WON the surviving partners may be allowed by the court to retain the name of the partners who
already passed away in the name of the firm? NO

Held:
In the case of Register of Deeds of Manila vs. China Banking Corporation, the SC said:
The Court believes that, in view of the personal and confidential nature of the relations between
attorney and client, and the high standards demanded in the canons of professional ethics, no
practice should be allowed which even in a remote degree could give rise to the possibility of
deception. Said attorneys are accordingly advised to drop the names of the deceased partners
from their firm name.

The public relations value of the use of an old firm name can tend to create undue advantages and
disadvantages in the practice of the profession. An able lawyer without connections will have to
make a name for himself starting from scratch. Another able lawyer, who can join an old firm, can
initially ride on that old firms reputation established by deceased partners.

The court also made the difference from the law firms and business corporations:
A partnership for the practice of law is not a legal entity. It is a mere relationship or association for
a particular purpose. It is not a partnership formed for the purpose of carrying on trade or
business or of holding property. Thus, it has been stated that the use of a nom de plume,
assumed or trade name in law practice is improper.

We find such proof of the existence of a local custom, and of the elements requisite to constitute
the same, wanting herein. Merely because something is done as a matter of practice does not
mean that Courts can rely on the same for purposes of adjudication as a juridical custom.
Petition suffers legal and ethical impediment.

ANTONIO C. GOQUILAY, ET AL. VS. WASHINGTON Z. SYCIP, ET AL.

FACTS:

Tan Sin An and Goquiolay entered into a general commercial partnership under the
partnership name Tan Sin An and Antonio Goquiolay for the purpose of dealing in real
estate.
The agreement lodged upon Tan Sin An the sole management of the partnership affairs.
The lifetime of the partnership was fixed at ten years and the Articles of Co-partnership
stipulated that in the event of death of any of the partners before the expiration of the term,
the partnership will not be dissolved but will be continued by the heirs or assigns of the
deceased partner. But the partnership could be dissolved upon mutual agreement in writing
of the partners.
Goquiolay executed a GPA in favor of Tan Sin An.
The plaintiff partnership purchased 3 parcels of land which was mortgaged to La Urbana
as payment of P25,000. Another 46 parcels of land were purchased by Tan Sin An in his
individual capacity which he assumed payment of a mortgage debt for P35K. A
downpayment and the amortization were advanced by Yutivo and Co.
The two obligations were consolidated in an instrument executed by the partnership and
Tan Sin An, whereby the entire 49 lots were mortgaged in favor of Banco HipotecarioTan
Sin An died leaving his widow, Kong Chai Pin and four minor children. The widow
subsequently became the administratrix of the estate.
Repeated demands were made by Banco Hipotecario on the partnership and on Tan Sin
An. Defendant Sing Yee, upon request of defendant Yutivo Sons , paid the remaining
balance of the mortgage debt, the mortgage was cancelled
Yutivo Sons and Sing Yee filed their claim in the intestate proceedings of Tan Sin An for
advances, interest and taxes paid in amortizing and discharging their obligations to La
Urbana and Banco Hipotecario
Kong Chai Pin filed a petition with the probate court for authority to sell all the 49 parcels of
land. She then sold it to Sycip and Lee in consideration of P37K and of the vendees
assuming payment of the claims filed by Yutivo Sons and Sing Yee.
Later, Sycip and Lee executed in favor of Insular Development a deed of transfer covering
the 49 parcels of land.When Goquiolay learned about the sale to Sycip and Lee, he filed a
petition in the intestate proceedings to set aside the order of the probate court approving
the sale in so far as his interest over the parcels of land sold was concerned.
Probate court annulled the sale executed by the administratrix w/ respect to the 60%
interest of Goquiolay over the properties Administratrix appealed.The decision of probate
court was set aside for failure to include the indispensable parties. New pleadings were filed
The second amended complaint prays for the annulment of the sale in favor of Sycip and
Lee and their subsequent conveyance to Insular Development.
The complaint was dismissed by the lower court hence this appeal.

PLAINTIFFS ARGUMENTS: The plaintiffs in their complaint challenged the authority of Kong
Chai Pin to sell the partnership properties on the ground that she had no authority to sell because
even granting that she became a partner upon the death of Tan Sin An the power of attorney
granted in favor of the latter expired after his death.

