Hung-Man-Yoc vs. Kieng-Chiong-Seng

A de facto partnership not evidenced by a public document and not registered in the Mercantile Registry has no legal existence or judicial personality, and its managing partner is not individually liable under article 120 of the Code of Commerce where he made no contract with the claimant.

Hung-Man-Yoc, in the name of Kwong-Wo-Sing, was the plaintiff, and Chua-Che-Co, Yu-Yec-Pin, and Ang-Chu-Keng were among the alleged partners of Kieng-Chiong-Seng, a mercantile partnership organized for the importation of goods for sale at a profit. The Code of Commerce regulated partnership formation, registration, firm names, and the liability of persons in charge of management who failed to comply with registration requirements. Those provisions frame the dispute over whether the alleged partners could be held liable for the partnership’s obligations.

Hung-Man-Yoc, in the name of Kwong-Wo-Sing, was the plaintiff, while Chua-Che-Co, Yu-Yec-Pin, and Ang-Chu-Keng were among the defendants alleged to be partners of Kiong-Tiao-Eng under the designation Kieng-Chiong-Seng. The court below found that Chua-Che-Co, Yu-Yec-Pin, and Ang-Chu-Keng were partners of Kiong-Tiao-Eng under the firm name Kieng-Chiong-Seng. The partnership was a mercantile one engaged in the importation of goods for sale at a profit, as testified to by its manager, Yu-Yec-Pin, and by Kiong-Tiao-Eng.

Its organization was not evidenced by any public document. Yu-Yec-Pin himself and some of his so-called partners merely noted in the books of the partnership, which were not introduced in evidence, the capital each had contributed. Yu-Yec-Pin further testified that the partnership was not recorded in the Mercantile Registry but in the Internal Revenue office.

The partnership contracted obligations in favor of the plaintiff. Chua-Che-Co was in charge of the management of the association, but he made no contract at all with the plaintiff; according to the testimony of the various witnesses, Yu-Yec-Pin, the agent of the partnership, made all the contracts for the partnership, and Kieng-Tiao-Eng also did so according to two of the witnesses.

• Nature of the Partnership: Respondent, the plaintiff-appellee, alleged in his brief that the partnership of Kieng-Chiong-Seng was a mercantile partnership organized for commercial pursuits, although its organization was not evidenced by a public document as required by article 119 of the Code of Commerce and it was not registered as required by article 17.

• Legal Existence of the Partnership: Whether the alleged partnership Kieng-Chiong-Seng acquired legal existence and judicial personality despite not being evidenced by a public document and not being registered in the Mercantile Registry.
• Firm Name: Whether Kieng-Chiong-Seng was a firm name of a general or limited partnership under articles 126 and 146 of the Code of Commerce.
• Liability of Chua-Che-Co: Whether Chua-Che-Co, as the person in charge of management of the association, is individually liable under article 120 of the Code of Commerce for obligations contracted in the partnership’s name when he made no contract with the plaintiff.

• Legal Existence of the Partnership: No. The alleged partnership never had legal existence nor acquired judicial personality because its organization was not evidenced by a public document and it was not registered in the Mercantile Registry.
• Firm Name: No. Kieng-Chiong-Seng was not a firm name of a general partnership because it did not contain the names of all or some of the partners, nor of a limited partnership because it lacked the same requisites and the word “limited”; it was merely a designation of the partnership.
• Liability of Chua-Che-Co: No. Under article 120 of the Code of Commerce, Chua-Che-Co was not individually liable because he made no contract with the plaintiff; the contracts were made by Yu-Yec-Pin and Kieng-Tiao-Eng.

