CIR v.

Suter and CTA

27 SCRA 152
Facts:
A Partnership was formed byin 1947 by Suter, Spirig and Carlson, with Suter as the
General Partner and the last two as limited partner. Thereafter, they registered it with the
SEC. In 1948, Suter and Spirig got married and Carlson sold his share to the couple. The
firm pays its taxes as a corporation until 1959 when CIR consolidated the income of the
firm with the income of the spouses. CIR assessed tax deficiency to Suter in the amount
of P2,678.06 for 1954 and P4,567.00 for 1955..
Suter sought for reconsideration of the order but was denied. CIR argued that Partnership
was dissolved upon the marriage of Suter and Spirig. On appeal to CTA, CTA reversed
the decision of CIR, hence the case to Supreme Court.
Issue:
Whether or not the Partnership is dissolved upon the marriage of Suter and Spirig.
Held:
No, the Partnership is not dissolved.
The petitioner-appellant has evidently failed to observe the fact that William J. Suter
"Morcoin" Co., Ltd. was not a universalpartnership, but a particular one. As appears
from Articles 1674 and 1675 of the Spanish Civil Code, of 1889 (which was the law in
force when the subject firm was organized in 1947), a universal partnership requires
either that the object of the association be all the present property of the partners, as
contributed by them to the common fund, or else "all that the partners may acquire by
their industry or work during the existence of the partnership". William J. Suter
"Morcoin" Co., Ltd. was not such a universal partnership, since the contributions of the
partners were fixed sums of money, P20,000.00 by William Suter and P18,000.00 by
Julia Spirig and neither one of them was an industrial partner. It follows that William J.
Suter "Morcoin" Co., Ltd. was not a partnership that spouses were forbidden to enter by
Article 1677 of the Civil Code of 1889.

Woodhouse v. Halili
83 Phil 526
Facts:
Woodhouse and Halili entered into contract that they shall organize a partnership for the
bottling and distribution of Mision soft drinks, with the former as industrialist partner and
the latter as capitalist partner. Moreover, the parties agreed that Woodhouse will receive
30% of the net profits. Prior the agreement, Woodhouse met with the Mision Dry
Corporation in USA for the right to bottle and distribute Mision soft drinks in the
Philippines. Woodhouse, this time with Halili, met again with the Mision Soft Drinks
Corporation, where a contract was executed granting Halili granted defendant the
exclusive right, license, and authority to produce, bottle, distribute, and sell Mision
beverages in the Philippines. When the operation started, Woodhouse received 2,000 as
allowance for first two months and 1,000 on the third month. Woodhouse then demanded
that partnership papers be executed. Halili responded that the same will be executed once
the sales reach 50,000. Woodhouse now seeks the execution of the Partnership contract.
Issue:
Whether or not the agreement may be executed
Held:
No, it cannot be executed.
Having arrived at the conclusion that the agreement may not be declared null and void,
the question that next comes before us is, May the agreement be carried out or executed?
We find no merit in the claim of plaintiff that the partnership was already a fait
accompli from the time of the operation of the plant, as it is evident from the very
language of the agreement that the parties intended that the execution of the agreement to
form a partnership was to be carried out at a later date. They expressly agreed that they
shall form a partnership. (Par. No. 1, Exhibit A.) As a matter of fact, from the time that
the franchise from the Mission Dry Corporation was obtained in California, plaintiff
himself had been demanding that defendant comply with the agreement. And plaintiff's
present action seeks the enforcement of this agreement. Plaintiff's claim, therefore, is
both inconsistent with their intention and incompatible with his own conduct and suit.
As the trial court correctly concluded, the defendant may not be compelled against his
will to carry out the agreement nor execute the partnership papers. Under the Spanish
Civil Code, the defendant has an obligation to do, not to give. The law recognizes the
individual's freedom or liberty to do an act he has promised to do, or not to do it, as he
pleases. It falls within what Spanish commentators call a very personal act (acto
personalismo), of which courts may not compel compliance, as it is considered an act of
violence to do so.