DEFENDANTS ARGUMENTS: The defendants defended the validity of the sale on the theory
that she succeeded to all the rights and prerogatives of Tan Sin An as managing partner.

ISSUE/S:
Whether or not a widow or substitute become also a general partner or only a limited partner.
Whether or not the lower court err in holding that the widow succeeded her husband Tan Sin An in
the sole management of the partnership upon Tans death
Whether or not the consent of the other partners was necessary to perfect the sale of the
partnership properties to Sycip and Lee?

HELD:

Kong Chai Pin became a mere general partner. By seeking authority to manage partnership
property, Tan Sin Ans widow showed that she desired to be considered a general partner. By
authorizing the widow to manage partnership property (which a limited partner could not be
authorized to do), Goqulay recognized her as such partner, and is now in estoppel to deny her
position as a general partner, with authority to administer and alienate partnership property.
The articles did not provide that the heirs of the deceased would be merely limited partners; on the
contrary, they expressly stipulated that in case of death of either partner, the co partnership will
have to be continued with the heirs or assignees. It certainly could not be continued if it were to
be converted from a general partnership into a limited partnership since the difference between
the two kinds of associations is fundamental, and specially because the conversion into a limited
association would leave the heirs of the deceased partner without a share in the management.
Hence, the contractual stipulation actually contemplated that the heirs would become general
partners rather than limited ones.

ISLAND SALES V. UNITED 65 SCRA 554


DOCTRINE: Condonation by creditor of share in partnership debt of one partner does not increase
pro rata liability of other partners.

FACTS:
UNITED PIONEERS GENERAL CONSTRUCTION COMPANY ET .AL, a general partnership duly
registered under the laws of the Philippines, purchased from ISLAND SALES, INC a motor vehicle
on instalment basis and for this purpose executed a promissory note for P9,440.00, payable in
twelve (12) equal monthly instalments of P786.63, the first instalment payable on or before May
22, 1961 and the subsequent instalments on the 22nd day of every month thereafter, until fully
paid, with the condition that failure to pay any of said instalments as they fall due would render the
whole unpaid balance immediately due and demandable.

Having failed to receive the instalment due on July 22, 1961, the plaintiff sued the defendant
company for the unpaid balance amounting to P7,119.07. Benjamin C. Daco, Daniel A. Guizona,
Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc were included as co-defendants in their
capacity as general partners of the defendant company.

Daniel A. Guizona failed to file an answer and was consequently declared in default.
Subsequently, on motion of the plaintiff, the complaint was dismissed insofar as the defendant
Romulo B. Lumauig is concerned.

When the case was called for hearing, the defendants and their counsels failed to appear
notwithstanding the notices sent to them. Consequently, the trial court authorized the plaintiff to
present its evidence ex-parte, after which the trial court rendered the decision appealed from.

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 defendant company. But the trial court
denied the said motion notwithstanding the conformity of the plaintiff to limit the liability of the
defendants Daco and Sim to only one-fifth (1/5) of the obligations of the defendant company.
Hence, this appeal.

ISSUE: Whether the condonation of a partners 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 the appellant Benjamin C. Daco shall be limited to only one-fifth ( 1/ 5 ) of the obligations
of the defendant company. The fact that the complaint against the defendant Romulo B. Lumauig
was dismissed, upon motion of the plaintiff, does not unmake the said Lumauig as a general
partner in the defendant company. In so moving to dismiss the complaint, the plaintiff merely
condoned Lumauig's individual liability to the plaintiff.
ISSUE: What is the extent of the liability of the partners considering that one partner was removed
as a co-defendant on motion of Island Sales?

HELD: Their liability is pro-rata pursuant to Article 1816 of the Civil Code. But is should be noted
that since there were 5 partners when the purchase was made in behalf of the partnership, the
liability of each partner should be 1/5th (of the companys obligation) each. The fact that the
complaint against Lumauig was dismissed, upon motion of the Island Sales, does not unmake
Lumauig as a general partner in the company. In so moving to dismiss the complaint, Island Sales
merely condoned Lumauigs individual liability to them.

