Topics Partnerships: Effects of Failure to Comply with Registration Requirements

A limited partnership that does not comply with the registration requirements
shall be treated as a general partnership in which all the members are liable for
partnership debts.
Case No. G.R. No. 19892 September 6, 1923
Case Name TECK SEING & CO., LTD., petitioner-appellee, SANTIAGO JO CHUNG CANG ET AL.,
partners, vs. PACIFIC COMMERCIAL COMPANY ET AL., creditor-appellants
Ponente Malcolm, J.
Digest by Sitty and Judy
Facts

1. Pacific Commercial Company, et al., as creditors to Teck Seing & Co., Ltd., filed a motion in which
the Court was ordered was prayed to enter an order to:
a. Declare the individual partners as parties to this proceeding;
b. Require each of the said partners to file an inventory of his property pursuant to the
provisions of Section 51 of Act No. 1956; and
c. Adjudicate as insolvent debtors, each of the said partners in the proceeding.
2. The said motion was filed by the creditors following Teck Seing & Co., Ltd.s application to be
adjudged insolvent.
3. The trial judge first granted the motion, but following the renewal of the opposition, denied it.
4. The creditors now appeal from the order of the trial judge denying their motion.
5. The counsel for petitioners argue that Teck Seing & Co., Ltd. is not a corporation but a sociedad
en comandita or a limited partnership basing on the provisions of the articles of partnership.
6. On the other hand, the creditor-appellants contend that the partnership contract established a
general partnership.
7. It appears that the basis of the trial court judges order to deny creditors motion is the revised
contention of the counsel for petitioners stating that Teck Seing & Co., Ltd. is only a de facto
commercial association and that the SC decision in Hung Man Yoc vs. Kieng Chiong Seng is
controlling.

Issue

WN Teck Seing & Co., Ltd., should be treated as a general partnership notwithstanding the failure of the
firm name to include the name of one of the partners

Ratio Decidendi

Issue
WN Teck Seing & Co., Ltd., should be
treated as a general partnership
notwithstanding the failure of the
firm name to include the name of
one of the partners
Ratio
The court held that Teck Seing appeared to have fulfilled the
requirements stated in Article 119 of the Code of Commerce
which 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.

In applying the provisions of Article 120 of the same Code,

which provides that the persons in charge of the management
of the association who 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, the Court
has held that 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.

On the question of whether the fact that the frim 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, the Court cited the
stance of Professor Jose A. Espiritu, as amicus curiae, which in
essence states that the doctrine of substantial compliance 1
prevails and the legal intention deducible from the acts of the
parties controls in determining the existence of a partnership.

In this case, it appears that the intention of the persons

comprising Teck Seing & Co., Ltd. is to establish a partnership
which they erroneously denominated as limited which would
result to an avenue to escape liability for possible losses.

The provisions of the Code of Commerce as to general

partnerships provide that if a firm is insolvent but one or
more of the partners are solvent, the creditors may proceed
both against the firm and against the solvent partner or
partners, exhausting the assets of the firm before seizing the
property of the partners.

The Court in this case, had ruled 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; and that the provision of said article
126 is for the protection of the creditors rather than of the
partners themselves.
Ruling

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
provision of the Insolvency Law. Without special finding as to the costs in this instance, it is so ORDERED.

1
Substantial, rather than strict, compliance in good faith with the legal requirements is all that is
necessary for the formation of a limited partnership; otherwise, when there is not even substantial
compliance, the partnership becomes a general partnership as far as third persons are concerned.