• Legal Existence of the Partnership: Article 119 of the Code of Commerce required the articles of partnership to be recorded in a public instrument and the partnership to be registered in the Mercantile Register; article 17 required registration. The partnership’s organization was not evidenced by any public document; Yu-Yec-Pin and some partners merely noted capital contributions in books not introduced in evidence; Yu-Yec-Pin testified that the partnership was not recorded in the Mercantile Registry but in the Internal Revenue office. The SC held that the alleged partnership never had legal existence nor acquired judicial personality in the acts and contracts executed and made by it under article 116, paragraph 2.
• Firm Name: Article 126 of the Code of Commerce required a general partnership firm name to contain the names of all the partners, or some of them, or at least one of them followed by “and company” in the latter cases; article 146 required a limited partnership firm name to contain the same requisites plus the word “limited.” None of the four names of the alleged members appeared in Kieng-Chiong-Seng, and it had none of these requisites, so it could not be the firm name of a general or limited partnership. Anonymous partnerships, or corporations, do not require a firm name or signature; a designation adequate for the business is sufficient under articles 151 and 152.
• Liability of Chua-Che-Co: Although the partnership had no legal standing, it was a de facto partnership and contracted obligations in favor of the plaintiff, so liability had to be enforced against someone. Article 120 of the Code of Commerce made the persons in charge of management who did not comply with article 119 responsible together with persons not members of the association with whom they transacted business in the association’s name. Chua-Che-Co was in charge of management, but he made no contract at all with the plaintiff; Yu-Yec-Pin, the partnership’s agent, made all the contracts, and Kieng-Tiao-Eng also did so according to two witnesses. He therefore incurred no liability and could not be held individually responsible for the plaintiff’s claims.

• De facto partnership without legal personality — A partnership not evidenced by a public document and not registered in the Mercantile Registry has no legal existence or judicial personality under the Code of Commerce, but obligations it contracted as a de facto partnership may still be enforced against the persons liable. The SC applied this to Kieng-Chiong-Seng, which was a mercantile partnership for importation and sale of goods but was not publicly documented or registered.
• Liability of persons in charge of management under article 120 — Persons in charge of managing an association who fail to comply with article 119 are responsible, together with non-members with whom they transacted business in the association’s name, for obligations contracted in that name. The SC applied this to Chua-Che-Co: he was in charge of management, but because he made no contract with the plaintiff and the contracts were made by Yu-Yec-Pin and Kieng-Tiao-Eng, he was not liable.
• Requisites of firm names — A general partnership firm name must contain the names of all the partners, or some of them, or at least one of them followed by “and company” in the latter cases; a limited partnership firm name must contain the same requisites plus the word “limited”; anonymous partnerships do not require a firm name or signature. The SC applied this to hold that Kieng-Chiong-Seng was not a valid firm name of a general or limited partnership.

• “The partnership in question was a mercantile one, as it was engaged in the importation of goods for sale here at a profit.” — The SC used this to characterize Kieng-Chiong-Seng as a mercantile partnership despite its lack of public documentation and registration.
• “All this being so, the alleged partnership never had any legal existence nor has it acquired any judicial personality in the acts and contracts executed and made by it. (Art. 116, par. 2.)” — This is the core ruling on the partnership’s lack of legal personality.
• “The defendant, Chua-Che-Co, was in charge of the management of the association, nor did he make any contract at all with the plaintiff, as clearly appears from the testimony of the various witnesses, the agent of the partnership, Yu-Yec-Pin, being the person who made all the contracts for the partnership; also Kieng-Tiao-Eng according to two of the witnesses.” — This passage identifies why Chua-Che-Co was not the person who contracted with the plaintiff.
• “It is evident, therefore, that he has incurred no liability and that he can not be held individually responsible for the payment of plaintiff's claims as the court below found.” — This is the SC’s conclusion on Chua-Che-Co’s individual liability.

• Article 17, Code of Commerce — Required registration of the partnership; the text states the partnership was not registered as required by this article.
• Article 116, paragraph 2, Code of Commerce — Cited for the rule that the alleged partnership never had legal existence nor acquired judicial personality in the acts and contracts executed and made by it.
• Article 119, Code of Commerce — Required the articles of partnership to be recorded in a public instrument and the partnership to be registered in the Mercantile Register; Kieng-Chiong-Seng’s organization was not evidenced by a public document.
• Article 120, Code of Commerce — Made persons in charge of management who did not comply with article 119 responsible together with non-members with whom they transacted business in the association’s name; applied to hold Chua-Che-Co not liable because he made no contract with the plaintiff.
• Article 126, Code of Commerce — Required a general partnership firm name to contain the names of all partners, or some, or at least one followed by “and company” in the latter cases; Kieng-Chiong-Seng did not comply.
• Article 146, Code of Commerce — Required a limited partnership firm name to contain the same requisites as a general partnership plus the word “limited”; Kieng-Chiong-Seng did not comply.
• Articles 151 and 152, Code of Commerce — Provided that anonymous partnerships, or corporations, do not require a firm name or signature and that a designation adequate for the business is sufficient; cited in the firm-name discussion.