RATIO: Article 1816 of the Civil Code provides:

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

BENITO LIWANAG and MARIA LIWANAG REYES vs.WORKMEN'S COMPENSATION


COMMISSION
Appellants Benito Liwanag and Maria Liwanag Reyes are co-owners of Liwanag Auto Supply. A
commercial guard who while in line of duty, was killed by criminal hands. His widow and minor
children, in due time filed a claim for compensation with the Workmen's Compensation
Commission, which ordere appelants to pay jointly and severally P3,494.40 to the
claimants.Hence this appeal, arguing that there is nothing in the compensation Act which provides
that the obligation of an employer arising from compensable injury or death of an employee should
be solidary obligation,and that, in absence of such, the responsibility of appellants should not be
solidary but merely joint.
Issue:
whether or not the appellants should pay jointly the amount awarded to the widow and children ?
Ruling:
Although the Workmen's Compensation Act does not contain any provision expressly declaring
solidary obligation of business partners like the herein appellants, there are other provisions of law
from which it could be gathered that their liability must be solidary. Arts. 1711 and 1712 of the new
Civil Code provide:
ART. 1711. Owners of enterprises and other employers are obliged to pay compensation for the
death of or injuries to their laborers, workmen, mechanics or other employees, even though the
event may have been purely accidental or entirely due to a fortuitous cause, if the death or
personal injury arose out of and in the course of the employment. . . . .
ART. 1712. If the death or injury is due to the negligence of a fellow-worker, the latter and the
employer shall be solidarily liable for compensation. . . . .And section 2 of the Workmen's
Compensation Act, as amended reads in part as follows: . . . The right to compensation as
provided in this Act shall not be defeated or impaired on the ground that the death, injury or
disease was due to the negligence of a fellow servant or employee, without prejudice to the right
of the employer to proceed against the negligence party. The provisions of the new Civil Code
above quoted taken together with those of Section 2 of the Workmen's Compensation Act,
reasonably indicate that in compensation cases, the liability of business partners, like appellants,
should be solidary; otherwise, the right of the employee may be defeated, or at least crippled. If
the responsibility of appellants were to be merely joint and solidary, and one of them happens to
be insolvent, the amount awarded to the appellees would only be partially satisfied, which is
evidently contrary to the intent and purposes of the Act. Moreover, Art. 1207 of the new Civil Code
provides:. . . . There is solidary liability only when the obligation expressly so states, or when the
law or the nature of the obligation requires solidarity. Wherefore, award appealed from is affirmed.

ELMO MUASQUE VS CA

Facts:
Elmo Muasque, in behalf of Galan and Muasque partnership as Contractor, entered into a
written contract with Tropical Commercial Co., through its branch manager Ramon Pons, for
remodelling of Tropicals building in Cebu. The consideration for the entire services is P25,000 to
be paid: 30% upon signing of contract, and balance on 3 equal instalments of P6,000 every
15working days.

First payment of check worth P7,000 was payable to Muasque, who indorsed it to Galan for
purposes of depositing the amount and paying the materials already used. But since Galan
allegedly misappropriated P6,183.37 of the check for personal use, Muasque refused to indorse
the second check worth P6,000. Galan then informed Tropical of the misunderstanding between
him and Muasque and this prompted Tropical to change the payee of the second check from
Muasque to Galan and Associates (the duly registered name of Galan and Muasque
partnership). Despite the misappropriation, Muasque alone was able to finish the project. The
two remaining checks were properly issued to Muasque.

Muasque filed a complaint for payment of sum of money plus damages against Galan, Tropical
and Pons for the amount covered by the first and second checks. Cebu Southern Hardware Co
and Blue Diamond Glass Palace were allowed as intervenors having legal interest claiming
against Muasue and Galan for materials used.

TC:
- Muasque and Pons jointly and severally liable to intervenors
- Tropical and Pons absolved
CA affirmed with modification:
- Muasque and Pons jointly liable to intervenors

Issue:
1. W/N Muasque and Galan are partners? yes
2. W/N payment made by Tropical to Galan was good payment? yes
3. W/N Galan should shoulder exclusively the amounts payable to the intervenors (granting he
misappropriated the amount from the two checks)? no! Whether the obligation of Munasque
and Galan is joint or solidary? SOLIDARY

Held:

1. YES. Tropical had every right to presume the existence of the partnership:
a. Contract states that agreement was entered into by Galan and Muasque
b. The first check issue in the name of Muasque was indorsed to Galan
The relationship was made to appear as a partnership.

2. YES. Muasque and Galan were partners when the debts to the intervenors were incurred,
hence, they are also liable to third persons who extended credit to their partnership.