Villanueva v. De Leon
47 Phil 780
Facts:
Florentinos will was admitted for probate and Villanueva was appointed executor of the
estate. Roberta de Leon filed a suit against the executor, where she alleged that she and
the deceased have been living together as husband and wife since 1888, that during this
time, they established a partnership for business purposes where each of them contributed
1,000. She now claims half of the estate of the deceased, as the partnership has not been
liquidated yet. The court ruled that de Leon has the right to intervene in the settlement of
the accounts. Villanueva opposed the order.
Issue:
Whether or not de Leon may intervene in the proceedings.
Held:
Yes, de Leon may intervene.
It is the duly of the probate court to scrutinize carefully the accounts of executors and
administrators and to correct all errors founded in law or fact. It is the right of all the
creditors and distributees of the estate to be present and, if so disposed, to contest the
account of the executor or administrator. Only a prima facie right at the time of filing the
petition is sufficient to entitle the applicant to intervene in the accounts of the executor or
administrator. It is for the trial court to determine whether the person seeking to
participate in the proceedings is a person interested within the meaning of the law, or is
merely an intruder who should be excluded from any further participation. The
determination of this question must necessarily be largely discretionary in the trial court.
Any doubt as to the interest of the petitioner ought, however, to be resolved in favor of
the petitioner, and any doubt arising in the appellate court ought to be resolved in favor of
the action taken by the trial judge. Administrators and executors instead of opposing the
intervention of interested parties should welcome the participation of the same for their
own protection. (See Garwood vs. Garwood [1866], 29 Cal. 514, cited by appellant;
Estate of Willey [1903], 140 Cal. 238.

Yu v. NLRC
224 Scra 76
Facts:
Yu was hired by a partnership as an Assistant General Manager through a resolution
passed by the 2 general partners and 3 limited partners. The resolution maintains that his
salary will be 4,000 a month, but what he received was actually just half of this. The
Partners promised that the unpaid salary will be given as soon as the additional funding
from abroad has arrived. Thereafter, the interest in the partnership was sold to Willy Co
and Emmanuel Zapanta, both subsequently acquired sole interest in the partnership.
When Yu reported to the new office, Co informed Yu that it is up to him (Co) on whether
to assume the obligations of the previous partnership or not regarding Yus unpaid salary.
Yu was not allowed to go to work. Hence, Yu filed a case for illegal dismissal and
recovery of unpaid salary.
Issue:
Whether or not the new partnership is liable to the creditor of the old partnership.
Held:
Yes, it is liable.
What is important for present purposes is that, under the above described situation, not
only the retiring partners (Rhodora Bendal, et al.) but also the new partnership itself
which continued the business of the old, dissolved, one, are liable for the debts of the
preceding partnership. In Singson, et al. v. Isabela Saw Mill, et al, 8 the Court held that
under facts very similar to those in the case at bar, a withdrawing partner remains liable
to a third party creditor of the old partnership. 9 The liability of the new partnership, upon
the other hand, in the set of circumstances obtaining in the case at bar, is established in
Article 1840 of the Civil Code which reads as follows:
Art. 1840. In the following cases creditors of the dissolved partnership are also creditors
of the person or partnership continuing the business:
(1) When any new partner is admitted into an existing partnership, or when any partner
retires and assigns (or the representative of the deceased partner assigns) his rights in
partnership property to two or more of the partners, or to one or more of the partners and
one or more third persons, if the business is continued without liquidation of the
partnership affairs;
(2) When all but one partner retire and assign (or the representative of a deceased partner
assigns) their rights in partnership property to the remaining partner, who continues the
business without liquidation of partnership affairs, either alone or with others;
(3) When any Partner retires or dies and the business of the dissolved partnership is
continued as set forth in Nos. 1 and 2 of this Article, with the consent of the retired
partners or the representative of the deceased partner, but without any assignment of his
right in partnership property;

