7campos Rueda Co. v. Pacific Commercial Co.

EN BANC
[G.R. No. 18703. August 28, 1922.]
INVOLUNTARY INSOLVENCY OF CAMPOS RUEDA & CO., S. en C. ,

appellee, vs . PACIFIC COMMERCIAL CO., ASIATIC PETROLEUM CO.,
and INTERNATIONAL BANKING CORPORATION , petitioners-appellants.
Jose Yulo, Ross & Lawrence and J. A. Wolfson for appellants.

Antonio Sanz for appellee.
SYLLABUS
INVOLUNTARY INSOLVENCY; LIMITED PARTNERSHIP; ACT OF BANKRUPTCY;

SOLVENCY OF PARTNERS. — In the Philippines a limited partnership duly organized in
accordance with law has a personality distinct from that of its members; and if it
commits an act of bankruptcy, such as that of failing for more than thirty days to pay
debts amounting to P1,000 or more, it may be adjudged insolvent on the petition of
three of its creditors although its members may not be insolvent.
DECISION
ROMUALDEZ , J : p
The record of this proceeding having been transmitted to this court by virtue of
an appeal taken herein, a motion was presented by the appellants praying this court
that this case be considered purely a moot question now, for the reason that
subsequent to the decision appealed from, the partnership Campos Rueda & Co.,
voluntarily led an application for a judicial decree adjudging itself insolvent, which is
just what the herein petitioners and appellants tried to obtain from the lower court in
this proceeding.
The motion now before us must be, and is hereby, denied even under the facts
stated by the appellants in their motion aforesaid. The question raised in this case is
not a purely moot one: the fact that a man was insolvent on a certain day does not
justify an inference that he was some time prior thereto.
"Proof that a man was insolvent on a certain day does not justify an
inference that he was on a day some time prior thereto. Many contingencies, such
as unwise investments, losing contracts, misfortune, or accident, might happen to
reduce a person from a state of solvency within a short space of time." (Kimball
vs. Dresser, 98 Me., 519; 57 Atl. Rep., 767)
A decree of insolvency begins to operate on the date it is issued. It is one thing to
adjudge Campos Rueda & Co. insolvent in December, 1921, as prayed for in this case
and another to declare it insolvent in July, 1922, stated in the motion.
Turning to the merits of this appeal, we nd that this limited partnership was, and
is indebted to the appellants in various sums amounting to not less than P1,000,
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payable in the Philippines, which were not paid more than thirty days prior to the date of
the ling by the petitioners of the application for involuntary insolvency now before us.
These facts were sufficiency established by the evidence.
The trial court denied the petition on the ground that it was not proven, nor
alleged, that the members of the aforesaid rm were insolvent at the time the
application was led; and that as said partners are personally and solidarily liable for
the consequences of the transactions of the partnership, it cannot be adjudged
insolvent so long as the partners are not alleged and proven to be insolvent. From this
judgment the petitioners appeal to this court, on the ground that this nding of the
lower court is erroneous.
The fundamental question that presents itself for decision is whether or not a
limited partnership, such as the appellee, which has failed to pay its obligations with
three creditors for more than thirty days, may be held to have committed an act of
insolvency, and thereby be adjudged insolvent against its will.
Unlike the common law, the Philippine statues consider a limited partnership as a
juridical entity for all intents and purposes, which personality is recognized in all its acts
and contracts (art. 116, Code of Commerce). This being so and the juridical personality
of a limited partnership being different from that of its members, it must, on general
principle, answer for, and suffer, the subject of rights and obligations. If, as in the
instant case, the limited partnership of Campos Rueda & Co. failed to pay its
obligations with three creditors for a period of more than thirty days, which failure
constitutes, under our Insolvency Law, one of the acts of bankrupt upon which an
adjudication of involuntary insolvency can be predicated, this partnership must suffer
the consequences of such a failure, and must be adjudged insolvent. We are not
unmindful of the fact that some courts of the United States have held that partnership
may not be adjudged insolvent in an involuntary insolvency proceeding unless all of its
members are insolvent, while others have maintained a contrary view. But it must be
borne in mind that under the American common law, partnership have no juridical
personality independent from that of its members; and if now they have such
personality for the purposes of the insolvency law, it is only by virtue of a general law
enacted by the Congress of the United States on July 1, 1898, section 5, paragraph (h),
of which reads thus:
"In the event of one or more but not all of the members of a partnership
being adjudge bankrupt, the partnership property shall not be administered in
bankruptcy, unless by consent of the partner or partners not adjudges bankrupt;
shall settle the partnership business as expeditiously as its nature will permit, and
account for the interest of the partner or partners adjudge bankrupt."
The general consideration that these partnership had juridical personality and the
limitations prescribed in subsection (h) above set forth gave rise to the con ict noted
in American decisions, as stated in the case of In re Samuels (215 Fed., 845). which
mentioned the two apparently con icting doctrines, citing one from In re Bertenshaw
(157 Fed., 363), and the other from Francis vs. McNeal (186 Fed., 481).
But there being in our insolvency law no such provision as that contained in
section 5 of said Act of Congress of July 1, 1898, nor any rule similar thereto, and the
juridical personality of limited partnerships being recognized by our statutes from their
formation in all their acts and contracts the decisions of American courts on this point
can have no application in this jurisdiction, nor do we see any reason why these
partnerships cannot be adjudges bankrupt irrespective of the solvency or insolvency of
their members, provided the partnership has, as such, committed some of the acts of
insolvency provided in our law. Under this view it is unnecessary to discuss the other
points raised by the parties, although in the particular case under consideration it can
be added that the liability of the limited partners for the obligations and losses of the
partnership is limited to the amounts paid or promised to be paid into the common
fund except when a limited partner should have included his name or consented to its
inclusion in the firm name (arts. 147 and 148, Code of Commerce).
Therefore, it having been proven that the partnership Campos Rueda & Co. failed
for more than thirty days to pay its obligations to the petitioners, the Paci c
Commercial Co., the Asiatic Petroleum Co., and the International Banking Corporation,
the case comes under paragraph 11 of section 20 of Act No. 1956, and consequently
the petitioners have the right to a judicial decree declaring the involuntary insolvency of
said partnership.
Wherefore, the judgment appealed from is reversed, and it is adjudged that the
limited partnership Campos Rueda & Co. is, and was on December 28, 1921, liable for
having failed for more than thirty days to meet its obligations with the three petitioners
herein, and it is ordered that this proceeding be remanded to the Court of First Instance
of Manila with instruction to said court to issue the proper decrees under section 24 of
Act No. 1956, and proceed therewith until its final disposition.
It is so ordered without special findings as to costs.
Araullo, C.J., Johnson, Street, Malcolm, Avanceña, Villamor, Ostrand, and Johns,
JJ., concur.

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EN BANC

[G.R. No. 18703. August 28, 1922.]

INVOLUNTARY INSOLVENCY OF CAMPOS RUEDA & CO., S. en C. ,

Jose Yulo, Ross & Lawrence and J. A. Wolfson for appellants.

INVOLUNTARY INSOLVENCY; LIMITED PARTNERSHIP; ACT OF BANKRUPTCY;

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