There is a general presumption that each individual partner is an authorized agent for the
firm and that he has authority to bind the firm in carrying on the partnership transactions.
The presumption is sufficient to permit third persons to hold the firm liable on transactions
entered into by one of the members of the firm acting apparently in its behalf and within the
scope of his authority.
3. NO. Article 1816 BUT construed together with Article 1824.

While it is true that under Article 1816 of CC, All partners, including industrial ones, shall be liable
pro rate with all their property and after all the partnership assets have been exhausted, for the
contracts which may be entered into the name and for account of the partnership, under its
signature and by a person authorized to act for the partnership. xxx, this provision should be
construed together with Article 1824 which provides that:

All partners are liable solidarily with the partnership for everything chargeable to the partnership
under Articles 1822 and 1823. While the liability of the partners are merely joint in transactions
entered into by the partnership, a third person who transacted with said partnership can hold the
partners solidarily liable for the whole obligation if the case of the third person falls under Articles
1822 and 1823.

The obligation is solidary because the law protects him, who in good faith relied upon the authority
of a partner, whether such authority is real or apparent. Tropical had every reason to believe that a
partnership existed between Munasque and Galan and no fault or error can be imputed against it
for making payments to Galan and Associates because as far as it was concerned, Galan was a
true partner with real authority to transact in behalf of the partnership it was dealing with (because
in the first place they entered into a duly registered partnership name and secondly, Munasque
endorsed the first check payment to Galan). This is even more true in the cases of the intervenors
who supplied materials on credit to the partnership. Thus, it is but fair that the consequences of
any wrongful act committed by any of the partners therein should be answered solidarily by all the
partners and the partnership as a whole. However, as between Munasque and Galan, Galan must
reimburse Munasque for the payments made to the intervenors as it was satisfactorily established
that Galan acted in bad faith in his dealings with Munasque as a partner.

Art. 1816. All partners, including industrial ones, shall be liable pro rata x x x for the contracts
which may be entered into the name and for the account of the partnership, under its signature
and by a person authorized x x x

Art. 1824. All partners are liable solidarily with the partnership for everything chargeable to the
partnership under Articles 1822 and 1823

Art. 1822. Where, by any wrongful act or omission of any partner acting in the ordinary course of
the business x x x or with the authority of his co-partners, loss or injury is caused to any person x x
x

Art. 1823. The partnership is bound to make good the loss:


(1) Where one partner acting within the scope of his apparent authority receives money or
property of a third person and misapplies it, and
(2) Where the partnership in the course of its business receives money or property of a third
person x x x is misapplied by any partner while it is in the custody of the partnership.

GR: In transactions entered into by the partnership, the liability of the partners is merely joint

Exception: In transactions involving third persons falling under Articles 1822 and 1823, such third
person may hold any partner solidarily liable for the whole obligation with the partnership.

Reason for exception: the law protects him, who in good faith relied upon the authority if a partner,
whether real or apparent.

However, as between Muasque and Galan, justice also dictates reimbursement in favour of
Muasque as Galan was proven to be in bad faith in his dealings with his partner.
VARGAS and COMPANY vs. CHAN HANG CHIU, ET AL.,

Facts:
On the 19th day of August, 1911, an action was begun by Chan Hang Chiu against the plaintiff in
this case as a mercantile association duly organized under the laws of the Philippine Islands, to
recover a sum of money. The summons and complaint were placed in the hands of the sheriff,
delivering to and leaving with one Jose Macapinlac personally true copies thereof, he being the
managing agent of said Vargas & Co. at the time of such service. On July 2, 1912, the justice's
court rendered judgment against Vargas & Co. for the sum of 372.28.

It is plaintiffs contention that Vargas & Co. being a partnership, it is necessary, in bringing an
action against it, to serve the summons on all of the partners, delivering to each one of them
personally a copy thereof; and that the summons in this case having been served on the
managing agent of the company only, the service was of no effect as against the company and the
members thereof and the judgment entered by virtue of such a service was void.

Issue: Whether or not it is indispensable in bringing an action to a partnership to serve summons


to all parties thereof.

Held: No, it is dispensable.

