G.R. No. 19621; February 23, 1923
Union Guarantee Company, Ltd. vs. Jing Kee & Co., a copartnership, Teng Kim Kuy, Teng Kim Tong and The Bank of Taiwan, Ltd.

FACTS

The plaintiff, Union Guarantee Company, Ltd., was a surety on a bond for the production of a bill of lading at the Manila Customs House for merchandise shipped by the defendant Jing Kee & Co. (a Japanese partnership) to Koon Kee & Co. (a Manila partnership). The shipment was covered by drafts drawn by Jing Kee & Co. on Koon Kee & Co. and endorsed by the Bank of Taiwan to the Bank of the Philippine Islands. The drafts were accepted by Koon Kee & Co. but were dishonored at maturity. To secure its release from the bond after the Collector of Customs demanded the bill of lading or payment, the plaintiff purchased and paid the full value of the dishonored drafts from the Bank of the Philippine Islands. The plaintiff then sued to recover the amounts from the defendants, including Teng Kim Kuy and Teng Kim Tong, who were admitted members of both the Jing Kee & Co. and Koon Kee & Co. partnerships. The defendants demurred and answered, alleging the plaintiff took possession of the bills of lading and the merchandise. The trial court dismissed the complaint.

ISSUE

Whether the defendants Teng Kim Kuy and Teng Kim Tong, as members of the accepting partnership (Koon Kee & Co.), are personally liable to the plaintiff as holder of the dishonored drafts.

RULING

Yes. The Supreme Court reversed the trial court. The acceptance of the drafts by Koon Kee & Co. created a legal liability for their payment. By purchasing the drafts, the plaintiff became the holder and owner, entitled to enforce the acceptor’s liability. The defendants, as members of the general partnership Koon Kee & Co., are liable personally and solidarily for the partnership’s transactions under Article 127 of the Code of Commerce. The defense that the plaintiff obtained the merchandise was a matter for the defendants to allege and prove, which they failed to do sufficiently. The Court entered judgment against defendants Teng Kim Kuy and Teng Kim Tong jointly and severally for the amount of the drafts with interest. (In a subsequent resolution, the Court denied the plaintiff’s petition for a rehearing to also hold the drawer, Jing Kee & Co., liable, noting the drafts were stamped “D.P.” meaning the bill of lading was not to be delivered until the draft was paid, thus the drawer was not liable to the plaintiff under those circumstances.)