(4) When all the partners or their representatives assign their rights in partnership
property to one or more third persons who promise to pay the debts and who continue the
business of the dissolved partnership;
(5) When any partner wrongfully causes a dissolution and remaining partners continue
the businessunder the provisions of article 1837, second paragraph, No. 2, either alone or
with others, and without liquidation of the partnership affairs;
(6) When a partner is expelled and the remaining partners continue the business either
alone or with others without liquidation of the partnership affairs;
The liability of a third person becoming a partner in the partnership continuing the
business, under this article, to the creditors of the dissolved partnership shall be satisfied
out of the partnership property only, unless there is a stipulation to the contrary.
When the business of a partnership after dissolution is continued under any conditions set
forth in this article the creditors of the retiring or deceased partner or the representative of
the deceased partner, have a prior right to any claim of the retired partner or the
representative of the deceased partner against the person or partnership continuing the
business on account of the retired or deceased partner's interest in the dissolved
partnership or on account of any consideration promised for such interest or for his right
in partnership property.
Nothing in this article shall be held to modify any right of creditors to set assignment on
the ground of fraud.
xxx xxx xxx
(Emphasis supplied)
Under Article 1840 above, creditors of the old Jade Mountain are also creditors of the
new Jade Mountain which continued the business of the old one without liquidation of
the partnership affairs. Indeed, a creditor of the old Jade Mountain, like petitioner
Benjamin Yu in respect of his claim for unpaid wages, is entitled to priority vis-a-vis any
claim of any retired or previous partner insofar as such retired partner's interest in the
dissolved partnership is concerned. It is not necessary for the Court to determine under
which one or mare of the above six (6) paragraphs, the case at bar would fall, if only
because the facts on record are not detailed with sufficient precision to permit such
determination. It is, however, clear to the Court that under Article 1840 above, Benjamin
Yu is entitled to enforce his claim for unpaid salaries, as well as other claims relating to
his employment with the previous partnership, against the new Jade Mountain.

Bernardo v. Pascual
109 Scra 936
Facts:
In March 1955, Pascual died while cutting timber and felling in the woods in Corona, San
Miguel, Bulacan. The spoused of the deceased filed a claim in the Workmens
Compensation Commission against Bernardo Sawmill. Petitioner Bernardo raised, as one
of his defenses, that he only become a concessionaire on October 1955. Hence he is not
liable to the deceased.
Issue:
Whether or not Bernardo is liable to the deceased.
Held:
Yes, he is liable.
With respect to petitioner's claim that he became a lumber concessionaire only on
October 13, 1955, suffice it to say that prior to the date, he was partner to several persons
owning the concession in San Miguel, Bulacan, and subsequent thereto, he acquired the
interest of his partners and became the sole concessionaire. Under those circumstances he
became liable to the creditors of the partnership. (Art. 1840, new Civil Code.)

Laguna Trans v. SSS

107 Phil 833
Facts:
Laguna Transportation Co. Inc. is a corporate entity engaged in the business of public
transport. The corporation was duly registered in Securities and Exchange Commission as
a corporate body in 1956. Before this, the same is already operating as an unregistered
partnership since 1949, with the stockholders as partners. The Corporation now asks the
court to exempt it from the mandatory membership to the Social Security Systems,
claiming that it is just in operation for less than two years from September 1, 1957, period
within which, under the SSS law, may not be compelled to be a member.
Issue:
Whether or not Laguna Transport may be compelled to be a member of SSS.
Held:
Yes, it may be compelled.
Finally, the weight of authority supports the view that where a corporation was formed
by, and consisted of members of a partnership whose business and property was
conveyed and transferred to the corporation for the purpose of continuing its business, in
payment for which corporate capital stock was issued, such corporation is presumed to
have assumed partnership debts, and is prima facie liable therefor. (Stowell vs. Garden
City News Corps., 57 P. 2d 12; Chicago Smelting & Refining Corp. vs. Sullivan, 246 IU,
App. 538; Ball vs. Bross., 83 June 19, N.Y. Supp. 692.) The reason for the rule is that the
members of the partnership may be said to have simply put on a new coat, or taken on a
corporate cloak, and the corporation is a mere continuation of the partnership. (8 Fletcher
Cyclopedia Corporations [Perm. Ed.] 402-411.)