Reasons:
1. It has been the universal practice in the Philippine Islands since American occupation, and was
the practice prior to that time, to treat companies of the class to which the plaintiff belongs as legal
or juridical entities and to permit them to sue and be sued in the name of the company, the
summons being served solely on the managing agent or other official of the company specified by
the section of the Code of Civil Procedure referred to. The plaintiff brings this action in the
company name and not in the name of the members of the firm. Actions against companies of the
class to which plaintiff belongs are brought, according to the uninterrupted practice, against such
companies in their company names and not against the individual partners constituting the firm. In
case the individual members of the firm must be separately served with process, the rule also
prevails that they must be parties to the action, either plaintiffs or defendant, and that the action
cannot be brought in the name of or against the company itself.

2. If it is necessary to serve the partners individually, they are entitled to be heard individually in
the action and they must, therefore, be made parties thereto so that they can be heard. It would be
idle to serve process on individual members of a partnership if the litigation were to be conducted
in the name of the partnership itself and by the duly constituted officials of the partnership
exclusively.

In this case, is apparent that the plaintiff is acting contrary to its own contention by bringing the
action in the name of the company. If not served with process, then the action should be brought
in the individual names of the partners and not in the name of the company itself.

TAI TONG V INSURANCE G.R. NO. L-55397 FEBRUARY 29, 1988

Facts:
Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of P100,000.00. To
secure the payment of the loan, a mortgage was executed over the land and the building in favor
of Tai Tong Chuache & Co. Arsenio Chua, representative of Thai Tong Chuache & Co. insured the
latter's interest with Travellers Multi-Indemnity Corporation for P100,000.00 (P70,000.00 for the
building and P30,000.00 for the contents thereof)
Pedro Palomo secured a Fire Insurance Policy covering the building for P50,000.00 with
respondent Zenith Insurance Corporation. On July 16, 1975, another Fire Insurance was procured
from respondent Philippine British Assurance Company, covering the same building for
P50,000.00 and the contents thereof for P70,000.00.

The building and the contents were totally razed by fire.

Based on the computation of the loss, including the Travellers Multi- Indemnity, respondents,
Zenith Insurance, Phil. British Assurance and S.S.S. Accredited Group of Insurers, paid their
corresponding shares of the loss. Complainants were paid the following: P41,546.79 by Philippine
British Assurance Co., P11,877.14 by Zenith Insurance Corporation, and P5,936.57 by S.S.S.
Group of Accredited Insurers Demand was made from respondent Travellers Multi-Indemnity for
its share in the loss but the same was refused. Hence, complainants demanded from the other
three (3) respondents the balance of each share in the loss in the amount of P30,894.31
(P5,732.79-Zenith Insurance: P22,294.62, Phil. British: and P2,866.90, SSS Accredited) but the
same was refused, hence, this action.

In their answers, Philippine British Assurance and Zenith Insurance Corporation denied liability on
the ground that the claim of the complainants had already been waived, extinguished or paid. Both
companies set up counterclaim in the total amount of P 91,546.79.

SSS Accredited Group of Insurers informed the Commission that the claim of complainants for the
balance had been paid in the amount in full.

Travellers Insurance, on its part, admitted the issuance of a Policy and alleged defenses that Fire
Policy, covering the furniture and building of complainants was secured by a certain Arsenio Chua
and that the premium due on the fire policy was paid by Arsenio Chua.

Tai Tong Chuache & Co. also filed a complaint in intervention claiming the proceeds of the fire
Insurance Policy issued by respondent Travellers Multi-Indemnity.

As adverted to above respondent Insurance Commission dismissed spouses Palomos' complaint


on the ground that the insurance policy subject of the complaint was taken out by Tai Tong
Chuache & Company, for its own interest only as mortgagee of the insured property and thus
complainant as mortgagors of the insured property have no right of action against the respondent.

It likewise dismissed petitioner's complaint in intervention in the following words:


From the above decision, only intervenor Tai Tong Chuache filed a motion for reconsideration but
it was likewise denied hence, the present petition.

Issue: WON Tai Tong had insurable interest

Held: Yes. Petition granted.

Ratio:
Respondent advanced an affirmative defense of lack of insurable interest on the part of the
petitioner that before the occurrence of the peril insured against, the Palomos had already paid
their credit due the petitioner. However, they were never able to prove that Tai had a lack of
insurable interest. Hence, the decision must be adverse against them.

However respondent Insurance Commission absolved respondent insurance company from


liability on the basis of the certification issued by the then Court of First Instance of
Davao, Branch II, that in a certain civil action against the Palomos, Arsenio Lopez Chua stands as
the complainant and not Tai Tong Chuache.
From said evidence respondent commission inferred that the credit extended by petitioner to the
Palomos secured by the insured property must have been paid. These findings was based upon a
mere inference.

