Union Guarantee Co. v. Jing Kee & Co.
REITERATIONFacts
The Antecedents: The plaintiff, Union Guarantee Company, Ltd., a domestic corporation, alleged that Jing Kee & Co., a Japanese partnership doing business in Manila, drew a draft on Koon Kee & Co., a domestic partnership, for Y. 5,909.47, payable sixty days after sight. The defendant Bank of Taiwan, Ltd. endorsed the bill of exchange to the Bank of the Philippine Islands. Koon Kee & Co. accepted the draft. Subsequently, the draft was dishonored upon presentation for collection. The plaintiff was a surety on a bond for the production of the bill of lading for the merchandise evidenced by the draft. The Collector of Customs required the production of the bill of lading or payment of the bond amount. To be released from its obligation, the plaintiff purchased the bill of exchange from the Bank of the Philippine Islands for P7,845.94, becoming the owner and holder of the draft. Similar allegations were made regarding another draft amounting to P9,380.33. The plaintiff sought to recover the total amount of both drafts from the defendants, who were alleged to be members of both Jing Kee & Co. and Koon Kee & Co. Procedural History: The defendants Teng Kim Kuy and Teng Kim Tong demurred to the complaint, which was overruled. They then filed an answer, alleging that the bills of lading were delivered to the Bank of Taiwan, Ltd. with instructions to release them only upon payment of the drafts, and that the plaintiff paid the Bank of the Philippine Islands to obtain possession of the bills of lading and the merchandise. The Bank of the Philippine Islands was not made a party, and no service was made upon the Bank of Taiwan, Ltd. The trial court rendered judgment for the defendants, dismissing the complaint. The Appeal: The plaintiff appealed, claiming the trial court erred in presuming the plaintiff secured the merchandise, in finding that if the plaintiff did not receive the merchandise, it permitted a third person to do so and secured its value, in finding the drafts were without consideration, and in dismissing the complaint.
Issue(s)
Whether the defendants Teng Kim Kuy and Teng Kim Tong, as members of the partnership Koon Kee & Co., are jointly and severally liable for the dishonored drafts accepted by the partnership. Whether the plaintiff, having purchased the dishonored drafts at full value to satisfy a surety obligation, is entitled to recover the amount thereof from the acceptors. Whether the trial court erred in dismissing the complaint.
Ruling
The judgment of the lower court is reversed. Judgment is rendered in favor of the plaintiff and against the defendants Teng Kim Kuy and Teng Kim Tong jointly and severally for the sum of P17,226.27, with interest thereon from August 3, 1920, at the rate of 9 per cent per annum, together with costs.
Ratio Decidendi
On Issue 1: The Court held that the defendants Teng Kim Kuy and Teng Kim Tong, being admitted members of the firm Koon Kee & Co., are liable for the partnership's obligations. Citing Articles 127 and 148 of the Code of Commerce, the Court emphasized that all members of a general or limited copartnership are personally and solidarily liable for the transactions made in the name and for the account of the partnership. The acceptance of the drafts by Koon Kee & Co. ipso facto placed a legal liability upon the firm for their payment. Since the defendants did not allege or prove any defense that would discharge Koon Kee & Co. from this liability, they remained liable as partners. On Issue 2: The Court found that the plaintiff, in its capacity as a surety on a bond for the production of the bill of lading, was compelled to purchase the dishonored drafts at their full value to be released from its obligation. By doing so, the plaintiff became the owner and holder of the drafts, thereby acquiring all the legal rights of Koon Kee & Co. as the acceptor. The acceptance of the draft created a liability upon Koon Kee & Co. to the plaintiff as the holder. The defendants failed to demonstrate how Koon Kee & Co. was discharged or released from this liability. On Issue 3: The Court found that the trial court erred in dismissing the plaintiff's complaint. The pleadings admitted the material allegations of the complaint, including the membership of the defendants in the partnership and the dishonor of the drafts. The Court reasoned that the primary purpose of the bond was to ensure the delivery of the merchandise to Koon Kee & Co. If the merchandise was not delivered to Koon Kee & Co. or was delivered to the plaintiff or a third person, this would constitute a defense, but the duty to allege and prove such a fact devolved upon the defendants, which they failed to do. Therefore, based on the admissions in the pleadings, the plaintiff, as the owner and holder of the purchased drafts, was entitled to recover from the acceptors.
Main Doctrine
The Court held that partners in a commercial partnership are personally and solidarily liable for the transactions made in the name and for the account of the partnership. Furthermore, the acceptance of a draft creates an immediate legal liability upon the acceptor. When a surety, to satisfy its obligation on a bond for the production of a bill of lading, is compelled to purchase the dishonored draft at its full value, it becomes the owner and holder of the draft and can recover from the acceptor, who is liable for the payment of the draft.