G.R. No. 26937, October 5, 1927
PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. SEVERO EUGENIO LO, ET AL., defendants. SEVERIO EUGENIO LO, NG KHEY LING and YEP SENG, appellants.

FACTS

On September 29, 1916, appellants Severo Eugenio Lo and Ng Khey Ling, along with others, formed a general commercial partnership named “Tai Sing & Co.” The partnership was registered in the mercantile register. Its appointed general manager, J.A. Say Lian Ping, later executed a power of attorney in favor of A.Y. Kelam to act as manager. Through successive managers/attorneys-in-fact (A.Y. Kelam and later Sy Tit), the partnership obtained loans and credit lines from the Philippine National Bank (PNB), secured by chattel mortgages on partnership property. The partnership incurred a debit balance of P16,518.74 as of June 30, 1922, plus accrued interest.

PNB filed a complaint to recover the debt. The defendants (partners Lo, Ng, and Yap Seng) raised several defenses, including that: (1) “Tai Sing & Co.” was not a valid general partnership because its name did not include the names of all or some of the partners as required by the Code of Commerce; (2) the loans were not authorized by the partnership; (3) the death of the original general manager extinguished the obligation; and (4) PNB’s failure to exhaust the mortgaged partnership property precluded a personal action against the partners.

The trial court ruled in favor of PNB, holding the defendants jointly and severally liable for the debt. The defendants appealed.

ISSUE

1. Whether the partnership “Tai Sing & Co.” was a valid general partnership despite its firm name not including the names of the partners.
2. Whether the partners are personally and solidarily liable for the partnership debts despite the alleged irregularities in the partnership’s formation and the bank’s dealings with its managers.
3. Whether the death of the original general manager extinguished the partnership’s obligations.
4. Whether PNB was required to first exhaust the partnership’s mortgaged assets before proceeding against the partners personally.

RULING

The Supreme Court AFFIRMED the trial court’s decision, holding the appellants jointly and severally liable for the partnership debt.

1. Validity of the Partnership and Firm Name: The Court held that the partnership was a valid general partnership. While Article 126 of the Code of Commerce required the firm name to include the names of all or some of the partners, the anomalous adoption of the name “Tai Sing & Co.” did not invalidate the partnership’s existence or negate the liability of the general partners to third parties under Article 127. The partnership was registered and operated as such, contracting debts with PNB. The primary purpose of the naming rule was to protect the public, and its non-observance did not shield the partners from liability for debts incurred in the course of the partnership’s business.

2. Personal and Solidary Liability of Partners: The Court affirmed that under Article 127 of the Code of Commerce, all members of a general partnership, whether managing partners or not, are personally and solidarily liable with all their property for transactions made in the name and for the account of the partnership by an authorized person. The appellants, as partners, were therefore liable. The Court noted that even assuming the initial attorney-in-fact lacked authority, the appellants later ratified the transactions by appointing Sy Tit as manager, who obtained the final credit from PNB.

3. Effect of the General Manager’s Death: The Court found this defense irrelevant. The obligation sued upon was evidenced by a document (Exhibit F) executed by Sy Tit as attorney-in-fact under a power of attorney granted by the appellants *after* the alleged death of the original manager. Therefore, the debt was incurred by the acting authority of the surviving partners.

4. Exhaustion of Partnership Assets: The Court rejected the argument based on Article 237 of the Code of Commerce, which states that partnership creditors must first exhaust partnership property before attaching the separate property of the partners. The trial court found, and the Supreme Court agreed, that the mortgaged partnership property no longer existed at the time of the complaint and was not offered to PNB for sale. Since the partnership assets were unavailable, the bank could directly proceed against the partners’ personal assets.

The Court also upheld the stipulated interest rate of 9% per annum as evidenced by the renewal documents executed by the partnership’s representatives.