The record of the case shows that the petitioner to support its claim for the insurance proceeds
offered as evidence the contract of mortgage which has not been cancelled nor released. It has
been held in a long line of cases that when the creditor is in possession of the document of credit,
he need not prove non-payment for it is presumed. The validity of the insurance policy taken by
petitioner was not assailed by private respondent. Moreover, petitioner's claim that the loan
extended to the Palomos has not yet been paid was corroborated by Azucena Palomo who
testified that they are still indebted to herein petitioner.

Public respondent argues however, that if the civil case really stemmed from the loan granted
to Azucena Palomo by petitioner the same should have been brought by Tai Tong Chuache or by
its representative in its own behalf. From the above premise, respondent concluded that the
obligation secured by the insured property must have been paid. However, it should be borne in
mind that petitioner being a partnership may sue and be sued in its name or by its duly authorized
representative. Petitioner's declaration that Arsenio Lopez Chua acts as the managing partner of
the partnership was corroborated by respondent insurance company. Thus Chua as the
managing partner of the partnership may execute all acts of administration including the right to
sue debtors of the partnership in case of their failure to pay their obligations when it became due
and demandable. Public respondent's allegation that the civil case flied by Arsenio Chua was in
his capacity as personal creditor of spouses Palomo has no basis. The policy, then had legal force
and effect.

CAMPOS RUEDA & CO V PACIFIC COMMERCIAL (44 PHIL 916)

Facts:
Campos, Rueda & Co., a limited partnership, is indebted to the appellants: Pacific Commercial
Co., Asiatic Petroleum Co, and International Banking Corporation amounting to not less than
P1,000.00 (which were not paid more than 30 days prior to the date of the filing by petitioners of
the application for voluntary insolvency).
The trial court denied their petition on the ground that it was not proven, nor alleged, that the
members of the firm were insolvent at the time the application was filed. It also held that the
partners are personally and solidarily liable for the consequences of the transactions of the
partnership.

Issue:
Whether or not a limited partnership may be held to have committed an act of insolvency.

Held:
Yes. A limited partnerships juridical personality is different from the personality of its members.
On general principle, the limited partnership must answer for and suffer the consequence of its
acts. Under our Insolvency Law, one of the acts of bankruptcy upon w/c an adjudication of
involuntary insolvency can be predicated is the failure to pay obligations.

The failure of Campos, Rueda & Co., to pay its obligations constitutes an act w/c is specifically
provided for in the Insolvency Law for declaration of involuntary insolvency. The petitioners have a
right to a judicial decree declaring the involuntary insolvency of said partnership.
DE LOS REYES V. LUKBAN AND BORJA

FACTS:
Teodoro delos Reyes brought a suit in the Court of First Instance of Manila against Vicente
Lukban and Espiridion Borja to recover from them payment for the merchandise they bought on
credit by the firmLukban & Borja from the plaintiff's ship supply store named La Industria. A
judgment was rendered, on which the defendant firm was ordered to pay the sum of P1,086.65
with interest thereon amounting to P1,102.95. Esperidion Borja paid P522.69. Teodoro delos
Reyes later on brought a suit against Lukban & Borja to recover the sum of P853, the remaining
unpaid balance plus legal interest. Defendant Lukban contended that he is not liable, he was
merely an industrial partner in the firm and it was Borja who furnished the capital.

As it was proven on trial that the partnership has no more remaining property, as it is already
insolvent, the court rendered judgment holding Borja and Lukban jointly and severally liable to pay
the sum to plaintiff de los Reyes.

ISSUE: Is a creditor entitled to collect individually from the partners the amount of the debt that the
dissolved partnership owed at the time of its dissolution?

RULING: Yes. The creditor has the right to recover from the partners thereof in the manner
provided by Art. 127 of the Code of Commerce (now governed by Art. 1816 of the Civil Code of
the Philippines). Art. 127 of the Code of Commerce provides: "All the members of the general co-
partnership, be they or be theynot 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".

VDA. DE CHAN DIACO VS PENG

FACTS: On June 13, 1925, the San Miguel Brewery, Porta Pueco & Co., and Ruiz & Rementaria
S. en C. instituted insolvency proceedings against Leoncia Vda. de Chan Diaco (alias Lao Liong
Naw), 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 firms alleged, among other things, that
Leoncia was indebted to them in the sum of P26,234.47. Lao Liong Naw & Co.,"
On August 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 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 may be joined in the same action, though the private
property of the latter cannot be taken in payment of the partnership debts until the common
property of the concern is exhausted.
PNB VS LO
FACTS:
In September 1916, Severo Eugenio Lo and Ling, together with Ping, Hun, Lam and Peng formed
a commercial partnership under the name of Tai Sing and Co., with a capital of P40,000
contributed by said partners. The firm name was registered in the mercantile registrar in the
Province of Iloilo. Ping, in the articles of partnership, was assigned as the general manager.
However, in 1917, he executed a special power of attorney in favor of Lam to act in his behalf as
the manager of the firm. Subsequently, Lam obtained a loan from PNB the loan was under the
firms name. In the same year, Ping died in China. From 1918 to 1920, the firm, via GM Lam,
incurred other loans from PNB. The loans were not objected by any of the partners. Later, PNB
sued the firm for non-payment. Lo, in his defense, argued that he cannot be liable as a partner
because the partnership, according to him, is void; that it is void because the firms name did not
comply with the requirement of the Code of Commerce that a firm name should contain the
names of all of the partners, of several of them, or only one of them. Lo also argued that the acts
of Lam after the death of Ping is not binding upon the other partners because the special power of
attorney shall have already ceased.
ISSUE: Whether or not Lo is correct in both arguments.
HELD: No. The anomalous adoption of the firm name above noted does not affect the liability of
the general partners to third parties under Article 127 of the Code of Commerce. The object of the
Code of Commerce in requiring a general partnership to transact business under the name of all
its members, of several of them, or of one only, is to protect the public from imposition and fraud; it
is for the protection of the creditors rather than of the partners themselves. It is unenforceable as
between the partners and at the instance of the violating party, but not in the sense of depriving
innocent parties of their rights who may have dealt with the offenders in ignorance of the latter
having violated the law; and that contracts entered into by a partnership firm defectively organized
are valid when voluntarily executed by the parties, and the only question is whether or not they
complied with the agreement. Therefore, Lo cannot invoke in his defense the anomaly in the firm
name which they themselves adopted. Lo was not able to prove his second argument. But even
assuming arguendo, his second contention does not deserve merit because (a) Lam, in acting as
a GM, is also a partner and his actions were never objected to by the partners, and (b) it also
appeared from the evidence that Lo, Lam and the other partners authorized some of the loans.
NOTE: Under the New Civil Code, a firm name may or may not include the name of one or more
of the partners (Article 1815).
ISSUE:
Whether or not Tai Sing & Co. is a general partnership in that the appellants can be held liable to pay
PNB

HELD: Yes. Tai Sing & Co. is a general partnership

RATIO:
Appellants admit and it appears from the articles of copartnership that Tai Sing & Co. is a general
partnership and it was registered in the mercantile register of Iloilo.
The fact that the partners opt to use Tai Sing & Co. as the firm name does not affect the liability of
the general partners to third parties under Article127 of the Code of Commerce. Jurisprudence states
that:
The object of article 126 of the Code of Commerce in requiring a general partnership to
transact business under the name of all its members, of several of them, or of one only, is
to protect the public from imposition and fraud
It is for the protection of the creditors rather than of the partners themselves.
The law must be unlawful and unenforceable only as between the partners and at the
instance of the violating party, but not in the sense of depriving innocent parties of their
rights who may have dealt with the offenders in ignorance of the latter having violated the
law.
Contracts entered into by commercial associations defectively organized are valid when
voluntarily executed by the parties, and the only question is whether or not they complied
with the agreement. Therefore, the defendants cannot invoke in their defense the anomaly
in the firm name which they themselves adopted.

As to the alleged death of the manager, Say Lian Ping before Kelam executed the contracts of
mortgage with PNB, this would not affect the liability of the partnership
Kelam was a partner who contracted in the name of the partnership and the other partners
did not object
Lo, Khey Ling, and Yap Seng appointed Sy Tit as manager, and he obtained from PNB the
credit in current account
Trial Court correctly held defendants to be jointly and severally liable to PNB
This is in accordance with Article 127 of the Code of Commerce all the members of a general
partnership, be they managing partners thereof or not, shall be personally and solidarily liable with all
their property, 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 a person authorized to use it.